Sen. Chuck Schumer comes to aid of Suffolk County residents hit with taxes by IRS on grant money to fix cesspools
ISLIP, N.Y. -- Some Suffolk County residents received grants to make environmental improvements to their homes, but then were shocked to learn it would count as taxable income.
However, there is new hope for tax relief. As CBS2's Carolyn Gusoff reported Monday, thousands of taxpayers say they were slammed with higher taxes for doing the right thing.
East Islip resident Louis Castronova upgraded his old septic system for one reason, but the nearly $30,000 fixes, paid for with grant money, ended up raising his taxes $4,000.
"That affected me as a middle class homeowner. This could have been college," Catronova said.
READ MORE: IRS says grants used by Suffolk County residents to improve backyard cesspools are taxable
More than 3,000 Suffolk homeowners are in the same boat. They signed up for county grants to replace polluting cesspools. But then the Internal Revenue Service counted the grant as taxable income, even though the installer was also taxed.
Critics say the IRS ruling hampers a critically important environmental fix.
"Unfortunately, we are drinking and swimming in our own waste water -- red tide, brown tide, mahogany tide, blue-green algae -- all caused by this waste water and it's ruining our way of life," said Adrienne Esposito of the Citizens Campaign for the Environment.
"People are not going to do this. They're going to say don't hook me up," Sen. Chuck Schumer said.
Schumer said he has found a workaround -- the USDA. He has asked the agency to formally determine the grants protect and preserve the environment, making them tax exempt.
"This was a screw-up by the IRS. They were too chicken to admit their mistake and now we are gong to force them to admit their mistake by having the USDA send them this letter," Schumer said.
"It's not happening any place else in the country that we are aware of -- if you get a grant to change out your septic system, you get dinged," said Kevin McDonald of the Nature Conservancy on Long Island.
The tax burden is slowing upgrades Suffolk County-wide. Only 70 homeowners per year have signed up. There are 360,000 homes with aging cesspools.
"This is as critical as it gets to our future," County Executive Steve Bellone said.
County officials call it incomprehensible double taxation on grant money, adding the grant is not a windfall for any homeowner, but a win only for the environment.
There was no immediate word from the USDA on Schumer's request.
