Tax Day Comes for Co-ops, Too

Baldwin EMC CEO Karen Moore

When I was growing up, the month of April signaled the start of our warm-weather seasons, which I always preferred to the cold. Many times, it was the month when we celebrated one of my favorite holidays, Easter. And of course, it was the month before summer vacation started, which meant it was time to start our yearly countdown to no more school.

Now that I’m an adult, April conjures up thoughts of a season that I was blissfully unaware of as a child – tax season. (I feel like I can hear readers groaning from here.)

I don’t know many people who enjoy talking about taxes, and I’m certainly not among them. But as chief executive officer of Baldwin EMC, I have a responsibility to make sure you, our members, are educated about the business of your cooperative and what makes us different from other utilities. And that is something I truly take pleasure in doing.

In 2018, Baldwin EMC paid approximately $3 million in taxes to the cities, towns and police jurisdictions in which we serve members. But wait, isn’t Baldwin EMC a tax-exempt cooperative? The answer to that is yes. And no. We are exempt from paying federal and state income taxes. However, we still pay our share, just like our members.

Here’s a little background on how cooperatives came to be federally tax-exempt. Congress passed two major pieces of legislation that helped establish these exemptions for cooperatives like Baldwin EMC: the 1916 Revenue Act, which initially established tax exemptions for “mutually beneficial” organizations; and the Miscellaneous Revenue Act of 1980, which created Internal Revenue Code 501(c)(12) and specifically listed electric cooperatives as exempt from federal income taxes. Cooperatives can hold on to that tax-exempt status as long as we receive at least 85 percent of our revenue from our members, and that revenue is used solely for our operational expenses.

While Baldwin EMC does maintain a federal tax-exempt status, we are not free from all taxes. We still pay payroll, property, revenue, city license and sales and use taxes. This includes a tax of 3 percent on revenue from members who live in a municipality’s city limits. A tax of 1.5 percent is paid on revenue from members in a municipality’s police jurisdiction.

Yes, that’s quite the sum. But I know those dollars will go to pave roads, make repairs to our community’s infrastructure and help us grow economically. I also know that if Baldwin EMC were to face an emergency, police and fire fighters will respond without hesitation, and our tax dollars are paying their salaries. That’s worth every penny.

As a not-for-profit, member-owned cooperative, there are lots of things that are unique about the way Baldwin EMC does business. However, when it comes to paying taxes, we’re really not all that different. We view our tax bill as a small price to pay in exchange for the privilege of doing business in Baldwin and Monroe Counties. And it certainly is a privilege.

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