Washington Gov. Gary Locke has signed into law a water reform measure that offers - among other benefits - a tax incentive plan for water utilities that invest in qualifying water use efficiency measures. Utilities that pay the Public Utility Tax are allowed to deduct 75 percent of expenditures on qualifying water conservation investments from their gross income. Additionally, the tax incentives create the State Water Right Trust Account in the state General Fund, which may only be spent after appropriation.

Water utilities currently pay a special tax of about 5 percent on the income they receive from distributing water. Under this measure, the tax rate would be reduced to about 1.25 percent in cases where the water is conserved or reused.