Congress introduces bill to fix unintended consequences of tax law for electric co-ops

Legislation introduced in Congress seeks to fix an unintended consequence of the 2017 federal tax law changes that impact electric cooperatives.

The RURAL Act — sponsored by Reps. Terri Sewell (D-AL) and Adrian Smith (R-NE) in the House and Sens. Tina Smith (D-MN) and Rob Portman (R-OH) in the Senate – would correct a provision that could jeopardize the tax-exempt status of electric cooperatives.

Specifically, it pertains to co-ops that receive federal, state or local government grants for storm recovery, broadband deployment or economic development. If grants push a co-op’s non-member income over 15 percent, it will be forced to pay federal taxes.

“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,” National Rural Electric Cooperative Association (NRECA) CEO Jim Matheson said. “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.”

NRECA is a trade association representing more than 900 local electric cooperatives.

“I serve communities across Alabama’s Black Belt that face persistent poverty,” Sewell said. “They depend on these rural cooperatives for reliable electricity and broadband service, and they are particularly vulnerable to anything that would increase price. These things are basic necessities. The tax-exempt status of the co-ops really ensures that these families get the critical services that they need. People across the spectrum recognize how important this is, and that it was not the intended effect of the 2017 tax law.”

The House bill had 244 cosponsors while the Senate version had 28 cosponsors.

“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,” Portman said. “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.”