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A Federal Tax Law Could Put Rural Electric Co-Ops In Missouri At Risk

Co-ops like Intercounty Electric are at risk of losing their tax exempt status if they receive too much federal money. 11-2-19
Jonathan Ahl | St. Louis Public Radio
Co-ops like Intercounty Electric are at risk of losing their tax-exempt status if they receive too much federal money.

ROLLA — A change in federal tax law is threatening the future viability of rural electric cooperatives, according to Missouri industry leaders.

Federal law requires nonprofit electric co-ops to have only 15% of their revenue come from outside their customer base in order to maintain tax-exempt status. But part of the 2017 tax cuts modified the law to have federal grants count toward that 15%. That means Federal Emergency Management Agency grants for repairs due to natural disasters could push the providers into the realm of taxable power companies.

The Association of Missouri Electric Cooperatives, the trade group representing co-ops in the state, is joining national efforts to lobby Congress to amend the law to remove the new provision.

“I think that it’s a little troubling that, if, say, an ice storm hit a co-op and they have to get federal disaster money, I don’t think it would be fair to cause them to lose their tax-exempt status,” said Caleb Jones, CEO of the Association of Missouri Electric Cooperatives.

Jones said the issue is bigger than just disaster aid. Electric co-ops are at the front of efforts to expand high-speed internet access to underserved rural areas. The law could discourage or even prevent expanding that access.

“Any money that comes in to Missouri to a local co-op to help expand rural broadband also could potentially cause them to lose their tax-exempt status,” Jones said.

Another area that is putting co-ops in a tough position is federal grants to develop renewable energy or make their equipment more efficient.

“That’s a real detriment to progress and innovation,” Jones said of the new tax law.

Co-ops from around the nation are joining the lobbying effort.

"It's our No. 1 issue; all hands on deck. We're doing everything we can," said Jim Matheson, CEO of the National Rural Electric Cooperative Association.

Jones says the Missouri congressional delegation supports the change, but there is no concrete proposal pending to amend the tax code.

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Jonathan Ahl is the Newscast Editor and Rolla correspondent at St. Louis Public Radio.