Hirono Urges IRS Not to Tax Emergency Reimbursements for Residents Impacted by Red Hill Fuel Leaks
WASHINGTON, D.C. – Today, U.S. Senator Mazie K. Hirono (D-HI) sent a letter to Douglas O’Donnell, Acting Commissioner of the Internal Revenue Service (IRS), urging the IRS to take action to ensure individuals and families impacted by the fuel leaks at the Red Hill Bulk Fuel Storage Facility are not required to pay taxes on emergency reimbursements they received for expenses incurred as a result of the leaks.
“Approximately 93,000 U.S. Navy water system users were impacted by the contaminated drinking water, many of whom relocated to temporary housing during the drinking water crisis,” wrote Senator Hirono in her letter. “With no access to clean drinking water, these individuals were unable to return to their homes, businesses, and schools for almost four months.”
As part of its response to the Red Hill fuel leak, the Department of Defense provided affected individuals with per diem payments to cover their basic living expenses while they were displaced. However, it was recently reported that some of those who received payments have also received tax forms indicating the payments may be subject to federal income tax.
“Given the extraordinary nature of the fuel leak, individuals who received per diem payments to cover their basic living expenses while they were displaced by the fuel leak must not be required to pay federal income tax on those payments,” concluded Senator Hirono. “I strongly encourage you to clarify that these payments should be excluded.”
As a member of the Senate Armed Services Committee and incoming Chair of the Armed Services Subcommittee on Readiness and Management Support, Senator Hirono is working closely with DOD leadership, community leaders in Hawaii, and her Senate colleagues to help ensure the safe and timely defueling and closure of Red Hill. In December 2022, she secured $1 billion in the FY23 National Defense Authorization Act for defueling and closing Red Hill. She also joined the Hawaii delegation in calling for a congressionally-initiated independent investigation into how DOD and the Navy responded to PFAS-based contamination events at Red Hill. In November 2022, Senator Hirono led a letter to Defense Secretary Lloyd Austin demanding information about DOD support for families and individuals impacted by the November 2021 fuel release. In April 2022, she hosted Senate Armed Services Committee Chairman Jack Reed (D-RI) in Hawaii for a tour of Red Hill.
The full text of the letter is below and available for download here.
Dear Acting Commissioner O’Donnell:
I write today to urgently request your assistance for individuals and families who were adversely affected by the fuel leak at the U.S. Navy’s Red Hill Bulk Fuel Storage Facility.
On May 6, 2021, a fuel leak occurred at the Red Hill Bulk Fuel Storage Facility in Honolulu, HI, which resulted in 19,000 gallons of jet fuel being spilled into a tunnel system near the Red Hill drinking water system, where the fuel remained until the drain pipeline ruptured on November 20, 2021. As a result, approximately 93,000 U.S. Navy water system users were impacted by the contaminated drinking water, many of whom relocated to temporary housing during the drinking water crisis. With no access to clean drinking water, these individuals were unable to return to their homes, businesses, and schools for almost four months.
As a result of this contamination, the Hawaii Department of Health (HDOH) issued two emergency orders directing the Navy to suspend operations at Red Hill, maintain the groundwater treatment system at Red Hill Shaft, and defuel and close the facility with oversight from the Environmental Protection Agency and the HDOH.
Part of the federal government’s response to the Red Hill fuel leak was to provide affected individuals with per diem payments to cover their basic living expenses while they were displaced. While military servicemembers, spouses, and dependents received payments that the Department of Defense (DOD) has determined are not subject to federal income tax, it has been publicly reported that individuals who received payments but are not affiliated with DOD – and specifically those who received payments through the DOD’s Emergency and Extraordinary Expense (EEE) authority – have since received tax forms (i.e. Form 1099-MISC) indicating their payments may be considered gross income and therefore may be subject to federal income tax.
Given the extraordinary nature of the fuel leak, individuals who received per diem payments to cover their basic living expenses while they were displaced by the fuel leak must not be required
to pay federal income tax on those payments – regardless of whether these payments were provided through the EEE authority or by some other means. Under the IRS’s general welfare exclusion, there is precedent for your agency to exclude these kinds of payments from gross income. I strongly encourage you to clarify that these payments should be excluded.
Thank you for your consideration of this urgent request. I look forward to your response.
Sincerely,
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