HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 10/18/2016 - RESOLUTION 2016-082 DIRECTING THE MAYOR TO SUBMITAgenda Item 10
Item # 10 Page 1
AGENDA ITEM SUMMARY October 18, 2016
City Council
STAFF
Travis Storin, Accounting Director
Travis Paige, Community Engagement Manager
SUBJECT
Resolution 2016-082 Directing the Mayor to Submit a Letter to the United States Secretary of the Treasury
Urging the Adoption of Internal Revenue Service Regulations or Other Laws to Exclude Water Conservation
Rebates Provided by Water Utilities from the Taxable Gross Income of Individuals Under the Federal Income
Tax.
EXECUTIVE SUMMARY
The purpose of this item is to demonstrate official support for the exclusion of water conservation rebates from
a residential utility customer’s taxable gross income under federal tax law.
STAFF RECOMMENDATION
Staff recommends adoption of the Resolution.
BACKGROUND / DISCUSSION
Fort Collins Utilities aims to help preserve the environment and save its residential customers money through
water conservation and energy efficiency programs. Customers receive these rebates by participating in and
providing information to Utilities staff and Platte River Power Authority on equipment purchased and installed.
Qualified equipment eligible for water conservation rebates include toilets, showerheads, sprinkler equipment
and Xeriscape installations.
Energy rebates are exempted from an individual’s taxable gross income under federal tax law and the 1099-
MISC federal tax form requirement based on Internal Revenue Service (IRS) guidelines, assuming the rebates
were delivered directly to the customer (IRS Publication 525). Water rebates are not tax exempt for residential
customers and, thus, do require issuance of 1099-MISC federal tax forms for rebate amounts greater than, or
equal to, $600 under Section 61(a) of the Internal Revenue Code.
The Fort Collins City Council, along with Colorado’s United States Senators and the WaterNow Alliance,
supports a tax exemption for water conservation rebates similar to that on energy rebates. This exemption will
allow communities to continue and expand consumer rebates and subsidies which are the most cost effective
and efficient tools for increasing water supply resilience and maintaining water affordability.
CITY FINANCIAL IMPACTS
Staff researched water rebates processed for residential customers in 2015 and discovered no single rebate
was issued to any customer exceeding the $600 threshold. In 2016, Utilities Xeriscape program was
restructured and the rebate amount of $500 per installation was increased to $750. Staff has and will continue
to adhere to IRS rules and requirements for any rebate exceeding $600 for this program. Rebate recipients will
be asked to submit an IRS Form W-9 to the City as a condition of rebate payment, so that the City files the
requisite information with the IRS and taxpayer.
Agenda Item 10
Item # 10 Page 2
Staff also researched energy rebates exceeding the $600 threshold and found 137 rebates processed through
the Efficiency Works Home program, and 94 solar rebates were processed. In cases where a contractor is
completing the work for the customer and deducting the amount of the energy rebate in their pricing to the
customer, CLEAResult (third party administrator for the Efficiency Works Program) is collecting W9’s and will
issue 1099-MISC forms when necessary.
Business energy rebates do not have the same tax exemption as residential. Through the collaborative
administration with Platte River Power Authority for business incentives, the collection of W-9 tax information
and issuance of 1099 forms is done as a normal part of the program process.
ATTACHMENTS
1. Water Now Alliance/National League of Cities Letter (PDF)
2. Congressional Letter of Support (PDF)
3. U.S. Senate Letter of Support (PDF)
4. Internal Revenue Service Response Letter (PDF)
5. Powerpoint presentation (PDF)
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ATTACHMENT 2
ATTACHMENT 3
ATTACHMENT 4
Water Efficiency Rebate Taxability
Travis Storin, Accounting Director
Travis Paige, Community Engagement Manager
10-18-16
ATTACHMENT 5
Current Tax Code
• Section 136 of the Internal Revenue Code (IRC) allows for a gross
income exclusion for any subsidy by a public utility to a customer
for purchase or installation of any energy conservation measure.
• “Energy conservation measure” is further defined by this section
as any installation or modification primarily designed to reduce
consumption of electricity or natural gas.
• IRC is silent with respect to water conservation efforts; thus such
subsidies or rebates are taxable.
2
Recent Events
12/11/15: Letter from CA Congressional delegation to IRS
and US Treasury
1/5/16: Response from IRS directs legislative change
2/25/16: HR 4615 introduced, referred to Ways and Means
5/26/16: Letter from CA, WA, CO, and NV Senators to US
Treasury requesting moratorium from IRS
3
Staff Recommendation
Staff recommends adoption of the Resolution.
