The following was printed in the Traverse City Record Eagle, as well as distributed via other news outlets.
Here in Michigan, we’re known for having some pretty tough winters. Michigan’s electric cooperatives take a tremendous amount of pride in keeping the lights on in strenuous conditions. But, we’re also always prepared for a storm.
Natural disasters such as tornadoes, ice storms, hurricanes, or wildfires can hit at any time. Recovery efforts following such events are often long, grueling and extremely expensive. Power restoration is one of the highest priorities.
Electric cooperatives frequently receive federal or state grants to assist with storm recovery efforts following severe weather. But due to an unintended consequence of federal tax law changes in 2017, electric co-ops may be penalized for accepting that aid.
Most of the more than 900 electric co-ops nationwide are recognized as tax-exempt organizations by the IRS so long as they receive no more than 15 percent of their income from non-members.
Under the 2017 tax law changes, federal, state and local grants now count towards that 15-percent threshold. If that limit is exceeded, a co-op will lose its tax-exempt status.
This is an existential issue for hundreds of electric co-ops across the nation. No co-op should be forced to choose between accepting aid to rebuild a community after a disaster and losing its tax-exempt status.
Congress inadvertently created this problem. Now Congress needs to pass legislation to fix it – before it’s too late. A legislative fix is the only option and without it, electric coops and the millions of American families and businesses they serve may lose the ability to quickly recover after natural disasters.
Electric co-ops are private, not-for-profit companies created to supply electricity to their member-consumers. They belong to the communities they serve and operate at cost. Clearly, these co-ops should not receive a tax bill that could be in the millions of dollars for stepping up after a natural disaster.
It defies logic for one government agency to give with the right hand only to have the IRS take back with the left. Even those rural areas and co-ops not affected by natural disasters are vulnerable under the new tax law, because any kind of federal, state or local grant (broadband, economic development, etc.) has the potential to push co-ops over the 15-percent threshold.
Thankfully, there is a common-sense remedy on the table. The bipartisan RURAL Act (H.R. 2147 and S. 1032), introduced by Reps. Sewell (D-Ala.) and Smith (R-Neb.) and Sens. Portman (R-Ohio) and Smith (D-Minn.), will restore certainty and common sense. The bill ensures that co-ops do not jeopardize their tax-exempt status when they accept government grants.
Time is running out and lawmakers must pass legislation this year. While many of Michigan’s congressional delegation in both the House and Senate have co-sponsored the bill, we need them to take the vital next step and push the bill to a vote. Passage of the RURAL Act in 2019 is essential for America’s rural communities. Ask your legislators to take action on this bill. As co-ops prepare for the next natural disaster, relief can’t come soon enough.