DOAA
Georgia Department
of Audits & Accounts
Greg S. Griffin
State Auditor
March 18, 2025
Honorable Chuck Hufstetler
Chairman, Senate Finance
121-C State Capitol
Atlanta,
GA 30334
SUBJECT: Fiscal Note
House Bill 511 (LC 50 1210S)
Dear Chairman Hufstetler:
The bill would create a state income tax deduction for contributions to catastrophe savings accounts
(CSA)
and interest earned on such contributions, subject to certain restrictions outlined in the bill. A
CSA is
any regular savings or money market account established by a resident individual taxpayer, for
residential
property in Georgia that serves as their primary residence, to cover qualified catastrophe
expenses. Contributions are subject to certain limits outlined in the bill. This bill would become
effective July 1, 2025, and be applicable to taxable years beginning on or after January 1, 2026.
Impact on Revenue
Georgia State University's Fiscal Research Center (FRC) estimated that the bill would decrease state
revenue as shown in Table 1. The appendix provides details of the analysis.
Table 1. Estimated State Revenue Effects
($ millions) FY 2026 FY 2027 FY 2028 FY 2029 FY 2030
State Revenue Effect ($0.4) ($0.4) ($0.4) ($0.4)
Impact on Expenditures
The Department of Revenue would be able to implement the provisions of the bill with existing
resources.
Respectfully,
Greg S. Griffin
State Auditor
GSG/RD/mt
Richard Dunn, Director
Office
of Planning and Budget
270 Washington Street, SW, Suite 4-101 Atlanta, Georgia 30334 [ Phone 404.656.2180
H.B.511 Fiscal Note for House Bill 511 (LC 50 1210S)
Page 2
Analysis by the Fiscal Research Center
The subject bill proposes to create a state income tax deduction for contributions to, and interest earned
from, catastrophe savings accounts (CSA), defined as any regular savings or money market account
established by a resident individual taxpayer, for residential
property in Georgia that serves as their
primary residence, to cover qualified catastrophe expenses. These accounts must be labeled as CSAs to
qualify for
the deduction. Qualified catastrophe expenses are defined as "a qualified deductible paid for
damage resulting from a catastrophic event" and "expenses incurred in repairing or replacing damage
to a taxpayer's primary residence as a result of a catastrophic event that are not covered by a
homeowner's insurance policy." A taxpayer may establish only one CSA and must specify that the
purpose of the account is to cover qualified catastrophe expenses. CSA funds later withdrawn but not
used by the taxpayer for qualified expenses will be taxed as ordinary income. If the owner of a CSA
account dies, the inheritor must pay income taxes on these funds ( unless they are the spouse of the
account owner).
For a taxpayer whose qualified deductible is $1,000 or less, the total amount of CSA contributions is
capped at $2,000. For a taxpayer whose qualified deductible is greater than $1,000, the total amount of
CSA contributions cannot exceed the lesser of twice the amount of the qualified deductible or $25,000.
For self-insured taxpayers, the total amount of CSA contributions is capped at $250,000. However, in
no case can the amount of CSA contributions exceed the fair market value of the taxpayer's primary
residence.
Alabama, Mississippi,
and South Carolina all have established the deductions proposed under this bill.
Data from these states indicates
that CSA participation is likely to be low. In 2022, Alabama and
Mississippi had just 0.04 and 0.02 percent of tax returns, respectively, that reported CSA deductions.
One driver of low participation may be that state-only income tax benefits are not sufficient to attract
participation. Absent a similar bill being
passed at the federal level, contributions to CSAs would not be
deductible from federal income tax and interest earned would be federally taxable.
The fiscal impacts presented in Table 1 are based on the following data and assumptions:
•
In 2024, the Alabama Tax Expenditure Report estimated the tax expenditure cost of a similar
provision
to be $120,000.
•
In 2024, the Mississippi Tax Expenditure Report estimated the tax expenditure cost of a similar
provision to
be $64,000.
• This information and state income tax rates from Tax Foundation allow for a calculation of
implied contributions and interest.
• Data from
the U.S. Bureau of Economic Analysis shows that in 2023, Alabama and Mississippi's
total personal income were approximately 36.7
and 18.2 percent of Georgia's personal income,
respectively.
• These ratios were used to gross
up the implied contributions and interest for these two states to
serve as
an estimate of what Georgia's contributions and interest would have been in 2024 had
the law been in effect at that time.
• Alabama's tax expenditure estimate for
CSA deductions grew at an average rate of 1.46 percent
from 2018
to 2024. Over the last three years, Mississippi's tax expenditure estimate for CSA
deductions has trended negatively. The estimates assume 1.46 percent annual growth in CSA
contributions and interest, matching the early experience of Alabama with this program.
• Projected deductible contributions
and interest in Georgia are multiplied by the state income tax
rate of 5.39 percent to estimate the fiscal impact.
H.B. 51] Fiscal Note for House Bill 511 (LC 50 1210S)
Page 3
• Fiscal impacts are
assumed to occur only at the time of filing.
For this analysis, a constant income tax rate of 5.39 percent is assumed. However, if certain conditions
are met, the state income tax rate will decrease and thus impact these estimates. Table 2 summarizes
this analysis.
Table 2. Projected CSA Contributions and Interest
($ millions) TV 2026 TV 2027 TV 2028 TV 2029 TV 2030
CSA Contributions and Interest $7.7 $7.8 $7.9 $8.1 $8.2
Income Tax Rate 5.39% 5.39% 5.39% 5.39% 5.39%
State Fiscal Impact ($0.42) ($0.42) ($0.43) ($0.43) ($0.44)
If a similar bill were passed at the federal level, incentives for CSAs would be much greater, and thus,
related activity would likely be much higher, increasing the cost to the state.
H.B. 511