Alex Padilla U.S. Senator for California

WASHINGTON, D.C. — As California communities recover from a devastating summer wildfire season, U.S. Senator Alex Padilla (D-Calif.) successfully secured unanimous passage of the Federal Disaster Tax Relief Act. The bill includes Padilla’s bipartisan legislation to provide critical tax relief for wildfire survivors who have received compensation for the losses and damages they have suffered. Padilla delivered remarks on the Senate floor ahead of the passage. The legislation previously passed in the House of Representatives and now heads to President Biden’s desk to be signed into law.

Padilla’s Protect Innocent Victims Of Taxation After Fire Act, co-led by Senators Bill Cassidy (R-La.), Jon Tester (D-Mont.), and Cynthia Lummis (R-Wyo.), provides past and future wildfire survivors with the certainty that their settlement money will not be taxed. Representatives Doug LaMalfa (R-Calif.-01) and Mike Thompson (D-Calif.-04) led companion legislation in the House of Representatives.

The bill would support the nearly 70,000 victims of the three major California fires in 2015, 2017, and 2018 who have received funds from the Pacific Gas and Electric Company (PG&E) Fire Victim Trust through a $13.5 billion wildfire settlement, as well as future recipients of other wildfire-related settlements. This includes those impacted by the devastating recent fires in southern Oregon and Maui.

Key Excerpts:

• Our Protect Innocent Victims of Taxation After Fire Act would make sure that individuals, families, and entire communities who have suffered from utility-caused wildfires can receive the full compensation to rebuild their lives — without fear that their settlement payments will be subject to taxes.

• 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.

• Disaster settlement funds aren’t income. It’s not an asset. It’s compensation for what a family has lost. It’s meant to be an opportunity to begin to rebuild your life, an opportunity that should not be diminished because our tax code is outdated.

• This bill that we just passed would make sure that all recent and future wildfire victims throughout the country have access to their full settlements. … This measure is a commonsense, bipartisan solution to protect Americans at the most difficult time in their lives.

Video of Padilla’s full remarks can be found here.

A full transcript of his remarks as delivered can be found here.

“The country comes together to help Louisiana when we’re in need after hurricanes and Louisianans are happy to do the same for others after similar disasters,” said Dr. Cassidy. “This tax provision is a way for Americans to help fellow Americans who are trying to help themselves.” 

“Fire survivors have been through enough in the wake of losing their homes and livelihoods to wildfires—it’s wrong to tax them on the settlement money meant to help them rebuild their lives,” said Representative Thompson. “The Senate’s unanimous vote to pass tax relief for fire survivors is an important step towards recovery for victims in my district and across California. Today’s overwhelming and bipartisan vote to deliver relief to victims was made possible by Senator Padilla and I thank him for his dedication and partnership in getting this passed.”

“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 Representative LaMalfa.

Full text of the Federal Disaster Tax Relief Act is available here.

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