President Trump has already set to work growing on the promise of the BEAD Program with the administration’s release of new broadband policies and a Notice of Funding Opportunity (NOFO) for BEAD funds in June 2025.
Unintended consequences makes broadband grants taxable
But this promise is now in jeopardy. Unintended consequences resulting from changes in the federal tax law made broadband grants treated as taxable income. That means Washington is trying to claw back 20 to 30 percent of the grant funding that has been allocated to rural and last-mile broadband providers.
Instead of investing every dollar into finally connecting those who need access to broadband the most, providers will be forced to send money back to Washington, unless the president and Congress step in to help.
This is not just bad policy, it is devastating for American workers, rural communities, and taxpayers who deserve this connectivity. It will halt thousands of broadband projects across the country and cost tens-of-thousands of hardworking Americans their jobs.
Broadband providers will be forced to scale back, leaving hundreds of thousands of Americans, many in rural communities that strongly support President Trump without affordable internet access.
This isn’t exactly news but it’s resurfacing. Beyond Telecom Law wrote about it in Feb 2025 and March 2022…
In March 2022, we published a blog post explaining that broadband grants are apparently subject to federal income taxation. Three years later, and with $42.5 billion in BEAD grants on the verge of disbursement, nothing has changed.
As discussed in 2022, the taxability of broadband grants seems to be an unplanned quirk of the 2017 Tax Cuts and Jobs Act. Prior to that, broadband grants were generally exempt from taxation based on a favorable IRS interpretation of Section 118 of the tax code. But the Tax Cuts and Jobs Act amended Section 118 to the effect that “contributions to capital” (including grants) made from governmental or civic groups to a corporation are taxable as gross income.
Recent recipients of state and federal broadband grants are already struggling with this.