Manager’s Message — August 2019
Protect Your Cooperative’s Tax Status—We Need Your Help
Dear Co-op Community Members:
Recent tax changes by the Internal Revenue Service are having unintended consequences to Oregon electric cooperatives, including Lane Electric. The changes could threaten our tax-exempt status and Lane Electric’s use of government aid in the future, such as disaster assistance from the Federal Emergency Management Agency or broadband grants.
The IRS change states that no more than 15% of an electric cooperative’s revenue can come from nonmember sources. This means any government aid would be considered nonmember income and could impact the tax-exempt status of Lane Electric and other cooperatives.
Why would Lane Electric use government aid? This past February is a wonderful example. As many of you remember, Lane Electric’s system suffered tremendous damage due to a historic snowstorm. The hit to our electrical system continues to require system cleanup. During the storm, we had to increase staffing to restore power as quickly as possible to our members.
This storm was expensive and recently was declared a federal disaster. Five counties in Oregon received this declaration. Damage in Lane County topped $17 million. The cost to Lane Electric alone was approximately $5.6 million.
The FEMA grant money to Lane Electric would be a significant help to keep our rates down and offset storm damage costs, but the challenge is what will be the cost to our tax-exempt status if we accept the money as revenue?
Aside from government aid for disasters, another impact to our members would be our ongoing broadband feasibility study. In the June General Manager’s report, I noted Lane Electric had contracted with Pulse Broadband to perform a feasibility study. We know many of you need high-speed internet.
While we continue to determine needed equipment, coverage, services and cost, we now have to consider the costs of requesting a broadband grant. Lane Electric has a desire, if feasible, to help members needing these broadband services. In fact, that is how we got our start when a group of citizens in 1939 wanted electric power to their rural homes. But requesting this grant could now come with consequences to our members.
How can you help? First, I encourage you to educate yourself on the topic. You can read more about the RURAL (Revitalizing Underdeveloped Rural Areas and Lands) Act on pages 28 and 29 in the article titled The RURAL Act to the Rescue.
Secondly, take action! Visit our grassroots page, www.ORECA-Action.org, and urge your members of Congress to support the RURAL Act.
Please help us preserve our tax-exempt status and keep your rates low.