Electric cooperatives throughout rural America, including Fall River Rural Electric Cooperative, face a financial crisis inadvertently caused by Congress. And the weight of this crisis is made even more clear when electric cooperatives must face power restoration costs following natural disasters. If you receive power from Fall River Electric at your business, home or recreational property, this message is specifically for you.
If Fall River Electric, a not-for-profit company, accepted government grants to restore power in the wake of a local natural disaster such as an earthquake, flood, major winter storm or forest wildfire, we could lose our tax-exempt status and be forced to pay back a substantial chunk of that money to the government. A change to federal tax laws in 2017 targeted at for-profit companies has created a requirement for co-ops to count grants from federal, state or local governments as non-member revenue. For Fall River Electric to maintain its tax-exempt status, no more than 15 percent of the Co-op’s annual income can come from sources other than its owner-members.
Here are two examples of how government grants have been used by local electric cooperatives:
n Our neighboring electric co-op, Lower Valley Energy in Jackson WY, has a pending multi-million-dollar grant request to the Federal Emergency Management Agency (FEMA) to pay for the replacement of seventeen 75-foot power poles that were downed during a February 2017 winter storm;
n Fall River Electric used a $3.2M grant in 2011 to install advanced metering infrastructure (AMI) smart meters throughout our service territory as well funding a fiber optic backbone for communications.
Looking ahead to the future, a grant to cover natural disaster recovery or infrastructure improvements could push Fall River over the 15 percent revenue threshold with severe consequences.
This would leave Fall River with an unfair choice: do we take the government grant money we would need to turn the lights back on after a disaster? Or do we turn down those grants, so we won’t have to spend our members’ money paying taxes rather than improving service? And if we are forced to pay taxes on a grant, would we have to increase rates to our members to cover that cost?
According to the Treasury Department, congressional action is the only way to address this issue. Fortunately, key lawmakers recognize this is an unintended consequence of the 2017 tax bill and they’re working together toward a solution before it hits home with their rural constituents.
The bipartisan RURAL Act, introduced by Reps. Terri Sewell (D-Ala.) and Adrian Smith (R-Neb.) and Sens. Rob Portman (R-Ohio) and Tina 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. Passage of the RURAL Act is essential for America’s rural communities. I urge our owner-members to join this effort by writing to your Congressional delegates. A draft letter can be found at www.action.coop which can be sent “as is” to your representatives or used as a guide to draft your own letter.
Once on this website, click the link “Take Action” and follow the three easy steps. Time is of the essence as this legislation needs to be passed soon so letters should be forwarded as soon as possible.