Two members of Congress from rural states are championing the top legislative priority for electric cooperatives: a bill to ensure that co-ops don’t lose their tax-exempt status if they accept government grants to restore power after natural disasters or provide broadband service to rural communities.
Reps. Terri Sewell, D-Ala., and Adrian Smith, R-Neb., are the lead sponsors of the RURAL Act, which would allow co-ops to once again take grants from local, state and federal governments without risking their tax-exempt status. Co-ops must receive at least 85% of their income from members to retain that status under federal law. However, the Tax Cuts and Jobs Act of 2017 inadvertently made it tougher for co-ops to meet that requirement by counting government grants as non-member income for the first time.
The RURAL Act would fix the problem, and the legislation is steadily gaining co-sponsors. During the last two weeks, 66 members of Congress have signed on to support the House bill, driving the total to 168 as of Sept. 20.
Sewell and Smith—in separate interviews—talked about the importance of the bill to rural communities and discussed their strategy for passing the legislation this year. Here’s what they had to say:
Why is it important to you to lead the effort to pass the RURAL Act in the House?
Sewell: You know, I come from the rural parts of my district, from Alabama’s Black Belt, so I truly believe we need access to important services that are provided by these electric co-ops, including reliable access to broadband and to electrical power after a disaster. This problem was an unintended consequence of the 2017 tax law and it threatens access to FEMA (Federal Emergency Management Agency) relief or government grants on broadband access. I believe that the NRECA co-ops are best situated for providing those kinds of services. That’s why I’m trying to fix that unintended consequence. I’m quite aware that co-ops serve over 42 million members in over 56% of our nation’s landscape, including 88% of our counties. This is really an important service, especially since you serve many poor rural areas.
Smith: My goal since coming to Congress is to address rural America’s challenge and strengthen it for the future. Just as rural power generation and transmission were vital to rural economic growth in the 20th century, access to both power and broadband will drive our rural economies in the 21st.
How would it harm your constituents if electric cooperatives lose their tax-exempt status?
Sewell: I serve communities across Alabama’s Black Belt that face persistent poverty. They depend on these rural cooperatives for reliable electricity and broadband service, and they are particularly vulnerable to anything that would increase price. These things are basic necessities. The tax-exempt status of the co-ops really ensures that these families get the critical services that they need.
Smith: Nebraska has a long tradition of relying on public and cooperative power generation to affordably meet the needs of families, farmers, ranchers and small businesses. Our goal in 2017 was to ensure as many Americans as possible could benefit from tax reform, and this bill helps ensure more Americans see those benefits.
Your bill is a rare bipartisan tax bill. What has been your most persuasive argument to convince your colleagues to co-sponsor the bill?
Sewell: These issues really aren’t partisan. Access to broadband and the need to rebuild service after a natural disaster—these aren’t Democratic or Republican issues. I’m very proud to co-sponsor this bill with Adrian Smith of Nebraska. While our districts are far apart geographically, they’re very similar in the rural parts. People across the spectrum recognize how important this is, and that it was not the intended effect of the 2017 tax law.
Smith: Access to affordable power is an issue important in every state, county, city and town. While there may not be broad agreement on issues like tax rates, there is strong agreement on the value electric cooperatives provide their members and their place in the tax code.
Are you pushing for a vote in the Ways and Means Committee this year? Or would it be faster to try to attach the legislation to some other must-pass bill? What do you see as the most effective strategy?
Sewell: I think that both Adrian and I are pushing to get a vote in the Ways and Means Committee. We both sit on Ways and Means. We’re looking for any opportunity to push the bill forward. I’ve advocated for consideration of the bill before the committee since I introduced it in April. But we know that the most direct way to get something like this done has been as an inclusion in a must-pass spending bill. I think that the more bipartisan support we continue to get in co-sponsorships, the more this will become a no-brainer and could be put into a package that’s passed later this year.
Smith: This bill should be broadly supported enough to move on its own, but my primary concern is ultimately getting it across the finish line.
How can co-ops and their members best help you pass the bill?
Sewell: I think you’re already doing it! I really want to thank the NRECA co-ops for your active engagement in making sure our members of Congress know about the bill. We’re going to continue to need that strong engagement to get this done. The more that co-ops can share with their members of Congress and their senators, the better. It’s going to take hearing those real-world consequences to convince members of Congress to sign onto the bill. The best people to tell that to them is your co-op members. There are no better voices that could be heard.
Smith: The best way to ensure legislation gets passed, even if it already has broad support, is to keep reminding your representatives and senators of how important it is to you. Keep contacting your federal representatives and, in particular, make clear to them the tangible impact of enacting this bill on your cooperative.
Read more coverage of the RURAL Act:
Listen to a recent podcast on the RURAL Act: