- Some U.S. senators reintroduced legislation to make federal broadband grants not taxable
- Currently, these grants are subject to a 21% corporate tax rate, which increases deployment costs for ISPs
- Rural ISP groups are hopeful this new bill will see the light of day
As we patiently wait for news on the Broadband Equity, Access and Deployment (BEAD) program, the U.S. Senate is pushing for legislation that could make it less costly for rural ISPs to apply for BEAD. Or so the industry hopes.
Senators Jerry Moran (R-Kan.) and Mark Warner (D-Va.) led a bill last week that would amend the Internal Revenue Service code so federal broadband deployment funding would not be considered taxable income. Sounds straightforward enough, except Congress already tried to move such legislation forward – the Broadband Grant Tax Treatment Act – both in 2022 and 2023.
Neither of those bills went anywhere. Sadly, that’s not surprising if you’re familiar with the saga of trying to get more funding passed for the Affordable Connectivity Program.
But here’s why this newest bill matters. Federal broadband grants are currently subject to a 21% corporate tax rate, which wasn’t the case until the passage of the 2017 Tax Cuts and Jobs Act. Previously, broadband grants were generally exempt from taxation, Keller and Heckman partner Casey Lide noted in a blog. However, that law amended IRS tax code so that “contributions to capital” made from the government or a non-profit can be taxable.
Having to pay taxes on a grant can bring ISP deployments to a screeching halt.
“The very substantial tax bill would come due while the network developer is still building up operations and may in fact threaten the operational feasibility of the entire project,” Lide wrote.
Ultimately, this means less funding is available for grant recipients to build out infrastructure in low-density areas, a National Rural Electric Cooperative Association (NRECA) spokesperson told Fierce.
Does the reintroduced bill have a chance of passage – or will it once again be stuck in limbo? For what it’s worth, rural broadband providers did get a bit of regulatory relief in December when the Senate and the Federal Communications Commission in December eased some financial reporting requirements.
Trade groups NTCA – The Rural Broadband Association and WISPA are keeping their fingers crossed that this “common-sense” legislation will see the light of day.
The Senate’s move underscores “the needed conversation we must have on our various universal service deployment programs,” said WISPA Director of Communications Mike Wendy. “So that they are less wasteful [as well as] tech-neutral/connectivity-agnostic, more targeted and more inclusive of smaller providers.”
In a statement provided to Fierce, NTCA said it “greatly appreciate[s] Congress’s commitment to funding broadband deployment programs that help further the mission of connecting all Americans.”
ISPs must also contend with state taxes when factoring in their deployment costs. “While state lawmakers cannot change federal tax issues, they have been tackling their own state-level tax challenges,” said Jake Varn, associate manager for the Pew Charitable Trust’s broadband access initiative. Pew has been working with states for many years to help them close the digital divide.
Since 2021, 10 states have passed tax exemptions for broadband grants or the purchase of equipment, Varn said. Also in the current 2025 legislative session, “another 15 broadband-related tax bills have already been introduced across the country.”
