Washington, D.C.—Today, the U.S. Senate passed H.R. 5863, the Federal Disaster Tax Relief Act. This legislation included Congressman Doug LaMalfa’s (R-Richvale) bill, H.R. 4970, Protect Innocent Victims of Taxation After Fire Act, which will exempt wildfire relief payments from federal income taxes. The legislation also streamlines the process for deducting losses from various natural disasters and includes provisions to exempt taxation on legal fees, emotional distress, lost wages, and other expenses linked to wildfire losses.
Once this bill is signed into law, taxpayers will be able to claim refunds for any taxes paid on wildfire settlement funds since 2020 by filing an amended return or claiming the change in the next tax year.
“I’m glad that we finally got this bill passed, and I appreciate the patience of the people who have waited over two years for this passage. It’s essential that we deliver the tax relief that our constituents need in the wake of disasters. This legislation ensures the IRS doesn’t steal what’s left after the blood-sucking attorney’s fees, so that individuals affected by disaster have every available dollar to recover and rebuild. I’ve had productive discussions with the White House in recent weeks and anticipate the bill will be signed into law without delay,” said Congressman LaMalfa.
What This Means for Wildfire Survivors:
- Allows amended tax returns to be filed, by taxpayers who qualify for wildfire payment tax relief, up to a year after enactment – rather than being limited to three years after originally filing a tax return.
- Shields payment recipients from losing many of their benefits, such as Covered California premium subsidies, VA co-pay assistance, and FAFSA, because the government misinterpreted their disaster relief as an income windfall.
- Estimated $512 million in taxes returned to wildfire victim and survivors.
- Applies not just to the Fire Victim Trust claimants, but any wildfire payments received in 2020 – 2025 for Federal wildfire disasters which occurred after 2014.
