HR-5225-119
Referred to the House Committee on Ways and Means.
What it does
This bill would amend the Internal Revenue Code to exclude from federal gross income any "qualified wildfire relief payments" received by individuals. Qualifying payments include compensation for additional living expenses, lost wages (excluding wages an employer would have paid anyway), personal injury, death, emotional distress, and other losses or damages resulting from a federally declared wildfire disaster declared after December 31, 2014. The exclusion would apply to amounts received after December 31, 2025, and would sunset on December 31, 2032. The bill also prevents recipients from claiming a double benefit — they may not also deduct expenses or increase property basis for amounts already excluded under this provision.
Who benefits
Individuals who have received or will receive financial settlements, government payments, or other compensation related to federally declared wildfire disasters — particularly those in wildfire-prone states such as California, Oregon, Washington, Colorado, and Texas. Victims of the 2025 Los Angeles-area wildfires and other recent large fires would be among the most directly affected. Attorneys and settlement administrators handling wildfire litigation may see increased settlement activity if tax liability is removed as a barrier. Utility companies facing wildfire liability may find settlements easier to reach if recipients are not taxed on proceeds.
Who is hurt
The federal government would forgo tax revenue on wildfire relief payments, which could reduce funds available for other programs. Taxpayers in non-wildfire-prone states may bear a proportionally larger share of the federal tax base. Victims of other types of federally declared disasters (floods, hurricanes, tornadoes) who do not receive a comparable exclusion may be treated less favorably under the tax code. Uninsured wildfire victims who receive no compensation payments would receive no benefit from this provision.
Supporters argue
Supporters argue that taxing compensation paid to wildfire victims for destroyed homes, lost wages, and personal injuries amounts to taxing people on their own losses — not on income — and that the federal tax code should not compound the financial devastation of a disaster. They contend that wildfire disasters have grown dramatically in scale and frequency, with the 2025 Los Angeles fires alone causing an estimated $135–150 billion in damages, and that victims receiving settlement payments from utilities or government programs should not face unexpected tax bills that reduce their ability to rebuild. They further argue the bill's double-benefit prohibition and sunset clause reflect responsible, targeted drafting.
Opponents argue
Opponents argue that the bill creates an unequal tax code by singling out wildfire victims for preferential treatment over victims of other federally declared disasters — such as hurricanes, floods, and tornadoes — who may face identical financial losses but no comparable exclusion. They contend that existing law already provides significant disaster-related tax relief through casualty loss deductions and other provisions, and that this bill primarily benefits large tort settlements with utility companies rather than the most vulnerable victims. They also argue that the revenue cost, while unquantified, represents a permanent structural preference for one disaster type that sets a problematic precedent for future carve-outs.