Florida Bill Could Give Insurance Tax Relief

A newly introduced bill could provide relief to Floridians hit by rising flood insurance costs, as lawmakers move to save the Sunshine State's declining homeowners' insurance market.

Congressman Byron Donalds, a Republican serving as representative for Florida's 19th congressional district since 2021, introduced the bill—HR 8102—on April 20, when it was referred to the House Committee on Ways and Means, alongside Senator Rick Scott, also a Republican.

The proposed legislation, titled "The Flood Insurance Relief Act," wants to amend the Internal Revenue Code of 1986 to provide an above-the-line deduction for flood insurance premiums and offer "much-needed tax relief for National Flood Insurance Program (NFIP) and private insurance policyholders across Southwest Florida, the Sunshine State, and the nation," as per a press release shared with Newsweek.

Florida is in the midst of a homeowners' insurance crisis caused by excessive litigation, widespread fraud and the increased risk of more frequent and more severe extreme weather events brought about by climate change.

All these factors have made the Sunshine State a less profitable and more risky market for private insurers, some of which have either withdrawn from the state completely in the past few years (as did Farmers), announced they won't be renewing policies or cut their coverage.

Homeowners in Southwest Florida, a region which suffered the devastating impact of Hurricane Ian in 2022, have been particularly hit by rising flood insurance costs.

The NFIP, which is managed by the Federal Emergency Management Agency (FEMA), provides flood insurance to property owners, renters and businesses across the country. In April 2023, the NFIP fully implemented its new pricing methodology, Risk Rating 2.0, raising rates nationwide as premiums caught up with the increased risk.

In 12 states flood insurance premiums have doubled, according to a study by First Street Foundation mentioned by Inside Climate News. In Florida, they have climbed by 231 percent, in Louisiana by 234 percent, in West Virginia by 272 percent, and in Kentucky and South Dakota by 207 percent each.

This jump in premiums has led to many homeowners dropping flood insurance entirely where this wasn't mandatory—a risky decision should a hurricane strike. Many have moved to Citizens Property Insurance, Florida's state-backed insurer of last resort and now the largest insurer in the state. According to Bankrate, all properties covered by Citizens now require flood coverage with the exception of policies without wind damage coverage and condo policies.

The growth in the number of policies offered by Citizens has worried lawmakers and experts, as they fear that the insurer's budget won't cover the damage potentially caused by a hurricane or a series of major storms hitting the state. In that case, the burden of covering the damage claims would fall on all Floridians. According to FEMA, just one inch of floodwater can cause up to $25,000 in damage.

To solve this issue, Florida regulators have recently approved six new insurers which are expected to begin offering policies in the state in the coming months, and Citizens has vowed to downsize.

Donalds' bill incentivizes flood insurance coverage by creating a non-refundable tax deduction for flood insurance premiums. If passed, the amendments made by the bill would apply to taxable years beginning after the date of the enactment of the legislation.

"Over recent years, residents of Southwest Florida and the Sunshine State have been faced with an exponential rise in flood insurance costs," Donalds said. "This unsustainable trend is severely impacting hardworking Florida families and it is critical that this problem is immediately addressed," he added.

Scott said in a statement shared with Newsweek that the bills introduced in the House and the Senate are a quick fix while they "continue to work on permanent solutions to the problems plaguing the NFIP."