Natural disasters: catastrophe savings accounts: personal income tax.

Assembly Members Calderon and Gipson propose creating tax-advantaged catastrophe savings accounts for California homeowners to prepare financially for natural disasters, establishing a five-year program running from 2026 through 2030. The accounts would allow annual contributions of up to $15,000 for insured homeowners and $250,000 for uninsured homeowners, with contributions deductible from adjusted gross income and interest earnings tax-exempt until December 2030.

The accounts must be designated savings or money market accounts used exclusively for qualified catastrophe expenses, which include costs from governor-declared wildfire, flood, or earthquake emergencies affecting a primary residence, insurance deductibles, and property-level disaster mitigation efforts. Account holders face a 2.5% penalty on funds used for non-qualified expenses. Each homeowner may maintain only one catastrophe savings account.

The Franchise Tax Board must report annually to the Legislature starting May 2028 on program metrics including the number of participants, average deduction amounts, and total deductions claimed. The program's tax provisions become inoperative on December 1, 2030, with account interest becoming taxable after that date. The legislation takes effect immediately upon enactment as a tax levy.