Potential Federal Tax on Water Conservation Rebates
In February of 2016, Contra Costa Water District (CCWD) became aware that water conservation rebates of $600 or more may be considered income by the IRS. Historically, CCWD, and many other California water agencies, have issued water conservation rebates with the understanding that they were not reportable as income, similar to the IRS consideration of energy conservation rebates. The State of California has made it clear that it does not consider these rebates as income for state tax filing. However, in a response to a Congressional Inquiry Letter (PDF), the IRS Response Letter (PDF) indicates that they do consider these rebates as income. CCWD is working with other California water agencies and our congressional representatives to seek clarification or legislative action to exclude water conservation rebates from income for federal tax purposes.
Therefore, to meet the federal IRS requirements, CCWD will now require rebate program participants approved for rebates of $600 or more to complete an IRS W-9 Form (PDF) and return to CCWD prior to issuing rebate checks.
Do I need to pay federal taxes if I receive a total of $600 or more in rebates in a calendar year? Beginning January 1, 2016, CCWD requires rebate program participants that are approved to receive $600 or more to complete an IRS W-9 form and submit it to the District. Then each January, CCWD will issue 1099 forms to those participants who received $600 or more in rebates in the prior year. To determine if in fact you are required to pay federal tax on the rebates, CCWD recommends you consult with a tax professional regarding your specific circumstances
Do I need to fill out and return the IRS W-9 form to CCWD to get my rebate? Yes. CCWD now requires program participants that are approved to receive $600 or more in rebates in a calendar year to complete an IRS W-9 form and return it to CCWD to receive their rebate. Each January, CCWD will mail out 1099 forms to those participants who received $600 or more in rebates in the prior year.
When do I need to mail in the IRS W-9 Form? If you are a rebate program participant, we recommend you mail in the completed W-9 form before CCWD conducts a final inspection of your project so your rebate check will not be delayed.
Where do I mail my completed IRS W-9 Form? If mailing your form, please send to:
Contra Costa Water District
Attn: Supervising Accountant
PO Box H20
1331 Concord Avenue
Concord CA, 94524
Does this apply to rebates received before January 1, 2016? No. At this time CCWD is not planning to send 1099s to participants that received their rebates prior to January 1, 2016. However, if in the future the IRS requires CCWD to do so, we will notify you. However, we do not foresee this happening.
Who will be issued a 1099 form? CCWD will issue 1099 forms in January to participants that received $600 or more in rebates in the prior calendar year.
When will the 1099 forms be issued? CCWD will send out the 1099 forms in January each year for the prior year’s rebates.
Will my personal information be safe? Yes. Please be assured that CCWD has very strict procedures to ensure the safety of your personal information. The forms will be held in confidence, in compliance with the Federal Trade Commission’s Customer Privacy Act.