Senate Passes Padilla Bill to Extend Tax Relief for Wildfire Victims

Legislation to Remove Taxes on Los Angeles Wildfire Settlements to Become Law

WASHINGTON, D.C. - Today, the Senate unanimously passed the Doug LaMalfa Federal Disaster Tax Relief Certainty Act, which included a version of U.S. Senators Alex Padilla (D-Calif.), Cynthia Lummis (R-Wyo.), Ron Wyden (D-Ore.), and Tim Sheehy's (R-Mont.) bipartisan and bicameral Protect Innocent Victims of Taxation After Fire Extension Act to ensure wildfire survivors are not taxed on compensation they receive for losses and damages suffered during a federally-declared wildfire disaster before January 1, 2027. Representatives Mike Thompson (D-Calif.-04) and the late Doug LaMalfa (R-Calif.-01) led companion legislation in the House of Representatives. The legislation now heads to the president's desk for his signature.

"After a fire takes your home, the last thing families and communities should have to think about is a tax bill on the very settlement meant to help them rebuild. In 2024, we passed the original Protect Innocent Victims of Taxation After Fire Act that fixed our outdated tax code to remove this unfair financial burden, but that provision expired at the end of last year - even as survivors of the Los Angeles fires are still working to rebuild," said Senator Padilla. "With devastating wildfires on the rise, I'm proud to get this commonsense, bipartisan solution over the finish line so survivors aren't left waiting, worrying, and wondering about their financial futures after disaster. We must continue working to make this exemption permanent."

"Doug LaMalfa was a tireless champion for western priorities, a valued colleague, and a dear friend. Watching this bipartisan legislation that he fought so hard for - and that now bears his name - signed into law is a fitting way to honor his legacy," said Senator Lummis. "I know he'd be proud that wildfire survivors won't be punished with a tax bill on top of everything else they've lost."

"The last thing you should have to worry about if your house burns down in a wildfire or washes away in a flood is being hit with a massive tax bill," said Senator Wyden. "This bill is going to deliver immediate relief to Oregonians and families across the country affected by this year's devastating blazes and disasters, and I'm proud we were able to get it over the finish line."

"As someone who has fought wildfires and worked alongside the communities they devastate, I know firsthand recovery doesn't end when the flames are out," said Senator Sheehy. "This commonsense, bipartisan legislation gives families the certainty they need as they begin to rebuild, and I'm proud to see it pass the Senate."

"Fire survivors have been through enough in the wake of losing their homes and livelihoods to wildfires. It's wrong to tax them on the settlement money meant to help them rebuild their lives," said Representative Thompson. "Our bill ensures that survivors of disasters in the near future don't have to come to Congress asking for relief after every fire, flood, hurricane, or other disaster. I'm thankful to Senator Padilla and our colleagues who voted to pass this bill."

This bipartisan legislation extends Padilla and Lummis' bill signed into law in 2024, which excluded wildfire-related settlement payments from federal income tax calculations, allowing survivors to put the full amount of their settlement money toward recovering from devastating losses. This includes payments that cover living expenses, lost wages, or compensation for injury, death, or emotional distress. The bill was signed into law as part of the Federal Disaster Tax Relief Act, which ensured taxes paid on payments made from the Pacific Gas and Electric Company (PG&E) Fire Victim Trust for three major California fires in 2015, 2017, and 2018 were refunded and not taxed. The legislation passed today would extend the tax exemption for any federally declared wildfire before January 1, 2027, including the 2025 Los Angeles wildfires, regardless of when payments are made to survivors.

Additionally, the Protect Innocent Victims of Taxation After Fire Extension Act would allow victims to claim the exemption in the year they receive payments rather than have to amend prior tax returns for a refund.

Yesterday, Padilla and Wyden spoke on the Senate Floor about the importance of passing this bill as quickly as possible in the wake of recent utility-caused wildfires in California, Oregon, and Hawaii, as well as the numerous wildfires currently burning across the Western United States.

Video of Padilla's remarks is available here.

Full text of the bill is available here.

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