CLEVELAND — Kristina Ferguson has been living in limbo since February 3, 2023.
That’s when a Norfolk Southern train carrying hazardous chemicals jumped off the tracks and caught fire less than a mile from her house, forcing her out of East Palestine and upending life in the small eastern Ohio village.
On Monday, Ferguson was glad to hear a bit of good news. The U.S. Senate recently passed a tax relief bill for disaster victims, including people in East Palestine. The Federal Disaster Tax Relief Act of 2023 is headed to President Joe Biden’s desk for his signature.
The legislation ensures Ferguson and her former neighbors will avoid paying federal income taxes on settlement checks from Norfolk Southern – whenever those checks arrive.
“I’m very thankful that that passed,” she said of the tax relief bill, a bipartisan piece of legislation that was introduced in October 2023.
“I hope this is just the start of the help that my community needs,” she added.
'So many disasters'
The bill specifically exempts recovery payments for East Palestine from taxation. It does the same thing for victims of certain wildfires.
And it changes the calculation around taking a disaster loss on your federal income tax return, basically making it easier for more people to qualify to get more money back through deductions that reflect their disaster losses.
“It’s pretty complicated,” said Alison Flores, a tax expert at H&R Block.
She’s a manager in the company’s tax institute, and she’s been in the industry for more than 15 years. “I’ve worked through a lot of hurricanes, tornadoes, wildfires and other disasters,” she said.
The tax-relief bill only applies to federally recognized disasters, with a special call-out to East Palestine.
It won’t do anything for Northeast Ohio homeowners hit by tornadoes, straight-line winds and power outages in August.
But it will impact people in Richland County and 10 other Ohio counties that were hammered by sometimes deadly tornadoes in March. Biden approved a major disaster declaration for those areas in early May.
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The legislation will also help taxpayers who are impacted by hurricanes and flooding in North Carolina, Florida, and other states. The IRS keeps a list of disasters by state on its website.
An IRS spokesman declined to discuss the potential impact or implementation of the bill. “IRS does not comment on proposed or pending legislation,” he wrote in an email.
The bill, H.R. 5863, will allow taxpayers to amend their returns dating back to 2020 to account for the new math around disaster-related deductions. It offers relief to victims of wildfires that happened as far back as 2016.
Tax preparers are still parsing the language and waiting for guidance from the IRS.
“Unfortunately, there have been so many disasters over the past year. A lot of our experts are really learning up and digging in and refreshing on these rules,” Flores said.
If the bill becomes law, taxpayers looking to amend past returns will have to decide whether to wait until the IRS's electronic filing system opens in late January or to file now on paper, which takes longer.
"If you were to paper file today, you would not have a refund check in time for holiday shopping," she said.
Flores had one piece of advice for people who are feeling overwhelmed.
“Reach out,” she said. “Make an appointment with a qualified professional, and then you can turn turn that worry over to them, and they’ll tell you what to do, what to bring in. And they can help you.”
'My heart breaks for my community'
For East Palestine residents, the bill provides an additional layer of clarity in a confusing situation.
In June, the IRS deemed the train derailment “an event of a catastrophic nature” and said that many disaster relief payments by Norfolk Southern wouldn’t be taxable.
That includes one-time inconvenience payments, moving expenses, home repairs, medical expenses, and checks for people who have sold their homes. The agency said that lost wages and money for businesses would be taxed.
By acting, Congress made the tax exemptions a matter of law – not just policy.
East Palestine residents and property owners are still waiting on their share of a $600 million settlement between the railroad and participants in a class-action lawsuit. Those payments could range from $70,000, on average, for households within two miles of the site to $250, on average, for households located 15 to 20 miles away.
Attorneys for the participants say the direct, lump-sum payments are being delayed because of a handful of appeals.
In a written statement, the lawyers said they had hoped to see payments start this year. Now, “it is unclear how long the appeals process will take.”
In late November, first responders and other community members started receiving separate personal injury checks based on their exposure to hazardous substances. Average personal injury payments are likely to range from $1,000 to $10,000 per person.
“There are nearly 5,000 payment determinations undergoing final review that should go out next week,” the lawyers wrote.
Ferguson said she isn’t part of the class-action settlement. She’s pursuing separate legal action against Norfolk Southern in hopes of replacing the childhood home she’ll never feel safe in again.
That home sits along a creek that needed remediation for toxic chemicals. The U.S. EPA administrator toured her house just two weeks after the derailment and the fire.
RELATED: U.S. EPA Administrator tours East Palestine and one house for an indoor air screening
Ferguson and her family – her boyfriend, daughter, aging mother and stepfather – are still living in a rental home 10 miles away. Norfolk Southern has been paying the rent.
“It just seems like it’s never ending,” she said of the cleanup and legal process. “And there’s people greatly affected by it that need out.”
She’s glad to see lawmakers paying attention. But she said there’s lots more work to do before East Palestine can heal.
“My heart breaks for my community,” she said. “Friends and family … whether they want to leave, whether they want to stay, whether they want to remodel their home after that. Whatever needs they have, I just pray that they’re all met.”
