Shaheen Holds Roundtable & Site Visit on Bipartisan Fix to Repealing Tax Law Flaw Penalizing NH Water Infrastructure Investments

December 13, 2019

(Atkinson, NH) – Today in Atkinson, U.S. Senator Jeanne Shaheen (D-NH) hosted a roundtable discussion at Atkinson Town Hall and toured the construction site of a new water infrastructure project impacted by an unfair provision in the Tax Cuts and Jobs Act of 2017 that has led to exorbitant taxes on infrastructure investments in towns across southern New Hampshire. Shaheen, joined by town and state officials, highlighted her new bipartisan bill that would fix the flaw in the tax law and provide relief to Granite State communities and companies facing inflated taxes under this provision in the tax code. 

“Atkinson and communities across New Hampshire have been planning important water infrastructure projects for years that are now under threat. This flaw in the tax code risks discouraging urgently needed investments in our water system that provide access to clean drinking water. We can’t let this tax compromise the safety of our water supplies,” said Senator Shaheen. “My legislation provides a bipartisan, commonsense fix to the unfair provision in the Republican tax bill that Majority Leader McConnell rushed through the Senate. This is an issue impacting communities across the country, particularly those in New Hampshire. I’ll continue to urge all members of Congress to join me in this effort and deliver meaningful relief to communities that have been unfairly penalized by this tax.” 

“This bill will correct an unforeseen result of recent changes to federal tax laws, relieving utility ratepayers from having to pay an unfair tax burden, and that can also create unnecessary barriers for important infrastructure projects like the Southern NH Regional Water Project or providing for new water connections necessitated by contamination," said Bob Scott, Commissioner of the NH Department of Environmental Services. 

The 2017 tax bill made adjustments to the tax treatment of Contributions In Aid of Construction (CIAC). Previously, water and wastewater utilities were exempted from taxes for CIAC received; however, the TCJA reinstated CIAC tax liability on these entities, which will either have to be covered by state and local governments or passed along to the ratepayers and property taxpayers. These changes have already resulted in $1.15 million in new federal taxes for water infrastructure projects in Southern New Hampshire and will serve in the future as a strong disincentive against investments in water infrastructure and community development.  

The U.S. tax code has long provided favorable tax treatment for CIAC, as well as for certain grants made by governmental or civic entities, to help companies and communities make investments in projects that benefit the public. Since 1996, the U.S. tax code has included a specific provision that excludes these contributions made to water and sewer utilities from their taxable income. Unfortunately, the TCJA eliminated this tax exemption. The TCJA also made an additional change that eliminated the tax-free treatment of capital contributions if made by governmental entities or civic groups. These changes could impact the Drinking Water and Groundwater Trust Fund in New Hampshire, as well as municipal governments that make investments in water or other infrastructure. Specifically, Shaheen and Murkowski’s bill would reverse these two harmful changes to the U.S. tax code and revert these specific provisions to pre-TCJA status.  

Bill text of the legislation can be found here.