Sending Office: Honorable Terri A. Sewell
Not-for-profit electric cooperatives provide affordable, reliable, and universally accessible electric service in the poorest, most rural parts of the country. These co-ops serve over 42 million-member consumers across 56 percent of the nation and in 88
percent of all U.S. counties. In addition, co-ops serve 93 percent of the nation’s persistent poverty counties and are controlled by the consumers they serve, making them vital to the economic health of thousands of communities across the country.
Need for Legislation:
Most electric cooperatives are exempt from federal income taxation under Internal Revenue Code section 501(c)(12). To maintain its exemption, an electric cooperative must collect 85 percent or more of its income from members. Prior to changes made to the
tax code in 2017, governmental grants were considered a contribution to capital and did not count as gross income. Now, federal, state and local grants are considered income – categorized as non-member income, rather than capital contributions. By accepting
grants, including Federal Emergency Management Agency funds restoring power after disasters or broadband grants providing service to rural communities, co-ops may lose their tax-exempt status.
Electric cooperatives depend on FEMA’s Assistance Program to help restore electric power to consumer members after presidentially declared natural disasters including floods, fires, hurricanes, tornadoes and ice storms. Disasters can have a disproportionate
impact on electric cooperatives and their member-consumers, due in large part to small communities having to share the cost of recovery. Without this assistance to help manage storm response expenses and ensure smooth recoveries from major natural disasters,
many co-op member-consumers living in disaster areas would face significantly higher electric rates.
Millions of rural Americans are locked out of the modern economy simply because of their zip code. According to the FCC, an estimated 6.3 million households in electric co-op service areas lack high-speed internet access. These rural families and businesses
are fighting an uphill battle in the digital economy. Expanded broadband internet access will begin to close the digital divide and boost rural America.
Revitalizing Underdeveloped Rural Areas and Lands Act (RURAL Act)
The Revitalizing Underdeveloped Rural Areas and Lands Act (RURAL Act) would amend the Internal Revenue Code (IRC) to ensure tax-exempt cooperative organizations’ do not lose their tax-exempt status when they use of certain government grants, contributions,
and assistance, including FEMA disaster relief and rural broadband grants.
If you would like to cosponsor H.R. 2147, the RURAL Act, to protect electric cooperatives’ ability to provide electricity and broadband services without jeopardizing their tax-exempt status, or if you have any questions, please contact:
Evan Giesemann with Rep. Terri Sewell:
Josh Jackson with Rep. Adrian Smith:
Terri A. Sewell (D – Alabama) Adrian Smith (R – Nebraska)
Member of Congress Member of Congress
e-Dear Colleague version 2.0