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Residential Utility Customer Assistance Funded with Coronavirus Relief Funds Not Taxable: IRS

The Internal Revenue Service (IRS) has released guidance indicating that residential utility assistance funded through the Coronavirus State and Local Fiscal Recovery Fund (CSLFRF) will not need to be reported as income.

Likewise, utility companies providing residential utility assistance funded through CSLFRF do not need to file a Form 1099 or other information to report such assistance, the IRS announced on Nov. 17.

Issued in the form of a “Frequently Asked Questions” (FAQ) list, the guidance will allow state, local, and utility programs funded with CSLFRF without fear of facing taxes on the value of that assistance later.

It also means that granting agencies and utilities do not need to prepare to issue information returns to the IRS detailing relief provided to residential customers. The guidance does not cover assistance provided to commercial customers.

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In October 2021, 21 U.S. House members from California and both of California’s senators sent a letter to the agency asking the IRS to clarify the issue.

In September, a similar letter was sent by the American Public Power Association, the California Municipal Utilities Association and 15 national organizations representing water, gas, and electric utilities; consumer groups; energy assistance groups; cities; counties; and state and local financial officers.