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[Congressional Bills 113th Congress]
[From the U.S. Government Publishing Office]
[H.R. 549 Introduced in House (IH)]

113th CONGRESS
  1st Session
                                H. R. 549

To amend the Internal Revenue Code of 1986 to provide for the creation 
    of policyholder disaster protection funds, Catastrophe Savings 
Accounts, and tax credits for natural disaster mitigation expenditures.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                            February 6, 2013

   Mr. Grimm (for himself, Mr. Pascrell, Mr. Rooney, and Mr. Deutch) 
 introduced the following bill; which was referred to the Committee on 
                             Ways and Means

_______________________________________________________________________

                                 A BILL

 
To amend the Internal Revenue Code of 1986 to provide for the creation 
    of policyholder disaster protection funds, Catastrophe Savings 
Accounts, and tax credits for natural disaster mitigation expenditures.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Homeowner Catastrophe Protection Act 
of 2013''.

            TITLE I--POLICYHOLDER DISASTER PROTECTION FUNDS

SEC. 101. FINDINGS.

    The Congress makes the following findings:
            (1) Rising costs resulting from natural disasters are 
        placing an increasing strain on the ability of property and 
        casualty insurance companies to assure payment of homeowners' 
        claims and other insurance claims arising from major natural 
        disasters now and in the future.
            (2) Present tax laws do not provide adequate incentives to 
        assure that natural disaster insurance is provided or, where 
        such insurance is provided, that funds are available for 
        payment of insurance claims in the event of future catastrophic 
        losses from major natural disasters, as present law requires an 
        insurer wishing to accumulate surplus assets for this purpose 
        to do so entirely from its after-tax retained earnings.
            (3) Revising the tax laws applicable to the property and 
        casualty insurance industry to permit carefully controlled 
        accumulation of pretax dollars in separate reserve funds 
        devoted solely to the payment of claims arising from future 
        major natural disasters will provide incentives for property 
        and casualty insurers to make natural disaster insurance 
        available, will give greater protection to the Nation's 
        homeowners, small businesses, and other insurance consumers, 
        and will help assure the future financial health of the 
        Nation's insurance system as a whole.
            (4) Implementing these changes will reduce the possibility 
        that a significant portion of the private insurance system 
        would fail in the wake of a major natural disaster and that 
        governmental entities would be required to step in to provide 
        relief at taxpayer expense.

SEC. 3. CREATION OF POLICYHOLDER DISASTER PROTECTION FUNDS; 
              CONTRIBUTIONS TO AND DISTRIBUTIONS FROM FUNDS; OTHER 
              RULES.

