On August 7, the U.S. Senate unanimously passed the Doug LaMalfa Federal Disaster Tax Relief Certainty Act (H.R. 5366), sending the bipartisan legislation to the President’s desk. Introduced by Senators Adam Schiff (D-CA) and Rick Scott (R-FL), with companion legislation led in the House by Representatives Greg Steube (R-FL), Mike Thompson (D-CA), and Jimmy Panetta (D-CA), the bill provides federal tax relief to victims of federally declared disasters, including wildfires and hurricanes. Congress renamed the bill in honor of the late Representative Doug LaMalfa, who had worked extensively on disaster tax relief legislation.
The measure incorporates a modified version of the Protect Innocent Victims of Taxation After Fire Extension Act (H.R. 5225), led by Senators Alex Padilla (D-CA), Cynthia Lummis (R-WY), Ron Wyden (D-OR), and Tim Sheehy (R-MT). Building on the wildfire tax exclusion enacted through the Federal Disaster Tax Relief Act of 2023 (P.L. 118-148), the provision excludes from survivors’ federal taxable income, qualified relief payments for additional living expenses, lost wages, personal injury, death, and emotional distress, provided those losses were not already covered by insurance or another source. The exclusion applies to federally declared wildfire disasters occurring before January 1, 2027, regardless of when the resulting settlement payments are distributed. This allows survivors to claim the exclusion in the year they receive payment rather than amending prior-year returns, although they may not claim separate deductions or credits for expenses covered by an excluded payment.
The previous exclusion expired at the end of 2025 meaning, without the President’s signature, qualifying wildfire settlement payments received in 2026 would be subject to federal income tax. Although this measure would only temporarily extend the exclusion, the sponsors have indicated that they will continue pursuing a permanent exemption.
For more information, contact RCRC Senior Policy Advocate Staci Heaton.