S. 2538: Working Waterfront Disaster Mitigation Tax Credit Act

This bill, titled the "Working Waterfront Disaster Mitigation Tax Credit Act," proposes amendments to the Internal Revenue Code to provide financial incentives aimed at disaster mitigation for working waterfront properties. Here’s a summary of the key provisions of the bill:

Tax Credit Implementation

The bill introduces a tax credit equal to 30% of qualified investments made for disaster mitigation projects on working waterfront property. This is intended to help such properties better withstand natural hazards.

Maximum Credit Limitations

• The maximum tax credit that any taxpayer can claim is capped at $300,000.
• The credit will be adjusted for inflation after 2026, ensuring it remains relevant over time.
• No taxpayer can claim this credit more than once in a 10-year period unless it pertains to certain qualified progress expenditures.

Definitions and Criteria

Qualified Investment

The "qualified investment" covers the basis of any eligible property used in a disaster mitigation project and must be placed in service during the taxpayer’s taxable year.

Eligible Property Criteria

Eligible properties must be:

• Tangible and eligible for depreciation.
• Either constructed or acquired by the taxpayer, with the original use of the property commencing with the taxpayer.

Types of Qualifying Projects

The bill outlines that a qualifying working waterfront disaster mitigation project must be designed to prevent or reduce damage from natural hazards, and may include:

• Structural elevation of buildings.
• Flood risk reduction measures like stormwater management.
• Shoreline stabilization efforts to prevent environmental erosion.
• Floodproofing strategies to protect infrastructure.
• Retrofitting existing structures to mitigate potential hazards.
• Warning systems to alert residents of impending hazards.

Working Waterfront Property Definition

A "working waterfront property" is defined as real property used actively in a trade or business that provides access to navigable waters for water-dependent activities such as commercial and recreational fishing, aquaculture, and boatbuilding.

Regulatory Oversight

The bill mandates the Secretary of the Treasury, in consultation with FEMA’s Administrator, to issue necessary regulations to implement and manage the tax credit program effectively.

Financial Provisions for U.S. Possessions

The bill also addresses payments to U.S. territories with tax systems, ensuring that they receive funds equivalent to losses incurred due to the introduction of this tax credit.

Effective Date

The proposed amendments are set to take effect for taxable years beginning after December 31, 2025.

Relevant Companies

• PKG (Packaging Corporation of America): This company might be impacted if they own waterfront properties that could qualify for the tax credit under the bill's provisions.
• DVN (Devon Energy Corporation): Devon's operations related to natural resources extraction may benefit from investments made towards disaster mitigation projects involving waterfront properties.