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Tax-Exempt Status

Oregon’s electric cooperatives are recognized as tax exempt organizations under the Internal Revenue Service code. In order to maintain a tax exempt status, an electric cooperative must receive at least 85% of all income from its members. Recent changes to the Internal Revenue Service code created an unintended consequence for electric cooperatives as government grants now may be considered non-member income.

Historically, electric cooperatives have received grants from a variety of federal, state and local governments to assist in providing services to their members for disaster assistance after major storms or other projects such as renewable energy or rural broadband. If the law is not changed, electric cooperatives may have to choose between maintaining their tax-exempt status or accepting FEMA assistance when recovering from a disaster. The winter storms of 2019 demonstrated the type of destruction Mother Nature can bring, and some Oregon electric cooperatives are now looking to FEMA for critical assistance.

Fortunately, there is important legislation in the U.S. Congress to solve this problem. The RURAL Act (H.R. 2147 and S. 1032) will correct this unintended consequence, which could jeopardize the tax-exempt status of your electric co-op. We need Oregon’s senators and representatives to get behind this legislation so electric co-ops do not have to make a choice between maintaining their tax-exempt status and receiving grants that could help their members.