Protect Innocent Victims of Taxation After Fire Extension Act
Summary
The "Protect Innocent Victims of Taxation After Fire Extension Act" aims to amend the Internal Revenue Code of 1986 by excluding qualified wildfire relief payments from gross income. This exclusion applies to compensation received by individuals for losses, expenses, or damages resulting from federally declared wildfire disasters after December 31, 2014. The bill ensures that victims of wildfires are not taxed on relief payments intended to help them recover.
Expected Effects
The act will prevent the taxation of wildfire relief payments, providing financial relief to individuals affected by these disasters. It will also prevent individuals from claiming both a tax exclusion for the relief payment and a deduction or credit for the same expenditure, or an increase in the basis of property.
Potential Benefits
- Provides financial relief to wildfire victims by excluding relief payments from gross income.
- Simplifies the tax process for individuals receiving wildfire compensation.
- Targets relief to those who have experienced losses not covered by insurance.
- Applies to federally declared disasters, ensuring a consistent standard for eligibility.
- Offers clarity on the tax treatment of wildfire relief payments.
Most Benefited Areas:
Potential Disadvantages
- May slightly increase the complexity of tax administration due to the need to verify qualified wildfire relief payments.
- Could potentially be exploited if eligibility criteria are not strictly enforced.
- The denial of double benefits (deduction/credit and basis increase) might be perceived as a drawback by some taxpayers, although it prevents abuse.
Constitutional Alignment
The bill aligns with the general welfare clause of the US Constitution (Preamble), as it seeks to provide relief to citizens affected by natural disasters. Congress has the power to lay and collect taxes, but also the implied power to provide for the general welfare through tax policy. The bill does not appear to infringe on any specific constitutional rights or limitations.
Impact Assessment: Things You Care About ⓘ
This action has been evaluated across 19 key areas that matter to you. Scores range from 1 (highly disadvantageous) to 5 (highly beneficial).