    (a) Contributions to Policyholder Disaster Protection Funds.--
Subsection (c) of section 832 of the Internal Revenue Code of 1986 
(relating to the taxable income of insurance companies other than life 
insurance companies) is amended by striking ``and'' at the end of 
paragraph (12), by striking the period at the end of paragraph (13) and 
inserting ``; and'', and by adding at the end the following new 
paragraph:
            ``(14) the qualified contributions to a policyholder 
        disaster protection fund during the taxable year.''.
    (b) Distributions From Policyholder Disaster Protection Funds.--
Paragraph (1) of section 832(b) of such Code is amended by striking 
``and'' at the end of subparagraph (D), by striking the period at the 
end of subparagraph (E) and inserting ``, and'', and by adding at the 
end the following new subparagraph:
                    ``(F) the amount of any distributions from a 
                policyholder disaster protection fund during the 
                taxable year, except that a distribution made to return 
                to the qualified insurance company any contribution 
                which is not a qualified contribution (as defined in 
                subsection (h)) for a taxable year shall not be 
                included in gross income if such distribution is made 
                prior to the filing of the tax return for such taxable 
                year.''.
    (c) Definitions and Other Rules Relating to Policyholder Disaster 
Protection Funds.--Section 832 of such Code (relating to insurance 
company taxable income) is amended by adding at the end the following 
new subsection:
    ``(h) Definitions and Other Rules Relating to Policyholder Disaster 
Protection Funds.--For purposes of this section--
            ``(1) Policyholder disaster protection fund.--The term 
        `policyholder disaster protection fund' (hereafter in this 
        subsection referred to as the `fund') means any custodial 
        account, trust, or any other arrangement or account--
                    ``(A) which is established to hold assets that are 
                set aside solely for the payment of qualified losses, 
                and
                    ``(B) under the terms of which--
                            ``(i) the assets in the fund are required 
                        to be invested in a manner consistent with the 
                        investment requirements applicable to the 
                        qualified insurance company under the laws of 
                        its jurisdiction of domicile,
                            ``(ii) the net income for the taxable year 
                        derived from the assets in the fund is required 
                        to be distributed no less frequently than 
                        annually,
                            ``(iii) an excess balance drawdown amount 
                        is required to be distributed to the qualified 
                        insurance company no later than the close of 
                        the taxable year following the taxable year for 
                        which such amount is determined,
                            ``(iv) a catastrophe drawdown amount may be 
                        distributed to the qualified insurance company 
                        if distributed prior to the close of the 
                        taxable year following the year for which such 
                        amount is determined,
                            ``(v) a State required drawdown amount may 
                        be distributed, and
                            ``(vi) no distributions from the fund are 
                        required or permitted other than the 
                        distributions described in clauses (ii) through 
                        (v) and the return to the qualified insurance 
                        company of contributions that are not qualified 
                        contributions.
            ``(2) Qualified insurance company.--The term `qualified 
        insurance company' means any insurance company subject to tax 
        under section 831(a).
            ``(3) Qualified contribution.--The term `qualified 
        contribution' means a contribution to a fund for a taxable year 
        to the extent that the amount of such contribution, when added 
        to the previous contributions to the fund for such taxable 
        year, does not exceed the excess of--
                    ``(A) the fund cap for the taxable year, over
                    ``(B) the fund balance determined as of the close 
                of the preceding taxable year.
            ``(4) Excess balance drawdown amounts.--The term `excess 
        balance drawdown amount' means the excess (if any) of--
                    ``(A) the fund balance as of the close of the 
                taxable year, over
                    ``(B) the fund cap for the following taxable year.
            ``(5) Catastrophe drawdown amount.--
                    ``(A) In general.--The term `catastrophe drawdown 
                amount' means an amount that does not exceed the lesser 
                of the amount determined under subparagraph (B) or (C).
                    ``(B) Net losses from qualifying events.--The 
                amount determined under this subparagraph shall be 
                equal to the qualified losses for the taxable year 
                determined without regard to clause (ii) of paragraph 
                (8)(A).
                    ``(C) Gross losses in excess of threshold.--The 
                amount determined under this subparagraph shall be 
                equal to the excess (if any) of--
                            ``(i) the qualified losses for the taxable 
                        year, over
                            ``(ii) the lesser of--
                                    ``(I) the fund cap for the taxable 
                                year (determined without regard to 
                                paragraph (9)(E)), or
                                    ``(II) 30 percent of the qualified 
                                insurance company's surplus as regards 
                                policyholders as shown on the company's 
                                annual statement for the calendar year 
                                preceding the taxable year.
                    ``(D) Special drawdown amount following a recent 
                catastrophe loss year.--If for any taxable year 
                included in the reference period the qualified losses 
                exceed the amount determined under subparagraph 
                (C)(ii), the `catastrophe drawdown amount' shall be an 
                amount that does not exceed the lesser of the amount 
                determined under subparagraph (B) or the amount 
                determined under this subparagraph. The amount 
                determined under this subparagraph shall be an amount 
                equal to the excess (if any) of--
                            ``(i) the qualified losses for the taxable 
                        year, over
                            ``(ii) the lesser of--
                                    ``(I) \1/3\ of the fund cap for the 
                                taxable year (determined without regard 
                                to paragraph (9)(E)), or
                                    ``(II) 10 percent of the qualified 
                                insurance company's surplus as regards 
                                policyholders as shown on the company's 
                                annual statement for the calendar year 
                                preceding the taxable year.
                    ``(E) Reference period.--For purposes of 
                subparagraph (D), the reference period shall be 
                determined under the following table:

