1120 H tax question

Started by MichaelK23 • 8 replies • 1103 views

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MichaelK23 (California)
Posts: 4

Posted:

We received a city water rebate for replacing our front lawn with water-conserving landscaping. Is the rebate considered non-exempt income under 1120H and thus taxable? Is there an way to offset the rebate, since the gardening work would be considered part of the 90% exempt expenditures.

DouglasK1 (Florida)
Posts: 2,046

Posted:

I'm no tax whiz, but my off the cuff thought is that a rebate is a discount on products or services purchased, in this case water. Was the rebate more than your annual water bill?

Escaped former treasurer and director of a self managed association.

RichardP13 (California)
Posts: 3,868

Posted:

I believe it would only if it was was reported as income to the IRS or FTB.

MichaelK23 (California)
Posts: 4

Posted:

No, it is unrelated to the water bill. We were in the middle of a record drought, so the city was giving rebates to those who replaced grass lawns with water-conserving plants and/or surfaces. I don't think you can connect the rebate to the water bill.

DouglasK1 (Florida)
Posts: 2,046

Posted:

Quote:

Posted By MichaelK23 on 02/22/2017 3:17 PM
No, it is unrelated to the water bill. We were in the middle of a record drought, so the city was giving rebates to those who replaced grass lawns with water-conserving plants and/or surfaces. I don't think you can connect the rebate to the water bill.

They may call it a rebate, but it sounds more like a grant to me. That said, I have no idea if government grants are taxable income for an HOA. I'd be interested in finding out, since there has been discussion about applying for a county grant here.

Escaped former treasurer and director of a self managed association.

RichardP13 (California)
Posts: 3,868

Posted:

In doing more research, the IRS has a loophole in the language. If it was energy efficient, it is not taxable, but there is nothing about water conservation, so they may be looking to have it included as income. The tricky part is, what if you then gave the money to the company doing the work, who pays then?

MichaelK23 (California)
Posts: 4

Posted:

Yes, it is confusing. We paid for the work, then the city inspected the new landscaping and approved the rebate. There has always been some confusion as to whether it was taxable and we did have to fill out info for 1099, but I still haven't heard anything definitive.

MichaelK23 (California)
Posts: 4

Posted:

...and thanks for your help.

JeanI (Louisiana)
Posts: 112

Posted:

Wouldn't your Association tax preparer know the answer?

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