LOUISVILLE, Ky. – More than a third of people in Kentucky get their power from an electric cooperative, and a small part of the 2017 tax law could make your bill more expensive.
“When Congress passed the tax cut in 2017, there was an unintended consequence: There was an effort to tax grants to private corporations but it changed the tax law to put the electric cooperatives tax-exempt status at risk,” National Rural Electric Cooperative Organization CEO Jim Matheson said. “Basically, it said government grants are considered to be revenue. That was never the case.”
Matheson has been lobbying congress to change the rules so electric cooperatives aren’t in danger of losing millions of dollars.
Currently, electric co-ops need to maintain at least 85 percent of their funding from members to keep their tax-exempt status.
If they receive more money from other sources, it could result in losing that status.
There are 26 electric cooperatives in Kentucky, providing power to 1.5 million people in mostly rural areas.
“The biggest risk is it creates a lot of uncertainty,” Meade County RECC CEO Marty Littrel said. “For electric distribution cooperatives, we’re obviously very weather dependent, and anything that could impact our tax-exempt status could create increases in the bills that our members receive from us.”
Littrel said the biggest source of grant funding co-ops typically receive is in the form of aid for storm relief, but there are other grants, like those used to expand broadband access.
“Broadband is a critical piece for growth, as well as retaining talent in rural communities,” Kentucky Electric Cooperatives CEO Chris Perry said. “So cooperatives are really working and trying to figure out ways to get rural broadband so they have access to high-speed internet, similar to the story of how we started, bringing electricity to the rural communities that didn’t have it.”
But all of that could be in jeopardy if lawmakers don’t act before the new year.
A bipartisan group of lawmakers introduced bills in the House and Senate earlier this year to reverse the new rule.
Republican U.S. Rep. Andy Barr is the only Kentucky lawmaker on board as a co-sponsor, but he joins 208 others in the House, along with 28 co-sponsors on the Senate bill.
“The big key for us is to get the vote scheduled on the bill,” Matheson said. “We’ve got the support, we just have to get it on the calendar and have it voted on.”
A spokesman for Senate Finance Committee Chairman Chuck Grassley said he supports efforts to resolve the issue, but did not say when or if a vote on the current bills will take place.