SEPTIC Act

This section would give the Act a short title: the Septic Exclusion for Property owners through Tax-free Infrastructure Compensation Act, or the SEPTIC Act.

This section would change how section 136 of the Internal Revenue Code excludes certain subsidies from a taxpayer's gross income, the income that gets taxed. Under current law, section 136(a) excludes a subsidy that a public utility provides for buying or installing an energy conservation measure. This section would keep that rule as new paragraph (1) of subsection (a) without changing what it covers, and would add a new paragraph (2): gross income also would not include a subsidy that a State or local government provides, directly or indirectly, to a resident of that State or locality, to buy or install a wastewater management measure, but only if the measure is installed for the taxpayer's own residence. A subsidy would qualify for the tax exclusion if it meets the terms of either paragraph (1) or paragraph (2). The section would add a definition of wastewater management measure to subsection (c): any installation or modification of property that is mainly designed to manage wastewater, including septic tanks and cesspools, for one or more dwelling units. This new definition becomes paragraph (2) of subsection (c), and the paragraph that used to be numbered (2) there becomes paragraph (3) instead, with no change to what it covers. Subsection (c)'s heading changes from a label about energy conservation measures to Definitions, and the heading of its first paragraph changes from In general to Energy conservation measure, again with no change to the substance of what that paragraph defines. The section would also change the heading of section 136 itself, and the matching entry in the tax code's table of sections, by adding the word wastewater alongside energy and by removing the words provided by public utilities, so the heading no longer names public utilities as the only source of the covered subsidies. These changes would apply to amounts received after the date this Act is enacted, for tax years ending after that date.