Long Island homeowners taxed after receiving grant money for new septic systems

SUFFOLK COUNTY, Long Island (WABC) -- Dozens of homeowners in Suffolk County who received thousands of dollars in grant money to install state-of-the-art, environmentally friendly septic systems under the county's new Septic Improvement Program are finding out they owe taxes on the grant money.

Josephine and Howard Brennan, of Patchogue, installed the septic system after receiving a $10,000 grant from Suffolk County.

The check was sent directly to the septic installation company, which, according to the program guidelines, pays taxes on the grant.

But when tax season rolled around this year, the Brennans were surprised to find out they owed $1,484 on the grant money as well.

"This is what we use to visit our grandkids in Minnesota, you know, Christmas gifts," Josephine Brennan said. "Two people don't pay for the one thing. That doesn't make sense to me."

Suffolk County officials said under the program guidelines, the taxes are only supposed to be paid by the septic installation company. They said Suffolk County Comptroller John Kennedy, Jr., has incorrectly sent 1099s to 34 homeowners.

He countered that narrative.

"I simply abide by what the Internal Revenue Service statute requires me to do, which is to send out notification," he said. "If I don't, then the county can incur, essentially, unlimited penalty."

Kennedy said he first warned the county about the issue last April, and that he sent a letter to the IRS seeking an official ruling on the issue.

Jason Elan, the spokesperson for Suffolk County Executive Steve Bellone, pointed the finger at Kennedy and accused him of playing politics.

Kennedy is running against Bellone in the next election for Suffolk County Executive.

"The comptroller's decision to ignore the advice of tax counsel could potentially derail Governor (Andrew) Cuomo's water quality investments in Suffolk County and across the state," Elan said. "The comptroller must rescind the 1099 tax forms that were sent in error to homeowners and stop playing politics with water quality."

Suffolk County launched the Reclaim Our Water Septic Improvement Program in July 2017 with the goal of improving water quality.

Nitrogen pollution from cesspools and septic systems has been identified as one of the main causes of degraded water quality, beach closures and toxic algae blooms. The new systems remove nitrogen.

Participating homeowners can receive up to $10,000 in grant money from Suffolk County and $20,000 from New York State for installing one of the new systems.

A spokesperson for Suffolk County said as of March 21, new septic systems have been installed at 74 homes.

Five homeowners have withdrawn from the program because of the 1099 issue.

Leslie Hall, of Middle Island, was thinking about participating in the program to replace his failing septic system. He said he's reconsidering after finding out that he would have to pay taxes on the grant money.

"We were told this was grant money, and we planned accordingly," Hall said. "But now, they're saying, oh well, we need to tax me, the vendor, and sales tax on the job, by the way, I don't think that's right."

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