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Reimbursements for Aliso Canyon relocations ruled not taxable by IRS

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Essential Energy Insights - February 2021

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Reimbursements for Aliso Canyon relocations ruled not taxable by IRS

The IRS established that nearby residents by the will notbe taxed for the reimbursements they received from

"The IRS will not assert that an affected arearesident must include these payments or reimbursements in gross income,"the agency said in a July 19 notice. Some tax advisers had warned residentsthat relocation and related payments might be taxable, according to a statementby Rep. Brad Sherman, a Democrat who represents the Porter Ranch residents inSouthern California.

The relocationprogram, directed by the Los Angeles County Department of PublicHealth, required the SempraEnergy utility to reimburse residents for relocation expenses suchas hotel stays, meals, staying with friends or family, rentals, cleaning, and airfiltration.

The residents' family and friends who receivedpayments through the relocation program must include the payments in theirgross income statements unless certain exemptions apply, according to the IRSnotice.

"My neighbors in Porter Ranch have been throughenough. They shouldn't have to worry that the IRS would seek to tax them on thereimbursements they received from SoCalGas," Sherman said. "Those whoevacuated didn't get a windfall — they left their homes to live in smallerquarters. Those who got air filters got no windfall — they got to continuebreathing air." Sherman worked with the Treasury Department and the IRS onthe clarification.