What This Bill Does
This bill changes tax rules for people who won money in lawsuits or settlements related to wildfires. It allows people to deduct attorney fees they paid for these cases. It also says that settlement money received for wildfire damages does not count as taxable income.
Who It Affects
People who received awards or settlements from lawsuits related to qualifying wildfires. Attorneys who received fees for these cases.
Key Provisions
- People can deduct attorney fees and court costs they paid for awards related to qualifying wildfire disasters, but only up to the amount of money they received from the judgment or settlement (Sec. 1(a)).
- A "qualifying wildfire disaster" means a forest or range fire that is a federally declared disaster, occurs in a disaster area, and happens in calendar year 2015 or later (Sec. 1(a)).
- Settlement money paid by a qualified settlement fund to compensate victims for wildfire losses does not count as income that people must report on their taxes (Sec. 2(a)).
What Changes
If this becomes law, people who won wildfire-related lawsuits can reduce their taxable income by the attorney fees they paid. People who receive settlement money from qualified wildfire settlement funds will not have to pay income taxes on that money.
Important Definitions
"Qualifying wildfire disaster": A forest or range fire that is federally declared, occurs in a disaster area, and occurred in calendar year 2015 or later.
"Qualified settlement fund": Not specified in bill text.
Effective Date
The attorney fee deduction applies to fees and court costs awarded after May 31, 2020. The settlement proceeds exclusion applies to amounts paid after May 31, 2020.
I
118TH CONGRESS
1ST SESSION
H. R. 176
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.
IN THE HOUSE OF REPRESENTATIVES
JANUARY 9, 2023
Mr. LAMALFA (for himself, Mr. THOMPSON of California, Mr. MCCLINTOCK,
and Mr. HUFFMAN) introduced the following bill; which was referred to
the Committee on Ways and Means
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 in-
come settlement funds received with respect to such dam-
ages.
Be it enacted by the Senate and House of Representa-
1
tives of the United States of America in Congress assembled,
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•HR 176 IH
SECTION 1. ABOVE THE LINE DEDUCTION FOR ATTORNEY
1
FEES RELATING TO AWARDS FOR PROPERTY
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DAMAGE DUE TO CERTAIN WILDFIRES.
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(a) IN GENERAL.—Section 62(a) of the Internal Rev-
4
enue Code of 1986 is amended by adding at the end the
5
following new paragraph:
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‘‘(22) ATTORNEY FEES AND COURT COSTS RE-
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LATING
TO
AWARDS
WITH
RESPECT
TO
CERTAIN
8
WILDFIRES.—
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‘‘(A) IN GENERAL.—Any deduction allow-
10
able under this chapter for attorney fees and
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court costs paid by, or on behalf of, the tax-
12
payer in connection with any award with re-
13
spect to a qualifying wildfire disaster. The pre-
14
ceding sentence shall not apply to any deduc-
15
tion in excess of the amount includible in the
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taxpayer’s gross income for the taxable year on
17
account of a judgment or settlement (whether
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by suit or agreement and whether as lump sum
19
or periodic payments) resulting from such
20
claim.
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‘‘(B) QUALIFYING WILDFIRE DISASTER.—
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For purposes of subparagraph (A), the term
23
‘qualifying wildfire disaster’ means any forest
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or range fire that—
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•HR 176 IH
‘‘(i) is a federally declared disaster (as
1
such
term
is
defined
in
section
2
165(i)(5)(A)),
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‘‘(ii) occurs in a disaster area (as such
4
term is defined in section 165(i)(5)(B)),
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and
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‘‘(iii) occurs in calendar year 2015 or
7
later.’’.
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(b) EFFECTIVE DATE.—The amendment made by
9
this section shall apply to attorney fees and court costs
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awarded after May 31, 2020.
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SEC. 2. EXCLUSION OF CERTAIN WILDFIRE SETTLEMENT
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PROCEEDS FROM GROSS INCOME.
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(a) IN GENERAL.—Part III of subchapter B of chap-
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ter 1 of the Internal Revenue Code of 1986 is amended
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by inserting after section 139I the following new section:
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‘‘SEC. 139J. CERTAIN WILDFIRE SETTLEMENT PROCEEDS.
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‘‘(a) IN GENERAL.—Gross income shall not include
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amounts paid by a qualified settlement fund established
19
to compensate victims for losses or damages in connection
20
with a qualifying wildfire disaster (as defined in section
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62(a)(22)(B)).
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‘‘(b) QUALIFIED SETTLEMENT FUND.—The term
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‘qualified settlement fund’ has the meaning given such
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•HR 176 IH
term in Section 1.468B–1 of title 26, Code of Federal
1
Regulations.’’.
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(b) CLERICAL AMENDMENT.—The table of sections
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for part III of subchapter B of chapter 1 of such Code
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is amended by inserting after the item relating to section
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139I the following new item:
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‘‘Sec. 139J. Certain wildfire settlement proceeds.’’.
(c) EFFECTIVE DATE.—The amendment made by
7
this section shall apply to amounts paid after May 31,
8
2020.
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Æ
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