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Emergency assistance during Red Hill crisis should not be taxed, congressional delegation says

FILE - Lauren Wright prepares to do laundry as her son, Jaxson Wright, 7, rests on a bag of clothes and her daughter, Gianna Wright, 13, does school work in a Waikīkī hotel room on Friday, Jan. 28, 2022, in Honolulu. The family was among thousands forced to leave their military housing because of jet fuel contamination in their water supply. Her Navy husband and three children ranging in age from 7 to 17 spent two months living in hotels after water smelling like fuel started pouring out of faucets at their home near Pearl Harbor. (AP Photo/Caleb Jones)
Caleb Jones
/
AP
FILE - Lauren Wright prepares to do laundry as her son, Jaxson Wright, 7, rests on a bag of clothes and her daughter, Gianna Wright, 13, does school work in a Waikīkī hotel room on Friday, Jan. 28, 2022, in Honolulu. The family was among thousands forced to leave their military housing because of jet fuel contamination in their water supply. Her Navy husband and three children ranging in age from 7 to 17 spent two months living in hotels after water smelling like fuel started pouring out of faucets at their home near Pearl Harbor. (AP Photo/Caleb Jones)

Hawaiʻi's congressional delegation has asked the U.S. Internal Revenue Service to correct the tax liability of families affected by the leak from the Navy Red Hill fuel storage facility in 2021.

Military families impacted by the tainted tap water were forced to leave their homes and temporarily live in Waikīkī hotels while cleanup efforts continued into 2022. Many also reported medical issues such as headaches, stomach pain and skin rashes.

They eventually received lodging reimbursements from the military.

However, the IRS recorded those reimbursements as extra income, meaning individuals are on the hook for thousands of dollars in federal and state taxes this year.

Hawaiʻi's federal representatives and senators wrote a joint letter to Douglas O’Donnell, the IRS acting commissioner, expressing their “deep concern” the agency was taxing emergency assistance.

The letter argues individuals receiving emergency assistance, like during the Red Hill leak, are exempted under the Stafford Act.

"Individuals dislocated by Red Hill should not have to take on additional tax burdens because of the emergency assistance provided to them in a time of great need due to a crisis caused by the federal government," the delegation wrote.

The IRS is working with the Defense Department to understand what happened with the distribution of funds.

Under pressure from local and federal officials, the military is in the process of shutting down the World War II-era facility and removing millions of gallons of fuel from its massive storage tanks. The Navy has said it can defuel the Red Hill facility by July 2024.

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