The electric cooperative network of over 19 million members nationwide is making their voice heard in Washington, D.C. to show support for passing the Revitalizing Underdeveloped Rural Areas and Lands (RURAL) Act (House Bill 2147 and Senate Bill 1032).
Passage of this bill is vitally important in order for non-profit, member-owned electric cooperatives like OTEC to retain their tax-exempt status and avoid burdensome taxation of grants they may receive to rebuild electrical infrastructures following a disaster, or expand services, such as broadband, to the underserved areas of rural America. This is what cooperatives do best.
Representative Greg Walden stated that “Electric cooperatives and other consumer-owned utilities play an important role in delivering affordable power to rural communities across Oregon and our nation.” And, this should continue.
Unfortunately, the Tax Cuts and Jobs Act Congress that passed in 2017 resulted in unintended consequence, which the RURAL Act will fix. The current law contains provisions that count federal, state and local grants as non-member income, and therefore potentially taxable. Previously, these types of grants have been defined as capital, not income.
In order to be considered tax-exempt, electric cooperatives must receive at least 85% of their income from members. So, if a cooperative receives, for example, a FEMA grant to help its system and members recover from damages following a major storm, this additional financial support could be considered taxable income if the FEMA assistance increases the co-ops non-member income over the 15 percent limit. The last thing a member needs following a major storm is a rate increase because their cooperative has received a grant that is considered taxable income.
This is what’s happening to Douglas Electric, who sustained major damage during last February’s brutal snowstorm in southern Oregon. Douglas sustained damages in excess of $10 million, so costly that FEMA support was requested. The millions in federal disaster grants that is supposed to help the co-op recover could now put Douglas Electric in danger of losing its tax-exempt status. This would cause significant hardship on their members.
A bipartisan group from Oregon’s congressional delegation has taken a leadership role in supporting this legislation. U.S. Representatives Earl Blumenauer, Peter DeFazio, Kurt Schrader and Greg Walden have all signed as co-sponsors of this important bill.
U.S. Senator Ron Wyden – the ranking member of the Finance Committee - is key to passing this vitally important legislation that affects millions of hard-working Americans, no matter what side of the aisle they’re on.
This is a call to ACTION because our work is not over until the RURAL Act is passed.
Please join OTEC in supporting this legislation by taking action and sending a message to Senator Wyden, asking him to support the RURAL Act and Oregon Cooperatives!
Learn more about the RURAL Act here: