Washington, D.C.—Yesterday, President Biden signed H.R. 5863, the Federal Disaster Tax Relief Act, into law. This legislation included Congressman Doug LaMalfa’s (R-Richvale) bill, H.R. 4970, Protect Innocent Victims of Taxation After Fire Act, which exempts 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. Taxpayers will now 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.
“After our visit with the president and Mrs. Biden at the White House Christmas Ball this week, I appreciate the President’s timely signature after his recent return from Africa on our important disaster tax relief bill,” said Congressman LaMalfa. “I am thankful to all who have helped Congressman Thompson and I get this bill signed into law. I am hopeful that we can get refunds out to those who were needlessly forced to pay the tax in recent years. Our office stands ready to assist if needed with the IRS processing these refunds and reducing ongoing fire risk to all of our forested areas and neighbors.”
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.