IRS looking to tax San Bruno victims' money from PG&E

December 20, 2010 9:19:17 PM PST
We're now learning it will take months to do proper inspections of Bay Area pipelines similar to the one that exploded in San Bruno. And while fire victims in San Bruno are waiting to find out what caused the disaster in their neighborhood, the IRS is planning to tax the money victims received from PG&E.

Congresswoman Jackie Speier, D-San Mateo, says IRS commissioner Douglas Shulman has the power to make the PG&E payout tax-free and she intends to pressure him use it.

The 37 homeowners whose houses were destroyed, and some of whom lost loved ones in the fire, were given $50,000 from PG&E to help rebuild their lives.

Those whose homes were damaged got $15,000. Now the IRS wants to tax what it considers income.

Bill Bishop's heart stent collapsed when he ran from the fire, and he's since had surgery to replace it. His house survived and has been repaired, but now looks out on the wasteland that was the neighborhood. He and wife Nellie can't believe the PG&E money could be considered income.

"It was a gift. At that first meeting it was, 'We're going to do this because we want you people to start to recover, this is a gift from me to you, no strings attached. Why is the IRS getting their hands in our pocket," says Bishop.

An IRS representative was at a San Bruno town hall meeting Sunday night; so was Speier.

"The whole issue is preposterous," says Speier.

Speier says she wants the IRS commissioner himself to come out and meet the victims in January.

"If he doesn't voluntarily agree to come out, I'm calling the president," says Speier.

"He definitely should come face the people," says Bishop.

PG&E and the CPUC met with Speier and other peninsula politicians at her San Mateo office on Monday morning, going over state and federal inspection regulations. It will be months before the San Bruno line and two similar lines in the East Bay can be brought back to full pressure, because required inspections now have to wait for warmer weather, but Speier says the lines should be safe in the meantime.

"The steps taken to reduce the pressure, the federal pipeline safety and hazard materials administration has said is the most important step that you can take," says Speier.

And Assemblyman Jerry Hill, D-San Mateo, says the CPUC is double-checking its records to make sure there's accurate information about the age and size of all PG&E's pipes.

"As Richard Clark from the CPUC said, they're scrubbing their database now," says Hill.

Speier says corrosion, damage, and a pre-existing leak are the most common causes of pipeline failure, but they've all been ruled out. So the question is could it be something specifically related to the combination of age and size. In that case, the CPUC might start ordering other state utilities to reduce pressure in their similar lines.

An audit of the PG&E pipelines performed just four months before the deadly San Bruno explosion is suggesting that the utility took shortcuts during its inspection of natural gas lines.

The San Francisco Chronicle reports that the audit was done to determine how well PG&E was complying with a 2002 federal law requiring inspections of all natural gas lines in urban areas. The audit says the utility had used a method called direct assessment on about three-fourths of the gas pipeline it tested, including the section of pipeline in San Bruno that later exploded. That method cannot detect some problems in pipelines, including weakness in welds.

Also, this weekend, a member of the National Transportation Safety Board told residents at a town hall meeting in San Bruno that the agency may subpoena witnesses to testify at a federal hearing in Washington D.C. early next year.


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