IRS Announces Guidance on COVID-19 Relief Taxability by ACWA Staff Nov 19, 2021 Water News WASHINGTON, D.C. –The U.S. Internal Revenue Service recently issued guidance clarifying that water assistance provided to individuals through the American Rescue Plan Act (ARPA) for COVID-19 relief will not be considered taxable income. The IRS issued the guidance in the form of Frequently Asked Questions (FAQs) related to the Coronavirus State and Local Fiscal Recovery Funds established under the ARPA. ACWA would like to recognize members of the California delegation, in both the Senate and House, for their efforts on this issue. Both of California’s senators signed the Senate letter. Twenty-one members of the delegation signed the House letter. They wrote to the IRS commissioner expressing concern about the potential tax implications for utility customer debt assistance provided with funding from the ARPA’s Coronavirus State and Local Fiscal Recovery Funds. ARPA, signed into law on March 11, 2021, established both the Coronavirus State Fiscal Recovery Fund and the Coronavirus Local Fiscal Recovery Fund. These funds provided support to state, territorial and tribal governments, as well as counties, metropolitan cities, and non-entitlement units of local governments in responding to the public health and economic impacts of COVID-19. ACWA and other statewide water associations advocated for months to secure federal funding and state appropriation of California’s share of that funding through the state budget process to assist with COVID-19-related customer arrearages. ACWA and the other associations also provided input into how the state should distribute the funding in an equitable and efficient manner to community water systems and wastewater treatment providers.