(b) CONFORMING AMENDMENT.—The table of sec-
tions for part III of subchapter B of chapter 1 of such 
Code is amended by inserting before the item relating to 
section 140 the following new item: 
‘‘Sec. 139I. Incentives for the purchase of WaterSense products.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this section. 
SEC. 6. MODIFICATIONS TO INCOME EXCLUSION FOR CON-
SERVATION SUBSIDIES. 
(a) IN GENERAL.—Subsection (a) of section 136 of 
the Internal Revenue Code of 1986 is amended— 
(1) by striking ‘‘any subsidy provided’’ and in-
serting ‘‘any subsidy— 
‘‘(1) provided’’, 
(2) by striking the period at the end and insert-
ing a comma, and 
(3) by adding at the end the following new 
paragraphs: 
‘‘(2) provided (directly or indirectly) by a public 
utility to a customer, or by a State or local govern-
ment to a resident of such State or locality, for the 
purchase or installation of any water conservation or 
efficiency measure, or 
‘‘(3) provided (directly or indirectly) by a storm 
water management provider to a customer, or by a 
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State or local government to a resident of such State 
or locality, for the purchase or installation of any 
storm water management measure.’’. 
(b) CONFORMING AMENDMENTS.— 
(1) DEFINITION OF WATER CONSERVATION OR 
EFFICIENCY MEASURE AND STORM WATER MANAGE-
MENT
MEASURE.—Section 136(c) of the Internal 
Revenue Code of 1986 is amended— 
(A) by striking ‘‘ENERGY CONSERVATION 
MEASURE’’ in the heading thereof and inserting 
‘‘DEFINITIONS’’, 
(B) by striking ‘‘IN
GENERAL’’ in the 
heading of paragraph (1) and inserting ‘‘EN-
ERGY CONSERVATION MEASURE’’, and 
(C) by redesignating paragraph (2) as 
paragraph (4) and by inserting after paragraph 
(1) the following: 
‘‘(2) WATER
CONSERVATION
OR
EFFICIENCY 
MEASURE.—For purposes of this section, the term 
‘water conservation or efficiency measure’ means any 
evaluation of water use, or any installation or modi-
fication of property, the primary purpose of which is 
to reduce consumption of water or to improve the 
management of water demand with respect to one or 
more dwelling units. 
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‘‘(3) STORM WATER MANAGEMENT MEASURE.— 
For purposes of this section, the term ‘storm water 
management measure’ means any installation or 
modification of property primarily designed to re-
duce or manage amounts of storm water with re-
spect to one or more dwelling units.’’. 
(2) DEFINITION OF PUBLIC UTILITY.—Section 
136(c)(4) of such Code (as redesignated by para-
graph (1)(C)) is amended by striking subparagraph 
(B) and inserting the following: 
‘‘(B) PUBLIC UTILITY.—The term ‘public 
utility’ means a person engaged in the sale of 
electricity, natural gas, or water to residential, 
commercial, or industrial customers for use by 
such customers. 
‘‘(C) STORM
WATER
MANAGEMENT
PRO-
VIDER.—The term ‘storm water management 
provider’ means a person engaged in the provi-
sion of storm water management measures to 
the public. 
‘‘(D) PERSON.—For purposes of subpara-
graphs (B) and (C), the term ‘person’ includes 
the Federal Government, a State or local gov-
ernment or any political subdivision thereof, or 
any instrumentality of any of the foregoing.’’. 
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(3) CLERICAL AMENDMENTS.— 
(A) The heading of section 136 of such 
Code is amended— 
(i) by inserting ‘‘AND WATER’’ after 
‘‘ENERGY’’, and 
(ii) by striking ‘‘PROVIDED BY PUB-
LIC UTILITIES’’. 
(B) The item relating to section 136 in the 
table of sections of part III of subchapter B of 
chapter 1 of such Code is amended— 
(i) by inserting ‘‘and water’’ after 
‘‘energy’’, and 
(ii) by striking ‘‘provided by public 
utilities’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
the date of enactment of this section. 
(d) NO INFERENCE.—Nothing in this section or the 
amendments made by this section shall be construed to 
create any inference with respect to the proper tax treat-
ment of any subsidy received directly or indirectly from 
a public utility, a storm water management provider, or 
a State or local government for any water conservation 
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measure or storm water management measure before the 
date of the enactment of this section. 
Æ 
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