Tax relief for fire victims still uncertain
Story by The Plumas Sun.
“We cannot stop or cease momentum. This is the fight and together we have created a very effective movement to bring justice to fire survivors,” Thompson said in a press release.
Victims of the Dixie Fire are in jeopardy of being victimized yet again.
State and federal taxes, imposed on settlement funds paid by Pacific Gas and Electric Co., threaten to slash compensation payments by over 50%, affecting how — and whether — many victims rebuild. Local, state and federal officials have joined a bipartisan effort to pass legislation that would exempt thousands of wildfire victims from having to pay income tax on their settlement money.
House approves HR 5863
The federal campaign celebrated May 21, when the U.S. House of Representatives overwhelmingly passed HR 5863, a bill designed to waive federal taxes on fire settlement funds. The vote was 382-7. HR 5863 would exclude from gross income any amount of compensation for expenses or losses incurred due to certain wildfire disasters, including the Dixie Fire.
It was, however, a short-lived celebration. The next day Sen. Ron Wyden, a Democrat from Oregon, said he would block the bill that would provide nearly $5 billion in tax relief for disaster victims. Wyden said it is a political move aimed at Sen. Michael D. Crapo, a Republican from Idaho, who has been “stonewalling” some of his bills.
“We cannot stop or cease momentum.”
Jennifer Gray Thompson, executive director of After the Fire USA
That is a frustrating setback but it will not deter efforts to approve the bill as it goes to the Senate for a vote, said Jennifer Gray Thompson, executive director of After the Fire USA, a nonprofit organization that supports communities as they recover from fire and rebuild their lives. She vowed to continue to lobby on behalf of Dixie and other fire victims.
“We cannot stop or cease momentum. This is the fight and together we have created a very effective movement to bring justice to fire survivors,” Thompson said in a press release.
State tax relief approved by Senate
Meanwhile, California legislation to make wildfire settlement payments free of state taxes was approved unanimously on the state Senate floor. On May 24, Sen. Scott Wilk’s bill, SB 1004, passed 37-0 and will now move to state Assembly committees for approval, then to the full California Assembly.
“Wildfire victims, who have lost everything through no fault of their own, deserve every cent of any settlements they may receive,” said Wilk, a Republican who represents Santa Clarita and the Lancaster/Palmdale area.
His constituents suffered from the 2020 Bobcat Fire, which burned over 115,000 acres and destroyed homes in the San Gabriel Mountains near Los Angeles. Officials determined it was caused by a tree coming in contact with power lines.
SB 1004 would exempt state taxes on settlement payments made in connection with any California wildfire from Jan 1. 2020 forward. It would have a 10-year sunset.
Success and stalling at the federal level
The effort to bring federal tax relief to fire victims began last year as HR 5863. Dixie Fire victims were facing enormous taxes levied on the settlement payments PG&E was starting to pay as compensation for losses in the fire the utility company admitted starting.
Plumas County Supervisor Kevin Goss joined Thompson, of After the Fire, on several trips to Washington, DC, to lobby on behalf of his constituents. His Plumas County district, which includes Greenville, was devastated by the 2021 Dixie Fire, the state’s largest single fire. It started July 13, 2021, and burned approximately 963,309 acres in Plumas, Lassen, Butte, Shasta and Tehama counties. California fire investigators blamed PG&E for equipment failures that caused the blaze and destroyed 1,311 structures, damaging another 94.
HR 5863 passed the House Jan. 31 on a bipartisan vote of 357-70. The bill went on to the Senate, where it was stalled for months. HR 5863 was then folded into HR 7024, a more encompassing tax bill that expands the child tax credit. Reps. Mike Thompson, a Democrat from California, and Doug LaMalfa, a Republican from California, supported the bill on behalf of the wildfire victims among their constituents.
On May 21 they were part of a successful effort led by Rep. Greg Steube, a Republican from Florida, to approve a discharge petition separating HR 5863 from HR 7024. The bipartisan approval led to the victory hailed by Jennifer Gray Thompson as “miraculous.”
Despite Wyden’s block, the bill now moves on to the U.S. Senate. In addition to affecting thousands of wildfire victims, it would also exempt the relief payments for losses that resulted from the 2023 East Palestine, Ohio, train derailment and declare designated hurricanes qualified for disaster-related tax treatments.
Reps. Thompson and LaMalfa urged their constituents to contact their senators to bring the measure to the floor and pass it quickly. “At this point that’s all we can do,” said Teri Dubose, a field representative for LaMalfa.
‘Stop Taxing Tragedy‘
Plumas County residents are joining the call for swift action on HR 5863 through a petition posted online at change.org and circulating at local businesses. Titled “Stop Taxing Tragedy,” it was launched by local recovery volunteer Lara Wheeler as a way to connect fire victims to additional resources available to help with recovery and rebuilding. She has collected around 500 signatures so far.
Without tax relief, those receiving financial settlements from PG&E could pay as much as 79% of their monetary compensation in taxes and attorney fees.
Lara Wheeler, recovery volunteer
Without tax relief, those receiving financial settlements from PG&E could pay as much as 79% of their monetary compensation in taxes and attorney fees, Wheeler said. Exempting fire victims from state and federal taxes could have substantial impacts not just on individuals, but devastated communities like Greenville, and on Plumas County as a whole. An influx of settlement funds will boost local businesses, which, in turn, will enhance overall economic stability countywide, she said.
“It could be transformative,” said Wheeler.
She has organized a June 11 town hall meeting to discuss the federal and state legislation. Scheduled for 5 p.m. at the Historic Taylorsville Hall in Taylorsville, it will include Goss as well as Jennifer Gray Thompson, a representative from California Sen. Brian Dahle’s office and tax attorney Robert Wood.