Congress Approves Tax Relief for East Palestine: A Win for Residents!

CLEVELAND — Kristina Ferguson has been caught in a whirlwind of uncertainty since February 3, 2023.

That fateful day, a Norfolk Southern train loaded with hazardous materials derailed and ignited just a stone’s throw from her home, shattering the peace of East Palestine and altering lives in this quaint eastern Ohio village forever.

This Monday brought a glimmer of hope for Ferguson and her neighbors. The U.S. Senate has just approved a tax relief bill aimed at helping disaster victims, including those affected in East Palestine. The Federal Disaster Tax Relief Act of 2023 is now awaiting President Joe Biden’s signature.

This crucial legislation will spare Ferguson and her fellow residents from facing federal income taxes on their settlement checks from Norfolk Southern—whenever those checks finally arrive.

“I’m incredibly grateful that this bill passed,” she expressed, referring to the bipartisan effort initiated in October 2023. “I truly hope this is just the beginning of the support that my community desperately needs.”

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‘So many disasters’

The newly passed bill specifically exempts recovery payments for East Palestine from taxation, extending similar relief to victims of specific wildfires. It simplifies the process for claiming disaster losses on federal income tax returns, making it easier for a wider range of individuals to qualify for deductions that reflect their hardships.

“It can get pretty complicated,” acknowledges Alison Flores, a tax expert with over 15 years of experience at a leading tax preparation firm. “I’ve navigated through hurricanes, tornadoes, wildfires, and many other calamities,” she adds, highlighting the multitude of disasters that have occurred.

While the tax relief bill focuses on federally recognized disasters—with East Palestine highlighted—it does not extend its benefits to homeowners in Northeast Ohio impacted by tornadoes and severe weather in August.

However, it does offer critical support to residents in Richland County and ten other counties battered by tornadoes in March, following President Biden’s major disaster declaration for those regions in early May.

RELATED:‘I prayed that we would make it through’: Richland Co. residents shaken by destructive tornado

The legislation also extends its reach to taxpayers affected by hurricanes and flooding in states like North Carolina and Florida. The IRS maintains a list of recognized disasters on its website.

While IRS representatives have refrained from commenting on the bill’s potential impact, tax experts are eagerly awaiting guidance to navigate the new regulations.

The bill, known as H.R. 5863, will empower taxpayers to amend past returns dating back to 2020, accommodating the updated calculations for disaster-related deductions. It even offers relief to wildfire victims from as far back as 2016.

“Unfortunately, there have been so many disasters this past year that our experts are refreshing their knowledge on these rules,” Flores explains.

If the bill becomes law, taxpayers considering amending prior returns will need to choose between waiting for the IRS’s electronic filing system to reopen in late January or filing on paper, which is a slower process. “If you go the paper route now, you won’t see a refund check in time for holiday shopping,” she warns.

For those feeling overwhelmed, Flores advises reaching out for help. “Consult with a qualified professional. They can guide you through the process and alleviate your worries.”

Derailed: East Palestine 6 Months Later

‘My heart breaks for my community’

The newly passed bill offers much-needed clarity for East Palestine residents amidst the chaos. In June, the IRS classified the train derailment as “an event of a catastrophic nature,” confirming that many of the disaster relief payments from Norfolk Southern would not be taxable.

This includes one-time inconvenience payments, moving costs, home repairs, medical expenses, and checks for homeowners who sold their properties. However, the IRS did indicate that lost wages and business compensation would be taxed.

By legislating these tax exemptions, Congress has transformed these measures into law, providing a more solid foundation for affected residents.

Residents of East Palestine continue to await their share of a $600 million settlement stemming from a class-action lawsuit against the railroad. Eligible payments could average around $70,000 for households within two miles of the disaster site and approximately $250 for those living 15 to 20 miles away.

Attorneys involved have noted delays in disbursement due to ongoing appeals. In a recent statement, they indicated the timeline for payment remains uncertain.

In late November, some first responders and community members began receiving personal injury checks related to their hazardous exposure, with average payouts estimated between $1,000 and $10,000.

“There are nearly 5,000 payment determinations undergoing final review that should be sent out shortly,” the lawyers stated.

Ferguson is not part of the class-action settlement; instead, she’s pursuing separate legal action against Norfolk Southern, hoping to secure a replacement for her childhood home—now a constant source of anxiety.

Her family has been living in a rental home 10 miles away, with Norfolk Southern covering the rent. “It feels like this nightmare is never-ending,” she laments, emphasizing the ongoing cleanup and legal struggles. “There are others deeply affected who need to get out.”

While she’s heartened to see lawmakers taking action, Ferguson knows there’s still a long road ahead for East Palestine to fully recover. “My heart aches for my community,” she reflects. “Whether it’s friends or family, I just pray that everyone’s needs are met, whether they decide to stay, leave, or rebuild their homes.”