Rebate/Payment from a Utility considered taxable.

[whkrueger]

I have a client who received a 1099-Misc from the local Water District with box 3 for $1500. The money was a rebate/payment to be used for removal of turf and replace with something that didn't need water.
This to help with water conservation during the drought here in California. The question is, is this $1500 considered income. I know the rebates from utilities towards energy conservation are not considered
taxable.

Thanks/Wayne

[Snaggletooth]

Taxable I think

This is similar to a payment for an easement. Don't know why this wouldn't be taxable, but if so, it would certainly add to the basis of the land. Not sure about state tax purposes, California might exempt it by statute since they have such a water problem.

[whkrueger]

It is considered not taxable by California.

This is similar to a payment for an easement. Don't know why this wouldn't be taxable, but if so, it would certainly add to the basis of the land. Not sure about state tax purposes, California might exempt it by statute since they have such a water problem.

[taxea]

Even if it is not taxable the IRS will look for it. Input it on Ln 21 (not subject to SE) and back it out.

[FEDUKE404]

Removing income from federal return

Even if it is not taxable the IRS will look for it. Input it on Ln 21 (not subject to SE) and back it out.

Are you implying that since the "rebate" is (allegedly) not taxable to CA the income, as reported on the Form 1099-MISC, is also not taxable on the federal return ? ?

If so, what would be your justification/explanation for "backing it out" ??

FE

[whkrueger]

taxea, sorry if you thought I was asking anyone do research for me. I am doing my own research, posting it in this form
is part of that research. Thanks for your input. From what I've read, the IRS does not specifically address Water Conservation,
which is what is rebate was for. They do address Energy rebates, which are limited to Electricty & Natural Gas. This is from
pub 525.

Even if it is not taxable the IRS will look for it. Input it on Ln 21 (not subject to SE) and back it out.

[Nashville]

Come back often

Mr (Ms) Krueger, I notice this is your first query on this message board. We have all kinds of people on the forum with varying levels of experience -- some of them do research, others do not, thus responses come from all areas of the spectrum. Some of our responses are helpful, some are not - most of us do try to helpful. I perceive from your posts that you have a great deal of experience.

I hope you will return often and share your expertise and views with us. The people who sponsor this forum run a good message board and have a good product. Best regards, "Nashville".

[whkrueger]

Here is the results of my research on this matter, so far:
- The Water Districts issued 1099-Misc for rebates over $600 because they were not sure if the rebate was taxable or not.
- IRS Pub 525 Energy Rebates are not taxable but are limited to Electricity and Natural Gas. It does not mention Water
Conservation. So it could be considered taxable.
- The State of California has requested a determination from the IRS to see if these rebates from removal of Turf for
Water Conservation is taxable or not. The determination was expected in January '16 but so far none has been issued
that I can see.

It would appear that this rebate from Water District for Turf Removal to help with Water Conservation is taxable until
the IRS say it's not.

Thanks
Wayne