BUFFALO, N.Y.—NRECA CEO Jim Matheson urged co-ops Thursday to
rally their communities and push Congress to pass legislation to prevent the federal government from stripping electric cooperatives of their tax-exempt status.
“This issue cuts right at the heart of who we are as not-for-profit, consumer-owned, community-focused cooperatives, and this is the time for us to act,” Matheson told co-op leaders at NRECA’s regional meeting. “I’m asking you to do this for your co-op and for your community.”
Congress must act by year’s end to pass the bipartisan
RURAL Act or some co-ops
risk losing their tax-exempt status if they take government grants to restore power after a natural disaster, bring broadband service to rural residents, boost economic development in local communities or create energy efficiency programs.
“Every co-op is one event away from suffering significant damage to its poles and wires, by any hurricane, ice storm, tornado, wildfire or flood,” Matheson said. “In the next 18 months, it might happen to you. It will definitely happen to at least one co-op in this room.”
The crisis is an unintended consequence of the
Tax Cuts and Jobs Act that Congress passed in 2017 at the urging of President Trump, who signed it into law. The law contains a provision that counts federal, state and local grants to co-ops as non-member income. Before that, grants had been defined as capital.
Co-ops must receive at least 85% of their income from members to remain tax-exempt under federal law. If grants are counted as income, some co-ops could have difficulty maintaining their non-profit status.
A bipartisan group of lawmakers from rural areas introduced the RURAL Act in April to allow co-ops to take grants without jeopardizing their tax status, but the bill has not yet been scheduled for a vote in the House or Senate.
Meanwhile, co-ops that have already taken grants to bring broadband to their consumer-members could be forced to begin paying taxes next year, diverting money away from their efforts to improve their communities, Matheson said.
“There’s a reason the for-profit companies haven’t built broadband in rural areas—the economics don’t work,” he said. “Many co-ops want to provide broadband to their members, and government grants are important to their efforts. But look at the choice a co-op now faces … a choice of do it and face higher costs by paying taxes, or don’t do it and leave our consumers without broadband. I don’t even have to say it, but this is wrong. We have to change it.”
He asked every co-op represented in the room to rally their members, community leaders and employees to
contact their members of Congress and urge them to support the RURAL Act. Lawmakers have less than two months of legislative days left to act this year.
“Let me know what you’ve done to move the needle on this issue at your co-op,” Matheson said. “Because those stories of how you take up the cause in your communities where you live, work and serve are the most powerful of all. If we all do that, if we all speak up—if we all stand up—then we can get this fixed.”
More RURAL Act Coverage:
Listen to a recent podcast episode on the RURAL Act: