People who got Norfolk Southern relief money after Ohio train derailment won't be taxed on it, IRS says

By Andrew Keshner

Decision is 'a long-overdue step,' says Sen. Sherrod Brown, an Ohio Democrat

The people receiving money to relocate, repair homes and pay medical bills after the February 2023 train derailment in East Palestine, Ohio, do not have to report the payments on their taxes, the Internal Revenue Service said Wednesday.

The compensation from Norfolk Southern Corp. (NSC), the operator of the derailed train, didn't count as taxable income in most cases because the IRS viewed it as "qualified disaster-relief payments" that are by law excluded from income, the agency said.

East Palestine is near the Ohio-Pennsylvania border. The IRS decision could help affected taxpayers in Ohio, Pennsylvania and West Virginia, the agency said.

The derailment and resulting fire released hazardous chemicals, including vinyl chloride. Norfolk Southern has spent millions of dollars on environmental remediation and monitoring, and reached a $600 million agreement in April to resolve a class-action lawsuit from nearby residents.

The IRS announcement Wednesday informs recipients on what should and shouldn't be reported on their taxes.

Relief payments for relocation expenses, expenses for the replacement of clothing and personal items, and home-repair or rehabilitation costs are tax-free, the agency said, as are compensation for homeowners who sold their homes after the derailment, compensation for medical expenses and one-time $1,000 "inconvenience" payments.

Some payments are taxable, the IRS said. Those include lost wages and payments to businesses.

The IRS included more filing information in its announcement for people affected by the derailment who have questions about their 2023 income-tax returns.

In a statement, Norfolk Southern said that residents with questions about documentation should visit its family-assistance center located in the company's East Palestine field office. "We're proud of the investments we've made in East Palestine and commend the IRS for taking action to relieve residents of an additional federal tax burden," the train operator said.

Sen. Sherrod Brown, an Ohio Democrat, called the IRS decision "a long-overdue step."

"The people of East Palestine should never have had to pay taxes on assistance they needed in the wake of the trail derailment," he said in a statement.

-Andrew Keshner

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06-06-24 0919ET

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