Homeowner Natural Disaster Mitigation

Second Regular Session Seventy-fifth General Assembly STATE OF COLORADO INTRODUCED SENATE BILL 26-049 LLS NO. 26-0507.02 Sam Anderson x4218 SENATE SPONSORSHIP Snyder and Frizell, HOUSE SPONSORSHIP Camacho, Senate Committees House Committees Finance A BILL FOR AN ACT CONCERNING HOMEOWNER NATURAL DISASTER MITIGATION. Bill Summary (Note: This summary applies to this bill as introduced and does not reflect any amendments that may be subsequently adopted. If this bill passes third reading in the house of introduction, a bill summary that applies to the reengrossed version of this bill will be available at http://leg.colorado.gov.) The bill adds individuals and homeowners' associations as eligible recipients of assistance from the natural disaster mitigation enterprise fund. The bill also provides that natural disaster mitigation includes installation of "impact-resistant roofing materials" and other "property-specific mitigation action" and provides definitions of the same. Additionally, the bill creates an income tax deduction for contributions to a catastrophe savings account (CSA), which is a savings account that a homeowner may use to cover the amount of insurance Shading denotes HOUSE amendment. Double underlining denotes SENATE amendment.

Capital letters or bold & italic numbers indicate new material to be added to existing law. Dashes through the words or numbers indicate deletions from existing law.

deductibles for claims stemming from hail, wildfire, or a catastrophic wind event, uninsured losses related to the same, and property-specific mitigation actions. The bill also exempts interest earned by CSAs from income tax.

Be it enacted by the General Assembly of the State of Colorado: SECTION 1.

In Colorado Revised Statutes, 24-33.5-1619, amend (2)(b), (3)(a), and (7)(b) introductory portion; and add (2)(f.5), (2)(h), and (3)(c)(III.5) as follows:

24-33.5-1619. Natural disaster mitigation enterprise - fund - goals - grant program - gifts, grants, or donations - legislative declaration - definitions - repeal.

(2) Definitions. As used in this section, unless the context otherwise requires:

(b) "Eligible entity" means:

(I) A governing subdivision of the state, including counties, municipalities, school districts, and special districts, that implements or intends to implement natural disaster mitigation measures, or that is applying for a federal grant that both requires matching funds and is dedicated to assisting in the implementation of pre-disaster natural disaster mitigation measures; OR (II) A HOMEOWNERS' ASSOCIATION OR AN INDIVIDUAL HOMEOWNER THAT IMPLEMENTS OR INTENDS TO IMPLEMENT NATURAL DISASTER MITIGATION MEASURES.

(f.5) "IMPACT-RESISTANT ROOFING MATERIAL" MEANS A ROOFING MATERIAL THAT HAS BEEN TESTED AND CERTIFIED THROUGH THE UNDERWRITERS LABORATORIES 2218 STANDARD RESISTANCE OF PREPARED ROOF COVERING MATERIALS AS A CLASS FOUR FOR IMPACT MATERIAL AND DESIGNED FOR HAIL RESISTANCE.

(h) "PROPERTY-SPECIFIC MITIGATION ACTION" MEANS A SCIENCE-BASED MITIGATION ACTION AS DEMONSTRATED BY THE "WILDFIRE PREPARED HOME" DESIGNATION FROM THE INSURANCE INSTITUTE FOR BUSINESS AND HOME SAFETY OR BY A SIMILAR MITIGATION CERTIFICATION PROCESS.

PROGRAM THAT INCLUDES A VERIFICATION AND

(3) Enterprise.

(a) There is hereby created in the department the natural disaster mitigation enterprise.

The government-owned business within the department for the business purpose of collecting the fee charged to certain insurers, and utilizing the fee revenue to administer the grant program and to provide local governments, HOMEOWNERS technical assistance on natural disaster mitigation. The enterprise exercises its powers and performs its duties and functions under the department as if transferred to the department by a type 2 transfer, as defined in the "Administrative Organization Act of 1968", article 1 of this title 24.

HOMEOWNERS ' enterprise is and ASSOCIATIONS , operates AND as a INDIVIDUAL

(c) The enterprise's primary powers and duties are to:

(III.5) PROVIDE GRANTS TO HOMEOWNERS' ASSOCIATIONS AND INDIVIDUAL HOMEOWNERS TO INSTALL IMPACT-RESISTANT ROOFING AND COMPLETE PROPERTY-SPECIFIC MITIGATION ACTIONS.

