Governor Josh Green, M.D. announced that the State will not require families and individuals adversely impacted by the Red Hill fuel crisis, to pay state taxes on relief provided by the federal government to cover expenses.

The Governor’s decision follows the U.S. Internal Revenue Service (IRS) announcement that targeted tax exemptions would be provided to those individuals and households who received relief after being uprooted from their homes as a result of the contamination of their drinking water. 

On March 2, 2023, the State of Hawai‘i Congressional Delegation united to send a letter to IRS Acting Commissioner Douglas O’Donnell demanding exemptions for any assistance provided by the Department of Defense due to the crisis.

Local families, including military personnel living on O‘ahu, received reimbursements for hotel lodging, meals and personal property damage expenses from the U.S. Department of Defense as a result of the Navy’s contamination of the drinking water distributed by its system, were initially informed that the reimbursements would be considered taxable income.

 The reimbursements for “Emergency and Extraordinary Expense” payments can be excluded from gross income calculations according to Section 139 of the Internal Revenue Code, as long as the expense was not also compensated for by insurance, because EEE payments are qualified disaster relief payments. The clarification of the tax code is included in the IRS announcement.