Federal tax rules address wildfire settlement payments and pandemic-era business credits. The topics include how Camp Fire settlement payments are treated for tax purposes and the processing of Employee Retention Credit claims.
Two distinct federal tax issues are the treatment of Camp Fire settlement payments and pandemic-era tax credits. North State tax cases can involve either issue.
Camp Fire Survivors Faced Years of Tax Uncertainty
The tax burden tracing back to the Camp Fire stems from how PG&E's Fire Victim Trust was treated under federal law. The trust was formed after PG&E's 2019 bankruptcy declaration. More than 70,000 people in California suffered losses from the Butte Fire, North Bay fires, and Camp Fire, according to the Press Democrat. California's Legislature enacted state tax relief in 2022 to exempt those settlement distributions from state income taxes. In December 2024, the Senate passed federal tax relief legislation that was headed to President Biden.
The Federal Disaster Tax Relief Act passed the Senate in December 2024. The bill was retroactive and addressed federal tax treatment of disaster-related settlement payments.
Delays in Pandemic-Era Credit Claims
The second topic is the Employee Retention Credit, a business tax credit created under the CARES Act in 2020 and expanded under later pandemic relief measures. It offered eligible employers a credit for retaining staff during COVID-19 disruptions. The IRS has warned about promoters and improper ERC claims.
The IRS backlog has left some Employee Retention Credit claims unresolved.
As of late August 2026, approximately 14,900 Employee Retention Credit claims remained in the IRS pipeline nationwide, with thousands still undergoing formal audit or administrative appeals, according to the Internal Revenue Service.
Gallagher Takes Office in California's 1st District
Gallagher assumed office in California's 1st Congressional District after winning a June 2026 special election, according to CapRadio. LaMalfa was the district's former representative. The district was redrawn, changing its boundaries. Parts of the district include communities affected by wildfires.
The Taxpayer Advocate Service is an independent organization within the IRS designed to help individuals and small businesses resolve administrative impasses with the agency.
