S-2744-119
Read twice and referred to the Committee on Finance.
Sponsored by Rick Scott (R-FL)
What it does
This bill would make two changes to the federal tax code. First, it would permanently codify and extend rules allowing individuals in federally declared major disaster areas (with incident periods beginning after July 4, 2025, and before January 1, 2027) to deduct personal casualty losses without meeting the normal 10% of adjusted gross income threshold, and would allow this deduction even for taxpayers who take the standard deduction. Second, it would create a new permanent tax code provision excluding from taxable gross income any compensation received for losses, expenses, or damages resulting from federally declared wildfire disasters occurring after December 31, 2014, for payments received through tax year 2030.
Who benefits
Individuals who suffer property or personal losses in presidentially declared major disaster areas between July 4, 2025, and January 1, 2027. Wildfire victims who received or will receive compensation (including for living expenses, lost wages, personal injury, death, or emotional distress) from federally declared wildfire disasters dating back to 2015. Residents of wildfire-prone states such as California, Oregon, Washington, Colorado, and Texas. Lower- and middle-income disaster victims who previously could not itemize deductions and thus could not claim casualty losses. Legal settlement recipients and government relief payment recipients from wildfires who would otherwise owe income tax on those payments. Attorneys and advocacy organizations representing wildfire victims in litigation.
Who is hurt
The U.S. Treasury would collect less revenue, which could indirectly affect funding for other federal programs or increase the federal deficit. Taxpayers in non-disaster areas receive no comparable benefit, creating an uneven tax treatment across similarly situated individuals. Disaster victims whose incidents fall outside the specified date windows would not qualify. Uninsured wildfire victims who received no compensation payments would not benefit from the income exclusion. States with income taxes conforming to federal law may also see reduced state tax revenue.
Supporters argue
Supporters argue that disaster victims face sudden, catastrophic financial losses through no fault of their own, and that the existing tax code — which requires losses to exceed 10% of adjusted gross income before any deduction applies — effectively denies relief to middle-income families who lose their homes or property. They contend that wildfire compensation payments, such as those from the 2018 Camp Fire and 2025 Los Angeles fires, represent reimbursement for losses already suffered, not income, and that taxing them compounds the harm. Prior temporary disaster tax relief provisions have been enacted repeatedly by Congress on a bipartisan basis, and this bill would codify and extend that established practice.
Opponents argue
Opponents argue that the bill creates a patchwork of date-specific and disaster-type-specific tax preferences that complicate the tax code and treat similarly situated taxpayers unequally — a homeowner who loses everything in a flood outside the qualifying window receives no comparable benefit. They contend that broad income exclusions for wildfire compensation, particularly those reaching back to 2015, may incentivize inflated legal settlements or create windfalls for higher-income claimants who receive large damage awards. Critics may also argue that targeted tax provisions are an inefficient mechanism for disaster relief compared to direct federal assistance programs, and that the revenue cost adds to the federal deficit without a corresponding offset.
Constitutional context
The Taxing and Spending Clause (Art. I, §8, cl. 1) grants Congress broad authority to create tax exclusions and deductions. The bill does not raise significant constitutional concerns under the uniformity requirement, as disaster-based classifications have historically been upheld as rational geographic distinctions rather than impermissible non-uniform taxation. No active constitutional tension area is implicated.
Checks and balances
Congress gains authority to define which disasters and time windows qualify for tax relief; the IRS implements and enforces the provisions; the President retains indirect influence through the disaster declaration process under the Stafford Act, which determines which areas qualify.
Historical precedent
Congress has repeatedly enacted temporary disaster tax relief provisions, including the Disaster Tax Relief and Airport and Airway Extension Act of 2017 and the Taxpayer Certainty and Disaster Tax Relief Act of 2020, which provided similar casualty loss deduction expansions and income exclusions following major disasters.