Tax Guidance On Red Hill Reimbursements

Part IV – Items of General Interest
FEDERAL TAX TREATMENT OF CERTAIN RED HILL FUEL SPILL PAYMENTS
Announcement 2023-07
This announcement informs Federal civilian employees and other civilians who are
not employed by the Federal government who received certain payments in 2022 and
2023 from the Department of Defense (DOD) in reimbursement for lodging, meals, and
personal property damage expenses after the release of petroleum from the Red Hill
Bulk Fuel Storage Facility on Oʻahu, Hawaii (Red Hill Fuel Spill) that such payments are
excludable from gross income for Federal income tax purposes under § 139 of the
Internal Revenue Code.
On November 28, 2021, the United States Navy detected the Red Hill Fuel Spill and
subsequent contamination of the Joint Base Pearl Harbor-Hickam (JBPHH) Water
System servicing Red Hill and surrounding areas. On December 3, 2021, the
Commander, Navy Region Hawaii issued an evacuation authorization (CNRH
Evacuation Authorization) for DOD civilian employees and their dependents, civilians
nonaffiliated with DOD, and dependents of active-duty personnel not accompanying
such personnel living in communities serviced by the JBPHH Water System. The
duration of the order was extended twice, on December 14, 2021, and December 23,
2021. On December 9, 2021, the Commanding General of U.S. Army Pacific issued an
evacuation authorization (CG USARPAC Evacuation Authorization) for residents of the

Aliamanu Military Reservation, Red Hill, and surrounding areas, effective December 2,
2021, in light of unusual and emergency circumstances arising from the Red Hill Fuel
Spill. The CG USARPAC Evacuation Authorization applied to all DOD personnel and
civilian employees and their dependents living in the relevant areas. Additional
communities were added to the CG USARPAC Evacuation Authorization pursuant to
addenda issued on December 10, 2021, and December 11, 2021. The CG USARPAC
Evacuation Authorization authorized but did not direct evacuation, allowing individuals
to choose to remain in their residences without use of potable water utilities.
On February 18, 2022, the Commander, Navy Installations Command sought
authority from the Secretary of the Navy (SECNAV) to make payments to the civilians
who were covered by the CNRH Evacuation Authorization and the CG USARPAC
Evacuation Authorization and addenda thereto (collectively, Affected Civilians) pursuant
to SECNAV’s “Emergency and Extraordinary Expense” authority under 10 U.S.C. § 127
(EEE Payments). SECNAV approved the making of EEE Payments to Affected
Civilians in a memorandum dated February 25, 2022.
Starting in 2022, DOD made three types of EEE Payments to Affected Civilians.
First, DOD made EEE Payments to reimburse lodging and meal expenses of Affected
Civilians who did not have potable water in their homes and who opted to relocate
pursuant to the CNRH Evacuation Authorization and CG USARPAC Evacuation
Authorization. Second, DOD made EEE Payments to reimburse meal expenses of
Affected Civilians who opted to remain in their housing without the use of potable water
utilities. Third, DOD made EEE Payments to reimburse personal property damage
expenses of some Affected Civilians.

To respond to questions raised concerning the Federal income tax treatment of
EEE Payments made by DOD to Affected Civilians, this announcement explains that
Affected Civilians receiving EEE Payments may exclude such payments from gross
income, to the extent the cost reimbursed by the EEE Payment was not also
compensated for by insurance or otherwise, because they are qualified disaster relief
payments within the meaning of § 139 of the Internal Revenue Code.
Specifically, the Department of the Treasury (Treasury Department) and the Internal
Revenue Service (IRS) have determined that the Red Hill Fuel Spill is a qualified
disaster for purposes of § 139(c)(4) that was determined by SECNAV (an applicable
Federal authority) to warrant assistance from DOD (a Federal agency or
instrumentality). Additionally, the Treasury Department and the IRS have determined
that the EEE Payments are qualified disaster relief payments for purposes of
§ 139(b)(4), as they are amounts paid to or for the benefit of an Affected Civilian (an
individual) by DOD (a Federal agency or instrumentality) in connection with the Red Hill
Fuel Spill (a qualified disaster) in order to promote the general welfare (and are not
compensation for services).
Accordingly, EEE Payments made by DOD to Affected Civilians in connection with
the Red Hill Fuel Spill, including reimbursement of lodging and meal expenses for those
Affected Civilians who did not have potable water in their homes and who opted to
relocate, reimbursement for meal expenses for those Affected Civilians who opted to
remain in their homes, and reimbursement for personal property damage expenses of
some Affected Civilians, are qualified disaster relief payments within the meaning of
§ 139(b)(4) that are excludable from the gross income of Affected Civilians to the extent
not compensated for by insurance or otherwise.
INSTRUCTIONS FOR AFFECTED CIVILIANS WHO HAVE NOT YET FILED TAXABLE
YEAR 2022 INDIVIDUAL FEDERAL INCOME TAX RETURNS
Affected Civilians who have not filed their taxable year 2022 individual Federal
income tax returns should not include any EEE Payment amounts (reflected on Form
1099-MISC, Miscellaneous Income) in gross income on their taxable year 2022 returns,
except to the extent the cost reimbursed by the EEE Payment was also compensated
for by insurance or otherwise.
INSTRUCTIONS FOR AFFECTED CIVILIANS WHO ALREADY HAVE FILED

