Reps. Huffman and Gosar Introduce Bipartisan Legislation To Ease Tax Burden on Homeowners Making Water-Efficient Choices

April 12, 2019

Washington, D.C.- Reps. Jared Huffman (D-CA) and Paul Gosar (R-AZ) introduced the Water Conservation Rebate Tax Parity Act today, bipartisan legislation ahead of Tax Day to amend Federal tax law to clarify that homeowners do 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.

Water utilities around the country–especially in drought-prone areas like California and Arizona–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.

“Americans should not be penalized for doing the right thing and installing water-saving technologies to make their homes and communities more resilient in the face of future droughts,” said Rep. Huffman. “House-by-house changes can add up to millions of gallons in water savings, and the tax code should support homeowners who replace water-thirsty lawns or reduce stormwater runoff in the same way the federal government already incentivizes energy conservation rebates. The Water Conservation Rebate Tax Parity Act is a bipartisan, smart solution to ensure our constituents are not taxed for improving their water footprint.”

“I am pleased to join Water, Oceans and Wildlife Subcommittee Chairman Jared Huffman in introducing the Water Conservation Rebate Tax Parity Act and appreciate his leadership on this legislation,” said Rep. Gosar, D.D.S. “This bill is important to homeowners, municipalities and water users in my district and throughout the country. Mr. Huffman’s bill provides parity in order to ensure reliable and sustainable water supplies that are critical to local communities. As the Mohave County Water Authority stated when passing Resolution No. 16-019, ‘taxing conservation and stormwater rebates is a disincentive to the millions of Americans who may invest in water conservation  and stormwater management …Such rebates are not income, but defray upfront costs as an incentive to spur private investment in improvements to increase efficiency reduce demand, and improve stormwater management.’”

“We applaud Congressmen Huffman and Gosar for their leadership and vision in introducing the Water Conservation Rebate Tax Parity Act. Local rebate programs are often the most cost-effective way for communities to increase water efficiency, manage runoff and improve water quality. Penalizing people with a tax bill for doing the right thing discourages participation in the very programs we need to meet our conservation objectives,” said Cynthia Koehler Executive Director of WaterNow Alliance, a network of over 400 local water decision makers nationwide. “This legislation is essential to provide clarity and certainty for thousands of cities, towns and water utilities across the country, enabling them to provide incentives to local business and residential consumers for programs to secure water supply and enhance local water quality."

“Metropolitan, the nation’s largest drinking water wholesaler, fully supports legislation that removes water conservation rebates from consideration as taxable income,” said Jeffrey Kightlinger, the General Manager of the Metropolitan Water District of Southern California. “Rebate programs are a cost-effective way to increase water efficiency and help adapt to a changing climate. We appreciate the efforts of Representatives Huffman, Gosar and other House Members to advance this important legislation.”

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 Water Conservation Rebate Tax Parity Act is supported by the California State Association of Counties, Western Urban Water Coalition, Natural Resources Defense Council (NRDC), Bay Area Council, National Association of Clean Water Agencies (NACWA), Arizona Municipal Water Users Association, Bay Planning Coalition, Coalition to Promote Water Conservation, Rural County Representatives of California (RCRC), Alliance for Water Efficiency, Metropolitan Water District, Los Angeles Department of Water and Power, Olivehain Municipal Water District, Carlsbad Municipal Water District, Otay Water District, Rincon Water, Valley Center Municipal Water District, Vista Irrigation District, City of Poway, Elsinore Valley Municipal Water District, Yuima Municipal Water District, Three Valleys Municipal Water District, Calleguas Municipal Water District, Irvine Ranch Water District, and Santa Clara Valley Water District, Las Virgenes Municipal Water District, City of Anaheim Public Utilities Department City of Camarillo, Sacramento Suburban Water District.