HR2940-119

What This Bill Does

The Advancing Water Reuse Act adds new section 48F to the Internal Revenue Code. It creates a 30 percent qualifying water reuse project credit based on the qualified investment in tangible depreciable property placed in service as part of a qualifying project. Eligible projects include onsite water recycling systems in industrial, manufacturing, data center, or food processing facilities; replacing freshwater such as groundwater with recycled water from a municipal provider for production or services; and building or expanding municipal water recycling systems to secure recycled water for production. The bill also includes a special transfer-property rule that lets the person transferring qualified property to a utility claim the credit under a binding written agreement, and it sunsets eligibility for property whose construction begins after December 31, 2032.

Who Benefits and How

Industrial facilities benefit because onsite water recycling equipment can qualify for a 30 percent investment credit. Manufacturing facilities benefit if recycled municipal water replaces freshwater in production processes. Data centers benefit from a tax incentive to reduce freshwater demand through qualifying reuse systems. Municipal water utilities benefit indirectly because customers have a federal incentive to build or expand systems that secure recycled water supplies.

Who Bears the Burden and How

The Internal Revenue Service must administer a new section 48F credit, transfer-property rule, and construction-start sunset. Federal taxpayers bear the cost of a new investment tax credit for qualifying water reuse property. Utilities receiving transferred property must coordinate binding written agreements so the correct party claims the credit. Project developers must document qualified investment, original use, depreciable property status, and qualifying water reuse purpose.

Key Provisions

• Creates a 30 percent qualifying water reuse project investment credit under new section 48F.
• Defines qualifying projects to include onsite recycling, recycled municipal water substitution, and municipal recycling systems for production use.
• Provides a special rule for qualified property transferred to utilities under a binding written agreement.
• Limits the credit to property whose construction begins before January 1, 2033.