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NARUC Asks For Clarification on Broadband Grant Tax Status

The nation's regulatory commissioners have asked the
Treasury Department to clarify that the government's broadband stimulus grants
are not taxable.

The National Association of Regulatory Utility Commissioners
says that the Recovery Act grants for smart grid energy projects have been held
up because nowhere in the act does it say whether the government billions are

It argues that not to make them tax-deductible would be
counterproductive and work against the goal of simulating the economy.

There is the same confusion about the tax status of the $7.2
billion in broadband grants being handed out by the National Telecommunications
& Information Administration and the USDA's Rural Utilities Service.

In a letter to Treasury Secretary Tim Geithner, top NARUC
officials say the issue is critical and that grant recipients are worried. Even
tax experts aren't sure, and neither NTIA nor RUS can resolve the uncertainty,
they argue.

"Nothing in ARRA indicates that the RUS/NTIA broadband
(or smart grid) grants are taxable," wrote NARUC's President David Coen
and telecommunications committee chairman, Ray Baum. "If the Department of
Treasury and the IRS determine that ARRA grants are taxable, it will significantly
undermine Congressional intent. It could ultimately increase costs to utility
ratepayers NARUC's members are charged to protect. It most certainly will
curtail the scope of grant funded broadband infrastructure, mapping, and
adoption projects."

They said they want NTIA and RUS to get together with
Treasury and quickly clarify the tax status.

NTIA has already handed out over $1 billion in grants for
broadband deployment and adoption, focusing on the so-called middle mile
projects that get broadband to anchor institutions like schools, libraries and
community centers.

A spokeswoman for NTIA said that it had received several inquiries about the tax issue and would be posting further information on its Website to provide further guidance to grantees.