‘‘(ee) prevent smoke inhala-
tion, such as air filters or other 
equipment designed to prevent 
smoke from entering the dwelling 
unit, 
‘‘(II) for property relating to sat-
isfying the standards required for re-
ceipt of a FORTIFIED designation or 
a Wildfire Prepared designation from 
the Insurance Institute for Business 
and Home Safety, or any third-party 
verified 
certification 
demonstrating 
compliance with nationally recognized 
and consensus-based hazard mitiga-
tion or resilience standards, provided 
that the qualified dwelling unit re-
ceives such designation or certifi-
cations following installation of such 
property, or 
‘‘(III) for any other hazard miti-
gation activity which has been identi-
fied by the Secretary, in consultation 
with the Administrator of the Federal 
Emergency Management Agency, for 
mitigation of a natural hazard or 
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compliance 
with 
other 
consensus- 
based resiliency standards. 
‘‘(B) HAZARD-SPECIFIC APPLICABILITY.— 
‘‘(i) IN GENERAL.—Subject to clause 
(ii), the term ‘qualified disaster mitigation 
expenditure’ shall only apply to expendi-
tures relating to a qualified dwelling unit 
which are described in subparagraph (A) if 
such expenditures address a hazard type 
identified in the applicable State or tribal 
Standard State Mitigation Plans or En-
hanced State Mitigation Plans, as prepared 
under section 201.4 or 201.5 of title 44, 
Code of Federal Regulations (as in effect 
on the date of enactment of this section). 
‘‘(ii) NEGATIVE
LISTS.—The Sec-
retary, in consultation with the Adminis-
trator of the Federal Emergency Manage-
ment Agency, may publish a list of inappli-
cable expenditures which are region-spe-
cific in order to prohibit the application of 
subsection (a) for expenditures relating to 
hazards which are not relevant to the loca-
tion of the qualified dwelling unit. 
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‘‘(C) EXCEPTION.—The term ‘qualified 
disaster mitigation expenditure’ shall not in-
clude any expenditure or portion thereof which 
is paid, funded, or reimbursed by a Federal, 
State, or local government entity, or any polit-
ical subdivision, agency, or instrumentality 
thereof. 
‘‘(2) QUALIFIED DWELLING UNIT.—The term 
‘qualified dwelling unit’ means a dwelling unit which 
is located— 
‘‘(A) in the United States or in a territory 
of the United States, and 
‘‘(B) in an area— 
‘‘(i) which, during the taxable year or 
the period of the 5 taxable years preceding 
such taxable year, has received hazard 
mitigation assistance through the Federal 
Emergency Management Agency in regard 
to any natural disaster which, with respect 
to the expenditure described in paragraph 
(1) which is made by the taxpayer, is ap-
plicable to such expenditure, and 
‘‘(ii)(I) in which a Federal natural 
disaster declaration has been made within 
the preceding 5-year period, 
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‘‘(II) which is adjacent to an area de-
scribed in subclause (I), or 
‘‘(III) which, with respect to any tax-
able year, has been designated as a com-
munity disaster resilience zone (as defined 
in section 206(a) of the Robert T. Stafford 
Disaster Relief and Emergency Assistance 
Act (42 U.S.C. 5136(a))). 
‘‘(d) LIMITATION.— 
‘‘(1) IN GENERAL.—In the case of an expendi-
ture described in clause (i) or (ii) of subsection 
(c)(1)(A), such expenditure shall be taken into ac-
count in determining the qualified disaster mitiga-
tion expenditures made by the taxpayer during the 
taxable year only if the onsite preparation, assembly, 
or original installation of the property with respect 
to which such expenditure is made has been com-
pleted in a manner that is deemed to be in compli-
ance with the latest published editions of relevant 
consensus-based codes, specifications, and standards 
or any more restrictive Federal, State, or local flood-
plain management standards and consistent with 
floodplain management regulations for the local ju-
risdiction in which the qualified dwelling unit is lo-
cated. 
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‘‘(2) LATEST PUBLISHED EDITIONS.—The term 
‘latest published editions’ means, with respect to rel-
evant consensus-based codes, specifications, and 
standards, either of the 2 most recently published 
editions. 
‘‘(e) LABOR COSTS.—For purposes of this section, 
expenditures for labor costs properly allocable to the onsite 
preparation, assembly, or original installation of the prop-
erty described in clause (i) or (ii) of subsection (c)(1)(A) 
shall be taken into account in determining the qualified 
disaster mitigation expenditures made by the taxpayer 
during the taxable year. 
‘‘(f) INSPECTION COSTS.—For purposes of this sec-
tion, expenditures for the cost of any inspection required 
under subsection (d) which is properly allocable to the in-
spection of the preparation, assembly, or installation of 
the property described in clause (i) or (ii) of subsection 
(c)(1)(A) shall be taken into account in determining the 
qualified disaster mitigation expenditures made by the 
taxpayer during the taxable year. 
‘‘(g) CARRYFORWARD OF UNUSED CREDIT.— 
‘‘(1) IN
GENERAL.—If the credit allowable 
under subsection (a)(1) for any taxable year exceeds 
the applicable tax limit for such taxable year, such 
excess shall be a carryover to each of the 5 suc-
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ceeding taxable years and, subject to the limitations 
of paragraph (2), shall be added to the credit allow-
able by subsection (a)(1) for such succeeding taxable 
year. 