(7) Grant program.

(b) The purpose of the grant program is to achieve the goals specified in subsection (6) of this section by assisting entities that are implementing disaster mitigation measures, or that have applied for federal grants that both require matching funds and are dedicated to assisting in the implementation of pre-disaster natural disaster mitigation measures. The board may not award grants for renewable energy generation projects, resources, or technologies. The board may award grants for projects that include slope stabilization, watershed restoration, fuels mitigation, drought mitigation, MATERIALS INSTALLATION, PROPERTY-SPECIFIC MITIGATION ACTIONS, and similar activities that directly reduce risks to communities, lives, and property. The board shall establish criteria to evaluate and prioritize applications for grants, based on:

IMPACT-RESISTANT ROOFING

SECTION 2. In Colorado Revised Statutes, 39-22-104, add (4)(ff) as follows:

39-22-104. Income tax imposed on individuals, estates, and trusts - single rate - report - tax preference performance statement - legislative declaration - definitions - repeal.

(4) There shall be subtracted from federal taxable income:

(ff) (I) FOR INCOME TAX YEARS COMMENCING ON OR AFTER JANUARY 1, 2027, BUT PRIOR TO JANUARY 1, 2037, AN AMOUNT EQUAL TO THE AMOUNT THAT A TAXPAYER CONTRIBUTED TO A CATASTROPHE SAVINGS ACCOUNT DURING THE INCOME TAX YEAR, NOT TO EXCEED FIFTY THOUSAND DOLLARS.

(II) IN ACCORDANCE WITH SECTION 39-21-304 (1), WHICH REQUIRES EACH BILL THAT CREATES A NEW TAX EXPENDITURE TO INCLUDE A TAX PREFERENCE PERFORMANCE STATEMENT AS PART OF A STATUTORY LEGISLATIVE DECLARATION, THE GENERAL ASSEMBLY FINDS AND DECLARES THAT:

(A) THE PURPOSE OF THE INCOME TAX SUBTRACTION CREATED IN THIS SUBSECTION (4)(ff) IS TO PROVIDE TAX RELIEF FOR CERTAIN INDIVIDUALS, SPECIFICALLY TAXPAYERS WHO INVEST IN NATURAL DISASTER MITIGATION; AND

(B) THE GENERAL ASSEMBLY AND THE STATE AUDITOR SHALL MEASURE THE EFFECTIVENESS OF THE SUBTRACTION IN ACHIEVING THE PURPOSE SPECIFIED IN THIS SUBSECTION (4)(ff) BASED ON THE NUMBER AND AGGREGATE AMOUNT OF SUBTRACTIONS CLAIMED.

(III) A CATASTROPHE SAVINGS ACCOUNT IS NOT SUBJECT TO ATTACHMENT, LEVY, GARNISHMENT, OR LEGAL PROCESS IN THE STATE.

(IV) INTEREST INCOME EARNED BY A CATASTROPHE SAVINGS ACCOUNT SHALL BE EXEMPT FROM TAXATION.

(V) AS USED IN THIS SUBSECTION (4)(ff), UNLESS THE CONTEXT OTHERWISE REQUIRES:

(A) "CATASTROPHE SAVINGS ACCOUNT" MEANS A REGULAR SAVINGS ACCOUNT OR MONEY MARKET ACCOUNT ESTABLISHED BY: A TAXPAYER WHO IS AN INSURANCE POLICYHOLDER FOR RESIDENTIAL PROPERTY IN COLORADO TO COVER AN INSURANCE DEDUCTIBLE UNDER AN INSURANCE POLICY FOR THE TAXPAYER'S LEGAL RESIDENCE THAT COVERS ROOF REPLACEMENT WITH IMPACT-RESISTANT ROOFING MATERIALS, PROPERTY-SPECIFIC MITIGATION ACTION, HAIL, WILDFIRE, OR OTHER CATASTROPHIC WIND EVENT DAMAGE; BY A TAXPAYER TO COVER SELF-INSURED LOSSES FOR THE TAXPAYER'S LEGAL RESIDENCE FROM HAIL, WILDFIRE, OR OTHER CATASTROPHIC WIND EVENT; OR A TAXPAYER TO PAY A QUALIFIED CATASTROPHE EXPENSE. A TAXPAYER MAY ESTABLISH ONLY ONE CATASTROPHE SAVINGS ACCOUNT. THE SOLE PURPOSE OF THE ACCOUNT, INCLUDING EARNED INTEREST, IS TO COVER THE AMOUNT OF INSURANCE DEDUCTIBLES AND OTHER UNINSURED PORTIONS OF RISKS OF LOSS FROM HAIL, WILDFIRE, OR A CATASTROPHIC WIND EVENT OR A QUALIFIED CATASTROPHE EXPENSE.

