Taxable Talk

Every so often the turf monster trips a player in a football or baseball game. Here’s one example:

This post deals with a very different kind of turf monster. Back in September I wrote about Southern California’s Metropolitan Water District issuing “rebates” to homeowners for replacing lawns (turf) with xeriscapes. It’s clear that such “rebates” are taxable for federal tax purposes. (California law specifically exempts such “rebates” for California tax purposes.)

Apparently, the Electric and Gas Industries Association (EGIA), which ran the program for the MWD, just discovered this. A correspondent sent me an email he received:

Dear Soon to be Taxed Homeowner:
Our records indicate that you received a rebate that exceeded $600 from SoCal Water$mart in 2015. In order to comply with Internal Revenue Service requirements you must complete and sign a W-9 form with your Social Security number or Tax ID. This form is available within the online application, and may be accessed by logging into your online account at https://mwdturf.conservationrebates.com/ and editing the application with the required tax information changes. The name on the W-9 form submitted for review must match the name that was on the rebate check…

Please log back into your online account at https://mwdturf.conservationrebates.com/, download and complete the W-9 form and upload the completed form back into the application. The W-9 will be reviewed, and a 1099 will be issued to you for tax and accounting purposes. If you have any concerns regarding whether your rebate is considered taxable income, please contact a qualified tax professional.

There are two obvious implications of this. First, the EGIA realizes that they must issue 1099s to any impacted taxpayers. It’s another case of substance over form: These may be called “rebates” but they’re really an economic incentive to remove turf and replace it with something else. And that results in what is clearly taxable income.

Second, there will probably be an issue with some taxpayers ignoring the email. The email notes that you’re going to be issued tax paperwork; how many taxpayers will want that? Of course, whether or not the 1099 is received does not change that the income is taxable (it is). Still, I suspect EGIA will have quite a bit of work on their hands to obtain all the taxpayer identification numbers.

UPDATE: My correspondent told me that the EGIA is requesting that impacted taxpayers email their taxpayer identification numbers to the agency. If you are an impacted taxpayer, do not do this. Email is fast but it is not secure. EGIA is allowing you to mail the Form W-9 to the agency; that is a far more secure means of transmitting your social security number.

To the EGIA, what were you thinking in these days of identity theft?

This entry was posted on Friday, November 20th, 2015 at 12:02 pm and is filed under California. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.