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Rural Act benefits co-op members

Chris Meyers

A few months ago, we shared with co-op members across the state about the importance of the Rural Act or the “Revitalizing Underdeveloped Rural Areas and Lands Act of 2019.” This vital piece of bipartisan legislation was approved by Congress in the final hours of the 2019 session and subsequently became law with President Trump’s signature. The Rural Act was America’s electric cooperatives’ top legislative priority because it sought to preserve and protect the tax-exempt status of not-for-profit rural electric cooperatives. The passage of the Rural Act signifies a triumphant feat for electric co-ops in Oklahoma and across the nation and for co-op members.

The Rural Act was necessary to address an unintended consequence from the “Tax Cuts and Jobs Act” that became law in 2017; this federal tax law redefined government grants to co-ops as income rather than capital. To maintain tax-exempt status, no more than 15% of a cooperative’s income can come from sources other than its consumer-members. Cooperatives that exceed that amount could lose their tax-exempt status. Since electric cooperatives qualify for certain federal and state grants as well as disaster funds from the Federal Emergency Management Agency (FEMA), treating grants as income would cause electric cooperatives to pay tens of millions of dollars in taxes, which would eventually impact co-op members adversely with higher electric rates.

The passing of the Rural Act resulted from the collaborative efforts of the National Rural Electric Cooperative Association (NRECA) and more than 300 co-sponsors in the 435-member House and two-thirds of Senators, including all U.S. congressmen for Oklahoma.

We are grateful the Rural Act was passed protecting co-op members, who are our neighbors, from potentially unfair increases in electric rates. As we move into 2020, we also remain grateful that Oklahoma’s electric cooperatives and electric cooperatives across the nation can continue to leverage federal and state grants to benefit local communities with economic development, which in some cases includes rural broadband deployment, as well as with storm recovery efforts across electric cooperative service territories.