At the end of 2019, Congress passed the Revitalizing Underdeveloped Rural Areas and Lands (RURAL) Act, fixing a tax law change that threatened to raise rates and delay the expansion of broadband for rural cooperative members across the country.
Passage of the RURAL Act ensures that cooperatives can accept federal funds for broadband deployment, disaster relief, and other efforts without risking their nonprofit tax exempt status. A change in the 2017 tax law would have labeled these funds as revenue for the first time, potentially causing co-ops to exceed the allowable percentage of non-member income they must maintain to remain tax exempt.
After Senators Tina Smith (D-Minn.) and Rob Portman(R-Ohio) and Representatives Adrian Smith (R-) and Terri Sewell (D-Ala.) introduced the bipartisan bill in April, it attracted 55 additional cosponsors in the Senate and more than 300 in the House. It was eventually incorporated into the consolidated appropriations act and signed into law in December.
“Obstacles From the Federal Government”
We described the possible impact of the 2017 tax law change on rural cooperatives over a year ago, when Senator Smith first brought the issue to our attention.
Failure to remedy it would have forced some co-ops to choose between continuing with desperately needed broadband and disaster recovery projects and increasing their members’ rates. Northwestern Electric Cooperative CEO Tyson Littau described the difficulty of that decision to the National Rural Electric Cooperative Association (NRECA):
Do we rebuild and try to strengthen our distribution system and pay the taxes, or do we delay the mitigation project that would improve 1,200 miles of line throughout our territory? I think we have a responsibility to the membership to improve the system for the future.
Gulf Coast Electric Cooperative was another co-op faced with the prospect of raising electric rates to...Read more