U.S. House of Representatives passes tax relief provision for wildfire victims

February 19, 2024

Bipartisan tax deal clears major hurdle for wildfire victim compensation

In a recent development, the U.S. House of Representatives passed a bipartisan tax deal that includes provisions for tax relief for victims of wildfires caused by utility companies.

This legislation, approved by a vote of 357-70, aims to exempt victims of such wildfires from paying federal taxes on compensation for their losses.

Jennifer Gray Thompson, CEO of After The Fire USA and a prominent advocate for this measure, hailed the moment as a milestone.

“Today is a milestone,” Gray Thompson remarked, highlighting the extensive, bipartisan effort spanning over two and a half years, coupled with the dedication of countless hours by wildfire survivors.

Advocacy and legislative journey

For years, victims of wildfires, notably those sparked by Pacific Gas & Electric Co.’s equipment in Northern California, have awaited restitution.

The establishment of the Fire Victim Trust, a settlement fund born out of PG&E’s bankruptcy, was meant to compensate individuals for lost homes, businesses, and loved ones.

However, the realization that these payments would be taxed by the Internal Revenue Service, potentially forcing victims into higher tax brackets and affecting their eligibility for essential benefits, added another layer of hardship.

Legislation to alleviate this federal tax burden faced multiple obstacles, including initial Senate rejection and delays in the House Ways and Means Committee, before the latest version was incorporated into the $78 billion Tax Relief for American Families and Workers Act of 2024.

The path forward

The bill now awaits consideration by the U.S. Senate, with the aim of providing tax relief on wildfire-related settlement payments received between December 31, 2019, and January 1, 2026.

This relief has been expanded to include compensation related to other disasters, such as the train derailment in East Palestine, Ohio.

The legislation’s passage is crucial for the recovery of fire survivors, as it allows for the filing of amended tax returns to recoup federal taxes paid on compensation.

Despite the optimism voiced by advocates like Gray Thompson and the bipartisan support in the House, some fire victims remain cautious, wary of congressional dysfunction and potential challenges ahead.

FSJA Comment

The recent advancement in tax relief legislation for victims of utility-sparked wildfires marks a pivotal moment in the long-standing battle for equitable compensation.

The overwhelming bipartisan support in the House reflects a growing recognition of the disproportionate burdens faced by disaster victims, particularly those affected by wildfires.

As the bill moves to the Senate, the stakes are high for countless individuals seeking justice and financial relief.

The collaborative effort between lawmakers, advocacy groups, and survivors underscores the importance of persistent, bipartisan solutions to complex issues.

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