The septic system feud
Sen. Chuck Schumer visits Patchogue to “demand answers” from the IRS regarding tax payments for county grants to help install nitrogen-reducing septic systems.

Courtesy photo

The septic system feud

Story By: ANTHONY PERROTTA
6/6/2019


The county comptroller previously issued tax forms to dozens of residents who voluntarily installed new nitrogen-reducing septic systems under a county grant program

 

SUFFOLK COUNTY—Sen. Chuck Schumer has weighed in on the septic feud between Suffolk County executive Steve Bellone’s administration and the county comptroller, John Kennedy. 

Earlier this year, Kennedy’s office issued tax forms to dozens of residents who voluntarily installed new nitrogen-reducing septic systems under the county’s Septic Improvement Program. Bellone’s team has since voiced concern that the move could cost certain residents thousands of dollars in additional tax payments and jeopardize the grant program’s future. 

Schumer stated that homeowners should not have to pay taxes on county grants they receive for the septic upgrades. “I’m here to demand answers and get the IRS to fix this problem,” he said during a press conference in the backyard of a Patchogue home last week. 

The homeowners, Josephine and Howard Brennan, unexpectedly had to pay $1,500 in taxes on the $10,000 grant that went towards the $26,000 septic upgrade on their property. 

Josephine Brennan, a retired teacher, said in a press conference that she and her husband made the upgrades because they “love the environment.” But, she said they were “shocked” when they received the tax forms. “We did our civic duty,” Brennan said, adding that she and her husband paid the extra money because the grant funding put them in a different tax bracket.  

Bellone wrote in a statement that the county’s grant program was “carefully and purposely designed so that installation companies, and not homeowners, receive the grant funding and report these disbursements to the IRS as income.”

Thomas Montalbine, president of Roman Stone Construction in Bay Shore, said the uncertainty surrounding this program could hurt the local manufacturing industry. “We’ve heard from some of our potential customers that they don’t want to get taxed,” Montalbine said, adding that his company is looking to hire more employees for the numerous installations ahead, but doesn’t know whether to “step on the gas peddle or slow down.” 

‘We’re all on the same side,” Schumer said. “The IRS should not tax people when they get grants to fix their homes.” Later in the conference, Schumer added that there is “precedent in so many places where [officials] have never issued a tax.”

Legis. Bridgette Flemming (D-Sag Harbor), who co-sponsored the legislation for the program, cited the state of Maryland, which has operated a similar program for 10 years “without any objection from the IRS.” 

Bellone’s statement adds, “The program was designed to protect homeowners who decide to do their part to improve water quality from any potential tax liability. Since the installation companies are all reporting the grant income they receive as income and are paying taxes on that income, the county is optimistic that the IRS will confirm that grants not be considered taxable income to homeowners.” 

Back in April, an IRS spokesperson said the agency isn’t allowed to comment on taxpayer liability or the specifics of a government program like this one. 

Bellone’s camp recently stated that there have been 1,731 applications for the program. Six households have withdrawn their applications since this issue emerged. There have been 396 grants issued and 102 installations as of last week. Over 120 pending installations, though, are in “potential jeopardy,” according to Bellone’s team. 

Bellone, a Democrat, is seeking reelection in November. Kennedy, a Republican, is challenging him for his post. Schumer, a Democrat, acknowledged that this is an important election year for the county, but said he wouldn’t “get into finger-pointing.” 

A spokesperson for Kennedy said he is waiting on a “definitive ruling” from the IRS. The spokesperson also stated that the comptroller would not be issuing any more tax forms at this time, as they are not due until Jan. 31, 2020. “[Kennedy] fully expects definitive ruling from the IRS by that time,” they added. n