Derailment assistance still not tax exempt on federal level
THE REVIEW — With 2023 coming to a close and tax season around the corner, residents impacted by the Norfolk Southern train derailment are confronted with the likelihood that any financial assistance received in the wake of the rail disaster will be considered taxable income at the federal level. Time, they say, is running out as the Federal Disaster Tax Relief Act or H.R. 5863, which provides tax relief to victims of East Palestine, hurricanes and wildfires, sits dormant.
Ashley McCollum, one of many East Palestine residents still displaced by the derailment, said taxing assistance would only add to the cumbersome weight those affected by rail disaster have been carrying since the train went off the tracks on Feb. 3.
“Those who are relocated have still been paying mortgages and utilities. With the increase of homes selling, property taxes have almost doubled for most. This is the highest tax increase that I have ever witnessed in the town of East Palestine over the past eight years,” she said. “This is just one instance of penalties we must endure from the derailment. Another would be being taxed for relocation given to many families for temporary relocation by the railroad.”
The bill introduced by Rep. Greg Steube of Florida on Oct. 2 would provide tax relief to victims of East Palestine, hurricanes and wildfires. On Nov. 2, the House Committee on Ways and Means voted unanimously to issue a report to the full chamber recommending that the bill be considered further but that is where the bill’s activity stops. A bill must be passed by both the House and Senate in identical form and then be signed by the President to become law.
The Village of East Palestine and the State of Ohio have already taken measures to ensure any derailment assistance is nontaxable. Ohio made the first move in July when State Rep. Monica Robb Blasdel (R-Columbiana County) secured a deduction for taxpayers impacted by the East Palestine derailment from their state income tax and rail safety measures. Robb Blasdel pushed for these amendments into the state budget, which was approved by the General Assembly and signed into law in July.
East Palestine followed suit in September by passing an ordinance to make sure no one is required to pay village income taxes on any payments they receive for derailment-related expenses or losses.
Rep. Bill Johnson (R-Marietta), who recently announced he is leaving his congressional seat to step into the role as president at Youngstown State, said the passage of H.R. 5863 is a top priority of his remaining time in Congress.
“There is still much left on my agenda to do before I depart Congress, including doing all I can to help pass tax exemption legislation to benefit the people of East Palestine,” Johnson posted on X (formerly Twitter) when announcing he had accepted the position at YSU.
Despite Johnson’s insistence that a federal tax exemption for East Palestine remains paramount, McCollum said the fact the legislation still hasn’t been guaranteeing a derailment tax exemption so late in the year speaks louder than what she considers political rhetoric.
McCollum also said that many residents were not informed that assistance would be taxable. Others, she said, felt they had no other choice but to sign tax documents in order to receive help many were desperate to get.
“With many attempts to get a solid answer on if we would be taxed for relocation of residents, we were never given anything in writing. Many of us took our question to our community on taxes since we were told we must sign a 1099 or not have any help,” McCollum said. “Some taxation agents tried to explain it was a way to file Norfolk Southern claims for insurance purposes. From the very beginning, we questioned this because like relocation guidelines, we never had clear indications of what would happen with taxes. Here we are now knowing taxes for relocation have been waived at a state level but not federal.”
Senator Sherrod Brown said a federal tax exemption for East Palestine residents and others impacted by the train derailment is still on the table and he is pushing to to include legislation to make assistance residents have received tax exempt as part of a tax package that is currently being negotiated and would be included as part of a must-pass government funding bill in January. He also called for swift passage of the Railway Safety Act, which would increase safety requirements for rail carriers and trains transporting hazardous materials.
“My job is to listen to the people of East Palestine – and fight to make sure their needs are met and that this community is made whole. That’s why I’m pushing Leader (Chuck) Schumer and my colleagues in both parties to quickly pass legislation in January to ensure that the assistance residents have received is tax exempt. We have to get this done before tax season begins,” Brown told this paper on Wednesday. “Finally, it’s long past time that Congress stood up to the rail lobbyists and passed the bipartisan Railway Safety Act to ensure a disaster like what happened in East Palestine does not happen again.”
McCollum has also expressed a need for stronger rail safety, but her main focus lately is on what’s to come when the railroad ends its derailment relocation assistance in a few weeks. Earlier this month, Norfolk Southern announced relocation assistance will conclude Feb. 9. McCollum said paying her mortgage in East Palestine and rent elsewhere is too much of a financial burden, and she is conflicted morally when it comes to putting a home that she believes is making her sick on the market for another family to buy.
“I will be forced to go back home no matter what I’ve brought to the attention of Norfolk Southern and the EPA,” she said. “I’m helpless and will further be victimized with taxes for relocation like many other residents just to attempt to save our family from what our bodies warn us against when we are back at what we once called ‘home.’”
