Reps. Huffman, Moore Introduce Bill to Ease Tax Burden for Homeowners Who Invest in Sustainable Technologies

Bipartisan legislation would make it easier and more affordable for homeowners to participate in water conservation efforts

March 05, 2025

Washington, D.C. – Today, U.S. Representative Jared Huffman (CA-02) and U.S. Representative Blake Moore (UT-01) reintroduced the Water Conservation Rebate Tax Parity Act. This bipartisan legislation would amend federal tax law to exempt homeowners from paying income tax on rebates received from water utilities for water conservation and runoff management improvements.

The bill encourages homeowners to invest in water-saving and flood-prevention improvements by ensuring they are not penalized with unexpected tax burdens. Companion legislation in the U.S. Senate is being introduced by U.S. Senators Alex Padilla (D-CA), John Hickenlooper (D-CO), and John Curtis (R-UT).

“Worsening climate change has triggered more severe and frequent droughts throughout California, and our communities and ecosystems are paying the price,” said Congressman Jared Huffman. “We need bold, innovative solutions to get this crisis under control immediately. The Water Conservation Rebate Tax Parity Act is one of the simplest and fastest ways to both reduce this water use and help California preserve its water supply, while also protecting our taxpayers from bearing the brunt of these costs. This legislation offers a win-win solution – enabling a cost-efficient transition to water-saving technologies locally while also protecting precious resources statewide.”

“Utahns know firsthand the importance of both water conservation and smart tax policy,” said Congressman Blake Moore. “This bill combines these two efforts by eliminating unnecessary tax burdens on homeowners who invest in water-efficient solutions, helping families keep more of their hard-earned dollars while promoting sustainability. Americans deserve a tax code that values responsible choices, and this bill is a commonsense step in the right direction.”

“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 and Moore, and Sens. Padilla and Curtis, 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.

“For Californians, conserving water is a way of life — and we know the importance of staying prepared for the next major drought,” said Senator Alex Padilla. “Saving water means saving money on your water bills, which is why water utilities throughout the state offer rebates for more efficient water fixtures or drought-tolerant landscaping. We should incentivize homeowners to invest in technologies that reduce their water consumption, not penalize them with additional federal income taxes.”

“Due to Utah’s dry climate, water conservation is essential to preserving our way of life. While households and communities have made significant strides in improving water efficiency, the federal tax code has yet to catch up in supporting these investments,” said Senator John Curtis. “By removing taxes on rebates for water-saving home upgrades, our bill rewards Utahns for adopting sustainable practices that benefit both our environment and economy.”

“Droughts don’t just disappear. We need to make the most of every drop,” said Senator John Hickenlooper. “Homeowners need to conserve their water to make us more drought resilient.”

BACKGROUND:

Public utilities and state and local governments across the country are increasingly offering rebates and incentives to homeowners who invest in water conservation and stormwater management improvements to reduce water use, limit stormwater runoff, and ease the strain on public infrastructure.

Encouraging residents to conserve water—whether by installing graywater capture systems, purchasing high-efficiency appliances, or upgrading plumbing fixtures—yields significant benefits for public health, the environment, and local economies. These rebates provide a net positive impact for both the public and utilities, yet they are still classified as taxable income under current federal law. This tax treatment discourages participation in water conservation investments.

The Water Conservation Rebate Tax Parity Act clarifies that these incentives—growing in both number and size—should not be considered taxable income, but rather a means of offsetting upfront consumer costs for the public good.

Specifically, the legislation:

Amends the tax code to exempt from taxation any rebates or subsidies for water conservation, efficiency, stormwater management, or wastewater management improvements.
Extends the tax exemption to rebates or subsidies provided directly or indirectly by public utilities, state and local governments, and stormwater management providers.
Applies the exemption retroactively to amounts received on or after December 31, 2021, ensuring that recent rebates are also covered.

The full text of the legislation can be found here.

The Water Conservation Rebate Tax Parity Act is supported by St. George, Utah Mayor Michelle Randall; Irrigation Association; Alliance for Water Efficiency; Plumbing Manufacturers International; Inland Empire Utilities Agency; National Water Resources Association; Association of Metropolitan Water Agencies; Association of Water Agencies; Eastern Municipal Water District; West Basin Municipal Water District; Western Urban Water Coalition; California Water Efficiency Partnership; Family Farm Alliance; Desert Water Agency; California Water Efficiency Partnership; Las Virgenes Municipal Water District; Upper San Gabriel Valley Municipal Water District; Coachella Valley Water District; Jurupa Community Services District; San Francisco Public Utilities Commission; and the City of Sacramento.

What Supporters Are Saying

"ACWA commends Senator Padilla and Congressman Huffman for their leadership on water policy and for reintroducing the Water Conservation Rebate Tax Parity Act. This vital legislation would exempt recipients of water conservation rebates from federal income taxes on conservation and runoff management projects. The bill would establish essential parity between energy efficiency and water conservation rebates. We applaud the bill's potential to leverage investments in responsible water use, which will not only promote clean waterways but also drive greater success in water conservation," said Marwan Khalifa, Interim Executive Director of the Association of California Water Agencies.

