Rules & Regs: New York County in Disarray Over Wastewater Grant Taxes

Also in this month's regulations update, a septic services company in Texas is found in contempt of court for its land application practices

Rules & Regs: New York County in Disarray Over Wastewater Grant Taxes

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Suffolk County, New York, has been a model for tackling nitrogen pollution from onsite wastewater systems. Now, local grants to upgrade treatment systems are producing another consequence for homeowners: larger tax bills that may be as much about local politics as taxes. And the issue has led one part of county government to consider legal action against another.

The county occupies the eastern tip of Long Island and is home to the wealthy communities known commonly as the Hamptons. Wastewater treatment at many county homes depend on cesspools. During the last couple years, the county has offered grants to replace those with nitrogen-reducing systems. At the same time, the county and several municipalities passed laws requiring low-nitrogen systems for new construction and for building expansions.

As tax season approached, homeowners received 1099 forms telling them they have additional tax liability this year because they received thousands of dollars in grant payments. 

“I said that’s ridiculous,” Dorothy Minnick, 69, tells the Newsday newspaper. “I didn’t make that income. I’m being penalized for doing something good for the environment.”

Tim Sheehan, who lives on Shelter Island, on the north side of Long Island, says he could face a tax bill $3,000 larger. “We were told from the outset the county grant would not be taxable income for us as homeowners.”

The tax anxiety can be traced to County Comptroller John Kennedy, whose office mailed the required IRS forms to taxpayers. This is also where the accusations start. Kennedy, a Republican, is the opponent of incumbent County Executive Steve Bellone, a Democrat, in the November election. Bellone is seeking a third term and has made water quality one of his top issues.

As of mid-March, 69 advanced systems have been installed in the county at an average cost of $20,523. The county capped its initial grants at $10,000, and some municipalities offer thousands more in grant money to help cover more of the cost. More than 1,500 people have applied for grants.

A legal opinion from the county’s tax counsel claims homeowners should not be liable for additional tax if they received a grant. That opinion cited two IRS cases about business grants. An opinion from the county attorney’s office says homeowners would not face tax consequences if grant money was paid directly to installers. Anthony Basile, associate professor of accounting and taxation at Hofstra University and a practicing CPA, was quoted in news reports as saying the tax form should go to the contractor and not the homeowner. Len Marchese, an accountant and comptroller for the town of Southampton, says the same thing.

Kennedy says he disagrees with opinions about who should receive tax bills. He says one concern is IRS rules that control the use of public funds for private benefit. He has resisted all requests for a change of opinion and says he plans to request a ruling from the IRS. He blames Bellone for the tax confusion and says he raised concerns in early 2018.

Some people say Kennedy has previously changed how 1099s are issued. Vendors tell reporters they have received two 1099s for the same job. One holds them liable for taxes, and the next, in the following year, shows a taxable income of zero.

In late March, a coalition of residents, contractors and environmental groups held a press conference to demand that Kennedy retract the 1099s for homeowners before the April 15 tax filing deadline. The East End Supervisors and Mayors Association added their voices to the others criticizing Kennedy’s decision. The county executive’s office also wrote a letter asking him to reconsider his action.

In early April, about a week before the filing deadline, the county’s Ways and Means Committee held a meeting to discuss what legal action and other actions can be taken against Kennedy. 

County in Michigan Could Nix Septic Inspection Law

Commissioners in Kalkaska County, Michigan, may eliminate the septic tank inspections now required before a home can be sold.

One commissioner in favor of dropping the requirement is Patty Cox, who is also the county liaison to the District Health Department No. 10.

“If you look at it, there are so many exceptions to the rule, and it creates an undue wait to sell their property,” she tells television station WWTV in Cadillac. She says she’s concerned about the environment, but believes individual municipalities should deal with onsite inspections.

The inspection rule dates to 2008, but it does not require inspections in 11 situations such as when a property is not occupied, if a home is new or if the property transfer is between members of the same family.

County commissioners scheduled a public forum about the issue for April 26 in Cadillac. The county is located in the northwest part of Michigan’s Lower Peninsula.

New York Village Passes Law Requiring Low-Nitrogen Onsite Systems

The Sag Harbor Village Board in late March passed a law requiring low-nitrogen onsite systems for all new homes and for existing buildings, including commercial buildings, if their area is expanded by at least 25%.

There was no opposition to the proposed law at a public hearing on Jan. 8. The law took effect April 1.

Sag Harbor is part of Suffolk County, on the eastern tip of Long Island, New York, where the county and several municipalities have adopted similar laws in order to reduce the amount of nitrogen causing pollution in the nearshore waters of the Atlantic Ocean. 

