Importance of "RURAL Act"
Oklahoma Association of
The “law of unintended consequences,” often cited but rarely defined, is that actions of people—and especially of governments —always have effects that are unanticipated or “unintended.”
Such was the case when, in 2017, Congress passed the “Tax Cuts and Jobs Act” and President Trump signed it into law. While the passage brought about tax and income benefits for large groups of people, it also brought about a dilemma for non-profit electric cooperatives.
The new law redefined government grants made to electric and telephone cooperatives as “non-member” income. Under federal tax law, no more than 15% of a cooperative’s income may come from sources other than its consumer-members. Now, cooperatives that exceed that amount could lose their tax-exempt status.
Since electric co-ops are not-for-profit utility entities, they are eligible for certain federal grants and disaster funds from the Federal Emergency Management Agency (FEMA) following authorized disaster declarations. These funds help cover repair costs from events like major ice storms, tornadoes, wildfires, etc. Additionally, both electric and telephone cooperatives are also eligible for certain federal grants to help with the expansion of broadband or high-speed internet service in rural areas.
Under the Tax Cuts and Jobs Act of 2017, those grant funds were inadvertently made to be counted as “non-member” income, thus threatening a receiving co-op’s tax-exempt status.
An effort is underway by the National Rural Electric Cooperative Association (NRECA) to help correct this unintended consequence. The “RURAL Act,” or “Revitalizing Underdeveloped Rural Areas and Lands Act of 2019,” includes language that would correct this co-op “non-member” income issue, thus preserving their tax-exempt status.
To help co-ops, the RURAL Act must be passed before the end of 2019. As of November 1st, more than 250 House Members—including all five from Oklahoma—have signed on as co-sponsors of the bill. We remain hopeful that the RURAL Act will be passed by year-end.
Co-ops: economic engines
Oklahoma Association of
Oklahoma’s electric cooperatives—including your own rural electric co-op—are economic engines within the communities they serve, which cover Oklahoma’s 77 counties. From their inception more than 80 years ago, electric co-ops have been committed to growing economic development in rural areas, which improves quality of life through local jobs and added tax revenues. Playing an active role in the growth and development of rural communities is part of the co-op DNA; it’s what the co-op difference is all about.
Numbers do tell a story, and the numbers I’m sharing with you today tell a powerful story. Collectively, Oklahoma’s electric cooperatives power more than 523,000 homes and businesses in the state, and an additional 125,000 consumers in neighboring states such as Arkansas, Colorado, Kansas, New Mexico and Texas. As a part of the electric cooperative business model, which is member driven, electric co-ops pay capital credits (also known as patronage capital) to members based on their specific electricity usage through the years. Together, Oklahoma’s electric cooperatives have returned nearly $37 million to members in 2018.
A major employer in the state, Oklahoma’s electric co-ops provide jobs to more than 2,720 people in various capacities. What’s more, co-ops pay over $22 million in state and local taxes, plus payroll taxes and make purchases of over $1.5 billion from suppliers in the state. Additionally, every year electric cooperatives of Oklahoma pay gross receipts taxes. About 95% of the total from gross receipt taxes goes to public school districts; it’s distributed based on the number of miles of power line in each school district. For fiscal year 2019, the Oklahoma Tax Commission reports public school districts received $44,087,183.10 paid by electric cooperatives. Together, electric cooperatives are continuously putting money back to local economies, enabling communities to develop and grow.
Every day, hundreds of Oklahomans go to work on your behalf. Serving you, our valued member, is our priority. Electric cooperatives remain steadfast in their mission of providing safe, reliable and affordable electricity while empowering local communities and nurturing local economies to thrive and flourish.