The Irrigation Association (IA) recently held an annual fly-in event in Washington, D.C. to connect IA members with elected officials and federal agencies and discuss important legislation. Topics ranged from farm bills to business policy to guest worker programs, but the main focus was bringing awareness to the Water Conservation Rebate Tax Parity Act, S. 2430 that was introduced to Congress in 2021. This act would amend 26 USC 136 of the Internal Revenue Code of 1986 that addresses energy conservation subsidies provided by public utilities to include the purchase or installation of not only natural gas and electricity but also water conservation or efficiency measures and storm water management measures.

 
While energy conservation rebates were exempted from federal taxes in 1992, the Alliance for Water Efficiency (AWE) notes that property owners are still taxed on rebates from water-saving investments that would address nationwide droughts and water shortages. The AWE's most recent update dates August 2022, when language regarding taxes for water conservation rebates was not included in the Inflation Reduction Act of 2022. The proposal is effectively stalled, but the IA's recent fly-in shows activity towards passing the act.

https://irrigationandlighting.org/news/ia-hosts-2024-washington-d-c-fly-in/
https://www.allianceforwaterefficiency.org/resources/legislative-watch/legislation-introduced-make-water-conservation-rebates-tax-free#
https://uscode.house.gov/view.xhtml?req=(title:26%20section:136%20edition:prelim)
https://www.congress.gov/bill/117th-congress/senate-bill/2430/text