Also in late March, members of the Westhampton Village Board had its initial discussion about passing a similar law for that municipality.

Montana Lawmakers Could Order Wastewater Pollution Study

After years of evidence that human waste is leaking into Montana lakes, the state Legislature is on the edge of requiring a formal study of the problem.

A joint resolution to start that study is now before a conference committee tasked with reconciling any different versions of the resolution passed by the houses of the Legislature. SJ 3, introduced by Sen. Fred Thomas, R-Stevensville, would set up an interim committee in the Legislative Council, which is the Legislature’s bipartisan study committee.

The interim committee has until September 2020 to look at the state’s septic system permit system and compare it to the permit systems of other states and to look at alternative onsite technologies and recommend ways to encourage their use. Results of the committee’s research would be reported to the next Legislature in 2021.

During a presentation in Whitefish in mid-March, lake scientist Jim Elser told an audience that wastewater treatment improvements and other actions have helped reduce phosphorus levels in Flathead Lake in the northwestern part of the state, according to the Billings Gazette newspaper. But although lakes in western Montana have not become murkier like lakes in other parts of the country, he says, nitrogen levels in Flathead Lake have not changed.

Texas Septic Company Found in Contempt of Court

A septic services company was found in contempt of court in March for violating a judge’s order about when it may operate. Judge Jerry Ray ordered Harrington Environmental Services to pay $100 for each of seven violations of a court injunction issued in November.

Johnson County and the city of Cleburne are suing Harrington Environmental Services for being a nuisance. The injunction allows the company to continue spreading septage on its property until a trial on the nuisance allegations is held in December. But the company may spread septage only when it is not raining or the soil is not saturated.

In the contempt case, neighbors of the company showed photos and videos of what they say were Harrington Environmental Services trucks stuck in muddy fields or operating in the rain. Cleburne Mayor Scott Cain says the company poses a threat to the city’s water supply, Lake Pat Cleburne, which is downstream of Harrington Environmental Services property.

“Ultimately we have 30,000 people, plus the outlying county, who depend on good, clean water to drink,” Cain tells KXAS television.

The company has a state permit to spread septage. Cleburne and the county also sued the Texas Commission on Environmental Quality for improperly issuing that permit. A judge sided with the local governments, but the commission is appealing the judge’s decision.

Polk County Announces Cost-Sharing Program for Failing Systems

Polk County, Minnesota, now has a cost-sharing program available to property owners who have failing septic systems or systems violating county codes. County grants will pay 75% to 90% of repair costs up to a maximum of $12,000.

Who receives these grants will be based on household income, condition of the existing system and its proximity to critical surface waters. The deadline to apply is June 1. After that, funds will be distributed first come, first served.

Missouri Continues Free Pumpout Program

Taney County has started its free pumpout program again for 2019. This is the sixth year for the program that provides free pumpouts to homeowners.

To qualify, homeowners must have a septic system attached to a single-family residence, cannot have a tank that is part of a centralized wastewater system and cannot have had a free pumpout in the last four years.

The program is paid for by the county’s half-cent Wastewater Capital Improvement Sales Tax and each year serves about 500 properties. Less than 1% of the annual tax revenue is needed to fund the service.

Leaking Tanks in Idaho Are Contaminating Tributary

A new study by the Idaho Department of Environmental Quality concludes leaking septic tanks are causing part of the water-quality problem in Lindsay Creek on the eastern side of the city of Lewiston and a tributary to the Clearwater and Snake rivers. The department plans to start a watershed advisory group, and public meetings about this are expected to be scheduled this spring. 

To find the presence of septic system leakage, researchers looked at the amounts of caffeine and artificial sweeteners in water. Caffeine can be removed by properly functioning septic systems, but the sweeteners acesulfame and Splenda are not. Because sweeteners are used only in products intended for human consumption, their presence means some of the water tested came from human sources.

More than 800 septic tanks are used for wastewater treatment in the Lindsay Creek watershed. Some people in the area have abandoned their shallow wells as a result.

More research is needed to understand how much nitrate people are contributing to the creek.

New York Continues Reimbursement Program for Onsite System Repairs

The Catskill Watershed Corp. has a 10-year, $86 million contract with New York City to repair or replace failing septic systems. The contract continues a program that began in 1997.

People whose septic systems have failed or are likely to fail are eligible for reimbursements. There is no cap on payments. Under the new contract, wastewater systems for nonprofit organizations and local governments will be included. Small businesses and homes are already covered. The watershed corporation was created in 1997 and allowed the city to avoid building a treatment facility by keeping its surface water supply clean through environmental protection.


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