Personal Income Tax Law: Corporation Tax Law: wildfires: exclusions.

Assembly Member Tangipa's proposal to exclude wildfire settlement payments from California state taxes would allow residents and businesses who receive compensation for wildfire damages to keep those funds tax-free through 2028. The measure creates parallel exclusions under both personal income and corporate tax codes for settlement amounts received to replace property destroyed or damaged by wildfires in affected areas of California.

The tax benefit would apply to property owners, residents, and businesses located in wildfire-damaged regions who receive settlement payments to cover their losses and expenses. Settlement entities, working with class action administrators, must provide documentation of payments when requested by either the Franchise Tax Board or the qualified taxpayers. The exclusions would take effect for tax years starting January 1, 2023 and continue through December 1, 2028.

To track the program's reach, the Franchise Tax Board must report to the Legislature by November 2028 on the number of taxpayers who claimed the exclusion and the total amount of wildfire settlements excluded from taxation. The bill's findings state these exclusions aim to prevent undue hardship for Californians in wildfire-devastated areas and do not constitute prohibited gifts of public funds under the state constitution.