``For a taxable year                               The reference period
  beginning in--                                             shall be--
      2015 and later...............
                                             The 3 preceding taxable 
                                                years.
      2014.........................
                                             The 2 preceding taxable 
                                                years.
      2013.........................
                                                The preceding taxable 
                                                year.
      2012 or before...............
                                                No reference period 
                                                applies.
            ``(6) State required drawdown amount.--The term `State 
        required drawdown amount' means any amount that the department 
        of insurance for the qualified insurance company's jurisdiction 
        of domicile requires to be distributed from the fund, to the 
        extent such amount is not otherwise described in paragraph (4) 
        or (5).
            ``(7) Fund balance.--The term `fund balance' means--
                    ``(A) the sum of all qualified contributions to the 
                fund,
                    ``(B) less any net investment loss of the fund for 
                any taxable year or years, and
                    ``(C) less the sum of all distributions under 
                clauses (iii) through (v) of paragraph (1)(B).
            ``(8) Qualified losses.--
                    ``(A) In general.--The term `qualified losses' 
                means, with respect to a taxable year--
                            ``(i) the amount of losses and loss 
                        adjustment expenses incurred in the qualified 
                        lines of business specified in paragraph (9), 
                        net of reinsurance, as reported in the 
                        qualified insurance company's annual statement 
                        for the taxable year, that are attributable to 
                        one or more qualifying events (regardless of 
                        when such qualifying events occurred),
                            ``(ii) the amount by which such losses and 
                        loss adjustment expenses attributable to such 
                        qualifying events have been reduced for 
                        reinsurance received and recoverable, plus
                            ``(iii) any nonrecoverable assessments, 
                        surcharges, or other liabilities that are borne 
                        by the qualified insurance company and are 
                        attributable to such qualifying events.
                    ``(B) Qualifying event.--For purposes of 
                subparagraph (A), the term `qualifying event' means any 
                event that satisfies clauses (i) and (ii).
                            ``(i) Event.--An event satisfies this 
                        clause if the event is 1 or more of the 
                        following:
                                    ``(I) Windstorm (hurricane, 
                                cyclone, or tornado).
                                    ``(II) Earthquake (including any 
                                fire following).
                                    ``(III) Winter catastrophe (snow, 
                                ice, or freezing).
                                    ``(IV) Fire.
                                    ``(V) Tsunami.
                                    ``(VI) Flood.
                                    ``(VII) Volcanic eruption.
                                    ``(VIII) Hail.
                            ``(ii) Catastrophe designation.--An event 
                        satisfies this clause if the event--
                                    ``(I) is designated a catastrophe 
                                by Property Claim Services or its 
                                successor organization,
                                    ``(II) is declared by the President 
                                to be an emergency or disaster, or
                                    ``(III) is declared to be an 
                                emergency or disaster in a similar 
                                declaration by the chief executive 
                                official of a State, possession, or 
                                territory of the United States, or the 
                                District of Columbia.
            ``(9) Fund cap.--
                    ``(A) In general.--The term `fund cap' for a 
                taxable year is the sum of the separate lines of 
                business caps for each of the qualified lines of 
                business specified in the table contained in 
                subparagraph (C) (as modified under subparagraphs (D) 
                and (E)).
                    ``(B) Separate lines of business cap.--For purposes 
                of subparagraph (A), the separate lines of business 
                cap, with respect to a qualified line of business 
                specified in the table contained in subparagraph (C), 
                is the product of--
                            ``(i) net written premiums reported in the 
                        annual statement for the calendar year 
                        preceding the taxable year in such line of 
                        business, multiplied by
                            ``(ii) the fund cap multiplier applicable 
                        to such qualified line of business.
                    ``(C) Qualified lines of business and their 
                respective fund cap multipliers.--For purposes of this 
                paragraph, the qualified lines of business and fund cap 
                multipliers specified in this subparagraph are those 
                specified in the following table:

