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RECs risk losing tax exempt status

Rural Electric Cooperatives are at risk of losing their tax-exempt status under changes made to the tax code in 2017.

Scott Peterson with the National Rural Electric Cooperative Association tells Brownfield that federal, state and local grans to co-ops are now considered non-member revenue under the law, “If community-based electric co-ops accept government grants to repair their systems after major storms or to deploy broadband, they could lose their tax-exempt status and be forced to pay back a substantial chunk of that money to the government.

Co-ops have to get 85% of their income from their members and only 15% can come from non-member revenue.

Peterson points to a situation in Wisconsin, “There’s damage to a Washington Island Electric co-op in Wisconsin from an ice flow that damaged an underwater transmission cable. That’s a $4-Million bill that the co-op will have to pay. The state has appropriated funds to help them, but it could put them into a taxable situation.”

Peterson says his association supports the RURAL Act, introduced in the House and Senate that would fix the problem for co-ops from the tax law that was rushed through in 2017 with resulting unintended consequences.

Cosponsors are: Representatives Adrian Smith of Nebraska and Terri Sewell of Alabama. And, Senators Tina Smith of Minnesota and Rob Portman of Ohio.