Legislation recently proposed in the previous Congress that would shield certain federal grants for broadband internet deployment projects from taxation has been reintroduced in both chambers.
On February 9, the Broadband Grant Tax Treatment Act (BGTTA) was introduced to the 118th Congress for the first time. The Senate version’s primary sponsors are Democratic Sen. Mark Warner and Kansas Republican Sen. Jerry Moran, while the House version mirroring its Senate counterpart was introduced by House Ways and Means Tax Subcommittee Chair Mike Kelly, a Pennsylvania Republican, and California Democrat Rep. Jimmy Panetta.
“Internet connectivity brings together all Americans; it strengthens small businesses and E-Commerce; and it expands educational opportunities for our children,” said Kelly in a press release. “This legislation allows for existing grant funding to be spent as effectively as possible to help all American families from farm communities in California to the shores of the Great Lakes in Pennsylvania.”
The BGTTA would amend the Code by adding new Code Sec. 139J, excluding “any qualified broadband grant made for purposes of broadband deployment” from taxable income. This includes funding provided by the Infrastructure and Jobs Act (IIJA) and the American Rescue Plan Act of 2021 (ARPA), which allocated $65 billion and $7 billion to expanding quality internet access nationwide, especially to underserved and rural areas.
Under the Tax Cuts and Jobs Act of 2017, grants are taxable as income. “With this change in statute, it is now incumbent upon Congress to act to free the ARPA and IIJA broadband grants from taxation and ensure all of the broadband grants awarded will be used to reach Americans with connectivity needs,” argued a coalition of broadband industry groups, including USTelecom and CTIA, in a joint letter November 2 to top lawmakers on the Senate Finance Committee and Ways and Means.
Originally, the BGTTA was introduced last September in the Senate by Warner, Moran, and Tim Kaine, the Virginia Democrat—they were joined by several colleagues from both parties. A House version emerged in the House later in December by way of Kelly and Panetta, as well as Democratic Reps. Terri Sewell of Alabama and Dan Kildee of Michigan and Georgia Republican Reps. Drew Ferguson and Buddy Carter.
Currently, recipients of broadband grants must return up to 20% in tax. “For instance, a $1 million grant would effectively be an $800,000 grant if taxed,” explained Charles Spencer-Davis and Dave Thomas of Sheppard Mullin Richter & Hampton LLP in a January blog post in support of the proposal. They illustrated that of the $65 billion provided by the IIJA, “as much as $13 billion would effectively be unavailable to broadband facility deployment and ‘lost’ to taxes.”
The reintroduced BGTTA is co-sponsored by Kaine and 14 other senators from both parties in addition to the original House sponsors.
Warner, a member of the Senate Finance Committee and author of the broadband provisions of the IIJA and ARPA, said that “taxing broadband investment awards diminishes” efforts to provide high-speed internet access to more Americans. “This legislation ensures that individuals and businesses are able to reap the benefits of every dollar set aside for broadband expansion and deployment …”
Groups that previously advocated for the BGTTA have expressed support for the reintroduced bills. “To achieve universal connectivity, Congress must eliminate this unnecessary tax to ensure that federal resources remain in the communities they seek to serve,” said USTelecom senior vice president of government affairs Brandon Heiner. “If Congress is serious about achieving universal connectivity, they should ensure that 100% of broadband grants go toward that goal.”
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