Congressman Huffman urges IRS to stop taxing water rebates

This was a slight of hand effort by government to transfer money to consumers—then transfer a portion back to government. Agencies gave “rebates” to homeowners to take out grass and replace it with drought resistant plantings. The Feds saw this as a great way to increase tax revenues. The IRS taxed the rebates as income.

“This is a perfect opportunity to help homeowners and businesses who are doing the right thing,” said Congressman Huffman. “The IRS should not be in the business of taxing rebates for home improvements that address water conservation and green infrastructure. Every consumer in America understands that rebates like these are not income, but an effort to defray costs.

“It’s time for the IRS to get up to speed by making water conservation rebates tax-free, just like we do with energy conservation rebates. This tax impacts communities across the nation. I look forward to pushing this common-sense, pro-consumer, pro-conservation reform forward.”

The need is not to stop the taxes on rebates; the real need is to reform the tax codes. Make an arbitrary goal—no more than 300 pages should cover it. Too much money is being spent on non-productive attorneys and CPA’s to limit as they say “their tax exposure”. Forgot the exposure, use common sense and stop using government tax codes as payoffs to friends and donors.

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Congressman Huffman urges IRS to stop taxing water rebates

By Ukiah Daily Journal, 12/26/15

Rep. Jared Huffman (D-San Rafael) and Congressman Brad Sherman (D-Sherman Oaks) this month led a letter signed by fellow members to the Internal Revenue Service and the Department of the Treasury, urging they act to clarify that homeowners who receive rebates for water conservation and stormwater management improvements to their home should not be required to pay federal taxes on those rebates.

Currently, the IRS considers water rebates to be taxable income. The letter sent by the lawmakers argues instead that the IRS should consider these rebates a reduction of the purchase price of the home improvement.

This change would establish parity between water and energy efficiency rebates. Currently, rebates provided for energy efficiency home improvements, such as the installation of Energy-Star-certified windows or doors or energy efficient appliances, are not subject to federal tax.

“This is a perfect opportunity to help homeowners and businesses who are doing the right thing,” said Congressman Huffman. “The IRS should not be in the business of taxing rebates for home improvements that address water conservation and green infrastructure. Every consumer in America understands that rebates like these are not income, but an effort to defray costs.

“It’s time for the IRS to get up to speed by making water conservation rebates tax-free, just like we do with energy conservation rebates. This tax impacts communities across the nation. I look forward to pushing this common-sense, pro-consumer, pro-conservation reform forward.”

“For many families, these water conservation improvements projects are too expensive to be installed without some financial incentive,” said Congressman Sherman. “These rebates are not income, and they should not be subject to tax. Rebates are used to reimburse consumers for implementing environmentally conscious improvements, and these efforts should be rewarded, not penalized.”

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 savings and ease the strain on public infrastructure.

However, these improvements are often too expensive for property owners to install without a financial incentive. To encourage more installations, water utilities across the country have established rebate programs to defray costs.

Additionally, protecting our waterways from stormwater runoff pollution is critical for public health, local economies, and the environment. Because so much of the natural surface in cities is paved over, rainwater flows over city streets, collecting a range of pollutants, such as motor oil, antifreeze, and pesticides, before entering into local water bodies, making stormwater runoff a significant cause of water pollution.

Dealing with this issue is not only a matter of good governance, but is required by the Clean Water Act, and water utilities in California and across the country have implemented rebate programs to incentivize property owners to act.

The letter states, “The IRS should issue a revenue ruling clarifying that these rebates are not taxable both because they are fundamentally a reduction in purchase price and because they are not intended to confer a net benefit on the private property owner.

“Fortunately, Treasury and the IRS have ample authority under current law to address this issue. The rebates should be nontaxable because they are fundamentally a reduction of the purchase price of the water conservation or green infrastructure installation.”

 

About Stephen Frank

Stephen Frank is the publisher and editor of California Political News and Views. He speaks all over California and appears as a guest on several radio shows each week. He has also served as a guest host on radio talk shows. He is a fulltime political consultant.