October 6, 2022

Time for the Federal Government to Stop Taxing Broadband Grants

By Grant Spellmeyer, ACA Connects President & CEO

It’s not all that difficult to understand.  You want less of something, you tax it; you want more of something, you don’t.  And, today, virtually every Member of Congress and government policymaker wants more broadband so that every American can connect to this critical service.  For that reason, it’s hard to fathom why the federal government is taxing recipients of grants from its new broadband grant programs.  Fortunately, last week U.S. Senators Mark Warner (D-VA) and Jerry Moran (R-KS) introduced the Broadband Tax Treatment Act (S. 5021) to ensure that grants awarded for broadband infrastructure are not considered taxable income for entities who received the federal funds. 

S. 5021 would prevent taxation of broadband monies distributed from the following programs:

  • Infrastructure Investment and Jobs Act (IIJA)
    • Broadband Equity, Access, and Deployment (BEAD),
    • State Digital Equity Capacity Grant,
    • Digital Equity Competitive Grant, and
    • Middle-mile grants;
  • USDA Rural Utilities Service (RUS) Distance Learning, Telemedicine, and Broadband Grant and pilot program; and
  • Covid Relief Connectivity Grants from the American Rescue Plan Act, including the Capital Projects Fund distributed by the U.S. Treasury.

The bipartisan duo was joined by fellow Senators Tim Kaine (D-VA), Roger Wicker (R-MS), Raphael Warnock (D-GA), and Shelley Moore Capito (R-WV) in this technical legislative clarification.  The Senators understand that it is vitally important to preserve the congressional intent of these programs to ensure that broadband resources are fully spent on closing the digital divide and not cut short by being returned to the Treasury. 

The legislation must still go through the congressional scoring process by the Joint Committee on Taxation to determine how much in offsets would be needed to cover the cost to comply with budgetary rules.  The bipartisan authors are targeting a possible package of expiring tax provisions in the lame duck session following the November election.  Payfors and the annual end of the year horse-trading will determine if the Broadband Tax Treatment Act will be enacted into law. 

ACA Connects has been engaged in the process with the bill’s authors and supports the legislation.  Ensuring that federal dollars are fully spent on deploying broadband to unserved and hard to reach areas should not be diverted due to a tax law gimmick.  The Senators should be commended for their efforts to ensure we meet our connectivity goals in America.