California wildfire survivors will no longer have to pay state income taxes on their settlement payments.
The change was included in the state budget last week and applies retroactively to payments made since January 2021. It will remain in place through 2030.
Bruce Ross, press secretary for State Senator Megan Dahle — who represents much of the North State and voted for the bill — said the measure lifts a heavy burden from survivors.
“... often the folks who had losses were having to wait a year or two or three to work through the legislative process. It was very frustrating."— Bruce Ross, State Senator Megan Dahle press secretary
"Your house burns down in a fire that ultimately maybe the power company was found responsible … that turns out to be taxable income,” Ross said. “So you think you're getting money that will help you rebuild your house, and almost half of it can end up going to the government."
Previously, lawmakers had to pass separate legislation for each fire. Ross said that created long delays for survivors waiting for relief.
“There was this process where there would be one bill for this fire and another bill for that fire, and often the folks who had losses were having to wait a year or two or three to work through the legislative process,” Ross said. “It was very frustrating."
Gov. Gavin Newsom’s administration worked with lawmakers to include the measure in the budget.
Survivors who already paid taxes on past settlement payments can apply for refunds through the Franchise Tax Board.
This comes as U.S. Congressman Doug LaMalfa pushes to expand federal relief with the Protect Innocent Victims of Taxation After Fire Extension Act. LaMalfa previously co-sponsored the Disaster Tax Relief Act, which exempted wildfire settlement payments from federal income tax through 2025.
His new bipartisan bill would extend that exemption through 2032 and make it easier for survivors by allowing them to claim the tax break in the year they receive payments, rather than amending past returns.
Sarah Bohannon contributed to this reporting.