Wednesday, April 29, 2026

U.S. House of Representatives Passes Bill to Shield Eaton Fire Settlements From Federal Taxes

Pasadena congresswoman calls the vote a victory for survivors still struggling to rebuild more than a year after the January 2025 blaze

Eaton Fire survivors who accept settlement payments from Southern California Edison would not owe federal income taxes on that money under a bill the U.S. House of Representatives passed Monday by voice vote.

The measure matters urgently in Pasadena and Altadena, where more than 9,400 structures were destroyed and 19 people killed when the Eaton Fire swept through foothill neighborhoods on January 7, 2025. A previous tax exemption on wildfire-related compensation expired December 31, 2025, leaving thousands of families uncertain whether settlement checks would shrink on arrival.

Rep. Judy Chu, a Pasadena Democrat who represents California’s 28th Congressional District and sits on the House Ways and Means Committee, called the vote “a major victory for natural disaster survivors nationwide, and especially for survivors of the Eaton Fire in my district,” according to a statement released by her office on April 28, 2026.

The legislation, H.R. 5366, is formally titled the Doug LaMalfa Federal Disaster Tax Relief Certainty Act. It was renamed to honor the late Rep. Doug LaMalfa, a Northern California Republican and original co-sponsor who died in January 2026 at age 65. Rep. Greg Steube, a Florida Republican, introduced the bill in September 2025. Senators Rick Scott of Florida and Adam Schiff of California are leading companion legislation in the Senate, where the bill now heads.

The bill would extend the exclusion of qualified wildfire relief payments from gross income for fires occurring between December 31, 2014, and January 1, 2027. Payments received through 2030 would be covered. It also codifies expanded rules allowing disaster survivors to deduct personal casualty losses without itemizing, according to the Congressional Budget Office, which estimated the measure would reduce federal revenue by $408 million over the 2026–2036 period.

The tax question has taken on particular weight in Altadena and Pasadena. More than 2,800 households have applied for Edison’s Wildfire Recovery Compensation Program, which launched October 29, 2025, and requires participants to waive the right to sue the utility. Edison has acknowledged that its power equipment may have sparked the fire, according to reporting by the Associated Press, though an official investigation remains ongoing. Thousands more survivors have joined lawsuits against the company.

Without the legislation, settlement payments could be taxed as ordinary income — reducing the funds available for rebuilding and potentially disqualifying some recipients from government benefits.

“Survivors deserve the full amount of their settlements so they can rebuild their homes, restore their lives, and recover from the devastation they have endured,” Chu said in her statement.

Chu also pointed to the broader financial toll on fire survivors. More than 70 percent of survivors have not returned to their homes, she said, and most have faced net losses exceeding $100,000. The UCLA Latino Policy & Politics Institute has separately reported that 70 percent of homes damaged or destroyed in the Eaton Fire show no visible sign of repair or rebuilding progress, a figure that encompasses both applying for a construction permit and listing a lot for sale.

The Ways and Means Committee approved the bill unanimously on March 25, 2026, with a vote of 43–0. Chu had offered an amendment during the committee markup, which she later withdrew, according to the committee’s record.

Chu has also introduced her own companion measure, H.R. 6842, the Disaster Survivors Tax Relief and Recovery Act, which she said would codify tax provisions included in Governor Gavin Newsom’s disaster supplemental funding request and address additional financial challenges facing survivors. That bill, introduced in December 2025, would remove penalties for retirement plan withdrawals of up to $100,000, increase the cap on penalty-free employer plan withdrawals from $50,000 to $100,000, and provide additional Low-Income Housing Tax Credits to encourage rebuilding, according to Chu’s office.

California submitted a formal disaster supplemental appropriation request of $33.9 billion — revised from an initial $39.68 billion — to the Trump administration in February 2025. According to statements from Newsom’s office, the administration has not transmitted the request to Congress for evaluation. Chu called on President Trump to “immediately fulfill Governor Newsom’s disaster supplemental funding request — with no strings attached.”

“Without that support, recovery will be slower, more expensive, and further out of reach for families already struggling to put their lives back together,” Chu said. “Natural disasters do not discriminate — and neither should our response.”

The Eaton Fire burned 14,021 acres and destroyed 9,419 structures, including residential, commercial, and other buildings, according to the California Department of Forestry and Fire Protection. The blaze also damaged an additional 1,076 structures. It remains the second most destructive wildfire in California history.

Chu’s Pasadena district office is located at 527 S. Lake Ave., Suite 250, Pasadena, CA 91101, and can be reached at (626) 304-0110.

The bill now awaits action in the Senate, where it has been referred to the Committee on Finance.

Rep. Chu’s statement was issued by her congressional office. Bill details were drawn from congressional records, the Congressional Budget Office, and the Ways and Means Committee. Eaton Fire statistics are from the California Department of Forestry and Fire Protection. Recovery data referenced by Chu has been separately reported by the UCLA Latino Policy & Politics Institute and Governing magazine. Edison’s compensation program details are from the utility’s public program documentation and reporting by the Associated Press and CalMatters.