Electric cooperatives have been meeting with federal lawmakers in their districts in recent weeks as part of a push for Congress to pass a bipartisan bill to prevent co-ops from losing their tax-exempt status.
Now, NRECA is asking co-ops to activate their employees and consumer-members in a major effort to build bipartisan support for action in the coming months. If Congress doesn't act by the end of the year, some co-ops risk
losing their tax-exempt status if they take government grants—including funds to restore power after a natural disaster or to bring broadband service to rural communities.
NRECA has been working with lawmakers to take action to fix the tax problem, which was an unintended consequence of the sweeping Tax Cuts and Jobs Act that Congress passed in 2017.
A bipartisan group of lawmakers from rural states and districts introduced the
RURAL Act in April to allow co-ops to take grants without affecting their not-for-profit status. Co-op leaders should reach out to their senators and House members to help build momentum for the bill, NRECA CEO Jim Matheson said.
"I encourage you to join us in these outreach and advocacy efforts to pass the RURAL Act," Matheson wrote in an Aug. 29 letter to co-op CEOs. "In addition, please encourage your staff and Board members to get involved."
The issue is especially urgent because Congress is running out of time to take action this year. The House will have 41 days remaining in this session when it reconvenes on Sept. 9. The Senate has 53 days left on its legislative schedule.
"This will not get done without the strong voice of co-ops across the country," said Louis Finkel, NRECA's senior vice president for government relations.
Co-op leaders can tell lawmakers what's happening on the ground in their states and congressional districts, he said.
"Tell them your stories," Finkel urged. "There's no substitute for constituents and community leaders sharing the challenges they face every day. It's important that our members tell Congress directly that we should not be taxed for taking federal or state dollars to extend broadband to rural communities."
Congress inadvertently caused the problem when it passed the 2017 tax bill, which included a provision that counts federal, state and local grants to co-ops as non-member income. In the past, those grants had been defined as capital.
Co-ops must receive 85% of all income from consumer-members to keep their tax-exempt status under federal law. Counting grants as income makes it much harder for co-ops to meet that requirement.
"We need to be clear and consistent that Congress fix an inadvertent problem that they created and that unfairly increases the tax burden in rural communities," Finkel said.
Unless Congress acts, many co-ops will have to pay taxes for the first time next year because they have already accepted grants for disaster relief or community development.
"Every dollar they have to pay in taxes is one less dollar that they can reinvest in bringing affordable and reliable electricity to their communities," Finkel said.
Co-ops that haven't taken grants yet shouldn't assume the tax problem won't affect them, he said.
"You can never predict when a natural disaster will hit and, if it does, no co-op should have to choose between taking federal dollars and turning the lights back on," Finkel said.
Reps. Terri Sewell, D-Ala., and Adrian Smith, R-Neb., introduced the RURAL Act in the House, and Sens. Rob Portman, R-Ohio, and Tina Smith, D-Minn., introduced it in the Senate. Co-ops can check to see whether their senators or House members are co-sponsors by checking these sites:
Finkel urged co-op leaders to "call, email and tweet" to
reach their members of Congress.
"Make your voice heard through any and all channels," he said. "Advocate for support and passage of the RURAL Act."
More RURAL Act Coverage:
Listen to a recent podcast episode on the RURAL Act: