Huffman, Curtis to Re-Introduce Bipartisan Legislation to Ease Tax Burden on Homeowners Making Water-Efficient Choices

June 10, 2024

Washington, D.C. – Today, U.S. Representative Jared Huffman (D-CA-02), Ranking Member of the Natural Resources Subcommittee on Water, Wildlife, and Fisheries, and Representative John Curtis (R-UT-03) announced they will be re-introducing legislation to amend federal tax law so that homeowners would not need to pay income tax when they receive rebates from water utilities for water conservation and water runoff management improvements that they have made. Representatives Judy Chu (CA-28) and Doug LaMalfa (CA-01) also joined this legislation as original cosponsors.

“Water scarcity has always been a challenge in the West, but year after year of climate change-driven drought has brought unfathomable shortages that gravely threaten people and ecosystems across the country. Bold, innovative solutions across the board are necessary to tackle this crisis,” said Rep. Huffman. “One of the simplest and fastest things Congress can do is ensure the federal government is not an obstacle to local and state efforts to conserve water and build more drought-resilient communities. The Water Conservation Rebate Tax Parity Act is a logical solution to ensure our constituents are not taxed for making smart water use improvements and will make it easier for property owners to switch to water-saving technologies.”

“This legislation is crucial for Utah, ensuring that incentives for water efficiency are accessible without the burden of federal taxes,” said Rep. Curtis. “This measure aligns with our commitment to preserving Utah's precious water resources, encouraging residents to adopt sustainable practices that benefit both our environment and economy."

“As climate change brings more frequent and severe droughts to states like California, it is crucial that Americans get support making home improvements that reduce their water use. As a Member of the Ways and Means Committee, I believe our federal tax code should encourage, not penalize, these investments. I’m joining Reps. Huffman, Curtis, and LaMalfa in reintroducing the Water Conservation Rebate Tax Parity Act to remove the federal tax burden on water conservation rebates, which will help more Americans reduce their water use and help states like California preserve our precious water resources,” said Rep. Chu.

Water utilities around the country–especially in drought-prone areas like California–are increasingly offering rebates and incentives to homeowners who make investments to reduce their water use, reduce stormwater runoff, and ease the strain on public infrastructure.

The Water Conservation Rebate Tax Parity Act clarifies that these rebates, which are growing in number and size across the nation, are not taxable income, but rather an effort to defray upfront consumer costs for a public benefit. Encouraging residents to reduce water usage by installing “gray water” capture systems or purchasing new water-efficient appliances and plumbing fixtures can provide significant water yield benefits, protecting public health, the environment, and local economies. These rebates provide a net benefit to the public and utilities.

This would ensure that the IRS treats water conservation rebates in the same manner as the Agency treats energy conservation rebates, including insulation, Energy Star-certified windows and doors, and energy efficient appliances, which are not taxable.

“The key to combatting climate change is collaboration, and it is our responsibility to do everything we can to ensure the transition to more efficient water use is rewarded. Marin County is proud to be one of the Bay Area’s counties leading the state in water conservation, but California’s water challenges are far from over. We fully support Congressman Huffman’s efforts to remove any roadblocks that might hinder California’s critical water conservation efforts,” said Dennis Rodoni, President Marin County Board of Supervisors.

“With climate change stressing water availability, Metropolitan has invested nearly $1 billion since 1990 to help transform Southern California’s landscape away from water thirsty grass and into more climate appropriate California friendly landscaping. As we adapt to climate change, more needs to be done to conserve water use. This bill will ensure this transition to more efficient water use is not penalized and make it easier for water conservation to become a way of life for all Californians. Metropolitan appreciates the introduction of this bipartisan bicameral legislation and looks forward to its passage,” said Adel Hagekhalil, General Manager and CEO of the Metropolitan Water District of Southern California. 

“The Inland Empire Utilities Agency (IEUA) believes that conservation plays an essential role in maintaining a drought resilient water supply. The Water Conservation Tax Parity Act recognizes the valuable role that conservation plays in the West and helps to incentivize more individuals to do their part in helping protect our water resources. We are proud to support this legislation,” Steve Elie, Chair of the IEUA Community & Legislative Committee.

“Water efficiency is becoming more important than ever with increasing drought, dwindling water supplies, and increasing costs. This bill will make investing in water efficiency easier because it eliminates an unnecessary tax on households that receive federal, state, and local incentives. The work of Rep. Huffman and the other co-sponsors is important to everyone who drinks and uses water,” said Ron Burke, President and CEO of the Alliance for Water Efficiency.

“AMWA is proud to support the “Water Rebate and Tax Parity Act” so households can benefit from water conservation and efficiency incentives without receiving a new tax bill. We thank Congressman Huffman for his leadership on this important issue,” said Tom Dobbins, CEO of Association of Metropolitan Water Agencies.

IA CEO Natasha Rankin, MBA, CAE, expressed the IA’s support for the legislation, stating, “The Water Conservation Rebate Tax Parity Act is a pivotal measure that acknowledges the significance of water conservation in our nation’s overall sustainability efforts. By providing equal tax treatment for water conservation rebates, this legislation encourages widespread adoption of water-efficient technologies and practices, including smart irrigation solutions, ultimately contributing to the responsible use of our water resources. We appreciate the leadership of Representatives Huffman, look forward to its introduction in the Senate, and encourage prompt consideration and passage of this legislation.”

“Coachella Valley Water District (CVWD) strongly supports the Water Conservation Rebate Tax Parity Act, which would remove water conservation rebates as taxable income.  As a water provider in one of the nation’s most arid regions, CVWD is committed to water conservation efforts that ensure our community’s water supply is sustainable for future generations.  In the last two years, CVWD has provided 1,700 customers with water conservation rebates totaling $15.7 million.  Because these rebates are currently treated as taxable income, many individuals, including elderly and low-income customers, are unwilling to participate in conservation programs because it increases their tax liability and can negatively impact their safety net benefits.  This legislation will allow CVWD to expand water conservation efforts, making our community more resilient to an increasingly arid climate,” said Scott Burritt, Director of Public Affairs and Customer Experience.

“Congressman Huffman’s Tax Parity Act would help increase the number of people that use turf rebate programs,” said Pravani Vandeyar, director of the City of Sacramento Department of Utilities. “In California – and the City of Sacramento in particular – we need to greatly increase our participation in rebate programs to meet the changing climate, and having a rebate declared as income by the federal government is an incredible barrier to participation.”

“Strengthening our drought resilience begins with optimizing the water we already have,” said Adrian Covert, Senior Vice President of Public Policy at the Bay Area Council. “By incentivizing conservation, efficiency, stormwater capture, and wastewater infrastructure and technologies, the Water Conservation Rebate Tax Parity Act better aligns the tax code with our climate goals. We sincerely thank Representative Huffman and his bipartisan cosponsors for their leadership on this important legislation."

“Supporting this bill will encourage homeowners to make water saving investments and home improvements.  We should not penalize our ratepayers for doing the right thing. Otherwise, it’s no good deed goes unpunished,” said Director Larry Dick, Metropolitan Water District of Southern California representing Municipal Water District of Orange County.

“As arid regions of the country–including Los Angeles County–continue to confront water scarcity, water conservation remains a critical tool to ensure a sustainable supply of safe drinking water. Upper San Gabriel Valley Municipal Water District offers several rebate and water efficiency programs that provide residents with the tools they need to conserve at home. However, the water industry has long struggled with water rebates treated as taxable income, which we have seen adversely impact the participation of senior citizens and disadvantaged communities in these programs. The Water Conservation Rebate Tax Parity Act would delivered the needed relief by ensuring these conservation rebates are not taxable income. Upper San Gabriel Valley Municipal Water District strongly supports the Water Conservation Rebate Tax Parity Act, and looks forward to it becoming law,” said Thomas A. Love, General Manager, Upper San Gabriel Valley Municipal Water District.

Full text of the legislation can be found here.