• The Resolution authorizes and directs the Mayor to send a letter to the
U.S. Treasury urging an exemption for water conservation
• The Resolution also expressly affirms the Council’s support for
incentivizing the installation of water conservation improvements.
4
-1-
RESOLUTION 2016-082
OF THE COUNCIL OF THE CITY OF FORT COLLINS
DIRECTING THE MAYOR TO SUBMIT A LETTER TO THE UNITED STATES
SECRETARY OF THE TREASURY URGING THE ADOPTION OF INTERNAL REVENUE
SERVICE REGULATIONS OR OTHER LAWS TO EXCLUDE WATER CONSERVATION
REBATES PROVIDED BY WATER UTILITIES FROM THE TAXABLE GROSS INCOME
OF INDIVIDUALS UNDER THE FEDERAL INCOME TAX
WHEREAS, Fort Collins Utility Services aims to help preserve the environment and its
customers money by offering rebates to its residential customers who participate in water
conservation and energy efficiency programs by purchasing and installing certain qualifying
equipment and improvements that contribute to water conservation and energy efficiency; and
WHEREAS, the rebates Utility Services provides to its residential customers under its
energy efficiency program are currently excluded from the customer’s federal taxable gross
income under Internal Revenue Code Section 136, but the rebates it provides to its residential
customers under its water conservation program are not; and
WHEREAS, Colorado’s United States Senators and the WaterNow Alliance have all sent
letters to the Internal Revenue Service and United States Treasury Department urging the
adoption of regulations by the Internal Revenue Service or for the support of other laws to
exclude from an individual’s federal taxable gross income, water conservations rebates received
from water utilities; and
WHEREAS, the City Council believes it would be in the best interest of its Utility
Services customers to be able to exclude such rebates from their gross income taxed under the
federal income tax and it would increase the incentive for customers to purchase and install
water conservation equipment and improvements.
NOW, THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE CITY OF
FORT COLLINS as follows:
Section 1. That the City Council hereby makes and adopts the determinations and
findings contained in the recitals set forth above.
Section 2. The Mayor is hereby authorized and directed to sign and send the attached
letter to the United States Secretary of the Treasury in substantially the form attached hereto as
Exhibit “A,” subject to minor modifications as the Mayor, in consultation with the City Manager
and City Attorney, may determine to be necessary and appropriate to protect the interest of the
City and Utility Services or to effectuate the purposes of this Resolution.
-2-
Passed and adopted at a regular meeting of the Council of the City of Fort Collins this
18th day of October, A.D. 2016.
_________________________________
Mayor
ATTEST:
_____________________________
City Clerk
City Manager’s Office
City Hall
300 LaPorte Ave.
PO Box 580
Fort Collins, CO 80522
970.221.6505
970.224.6107 - fax
fcgov.com
October 20, 2016
The Honorable Secretary of the Treasury
1500 Pennsylvania Avenue NW
Washington, D.C. 20220
Dear Secretary Lew,
On behalf of the Fort Collins City Council, I am writing in support of resolving the uncertainty related to the
taxability of water conservation rebates paid to residential utility customers and how the IRS taxes these
rebates and to encourage an exemption from taxation for them similar to that provided for energy
efficiency rebates. Energy efficiency rebates are exempted from an individual’s taxable gross income
under federal tax law and from the 1099-MISC federal tax form requirement.
Fort Collins Utilities aims to help preserve the environment and save our customers money through water
conservation and energy efficiency programs. Customers receive these rebates by participating in and
providing information to Utilities staff on equipment purchased and installed. Qualified equipment eligible
for water conservation rebates include toilets, showerheads, sprinkler equipment and Xeriscape
installations.
The Fort Collins City Council, along with Colorado’s United States Senators and the WaterNow Alliance,
support a tax exemption for water rebates similar to that on energy rebates. This exemption and clarity on
tax liability will allow communities to continue and expand consumer rebates and subsidies which are the
most cost effective and efficient tools for increasing water supply resilience and maintaining water
affordability.
Living in a region where water conservation is critical, we continually look for ways and means to educate
and incentivize conservation efforts in both the residential and business sectors. We encourage
innovation and partnerships and do not want the threat of tax liability to be a hurdle in our efforts.
Thank you for your attention and efforts in this matter.
Sincerely,
Wade Troxell
Mayor, Fort Collins, CO
Cc:
Michael Bennet, United States Senator
Cory Gardner, United States Senator
Jared Polis, United States Representative
EXHIBIT A
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ATTACHMENT 1