California’s Federal Disaster Tax Relief Act is progressing towards becoming law. If enacted, the bill would exempt wildfire relief payments and related expenses from federal income taxes. The bill now advances to the Senate.
What’s Included in the Disaster Tax Relief Bill?
The House approved the Federal Disaster Tax Relief Act (H.R. 5863) with a vote of 382-7. The legislation includes provisions introduced by a U.S. representative, exempting fire victims from federal income taxes on relief payments.
The representative emphasized the significance of the bipartisan vote, stating it is a crucial step toward recovery for those who lost homes, businesses, and loved ones.
Additionally, the bill includes the Protect Innocent Victims Of Taxation After Fire Act (H.R. 4970) from another congressman. He noted that fire victims have waited long enough, and their award money should not be subject to IRS taxation.
If passed, the bill would exempt victims of PG&E wildfires and other qualified wildfire victims from owing federal income tax on settlement money or attorney fees. Specifically, it excludes from a taxpayer’s gross income any amount received as compensation for expenses or losses due to a qualified wildfire disaster, defined as occurring after December 31, 2014, and declared a federal disaster.
The bill also excludes relief payments for losses from the East Palestine, Ohio, train derailment and declares Hurricane Ian and other federally declared disasters as qualified disasters.
Progress of the Bill
The legislation was initially introduced by the representative to provide tax relief to PG&E fire victims in October 2023. Since then, efforts have been made to advance the bill. A 218-member bipartisan group successfully pushed a petition, forcing the House Speaker to bring the Disaster Tax Relief Bill to the House floor for a vote.
This marks only the third successful House discharge petition in the 21st Century. A “discharged” bill must be brought to the House floor for a vote.
With the House’s approval, the bill now awaits a majority vote in the Senate. Once approved by the Senate, it will proceed to the President for final approval.