The Broadband Grant Tax Treatment Act introduced in the Senate today would exempt grant funding that network operators receive for rural broadband deployments from taxation.

According to the release, broadband deployment grants are currently factored into a company’s income and will soon be subject to additional taxes as a result of scheduled changes to the corporate tax code that go into effect early next year.

If adopted, the bill would exclude broadband deployment grants awarded through the Infrastructure Investment and Jobs Act (IIJA) and the American Rescue Plan Act (ARPA) from an organization’s income, the release states.

This would be achieved through an amendment to the Internal Revenue Code.

The bill specifically calls out these broadband deployments grants as among those to which the exemption would apply:

  • Broadband Equity Access and Deployment (BEAD) grants
  • State Digital Equity Capacity Grants in the Infrastructure Investment and Jobs Act (IIJA)
  • Digital Equity Competitive Grants in the IIJA
  • Rural Utilities Service (RUS) broadband grant pilot program grants referenced in the IIJA
  • RUS Distance Learning, Telemedicine and Broadband Program grants referenced in the IIJA
  • Broadband infrastructure grants received from a state, territory, tribal government or unit of local government through certain section of the Social Security Act
  • Certain grants received in the Consolidated Appropriations Act of 2021

The bill was introduced by Senators Mark Warner (D-Virginia) and Jerry Moran (R-Kansas). They were joined by Senators Tim Kaine (D-Virginia), Roger Wicker (R-Mississippi). Raphael Warnock (D-Georgia) and Shelley Moore Capito (R-West Virginia).

“Every dollar that was set aside to fund broadband expansion and deployment should be used for that purpose,” said Warner in the press release.

Moran said in the release that the legislation would “maximize the impact and success” of broadband grants.

Industry Support

At least three broadband provider organizations voiced support for the bill.

Taxing broadband grants would “dramatically reduce the impact” of funding programs and “likely leave the hardest-to-reach communities without essential connectivity for even longer,” said Shirley Bloomfield, chief executive officer of NTCA—The Rural Broadband Association, in a prepared statement. “It is critical that all broadband grant funds go toward their intended purpose of network deployment.”

Derrick B. Owens, senior vice president of government and industry affairs for WTA—Advocates for Rural Broadband, echoed those comments in a prepared statement, which noted that the tax code would make it harder for small locally-based broadband providers to maximize the amount of funding going to build out the network.

According to a statement from USTelecom Senior Vice President of Government Affairs Brandon Heiner, grant recipients would be required to return as much as 20% of broadband grants to the government if the Broadband Grant Tax Treatment Act is not adopted.

“It is vital that Congress move to eliminate this tax as America’s broadband providers carefully plan and prepare to allocate resources to connect as many Americans as possible,” Heiner added.

The BEAD program has a budget of $42.5 billion for broadband deployment grants. The ARPA made $350 billion in funding available to states, counties and cities that could be used for a variety of purposes, including broadband.

The full text of the Broadband Grant Tax Treatment Act is available at this link.

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