Reporter for The Canyon Weekly
Oregon lawmakers are considering tax exemptions for fire survivors as PacifiCorp braces itself for billions of dollars in possible payouts over the 2020 Labor Day fires.
At the opening of the 2024 legislative session Feb. 5, identical bills were introduced in the House and Senate to exempt wildfire settlements from state personal income taxes.
HB 4007 and SB 1520 were assigned to the revenue committees of their respective chambers and must come to a floor vote no later than March 10.
Last year PacifiCorp reached $604 million in settlements with hundreds of claimants including individuals and businesses, while thousands more survivors are seeking billions in damages. Ongoing suits include James et al vs. PacifiCorp, which has a class of roughly 5,000 survivors of the Santiam, South Obenchain, Echo Mountain Complex and 242 fires.
In December 2023 survivors of the Archie Creek Fire settled with PacifiCorp for $299 million. After legal fees and state and federal taxes they ultimately received between 20% and 30% of their original shares, according to attorney Jeffrey Mornarich.
He submitted a letter Feb. 7 in support of SB 1520 and told lawmakers this shortfall was due in part to “draconian tax law.” Mornarich said his clients “desperately need relief… so that they have a fighting chance to begin to rebuild their lives.”
If passed, the bills would exempt legal settlements from state income taxes for fires which occurred after Jan. 1, 2020, and which were declared state and federal emergencies.
The proposal would not apply to jury verdicts, such as $175 million which has been awarded so far to 26 claimants in James. Damages trials are under way this month and in April to hear samples of remaining James claims and set a standard for settlement talks expected in the spring.
In preparation for future wildfire payouts, PacifiCorp is building cash reserves in excess of $3.5 billion over the next five years and has recently sold $3.8 billion in bonds.
According to a Moody’s report on Nov. 21, 2023, PacifiCorp said it plans to stockpile cash by reducing expenses, including suspension of dividends estimated at $700 million yearly. The financial analytics firm said PacifiCorp also has access to $1.7 billion in revolving credit for potential fire payouts.
Then on Jan. 3 PacifiCorp sold $3.8 billion in blue-chip bonds, which according to a Bloomberg article that day was intended to help fund wildfire payouts. The report cited an anonymous source and PacifiCorp would not confirm the claims but said the bonds were meant to help with long-term capital projects and the servicing of debt.
Moody’s further reported that, in addition to last year’s settlements, PacifiCorp was on the hook for roughly $1.3 billion in total legal expenses since it started fighting wildfire litigation in 2020.
When asked for comment about its financial preparations for wildfire settlements, PacifiCorp told The Canyon Weekly it “has settled and is committed to settling all reasonable claims.”
Similar legislation is working its way through Congress to allow federal tax exemptions for all fire recovery funds except insurance payouts and wage replacements by employers. The Senate took up SB 3711 Jan. 31 after a similar bill passed the House that day with broad bipartisan support.