``Line of Business on Annual                                   Fund Cap
  Statement Blank:                                          Multiplier:
        Fire.........................................             0.25 
        Allied.......................................             1.25 
        Farmowners Multiple Peril....................             0.25 
        Homeowners Multiple Peril....................             0.75 
        Commercial Multi Peril (non-liability                     0.50 
            portion).
        Earthquake...................................            13.00 
        Inland Marine................................             0.25.
                    ``(D) Subsequent modifications of the annual 
                statement blank.--If, with respect to any taxable year 
                beginning after the effective date of this subsection, 
                the annual statement blank required to be filed is 
                amended to replace, combine, or otherwise modify any of 
                the qualified lines of business specified in 
                subparagraph (C), then for such taxable year 
                subparagraph (C) shall be applied in a manner such that 
                the fund cap shall be the same amount as if such 
                reporting modification had not been made.
                    ``(E) 20-year phase-in.--Notwithstanding 
                subparagraph (C), the fund cap for a taxable year shall 
                be the amount determined under subparagraph (C), as 
                adjusted pursuant to subparagraph (D) (if applicable), 
                multiplied by the phase-in percentage indicated in the 
                following table:

------------------------------------------------------------------------
                                                 Phase-in percentage  to
                                                 be applied  to fund cap
          ``Taxable year beginning in:                computed  under
                                                  subparagraphs  (A) and
                                                           (B):
------------------------------------------------------------------------
2012...........................................                5 percent
2013...........................................               10 percent
2014...........................................               15 percent
2015...........................................               20 percent
2016...........................................               25 percent
2017...........................................               30 percent
2018...........................................               35 percent
2019...........................................               40 percent
2020...........................................               45 percent
2021...........................................               50 percent
2022...........................................               55 percent
2023...........................................               60 percent
2024...........................................               65 percent
2025...........................................               70 percent
2026...........................................               75 percent
2027...........................................               80 percent
2028...........................................               85 percent
2029...........................................               90 percent
2030...........................................               95 percent
2031 and later.................................             100 percent.
------------------------------------------------------------------------

            ``(10) Treatment of investment income and gain or loss.--
                    ``(A) Contributions in kind.--A transfer of 
                property other than money to a fund shall be treated as 
                a sale or exchange of such property for an amount equal 
                to its fair market value as of the date of transfer, 
                and appropriate adjustment shall be made to the basis 
                of such property. Section 267 shall apply to any loss 
                realized upon such a transfer.
                    ``(B) Distributions in kind.--A transfer of 
                property other than money by a fund to the qualified 
                insurance company shall not be treated as a sale or 
                exchange or other disposition of such property. The 
                basis of such property immediately after such transfer 
                shall be the greater of the basis of such property 
                immediately before such transfer or the fair market 
                value of such property on the date of such transfer.
                    ``(C) Income with respect to fund assets.--Items of 
                income of the type described in paragraphs (1)(B), 
                (1)(C), and (2) of subsection (b) that are derived from 
                the assets held in a fund, as well as losses from the 
                sale or other disposition of such assets, shall be 
                considered items of income, gain, or loss of the 
                qualified insurance company. Notwithstanding paragraph 
                (1)(F) of subsection (b), distributions of net income 
                to the qualified insurance company pursuant to 
                paragraph (1)(B)(ii) of this subsection shall not cause 
                such income to be taken into account a second time.
            ``(11) Net income; net investment loss.--For purposes of 
        paragraph (1)(B)(ii), the net income derived from the assets in 
        the fund for the taxable year shall be the items of income and 
        gain for the taxable year, less the items of loss for the 
        taxable year, derived from such assets, as described in 
        paragraph (10)(C). For purposes of paragraph (7), there is a 
        net investment loss for the taxable year to the extent that the 
        items of loss described in the preceding sentence exceed the 
        items of income and gain described in the preceding sentence.
            ``(12) Annual statement.--For purposes of this subsection, 
        the term `annual statement' shall have the meaning set forth in 
        section 846(f)(3).
            ``(13) Exclusion of premiums and losses on certain puerto 
        rican risks.--Notwithstanding any other provision of this 
        subsection, premiums and losses with respect to risks covered 
        by a catastrophe reserve established under the laws or 
        regulations of the Commonwealth of Puerto Rico shall not be 
        taken into account under this subsection in determining the 
        amount of the fund cap or the amount of qualified losses.
            ``(14) Regulations.--The Secretary shall prescribe such 
        regulations as may be necessary or appropriate to carry out the 
        purposes of this subsection, including regulations--
                    ``(A) which govern the application of this 
                subsection to a qualified insurance company having a 
                taxable year other than the calendar year or a taxable 
                year less than 12 months,
                    ``(B) which govern a fund maintained by a qualified 
                insurance company that ceases to be subject to this 
                part, and
                    ``(C) which govern the application of paragraph 
                (9)(D).''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2013.

