Earlier this month, Rep. Blake Moore (R-Utah), along with Rep. Jared Huffman (D-Calif.) and Congresswoman Judy Chu (D-Calif.) introduced legislation that would amend federal tax law to exempt homeowners from paying income tax on rebates received from water utilities for water conservation and runoff management improvements.
The Water Conservation Rebate Tax Parity Act encourages homeowners to invest in water-saving and flood-prevention improvements by ensuring they are not penalized with unexpected tax burdens. Companion legislation in the Senate has been introduced by Sens. John Curtis (R-Utah), Alex Padilla (D-Calif.), and John Hickenlooper (D-Colo.).
Public utilities and state and local governments across the country are increasingly offering rebates and incentives to homeowners who invest in water conservation and stormwater management improvements to reduce water use, limit stormwater runoff and ease the strain on public infrastructure.
Encouraging residents to conserve water — whether by installing graywater capture systems, purchasing high-efficiency appliances, or upgrading plumbing fixtures — yields significant benefits for public health, the environment and local economies. These rebates provide a net positive impact for both the public and utilities, yet they are still classified as taxable income under current federal law.
According to the lawmakers who introduced the new bill, this tax treatment discourages participation in water conservation investments. The Water Conservation Rebate Tax Parity Act clarifies that these incentives — growing in both number and size — should not be considered taxable income, but rather a means of offsetting upfront consumer costs for the public good.
“Utahns know firsthand the importance of both water conservation and smart tax policy,” said Rep. Moore. “This bill combines these two efforts by eliminating unnecessary tax burdens on homeowners who invest in water-efficient solutions, helping families keep more of their hard-earned dollars while promoting sustainability. Americans deserve a tax code that values responsible choices, and this bill is a commonsense step in the right direction.”
“Worsening climate change has triggered more severe and frequent droughts throughout California, and our communities and ecosystems are paying the price,” said Rep. Huffman. “We need bold, innovative solutions to get this crisis under control immediately. The Water Conservation Rebate Tax Parity Actis one of the simplest and fastest ways to both reduce this water use and help California preserve its water supply, while also protecting our taxpayers from bearing the brunt of these costs. This legislation offers a win-win solution – enabling a cost-efficient transition to water-saving technologies locally while also protecting precious resources statewide.”
The Water Conservation Rebate Tax Parity Act is supported by the Association of Metropolitan Water Agencies (AMWA), the Alliance for Water Efficiency, the National Water Resources Association and several other water groups and districts.
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