Analyst: BEAD Federal Tax Exemption Bill Would Not Apply to States

WASHINGTON, Mar. 3, 2025 – A bipartisan Senate bill aimed at exempting Broadband Equity, Access and Deployment program grants from federal taxation would not prevent states from imposing their taxes on these funds, according to Casey Lide, a partner at Keller & Heckman.

In a Saturday email, Lide said, “the bill would not bar states from taxing BEAD or other broadband grants. However, state income tax is a much smaller issue compared to federal income tax.”

The bill under consideration is the Broadband Grant Tax Treatment Act, introduced on February 24 by Sens. Mark Warner, D-Virginia, and Jerry Moran, R-Kansas. The bill would remove federal taxation from BEAD and American Rescue Plan funding, ensuring that BEAD funding doesn’t get recycled back into the federal government.

In a Tuesday blog post, Lide highlighted concerns regarding the timing of tax liabilities under BEAD, warning that tax liabilities could undermine the financial viability of broadband projects.

“Crucually, the tax bill applies to grants used to cover front-end costs relating to construction of a broadband network, with taxes likely due on the grant before revenues ramp up,” Lide noted. “If a company receives $50 million in grant funds in 2024 to construct a rural broadband network, the company would need to pay $10 million in taxes on the grant (give or take) in 2025. 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.”