Hawaii delegation asks IRS to exempt Red Hill families

Hawaii’s congressional delegation is asking the IRS to back off of families that were affected by the Red Hill water crisis — many of them outraged that under current regulations the money they received from the military for temporary housing is considered income and that they are being slapped by the IRS with steep taxes.

In a letter to Acting IRS Commissioner Douglas O’Donnell signed by all four members of Hawaii’s delegation, lawmakers called on the IRS to “use its administrative authority to exempt any assistance provided by the Department of Defense to ensure the equitable administration of the tax code.”

In November 2021, fuel from the Navy’s World War II-era Red Hill fuel storage facility contaminated the Navy’s water system that serves Joint Base Pearl Harbor-Hickam and several surrounding facilities and communities. The tainted water displaced many of those on the system and forced them to live in Waikiki hotels for months while they waited for clean water for drinking and bathing to be restored.

The military ultimately agreed to reimburse many families for the costs. During a visit to Hawaii in January, Army Secretary Christine Wormuth told reporters that for the Army “the bill for that was about $90 million, but it was absolutely the right thing to do and what we needed to do.”

“(The crisis) also affected individuals not connected to the military, including homes, schools and businesses in the civilian community that use the Navy’s water,” the lawmakers’ letter stated. “This fuel leak affected almost 100,000 residents; forcibly displaced more than 3,500 families into temporary lodging; and sickened many with rashes, sore throats, stomach pain, headaches, diarrhea, vomiting and oral chemical burns.”

In the letter, the delegation told the IRS that “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.”

When reports of contaminated water and residents exhibiting symptoms first emerged, the state Department of Health advised families on the Navy water system to stop using it. Joint Base Pearl Harbor-Hickam’s then-commander Capt. Erik Spitzer initially pushed back and insisted to base residents the water was safe to drink, for which he later apologized in a Facebook post. Civilians in former military housing areas like the Kapilina Beach Homes were initially told they weren’t on the Navy water system.

Now both military and state officials say that they successfully restored clear water to the Navy’s Oahu system, but the Red Hill water crisis deeply damaged the confidence military families had in Navy leaders and soured relations with Hawaii residents. The Red Hill fuel tanks — which currently store about 104 million gallons of fuel — sit 100 feet above a critical aquifer that provides most of Honolulu’s clean drinking water.

Local officials had called the facility a “ticking time bomb” that threatens the island’s water supply well before the 2021 leak. After months of resisting a state emergency order in March 2022, the Pentagon announced it would defuel the tanks, though the facility has fallen into deep disrepair and requires extensive repairs and upgrades to safely remove the fuel.

More than a year later, many of those who drank the water say they continue to suffer a variety of symptoms running the gamut from fatigue to intestinal and breathing problems. The Defense Health Agency recently set up a special Red Hill Clinic to examine service members and military family members who say they still have symptoms, but services are not available for local civilians reporting symptoms.

While military families were able to get care at military medical facilities, local families without military ties often had to pay out of pocket when they began experiencing strange symptoms. Military officials say they are trying to resolve the bureaucratic roadblocks to provide medical care and evaluations to civilians who drank the water.

When it comes to the housing and rental assistance that many families received, the letter said members of the congres­sional delegation “understand (the IRS is) working with the Department of Defense to understand what happened to determine the tax implications of this assistance” and that “just as assistance provided to individuals by the Federal Emergency Management Agency under the Stafford Act is exempted under Section 139 of the Internal Revenue Code, we believe the Red Hill emergency assistance should also be exempted.”