Bill to Make Wildfire Settlements Exempt From State Income Tax Approved By Assembly Revenue And Taxation Comm.

A bill to make all wildfire settlement payments tax free was approved by the Assembly Revenue and Taxation Committee on Tuesday, moving the bill to the Assembly Appropriations Committee.

Senate Bill 1004, authored by Senator Scott Wilk (R-Santa Clarita), would specifically, for all taxable years beginning on or after January 1, 2024, and before January 1, 2029, provide an exclusion from gross income for any qualified taxpayer for amounts received for costs and losses associated with wildfires.

Senator Wilk originally wrote the bill back in February as a way to help wildfire victims retain all settlement money to help better build their lives back up. While a previous bill in 2022, SB 1246, also exempted wildfire victims from state income taxes on wildfire settlements, it only covered the 2017 Thomas Fire and the 2018 Woolsey Fire, leaving all others not covered. Wilk was especially incensed to create this bill as the 2020 Bobcat Fire, which burned over 115,000 acres and destroyed homes in Juniper Hills in his district, left many there struggling to get back on their feet partially because of the state income tax taking a chunk of their settlement money away.

As Wilk noted in a statement on Tuesday, “In 2022, Senate Bill 1246 and Assembly Bill 1249 were signed into law, making settlements related to the Thomas Fire, the Woolsey Fire, the Butte Fire, the North Bay Fires, and the Camp Fire tax-exempt. Similarly, Senate Bill 370 and Senate Bill 542, which proposed the same for the Kincade and Zogg Fires, passed the Senate unanimously in 2023. In September 2020, the Bobcat Fire, which burned over 115,000 acres and destroyed homes in the Juniper Hills community, was determined to have been caused by a tree coming into contact with power lines. No settlements have been paid out yet for this fire, making them eligible to be tax-free if SB 1004 is signed into law.”

As single filer Californians face paying 6% income tax if they make around $50,000 a year, 9.3% if they make over $100,000 a year and 11.3% if they make over $500,000 a year, paying such a large percentage can be daunting, especially if they are looking to buy a new home or rebuild. For joint filers, paying the income tax on a settlement can prove hard as well, as 6% is taxed for $100,000 joint income, 9.3% is taxed for above $500,000, and 11.3% is taxed for over $1,000,000.

The bill was also ammended earlier this year, switching the original wildfire tax exemption window from between 2020 and 2034 to between 2024 and 2029.

While Democratic legislators are usually opposed to such a tax exemption, Senators found no fault in SB 1004 as it meant that wildfire victims from any class would have all the more funds to find someplace to live. SB 1004 unanimously passed both of the Senate committees it went through and passed the Senate in a 37-0 vote in May. This led to Tuesday where the bill easily cleared it’s first Assembly Committee.

Very pleased to see SB 1004 clear Asm. Rev & Tax! In the last 2 weeks, CA has witnessed an explosion of wildfires. Combined with dry conditions & record-breaking heat, the threats they pose to our communities are more concerning than ever. 1/ pic.twitter.com/3lfkG3dTbI

— Scott Wilk (@ScottWilkCA) July 2, 2024

“In the last two weeks, my district and the entire state have witnessed an explosion of wildfires. Combined with dry conditions and record-breaking heat, the threats these wildfires pose to our communities are more concerning than ever,” added Senator Wilk in a statement on Tuesday. “While I hope that no family will need this bill, history has proven that we must have every tool available to help victims rebuild their lives in the wake of a worst-case scenario.

“If you received a settlement because you lost your home through no fault of your own, you deserve every cent. This bill removes one more worry for all victims.”

Insiders in Sacramento also noted to the Globe on Tuesday that SB 1004 would likely be signed into law later this year.

“The response by lawmakers from both parties have been incredible on SB 1004,” explained “Dana”, a staffer in the Capitol building, to the Globe on Tuesday. “Even more poignant has been the response of victims. They know how much every penny counts in getting their lives back together, and this bill gives anyone affected by wildfires in California in the 2020’s tax free settlements. It’s hard to find people against this.”

SB 1004 is expected to be heard in the Assembly Appropriations Committee soon.