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WASHINGTON, D.C. - Calling the Norfolk Southern derailment in East Palestine "catastrophic in nature," the IRS and Treasury Department made derailment-related assistance "disaster relief" and tax exempt, U.S. Sen Sherrod Brown (D-OH) announced on Wednesday.
In April, Brown continued to push for East Palestine derailment tax relief, calling on the Secretary of the Treasury Janet Yellen and the Internal Revenue Service (IRS) Director Danny Werfel to declare the derailment "a catastrophic event." Under Section 139 of the IRS tax code certain payments to individuals may be excluded from income if they were to pay or reimburse expenses incurred as a result of a "qualified disaster."
"We took on the IRS and now East Palestine residents will not have to pay tax on assistance they received from Norfolk Southern," said Brown. "This is a long overdue step - the people of East Palestine should never have had to pay taxes on assistance they needed in the wake of the train derailment."
Assistance that will be tax-exempt include inconvenience payments from Norfolk Southern, along with reimbursements for relocation, home repairs, medical expenses, and replacement clothes and household items.
The Village of East Palestine and the State of Ohio have already taken measures to ensure any derailment assistance is nontaxable. Ohio made the first move in July when State Rep. Monica Robb Blasdel (R-Columbiana County) secured a deduction for taxpayers impacted by the East Palestine derailment from their state income tax and rail safety measures. Robb Blasdel pushed for these amendments into the state budget, which was approved by the General Assembly and signed into law last July.
East Palestine followed suit in September by passing an ordinance to make sure no one is required to pay village income taxes on any payments they receive for derailment-related expenses or losses.
Brown (D-OH) has been pushing for passage of a federal bill to do the same since January. The Federal Disaster Tax Relief Act was first introduced by Rep. Greg Steube of Florida and would provide tax relief to victims of hurricanes and wildfires as well as the train derailment.
Last month, the bill came to the House Floor for a vote after Deluzio signed on to an effort to discharge the bill, bypassing committee and bringing it directly to the floor for a vote. The bill passed on a bipartisan basis and now heads to the Senate for consideration.
Brown, who negotiated the deal with Senate Finance Committee Chairman Ron Wyden (D-OR) and House Ways and Means Committee Chairman Jason Smith (R-MO), was hopeful it would make it to the Senate by the beginning of the tax filing season, but the bill moved slowly.
Brown has repeatedly made his stance clear that any and all money received by residents from Norfolk Southern including early $1,000 checks distributed in the days following the derailment which have been referred to as "inconvenience checks" should not be taxed as income as the impacted residents attempt to become "whole again."