It has been over a year since lawmakers reintroduced the Broadband Grand Tax Treatment Act (BGTTA) last February. Since that time, the BGTTA, which would amend the Internal Revenue Code to make previous federal broadband grants non-taxable, has lingered in the House untouched. That is a shame because the BGTTA has the potential to play a critical role in helping to close the digital divide by safeguarding billions of broadband dollars from being unnecessarily taxed away. It would also nicely complement the pro-growth tax package currently working its way through Congress.

Over the last few years, it has become increasingly clear that participation in the modern economy requires reliable broadband access. Broadband allows Americans to do everything from working remotely and attending classes online to paying their bills and shopping for groceries. It also allows near-unlimited access to information at the mere click of a button and the ability to communicate with anyone, anytime, and anywhere. Realizing its critical importance, in 2021 lawmakers decided to allocate a significant amount of funding to broadband deployment, through programs like the Broadband Equity, Access and Deployment (BEAD) program, as part of the Infrastructure Investment and Jobs Act (IIDA).

Unfortunately, recent changes in the corporate tax code stipulate that all federal grants be counted as taxable income. That means that even federal dollars that have been set aside for a specific purpose, such as the $42.5 billion in program funding for BEAD, are subject to taxation. This is a problem because it unnecessarily subverts the will of Congress when it sets aside that money and the reason it chose that specific amount. More importantly, it potentially undercuts being able to meet the objectives of the program in question. In the case of BEAD, and other federal broadband programs like the Tribal Broadband Connectivity Fund, that means potentially failing to connect unserved and underserved communities.

Indeed, USTelecom has previously warned that without immediate changes to the tax code, grant recipients could be forced to return as much as “20 percent of those grants in the form of taxes,” placing the goal of universal connectivity in significant jeopardy. While 20 percent may not seem like a lot, providers rely on this money to lower the cost of connecting communities that are remote or otherwise too expensive to reach. Without it, some providers may decide it is not worth even applying for grant money, which already comes with strings attached.

Read the full Townhall article here.

Nate Scherer is a policy analyst with the American Consumer Institute, a nonprofit education and research organization. For more information about the Institute, visit us at www.TheAmericanConsumer.Org or follow us on X @ConsumerPal.