The IRS says it will refund taxes collected from Ohio residents who received financial assistance after the Norfolk Southern derailment

After all, most people who received money from Norfolk Southern in the aftermath of last year’s fiery train derailment in eastern Ohio won’t have to pay taxes on millions of dollars in relief payments.

The Internal Revenue Service said Wednesday that most payments received by people living near East Palestine, Ohio, to help them afford temporary housing or replace their belongings are not taxable because of the Feb. 3, 2023, derailment which forced thousands of people to evacuate their homes, qualified as ‘an event of a catastrophic nature’.

The railroad estimates it paid more than $21 million to residents after the derailment as part of the more than $107 million in assistance it provided to communities affected by the catastrophic train crash.

The fact that residents were told they would have to pay taxes on the rail money was a sore point for those still struggling to recover from the derailment.

“I don’t know why they didn’t do that from the very beginning,” said East Palestine resident Misti Allison. “The IRS ruling is a positive step in the right direction, but in the grand scheme of things it is minor. I truly hope that President Biden makes good on his promise that what Norfolk Southern “cannot make whole” that “the government will make whole.”

Residents are weighing whether to accept part of the $600 million class action settlement that Norfolk Southern agreed to or opt out of that deal so they can pursue their own individual lawsuits. Later this month, they could hear the outcome of the National Transport Safety Council’s investigation into the derailment at a hearing in eastern Palestine. Earlier, the safety council said the crash was likely caused by an overheating of one of the train cars, which was not detected quickly enough by track sensors to prevent the derailment.

U.S. Sen. Sherrod Brown of Ohio said it shouldn’t have taken so long for the IRS to realize the derailment was a disaster.

“This is a long overdue step: the people of eastern Palestine should never have had to pay taxes on the assistance they needed in the aftermath of the train derailment,” Brown said.

Norfolk Southern also praised the IRS decision.

“We are proud of the investments we have made in East Palestine and commend the IRS for taking action to relieve residents of an additional federal tax burden,” the railroad said in a statement.

The IRS said some payments would be taxable if they related to lost revenue or payments to businesses or payments the railroad made to access land during the ongoing cleanup effort.

Residents who already filed their taxes before the normal April 15 deadline will have to amend their returns and request a refund for the taxes they paid on payments from the railroad.

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