Comptroller Kennedy’s Actions – Which Have Already Incurred Thousands of Dollars on Homeowners’ Federal Tax Bills – Would Also Jeopardize Governor Cuomo’s $10 Million Investment
Today, Suffolk County’s Water Quality Czar sent another letter to Suffolk County Comptroller John Kennedy to urge him to move quickly to rescind income tax liability forms issued by his office to homeowners who voluntarily installed new nitrogen reducing septic systems under a County grant program. The letter comes after the County's Water Quality Czar already sent two letters to the Comptroller to request that he comply with the legal opinion of the County's tax counsel.
At last week’s Ways and Means Legislative Committee meeting, Comptroller Kennedy stated that he would assemble a team of pro-bono accountants to help taxpayers file amended returns for the 2018 tax year in order to recover any income tax they paid on the grant funds, effectively admitting the error of his position to issue the 1099 forms in the first place.
A copy of the letter can be found below:
Dear Comptroller Kennedy,
I write now in a third attempt to prompt a positive response from your office to my efforts to protect Suffolk County residents who have participated in the County’s Septic Improvement Program from thousands of dollars in new taxes they have been burdened with as a result of your decision to issue 1099 forms to homeowners in contradiction of the legal opinion of the County’s tax counsel.
Regrettably, there has been no response by your office to my letters of March 14, 2019 and March 26, 2019, urging you to move quickly to rescind the 1099 forms issued to homeowners prior to the April 15th tax filing deadline. My office continues to receive inquiries from puzzled taxpayers who are concerned about your decision to make grants for the installation of nitrogen reducing septic systems potentially taxable for homeowners who never receive funding under the program.
Their concerns are heightened by the fact that the installation companies which do receive the funds from the County are already declaring the grants as income and are already paying taxes on that income. Department of Health Services staff has confirmed that in many instances, installers and homeowners have paid taxes on the same grant funding, and that homeowners have been forced to pay thousands of dollars in additional taxes that they should not have had to pay as a result of your actions. In at least one case, a homeowner advises that your actions have pushed her into a higher tax bracket and made her Social Security benefits taxable for the first time. The damage that has resulted from your actions is real, and is costing individual taxpayers thousands of dollars in new taxes.
Astute citizens have recently raised objections to what they see as “triple taxation”. They note that the grant funds themselves are derived from sales tax revenues paid by consumers in Suffolk County, as a first taxation. Taxation of those sales tax revenues once grant funds are received by installers of IA systems and declared as taxable income constitutes a second taxation of that revenue stream. Since homeowners have been issued 1099 forms by your office and have declared the grants as taxable income – even though they never received a check from the County – those revenues are subject to a third form of taxation. The frustration being expressed by taxpayers who voted overwhelmingly to dedicate these revenues to improve water quality, only to see the funding whittled away and redirected through taxation, is understandable. I urge you, once again, to rescind 1099 forms already issued to homeowners and to cease issuing 1099s to homeowners moving forward, to put an end to this “triple taxation” scenario once and for all.
During your testimony before the Ways and Means Committee last Thursday, you stated that you plan to assemble a team of pro bono accountants to help taxpayers file amended returns for the 2018 tax year in order to recover any income tax they paid on the grant funds, which had already been declared as income by the installers, who had already paid taxes on the same grants. Please clarify what the next steps in this process will be, so that the Department of Health Services can advise impacted taxpayers accordingly.
Thank you in advance for your anticipated courtesies in this regard. I look forward with working with you to protect taxpayers from the additional liabilities that your decision to issue 1099 forms to homeowners has caused.
PETER A. SCULLY
Deputy County Executive