TXCPA Committee Assists Senator Cruz’s Office with Panhandle Wildfire Federal Tax Relief Bill

Last month, TXCPA’s Federal Tax Policy Committee collaborated with the office of Senator Ted Cruz on a bill to create specified federal tax relief for qualified taxpayers who were victims of the February 2024 Panhandle wildfires. The total damage of these wildfires did not meet the qualification threshold of a major disaster declaration. The committee assisted with technical questions related to the definition of areas eligible for federal relief, clarification of allowable deductions and the tax treatment of benefits received. S. 4806 accomplishes the following:

 

1. Exempts government relief payments and settlement payments from Xcel Energy from the definition of gross income, exempting them from an income tax liability.

 

2. If farmers or ranchers are forced to sell more livestock than they would normally sell because of the fires, the additional amount sold shall be treated as an involuntary conversion and no capital gain will be recognized.

 

3. In instances where taxpayers receive dissimilar property from an involuntary conversion stemming from the fires, they will have four years, rather than two, to convert the dissimilar property back into livestock.

 

4. If it is not feasible, because of the fires, for cattlemen to reinvest proceeds received from involuntarily converted livestock into property similar to livestock, other property used for farming purposes shall be treated as property similar to livestock.

 

5. Adds the word “fire” to the list of weather-related causes for which a taxpayer may defer recognizing income, should he/she be forced to sell livestock due to a weather-related cause. However, this is only available to farmers who use the cash accounting method.