                 TITLE II--CATASTROPHE SAVINGS ACCOUNTS

SEC. 201. CATASTROPHE SAVINGS ACCOUNTS.

    (a) In General.--Subchapter F of chapter 1 of the Internal Revenue 
Code of 1986 (relating to exempt organizations) is amended by adding at 
the end the following new part:

                ``PART IX--CATASTROPHE SAVINGS ACCOUNTS

``SEC. 530A. CATASTROPHE SAVINGS ACCOUNTS.

    ``(a) General Rule.--A Catastrophe Savings Account shall be exempt 
from taxation under this subtitle. Notwithstanding the preceding 
sentence, such account shall be subject to the taxes imposed by section 
511 (relating to imposition of tax on unrelated business income of 
charitable organizations).
    ``(b) Catastrophe Savings Account.--For purposes of this section, 
the term `Catastrophe Savings Account' means a trust created or 
organized in the United States for the exclusive benefit of an 
individual or his beneficiaries and which is designated (in such manner 
as the Secretary shall prescribe) at the time of the establishment of 
the trust as a Catastrophe Savings Account, but only if the written 
governing instrument creating the trust meets the following 
requirements:
            ``(1) Except in the case of a qualified rollover 
        contribution--
                    ``(A) no contribution will be accepted unless it is 
                in cash, and
                    ``(B) contributions will not be accepted in excess 
                of the account balance limit specified in subsection 
                (c).
            ``(2) The trustee is a bank (as defined in section 408(n)) 
        or another person who demonstrates to the satisfaction of the 
        Secretary that the manner in which that person will administer 
        the trust will be consistent with the requirements of this 
        section.
            ``(3) The interest of an individual in the balance of his 
        account is nonforfeitable.
            ``(4) The assets of the trust shall not be commingled with 
        other property except in a common trust fund or common 
        investment fund.
    ``(c) Account Balance Limit.--The aggregate account balance for all 
Catastrophe Savings Accounts maintained for the benefit of an 
individual (including qualified rollover contributions) shall not 
exceed--
            ``(1) in the case of an individual whose qualified 
        deductible is not more than $1,000, $2,000, and
            ``(2) in the case of an individual whose qualified 
        deductible is more than $1,000, the amount equal to the lesser 
        of--
                    ``(A) $15,000, or
                    ``(B) twice the amount of the individual's 
                qualified deductible.
    ``(d) Definitions.--For purposes of this section--
            ``(1) Qualified catastrophe expenses.--The term `qualified 
        catastrophe expenses' means expenses paid or incurred by reason 
        of a major disaster that has been declared by the President 
        under section 401 of the Robert T. Stafford Disaster Relief and 
        Emergency Assistance Act.
            ``(2) Qualified deductible.--With respect to an individual, 
        the term `qualified deductible' means the annual deductible for 
        the individual's homeowners' insurance policy.
            ``(3) Qualified rollover contribution.--The term `qualified 
        rollover contribution' means a contribution to a Catastrophe 
        Savings Account--
                    ``(A) from another such account of the same 
                beneficiary, but only if such amount is contributed not 
                later than the 60th day after the distribution from 
                such other account, and
                    ``(B) from a Catastrophe Savings Account of a 
                spouse of the beneficiary of the account to which the 
                contribution is made, but only if such amount is 
                contributed not later than the 60th day after the 
