Title: A bill to amend the Internal Revenue Code of 1986 to establish a deduction for attorney fees awarded with respect to certain wildfire damages and to exclude from gross income settlement funds received with respect to such damages.
Policy area: Taxation

Summary:
This bill allows a deduction from gross income (above the line deduction) for attorney fees and court costs awarded with respect to a qualifying wildfire disaster (i.e., any forest or range fire that is a federally declared disaster, occurs in a disaster area, and occurs in 2015 or later).
The bill excludes from the gross income of a taxpayer, for income tax purposes, amounts paid to compensate victims for losses or damages in connection with a qualifying wildfire disaster.

[Congressional Bills 117th Congress]
[From the U.S. Government Publishing Office]
[S. 4666 Introduced in Senate (IS)]

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117th CONGRESS
  2d Session
                                S. 4666

To amend the Internal Revenue Code of 1986 to establish a deduction for 
 attorney fees awarded with respect to certain wildfire damages and to 
  exclude from gross income settlement funds received with respect to 
                             such damages.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             July 28, 2022

    Mrs. Feinstein (for herself, Mr. Padilla, and Mr. Hickenlooper) 
introduced the following bill; which was read twice and referred to the 
                          Committee on Finance

_______________________________________________________________________

                                 A BILL


 
To amend the Internal Revenue Code of 1986 to establish a deduction for 
 attorney fees awarded with respect to certain wildfire damages and to 
  exclude from gross income settlement funds received with respect to 
                             such damages.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. ABOVE THE LINE DEDUCTION FOR ATTORNEY FEES RELATING TO 
              AWARDS FOR PROPERTY DAMAGE DUE TO CERTAIN WILDFIRES.

    (a) In General.--Section 62(a) of the Internal Revenue Code of 1986 
is amended by inserting after paragraph (21) the following new 
paragraph:
            ``(22) Attorney fees and court costs relating to awards 
        with respect to certain wildfires.--
                    ``(A) In general.--Any deduction allowable under 
                this chapter for attorney fees and court costs paid by, 
                or on behalf of, the taxpayer in connection with any 
                award with respect to a qualifying wildfire disaster. 
                The preceding sentence shall not apply to any deduction 
                in excess of the amount includible in the taxpayer's 
                gross income for the taxable year on account of a 
                judgment or settlement (whether by suit or agreement 
                and whether as lump sum or periodic payments) resulting 
                from such claim.
                    ``(B) Qualifying wildfire disaster.--For purposes 
                of subparagraph (A), the term `qualifying wildfire 
                disaster' means any forest or range fire that--
                            ``(i) is a federally declared disaster (as 
                        defined in section 165(i)(5)(A)),
                            ``(ii) occurs in a disaster area (as 
                        defined in section 165(i)(5)(B)), and
                            ``(iii) occurs in calendar year 2015 or 
                        later.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to attorney fees and court costs awarded after May 31, 2020.

SEC. 2. EXCLUSION OF CERTAIN WILDFIRE SETTLEMENT PROCEEDS FROM GROSS 
              INCOME.

    (a) In General.--Part III of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 is amended by inserting after section 
139I the following new section:

``SEC. 139J. CERTAIN WILDFIRE SETTLEMENT PROCEEDS.

    ``(a) In General.--Gross income shall not include amounts paid by a 
qualified settlement fund established to compensate victims for losses 
or damages in connection with a qualifying wildfire disaster (as 
defined in section 62(a)(22)(B)).
    ``(b) Qualified Settlement Fund.--The term `qualified settlement 
fund' has the meaning given such term in Treasury Regulation 1.468B-
1.''.
    (b) Clerical Amendment.--The table of sections for part III of 
subchapter B of chapter 1 of such Code is amended by inserting after 
the item relating to section 139I the following new item:

``Sec. 139J. Wildfire settlement proceeds.''.
    (c) Effective Date.--The amendment made by this section shall apply 
to amounts paid after May 31, 2020.
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