Bipartisan tax deal that includes exemption of wildfire relief payments from federal income taxes passes out of the House

The House recently voted on and passed the Tax Relief for American Families and Workers Act of 2024, by a vote of 357-70.

The bill was passed under suspension of the rules, a streamlined process that sidesteps the Rules Committee’s approval and amendment process but requires a two-thirds majority for passage.

Congressman Doug LaMalfa’s (bill with Congressman Mike Thompson, the Protect Innocent Victims Of Taxation After Fire Act, which exempts all wildfire relief payments from federal income taxes and taxation on legal fees, emotional distress, lost wages, and additional living expenses has been included in the legislation.

Once the bill is signed into law, any taxes already paid on wildfire settlement money since 2020 will be eligible for retroactive refund during this tax season. The legislation also includes LaMalfa’s cowritten legislation, the Taxpayer Certainty and Disaster Tax Relief Act, which makes it simpler to write off losses from other natural disasters.

“Fire survivors have waited too long for certainty regarding the settlement with PG&E,” LaMalfa said. “To have to pay a huge portion to the government because the IRS deemed disaster aid as income adds insult to injury, especially paying the income tax on the lawyers’ fees. My staff and I have worked diligently on this initiative for many months to finally see it come to fruition. I thank Ways and Means Chairman Smith for negotiating this deal, and Speaker Johnson for getting it to the House Floor for a vote expeditiously. The Senate needs to quickly act, as the new tax period will be upon us soon.”

“Today’s strong bipartisan vote to provide essential tax relief to fire survivors is an important step towards recovery for those who lost homes, businesses, and loved ones in disastrous wildfires,” said Thompson. “Rep. LaMalfa has been a tremendous partner in this effort as we have worked closely with House Leadership to secure the inclusion of this bill into the tax package. The Senate must swiftly consider and pass this bill so that our fire survivors receive the tax relief they desperately need.”

“We are grateful for the collaboration and leadership of Rep. Doug LaMalfa in shepherding this critically important bill to the floor,” said Jennifer Gray Thompson, MPA, Founder and CEO of After the Fire USA. “If successful, this bill will be the most important legislation ever passed for fire victims, affecting hundreds of thousands of disaster survivors and correcting a grave error in the tax code. This legislation will determine whether or not families can finally get home. Rep. LaMalfa’s commitment to fire victims and bipartisanship on this issue is deeply appreciated by megafire victims at home and across the country.”

“This is absolutely the best news Fire Victims have received since the fire, a lot of hard work has gone into this bill by many people, and we will be forever grateful, a special thank you to Congressman LaMalfa and Thompson, they fought so hard for this bill,” said Paradise Councilman Steve Crowder.

The bill is fully paid for by repurposing funds previously authorized for COVID relief. This bill also expands the Child Tax Credit, increases supply of low-income housing by enhancing the Low-Income Housing Tax Credit, builds up Main Street by reducing bureaucratic paperwork and expanding the small business expensing cap, and improves trade agreements with Taiwan to bolster competitiveness with China.