S. 857 — Water Conservation Rebate Tax Parity Act

This section expands the exclusion from gross income under IRC §136(a) for subsidies provided (directly or indirectly) by public utilities, storm water management providers, or state or local governments to include (1) water conservation or efficiency measures (i.e., evaluations of water use or installations/modifications to reduce water consumption or improve water demand management for dwelling units), (2) storm water management measures (i.e., installations/modifications to reduce or manage storm water or prevent flooding impacts for dwelling units), and (3) wastewater management measures (i.e., installations/modifications to manage wastewater, including septic tanks and cesspools, for dwelling units and limited to the taxpayer's principal residence). (As background, prior to amendment, §136 excluded only subsidies from public utilities—defined to include sellers of electricity, natural gas, or water—for energy conservation measures installed in or on a taxpayer's principal residence.) The amendments apply to amounts received after December 31, 2021, with no inference created as to the tax treatment of similar subsidies received before January 1, 2022.