US electric co-ops continue their fight to protect tax-exempt status

Rural electric co-ops serve 42 million Americans

A bipartisan bill to protect electric co-ops’ tax-exempt status has secured the backing of a third of US senators.

Introduced by Senators Rob Portman (R-OH), and Tina Smith (D-MN), The Revitalizing Underdeveloped Rural Areas and Lands (Rural) Act would allow not-for-profit co-ops to accept government grants for disaster relief, broadband service and other priorities without losing their tax-exempt status.

So far, 38 senators have pledged support for the bill. Another 269 members of the House of Representatives have also have signed on to the bill. The National Rural Electric Cooperative Association (NRECA), the trade body for rural electric co-ops in the USA, is encouraging members to contact their representatives to ask that they support the bill.

The act aims to address a legislative barrier for electric co-ops created with the passing of the Tax Cuts and Jobs Act of 2017.

While most electric co-operatives are tax-exempt under the Internal Revenue Code, to qualify for this they must receive at least 85% of all income from members. Under the 2017 federal tax law government grants are now considered non-member income. This means that of co-ops that receive any kind of federal or state government funding are facing challenges to their tax-exempt status.

Government funding can include grants for disaster relief assistance, energy efficiency, economic development and rural broadband deployment.

“This growing bipartisan support is critical as we work to reverse the impact of tax law changes that create significant uncertainty for electric co-ops across the nation,” said Nreca CEO Jim Matheson.

“As stewards of America’s rural communities, electric co-ops work hard to secure grants to recover from fires, floods, hurricanes and winter storms, or jump-start local economic development projects like building out a broadband network. But those efforts are in jeopardy unless Congress fixes this mistake.”

US electric co-ops serve 42 million Americans across 56% of the nation’s landscape.

Senator Portman said: “In today’s technology-dependent world, we must do more to bring high-speed internet and stronger grid infrastructure to the rural areas of our country. Tax-exempt rural co-ops provide these important services to parts of the country where access to reliable electricity and high-speed internet is the most limited, and they rely heavily on grants to perform these services.

“Without this legislation, many co-ops may miss out on grant income or disaster assistance, hurting our efforts to promote economic development and job creation in these rural areas.”

Senator Smith added: “Because of the mistake in the 2017 tax law, many co-operatives in Minnesota and across the country are in danger of being forced to choose between keeping their tax exemptions and accepting an important grant to clean up a disaster, or to expand much needed broadband services in a rural community. That uncertainty is making it difficult for them to effectively plan for the future – and it’s unnecessary.”

Share This Post

We hope you enjoyed this article. If you did, we would love it if you would share it to your social networks!