The Senate bipartisan infrastructure bill includes a provision sought by NAHB to restore an exemption for water and sewer contributions in aid of construction (CIAC). If enacted into law, this would be effective for contributions made after Dec. 31, 2020.
As part of the Tax Cuts and Jobs Act enacted in 2018, Congress eliminated an exemption for water and sewer CIAC, making such contributions taxable if the utility is a privately-owned, for-profit entity.
As a result, in areas served by a corporate, for-profit water utility, when a builder installs new water or sewer infrastructure to support additional housing — at no cost to the existing residents — that infrastructure is taxed by the federal government. In some states, affected utilities were required to pass this tax liability to the developer, resulting in CIAC surcharges as high as 40%.
NAHB has been working with a bipartisan group of senators to restore the water and sewer exemption. In June, Sens. Jeanne Shaheen (D-N.H.) and Lisa Murkowski (R-Alaska) introduced legislation (S. 1997) to do so. This bill formed the basis for the restoration of the exemption in the bipartisan infrastructure bill, and NAHB is grateful for their leadership on this issue.
The Senate is working to pass this bill in the coming days, but House action will likely be delayed until the fall.