Announcement 2022-26 notifies taxpayers that payments by the County of Suffolk in the state of New York to residential property owners under Suffolk County’s Septic Improvement Program (SIP Program)…

# (A)

by the Secretary of Agriculture to be primarily for the purpose of conserving soil and water resources, protecting or restoring the environment, improving forests, or providing a habitat for wildlife and

# (B)

by the Secretary of the Treasury or her delegate as not increasing substantially the annual income derived from the property.

Further, § 126(b)(2) provides that the term “excludable portion” does not include that portion of any payment allowable as a deduction in the taxable year the amount is paid or incurred.

On November 16, 2022, the Natural Resources Conservation Service of the U.S. Department of Agriculture provided public notice that the Secretary of Agriculture has determined that the SIP Program payments are primarily for the purpose of conserving soil and water resources and protecting or restoring the environment. See https://www.federalregister.gov/documents/2022/11/16/2022-24937/determination-of-the-primary-purpose-of-the-new-york-suffolk-county-septic-improvement-program-sip, 87 FR 68669 (Nov. 16, 2022). Consequently, the SIP Program payments meet the requirements of § 126(b)(1)(A) of the Code. In addition, because the SIP Program payments are made only in connection with property that is the primary residence of the owner, not a rental property, and not a property in which an in-home business is located, no income is derived from properties on which an I/A OWT system will be installed using funds provided by Suffolk County under the SIP Program. Accordingly, this announcement confirms that the SIP Program payments do not increase substantially the annual income derived from the property within the meaning of § 126(b)(1)(B). Finally, § 126(b)(2) does not operate to reduce the excludable portion of any SIP Program payment because no portion of the payment is allowable to Suffolk County as a deduction in the taxable year the amount is paid or incurred by Suffolk County.

Because the requirements of § 126(a) of the Code are met for Suffolk County’s payments under the SIP Program, the payments are not included in the gross income of the payment recipients for Federal income tax purposes. In addition, Suffolk County does not have an information reporting obligation under § 6041 with respect to the payments under the SIP Program.

Payments under the SIP Program have been ongoing and, therefore, some payment recipients may have reported the payments as gross income on their Federal income tax return for the year or years they received the payment(s). If so, those individuals should file an amended return https://www.irs.gov/forms-pubs/about-form-1040x for the year or years in which they reported the income and decrease their adjusted gross income by the appropriate amount. The Explanation of Changes on Form 1040-X should refer to Announcement 2022-26. Generally, § 6511(a) of the Code requires that amended returns claiming a refund of tax must be filed within 3 years from the date of filing the original return or within 2 years from the time the tax was paid, whichever is later. Individuals can file Form 1040-X electronically with tax filing software to amend 2019 or later Forms 1040 or 1040-SR. See https://www.irs.gov/filing/amended-return-frequently- asked-questions for more information.

For further information concerning this announcement, contact the Office of Associate Chief Counsel, Passthroughs and Special Industries, Branch 6 at (202) 317-6853 (not a toll-free number).