Municipalities Matter

Municipalities Matter

Municipalities Matter

Municipalities Matter: Stop Taxing Water Efficiency Rebates

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By Sam Mamet, CML executive director, and Cynthia Koehler, WaterNow Alliance executive director 

Water Efficiency

The National League of Cities (NLC) and WaterNow Alliance (WNA) are teaming up to ask the White House to clarify that water efficiency rebates offered by our communities to promote resilience and water security should not be considered “income” for federal tax purposes. If you would like to help with this effort, please take a look at the draft letter to the White House that these organizations are circulating online for sign-on by the governing boards and executive staff of public utilities. 

Water conservation and efficiency rebates are a critical tool for municipal leaders and water utilities in encouraging their ratepayers to adopt water saving technology. From “cash for grass” to toilet rebates to support for low water irrigation systems, consumer subsidies have helped local water utilities save millions of gallons of water across Colorado and the nation. However, as conservation rebate programs have grown, the IRS has indicated that it views rebate checks (more than $600) as taxable income, requiring water utilities to issue 1099s to all participating consumers. Taxing water rebates as income is a clear disincentive to people who would otherwise be willing and able to adopt efficiency technology for their homes and businesses. 

NLC and WNA both participated earlier this year in the White House Water Innovation Roundtable, where the administration laid out its commitment to support communities in advancing water saving programs. For this reason, a direct appeal from water leaders – those who bear the greatest burden for ensuring cities and towns have secure and resilient water supplies – may make a difference. A large number of water industry organizations have also weighed in asking the IRS to reconsider its policy. But the administration has yet to hear directly from the leaders of cities and towns most directly impacted. 

To date, more than 65 local leaders from across the West have signed on to the White House Letter. You can view the current list of signatories here. WNA has prepared a policy brief about this issue that you can read here. For more information, contact Cynthia Koehler, WaterNow Alliance executive director, at ck@waternow.org.


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