Senator Dianne Feinstein is expected to introduce legislation next week to exempt water conservation rebates from federal taxes. Her bill is similar to H.R. 4615 (Huffman), which is supported by 10 California Democrats and one Republican.
The legislation is in response to turf rebates issued primarily in California to encourage water conservation. Water customers are receiving federal 1099 forms that require rebates over $600 to be reported as taxable income. RCRC is working with a coalition of California water districts and other organizations from western states to either amend the tax code or seek administrative relief from the IRS, which is considering whether the drought constitutes special circumstances under which the IRS can grant an income exemption without congressional action.