SECTION 2. BACKGROUND

.01 Derailment in East Palestine, Ohio On February 3, 2023, a multi-car freight train operated by a common carrier derailed in the Village of East Palestine, located in Columbiana County in the State of Ohio. Several of the train cars contained hazardous materials, including vinyl chloride, ethylene glycol monobutyl ether, ethylhexyl acrylate, butyl acrylate, benzene residue, and isobutylene. Some of these train cars spilled their loads onto the ground and into local waterways, and other train cars caught fire. Later, the contents of certain train cars were vented and burned off by the common carrier to prevent an explosion.

As a result of the Derailment, and the potential environmental and health concerns from the spillage of the hazardous material, a number of residents and businesses near the Derailment site were evacuated. The Environmental Protection Agency deployed a team to East Palestine, Ohio to support state and local emergency and environmental response efforts.

Following the Derailment, the common carrier began operating a family assistance center in Ohio to provide financial support to affected individuals of East Palestine, Ohio and surrounding communities, including communities in the Commonwealth of Pennsylvania and the State of West Virginia. Beginning in 2023, the common carrier made payments to affected individuals for the following items: (a) relocation expenses, including for hotels, meals, gas or other fuel, pet boarding, and replacement of clothing and other personal items; (b) costs to repair and rehabilitate homes and the surrounding environment (for example, power washing, air purifiers, air duct cleaning, and well-water testing); (c) medical expenses, including prescription medications; (d) lost wages; (e) one-time “inconvenience

payments” of $1,000; (f) compensation to certain affected individuals who sold their homes, if the sale was completed after the Derailment; and (g) payments to property owners to allow the common carrier access to the track for remediation and for access to clean nearby creeks and streams. In connection with the Derailment, the common carrier also made payments to certain businesses.

The common carrier has furnished Forms 1099-MISC, Miscellaneous Infor- mation, to affected individuals for payments made after February 3, 2023, and on or before December 31, 2023, reporting these payments as includable in gross income.

.02 Exclusion of qualified disaster relief payments from gross income .

Section 139(a) provides that gross income does not include any amount received by an individual as a qualified disaster relief payment. This exclusion does not apply to exclude payments made to businesses from gross income.

Section 139(b) provides that a qualified disaster relief payment includes any amount paid to or for the benefit of an individual–

(1) To reimburse or pay reasonable and necessary personal, family, living, or funeral expenses (not otherwise compensated for by insurance or otherwise) incurred as a result of a qualified disaster,

(2) To reimburse or pay reasonable and necessary expenses (not otherwise compensated for by insurance or otherwise) incurred for the repair or rehabilitation of a personal residence or repair or replacement of its contents to the extent that the need for such repair, rehabilitation, or replacement is attributable to a qualified disaster, or

(3) By a person engaged in the furnishing or sale of transportation as a common carrier by reason of the death or personal physical injuries incurred as a result of a qualified disaster.

Under § 139(c)(3), the term “qualified disaster” includes a disaster that results from an accident involving a common carrier, or from any other event, which is determined by the Secretary of the Treasury or her delegate (Secretary) to be of a catastrophic nature.

June 24, 2024 1748 Bulletin No. 2024–26