                distribution from such other account.
    ``(e) Tax Treatment of Distributions.--
            ``(1) In general.--Any distribution from a Catastrophe 
        Savings Account shall be includible in the gross income of the 
        distributee in the manner as provided in section 72.
            ``(2) Distributions for qualified catastrophe expenses.--
                    ``(A) In general.--No amount shall be includible in 
                gross income under paragraph (1) if the qualified 
                catastrophe expenses of the distributee during the 
                taxable year are not less than the aggregate 
                distributions during the taxable year.
                    ``(B) Distributions in excess of expenses.--If such 
                aggregate distributions exceed such expenses during the 
                taxable year, the amount otherwise includible in gross 
                income under paragraph (1) shall be reduced by the 
                amount which bears the same ratio to the amount which 
                would be includible in gross income under paragraph (1) 
                (without regard to this subparagraph) as the qualified 
                catastrophe expenses bear to such aggregate 
                distributions.
            ``(3) Additional tax for distributions not used for 
        qualified catastrophe expenses.--The tax imposed by this 
        chapter for any taxable year on any taxpayer who receives a 
        payment or distribution from a Catastrophe Savings Account 
        which is includible in gross income shall be increased by 10 
        percent of the amount which is so includible.
            ``(4) Retirement distributions.--No amount shall be 
        includible in gross income under paragraph (1) (or subject to 
        an additional tax under paragraph (3)) if the payment or 
        distribution is made on or after the date on which the 
        distributee attains age 62.
    ``(f) Tax Treatment of Accounts.--Rules similar to the rules of 
paragraphs (2) and (4) of section 408(e) shall apply to any Catastrophe 
Savings Account.''.
    (b) Tax on Excess Contributions.--
            (1) In general.--Subsection (a) of section 4973 of the 
        Internal Revenue Code of 1986 (relating to tax on excess 
        contributions to certain tax-favored accounts and annuities) is 
        amended by striking ``or'' at the end of paragraph (4), by 
        inserting ``or'' at the end of paragraph (5), and by inserting 
        after paragraph (5) the following new paragraph:
            ``(6) a Catastrophe Savings Account (as defined in section 
        530A),''.
            (2) Excess contribution.--Section 4973 of such Code is 
        amended by adding at the end the following new subsection:
    ``(h) Excess Contributions to Catastrophe Savings Accounts.--For 
purposes of this section, in the case of Catastrophe Savings Accounts 
(within the meaning of section 530A), the term `excess contributions' 
means the amount by which the aggregate account balance for all 
Catastrophe Savings Accounts maintained for the benefit of an 
individual exceeds the account balance limit defined in section 
530A(c)(1).''.
    (c) Conforming Amendment.--The table of parts for subchapter F of 
chapter 1 of the Internal Revenue Code of 1986 is amended by adding at 
the end the following new item:

               ``Part IX. Catastrophe Savings Accounts''.

    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2013.

     TITLE III--TAX CREDIT FOR NATURAL DISASTER MITIGATION PROPERTY

SEC. 301. NONREFUNDABLE PERSONAL CREDIT FOR NATURAL DISASTER MITIGATION 
              PROPERTY.

    (a) In General.--Subpart A of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 is amended by inserting after 
section 25D the following new section:

``SEC. 25E. NATURAL DISASTER MITIGATION PROPERTY.

