The proposed Water Infrastructure Act will add flexibility for reservoir, irrigation, and water companies to generate essential revenue to invest in infrastructure. The bill reforms section 501(c)(12) of the federal tax code and is aimed to help companies stay in business and stimulate private investment in water infrastructure throughout rural America.
The current tax provision (dating back to 1926) provides a tax exemption for mutual water, irrigation, ditch, and reservoir companies – but only if they receive at least 85 percent of their income from members each year. This has created significant challenges for many companies to finance repairs without raising water rates. The result has been delayed infrastructure improvements, wasted water, and even public safety and health issues.
The WATER Act will permit mutual water, irrigation, ditch, and reservoir companies to generate additional non-member income provided that the income is used for the operations, maintenance and capital improvements of water infrastructure.
“The passage of this Act is imperative for stimulating private financing for water infrastructure improvements across rural America,” says Brian Kuehl, director of federal affairs at K·Coe Isom. “The time to reform the nearly 100-year-old water infrastructure tax code is overdue, as the overarching benefits to agriculture, conservation, homes, and businesses will be effectively widespread. We’re pleased that this bipartisan legislation is moving through Congress.”
The bill is supported by a wide range of agricultural interests from the American Farm Bureau Federation to numerous state and local water user associations throughout the West. Following July passage through the U.S. House of Representatives, the WATER Act now faces passage in the Senate.
K·Coe Isom is helping to advance changes to the federal tax code that will benefit farmers, ranchers and agricultural businesses throughout the United States. Working on behalf of western irrigation and reservoir companies, K·Coe Isom’s federal affairs team has been helping to advance the WATER Act (H.R. 519/S. 1090) through Congress and is working to support the passage of the bill into law.
Contact K·Coe Isom’s federal affairs team with questions regarding these changes.