Electric co-ops say tax law threatens rural broadband aid

A little-noticed provision in the 2017 tax reform law could threaten the non-profit status of rural electric cooperatives if they use federal disaster aid or take advantage of a new initiative to expand broadband service.  The provision in the Tax Cuts and Jobs Acts means that government grants to co-ops, including disaster aid and assistance through a rural broadband program Congress enacted earlier this year, are now taxable, according to a letter the National Rural Electric Cooperative Association has (NRECA) sent to the congressional tax-writing committees.  Under Section 118 of the old tax law, a corporation’s gross income excluded any contribution to its capital. Under the new law, contribution to capital now excludes “any contribution by any government entity or civic group," the letter says.