In exciting news, California now prioritizes working to eliminate tax barriers as a way to drive greater efficiency of water use in all sectors. As recommended by WaterNow and our members, California’s final Water Resilience Portfolio calls for evaluating proposals for exempting “any rebates, vouchers, or other financial incentives issued by a local water agency for participation in water efficiency or stormwater runoff improvement programs” from state income tax.
WaterNow has a long history of advocating that financial incentives people receive in return for installing distributed green infrastructure should not be taxable income. Rebates, vouchers, grants, and other incentives are key mechanisms for water utilities to implement sustainable, localized infrastructure solutions like water efficient appliances, replacing lawns with drought-tolerant native plants, or rain gardens. Current policy that taxes these incentives as income is, however, a real barrier to utilities’ ability to fully leverage the water management benefits of efficiency, conservation, onsite reuse, and distributed green infrastructure.
While it will be up to the California Legislature to definitively set this tax exclusion, recognizing the need to eliminate this barrier to greater efficiency in the Portfolio is an encouraging step forward. WaterNow will continue to work with California, as well as the Federal government, to ensure water conservation rebates are tax-free.
Utility-sponsored financial incentives, including consumer rebates, are among the most important and cost-effective tools available to local water providers to achieve water use efficiency objectives, particularly for turf replacement, and other high cost water-saving options. To learn more about ways to deploy incentives to reap the benefits of localized infrastructure solutions, check out the Motivating Private Property Owners to Employ Localized Solutions section of WaterNow’s Tap into Resilience Toolkit.