This week, U.S. Representatives John Curtis (R-UT-03) and Jared Huffman (D-CA-02) 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 (D-CA-28) and Doug LaMalfa (R-CA-01) also joined this legislation as original cosponsors. 

“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."

“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.”

“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 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.

“As Mayor of St. George, I want to thank Rep. 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,” says Kerry Stackpole, CEO, Plumbing Manufacturers International. “We applaud Representatives John Curtis (R-UT-03) and Jared Huffman (D-CA-02) for reintroducing 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.”

“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.

“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,” said 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.”

Full text of the legislation can be found here.

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