In 1968, Congress created NFIP to address the increasing cost of federal disaster assistance by providing flood insurance to property owners in flood-prone areas, where such insurance was either not available or prohibitively expensive. The 1968 law also authorized premium subsidies to encourage community and property owner participation. To participate in the program, communities must adopt and agree to enforce floodplain management regulations to reduce future flood damage. In exchange, federally backed flood insurance is offered to residents in those communities. NFIP was subsequently modified by various amendments to strengthen certain aspects of the program. The Flood Disaster Protection Act of 1973 made the purchase of flood insurance mandatory for properties in SFHAs that are secured by mortgages from federally regulated lenders. This requirement expanded the overall number of insured properties, including those that qualified for subsidized premiums. The National Flood Insurance Reform Act of 1994 expanded the purchase requirement for federally backed mortgages on properties located in an SFHA. FEMA bases NFIP premium rates on a property’s flood risk and other factors. A FIRM is the official map of a community on which FEMA has delineated both the risk premium zones applicable to the participating community and SFHAs. FEMA studies and maps flood risks, assigning flood zone designations from high to low depending on the likelihood of flooding. Properties in SFHAs are at high risk, specifically a 1 percent or greater annual chance of flooding, and are designated as zones A, AE, V, or VE. FEMA also bases premium rates on property and policy characteristics. For example, FEMA bases premium rates on occupancy type (single-family or multifamily unit), number of floors, and elevation of the property—that is, the difference between the lowest elevation of the building relative to its base flood elevation—if applicable. Base flood elevation refers to the level relative to mean sea level at which there is a 1 percent or greater chance of flooding in a given year. Additionally, FEMA uses policy characteristics, such as building and content coverage amounts and policy deductible amounts, in setting premium rates. NFIP has two basic categories of premium rates: those intended to reflect the full risk of flooding to the group of properties within a rate class (full- risk rates) and those that are not intended to reflect full risk (subsidized rates). Full-risk rate structures are mostly buildings constructed after a community’s FIRM was published and are referred to as post-FIRM. These structures have been built to flood-resistant building codes or have had their flood risks mitigated and generally are at or above base flood elevation. Structures with subsidized rates are mostly buildings constructed before a community joined NFIP and are generally referred to as pre-FIRM because they were built before the potential for flood damages was known and identified on the community’s FIRM. Unlike full- risk rates, subsidized rates do not take elevation of the property into consideration. Property elevation can be obtained through elevation certificates. More recent legislation—the Biggert-Waters Act and HFIAA—affected NFIP’s ability to charge subsidized premium rates on certain types of properties and will likely change the number of policies that are subsidized, as well as the size of the subsidy. For example, the Biggert- Waters Act prohibited subsidies from being extended for homes sold to new owners after July 6, 2012, (date of enactment) and removed subsidies if properties lapsed in coverage as a result of the policyholders’ deliberate choice. However, HFIAA reinstated premium subsidies for properties that were purchased after July 6, 2012, and properties not insured by NFIP as of July 6, 2012. Because new policyholders may join NFIP and receive subsidized rates, such as owners of pre-FIRM properties that previously were not insured, the number of subsidized policies could increase over time. However, provisions under both acts gradually phase out subsidies by requiring FEMA to increase premiums annually until full-risk rates are reached. The Biggert-Waters Act requires FEMA to increase premiums by 25 percent each year until full-risk rates are reached for certain types of properties, including business properties, residential properties that are not a primary residence, properties that have sustained substantial damage or improvement, and severe repetitive loss properties. HFIAA did not affect the phase-out schedule for those properties, and the act also contains provisions requiring FEMA to increase premium rates on other subsidized policies, such as those for primary residences purchased after July 6, 2012, and primary residences not insured by NFIP as of the same date, by at least 5 percent but no more than 15 percent annually. FEMA supports a variety of flood mitigation activities that are designed to reduce flood risk and thus NFIP’s financial exposure. These activities, which are implemented at the state and local levels, include hazard mitigation planning; the adoption and enforcement of floodplain management regulations and building codes; and the use of hazard control structures, such as levees, dams, and floodwalls or natural protective features such as wetlands and dunes. Community-level mitigation funding