After more than five years of waiting in some cases, wildfire survivors across the West will be relieved of paying federal income taxes on their recovery settlements and lawyers fees.
The passed the Senate on Wednesday night, about six months after it was approved by the U.S. House of Representatives nearly unanimously. It had been stalled for months, tucked into opposing tax packages from Senate Republicans and Democrats.
The bill, which is likely to be signed by President Joe Biden, would exempt people who have survived a wildfire between 2016 and 2026 from paying federal income taxes on disaster recovery settlements and fees paid to lawyers that were received or paid between 2020 and 2026.
Victims elsewhere are also likely to benefit. The bill applies to the survivors of the East Palestine train derailment that occurred in Ohio in 2023, though they鈥檝e largely been exempted from federal income tax on payments from Norfolk Southern due to intervention from the Internal Revenue Service.
The disaster act would also provide relief for natural disaster survivors since 2020 in the form of a casualty loss deduction. That means that those who only received partial payments from insurers on home damage and other residential property damage could deduct those uncovered losses on their federal income taxes without itemization.
Passage of the bill, introduced last year by a Florida Republican Rep. W. Gregory Steube, follows a public plea last month by a political action committee. American Disaster Survivors sponsored billboards asking for help in Idaho and Oregon to grab the attention of the two leaders of the U.S. Senate Finance Committee where the bill sat. Oregon鈥檚 senior U.S. senator, Democrat Ron Wyden, chairs the committee, and Idaho鈥檚 U.S. Sen. Mike Crapo is its ranking Republican member. The disaster PAC was founded by survivors of fires that burned towns in California during 2017 and 2018 and which are still only partially rebuilt.
The bill would sunset in 2026, according to Wyden spokesperson Hank Stern, because federal tax codes are coming up for negotiation in 2025 and there is not a lot of political will among Republicans to do long-term tax policy in the lame duck session before a new Congress and administration comes to power in January. Wyden said in a speech following the bill鈥檚 passage that it was necessary and long overdue.
鈥淭heir homes and their businesses are burned, their possessions and livelihoods gone, and finally, the federal government is showing some common sense,鈥� he said.
He and California House and Senate Democrats and Republicans who championed the bill said despite working in a bipartisan way to get it passed in the Republican-controlled House, Senate Republicans stalled progress.
鈥淲e鈥檙e going to be able to say to Westerners who鈥檝e been hit by these big fires that they鈥檙e going to be able to go to bed tonight in the Western United States with a little relief that the federal government has finally come to its senses and made sure that they鈥檙e not going to have this additional tax burden,鈥� Wyden said in his speech.
Spokespersons for the American Disaster Relief PAC said it would impact survivors of wildfire in many states.
鈥淭his has given a much needed glimmer of hope to millions of Americans across California, Oregon, Hawaii, Washington and Idaho who have been devastated by tragedy.鈥�
Oregon Republicans also welcomed the bill, including state Rep. Christine Goodwin of Canyonville, who worked on a similar bill passed by Oregon鈥檚 Legislature.
鈥淲hen I first wrote Oregon鈥檚 framework for wildfire disaster tax relief, I did so with the belief that government should not profit from the misfortune of its citizens. It took Rep. Jami Cate and I many years to get the bill over the line here in Oregon; I鈥檓 happy to see similar efforts happen so swiftly at the federal level.鈥�
The state bill passed unanimously in the spring of 2024, ending state income taxation on settlements and lawyer fees for wildfire victims. That bill, , was championed by survivors of the 2020 Labor Day Fires, including Sam Drevo, who survived the Santiam Canyon fire that burned down much of the city of Gates in the heart of the Santiam State Forest.
鈥淥n behalf of fire survivors everywhere, I am deeply grateful that this passed. I鈥檓 not super thrilled about the sunset, but it鈥檚 a huge step forward for fire survivors,鈥� Drevo said.
He and his mom are still sorting out how much she was taxed on the settlement she received to help her rebuild her home in Gates that was completely wiped out by the fires.
鈥淚 know it鈥檚 going to be helpful, and to other people it鈥檚 going to be helpful. In general, it鈥檚 a huge thing to have this type of tax relief, especially in a situation where you lose everything,鈥� he said.