Advancing Water Reuse Act
- Sponsor
- Sen. Luján, Ben Ray [D-NM]
- Committees
- Finance Committee (primary)
- Last action
- May 13, 2026
Bottom line
The Advancing Water Reuse Act creates a 30% federal investment tax credit to incentivize businesses and municipalities to invest in water recycling and reuse infrastructure, aiming to reduce reliance on freshwater sources.
What it actually does
This bill amends the Internal Revenue Code of 1986 to establish a new investment tax credit for qualifying water reuse projects. It allows a credit equal to 30 percent of the qualified investment for projects that install, replace, or modify onsite water recycling systems in industrial, manufacturing, data center, or food processing facilities, or projects that replace freshwater use with recycled water from municipal providers, or build/expand municipal water recycling systems.
Proponents argue
Supporters argue that this legislation will significantly accelerate the adoption of water conservation technologies, enhance water security in regions facing drought and water scarcity, and promote sustainable industrial practices. They contend it will lead to long-term environmental benefits and foster economic resilience by reducing operational costs for businesses and supporting green infrastructure development.
Opponents contend
Critics might argue that introducing a new 30% investment tax credit represents a substantial federal tax expenditure that could increase the national deficit. They may also contend that such a broad incentive could disproportionately benefit large corporations, potentially leading to market distortions or subsidizing projects that would have been undertaken without federal intervention, thus being an inefficient use of taxpayer dollars.
The bill is concise and clearly structured, making it highly accessible for readers to quickly understand its core provisions and implications.
Section 2(a), inserting new Section 48F into the Internal Revenue Code
Establishment of 30% Investment Tax Credit for Water Reuse Projects
This provision amends the Internal Revenue Code to introduce a new tax credit, known as the 'qualifying water reuse project credit.' This credit is set at 30% of the qualified investment made in eligible water reuse projects. It aims to reduce the financial burden on entities investing in infrastructure for water recycling and reuse.
Supporters argue
Supporters argue this credit will accelerate the adoption of water-saving technologies, enhance water security in drought-prone regions, and foster innovation in water treatment, ultimately benefiting the environment and local economies by making these crucial investments more financially viable.
Critics contend
Critics might contend that a 30% credit is overly generous, potentially leading to projects that would have occurred anyway, or that it could be more effectively targeted to specific regions or industries with acute water stress to maximize its impact per dollar spent.
Tradeoffs
The bill balances the goal of promoting widespread water conservation against the cost to federal revenue and the potential for market distortions. It also weighs the benefits of broad incentives against the precision of targeted interventions for specific water challenges.
This subsection outlines a special rule for qualified property transferred to utilities. It specifies that if a person transfers qualified water reuse property to a utility, the original person (transferor) can claim the tax credit, provided a binding written agreement exists. The property is then not taken into account for any credit allowed to the utility.
Section 48F(d)
Why it matters:This is standard legislative practice for addressing specific ownership and financing arrangements in tax law, ensuring the credit can be utilized in common business models involving utilities without ambiguity.
Case for: Proponents would argue this provision ensures flexibility in project financing and ownership structures, allowing the credit to be fully utilized even when a project involves a utility taking ownership of assets developed by another entity, thus broadening the credit's applicability.
Case against: Critics might suggest it adds complexity to the tax code and could open avenues for tax planning that might not perfectly align with the core intent of incentivizing new, direct investment by the ultimate operator of the water reuse system.
Estimated impact: Facilitates credit utilization in specific business models involving asset transfers to utilities, potentially increasing the overall uptake of the credit by clarifying eligibility for various project structures.