# What This Bill Does

This bill changes how the government taxes water and sewerage utilities when they receive money from local governments to build or expand their systems. Right now, when a city or county gives money to a water company to help build new pipes or treatment facilities, the tax code treats this as income that the utility has to pay taxes on. This bill says that for water and sewerage utilities specifically, these government contributions should instead be treated as capital contributions—basically, money that goes toward building assets rather than money the company earned as profit.

The practical effect is that water and sewerage utilities won't have to pay federal income taxes on money they receive from government entities (like municipalities or counties) to help fund infrastructure projects. However, there are some important conditions attached. The utility has to actually spend the money on water or sewerage infrastructure within two years of receiving it, and the money can't be included in the utility's rate base—meaning they can't use it to justify charging customers higher rates. The utility also has to keep detailed records showing where the money came from and how it was spent.

This matters because water and sewerage systems across the country need significant upgrades and expansions. By reducing the tax burden on utilities that receive government funding for these projects, the bill could make it easier for local governments to help pay for infrastructure improvements. However, it's worth noting that utilities won't be able to claim tax deductions or credits for these expenditures, and any property built with this money starts with a zero tax basis. The bill applies to contributions made after December 2017, so it's retroactive to cover projects that have already happened.

To amend the Internal Revenue Code of 1986 to provide that certain contributions by government entities are treated as contributions to capital.

Kuster, Ann M.

 <p>This bill allows an exclusion from gross income, for income tax purposes, of certain amounts received as contributions to capital by a regulated public utility that provides water or sewerage disposal services. It also provides a three-year statute of limitations period for any deficiency attributable to the treatment of such amounts as a contribution to capital.</p>