Tax Change Deters Rural Co-ops From Expanding Internet Access

Recent tax code changes might prevent co-ops from connecting more rural communities. Cooperatives could potentially lose their tax exempt status if they accept government grants for broadband expansion and disaster recovery — an unintended yet foreseeable consequence of the Republican “Tax Cuts and Jobs Act” passed late in 2017. Sen Tina Smith (D-MN) called attention to the oversight, noting, “This uncertainty has caused cooperatives significant concern and frozen some of their grant applications.” To ensure that convoluted tax policy isn’t standing in the way of better connectivity for millions of rural residents, Sen Smith plans to introduce legislation that would ensure government grants are not counted as income for the purpose of a telephone or electric cooperative’s tax-exempt status. Sen Smith pointed out that the tax code change was not intended to impede co-ops from accepting government broadband funding. Rather, the goal was to force for-profit corporations to pay taxes on economic development incentives offered by state and local governments.