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— 
‘‘(A) located— 
‘‘(i) in the United States or in a terri-
tory of the United States, and 
‘‘(ii) in an area— 
‘‘(I) in which a Federal disaster 
declaration has been made within the 
preceding 10-year period, or 
‘‘(II) which is adjacent to an 
area described in subclause (I), and 
‘‘(B) used as a residence by the taxpayer. 
‘‘(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, 
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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. 
‘‘(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-
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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) 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 
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 25D the following new item: 
‘‘Sec. 25E. Disaster mitigation expenditures.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2019. 
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 45S the fol-
lowing new section: 
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‘‘SEC. 45T. 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-
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 2020, each of the 
dollar amounts under subparagraph (A) shall 
be increased by an amount equal to— 
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‘‘(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 2019’ for ‘calendar year 2016’ in sub-
paragraph (A)(ii) thereof. 
‘‘(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.—For purposes of this section, the term ‘qualified 
disaster mitigation expenditure’ has the same meaning 
given such term under paragraph (1) of section 25E(c), 
except that ‘place of business’ shall be substituted for 
‘qualified dwelling unit’ each place it appears in such para-
graph. 
‘‘(d) SPECIAL RULES.—Rules similar to the rules of 
subsections (d) through (g) of section 25E shall apply for 
purposes of this section.’’. 
(b) CONFORMING AMENDMENTS.— 
(1) Section 38(b) of such Code is amended by 
striking ‘‘plus’’ at the end of paragraph (31), by 
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