Summary#
The No Taxation on PFAS Remediation Act would amend the Internal Revenue Code of 1986. Its stated goal is to exclude certain reimbursements for PFAS cleanup from an individual’s gross income (the income used to calculate federal income tax).
- An individual would not include in gross income an amount received as reimbursement for remediating contamination by a perfluoroalkyl or polyfluoroalkyl substance (PFAS).
- The change would apply to reimbursements made in taxable years beginning after December 31, 2020.
- In certain cases, a person could claim a related tax credit or refund for up to one year after the bill’s enactment, even if the usual claim deadline would expire sooner.
- The bill would not itself provide reimbursement money or require anyone to clean up contamination.
- The bill was introduced and referred to the House Ways and Means Committee. It is not law, and passage is uncertain.
What it means for you#
- Individuals receiving PFAS cleanup reimbursements: If the bill became law, qualifying reimbursements would be excluded from federal gross income for the covered tax years. The bill does not say that all costs or payments connected to PFAS would qualify.
- People seeking an earlier-year refund or credit: The bill provides an extra claim period in some cases: the claim must be filed within one year after enactment if the usual limitation period would expire before then.
- Businesses: The exclusion in the bill applies to individuals, not businesses.
- People who do not receive a qualifying reimbursement: The bill does not directly change their taxes or provide them a benefit.
Money#
No publicly available information gives an estimate of the bill’s effect on federal revenue or the value of refunds.
- Excluding reimbursements could reduce federal income tax collected; the bill gives no estimate.
- The bill could allow some refunds or credits for earlier tax years. It does not state how many claims might be made or their total value.
- The bill does not authorize spending or set a fee.
What is unclear#
- The Internal Revenue Code text needed to verify the current tax treatment was not supplied, so the current-law treatment of these reimbursements cannot be confirmed here.
- The bill does not define “remediation” or explain which payments count as amounts attributable to a remediation reimbursement.
- It does not specify who may provide the reimbursement or what proof a taxpayer must keep.
- It does not set out how taxpayers claim the exclusion or how the IRS would resolve disputed claims.
Case for#
- The bill appears intended to keep federal income tax from reducing reimbursements meant to pay for PFAS cleanup.
- A possible argument for the change is that a reimbursement for cleanup is meant to cover a cost, and excluding it from gross income could help the recipient use it for that purpose.
- Applying the change to tax years beginning after 2020 could allow some people who already reported such reimbursements to seek a credit or refund.
Case against#
- The bill does not define key terms or explain which reimbursements qualify, which could leave taxpayers uncertain about how to report them.
- The exclusion could reduce federal revenue, including through refunds for earlier years, but the bill materials give no estimate of the amount.
- The bill does not explain what documentation the IRS could require or how disputes over eligibility would be handled.