One year after East Palestine derailment, Congress mulling tax break for relief payments

WASHINGTON — President Joe Biden drew renewed attention to the site of the East Palestine, Ohio, train derailment during a Friday visit, as Congress considers a bill that would relieve victims from federal taxes on compensation after the massive freight train calamity that leaked hazardous chemicals into communities one year ago.

The large tax policy package, which received overwhelming bipartisan support in the U.S. House last month, contains a provision that would categorize payments to derailment victims as “qualified disaster relief payments” under current Internal Revenue Service code.

The legislation specifically exempts federal taxes on payments to individuals from Norfolk Southern Railway, or any subsidiaries, insurers or agents related to the company. The bill would also exempt any payments for loss, damages or other expenses from federal, state or local governments.

Norfolk Southern says it’s paid $21 million in direct payments to more than 8,400 individuals from more than 4,500 households in Ohio and Pennsylvania since the Feb. 3, 2023, derailment.

On that day, dozens of cars caught fire after one of the company’s freight trains derailed on the Ohio-Pennsylvania border. The train was hauling toxic substances, including vinyl chloride. Officials ordered a “controlled venting” to avoid any explosions of the highly flammable chemicals, and the enormous black smoke plume grabbed headlines worldwide.

U.S. House vote overwhelming

Lawmakers applauded the measure that would lift the tax burden on residents affected by the derailment.

Democratic Rep. Chris Deluzio of Pennsylvania said he voted for the tax bill, which passed the House Jan. 31 in a 357-50 vote, “because it gives a tax break to my constituents who received payments from Norfolk Southern in the aftermath of last year’s devastating derailment.”

“As we mark the one-year anniversary of that derailment this Saturday, know this: I’m in this fight for as long as it takes to make rail safer and to make sure that folks like us who live near the tracks are not treated like collateral damage in the way of big railroads’ profits,” Deluzio, whose district abuts Ohio, said in a statement following the vote.

The tax policy bill is now in the U.S. Senate, which has taken no action. The chamber is scheduled to return from a Presidents Day recess Feb. 26.

No federal disaster order

President Joe Biden has not declared the derailment a federal disaster, and the Federal Emergency Management Agency has not issued direct individual government disaster relief payments. However, several federal agencies have directed resources to the area, according to the White House.

In a September executive order, Biden left open Republican Ohio Gov. Mike DeWine’s federal disaster request “to allow the State time to submit information on needs that may arise in the future and cannot be addressed by Norfolk Southern, State, and local governments.”

Biden on Friday visited the village of East Palestine for the first time since the derailment. He also stopped in Darlington Township, just across the border in Pennsylvania.

The White House declined to comment Friday on the pending tax legislation.

Democratic Sen. Sherrod Brown of Ohio urged the president in August to grant DeWine’s request, saying “Nobody trusts Norfolk Southern to do what’s right by the community and compensate residents for the significant costs – including health care costs – that have resulted from the company’s negligence. Understandably, this community feels left behind – by both the company and their government.”

Payments from Norfolk Southern

But Norfolk Southern “is committed to making it right in East Palestine,” spokesman Connor Spielmaker told States Newsroom in an emailed statement Friday.

“To date, we have contributed more than $103 million to the community, including $21 million directly to residents,” Spielmaker said. “We are pleased to see Congress taking steps to address this issue that will help provide those residents with much needed tax relief.”

The company could not provide a specific number of how many 1099-MISC tax forms it sent to residents who received $600 or more in direct payments in 2023. (The threshold to trigger the federal tax document is $600 by law, an amount that the proposed tax legislation, if enacted, would increase to $1,000 for any 1099 taxable income. As law stands, taxpayers do not have to report amounts lower than $600 to the IRS.)

The company is offering informational tax workshops facilitated by Youngstown-based HD Growth Partners this month in both East Palestine and nearby Darlington Township.

Congress’ Joint Committee on Taxation estimates the tax relief on direct payments to derailment victims will cost the government $1 million in 2024.