Bill Overview
Title: A bill to amend the Internal Revenue Code of 1986 to establish a deduction for attorney fees awarded with respect to certain wildfire damages and to exclude from gross income settlement funds received with respect to such damages.
Description: This bill allows a deduction from gross income (above the line deduction) for attorney fees and court costs awarded with respect to a qualifying wildfire disaster (i.e., any forest or range fire that is a federally declared disaster, occurs in a disaster area, and occurs in 2015 or later). The bill excludes from the gross income of a taxpayer, for income tax purposes, amounts paid to compensate victims for losses or damages in connection with a qualifying wildfire disaster.
Sponsors: Sen. Feinstein, Dianne [D-CA]
Target Audience
Population: Individuals affected by federally declared wildfire disasters since 2015
Estimated Size: 400000
- The bill impacts individuals who have been affected by qualifying wildfire disasters since 2015, as they may have received settlement funds for damages.
- Individuals who have incurred attorney fees and court costs for claims related to qualifying wildfire disasters will be able to deduct these expenses from their gross income.
- The bill specifically targets financial relief and tax reductions for victims of federally declared wildfire disasters, thus directly impacting this group.
- The population impacted includes those who reside in areas prone to wildfires, especially if they have experienced such an event that has been federally declared as a disaster.
Reasoning
- The policy is aimed at providing financial relief and tax benefits to individuals who were affected by federally declared wildfire disasters.
- It targets individuals who have had to pay attorney fees and court costs related to such disasters, providing them a deduction on these expenses.
- The policy excludes from gross income the amounts received as settlement for losses or damages due to such disasters, effectively increasing the net income of the affected victims.
- California, Oregon, and Nevada are states with higher occurrences of federally declared wildfire disasters, thus individuals from these areas are more likely to be impacted.
- The policy has a budget that limits its impact to a certain number of individuals, and thus most heavily impacts those with significant legal expenses or large settlements.
- Those who haven't been directly impacted by a federally declared wildfire disaster or have low legal costs related to such events are less likely to be affected by this policy.
Simulated Interviews
Primary School Teacher (Santa Rosa, CA)
Age: 45 | Gender: female
Wellbeing Before Policy: 5
Duration of Impact: 10.0 years
Commonness: 10/20
Statement of Opinion:
- I think this policy would be beneficial as it helps reduce the tax burden from the settlement I've received.
- Every dollar saved helps rebuild and recover from the disaster.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 6 | 5 |
| Year 3 | 7 | 5 |
| Year 5 | 7 | 6 |
| Year 10 | 8 | 6 |
| Year 20 | 6 | 5 |
Retired (Paradise, CA)
Age: 60 | Gender: male
Wellbeing Before Policy: 3
Duration of Impact: 10.0 years
Commonness: 8/20
Statement of Opinion:
- This tax relief could ease the burden of high legal fees I incurred while dealing with the insurance company.
- Saving on taxes would help me stabilize my financial situation.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 3 |
| Year 2 | 6 | 4 |
| Year 3 | 6 | 4 |
| Year 5 | 7 | 5 |
| Year 10 | 7 | 5 |
| Year 20 | 5 | 3 |
Freelance Graphic Designer (Eugene, OR)
Age: 29 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 5.0 years
Commonness: 12/20
Statement of Opinion:
- The policy seems beneficial but I personally didn't incur high costs, so the impact may not be huge for me.
- It could help others who had more damage and costs than I did.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 6 | 6 |
| Year 3 | 6 | 6 |
| Year 5 | 7 | 6 |
| Year 10 | 7 | 7 |
| Year 20 | 6 | 6 |
Construction Worker (Reno, NV)
Age: 50 | Gender: male
Wellbeing Before Policy: 4
Duration of Impact: 20.0 years
Commonness: 7/20
Statement of Opinion:
- I hope the policy would aid in covering my legal expenses which were significant.
