BOARD AGENDA MEMORANDUM
SUBJECT:
Title
Recommended Position on Federal Legislation: HR 448 (Huffman) Water Conservation Rebate Tax Parity Act.
End
RECOMMENDATION:
Recommendation
Adopt a position of “Support” on: HR 448 (Huffman) Water Conservation Rebate
Tax Parity Act.
Body
SUMMARY:
HR 448 (Huffman) Water Conservation Rebate Tax Parity Act
Recommendation: Support
Priority Recommendation: 2
This bill amends the Internal Revenue Code of 1986 to expand the inclusion for certain
conservation subsidies to include subsidies for water conservation or efficiency
measure and storm water management measures.
Currently, any rebate issued by the Santa Clara Valley Water District (District) or other
utilities over the amount of $600 requires a 1099 Federal tax form be issued to the recipient of that rebate.
This bill clarifies that these rebates are not taxable income, but rather an effort to defray
upfront consumer costs for the public benefit.
Summary of key provisions is as follows:
• Modifications to income exclusion for conservation subsidies provided directly or
indirectly by a public utility to a customer or by a State or local government to a
resident of such State or locality, for the purchase or installation of any water
conservation or efficiency measure. As proposed, water conservation and efficiency measures include evaluation of water use, or any installation or modification of property, the primary purpose of which is to reduce consumption of water or to improve the management of water demand with respect to one or more dwelling units.
• Modifications to income exclusion for conservation subsidies provided (directly or
indirectly) by a storm water management provider to a customer, or by a State or
local government to a resident of such State or locality, for the purchase or
installation of any storm water management measure.
• Amended definitions of Water Conservation or Efficiency Measure and Storm
Water Management Measure. As proposed, storm water management measures means any installation or modification of property primarily designed to reduce or manage amounts of storm water with respect to one or more dwelling units
• Amended definitions of Public Utility, Storm Water Management Provider and
Person.
• Effective Date shall apply to amounts received after December 31, 2015.
Status
HR 448 was introduced on January 11, 2017 and referred to the House Ways and
Means Committee. The Board took a support position on a similar bill that was
introduced in the last congressional session by Representative Huffman as HR 4615 -
Water Conservation Rebate Tax Act.
Importance to the District
For many years, the Santa Clara Valley Water District has been offering rebates to
promote water conservation. Under California income tax statutes, a qualified water
use efficiency rebate received from a water agency is excluded from gross income for
the purpose of filing state income taxes. However, the Internal Revenue Code does not
provide a similar exclusion. HR 448 is intended to provide a similar income tax
exclusion for water conservation rebates. Water conservation rebate programs
encourage reduced water use and taxing the rebates acts as a disincentive to water
conservation efforts.
This bill aligns with the Board’s 2017 Legislative Guiding Principles which includes the
following statement: “Support tax exempt status for water conservation rebates.”
Pros
• Encourages the use of water conservation rebates by not penalizing the
recipient with a tax liability on the rebate received.
• Saves the District the expenditures and labor that are required to calculate
and send out the 1099 Federal tax forms currently required for any rebates
over $600.
Cons
• None identified at this time.
FINANCIAL IMPACT:
None.
CEQA:
The recommended action does not constitute a project under CEQA because it does
not have a potential for resulting in direct or reasonably foreseeable indirect physical
change in the environment.
ATTACHMENTS:
None.
UNCLASSIFIED MANAGER:
Manager
Rick Callender, 408-630-2017