Advancing Water Reuse Act

Bill Number: H.R. 2940
Origin Chamber: House
Congress: 119th Congress, Session 1
Policy Area: Taxation
Status: Introduced
Latest Action: 2025-04-17: Referred to the House Committee on Ways and Means.
Last Updated: 2026-05-29T15:20:20Z

AI-Generated Summary

Purpose of the Legislation

The Advancing Water Reuse Act (H.R. 2940) aims to promote water conservation and sustainability by providing a federal tax incentive for investments in projects that recycle and reuse water, particularly in industrial and municipal settings. It encourages the shift from using freshwater sources, like groundwater, to recycled water for producing goods or providing services.

Key Provisions

Investment Tax Credit: Taxpayers can claim a 30% credit on the cost (known as the "basis") of eligible property placed in service during a tax year for qualifying water reuse projects. This credit is part of the general business investment tax credit under the Internal Revenue Code.
Qualified Property: Includes tangible assets, such as equipment or infrastructure, that can be depreciated (a tax deduction for the declining value of assets over time). The property must be newly constructed, reconstructed, or acquired for its first use by the taxpayer.
Qualifying Water Reuse Projects: Defined as initiatives that:
Install, replace, or modify onsite water recycling systems in industrial, manufacturing, data center, or food processing facilities.
Replace freshwater with recycled water from municipal providers for producing goods or services.
Build or expand municipal water recycling systems to supply recycled water for goods production or services.
Special Rule for Transfers to Utilities: If property is transferred to a utility company under a binding agreement, the original owner (not the utility) can claim the credit. The utility cannot claim it for the same property.
Termination Date: The credit applies only to projects where construction begins before December 31, 2032.
Effective Date: Applies to periods after the bill's enactment, with rules similar to those for other investment credits.

Significant Changes to Existing Law

This bill adds a new section (48F) to the Internal Revenue Code, creating a dedicated tax credit for water reuse projects. It expands the existing investment tax credit framework (under section 46), which previously focused more on energy-related investments, by including water conservation as an eligible category. No existing credits are repealed or altered; this is an addition to encourage environmental projects.

Potential Impacts

On Government Agencies: The Internal Revenue Service (IRS) will administer the credit, potentially increasing workload for verifying eligibility but with minimal new funding needs. It supports broader federal goals for water resource management without direct mandates on agencies like the Environmental Protection Agency (EPA).
On Citizens: Indirect benefits through reduced water scarcity and lower costs for water-intensive industries, which could stabilize prices for goods like food or electronics. Promotes environmental sustainability by conserving freshwater.
On International Relations: Limited direct impact, though it aligns with global efforts on water security and could enhance U.S. leadership in sustainable practices, potentially influencing trade or aid discussions on water issues.
Overall: Likely to spur private investment in green infrastructure, reducing reliance on finite water supplies and mitigating drought risks in water-stressed regions.

Main Stakeholders Affected

Businesses and Facilities: Industrial, manufacturing, data center, and food processing operators who invest in onsite recycling systems and can reduce tax liabilities.
Utilities and Municipal Providers: Benefit from expanded recycling infrastructure but may forgo credits on transferred property; they gain from increased recycled water supply.
Taxpayers and Investors: Eligible entities claiming the credit, including those funding project construction.
Environmental and Community Groups: Indirectly supported through water conservation efforts that protect public water resources.

Notable Legal, Constitutional, or Political Implications

Legal: The credit is structured like existing tax incentives, ensuring compatibility with IRS rules on depreciation and progress expenditures (costs incurred during construction). It avoids retroactivity by applying only to future projects.
Constitutional: No apparent issues; tax incentives are a standard congressional tool under the taxing power (Article I, Section 8), promoting general welfare through environmental goals without infringing on states' rights over water management.
Political: Reinforces bipartisan support for sustainability (introduced by members from both parties), potentially advancing climate and infrastructure agendas. It could face debate over fiscal costs (estimated revenue loss from credits) but aligns with national priorities like water security amid climate change.

This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.

Sponsor

Rep. LaHood, Darin [R-IL-16]

Cosponsors (25)

Rep. Sánchez, Linda T. [D-CA-38], Rep. Tenney, Claudia [R-NY-24], Rep. Schneider, Bradley Scott [D-IL-10], Rep. Fitzpatrick, Brian K. [R-PA-1], Rep. Scholten, Hillary J. [D-MI-3], Rep. Castor, Kathy [D-FL-14], Rep. Vindman, Eugene Simon [D-VA-7], Rep. Casten, Sean [D-IL-6], Rep. McBride, Sarah [D-DE-At Large], Rep. Costa, Jim [D-CA-21], Rep. Morrison, Kelly [D-MN-3], Rep. Wittman, Robert J. [R-VA-1], Rep. Harrigan, Pat [R-NC-10], Rep. Lee, Susie [D-NV-3], Rep. Min, Dave [D-CA-47], Rep. Courtney, Joe [D-CT-2], Rep. Mackenzie, Ryan [R-PA-7], Rep. Tran, Derek [D-CA-45], Rep. Levin, Mike [D-CA-49], Rep. Davids, Sharice [D-KS-3], Rep. Carey, Mike [R-OH-15], Rep. Krishnamoorthi, Raja [D-IL-8], Rep. Vasquez, Gabe [D-NM-2], Rep. Cohen, Steve [D-TN-9], Rep. Malliotakis, Nicole [R-NY-11]