Bipartisan bill would create federal tax credit for industrial water reuse projects

A bipartisan group of lawmakers has introduced legislation aimed at expanding industrial water reuse through new federal tax incentives.

Ben Ray Luján and Katie Britt introduced the Advancing Water Reuse Act, which would create a 30% investment tax credit for qualifying water reuse projects at manufacturing facilities, food processing plants, data centers and municipal recycling systems.

The legislation is designed to encourage businesses and utilities to invest in infrastructure that captures and treats wastewater, stormwater, saltwater or graywater for reuse in industrial operations, irrigation and groundwater replenishment. Supporters said the measure would help reduce pressure on freshwater supplies while supporting economic growth and long-term water resilience.

Under the proposal, the tax credit would apply to onsite recycling system installations and expansions, projects that replace freshwater use with municipally recycled water, and municipal recycling infrastructure built to support industrial operations.

Luján said the bill would help communities protect water resources while giving businesses greater certainty to invest and grow. Britt said water reuse technologies can reduce strain on aging infrastructure and help ensure reliable water supplies for residents, agriculture and industry.

The legislation has drawn support from a broad coalition of water sector and industry organizations, including the WateReuse Association, American Water Works Association, Water Environment Federation, National Association of Clean Water Agencies and Xylem.