‘‘(2) LIMITATION.—The amount of the unused 
credit which may be taken into account under para-
graph (1) for any taxable year shall not exceed the 
amount (if any) by which the applicable tax limit for 
such taxable year exceeds the sum of— 
‘‘(A) the credit allowable under subsection 
(a)(1) for such taxable year determined without 
regard to this subsection, and 
‘‘(B) the amounts which, by reason of this 
subsection, are carried to such taxable year and 
are attributable to taxable years before the un-
used credit year. 
‘‘(3) APPLICABLE TAX LIMIT.—For purposes of 
this subsection, the term ‘applicable tax limit’ means 
the limitation imposed by section 26(a) for the tax-
able year reduced by the sum of the credits allowable 
under this subpart (other than this section). 
‘‘(h) DOCUMENTATION.—Any taxpayer claiming the 
credit under this section shall provide the Secretary with 
adequate documentation regarding the specific qualified 
disaster mitigation expenditures made by the taxpayer 
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during the taxable year, as well as such other information 
or documentation as the Secretary may require.’’. 
(b) CONFORMING AMENDMENT.—The table of sec-
tions 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 25F the following new item: 
‘‘Sec. 25G. Disaster mitigation expenditures.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2025. 
SEC. 3. BUSINESS-RELATED CREDIT FOR DISASTER MITIGA-
TION. 
(a) IN GENERAL.—Subpart D of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of 
1986 is amended by inserting after section 45AA the fol-
lowing new section: 
‘‘SEC. 45BB. DISASTER MITIGATION CREDIT. 
‘‘(a) GENERAL RULE.—For purposes of section 38, 
the disaster mitigation credit determined under this sec-
tion for any taxable year is an amount equal to 25 percent 
of the qualified disaster mitigation expenditures made by 
the taxpayer during the taxable year. 
‘‘(b) MAXIMUM CREDIT.— 
‘‘(1) IN GENERAL.—Subject to paragraph (2), 
the amount of the credit determined under sub-
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section (a) for any taxable year shall not exceed 
$5,000. 
‘‘(2) PHASEOUT.— 
‘‘(A) IN
GENERAL.—The amount under 
paragraph (1) for the taxable year shall be re-
duced (but not below zero) by an amount which 
bears the same ratio to the amount under such 
paragraph as— 
‘‘(i) the amount (not less than zero) 
equal to the average gross receipts of the 
taxpayer over the 3 preceding taxable 
years minus $5,000,000, bears to 
‘‘(ii) $5,000,000. 
‘‘(B) INFLATION
ADJUSTMENT.—In the 
case of any taxable year after 2026, each of the 
dollar amounts under subparagraph (A) shall 
be increased by an amount equal to— 
‘‘(i) such dollar amount, multiplied by 
‘‘(ii) the cost-of-living adjustment de-
termined under section 1(f)(3) for the cal-
endar year in which the taxable year be-
gins, determined by substituting ‘calendar 
year 2025’ for ‘calendar year 2016’ in sub-
paragraph (A)(ii) thereof. 
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‘‘(C) ROUNDING.—If any reduction deter-
mined under subparagraph (A) is not a multiple 
of $50, or any increase under subparagraph (B) 
is not a multiple of $50, such amount shall be 
rounded to the nearest multiple of $50. 
‘‘(c) QUALIFIED DISASTER MITIGATION EXPENDI-
TURE.— 
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, the term ‘qualified disaster mitigation expendi-
ture’ has the same meaning given such term under 
paragraph (1) of section 25G(c), except that ‘place 
of business’ shall be substituted for ‘qualified dwell-
ing unit’ each place it appears in such paragraph. 
‘‘(2) PLACE
OF
BUSINESS.—For purposes of 
this section, an expenditure shall not be treated as 
a qualified disaster mitigation expenditure (as de-
fined in paragraph (1)) unless the taxpayer’s place 
of business is located— 
‘‘(A) in the United States or in a territory 
of the United States, and 
‘‘(B) in an area— 
‘‘(i) in which a Federal natural dis-
aster declaration has been made within the 
preceding 5-year period, 
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‘‘(ii) which is adjacent to an area de-
scribed in clause (i), 
‘‘(iii) which, during the taxable year 
or the period of the 5 taxable years pre-
ceding such taxable year, has received haz-
ard mitigation assistance through the Fed-
eral Emergency Management Agency in re-
gard to any natural disaster which, with 
respect to the expenditure described in sec-
tion 25G(c)(1) which is made by the tax-
payer, is applicable to such expenditure, or 
‘‘(iv) which, with respect to any tax-
able year, has been designated as a com-
munity disaster resilience zone (as defined 
in section 206(a) of the Robert T. Stafford 
Disaster Relief and Emergency Assistance 
Act (42 U.S.C. 5136(a))). 
‘‘(d) SPECIAL RULES.—Rules similar to the rules of 
subsections (d) through (g) of section 25G shall apply for 
purposes of this section. 
‘‘(e) NO DOUBLE BENEFIT.—No credit shall be de-
termined under this section with respect to any expendi-
tures for which a credit was allowed under section 25G.’’. 
(b) CONFORMING AMENDMENTS.— 
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(1) Section 38(b) of such Code is amended by 
striking ‘‘plus’’ at the end of paragraph (40), by 
striking the period at the end of paragraph (41) and 
inserting ‘‘, plus’’, and by adding at the end the fol-
lowing new paragraph: 
‘‘(42) the disaster mitigation credit determined 
under section 45BB(a).’’. 
(2) The table of sections for subpart D of part 
IV of subchapter A of chapter 1 of such Code is 
amended by inserting after the item relating to sec-
tion 45AA the following new item: 
‘‘Sec. 45BB. Disaster mitigation credit.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2025. 
Æ 
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