Title 5 Credit for Mandated Septic System Repairs, Replacements, Upgrades and Sewer Connections

Taxpayers who repair or replace a failed septic system may be entitled to a credit (“Title 5 credit”) against personal income tax due.  G.L. c. 62, § 6(i).  In general, a septic system that is repaired or replaced must have been determined to be a "failed system" pursuant to an inspection performed prior to such repair or replacement.  TIR 97-12.  TIR 99-5 allowed taxpayers who connect to a sewer system pursuant to a federal court order, consent decree, or similar mandate from a federal court of competent jurisdiction to take the Title 5 credit.  DOR Directive (“DD”) 01-6 extended the Title 5 credit to taxpayers who connect to a sewer system pursuant to an Administrative Consent Order from the Massachusetts Department of Environmental Protection (“DEP”), a Massachusetts state court order, consent decree, or similar mandate from a state court of competent jurisdiction.

The Act amends G.L. c. 62, § 6(i) to allow the Title 5 credit to taxpayers who repair, replace, or upgrade a cesspool or septic system or who connect to a sanitary sewer collection system, if such repair, replacement, upgrade or sewer connection is required pursuant to the provisions of Title 5 of the State Environmental Code, 310 CMR 15.000, a watershed permit issued by the DEP, or other requirements or conditions for implementation of the watershed permit imposed by the permittee or the DEP.[12]

This amendment clarifies that eligible repairs, replacements, upgrades, or connections shall include, but not be limited to: (1) upgrades to best available nitrogen reducing technology pursuant to 310 CMR 15.215(2)(a) or (2)(d)1, or pursuant to the requirements of a watershed permit issued in accordance with 314 CMR 21.00; and (2) connections to a sewer pursuant to the requirements of a watershed permit.  In order to claim the credit for such repairs, replacements, upgrades, or connections, a taxpayer must obtain a verification letter from the city or town which states that repair, replacement, or upgrade of the system or connection to a sewer was required pursuant to 310 CMR 15.215(2)(a) or (2)(d)1, or pursuant to the requirements of a watershed permit issued in accordance with 314 CMR 21.00.  If the tax credit is being claimed for costs associated with an upgrade to best available nitrogen reducing technology, the taxpayer must provide the Certificate of Compliance (See 310 CMR 15.021; TIRs 97-12 and 99-5).  If the tax credit is being claimed for costs associated with a sewer connection, the verification letter must state the date the sewer connection was completed, and that “abandonment” of the taxpayer’s septic system was undertaken in accordance with 310 CMR 15.354.  See DD 01-6.   

The credit is generally available to eligible taxpayers beginning in the tax year in which the work required to repair, replace, or upgrade a septic system or connect to a sewer was "completed."  See G.L. c. 62, § 6(i); TIR 97-12. For purposes of claiming the credit, such year is the year stated in the verification letter.  Taxpayers claiming the Title 5 credit must attach a copy of the verification letter to Schedule SC when filing their Form 1 or Form 1-NR/PY.

Please click here to read the full document from the Massachusetts Department of Revenue.