Legislature Approves Tax Relief for Wildfire Victims

Budget Bill Ends State Taxation of Settlements Paid for Wildfire Damages

SACRAMENTO, Calif. ­— After two years of legislative and budget maneuvering, the California Legislature passed a bill last week to waive state income taxes for survivors of wildfire disasters who were paid settlements for their losses by entities found to have started the wildfires, primarily electric utilities. 

The bill covers the tax years from Jan. 1, 2021, through Jan. 1, 2030, and covers settlements from any fire declared to be a state or federal disaster – including the Dixie Fire, the Mill Fire and the Slater Fire, which devastated communities around the 1^st Senate District in recent years.

“This has been a long and complex effort in the Legislature, including the veto of a similar bill last year,” said Sen. Megan Dahle, R-Bieber. “But I have been committed to making sure that California doesn’t balance its budget on the backs of wildfire victims, and that money paid out as compensation for losses goes toward helping families rebuild. I’m grateful to Assemblywoman Heather Hadwick, Assemblyman Tom Lackey, and the administration for their work on this critical tax relief that will help communities move forward.”

Similar tax relief was included in the state budget in June, but was limited to settlements from class-action lawsuits, which are not always filed after major fires. The updated language passed in Senate Bill 159 broadens the eligibility to cover all settlements. 

For those who have already paid income taxes on past settlements, refunds should be available through the Franchise Tax Board by filing amended state tax returns. For guidance, it can be helpful to contact a tax professional.

Megan Dahle’s Office PR