IRS Says SoCalGas Reimbursements Will Not Be Taxed
Congressman Sherman Successfully Urges Treasury to Declare Reimbursements Nontaxable
Washington DC – Today the Internal Revenue Service (IRS) issued a notice that residents affected by the Porter Ranch Gas leak will not be required to pay income tax on money they received from Southern California Gas Company (“SoCalGas”) as reimbursement for their relocation and other expenses incurred as a result of the gas leak. This announcement came at the urging of Congressman Brad Sherman (D-Porter Ranch), who worked with the Treasury Department over the last six months to reach this result.
Many Porter Ranch residents had heard from their tax advisers that the IRS might classify the reimbursements they received from SoCalGas as taxable income – for living expenses, air filtration, etc. As the IRS notice stated, “Questions have been raised concerning the taxability of these expenses paid on behalf of or as reimbursements to affected area residents.”
“My neighbors in Porter Ranch have been through enough. They shouldn’t have to worry that the IRS would seek to tax them on the reimbursements they received from SoCalGas. Those who evacuated didn’t get a windfall – they left their homes to live in smaller quarters. Those who got air filters got no windfall – they got to continue breathing air. I’m pleased that after months of working with the Treasury Department and the IRS, the tax authorities have reached the correct decision and provided some clarity for taxpayers in the North-West San Fernando Valley,” said Congressman Brad Sherman, CPA.
Background:
For nearly four months, the northern Los Angeles community of Porter Ranch suffered from the largest natural gas leak in U.S. history. More than 7,000 families were displaced from their homes and forced to relocate. Schools in the area were also closed. Congressman Sherman lives with his family in the Porter Ranch community, and his home was as close as any to the leak.
Attached find today’s notice issued by the IRS as well as the text of Congressman Sherman’s Questioning of Treasury Secretary Jacob Lew on tax assessments of the Porter Ranch Gas Leak at a Hearing of the House Financial Services Committee: March 22, 2016.
-30-