IRS answers Fischer’s call for clarified tax status on lead pipe removal costs

U.S. Sen. Deb Fischer (R-NE) applauded action by the Internal Revenue Service (IRS) clarifying that property owners will not owe taxes on the cost of having their lead service lines replaced through the Infrastructure Investment and Jobs Act and other state and local programs.

The IRS on Feb. 23 announced that it will issue a formal clarification — as an official IRS tax guidance update — on March 11, clarifying that work done by water service providers to replace lead service lines on private properties will not need to be reported as taxable income.

The clarification is in response to a recent letter led by Sen. Fischer and U.S. Sen. Amy Klobuchar (D-MN) that called on the IRS to clarify the tax status of the grants so property owners could move forward with their replacement projects.

“I’m pleased that the IRS has listened to our concerns and acted swiftly,” Sen. Fischer said on Tuesday. “Now, state and local governments across the country can start the critical work of removing dangerous lead service lines.”

The lawmakers’ Feb. 6 letter sent to IRS Commissioner Danny Werfel acknowledged that the IRS was working on guidance clarifying that lead pipe replacement projects would be considered non-taxable under the General Welfare Exclusion, and urged the agency to act “as swiftly as possible” so state and local governments could start working with residents to remove dangerous lead service lines from all types of housing units.

“Our country has an estimated 9.2 million service lines leaching lead into drinking water, which is putting Americans’ health at risk,” said Sen. Klobuchar. “Following Sen. Fischer and my calls to the IRS, the agency is issuing new guidance so that state and local governments can begin to work with residents to remove these dangerous lead service lines across the country.”