S. 586 — Flood Insurance Affordability Tax Credit Act

This section establishes a new refundable tax credit under IRC §36C equal to 33% of premiums paid by a taxpayer for flood insurance under the National Flood Insurance Program (NFIP)—the federal program providing flood insurance in designated high-risk areas where private coverage is generally unavailable—covering the taxpayer's principal residence. The credit phases out ratably for household incomes above 350% of the federal poverty line (fully phasing out at 435%, using rules similar to the premium tax credit under IRC §36B), is denied to married individuals filing separately and to dependents, and is reconciled with advance payments under IRC §7527B (with regulations required for coordination). It also disallows a deduction under IRC §280C for the credited portion of such premiums and includes conforming amendments; the changes apply to taxable years beginning after enactment.

This section establishes a new program under IRC §7527B under which the IRS Secretary makes payments to the FEMA Administrator of applicable flood insurance premiums (as defined in IRC §36C(c)) on behalf of applicable individuals who elect the program. Payments on behalf of any individual during a taxable year are limited to 33% of such premiums paid or incurred by the individual (after reductions under IRC §36C(b) based on the individual's most recent available tax return information or other reliable data).