AL HB721

Establishes catastrophe savings accounts for Alabama homeowners to cover insurance deductibles and uninsured losses from windstorms, hurricanes, tornadoes, hail, and similar events.

Allows individual taxpayers to claim a deduction against state income tax for amounts contributed to a catastrophe savings account, and exempts all interest earned by the account from state income tax.

Sets contribution limits based on insurance deductible amount: $2,000 maximum for deductibles of $1,000 or less; up to $15,000 for deductibles exceeding $1,000; and up to $250,000 for self-insured individuals (not exceeding home value).

Requires distributions from the account to be included in taxable income unless used for qualified catastrophe expenses, with an additional 2.5% tax penalty on taxable distributions (exceptions apply for taxpayers over age 70 or those no longer owning a qualifying residence).

Protects catastrophe savings accounts from attachment, levy, garnishment, or legal process; authorizes Department of Revenue to promulgate implementing rules; becomes effective immediately upon passage.