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NSDC Seeks IRS Clarification on Tax Treatment of Utility Arrears Assistance

 November 1, 2021 | Cole Karr

The National Special Districts Coalition sent Monday a letter to the Internal Revenue Service (IRS) seeking clarity on how the agency intends to treat customer utility relief funded under the American Rescue Plan Act’s Coronavirus State and Local Fiscal Recovery Fund (CSLFRF).

Special districts across the county can access CSLFRF through state, county, and city government transfers. Districts may utilize the funds to assist customers with water, wastewater, electricity, and home heating arrears. Districts leveraging this assistance need a firmer understanding on the implications of their customers’ accepting utility payments and whether the district will be required to report the assistance as income.

“As many special districts’ utility customers may receive CSLFRF aid in the form of utility assistance, we are concerned about the potential tax implications for residential customers receiving aid,” the Coalition wrote to IRS Commissioner Charles Rettig. “For all intents and purposes, the ‘assistance to households’ use of CSLFRF monies is a form of disaster relief, which is normally is not considered taxable income. The Coalition asks requests the Internal Revenue Service offer guidance that would clarify this issue and ensure these customers not be held liable for additional taxation or a reduction in other income-based benefits.”

Stay tuned to NSDC for further developments and response from IRS as it becomes available. Contact Cole Karr, NSDC Federal Advocacy Coordinator, for questions.

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