Most people who received money from Norfolk Southern Railroad after last year’s devastating train derailment in eastern Ohio won’t have to pay taxes on millions of dollars in aid payments.
The Internal Revenue Service said Wednesday that most of the money people living near East Palestine, Ohio, received to pay for temporary housing or replace belongings will not be taxable as the Feb. 3, 2023 derailment forced thousands to evacuate. Home is considered a “catastrophic event”.
The railroad estimates it has paid more than $21 million to residents following the derailment as part of more than $107 million in aid to communities affected by catastrophic train crashes.
Residents were told they would have to pay taxes on the railroad’s money, a sore point for people still trying to recover from the derailment.
“I don’t know why they didn’t do it from the beginning,” East Palestine resident Misty Allison said. “The IRS ruling is a positive step in the right direction, but insignificant in the grand scheme of things. I do hope President Biden will make good on his promise that Norfolk Southern University’s inability to make it whole’, and ‘the government will make it whole’.
Residents are weighing whether to accept part of a $600 million class-action settlement agreed to by Norfolk Southern or opt out of the agreement so they can file their own individual lawsuits. They will hear the findings of the National Transportation Safety Board’s investigation into the derailment at a hearing in East Palestine later this month. Previously, the safety board said the accident may have been caused by an overheating bearing on one of the railcars, which was not detected by trackside sensors in time to prevent a derailment.
U.S. Sen. Sherrod Brown of Ohio said it shouldn’t have taken the IRS so long to realize the derailment was a disaster.
“This is a step that is long overdue – the people of East Palestine should not have to pay taxes at all for the aid they need after the train derails,” Brown said.
Norfolk Southern also praised the IRS’s decision.
“We are proud of the investments we have made in East Palestine and commend the IRS for taking action to relieve residents of additional federal tax burdens,” the railroad said in a statement.
The IRS said certain payments would be taxable if they were lost income, payments to businesses or payments the railroad made to acquire land during an ongoing cleanup.
Residents who have filed their taxes before the regular April 15 deadline must amend their returns and claim a refund of the tax they paid from rail payments.
