Bills meant to ease Camp Fire tax burdens languish in Congress
Two bills, one introduced into the House of Representatives in March and another one in the US Senate in late July meant to relieve the tax burden on wildfire victims going back to 2015, are languishing in Congress.
On March 30, Democrat Congressman Mike Thompson, along with Republican Congressman Doug LaMalfa, introduced into Congress a bill that would exempt thousands of fire victims from paying federal income tax on their settlement money, in addition to paying taxes on attorney fees included in the settlements but as yet to be heard in committee.
Additionally, a similar bill introduced by Sen. Dianne Feinstein was referred to the Senate Finance Committee when she presented it in late July as a companion bill to the Thompson/ LaMalfa legislation.
“Unfortunately, the specific situations of each of these victims are different, and it is unclear to many whether they will need to pay federal income tax on the amounts they receive,” she said In late July, according to the Congressional Record. “Moreover, it is unfair that these victims should have to worry about paying taxes on amounts that are simply intended to make them whole.”
She also pointed out that 30% of the settlement money goes to fees for attorneys, some of whom victims did not individually hire, and that the victims will owe taxes on the full settlement, including those attorney fees.
“Our legislation would do two things. First, it would clarify that such wildfire settlement fees are not taxable,” she said. “Second, it would create an above-theline tax deduction for relevant attorney fees. This would provide tax certainty and fairness to wildfire settlement victims now and into the future.”
Feinstein’s version has yet to be heard in committee and has three co-sponsors, including fellow California Senator Alex Padilla, Colorado senator John Hickenlooper, and Washington Senator Patty Murray.
On Wednesday, Alexandra Lavy, an aide to LaMalfa, said that the House legislation is still up for consideration in the 117th Congress.
However, according to the Congressional Record, the bill, which was supposed to be forwarded to the Ways and Means Committee, hasn’t been heard by the committee.
Lavy noted that LaMalfa is still working in a bipartisan way to get the bill to move forward. The House version has 13 cosigners, including 11 Democrats and two Republicans. Of the 13 cosigners to the House bill, 12 are in California; one is in Oregon.
The Thompson/LaMalfa bill would also allow an exemption for any wildfire victim in a fire declared a federal disaster and occurred in a disaster area during 2015.
The amendment would also apply to any settlement, attorney fees, or court costs awarded after May 31, 2020.
In early October, Gov. Newsom signed a bill authored by Assemblyman James Gallagher and coauthored by Senator Jim Nielsen that allowed for similar exemptions for those paying state taxes.
That bill applied to victims of the 2015 Butte Fire in Amador and Calaveras counties, as well as victims of the 2017 fires in Napa, Sonoma, Lake, Butte, Mendocino, and Solano counties that killed 44 people and caused more than $14 billion in property damage.
Those fires became known as the 37 Fire, Adobe Fire, Atlas Fire, Blue Fire, Cascade Fire, Cherokee Fire, Honey Fire, LaPorte Fire, Lobo Fire, Maacama/ Youngs Fire, McCourtney Fire, Norrbom Fire, Nuns Fire, Patrick Fire, Pocket Fire, Point Fire, Pressley Fire, Pythian/Oakmont Fire, Redwood/ Potter Valley Fire, Sullivan Fire, Sulphur Fire, and the Tubbs Fire, or collectively as the 2017 North Bay Fires.
The bill also exempted those victims of the Camp Fire in 2018 that killed 85 people. The fire devastated the town of Paradise, the community of Concow, and large portions of Magalia and Butte Creek Canyon communities.