ARLINGTON, Va. – A bipartisan majority in the U.S. House of Representatives has cosponsored legislation to fix an unintended consequence for electric cooperatives from the 2017 federal tax law changes.
The RURAL Act, sponsored by Reps. Terri Sewell and Adrian Smith and Sens. Tina Smith and Rob Portman, currently has 230 cosponsors in the House and 29 in the Senate.
Changes to federal tax laws in 2017 created severe unintended consequences for electric cooperatives and millions of American families and businesses they serve. Under the revised law, co-ops that receive federal, state or local government grants face an existential issue and are at risk of losing their tax-exempt status.
“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.”
The 2017 federal tax law changes impact all grants to co-ops, including those designated 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.
Sen. Rob Portman, R-Ohio – “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.”
Rep. Terri Sewell, D-Ala. – “I serve communities across Alabama’s Black Belt that face persistent poverty. 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.”
Sen. Tina Smith, D-Minn. – “Because of the mistake in the 2017 tax law, many cooperatives 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.”
Rep. Adrian Smith, R-Neb. – “Access to affordable power is an issue important in every state, county, city and town. While there may not be broad agreement on issues like tax rates, there is strong agreement on the value electric cooperatives provide their members and their place in the tax code.”
The National Rural Electric Cooperative Association is the national trade association representing more than 900 local electric cooperatives. From growing suburbs to remote farming communities, electric co-ops serve as engines of economic development for 42 million Americans across 56 percent of the nation’s landscape. As local businesses built by the consumers they serve, electric cooperatives have meaningful ties to rural America and invest $12 billion annually in their communities.
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