(B) "FORTIFIED" MEANS A HOMEBUILDING STANDARD PROGRAM FROM THE INSURANCE INSTITUTE FOR BUSINESS AND HOME SAFETY OR A SIMILAR ENTITY THAT RESEARCHES BUILDING MATERIALS SPECIFICALLY DESIGNED TO PREVENT DAMAGE FROM NATURAL DISASTERS, INCLUDING BUT NOT LIMITED TO HIGH WINDS, HURRICANES, HAILSTORMS, AND SEVERE THUNDERSTORMS.

(C) "IMPACT-RESISTANT ROOFING MATERIALS" MEANS A ROOFING MATERIAL THAT HAS BEEN TESTED AND CERTIFIED THROUGH THE UNDERWRITERS LABORATORIES 2218 STANDARD RESISTANCE OF PREPARED ROOF COVERING MATERIALS AS A CLASS FOUR MATERIAL AND DESIGNED FOR HAIL RESISTANCE.

FOR IMPACT

(D) "LEGAL RESIDENCE" MEANS THE RESIDENCE OF AN INDIVIDUAL THAT IS THE PRINCIPAL OR PRIMARY HOME OR PLACE OF ABODE OF THE INDIVIDUAL AND IS THE PLACE IN WHICH THE INDIVIDUAL'S HABITATION IS FIXED. A LEGAL RESIDENCE MUST BE A PERMANENT BUILDING OR PART OF A BUILDING AND MAY INCLUDE A HOUSE OR CONDOMINIUM. A VACANT LOT OR BUSINESS ADDRESS IS NOT A LEGAL RESIDENCE.

(E) "PROPERTY-SPECIFIC MITIGATION ACTION" MEANS A SCIENCE-BASED MITIGATION ACTION AS DEMONSTRATED BY THE "WILDFIRE PREPARED HOME" DESIGNATION FROM THE INSURANCE INSTITUTE FOR BUSINESS AND HOME SAFETY OR BY A SIMILAR MITIGATION CERTIFICATION PROCESS.

PROGRAM THAT INCLUDES A VERIFICATION AND

(F) "QUALIFIED CATASTROPHE EXPENSES" MEANS EXPENSES PAID OR INCURRED BY REASON OF PREPARATION FOR OR ROOF REPLACEMENT AND REPAIRS RELATED TO DAMAGE CAUSED BY HAIL, WILDFIRE, OR A CATASTROPHIC WIND EVENT, INCLUDING THE ANNUAL COST OF A FORTIFIED ENDORSEMENT TO SUPPLEMENT AN INSURANCE POLICY; THE COST OF MITIGATION ACTIONS THAT WOULD REDUCE THE RISK OF WILDFIRE, HAIL DAMAGE, OR OTHER CATASTROPHIC WIND EVENT DAMAGE;

OBTAINING EVALUATION SERVICES TO QUALIFY FOR A FORTIFIED DESIGNATION; OR THE COST OF COMPLETING A PROPERTY-SPECIFIC MITIGATION ACTION UNDER THE "WILDFIRE PREPARED HOME" PROGRAM OR A SIMILAR MITIGATION PROGRAM THAT INCLUDES A VERIFICATION AND CERTIFICATION PROCESS.

(VI) THIS SUBSECTION (4)(ff) IS REPEALED, EFFECTIVE JANUARY 1, 2042.

SECTION 3. Act subject to petition - effective date. This act takes effect at 12:01 a.m. on the day following the expiration of the ninety-day period after final adjournment of the general assembly (August 12, 2026, if adjournment sine die is on May 13, 2026); except that, if a referendum petition is filed pursuant to section 1 (3) of article V of the state constitution against this act or an item, section, or part of this act within such period, then the act, item, section, or part will not take effect unless approved by the people at the general election to be held in November 2026 and, in such case, will take effect on the date of the official declaration of the vote thereon by the governor.