H.R. 5225: Protect Innocent Victims of Taxation After Fire Extension Act

This bill, known as the Protect Innocent Victims of Taxation After Fire Extension Act, aims to amend the Internal Revenue Code to provide specific tax relief for individuals affected by wildfires. It proposes to exclude certain payments received as compensation for losses or damages related to wildfires from being counted as taxable income. Below are the key components of the bill:

Key Provisions

• Exclusion of Compensation from Gross Income: The bill states that amounts received by individuals as qualified wildfire relief payments will not be included in their gross income for tax purposes.
• Definition of Qualified Wildfire Relief Payment: A "qualified wildfire relief payment" refers to any compensation received for losses or damages incurred due to a wildfire disaster. This can include payments for:
  • Additional living expenses
  • Lost wages (but not if these wages would have been paid by an employer)
  • Personal injury
  • Death
  • Emotional distress
  However, to qualify, these payments must be for losses not already covered by insurance or other means.
• Definition of Qualified Wildfire Disaster: A "qualified wildfire disaster" is defined as any wildfire event that has been federally declared as a disaster, occurring after December 31, 2014.
• Denial of Double Benefit: The bill ensures that taxpayers cannot receive a double benefit. This includes prohibiting:
  • Deductions or credits for any expenditures related to the amount excluded from gross income due to the relief payments.
  • Adjustments to property basis for amounts excluded, preventing taxpayers from inflating their property value due to these payments.
• Termination Date: The provisions of this bill will not apply to any amounts received after December 31, 2032.

Effective Date

The changes outlined in this bill will take effect for amounts received after December 31, 2025.

Relevant Companies

None found.