Taxing Wildfire Survivors?

As someone with a substantial insurance background, I initially learned that insurance settlements are generally not taxable income. However, this does not apply to wildfire survivors who receive settlements from utility companies found liable for causing the fire that destroyed their homes and belongings. The federal government considers these funds as taxable income.

My experience as a member of After the Fire USA ’s Advisory Board has allowed me to interview numerous wildfire experts for my webcast, Environmental Social Justice, and to learn about the physics of fire. Due to increased temperatures, drought, and evaporation, wildfires have grown in frequency and severity over the past 7-10 years worldwide. These fires have an average speed of 14 mph (23 kph), making it nearly impossible to outrun them. When they reach a community, there is often little time to evacuate. This means you may only have time to grab your family, pets, and livestock, get into your car (if it's not in a closed garage), and leave with just the clothes on your back, your wallet, and your phone, if you are lucky. We also have “firenadoes,” a new phenomenon where a warm updraft and a wildfire intertwine, creating a 33-164 foot tall, several feet wide whirlwind with wind speeds over 120 mph (200 kph). You cannot outrun or outdrive these.

When someone flees a wildfire, often in just their slippers and robe, they are left with absolutely nothing. In cases where a utility company caused the fire, a settlement is offered to try to make the victims “whole” again, but it falls short. Many people do not realize that if your home is valued at $1 million and you have insurance for $1 million, that amount will not cover a complete rebuild and replacement of personal property. The cost to remediate the property from contamination varies depending on the location, and there is also the cost of raw materials, which will spike due to increased demand, as will the cost of hiring a contractor. Additionally, some contractors may take the settlement check and never be seen again. These challenges have occurred before and will likely happen again.

Many survivors look to utility settlements as a way to get back on their feet or at least tide them over until they can figure out what to do. However, federal taxes claim a large portion of these settlements by considering them as “income.” To add insult to injury, this one-time taxable income can push survivors into a higher tax bracket, causing them to lose medical benefits, scholarships for their children, and other federally funded payments. What can be done? Push back.

For the past two years, Jennifer Gray Thompson, MPA , CEO of After the Fire USA , and her team have been making herculean efforts to bring equity to wildfire survivors. They have met with numerous politicians on both sides of the political spectrum with one goal: to remove the unjust tax on those who have lost everything. They have achieved significant success but recently encountered a politically driven stalemate, with certain politicians refusing to work across party lines. This is not acceptable.

We need to have a call to action

Fight for H.R.5863 - Federal Disaster Tax Relief Act of 2023 and H.R.7024 - Tax Relief for American Families and Workers Act of 2024

Help After the Fire USA with their endeavors:

ORGANIZE a call and write campaign for every single day -- Monday thru Thursday -- when they are in session next week and for at least 3 weeks after, unless we get it done before.

LINK to contact Senate Offices: https://www.senate.gov/senators/senators-contact.htm

DEMAND (constructively) Sen. Crapo (R-Idaho) negotiate the larger tax bill and stop angling for his own benefit in 2025.

Crapo could work in a bipartisan manner to pass the larger Tax Bill (HR 7024) instead of refusing to negotiate and waiting out the election clock until he is (possibly) Chair of Senate Finance. This is unacceptable.

DEMAND (constructively) that Sen. Wyden (D-Oregon) ask Majority Leader Schumer put the larger Tax Bill (HR 7024) up for a Senate Vote once and for all. Or allow our part, HR 5863, to proceed without blocking it or leveraging it.

Remind him we are out of time, and we cannot afford to wait out the politics.

DEMAND (constructively) Majority Leader Schumer (D-NY) either put up the larger Tax Bill (HR 7024) for a vote now, regardless of Crapo's hold OR put our part (HR 5863) up now. We expect him to actively support our bill and cause.

DEMAND BIPARTISANSHIP: Bipartisanship is what makes America great. We don't have to agree on everything in order to function as adults. Working together to do good things for normal people is what we need. We do not need base baiting politics that harm Americans. 

No threats. Please do not abuse staff.