A wildfire took everything they own. Now the IRS wants any insurance settlement Colorado fire survivors receive
Wildfire survivors from Colorado and California are teaming up for a high-stakes battle.
This time, they're taking on Uncle Sam and a tax policy they say adds insult to injury.
The group traveled to Washington D.C. to lobby for a law that would prevent the IRS from taking a cut of legal settlements fire victims receive.
While a bill in congress would exempt settlements from federal taxes, it's stalled and time is running out for Californians, who have already settled their lawsuit with a utility company there.
Desperate for help, the Californians turned to Coloradans for help and fire survivors here were glad to give back. They reunited in D.C. a year after they first met.
Superior trustees, Jenn Kaaoush and Neal Shah, recalled how a group of strangers from California showed up a month after the Marshall Fire to help.
Shah says the Californians knew exactly what they were going through.
"Here's things you need to think about, here's things the community needs and, by the way, we will be there for the next two years. Call us anytime," he said.
So, when the California fire survivors asked for help, Kaaoush and Shah didn't hesitate, even though they had never been to Capitol Hill let alone lobbied for the legislation.
"There were some cases where I felt not as confident going into legislators' offices and then I remembered why we were there and I had the strength to go in and push every angle to get a 'yes.'"
While most members of Colorado's congressional delegation had staff meet with the fire survivors, congressman Joe Neguse met with them directly. Kaaoush and Shah made a plea not only for Californians but all disaster survivors, saying none of the insurance settlements should be counted as taxable income.
"Places like Florida with the seaside condo collapse and Texas freeze. Those are in litigation and there will be settlements, a payout, at some point," Kaaoush said.
Categorizing settlements as income not only means victims lose money to taxes but, Shah says, some will lose federal benefits that have income restrictions.
"We should collectively acknowledge that these are disasters homeowners had no part in so they don't deserve to lose a chunk of that," Shah said.
Congressman Neguse, who co-chairs the Wildfire Caucus, agrees. He says he is cautiously optimistic about the bill's chances.
"The fact that it's bipartisan at a time of divided government bodes well for its chances of getting signed into law by President Biden, which we need to do as soon as we can," he said.
Exempting California's settlement alone will cost the federal government hundreds of millions of dollars in tax revenue. So, Kaaoush and Shah know there will be push-back but they say they're not giving up.
They also plan to ask the state legislature to exempt disaster settlements from state taxes.
