Rep. Zeldin announces end of taxing septic grants after IRS ruling

Relief is coming to taxpayers who have received grants to convert aged septic systems to nitrogen-reducing Innovative/Alternative systems.

Congressman Lee Zeldin, (R-Shirley), in perhaps his last major move since giving up his seat in a losing battle to become governor of New York, has announced the Internal Revenue Service has ruled residents won’t be liable for taxes on Suffolk County grants received to offset construction costs. Sen. Charles Schumer (D-NY) made a similar announcement.

“This decision from the IRS is the correct and just policy, and is a huge victory for Suffolk County taxpayers,” Mr. Zeldin said. “Saddling Long Islanders with an unexpected bill come tax season was always unacceptable,” he said.

When the county first announced the program aimed at improving water quality by supporting installation of the I/A systems, no one thought the grant money would be taxed. But papers they signed to receive the money indicated there could be tax consequences.

The grants became a political football between County Executive Steve Bellone (D) and County Comptroller John Kennedy (R) over taxing the grants when the two men became rivals for the County Executive’s seat in 2019.

Tax forms were sent to both those who received the grant money and the companies handling installations of the upgraded systems.

Deputy Suffolk County Executive Peter Scully argued at the time taxing the grants would discourage county residents from upgrading their septic systems, an effort considered vital to protecting drinking water and surrounding water in the Peconic Estuary from being compromised by high nitrate levels.

Mr. Scully accused Mr. Kennedy of playing politics.

Mr. Zeldin made the same argument, joining Congressman Tom Suozzi (D-Glen Cove) to work to reverse the IRS ruling that had upheld Mr. Kennedy’s view that the grants had to be taxed.

While their efforts failed to gain traction initially, they were persistent and were joined by U.S. Senator Charles Schumer. Still, no action was taken and Mr. Zeldin made it clear he would continue his efforts to reverse the original IRS decision, as did Mr. Schumer.