    ``(a) Allowance of Credit.--In the case of an individual, there 
shall be allowed as a credit against the tax imposed by this chapter 
for the taxable year an amount equal to 25 percent of the qualified 
natural disaster mitigation property expenditures made by the taxpayer 
during such taxable year in connection with a qualified principal 
residence of the taxpayer.
    ``(b) Maximum Credit.--The credit allowed under subsection (a) with 
respect to any principal residence of the taxpayer for any taxable year 
shall not exceed the excess of--
            ``(1) $5,000 (half such amount in the case of a married 
        individual filing a separate return), over
            ``(2) the aggregate amounts allowed as a credit under this 
        section to the taxpayer (or the taxpayer's spouse) with respect 
        to such residence for all prior taxable years.
    ``(c) Limitation Based on Amount of Tax.--In the case of a taxable 
year to which section 26(a)(2) does not apply, the credit allowed under 
subsection (a) for any taxable year shall not exceed the excess of--
            ``(1) the sum of the regular tax liability (as defined in 
        section 26(b)) plus the tax imposed by section 55, over
            ``(2) the sum of the credits allowable under this subpart 
        (other than this section and sections 23, 24, and 25B) and 
        section 27 for the taxable year.
    ``(d) Qualified Natural Disaster Mitigation Property Expenditure.--
For purposes of this section, the term `qualified natural disaster 
mitigation property expenditure' means an expenditure for--
            ``(1) property to improve the strength of a roof deck 
        attachment,
            ``(2) property to create a secondary water barrier to 
        prevent water intrusion,
            ``(3) property to improve the durability of a roof 
        covering,
            ``(4) property to brace gable-end walls,
            ``(5) property to reinforce the connection between a roof 
        and supporting wall,
            ``(6) property to protect openings from penetration by 
        windborne debris,
            ``(7) property to protect exterior doors and garages,
            ``(8) property to improve the natural resiliency of the 
        property, including the restoration, establishment, or 
        enhancement of aquatic resources (having the meanings given 
        such terms by part 332 of title 33 of the Code of Federal 
        Regulations), as prescribed by the Secretary after consultation 
        with the Administrator of the Environmental Protection Agency 
        and the Assistant Secretary of the Army for Civil Works,
            ``(9) seismic retrofitting, including property to increase 
        resistance to seismic activity, ground motion, or soil failure 
        due to earthquakes, or
            ``(10) such other measures to mitigate natural disaster 
        damage to homes, as prescribed by the Secretary after 
        consultation with the Administrator of the Federal Emergency 
        Management Agency and, to the extent applicable, in accordance 
        with section 12(d) of the National Technology Transfer and 
        Advancement Act of 1995 (15 U.S.C. 272 note; Public Law 104-
        113).
    ``(e) Qualified Principal Residence.--For purposes of this section, 
the term `qualified principal residence' means the principal residence 
of the taxpayer (within the meaning of section 121) if such residence--
            ``(1) is assessed by the locality in which it is located at 
        a value which does not exceed 300 percent of the national 
        median home price (determined as of the close of the taxable 
        year for which the credit determined under this section is 
        allowed), and
            ``(2) is not severe repetitive loss property (as defined in 
        section 1361A of the National Flood Insurance Act (42 U.S.C. 
        4102a(b))).
    ``(f) Rules Related to Inspections and Labor Costs.--For purposes 
of this section--
            ``(1) Inspection requirement.--An expenditure shall be 
        taken into account in determining the qualified natural 
        disaster mitigation property expenditures made by the taxpayer 
        during the taxable year only if the installation of the 
        property with respect to which such expenditure is made has 
        been completed in a manner that is deemed to be adequate by an 
        inspector that is licensed or certified by the State or other 
        governmental authority, or its designee, having jurisdiction 
        over inspectors in the area where the installed property is 
        located.
            ``(2) Labor and inspection costs.--For purposes of this 
        section, expenditures for labor costs properly allocable to the 
        onsite preparation, assembly, or original installation of the 
        property described in subsection (d) (including the cost of 
        inspections referred to in paragraph (1)) shall be taken into 
        account in determining the qualified natural disaster 
        mitigation property expenditures made by the taxpayer during 
        the taxable year.
    ``(g) Basis Adjustment.--For purposes of this section, if a credit 
is allowed under this section for any expenditure with respect to any 
property, the increase in the basis of such property which would (but 
for this subsection) result from such expenditure shall be reduced by 
the amount of the credit so allowed.''.
    (b) Conforming Amendment.--The table of sections for subpart A of 
part IV of subchapter A of chapter 1 of such Code is amended by 
inserting after the item relating to section 25D the following new 
item:

``Sec. 25E. Natural disaster mitigation property.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2013.
                                 <all>
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