IRS announces tax relief for Red Hill residents saddled with ‘unfair’ bills

HONOLULU (HawaiiNewsNow) - The IRS announced Wednesday it will not tax residents who were reimbursed during the Red Hill fuel leak crisis.

This comes after calls for relief led by U.S. Sen. Brian Schatz, D-Hawaii, and other members of Hawaii’s congressional delegation.

Some Red Hill families who were forced to live in hotels for months because of the Navy’s tainted tap water were getting hit with huge tax bills.

It’s a story Hawaii News Now first reported in February. The next month, the Pentagon told HNN the reimbursements under EEE authority “were taxable income.”

Now the IRS says the Red Hill military reimbursements are disaster relief payments and not taxable income.

HNN spoke with one woman who got nailed with $6,500 in federal and state taxes.

“I’m still very grateful. This is one battle that was won,” said Navy retiree and Pearl Harbor resident Carolina Alama.

Congressman Ed Case said he learned from IRS officials 1,700 civilians got taxed for the emergency assistance for hotels, food, clothing and property damage.

“It was wrong. It was obviously wrong. There was really no question about it. Everybody involved knew it was wrong,” Case told Hawaii News Now.

“It’s now up to the IRS to make sure that every taxpayer impacted by this mistake is aware of this fix,” Schatz added. He said the IRS should pay anyone back if they already paid taxes.

Last month, Schatz convened a meeting with senior officials from the Department of Defense, the IRS, and the Treasury Department to call for an exemption on the unfair taxes.

Hawaii’s congressional delegation also convened in a letter to the IRS urging the agency to find a resolution.

SPECIAL SECTION: NAVY WATER CRISIS

“It’s almost like some logic was applied to the situation and some compassion,” said former Pearl Harbor resident Kat McClanahan.

Governor Josh Green announced families won’t have to pay state taxes on the payments.

The IRS says if Red Hill families already filed taxes, they can file an amended return and use the words “Red Hill Relief.”

Sam Irwin, manager at Hanks Tax Service says people have three years to file an amended return.

Anyone with questions regarding Red Hill can contact Schatz’s office online or by calling (808) 523-2061.

For state tax information and inquiries, call (808) 587-4242.

Here’s a look at the IRS guidance on how impacted Red Hill families should file:

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