Huffman joins effort to help fire victims with the IRS

January 22, 2022

Washington, D.C. – Congressman Jared Huffman (D-San Rafael) has joined colleagues in the House and Senate in signing a letter to Internal Revenue Service Commissioner Charles Rettig 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 70,000 survivors of the 2015 Butte Fire, the 2017 North Bay Wildfires, and the 2018 Camp Fire.

Joining Huffman are Congressman Doug LaMalfa (R-Calif) and Congressman Mike Thompson (D-Calif) with Senator Dianne Feinstein (D-Calif), Senator Alex Padilla (D-Calif), Congressman Tom McClintock (R-Calif), and Congressman John Garamendi (D-Calif)

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. This tax season, survivors are struggling to decipher the tax code, determine what amount of their claims can be used to replace their losses, and the overall taxability of their payments. The 2021 tax season begins on January 24, 2021.

“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 Congressman 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.”

According to Huffman’s office, individual assistance is available from the IRS, but they are incredibly backed up. Instead of personal individual help, the guidance itself is more likely to go over a bunch of commonly experienced situations and Frequently Asked Questions. Here’s an example of where disaster victims can find some guidance:

The IRS could also go a step further and issue an Internal Revenue Bulletin (or an Advance Notice for a Bulletin) which directly clarifies how it will handle the taxation of settlements stemming from losses caused by private entities in Federal disasters. Unlike other guidance (which is more of “advice”), the Bulletin would actually change how the IRS views certain types of earnings/gains/income.

“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 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.

“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.”

“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.”

“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.

Congressman Jared Huffman represents California’s 2nd Congressional District, which spans the North Coast of the state from the Golden Gate Bridge to the Oregon border, and includes Marin, Sonoma, Mendocino, Humboldt, Trinity, and Del Norte counties.

By:  K.C. Meadows
Source: Ukiah Daily Journal