IRS rules grants on upgraded septic tanks count as taxable income

Suffolk homeowners may have to pay federal taxes on grants used to upgrade septic tanks.
Suffolk County Comptroller John Kennedy says the IRS has issued a ruling that residents who take part in Suffolk's Nitrogen Reducing Septic Tank Program and receive grant money will have to pay a tax.
"Perhaps some of the controversy could have been avoided had the Bellone administration consulted with us," said Kennedy. "They did not. And to date, as a matter of fact, they've chosen simply to go ahead and claim that I've made an effort to politicize this issue."
The Suffolk County Septic Improvement Program provides $20,000-$30,000 to homeowners who want to upgrade their cesspools to a nitrogen reducing septic system. The program has been in effect since 2017.
Although the IRS has ruled in Kennedy's favor that residents who receive grant money should be taxed, some officials from the county disagree.
"It's highly unusual, I think, for an elected official to request a ruling that results in imposing a new kind of tax on residents," said Deputy Suffolk County Executive Peter Scully. "Clearly there needs to be a solution. We're already receiving calls from congressmen and senators saying, 'We need to work together to fix this, to make sure this important program is protected.' Most importantly, to make sure our taxpayers don't face additional costs."
Environmentalists say they fear this will deter residents from taking part in the program and have a negative impact on Long Island's drinking water.
"This is just one more large hurdle to get over in order to achieve the ultimate goal of clean water," said Adrienne Esposito, of Citizens Campaign for the Environment.
The Suffolk County Septic Improvement Program is still up and running. However, the county is warning residents who want to take part in it that they may be taxed. Officials say they are working on finding a solution so that does not happen.