Will a 2017 Tax Cut Rule Prevent Rural Broadband Expansion?

When Congress and former President Trump pushed through the Tax Cuts and Jobs Act of 2017, little did they know that a less-discussed part of the bill might make closing the digital divide more difficult. As of now, $42.45 billion in federal broadband grants — as part of the Broadband Equity, Access and Deployment (BEAD) program — is taxable income due to the 2017 tax cut law. In theory, grant-winning companies could recoup the money they would lose to the tax through bonus depreciation, but the amount they can offset starts to dwindle in 2023, said Ryan Johnson, a partner and CPA at Aldrich Advisors, which helps telecommunications companies. Next year — again thanks to the 2017 tax bill — the bonus depreciation rate will decrease to 80 percent, meaning that if a company were to win $10 million, only $8 million could be offset by bonus depreciation. The bonus depreciation rate drops to 60 and 40 percent in 2024 and 2025, respectively. For big companies like AT&T and Comcast, this new rule might not be a deal breaker, Johnson said. But for smaller companies — some of which are in the best position to provide Internet to very remote areas — the rule could dissuade organizations from applying for federal broadband dollars altogether.