There is pending legislation in Congress entitled the Water and Agriculture Tax Reform Act (Water Act). This legislation was introduced in the Senate as S.1441 and in the House as H.R. 3023 in 2013. The bill has been introduced, but there is no further update as of January 2017. For more information go to Congress.gov.
Here is the synopsis of the bill:
- The Act would apply to 501(c)(12)s and ditch companies who file 990 returns.
- It would allow you to keep you non-profit tax status for any given year when your non-member income exceeds 15% of your total revenue. Now, your member income (assessments) has to be at least 85% of your revenue.
- So if you had other income, e.g. recreational leases, sale of assets, you would not be subject to the tax.
- However, you have to use this income for ditch company purposes and can’t distribute it to your members.
- The Act would get away with the one member, one vote rule. Ditch companies don’t typically vote like this as it is usually by number of shares. It appears that the ditch companies are violating the current IRS rules for non-tax status.
Tomorrow, the Senate Finance Committee will mark up the Highway Trust Fund bill – legislation to extend the solvency of the federal highway program. U.S. Senator Michael Bennet (D-CO) has filed the WATER Act as a proposed amendment to that bill.
It is important that you contact our Colorado members of Congress today and ask them to contact the Chair of the Senate Finance Committee, Senator Wyden, and the Ranking Member of the Committee, Senator Hatch, to ask that they include the WATER Act in the Highway Trust Fund bill when it passes out of committee.
A white paper on the WATER Act that provides background information on this legislation is attached
If you have time today and can contact your Representative or Senator or their staffs, it would be a great help to have this important legislation for ditch companies become law.
Thanks for helping in our common effort to help Colorado’s ditch and reservoir companies. Please contact DARCA if you have any questions.