Protects tax-exempt status of electric cooperatives

Indiana Electric Cooperatives applauds the passage of the RURAL Act. The legislation, part of the spending bills signed Friday by the president, protects more than 900 electric cooperatives throughout the nation that risked losing their tax-exempt status when they accept government grants for disaster relief, broadband service and more.

The bill’s passage fixes a problem created in 2017 when Congress passed the Tax Cuts and Jobs Act, which redefined government grants to cooperatives as income rather than capital. That change made it difficult for many cooperatives to abide by the 15% limit on non-member income to keep their tax-exempt status. The RURAL Act once again exempts grants from being counted as income and is retroactive to the 2018 tax year.

“Not-for-profit electric cooperatives have a responsibility to represent the best interest of our consumer-members and we were concerned about the long-term implications of this unintended consequence,” said John Gasstrom, CEO at Indiana Electric Cooperatives.

Lawmakers passed the popular bipartisan legislation in the final hours of the 2019 session as part of a larger tax and spending bill that funds the government through September 2020.

“We are grateful to members of the Indiana delegation who supported this important legislation,” said Gasstrom. “This will have a meaningful impact on Indiana’s electric cooperatives and the people they serve – protecting rates and encouraging investment in rural infrastructure.”

Without the fix, some co-ops would have had to start paying taxes this spring after receiving grants in 2018 or 2019 to repair storm damage, bring high-speed internet to rural communities or invest in renewable energy and energy-efficiency programs. Many co-op leaders feared they would have to make difficult decisions about rates to pay the new taxes.