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Leaders introduce bill to safeguard wildfire settlement payments

Senator Dianne Feinstein introduced legislation to help victims of wildfires who have received compensation for damages. The bill is cosponsored by Senators Alex Padilla (D-Calif.) and John Hickenlooper (D-Colo.) and companion legislation was introduced by Congressman Mike Thompson (D-Calif.) in the House in March.

After being found legally liable for wildfires in 2015, 2017 and 2018, PG&E established a $13 billion trust to provide payments to wildfire survivors. However, thousands of Californians who receive these payments owe income or other taxes on both the settlements they receive as well as money that goes directly to attorney fees.

The bill has two provisions:

  • The first provision would eliminate income taxes on settlement payments made to victims of wildfires. Currently, some compensation payments can be considered as income by the IRS, even though the payments are intended to compensate recipients for the wildfire damage that PG&E caused.
  • The second provision would allow recipients of compensation payments to deduct attorney and court fees from their taxes. As much as one-third of payments are often devoted to fees for attorneys that manage the compensation trust – who aren’t even hired by payment recipients – but that amount is still considered “income.” Allowing those fees to be deducted will further assist these families affected by wildfire.

“Tens of thousands of Californians have been harmed by wildfires that were found to be caused by PG&E, but the payouts they receive from PG&E’s wildfire victim fund are often insufficient to cover damages because so much goes to attorney fees, court costs and taxes,” Senator Feinstein said. “These payments are not income – they are restitution for damage from fires that PG&E caused. This bill, which will exempt wildfire payouts from income taxes and allow attorney fees and court costs to be deducted from taxes, means that families that have suffered because of these wildfires will receive proper compensation to help rebuild their lives.”

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