WASHINGTON, D.C. — U.S. Senator Bob Casey of Pennsylvania has issued a recent plea to the Internal Revenue Service (IRS) and Treasury Secretary Janet Yellen, asking them to label the Norfolk Southern train derailment as a catastrophe. This designation would exempt affected families from paying taxes on aid received for basic necessities incurred due to damage caused by the disaster.
The train disaster in question occurred on February 3, 2023, in East Palestine, Ohio, just shy of Pennsylvania’s border. A Norfolk Southern train, transporting hazardous materials, derailed and subsequently erupted into flames. This disaster necessitated an immediate evacuation of residents in both Ohio and Pennsylvania, raising a multitude of safety concerns.
In response to the disaster, Norfolk Southern set up a Family Assistance Center in New Waterford, Ohio. The center was tasked with providing support to the evacuated families, offering a $1,000 inconvenience payment to those who could prove that they were evacuated. The company also offered reimbursements for essential expenses such as food, clothing, and shelter.
However, these payments were reported to the IRS using Form 1099, subsequently tagging them as taxable income. As a result, affected families face an unexpected tax burden amid trying to recover from the disaster’s impact.
Senator Casey’s letter to IRS Commissioner Danny Werfel and Treasury Secretary Janet Yellen draws attention to this predicament. He emphasizes that payments made to disaster victims for things like food, shelter, and clothing are not income themselves, but reimbursements in the face of an unplanned disaster. He further argues that considering these payments as taxable income puts an undue burden on families already in distress.
He wrote, “Impacted individuals and families faced great hardships and disruption during this period and were forced to deal with sudden unexpected evacuations and school closures with little access to their belongings or homes…The Pennsylvania victims of this disaster should not be forced to pay tax on reimbursements for the hardship they endured and the losses they suffered.”
Senator Casey is urging the IRS and Treasury Department to use their authority under Section §139 of the Internal Revenue Code which allows them to classify the Norfolk Southern accident as a catastrophic event. Recognizing the disaster as such would enable the reasonable and necessary payments made to affected families to be tax exempt.
The potential implication of such a decision by the IRS and the Department of Treasury is significant. Not only would it provide immediate financial relief to those directly affected by the Norfolk Southern derailment, but it also sets a precedent for tax relief in future disasters.
This appeal by Senator Casey underscores the role that IRS and Treasury Department can play in providing fiscal relief to disaster victims by scrutinizing IRS codes and making use of discretionary powers in exceptional circumstances. It also highlights how critical it is that such decisions are made with a deep understanding of the existing tax laws and the impact on those most affected.
Senator Casey’s stance is, at its heart, a plea for compassion and empathy. By making a case for tax exemptions for disaster victims, this may be the first step towards a conversation around modifying policies to better support and aid those caught in disaster circumstances.
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