The Internal Revenue Service announced today that civilians whose drinking water was contaminated by jet fuel from the Navy’s Red Hill facility in November 2021 will not have to pay federal taxes on reimbursements they received from the military to cover expenses such as temporary lodging, meals and personal property damage.

The emergency assistance was paid out to an estimated 1,700 civilian families who were on the Navy’s drinking water system that serves neighborhoods in and around Joint Base Pearl Harbor-Hickam. Affected families started receiving 1099 income forms from the IRS a few months ago stating that they owed taxes on the relocation assistance, sparking outrage from the residents.

Hawaii’s congressional delegation stepped in, sending a letter to Acting IRS Commissioner Douglas O’Donnell in March calling on the IRS to use its authority to exempt the assistance from taxes. U.S. Sen. Brian Schatz said he subsequently convened a meeting with senior officials from the Department of Defense, the IRS and the Treasury Department to push for the payments to be exempt.

The announcement comes just two weeks before the deadline for filing 2022 tax returns.

The IRS said that families who have not yet filed their federal tax returns should not include the payments as part of their gross income.

Those who have already filed and included the payments in their gross income can file amended returns on Form 1040-X, Amended U.S. Individual Income Tax Return. If the original federal tax return was filed electronically, the amended return should also be filed electronically, according to the IRS guidance.

For electronic forms, the “Explanation of Changes” should specify “Red Hill Relief,” according to the IRS. For paper forms, filers should mark the top of their Form 1040-X with “Red Hill Relief” and begin Part III, “Explanation of Changes,” with “Red Hill Relief.”