Suffolk County Residents Unhappy With IRS After Being Taxed On Grants Awarded For Environmental Upgrades

PATCHOGUE, N.Y. (CBSNewYork) -- Some Long Island homeowners have made a plea to the Internal Revenue Service after receiving grants to make environmental improvements to their backyard cesspools.

They were later taxed as if the grant was personal income.

On Wednesday, Sen. Chuck Schumer pushed the IRS to clear up the tax confusion, CBS2's Carolyn Gusoff reported.

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The Brennans of Patchogue said they were devastated and confused when a 1099 arrived months ago suggesting a $10,000 grant they got to upgrade their backyard cesspool could be taxed as income.

"It meant that we were in a new tax bracket and therefore we had to pay the [IRS] this year," Josephine Brennan said.

"We always get money back from the federal government every year, and this year we had to pay almost $1,500 in taxes," Howard Brennan added.

"[We were] penalized for doing something good," Josephine said.

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Something good for the environment. The Brennans took part in an effort to clean up nitrogen that chokes wetlands, killing marine line. They accepted a Suffolk County grant to replace their old cesspool with an environmentally friendly septic system.

"That's basically dirty, nasty water. Every conventional system is leaching that into the ground," said Joe Densieski, owner of Wastewater Works.

New septic systems return wastewater to the ground nearly nitrogen free.

"It's very clean and low nitrates," Densieski said.

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Suffolk politicians have differed on whether 1099s should have been sent to grant recipients, but Sen. Schumer said a ruling from the IRS would clear up expensive confusion.

"It was done as a pubic good. It was as if they improved your road and then made you pay a tax because your road is better," Schumer said. "Until they say they won't do it, these homeowners are going to be worried."

Worry is causing homeowners to drop out of a program that was supposed to be Suffolk's answer to nitrogen pollution.

"Having these grants taxed really means we will not have clean water for the future. It's really that dire and that essential," said Adrienne Esposito of the Citizens Campaign for the Environment.

Future septic upgrades will be in limbo until the IRS weighs in.

An IRS spokesman told CBS2 federal law prohibits the agency from commenting on specific taxpayer matters.

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