Rep. Tom Suozzi (D-Glen Cove) and U.S. Sen. Kirsten Gillibrand are pressing lawmakers to include in a $2 trillion infrastructure plan a bill eliminating the federal tax homeowners owe on grants used to upgrade septic systems.
"Taxing Long Island families for using grants to upgrade their septic tanks is nonsensical and wrong," Gillibrand said in a release. "The federal government should be supporting, not punishing, efforts to improve wastewater infrastructure and water quality."
The Internal Revenue Service ruled last year that Suffolk County residents who used county grants of $10,000 to $20,000 to upgrade their septic systems had to treat that money as income, even though most of the money went directly to contractors installing the new systems, not to homeowners.
Immediately impacted were recipients of 293 grants totaling $3 million. The bill would cover all Suffolk residents who applied for grant funding after Dec. 31, 2018. Adrienne Esposito, executive director of Farmingdale-based Citizens Campaign for the Environment, which lobbied for the program’s creation, said the legislation could affect roughly 1,100 county residents who have taken part in the program along with residents who used similar programs in Nassau County, upstate New York and elsewhere in the country.
"This is gigantic," Esposito said. "The tax scheme has really thwarted clean water efforts across Long Island … This is the fix."
The $20 million septic upgrade program was one of Suffolk County Executive Steve Bellone’s key water quality initiatives, offering a path to modernize some 360,000 aging septic and cesspool systems, serving almost three quarters of homes in the county, that are a major source of nitrogen pollution on Long Island.
To replace a conventional septic system costs $7,000 to $8,000, but new, cleaner systems cost an average $22,000, Esposito said. The grants made replacement economically feasible, she said, until the IRS ruling upset the model. "It was catastrophic in some cases," she said. "You had senior citizens surviving on Social Security and this bumped them into a new tax bracket."