In the final hours of work before members of Congress went on recess for five weeks, a bill backed by Oregon’s U.S. Sen. Ron Wyden to relieve natural disaster survivors from paying federal income taxes on their recovery settlements and lawyers fees passed against unexpected odds.
The bipartisan Federal Disaster Tax Relief Act passed in the Senate by unanimous consent Friday before both chambers left Washington, D.C., for five weeks. The proposal — which essentially renews a 2024 law that expired — survived an unexplained attempt by U.S. Sen. Ted Cruz, a Republican from Texas, to stall it via a procedural move that Wyden, Democratic lawmakers and wildfire survivors blasted on social media for days leading up to the recess.
Cruz’s spokespersons did not respond to multiple requests for comment last week and on Monday. The act already passed the House and goes to the White House for final signature by President Donald Trump.
It allows disaster survivors to more easily deduct from their federal income taxes the cost of any uninsured or uncovered property losses and makes disaster settlement payments non-taxable, including any portion of awards that cover lawyers’ fees, living expenses, lost wages, or compensation for injury, death, or emotional distress. The latter is most valuable for survivors of man-made disasters, such as wildfires ignited by powerlines.
The tax relief applies to people who have survived a wildfire since 2016. It technically expired at the end of 2025 after Wyden was unable to get lawmakers to take a vote on it before Congress recessed for the year. Wyden said in a statement that this time, “common sense prevailed.”
There would have been little time to pass the bill before year’s end, because both the U.S. House and Senate won’t return to D.C. until mid-September and then only for a few weeks before leaving town again for all of October in the leadup to the midterm elections in November.
In 2024, the Oregon Legislature unanimously passed Senate Bill 1520 ending state income taxation on settlements and lawyer fees for wildfire victims. The bill was championed by survivors of the 2020 Labor Day Fires, some of which were found to be caused by Pacific Power electrical lines.
A proposal to require utilities that cause powerline-ignited fires to cover the cost of federal income taxes on settlements paid to survivors died in the final hours of the 2025 Oregon legislative session.
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