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Suozzi bill would end federal tax on septic system grants

Rep. Thomas Suozzi (D-Glen Cove) speaks at a

Rep. Thomas Suozzi (D-Glen Cove) speaks at a Memorial Day ceremony Sunday at Long Island National Cemetery in Pinelawn. Credit: Kendall Rodriguez

ALBANY — Rep. Thomas Suozzi is introducing a bill to end a federal tax on grants provided to Suffolk County residents to offset the cost of upgrading their septic systems.

Suozzi (D-Glen Cove) said the bill would be introduced Thursday into the powerful Ways and Means Committee, on which he serves. An aide said the congressman is optimistic the measure will be part of a larger bill involving infrastructure headed to the House floor in two weeks.

The Internal Revenue Service had ruled that residents would have to pay federal tax on grants of $10,000 to $20,000 to upgrade septic tanks and replace cesspools under a county program to protect Long Island’s water quality. Homeowners voluntarily joined the program before they knew the grants would be treated as income under the Jan. 15 IRS ruling.

The IRS said the grants count as taxable income even if homeowners never receive a check. In most cases, the county pays grant money directly to contractors who install the systems, officials said.

Suozzi's bill would allow a resident to exclude from his or her taxable income any subsidy from the state or a local government for “any waste management measure" to their home. The measure is defined as any installation or modification including septic tanks and cesspools. The bill also would allow Suffolk County taxpayers to amend their 2020 tax returns for grants received in 2019.

“The notion that Suffolk County homeowners would be taxed for participating in a water quality program that will make their water cleaner simply defies all logic,” County Executive Steve Bellone said Tuesday. “We launched the most ambitious septic improvement program in the state to make it affordable for homeowners to replace their outdated septic systems and cesspools to help solve the water quality crisis.”

Officials estimate there are at least 360,000 cesspools and aging septic systems in Suffolk. Since the county grant program began, the county has disbursed 293 grants worth $3 million, officials said.

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