WASHINGTON, March 8, 2010 - The National Association of Regulatory Utility Commissioners on Monday urged the Treasury Department to clarify the tax implications for the American Reinvestment and Recovery Act.
NARUC criticized the Commerce Department and the Agriculture Department for failing to clarify whether Broadband Technologies Opportunity Program grants, Broadband Infrastructure Program grants, and broadband mapping grants are taxable.
“Indeed, the most recent FAQ on point provided by NTIA/RUS appears to raise more issues and resolve none,” said NARUC.
The FAQ [frequently asked questions] from NTIA and RUS reads:
"Q: Are BIP grants taxable? If so, can the grantee use grant funds to pay the taxes?
A: Applicants who are not exempt from taxation should consult with their tax advisors on the potential tax consequences of BIP grants. Federal taxes are not an eligible cost under Federal grant programs such as BIP. For an example of the analysis that the IRS may apply to BIP grants see: http://www.irs.gov/pub/irs-drop/n-03-18.pdf. BIP staff cannot provide guidance on tax implications to applicants."
NARUC called on the Treasury Department and its Internal Revenue Service to rule on whether the grants are taxable. Taxing grant money given to awardees could undercut the projects’ budgets by 35 percent to 40 percent, NARUC said, and would add an extra level of undue hardship.