IRS decides people who got money from Norfolk Southern after Ohio derailment won’t be taxed on it

Most people who received money from Norfolk Southern in the wake of last year’s fiery train derailment in eastern Ohio won’t have to pay taxes on millions of dollars in aid payments after all.

The Internal Revenue Service said Wednesday that it had decided that most of the payments people who live near East Palestine, Ohio, received to help them pay for temporary housing or replace their belongings aren’t taxable because the Feb. 3, 2023, derailment that forced thousands of people to evacuate their homes qualified as “an event of a catastrophic nature.”

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

The fact that residents were told they had to pay taxes on the money from the railroad was a sore spot for the people who are still struggling to recover from the derailment.

“That is good news. I don’t know why they didn’t do that from the very beginning then,” East Palestine resident Misti Allison said. “I think that East Palestine residents and those that have been impacted by the train derailment have really been the victims of a huge chemical calamity and huge disaster. And so it’s great that the IRS is stepping in and making sure that those that are impacted don’t have any additional burden associated with this.”

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U.S. Sen. Sherrod Brown, who has been fighting for the designation on behalf of his constituents in Ohio, said it shouldn’t have taken the IRS this long to realize the derailment was a disaster.

“This is 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 train derailment,” Brown said.

Norfolk Southern also praised the IRS decision.

“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 railroad said in a statement.

The IRS said some payments would be taxable if they were for lost income or payments to businesses or payments the railroad made to get access to land during the ongoing cleanup.

Residents who filed their taxes already 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.