Treasury Department says broadband stimulus capital expenditures will not be counted as taxable gross income

The Treasury Department has told the National Telecommunications & Information Administration that some broadband grants will be tax deductible, and others won't.

Generally, a corporation's gross income includes all income, including governmental grants, absent any exclusion. But there is an exclusion for grants for capital expenditures to be used solely for acquiring capital assets to expand the business and that also meet other criteria -- be used for working capital rather than compensation for service and be of commensurate benefit to the size of the grant. In that case, the grant is not counted as taxable gross income. But grant money used for operating expenses is taxable as gross income grant recipients will be able to deduct business expenses, operating losses and other deductions.