Universal broadband in the United States has evolved from an aspirational policy goal and now has become a robustly funded federal policy.
The Federal government has already allocated more than $72 billion for broadband development and infrastructure. At the end of 2021, President Joe Biden signed into law the Infrastructure Investment and Jobs Act (“IIJA”), a major infrastructure investment that included $65 billion allocated for broadband development, particularly in rural and underserved communities. The IIJA followed the American Rescue Plan “(ARP”), signed into law in March 2021, which included more than $7 billion in funding for a variety of broadband infrastructure projects, including the Emergency Connectivity Fund, state and local recovery funds, and provisions capital projects to expand broadband deployment.
Eligible state, territorial, city, county, and Tribal governments can apply for ARP broadband funding through the Treasury Submission Portal. ARP funds have already been – and will continue to be – disbursed to states, cities, counties, and Tribal governments throughout the U.S. to fund construction of broadband infrastructure and expand access to broadband services. The federal government has already started awarding Broadband, Equity, Access and Deployment (“BEAD”) grants from the $42 billion provided under the IIJA, and will continue to do so on a rolling basis.
Necessary and critical broadband work is being done with the support of government grants and funding. But there is a fundamental issue that, if left unaddressed, will dramatically blunt the impact of the billions of dollars intended to bring broadband to every person in America: taxes.
Currently, federal broadband subsidies allotted to broadband providers for facility deployment are taxable income under the Internal Revenue Code of 1986, requiring the return of as much as 20% of grant money back to the federal government. For instance, a $1 million grant would effectively be an $800,000 grant if taxed. And of the $65 billion allocated for broadband infrastructure under the IIJA, as much as $13 billion would effectively be unavailable to broadband facility deployment and “lost” to taxes.
Fortunately, multiple bipartisan bills have been introduced in Congress that would exempt these subsidies from taxation. The tax exemption would ensure all of the much-needed broadband funding would go directly into the infrastructure and development by those deploying broadband.
On December 7, the Broadband Grant Tax Treatment Act (the “BGTTA”) was introduced in the House “to plenty of applause from the broadband sector.” The House bill mirrors the version of the BGTTA that was introduced in the Senate on September 29, 2022. The BGTTA would amend the Internal Revenue Code to exempt from gross income “any qualified broadband grant made for purposes of broadband deployment.” More specifically, the bill would exempt from taxable income the subsidies broadband deployers receive from the IIJA and the ARP. The BGTTA amendments would apply retroactively to any qualified subsidy amounts received in taxable years ending after March 11, 2021.
The BGTTA will ensure that broadband deployers – including companies, organizations, and municipalities – can use every dollar they receive to bring broadband access to all Americans. Passage of the BGTTA combined with the existing funding programs will “help close the digital divide in our country,” according to Shirley Bloomfield, CEO of NTCA-the Rural Broadband Association. USTelecom President Jonathan Spalter agrees that “[c]losing the digital divide in America… will require every cent of the . . . billion[s] Congress has dedicated for that critical purpose.” Further, grant applicants are required to demonstrate they have sufficient resources to sustain a broadband infrastructure project from construction through the grant period and beyond. But the existing tax obligations make many rural and underserved areas with fewer financial resources ineligible “due to their inability to meet the financial sustainability requirement” and pay taxes on the grant.
The BGTTA bills have bipartisan support and are awaiting votes in both the House and Senate. Failure to provide for a tax exemption could leave many households located in the most sparsely populated areas across the U.S. without access to broadband.
 UPDATED FACT SHEET: Bipartisan Infrastructure Investment and Jobs Act, The White House, Aug. 2, 2021, https://www.whitehouse.gov/briefing-room/statements-releases/2021/08/02/updated-fact-sheet-bipartisan-infrastructure-investment-and-jobs-act/.
 Kevin Taglang, What the American Rescue Plan is Doing for Broadband, Benton Institute, Mar. 15, 2022, https://www.benton.org/blog/what-american-rescue-plan-doing-broadband.
 U.S. Department of the Treasury, Coronavirus State and Local Fiscal Recovery Funds, https://home.treasury.gov/policy-issues/coronavirus/assistance-for-state-local-and-tribal-governments/state-and-local-fiscal-recovery-funds#:~:text=The%20American%20Rescue%20Plan%20Act,nonprofits%2C%20or%20aid%20to%20impacted.
 U.S. Department of the Treasury, ARP State and Local Fiscal Recovery Funds: Project Highlights, available at https://home.treasury.gov/system/files/136/American-Rescue-Plan-Anniversary-SLFRF-Examples.pdf.
 NTIA, Biden-Harris Administration Awards Nearly $9 Million to California in ‘Internet for All’ Planning Grants, https://broadbandusa.ntia.gov/news/latest-news/biden-harris-administration-awards-nearly-9-million-california-internet-all.
 Kaylee Shipley, Sen. Warner applauds House introduction of Broadband Grant Tax Act, ABC 13 News, Dec. 7, 2022, https://wset.com/news/local/senator-mark-warner-applauds-house-introduction-of-broadband-grant-tax-act-washington-dc-december-2022.
 John Eggerton, House Bill Exempts Broadband Subsidies From Taxes, MSN, Dec. 7, 2022, https://www.msn.com/en-gb/money/other/house-bill-exempts-broadband-subsidies-from-taxes/ar-AA151Ccn.
 Eggerton, House Bill Exempts Broadband Subsidies From Taxes.
 Press Release, U.S. Sen. Mark R. Warner Applauds House Introduction of Broadband Grant Tax Treatment Act, Dec. 7, 2022, https://www.warner.senate.gov/public/index.cfm/2022/12/u-s-sen-mark-r-warner-applauds-house-introduction-of-broadband-grant-tax-treatment-act.
 S. 5021, 117th Congress, 2d Session, Broadband Grant Tax Treatment Act, available at https://www.congress.gov/117/bills/s5021/BILLS-117s5021is.pdf.
 Eggerton, House Bill Exempts Broadband Subsidies From Taxes.
 Press Release, U.S. Sen. Mark R. Warner Applauds House Introduction of Broadband Grant Tax Treatment Act.