AWE Seeks Tax-Exempt Status for Water Conservation Rebates

The Alliance for Water Efficiency is urging a change in federal tax law so that rebates and credits for water conservation and green infrastructure projects remain tax-free for recipients. 

In response to urging from key lawmakers, AWE has suggested that these payments from water utilities not be included in gross income by the Internal Revenue Service—the same treatment as energy rebates receive under the tax code. 

Because water rebates and credits are now considered “income” by the IRS, utilities are required to send a Form 1099 (Miscellaneous Income) to any customer who receives more than $600 in rebates for a calendar year. That form, which is also sent to the IRS, could result in a tax liability for the homeowner or business that took action to conserve water usage or curtail storm water runoff—a potential disincentive for people to help improve water efficiency. And those rebates can reach tens of thousands of dollars when a homeowner has torn up extensive lawn and landscaping to save on water use.

This issue was included in the U.S. Treasury Department’s so-called “greenbook,” an annual report on tax policy changes the administration would like Congress to enact.  It is also the goal of legislation that is being considered by Rep. Jared Huffman, D-CA.

AWE is working with members of the tax-writing House Ways and Means Committee and Senate Finance Committee on ways that this important change in the tax law can be made. We’ll keep you posted on progress.