Congressman Jared Huffman

Representing the 2nd District of California

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

Jan 11, 2017
Press Release

Washington, D.C.- Congressmen Jared Huffman (D-San Rafael) and Dana Rohrabacher (R-Costa Mesa) led a bipartisan group of 5 members of Congress in reintroducing the Water Conservation Rebate Tax Parity Act today, legislation 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–but especially in drought-prone areas like California – are increasingly offering rebates and incentives to homeowners who make investments to reduce water use and ease the strain on public infrastructure.

Reps. Huffman and Rohrabacher led a Congressional effort in the 114th Congress to urge the IRS and the Department of the Treasury to clarify that these rebates are not considered taxable income. Despite a concerted effort supported by environmental groups and water utilities around the country, the Treasury Department never issued new guidance, meaning that homeowners are still facing uncertainty when they are issued water conservation rebates. For responsible homeowners across the country who took advantage of local utilities’ rebate programs to improve water conservation or water runoff management, this may mean an unexpected tax bill.

“On tax day in 2016, homeowners across the country were unfairly told they owed taxes 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. “These 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. The Water Conservation Rebate Tax Parity Act is a bipartisan, common-sense fix to ensure our constituents are not taxed for improving their water footprint.”

Of the legislation, Rep. Dana Rohrabacher said: “It is high time for the federal government to get out of the way of Californians and other residents of Western states who are doing their best to deal with this widespread and long-lasting drought.”

The Water Conservation Rebate Tax Parity Act clarifies that these rebates are not taxable income, but rather an effort to defray upfront consumer costs for the public benefit. Encouraging residents to reduce water usage by replacing water-thirsty lawns, installing “gray water” capture systems, or purchasing new water-efficient appliances can provide significant water yield benefits, protect 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 cosponsored by: Rep. Jared Huffman (D-CA), Rep. Dana Rohrabacher (R-CA), Rep. Lloyd Doggett (D-TX), Rep. Doug LaMalfa (R-CA), and Rep. Martha McSally (R-AZ).

The legislation was originally introduced in the 114th Congress by Congressman Jared Huffman (D-San Rafael) and Dana Rohrabacher (R-Costa Mesa).

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