A bill with the goal of fostering investment in water reuse projects by amending the Internal Revenue Code to provide a tax credit for investing in such water-reuse projects was introduced in the House of Representatives by a bipartisan group of lawmakers.

On April 17, 2025, the Advancing Water Reuse Act, H.R. 2940, was introduced by Representatives Darin LaHood (R-Ill.); Linda Sanchez (D-Calif.); Brad Schneider (D-Ill.); and Claudia Tenney (R-N.Y.). The bill was then referred to the House Committee on Ways and Means and no other action has been taken on it.

H.R. 2940 would provide investors in qualifying water reuse projects with a tax credit of 30 percent of the qualified investment for any taxable year. A “qualifying water reuse project” is described as a project in which a water recycling system located in an industrial, manufacturing, data center, or food processing facility has been installed, replaced, or modified.

Such a water recycling system would replace freshwater, such as in groundwater, with recycled water from a municipal water provider for the production of goods or provision of services; or builds or expands a municipal water recycling system for the purpose of securing recycled water for the production of goods or provision of services.

However, the bill directs that no tax credit will be provided to those who transfer property to a utility, saying, “such property shall be treated as qualified property with respect to such person,” and “such person shall be treated as having placed such property in service at the time of such transfer.” However, that such property “shall not be taken into account for purposes of determining any credit allowed.”

H.R. 2940 has the support of the WateReuse Association, which is dedicated to advancing laws, policy, funding, and public acceptance of recycled water. In a written statement, Bart Weiss, president of the Association said,”Growing industry means growing demand for water. U.S. data centers, for example, are expected to consume up to 33 billion gallons of water in 2028.”

Hyperscale data centers alone will use as much water as 299,154 households, while a single semiconductor chip manufacturing facility can use as much water as a small- to midsize city, which the Association says is tens of millions of gallons per day.

The provisions in H.R. 2940 “will create opportunities for businesses to expand operations and grow jobs while also protecting local water resources by establishing an investment tax credit for industrial water reuse,” said Weiss, who added, “This water can originate in the same facility that captures, treats, and reuses it, which is known as onsite reuse; or, it can be supplied through a public-private partnership by which municipalities provide treated recycled water.” That makes such water reuse systems “effective and efficient process to meet specific quality standards for an intended end use,” he said.

Click here to read H.R. 2940.