State of Emergency Tax Exemption Bill Introduced In Senate

A bill that would exclude settlement payments made in connection with any declared state of emergency from taxable income was introduced in the Senate on Thursday, building on several bills that covered certain disasters, such as a bill made into law last year that only allowed settlements from PG&E in relation to the 2020 Zogg Fire to be exempted from taxable income.

According to Senate Bill 927 by Senator Brian Dahle (R-Bieber), the bill, for taxable years beginning on or after January 1, 2023, would provide an exclusion from gross income for amounts received in settlement by a taxpayer to replace property damaged or destroyed by a natural disaster that was declared a state of emergency by both the Governor and the President of the United States. Essentially, rather than waive taxes on a disaster by disaster basis, all disasters under the criteria set in SB 927 would be covered.

In a statement on Thursday, Dahle said, “When someone loses property to a fire, flood, or other catastrophe and receives a settlement as compensation, from a utility or other private entity, federal and state laws consider that taxable income. This is an unjust burden on Californians trying to rebuild their homes and lives after disasters.”

“This bill will help those who have been through a very challenging and difficult time to put every dollar towards rebuilding their lives and living the California Dream. The last thing we should be doing is taxing individuals on those payments.”

Experts noted that the bill would likely gain traction, as support for bills asking the same for individual disasters, such as the 2020 Zogg Fire and the 2018 Camp Fire, have been fire. In the case of SB 542, the one covering the Zogg Fire that was also written by Dahle last year, the bill didn’t even need an Assembly vote, with the Governor adding the bill’s language into his passed budget bill instead.

“This is a common sense bill,” explained Jake Holcomb, a home damage assessor who specialized in fire and wildfire damage, to the Globe. “These settlements aren’t like a settlement over feuding neighbors or defamation or something like that. This is money they get from a company responsible for starting a disaster, money they need to help rebuild or move or just get on with their life. These are people who lost so much. They don’t need to pay a state a cut of what they get for an emergency situation.”

“Every time this comes up, lawmakers unanimously approve the exemptions. With this, we take out the middle man on most of them, or at the very least, the big ones. This way, it is one less thing for people to worry about. And, you know, it’s one of those bills where you can clearly see how it helps people. I’ve had to work with so many who, after one of these disasters, they need to squeeze every penny. And, like I said before, this really helps.”

SB 927 is expected to be heard in Senate committees soon.