Washington–Senator Dianne Feinstein (D-Calif.) joined Congressmen Doug LaMalfa (R-Calif) and Mike Thompson (D- Calif) and a group of their colleagues in sending a letter to Internal Revenue Service Commissioner Charles Rettig urging him to expedite and release tax guidance to help wildfire victims understand the taxability of their claims from the Fire Victim Trust. The trust, a $13.5 billion settlement established in July 2020, is made up of over seventy thousand survivors of the 2015 Butte Fire, the 2017 North Bay Wildfires and the 2018 Camp Fire. The trust first began distributing funds in November 2020 and by the end of 2021 totaled $1.7 billion in awards. As a result, this year will be the first that many victims’ awards may be taxable.
In addition to Senator Feinstein and Congressmen LaMalfa and Thompson, the letter was also signed by Senator Alex Padilla (D-Calif.) and Congressmen Tom McClintock (R-Calif.), John Garamendi (D-Calif.) and Jared Huffman (D-Calif.).
Full text of the letter is available here.
“The 2020 PG&E settlement provided assistance to more than 70,000 Californians who were victims of wildfires found to be caused by the company. I encourage the IRS to rapidly develop tax guidance for claimants of the Fire Victim Trust so they can understand the tax implications for the relief they receive and start to spend those funds to rebuild their lives,” said Senator Feinstein.
“Today, over 70,000 Californians impacted by the Butte, North Bay, and Camp wildfires face uncertainty over whether their Fire Victim Trust claims are taxable,” said Senator Padilla. “As the upcoming tax season nears, I’m joining my colleagues to ask that the IRS clarify the taxation status of these funds and give Californians the clarity they deserve as they continue to recover from these wildfires.”
“It is unfair to ask fire victims to comprehend a complex tax code while dealing with the emotional turmoil in the aftermath of a wildfire. These survivors should be focusing on rebuilding their homes, businesses, and towns. I urge the IRS to alleviate some of these hardships by quickly releasing guidance to help victims navigate this difficult process. These victims are currently in a legal gray area and the IRS has indicated that much of the settlement funds shouldn’t be taxed. We’ve been waiting for months for final guidance and it needs to be provided immediately. I’m happy that bipartisan pressure is mounting on the IRS to give firm answers to victims,” said Congressman Doug LaMalfa.
“Over the last few years, our communities in Northern California have experienced some of the worst wildfires in our nation’s history,” said Congressman Thompson. “I joined my colleagues to send a letter to the IRS urging them to release guidance for claimants of the Fire Victim Trust so they can understand the implications the settlement funds will have on their taxes. As families and businesses rebuild from the damages of these fires, it’s essential that the tax code is easy to understand so our constituents can properly use their settlements to get their lives back on track.”
“It should not be difficult for fire victims to use their settlement payments to rebuild their lives. They have already experienced enough hardship,” said Congressman McClintock.
“Wildfire victims who are working to rebuild their homes and their lives should not be burdened by an unclear tax system,” said Congressman Garamendi. “We are asking the IRS to remove the bureaucratic red tape and make it clear to wildfire victims how they can use their credit from the Fire Victim Trust to rebuild and replace what they lost.”
“My constituents in Northern California have suffered enough from the devastation brought on by wildfires. They do not need the additional uncertainty of filing their taxes without proper direction while they attempt to recover and rebuild their lives,” said Rep. Huffman. “I am calling on the IRS to immediately issue guidance so that all those affected by the California wildfires can file their taxes on time and with confidence. It is the least government can do to support Californians who have lost property, homes, and even loved ones.”