is available through FEMA via grant programs such as the Flood Mitigation Assistance Program. Through these programs, FEMA provides communities cost-sharing opportunities for mitigation activities. At the individual property level, mitigation options include elevating a building to or above the area’s base flood elevation, relocating the building to an area with less flood risk, or purchasing and demolishing the building and turning the property into green space. Although any pre-FIRM property located in an SFHA in a participating community is currently generally eligible for a subsidy, according to some stakeholders we interviewed and our analysis of literature we reviewed, options for targeting assistance to subsidized NFIP policyholders who may experience difficulty paying full-risk rates include means testing based on the income level of policyholders or geographic areas, setting premium caps, and basing assistance on the cost of mitigating the risk of damage to a home. These options are not mutually exclusive and could be combined depending on Congress’s policy priorities for NFIP. However, they all involve trade-offs, and implementing any of them would likely be challenging. According to some stakeholders we interviewed and our analysis of literature we reviewed, means testing to determine eligibility for NFIP assistance could help directly address affordability concerns by targeting subsidies to those in need. According to a NAS report on NFIP affordability we reviewed, a means-tested program could be designed in various ways, including targeting assistance based on individual policyholders’ financial need or the financial characteristics of a local geographic area. Currently, NFIP subsidies are tied to the property, not the property owner, and any pre-FIRM property located in an SFHA in a participating community is eligible for a subsidy. In contrast, a means- tested program would decouple the subsidy from the property and instead attach it to the policyholder or a group of policyholders on the basis of need, as determined by specified financial requirements and eligibility criteria. In our July 2013 report on subsidized properties, we found that this approach would allow the federal government to provide assistance only to those NFIP policyholders deemed eligible, with the rest paying full- risk rates. Means-tested programs that consider individuals’ financial need are not new to the federal government, and some stakeholders we interviewed suggested that a means-based assistance program for NFIP could be designed similarly to other existing programs. Over the years, Congress has established a number of programs to provide cash and noncash assistance based on the financial need of individuals and families. For example, to be eligible for certain federal housing programs, individual households must meet specific income limits. These limits reflect the financial characteristics of a local area because they are expressed as a percentage of the area median income (AMI) for the county or metropolitan area in which the household is located, and the limits range from 30 percent through 140 percent of AMI. For example, to be eligible for homeowner rehabilitation and homebuyer assistance under HUD’s HOME Investment Partnership Program, households must have incomes at or below 80 percent of AMI. Similarly, under the Federal Home Loan Bank System’s Community Investment Program, the income of a qualifying mortgage borrower may not exceed 115 percent of AMI. Some stakeholders we interviewed suggested that similar AMI limits could be used to determine eligibility for NFIP because these measures reflect local characteristics. An NFIP assistance program based on individuals’ or households’ income would require a similar threshold to be set. In order for FEMA to implement a means-tested option that considers individual policyholders’ financial need, it would need income information at the individual or household level for policyholders who receive a subsidized rate under the current NFIP structure. Because the current NFIP structure attaches the assistance to the property rather than the policyholder, FEMA does not collect income information for policyholders who receive subsidies. As a result, a system to collect this information would need to be designed and implemented. We identified two primary ways FEMA could obtain income data, but gathering such information could be challenging. According to some stakeholders we interviewed, IRS could provide FEMA with income data it collects from tax filers. For example, some stakeholders said that a partnership between FEMA and IRS could be established, similar to the partnership IRS and the Department of Education have for the Free Application for Federal Student Aid (FAFSA) form. The Department of Education began coordinating with IRS in 2010 to provide an option for tax filers to prepopulate the FAFSA using an automatic data transfer from their tax returns. However, restrictions set forth in the Internal Revenue Code prohibit the disclosure of taxpayer information to other federal agencies without a statutorily specified purpose, and new processes would need to be established if taxpayer data were to be used. Under section 6103 of the Internal Revenue Code, federal tax information must be kept confidential and may not be disclosed, except as otherwise specifically authorized.