- It may finally allow a fresh start without financial overhang from the fire.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 4 |
| Year 2 | 5 | 4 |
| Year 3 | 6 | 4 |
| Year 5 | 7 | 5 |
| Year 10 | 7 | 5 |
| Year 20 | 6 | 4 |
Retail Manager (Salem, OR)
Age: 34 | Gender: female
Wellbeing Before Policy: 5
Duration of Impact: 5.0 years
Commonness: 15/20
Statement of Opinion:
- Given my circumstances, any policy offering tax relief on gains or compensations could improve financial stability.
- It helps to mitigate the income disruptions we've experienced.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 6 | 5 |
| Year 3 | 7 | 6 |
| Year 5 | 7 | 6 |
| Year 10 | 7 | 6 |
| Year 20 | 6 | 5 |
Winery Owner (Santa Barbara, CA)
Age: 52 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 10.0 years
Commonness: 6/20
Statement of Opinion:
- It would significantly help in reducing the tax liabilities from compensations I've received for vineyard damages.
- This policy seems tailored for those of us hit hard by wildfires.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 6 |
| Year 2 | 7 | 6 |
| Year 3 | 7 | 6 |
| Year 5 | 8 | 7 |
| Year 10 | 8 | 7 |
| Year 20 | 7 | 6 |
Firefighter (Medford, OR)
Age: 41 | Gender: other
Wellbeing Before Policy: 7
Duration of Impact: 0.0 years
Commonness: 14/20
Statement of Opinion:
- I may not be directly financially impacted by this policy but see its potential benefit to affected residents.
- As a firefighter, I see the struggles that survivors go through. This could ease some of their burdens.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 7 | 7 |
| Year 3 | 7 | 7 |
| Year 5 | 7 | 7 |
| Year 10 | 7 | 7 |
| Year 20 | 7 | 7 |
Tech Support Specialist (San Francisco, CA)
Age: 37 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 5.0 years
Commonness: 12/20
Statement of Opinion:
- Though my personal stakes were low, the policy could greatly support those with massive losses and legal expenses.
- Policies like these are needed with the growing frequency of wildfires.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 6 | 6 |
| Year 3 | 7 | 6 |
| Year 5 | 7 | 6 |
| Year 10 | 7 | 6 |
| Year 20 | 6 | 6 |
Small Business Owner (Redding, CA)
Age: 55 | Gender: male
Wellbeing Before Policy: 4
Duration of Impact: 10.0 years
Commonness: 8/20
Statement of Opinion:
- The additional financial relief could avoid future financial instability for my business.
- Tax reductions on settlements are much needed to aid recovery processes.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 4 |
| Year 2 | 5 | 4 |
| Year 3 | 6 | 5 |
| Year 5 | 6 | 5 |
| Year 10 | 6 | 5 |
| Year 20 | 5 | 4 |
Nurse (Portland, OR)
Age: 44 | Gender: female
Wellbeing Before Policy: 5
Duration of Impact: 10.0 years
Commonness: 9/20
Statement of Opinion:
- This would relieve some of the stress associated with the legal costs of settlements.
- Any financial support helps in these disastrous times.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 7 | 5 |
| Year 3 | 7 | 5 |
| Year 5 | 7 | 6 |
| Year 10 | 7 | 6 |
| Year 20 | 6 | 5 |
Cost Estimates
Year 1: $150000000 (Low: $100000000, High: $200000000)
Year 2: $150000000 (Low: $100000000, High: $200000000)
Year 3: $150000000 (Low: $100000000, High: $200000000)
Year 5: $150000000 (Low: $100000000, High: $200000000)
Year 10: $150000000 (Low: $100000000, High: $200000000)
Year 100: $15000000000 (Low: $10000000000, High: $20000000000)
Key Considerations
- The policy provides significant economic relief targeted specifically at victims of federally declared wildfire disasters.
- The exclusion of settlement funds from gross income aligns with providing full compensation for damages without tax burdens.
- Implementation will require careful identification of qualifier events and individuals, necessitating coordination with disaster declarations.