In September 2022, Governor Newsom signed bills that made settlement payments from PG&E’s Fire Victim Trust state tax-free, providing some relief to affected individuals and businesses. Claims from the 2017 Thomas Fire and 2018 Woolsey Fire, attributed to Southern California Edison equipment, were also made state tax-free. But victims say this was not enough.
“[Federal taxes mean] that you’re not going to be able to financially make yourself whole after the worst night of your life,” said Brian Sherwood, who survived the 2017 Tubbs Fire. Fire victims have also had to deal with gradual, incremental payments from the FVT—as of June 2023, the most any claimant had received was 60% of their claim amount. Sherwood said he was underinsured and his family had to take out personal loans and use private funding to rebuild.
Congressmen Mike Thompson (D — Calif.) and Doug LaMalfa (R — Calif.) introduced H.R. 7305 in 2022, which would have exempted victims from having to pay federal income tax on their PG&E Trust settlements. Unfortunately, the bill failed to pass before the 2022 Congressional session ended and a new Congress was sworn in, making the bill “effectively dead”.
“It is a sad day when a bipartisan bill that helps people and has broad support in both chambers of Congress can’t get through the Senate,” Thompson said in a December 20th statement. “This is terrible for fire survivors throughout California. There are several tax bills that must be considered next year and I will continue to push that relief for fire survivors be included.”
Thompson, LaMalfa, and other co-sponsors reintroduced an almost identical bill, H.R. 176 on January 9th, 2023. The bill, like its predecessor, aims “to amend the Internal Revenue Code of 1986 to establish a deduction for attorney fees awarded with respect to certain wildfire damages and to exclude from gross income settlement funds received with respect to such damages.”
Lobbying for the passage of the bill was an urgent matter, as victims hoped it would pass before taxes were due on April 15th. Unfortunately, that didn’t happen. Now, victims are hoping the bill will pass before the October 16th extension deadline.
The treatment of PG&E Fire Victim Trust settlement payments also impacts premiums for Covered California health insurance and other income-based services or benefits. That’s because household income is a factor when determining whether someone is eligible for financial help. Cathy Yanni, Trustee for the Fire Victim Trust, supports the passage of the bill, saying “Every dollar counts to fire survivors as they rebuild their lives.”
The Fire Victim Trust was established in 2020 as a result of the PG&E bankruptcy to provide a fair and efficient claim review process for compensating fire victims. The Trust compensates victims for various economic and non-economic losses, including property damage, additional living expenses, lost wages, business losses, emotional distress, and medical expenses.