The Right Call

Bureaucracy isn’t typically so responsive, and it usually takes a bit longer to correct a mistake. So it’s notable that the Internal Revenue Service late last week resolved, finally, an ongoing dispute that has hamstrung efforts to protect groundwater on the East End — and could turbocharge that effort moving forward.

At issue were grants awarded by Suffolk County and, in the five East End towns, by town government as well to pay for advanced wastewater treatment systems for homeowners. Together, the grant programs were designed to offset most or all of the cost to homeowners of installing the new systems, which are expensive — some as much as $40,000 — but significantly better at removing nitrogen from wastewater, compared to septic tanks and often failing cesspools.

But in 2018, operating under an abundance of caution (and, it must be noted, planning a challenge to Suffolk County Executive Steve Bellone on Election Day), County Comptroller John Kennedy began sending out 1099s, treating the grants as taxable income for recipients. That was a gut punch for many; it pushed some into higher tax brackets, and surprised all with a tax bill they were expressly told not to expect.

The IRS initially agreed, but the steady pressure of officials at many levels — not just Bellone’s administration but U.S. Senator Chuck Schumer — brought a ruling from the U.S. Department of Agriculture that stated the obvious: The only real beneficiary here is the environment, and the grants are not taxable. Last week, the IRS saw the light.

Credit to all who refused to give up the fight and ultimately won a major victory for the county’s taxpayers, including those who were forced to pay that tax, wrongly, but now will be made whole. But the more important point: This should jump-start the county’s and towns’ grant programs — with a major dark cloud removed, the money can flow, and more homeowners should be willing to step forward, do the right thing to protect the water all around us, and beneath our feet, without risking a fiscal nightmare.

The IRS rarely looks like the good guys, but they are riding in on white stallions this time.