Stranded - State Grant Program - Tax Concerns

Feeling a bit stranded in the $10,000 Grant Program from the State?    You are not alone.

You made it through the Strengthen Alabama Home (SAH) Grant Program, finally got your roof replaced, then WHAM the State of Alabama smacks you with a tax bill for the grant dollars you might have thought were "a gift."


First, there was a brief mention of having to pay a third-party evaluator to process your initial application, that's $400-$750 that you had to pay whether you were approved or not.


Then, through no fault of your own, the $10,000 did not cover the costs of your roof replacement given the high-cost installation techniques and labor that go into meeting the basic Fortified Home 
standards.    (Click the link below to review the Fortified program details)

Fortified HOME

Now comes the tax man for his share of the grant money you thought was for your home improvements.   While it is mentioned in your agreement with the grant program, it is far from clear that you WILL receive a 1099 for this "grant."


Let's be sure this is sinking in - you applied through the State for a grant to strengthen your home, replace your roof and possibly had to reinforce the gables of your home.   That took months of near zero communications from the program managers, but your roof was finally replaced.


You then had to pay the program's "approved contractors" for all costs over the $10,000 grant (more than half of the participants in this program have paid-out a few hundred to several thousand dollars). Again, this probably came as a surprise to many in the program.   Not that they would have to pay the overage, but how MUCH you would have to pay until you received three quotes, again, from an "approved contractor." 


There was no one available to answer your questions, calls were never returned, and the information you received was possibly too complex to comprehend (construction lingo and such) unless you are a construction lawyer and/or an "approved contractor."


This is an example:    A very basic part of a roof replacement process under the Fortified HOME and Strengthen Alabama Homes program:

Page 1 of the Home Review Report that you received:  Shingles require ASTM D-3161 Class F and ASTM D 7158 Class H.    Any questions about that?   It's fairly standard in the roofing business, but few roofers could decipher that shingle requirement - how are you supposed to know?


What now?   You had best talk to your tax preparer about the taxes due, both Federal and State, due to the 1099 you received, or will receive.     Please do suggest that your preparer review any tax credits available, as the State of Alabama does offer a credit for fortification, but like the "lingo" in the grant documents, the tax codes are akin to reading Latin for the first time -- what in the world are they doing to us?


This is a hint as to where in the tax codes you might find information on tax credits:

Section 40-18-15.4

Deductions for certain retrofitting or upgrades to homes - Residence in Alabama Insurance Underwriting Association zone.