New Tax Credit Offers 30% Relief for Businesses Protecting Waterfronts from Natural Disasters, Starting 2026

The Working Waterfront Disaster Mitigation Tax Credit Act is setting up a major incentive for coastal businesses to prepare for the next big storm. Essentially, this bill creates a brand-new federal tax credit that covers 30% of the cost of specific disaster mitigation projects for qualifying waterfront properties. This isn’t pocket change—the credit is capped at $300,000 per taxpayer annually, a limit that will adjust for inflation starting in 2027. The goal is simple: use tax breaks to encourage private investment in hardening coastal infrastructure against natural hazards, with the changes applying to tax periods starting after December 31, 2025.

The Fine Print on Floodproofing

So, who can claim this 30% credit? The bill is very specific about what counts. First, the property must be “working waterfront property,” meaning it’s used for an active business that provides access to navigable waters for things like commercial fishing, boatbuilding, or other water-dependent activities. Crucially, that business can’t be a corporate giant; its average annual gross receipts over the prior three years must be under $47 million (a figure that also adjusts for inflation after 2026).

Second, the money spent—the “qualified investment”—must be on eligible property that is new, depreciable, and part of a project specifically designed to protect the property from natural hazards. Think structural elevation, floodproofing, shoreline stabilization against erosion, or installing advanced warning systems. The bill even ties these projects to specific building standards, requiring compliance with the 2021 International Building Code (or later approved versions) to ensure the work is actually effective. If you’re a small shipyard or a fishing dock owner, this credit could make the difference between affording a necessary seawall upgrade or just crossing your fingers during hurricane season.

Who Pays and Who Gets Left Out

While this credit is a clear win for eligible coastal businesses—helping them reduce risk and potentially lowering future insurance costs—it’s important to look at the practical limitations. The $300,000 cap is generous and should cover substantial projects for small to mid-sized businesses, which are the target audience given the $47 million revenue limit. However, the bill explicitly states that the credit only applies to new property or construction; qualified rehabilitation expenditures are excluded. This means if a business wants to simply retrofit an older, existing structure using cost-effective methods, they might not qualify for the credit, potentially pushing them toward more expensive new construction just to claim the tax break.

Also, if your business is near the water but doesn't meet the strict definition of “water-dependent activity”—say, a coastal tourist shop that doesn't directly support fishing or boat traffic—you're likely out of luck. This specificity is good for keeping the credit focused but means many businesses affected by coastal hazards won't benefit. Ultimately, the cost of this tax expenditure falls on the general federal taxpayer, making it a targeted subsidy to increase the resilience of a specific, economically vital sector. The Treasury Department will also need to collaborate with FEMA to issue rules, which suggests a necessary layer of oversight to ensure the projects are truly effective mitigation efforts.