Details of Public Law 118-148, section 4 , Federal Disaster Tax Relief Act of 2023

The section allows East Palestine train derailment payments to be treated as qualified disaster relief payments as defined under Internal Revenue Code (IRC) section 139(b).

The section defines East Palestine train derailment payments as amounts received by or on behalf of an individual as compensation for loss, damages, expenses, real property value loss, real property closing costs (including relator commissions), or inconvenience resulting from the East Palestine train derailment. The amount must have been provided by a Federal, State, or local government agency, Norfolk Southern Railway, or any subsidiary, insurer, or agent of Norfolk Southern Railway or any related person.

The section defines the term “East Palestine train derailment” as the derailment of a train in East Palestine, Ohio on 02/02/2023.

Under the Personal Income Tax Law, California conforms by reference to Part III of Subchapter B of Chapter 1 of Subtitle A of the IRC, relating to items that are specifically excluded from gross income, as of the “specified date” of 01/01/2015, in Revenue and Taxation Code (RTC) section 17131. As a result, California does not conform to the East Palestine Train Derailment payments exclusion under Personal Income Tax Law.

Under the Corporation Tax Law, pursuant to RTC section 24329, California conforms to the treatment of disaster relief payments as of the “specified date” of 01/01/2015. As a result, the federal section to treat East Palestine Train Derailment payments as disaster relief payments does not apply under the Corporation Tax Law.

The estimated revenue impact to conform to the above federal provisions would result in the following loss:

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