Warner, Wyden Eye Adding Broadband Grant Exemption to Tax Package

Broadband Grant Tax Treatment Act (HR-889/S-341) lead Senate sponsor Mark Warner, D-Va., is considering attaching the measure’s language to the House-approved Tax Relief for American Families and Workers Act (HR-7024) ahead of the upper chamber’s consideration of the package. Lobbyists question whether there’s sufficient momentum for swift action on HR-889/S-341 despite communications industry interest. Meanwhile, a potential bid to allocate $3.08 billion from an FCC reauction of 197 returned AWS-3 licenses to fully fund the Secure and Trusted Communications Networks Reimbursement Program (see 2401240001) is unlikely to become part of the 2024 National Security Act supplemental appropriations package but could be a factor in talks for other must-pass legislation this year.

“I would like to” add S-341’s text to HR-7024 “and I’ve even got a pay-for,” Warner told us. The pay-for would zero the effect the $578 million Congress’ Joint Committee on Taxation estimates its enactment would cost, Warner added. HR-889/S-341, first filed in 2022 (see 2209290067), would amend the Internal Revenue Code to say broadband grants enacted via either statute don’t count as “gross income.” The Competitive Carriers Association and seven other communications sector groups asked congressional leaders in late January to include HR-889/S-341 text in the tax package (see 2401260073).

Warner told us he’s “in conversations” about attaching S-341 to HR-7024 if the Senate Finance Committee decides to mark up the measure. Senate Finance ranking member Mike Crapo of Idaho and other panel Republicans are seeking a markup rather than letting the House-passed version of HR-7024 move directly to the full chamber. Senate Finance Chairman Ron Wyden, D-Ore., was noncommittal Tuesday afternoon. Warner “and I are talking,” Wyden said. “I want to find some way to address broadband tax issues more comprehensively” but “I don't have anything to announce” yet.

HR-889/S-341 “is a very commonsense, good-government reform to include” in a tax package if possible, but “it would not be worth it” to press the issue if opening HR-7024 for amendments “might delay or prevent passage,” said James Erwin, executive director of Americans for Tax Reform’s Digital Liberty project. ATR supports HR-889/S-341 because it makes no sense to “require anybody who receives” money via NTIA’s broadband equity, access and deployment program “to then give one-fifth of it back for no reason.”

Erwin cautioned there doesn’t appear to be a “particularly strong push” beyond communications sector stakeholders to attach HR-889/S-341. He said he hasn't “heard a lot from third-party groups or think tanks” on the issue. Several telecom lobbyists said their clients are prioritizing other legislative issues over HR-889/S-341. These include securing stopgap funding for the FCC’s affordable connectivity program and additional rip-and-replace money.

AWS-3 Proposal

Sen. Steve Daines, R-Mont., told us it's possible the FY 2024 “appropriations and budget bills” still under negotiation might be a better “vehicle” for moving his yet-to-be-filed rip-and-replace funding proposal than the national security supplemental. The Senate voted 67-32 Thursday to invoke cloture on the motion to proceed to the National Security Act as a substitute amendment to legislative vehicle HR-815. The Senate voted 50-49 against advancing an earlier proposal, the Emergency National Security Supplemental Appropriations Act, after Daines and most other Republicans objected to the legislation's border security provisions. The National Security Act would deal only with aid to Israel, Taiwan and Ukraine, which could also be a hurdle to House passage of the measure.

Congress must provide the additional $3.08 billion needed to fully fund the rip-and-replace program given the 2020 Secure and Trusted Communications Networks Act's requirement that participants fully swap out equipment from suspect vendors like Huawei and ZTE, Daines told us. “We have smaller providers that simply can’t afford the price tag” if the FCC must continue prorating reimbursements absent more federal funding. “I want to get this done,” he said: “It’s a sound policy” move. Lawmakers are eyeing a range of options for allocating the additional rip-and-replace money amid stalled negotiations on a spectrum legislative package that leaders proposed use some future auction proceeds as a funding mechanism (see 2311070050).

Senate Appropriations Financial Services Subcommittee Chairman Chris Van Hollen, D-Md., still hasn’t “had any direct communication” with Daines about the pending proposal. Van Hollen is exploring legislation that would authorize future spectrum auction proceeds to pay for both the rip-and-replace shortfall and ACP (see 2401250075). He hasn't ruled out alternatives to that approach. “The bottom line is we need to fund” rip and replace “so if others have better ideas” than a spectrum package, “then I’m all ears,” Van Hollen said.

“Congress really needs to reauthorize” the FCC’s spectrum mandate, so “if the ‘cost’ is allocating some proceeds for rip and replace, that would be a win-win for everyone,” Erwin told us. “And it would be much better for that funding to come from” sales revenue rather than a direct congressional appropriation. Even Hill action authorizing specific FCC auctions, rather than a general renewal of its mandate, is “a good idea” given a range of issues like DOD’s opposition to sales of spectrum on the 3.1-3.45 GHz band, which has held up a more comprehensive package, he said.

“Others may disagree and say it’s best to do everything all at once,” Erwin said. Several telecom lobbyists noted some ISPs are objecting to Daines’ proposal as more of a “messaging bill” than a serious alternative. However, those providers are among the strongest backers of the House Commerce Committee-cleared Spectrum Auction Reauthorization Act (HR-3565) as a package that would give the communications sector more certainty. The measure would renew the FCC’s auction authority through Sept. 30, 2026 (see 2305240069).