OTEC applauds bill protecting tax-exempt status

Dec. 20--Oregon Trail Electric Cooperative officials are celebrating Congress' passage of a bill this week that will protect OTEC's and other electric cooperatives' tax-exempt status.

Congress passed the RURAL Act, and President Donald Trump is expected to sign it into law.

The bill -- the acronym stands for Revitalizing Underdeveloped Rural Areas and Lands -- was prompted by what proponents say was an unintended effect of the 2017 federal tax cut law.

That law required member-owned cooperatives such as OTEC to count federal grants, such as they might receive to help with repairs following a natural disaster, as "nonmember income."

In the past, cooperatives could count federal grants as "member income."

The difference is crucial because cooperatives, to maintain the tax-exempt status that can save them substantial amounts of money, must receive at least 85% of their revenue from members.

The change in the 2017 tax cut law could have forced cooperatives to either accept federal grants following an emergency and potentially lose their tax-exempt status, or decline the federal aid and try to find another way to pay for expensive repairs.

This potential conundrum came to light earlier this year when a snowstorm caused major damage to power lines owned by Douglas Electric Cooperative in Western Oregon.

The cooperative faced a repair bill of $9 million to $10 million.

Douglas Electric was eligible for grants from the Federal Emergency Management Agency to cover part of the repair costs, but cooperative officials were leery of doing so due to the potential loss of its tax-exempt status.

Although a natural disaster brought to light the potential effect of the 2017 tax cut law, cooperatives could also have been affected if they were considering using federal money to expand broadband service or other community development projects, which is among OTEC's goals, said Joseph Hathaway, communications coordinator for the cooperative based in Baker City.

In a press release Thursday, OTEC said: "We'd like to thank all of Oregon's elected congressional delegates who set aside bipartisan politics and supported this vitally important bill that helps more than 500,000 rural Oregonians. Senator Ron Wyden, Congressman Greg Walden, Congresswoman Suzanne Bonamici, Congressman Earl Blumenauer, Congressman Peter DeFazio and Congressman Kurt Schrader, we appreciate all your help in stopping unintended severe tax penalties to electric cooperatives."

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