I 117th CONGRESS 1st Session H. R. 5438 IN THE HOUSE OF REPRESENTATIVES September 30, 2021 Mr. Cartwright (for himself, Mr. Blumenauer , Ms. Brownley , Mr. Connolly , Ms. Eshoo , Mr. Evans , Mr. García of Illinois , Mr. Huffman , Mr. Khanna , Mr. Lowenthal , Ms. Norton , Ms. Pingree , Mr. Raskin , Mr. Takano , Ms. Velázquez , and Mr. Welch ) introduced the following bill; which was referred to the Committee on Ways and Means , and in addition to the Committees on Energy and Commerce , and Oversight and Reform , for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned A BILL To provide incentives for the purchase of water-efficient products, and for other purposes.

1. Short title This Act may be cited as the Water Advanced Technologies for Efficient Resource Use Act of 2021 . 2. Definitions In this Act: (1) Administrator The term Administrator means the Administrator of the Environmental Protection Agency. (2) Agency The term agency has the meaning given such term in section 7902(a) of title 5, United States Code. (3) Covered consumer The term covered consumer means an individual served by an eligible entity. (4) Eligible entity The term eligible entity means— (A) a State, local, or Tribal government; (B) a drinking water utility or wastewater utility; (C) a municipal water authority or a regional water authority; or (D) a nonprofit organization. (5) Incentive The term incentive includes— (A) rebates, vouchers, and other financial incentives; and (B) the direct installation of a WaterSense product. (6) Nonprofit organization The term nonprofit organization means an organization that— (A) is described in section 501(c)(3) of the Internal Revenue Code of 1986 ( 26 U.S.C. 501(c)(3) ); and (B) is exempt from taxation under section 501(a) of such Code. (7) Product The term product means a product, building, landscape, facility, process, or service. (8) State The term State means each of the several States of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands, Guam, American Samoa, and the Commonwealth of the Northern Mariana Islands. (9) WaterSense product The term WaterSense product means a product that is certified to display the WaterSense label under the WaterSense program established under section 324B of the Energy Policy and Conservation Act ( 42 U.S.C. 6294b ). 3. Federal procurement of WaterSense products (a) Procurement (1) In general Except as provided in paragraph (2), in procuring any water-consuming product, the head of an agency shall procure a WaterSense product. (2) Exceptions Paragraph (1) does not apply if— (A) with respect to the type of water-consuming product being procured, the head of an agency finds, in writing, that— (i) no WaterSense product is cost-effective over the life of such type of product, taking current and future water and wastewater cost savings into account; or (ii) no WaterSense product of such type is reasonably available to meet the functional requirements of the agency; or (B) the water-consuming product being procured is designed for use in combat or combat-related missions. (b) Installation and maintenance As applicable, the head of an agency that procures a WaterSense product under subsection (a)(1) shall use a certified professional (including a licensed plumber or a licensed mechanical contractor, as appropriate) to install and maintain such product. (c) Measures To reduce water consumption The head of each agency shall consider adopting measures to reduce agency water consumption, including such measures as the use of— (1) water reuse, reclamation, or recycling technology; (2) water leak detection technology; and (3) products that— (A) do not consume water; and (B) perform similar functions as comparable water-consuming products. (d) Listing of WaterSense products The Administrator of General Services shall clearly identify and prominently display, in a listing of water-consuming products, WaterSense products. (e) Regulations Not later than 180 days after the date of enactment of this section, the Administrator of the Environmental Protection Agency and the Director of the Office of Management and Budget shall issue regulations to carry out this section. 4. Incentives for the purchase of WaterSense products (a) Establishment The Administrator shall establish a program to provide grants to eligible entities to provide incentives to covered consumers for the purchase of a WaterSense product. (b) Eligibility To be eligible to receive a grant under this section, an eligible entity shall— (1) submit an application to the Administrator at such time, in such form, and containing such information as the Administrator may require; and (2) provide assurances, which the Administrator determines are satisfactory, that the eligible entity will use such grant to supplement, but not supplant, other incentives that are available to a covered consumer for the purchase of a WaterSense product. (c) Evaluation criteria for applications (1) In general In evaluating an application submitted under subsection (b)(1), the Administrator shall consider— (A) the estimated effect of providing incentives; (B) if the eligible entity previously received a grant under this section— (i) the degree to which the use of such grant encouraged the purchase of WaterSense products; and (ii) whether there are amounts of such grant that remain unused; and (C) whether the eligible entity promotes or implements a program to recycle or manage the disposal of any products that are replaced as a result of the provision of incentives under this section. (2) Priority The Administrator shall prioritize providing grants under this section to eligible entities that will provide incentives to low- and middle-income households. (d) Use of grant (1) In general An eligible entity that receives a grant under this section shall— (A) use such grant to provide incentives to covered consumers that purchase a WaterSense product; or (B) with approval from the Administrator, provide some, or all, of such grant to another eligible entity for use in accordance with subparagraph (A). (2) Administrative costs Not more than 50 percent of each grant provided under this section may be used to pay for the administrative cost of providing incentives in accordance with paragraph (1). (3) Incentive amounts With respect to rebates, vouchers, and other such financial incentives, an eligible entity shall determine the amount to provide based on the following: (A) The amount of the grant provided to the eligible entity under this section. (B) The amount of any other incentives that are available to a covered consumer for the purchase of a WaterSense product. (C) The estimated amount necessary to encourage a covered consumer to purchase a WaterSense product. (D) As applicable, the costs to a covered consumer for onsite preparation, assembly, and installation of a WaterSense product. (e) Authorization of appropriations There are authorized to be appropriated to carry out this section— (1) $50,000,000 for fiscal year 2022; (2) $100,000,000 for fiscal year 2023; (3) $150,000,000 for fiscal year 2024; (4) $100,000,000 for fiscal year 2025; and (5) $50,000,000 for fiscal year 2026. 5. Exclusion from gross income of amounts received as incentives for the purchase of WaterSense products (a) In general Part III of subchapter B of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting before section 140 the following new section: 139I. Incentives for the purchase of WaterSense products (a) In general In the case of an individual, gross income does not include any amount received as an incentive under section 3 of the Water Advanced Technologies for Efficient Resource Use Act of 2021 . (b) Denial of double benefit (1) Deductions and credits No deduction or credit under this subtitle shall be allowed for any expenditure with respect to which any amount excluded under subsection (a) was provided. (2) Basis adjustment The adjusted basis of any property with respect to which an amount excluded under subsection (a) is provided shall be reduced by the amount so excluded. . (b) Conforming amendment The table of sections 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. 6. Modifications to income exclusion for conservation 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 inserting any subsidy— (1) provided , (2) by striking the period at the end and inserting 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 government 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 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 management 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 Energy 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 modification 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. (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 reduce or manage amounts of storm water with respect to one or more dwelling units. . (2) Definition of public utility Section 136(c)(4) of such Code (as redesignated by paragraph (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 provider The term storm water management provider means a person engaged in the provision of storm water management measures to the public. (D) Person For purposes of subparagraphs (B) and (C), the term person includes the Federal Government, a State or local government or any political subdivision thereof, or any instrumentality of any of the foregoing. . (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 public 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 treatment 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 measure or storm water management measure before the date of the enactment of this section.