TAXABLE YEAR 2022 INDIVIDUAL FEDERAL INCOME TAX RETURNS
Affected Civilians may amend their taxable year 2022 Federal income tax returns by
filing Form 1040-X, Amended U.S. Individual Income Tax Return, to exclude EEE
Payment amounts (reflected on Form 1099-MISC, Miscellaneous Income) that were
previously included on original taxable year 2022 individual Federal income tax returns,
to the extent the cost reimbursed by the EEE Payment was not also compensated for by
insurance or otherwise. The IRS accepts paper and electronically filed Forms 1040-X.
• If filing Form 1040-X electronically, include “Red Hill Relief” at the beginning of
Part IV, Explanation of Changes.
• If filing Form 1040-X on paper:
o Include “Red Hill Relief” at the top of Form 1040-X. Also, include “Red Hill
Relief” at the beginning of Part III, Explanation of Changes, and
o Mail the Form 1040-X to:
Department of the Treasury

Internal Revenue Service
Austin, TX 73301-0052
The principal author of this announcement is Jonathan A. Dunlap of the Office of
Associate Chief Counsel (Income Tax & Accounting). For further information regarding
this announcement contact Mr. Dunlap at 202-317-4718 (not a toll-free call).

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Part IV – Items of General Interest

FEDERAL TAX TREATMENT OF CERTAIN RED HILL FUEL SPILL PAYMENTS

Internal Revenue Code.

subsequent contamination of the Joint Base Pearl Harbor-Hickam (JBPHH) Water

Commander, Navy Region Hawaii issued an evacuation authorization (CNRH

nonaffiliated with DOD, and dependents of active-duty personnel not accompanying

evacuation authorization (CG USARPAC Evacuation Authorization) for residents of the

communities were added to the CG USARPAC Evacuation Authorization pursuant to

to choose to remain in their residences without use of potable water utilities.

On February 18, 2022, the Commander, Navy Installations Command sought

Evacuation Authorization and addenda thereto (collectively, Affected Civilians) pursuant

to SECNAV’s “Emergency and Extraordinary Expense” authority under 10 U.S.C. § 127

(EEE Payments). SECNAV approved the making of EEE Payments to Affected

Civilians in a memorandum dated February 25, 2022.

pursuant to the CNRH Evacuation Authorization and CG USARPAC Evacuation

Authorization. Second, DOD made EEE Payments to reimburse meal expenses of

expenses of some Affected Civilians.

payments within the meaning of § 139 of the Internal Revenue Code.

Federal authority) to warrant assistance from DOD (a Federal agency or

compensation for services).

Accordingly, EEE Payments made by DOD to Affected Civilians in connection with

for by insurance or otherwise.

INSTRUCTIONS FOR AFFECTED CIVILIANS WHO ALREADY HAVE FILED

Payment amounts (reflected on Form 1099-MISC, Miscellaneous Income) that were

Part IV, Explanation of Changes.

• If filing Form 1040-X on paper:

Relief” at the beginning of Part III, Explanation of Changes, and

o Mail the Form 1040-X to:

Department of the Treasury

this announcement contact Mr. Dunlap at 202-317-4718 (not a toll-free call).

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