CALIFORNIA, USA — California wildfire survivors are one step closer to not having to pay federal taxes on settlement money they receive through the PG&E Victims Trust. The bill made it out of the Ways and Means Committee Thursday.
Despite the unanimous vote, the House of Representatives Bill 7305 still has to go to the House, Senate and then President Biden’s desk to become law.
The fire survivors don't owe California State Tax on their settlements, under a law signed by Gov. Newsom in 2022, but the victims say the PG&E bankruptcy settlement, also negotiated by the governor, still doesn’t make them whole.
Will Abrams survived the 2017 Tubbs Fire, the second deadliest fire in California’s history.
“Myself and my family got alerted by our house being on fire,” said Abrams.
By the time it was over, 22 people were killed and more than 5,600 homes destroyed, including Abrams’.
Abrams is one of 70,000 people receiving money from the PG&E Fire Victims Trust and is currently being taxed by the federal government on the settlement.
“Victims need this. They are trying to put food on the table, trying to make ends meet and this unfair tax needs to be pushed aside so the settlement money isn’t taxed as if it’s earned income,” said Abrams.
A bipartisan bill authored by California Democrat Congressman Mike Thompson and Republican Congressman Doug LaMalfa would, if passed, make PG&E fire victims settlements exempt from taxes.
“[Victims] didn’t even get enough to rebuild their homes and on top of that they were taxed, this is wrong,” said Thompson.
Richard Lane also lost his house in the Tubbs fire.
“Nobody knew aspects of our settlement would be taxable,” said Lane.
Some of the settlement money, like compensation for lost property, isn't subject to tax; but survivors are still being taxed on the money they received for emotional trauma.
“We don’t have a law that makes attorney’s fees or emotional distress funds nontaxable I am looking at a five figure tax liability bill,” said Lane.
Victims like Abrams and Lane have been deferring their federal taxes.
Lane has run the numbers and knows he most likely won't receive his full settlement. PG&E paid the victims trust half in cash and half in stock, which hasn't done as well as projected.
Lane says taxes make the hit even worse.
“We are hoping to get 70% of our settlement and there is no word from the fire victim’s trust when they might sell more stock. So, to only get 70% to start with and then the federal government wants to take a third,” he said.
If this bill doesn’t make it to the president in time, Thompson says victims will be refunded the amount they were taxed.
If signed into law, the bill as written would apply to critical disasters across the nation from hurricane survivors in the South to those recovering from train derailments earlier this year in the Midwest.
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