H.R. 1871 — Water Conservation Rebate Tax Parity Act

This section expands the exclusion from gross income under section 136 of the Internal Revenue Code—from energy conservation measures only—to also cover (1) water conservation or efficiency measures (e.g., installations to reduce water consumption or improve water demand management), (2) storm water management measures (e.g., installations to reduce storm water or prevent flooding), and (3) wastewater management measures (e.g., septic tanks), if provided directly or indirectly by a public utility (now defined to include sellers of electricity, natural gas, or water), a storm water management provider, or a state or local government with respect to the taxpayer's principal residence. (As background, the exclusion applies to subsidies for qualified measures installed in or on a dwelling unit, preventing such payments from counting as taxable income.) The amendments apply to amounts received after December 31, 2021, with no inference created as to the tax treatment of similar subsidies received before that date.