Press Democrat: US Senate passes long-awaited tax relief for fire victims
By Marisa Endicott
After years of frustrating failures, a bill to exempt victims of utility-sparked wildfires from paying taxes on their settlements passed the U.S. Senate Wednesday and will head to President Joe Biden’s desk for approval.
He is widely expected to sign the bill.
“Disaster settlement funds aren’t income. It’s not an asset. It’s compensation for what a family has lost,” California Democratic Sen. Alex Padilla said on the Senate floor immediately after the bill passed on a unanimous vote.
“It’s meant to be an opportunity for you to begin to rebuild your life, an opportunity that should not be diminished because our tax code is outdated,” Padilla said.
He noted that in California alone, more than 70,000 people have suffered losses from the Butte Fire, the North Bay fires and the Camp Fire in recent years.
“If you can imagine when you are wading through the ashes of your former home and thinking about how you can possibly begin to rebuild, the last thing you should have to worry about is that the government is going to tax the payment from your legal settlement that already fails to cover the full cost of your losses in the first place,” Padilla said.
Fire victims spent years waiting for restitution from Pacific Gas & Electric Co. after its equipment ignited a series of wildfires, including the 2017 North Bay firestorms and the 2018 Camp Fire, only to find out their payments would be federally taxed as income.
In the years since, as corrective legislation started and stalled repeatedly, fire victims undertook a fierce advocacy campaign to push the effort forward. The California Legislature acted far quicker, eliminating state taxes on settlement payments in 2022.
Jeff Okrepkie, a Santa Rosa City Council member who lost his Coffey Park home in the 2017 Tubbs fire, is one of those 70,000 claimants.
The Fire Victim Trust was formed after P&GE’s 2019 bankruptcy declaration. As a result, the people in the trust were debtors, Okrepkie pointed out.
“That means the money we got out of the trust was taxable.”
Spurred by senators Bill Dodd, D-Napa, and Mike McGuire, D-Healdsburg, along with assemblymember Jim Wood, D-Healdsburg, among others, California acted quickly to exempt such awards from state taxation.
But the federal government moves more slowly.
The bill passed by the US Senate Tuesday evening is retroactive, “so we can submit amended tax returns from multiple years ago,” said Okrepkie, who will now recoup “tens of thousands of dollars in taxes” paid on his Fire Victim Trust award.
“And you can multiply that by tens of thousands of people.”
The Federal Disaster Tax Relief Act passed the House of Representatives in May after a number of maneuvers to keep the bill alive, led by Reps. Mike Thompson, D-St. Helena, and Doug LaMalfa, R-Richvale, who first introduced the legislation in 2022.
It had stalled in the Senate, but was finally passed Wednesday through an unusual process known as “hotlining” where legislation is moved from a Senate committee to a full vote, bypassing regular procedures like floor debate. The bill must have unanimous consent in these cases to succeed.
“This is a huge moment of justice for disaster survivors, said Jennifer Gray Thompson, CEO of After The Fire USA, a key advocate for the legislation.
“The direct impact on people’s lives is so profound” she said. “It was a massive group effort. We all did our part.”
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