“The SFPUC strongly supports eliminating federal taxes on water conservation rebates, wastewater management rebates, and stormwater management grants that we provide to our customers. Helping our customers with incentives to conserve water and better manage stormwater is needed and benefits everyone. As we have seen from devastating storms across our country, no one is immune. This bipartisan bill is an important tool as we work together to manage the effects of climate change and the weather whiplash we experience from intense droughts and historic storms. We appreciate the leadership of Congressman Huffman, Senator Padilla, and their bipartisan cosponsors on this important issue,” said Dennis Herrera, General Manager of the San Francisco Public Utilities Commission.

“The Water Conservation Rebate Tax Parity Act is a practical and necessary solution that empowers consumers to reduce water use while removing burdensome tax requirements that discourage conservation. By making water conservation rebates tax-exempt, this bill incentivizes investment in smart water use products, lowers costs for consumers and bolsters our nation’s long-term water security. We commend Representatives Huffman and Moore, along with Senators Curtis, Padilla and Hickenlooper for championing this critical legislation and urge Congress to act quickly to sign this bipartisan measure into law,” said Natasha Rankin, CEO of the Irrigation Association.

“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 Larry Dick, Director of the Metropolitan Water District of Southern California representing Municipal Water District of Orange County.

“As Mayor of St. George, I want to thank Sen. John Curtis for his leadership on this important bill. Water conservation is vital to our future water planning. Fixing this IRS overreach is going to remove this tax penalty and allow more customers to take advantage of our grass removal rebate program,” said Michelle Randall, Mayor of St. George, Utah.

“The Water Conservation Rebate Tax Parity Act is a vital step towards encouraging more efficient water use. We applaud Senators John Curtis (R-Utah), Alex Padilla (D-Calif.), and John Hickenlooper (D-Colo.) for introducing this important bipartisan legislation to revise tax rules which will reward consumers who utilize water utility rebates and implement water conservation improvements, including the purchase of manufactured plumbing products certified by the EPA’s WaterSense program,” said Kerry Stackpole, CEO of the Plumbing Manufacturers International.

“The National Water Resources Association strongly supports the reintroduction of the Water Conservation Rebate Tax Parity Act. Water utilities across the arid West rely on rebate programs to encourage the adoption of water-efficient technologies that reduce demand and enhance long-term water security. This bipartisan legislation ensures these vital conservation incentives receive fair federal tax treatment, aligning them with energy efficiency rebates. We appreciate the leadership in both chambers and urge swift passage to support responsible water management in our region,” said Greg Morrison, Executive Vice President of the National Water Resources Association.

“By eliminating federal taxes on water conservation rebates, the Water Conservation Rebate Tax Parity Act will help more households and businesses afford efficiency upgrades that reduce water waste, lower utility bills, and enhance community resilience. The Alliance for Water Efficiency fully supports this bipartisan effort to align tax policy with our nation’s water sustainability goals,” said Ron Burke, President & CEO of the Alliance for Water Efficiency.

"Modern technology and water conservation techniques can significantly bolster our water supplies. Local water systems and their customers must work together to preserve precious water resources, improve drought resiliency, and safeguard water supplies for the future. Unfortunately, the federal tax code discourages customer participation in local water conservation and efficiency incentive programs, by treating these benefits as taxable income. The Water Conservation Rebate Tax Parity Act will eliminate this tax penalty and ensure that rebates are offered in full to help households afford these upgrades, so AMWA is proud to support the legislation,” said Tom Dobbins, CEO of the Association of Metropolitan Water Agencies.

“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. This bill will ensure this transition to more efficient water use is not penalized. Metropolitan appreciates the introduction of this bipartisan bicameral legislation and looks forward to its passage,” said Deven Upadhyay, General Manager of the Metropolitan Water District of Southern California.

“Desert Water Agency (DWA) strongly supports the Water Conservation Rebate Tax Parity Act. Removing the tax burden on rebates makes it easier for underserved communities and low-income families to make water-conscious choices without fear of risking their federal benefits,” said Victoria Llort, Director of Public Affairs & Conservation, Desert Water Agency.

“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 1,715 customers with water conservation rebates totaling $17.1 million. Because these rebates are currently treated as taxable income, many individuals, including elderly and fixed or low-income customers, are reluctant to participate in conservation programs because it increases their tax liability and can jeopardize 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 of the Coachella Valley Water District.

“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 of the Upper San Gabriel Valley Municipal Water District.

“Las Virgenes Municipal Water District is a strong supporter of the Water Conservation Rebate Tax Parity Act. As arid regions of the country–such as Southern California–are confronting the real-life impacts of water scarcity, water conservation is among the most important tools we have to ensure a sustainable supply of safe drinking water for generations to come. Water conservation rebate programs are an effective way to facilitate this environmental stewardship. Customers who do the right thing and invest their hard-earned dollars to conserve water, should not be left with a tax liability for phantom income resulting from incentive programs that partially offset their costs. The Water Conservation Rebate Tax Parity Act would end this outdated arrangement,” said Dave Pedersen, General Manager of the Las Virgenes Municipal Water District.

"Water agencies throughout the country welcome the reintroduction of the Water Conservation Tax Parity Act, which promises to treat water conservation rebates as what they truly are—an investment in our community and resources. Exempting these rebates from taxable income encourages more people to participate in vital water-saving measures," said Chris Berch, General Manager of the Jurupa Community Services District.

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