Septic feud continues
SUFFOLK COUNTY—Officials are taking issue with Suffolk County comptroller John Kennedy’s office issuing tax forms to dozens of Suffolk residents who voluntarily installed new nitrogen-reducing septic systems under a county grant program.
Members from Suffolk County executive Steve Bellone’s camp have expressed concern that the move can cost certain homeowners thousands of dollars in additional federal tax payments. Systems cost about $20,000, while grants for individual homeowners who have them installed are capped at $10,000.
Peter Scully, Suffolk County’s water quality czar, wrote a second letter to the county comptroller last week, urging him to recall the 1099 tax forms so that homeowners can file their income taxes by the April 15 deadline.
“It boggles the mind that anyone can believe that having both homeowners and installers declaring the same grants as income and having taxes paid by both parties on the same disbursement of funding is an acceptable outcome,” Scully wrote. “The businesses that are installing the systems and receiving the funds expect to pay taxes on that income. Why any elected officials would insist that homeowners should be taxed instead is mind-boggling.”
The letter came over a week after Scully’s initial letter to the comptroller, also urging him to rescind the tax forms unless he gets a binding opinion from the IRS saying the forms should go to homeowners rather than the contractors who received funding for the program. In addition, Scully’s most recent letter states that he has not yet received an update from Kennedy’s office.
“It’s bad enough that Washington repealed our state and local tax deductions, but now [Kennedy] wants to exacerbate the situation by imposing a water tax on those very same homeowners,” said Jason Elan, a spokesperson for Bellone’s office.
“The comptroller’s decision to ignore the advice of [the county’s] tax counsel could potentially derail Gov. Cuomo’s water quality investments, not just in Suffolk County, but across the state,” Elan added. “[Kennedy] must reverse course, rescind the 1099 tax forms that were issued to homeowners, and stop playing politics with water quality.”
The County Septic Improvement Program is the first of its kind in New York State that provides grants to homeowners who choose to replace their cesspools or septic system with new nitrogen-reducing septic systems, according to officials.
The program was established in 2017, using $2 million per year approved by voters in a 2014 referendum. Bellone’s office said that due to the success of the county’s program, Cuomo announced in early 2018 that Suffolk would receive 70 percent of the $15 million awarded statewide under the first year of the state’s Septic System Replacement Fund.
Eight of the 10 townships in Suffolk County have installed the nitrogen-reducing systems, according to Elan. Islip Town has 21 homeowners who have been issued grant certifications to participate in the water quality program.
There have been 73 installations throughout the county, according to officials. There are also 81 installations pending and 1,557 total applicants.
Kennedy said his office wrote to Bellone’s administration in April 2018, asking about the legitimacy of their legal opinion that says the comptroller’s office is exempt from reporting the payment of county funds for the septic system program.
“Rather than seeking the guidance that we asked for almost a year ago, they did nothing,” Kennedy wrote in a statement.
“I will now do yet another task that is clearly the responsibility of county executive Bellone, because it is my job to protect the well-being of the taxpayers – all of Suffolk County’s taxpayers with this, and every other aspect of the financial operations of government,” said Kennedy, who is running for Bellone’s post in November. “Any and all questions concerning hardship or misrepresentation should be directed to the source, Steve Bellone.”
These particular tax forms, 1099s, are records that an entity or person – not an employer – gave or paid someone money. There are several kinds of 1099s, but one of the most common examples applies to independent contractors who received $600 or more during the tax year.
Robert Marvin, an IRS spokesperson, said the agency isn’t allowed to comment on taxpayer liability or the specifics of a government program like this one.
The agency did, however, provide documents that read: “Gross income includes accessions of wealth, clearly realized, and over which the taxpayer has complete dominion. Government grants and cost-sharing benefits generally constitute gross income for federal income tax purposes. Courts, however, have held that taxpayers do not have gross income where the recipient of the grant lacks complete dominion and control over the grant”.
The documents cite a case, Baily v. Commissioner, where grants for a façade didn’t count toward the recipient’s gross income.
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