Water utilities nationwide are increasingly providing rebates to consumers to incentivize efficiency and water innovation with great success particularly in California where local investments in efficiency were at the forefront of addressing the state’s major drought.  IRS policy, however, may treat these rebates as taxable income. From “cash for grass” to low-flow toilet rebates to support for graywater and low water irrigation systems, financial subsidy programs have been critical in saving millions of gallons of water across the West.  Taxing water rebates as income is a clear disincentive to sustainable water solutions.

Last year with our partners at the National League of Cities, we put together a letter to the White House signed by over 125 water leaders across the nation urging a change in policy regarding the IRS’s treatment of water efficiency rebates. Now a bipartisan bill in the Senate, led by Senator Dianne Feinstein (D-Calif.), Dean Heller (R-Nev.), Michael Bennet (D-Colo.) and Cory Gardner (R-Colo.) has been introduced to address the issue and ensure that consumer rebates for efficiency cannot be taxed. Read more below.

This news release was issued June 28, 2017:

Senate header

For Immediate Release

June 28, 2017

Contact: Adam Russell (Feinstein), 202-224-9629

Megan Taylor (Heller), 202-224-6244

Samantha Slater (Bennet), 202-510-7014

Casey Contres (Gardner), 202-224-5941


Senators Introduce Bipartisan Bill to Encourage Residential Water Conservation


                Washington—Senator Dianne Feinstein (D-Calif.), Dean Heller (R-Nev.), Michael Bennet (D-Colo.) and Cory Gardner (R-Colo.) today introduced the Water Conservation Tax Parity Act, a bipartisan bill to encourage residential water conservation and stormwater management programs.


Some entities, including public utilities, sewage districts and local governments, currently provide rebate programs for participation in water conservation or stormwater management measures. The bill would exempt the value of these rebates from gross income calculations.


“As Western states recover from a historic drought, making water conservation and management rebates tax-exempt is a commonsense proposal,” Feinstein said. “These programs should be treated the same as energy conservation programs which are already tax-exempt. Water conservation and management are just as important to our environment and economy and intersect with energy conservation. Providing this financial incentive will allow more residents to participate in these vital programs.”


            “Nevada is one of the driest states in the nation, so it makes little sense to tax homeowners for using water more responsibly,” Heller said. “Our legislation creates an important exemption for conservation and storm management rebates that will encourage Nevadans to conserve water. Water is a critical resource, and conservation efforts are essential to Western states like Nevada, which is why I want to thank Senator Feinstein for working with me to address this important issue.”


            “This bill ensures that homeowners who make smart investments in water conservation aren't unfairly penalized,” Bennet said. “Drought is a serious issue in Colorado. This fix will make it easier for families to save water—something that is good for both our environment and our economy.”


            “With massive population growth along the front range, coupled with much of the West being mired in drought, Coloradans know all too well how important it is to conserve water,” Gardner said. “This bipartisan legislation will incentivize Coloradans to save water and reward our local governments for their water conservation efforts. Protecting our environment and growing our economy are not mutually exclusive and I’m proud to introduce this bill that works toward accomplishing both of those goals.”


The bill is supported by a coalition of organizations and public utilities including Western Urban Water Coalition, Alliance for Water Efficiency, American Water Works Association, National Association of Water Companies, U.S. Water Alliance, Western Coalition of Arid States, the National Water Resources Association, WaterNow Alliance and the Association of California Water Agencies.


The full text of the legislation can be found here.


Congressmen Jared Huffman (D-Calif.) and Dana Rohrabacher (R-Calif.) have introduced similar legislation in the House of Representatives.




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