The Kaua’i Island Utility Co-op (KIUC) received notice from the U.S. Internal Revenue Service this week that it has been granted federal tax-exempt status as a not-for-profit electric cooperative. The co-op has a deal on the table to buy Kauai
The Kaua’i Island Utility Co-op (KIUC) received notice from the U.S. Internal Revenue Service this week that it has been granted federal tax-exempt status as a not-for-profit electric cooperative.
The co-op has a deal on the table to buy Kauai Electric from KE parent company Citizens Communications for $215 million. The deal requires state Public Utilities Commission approval.
A PUC decision is expected on or before Tuesday, Sept. 17. If the PUC approves the sale, KIUC will be the first electrical cooperative in the state to own a public utility.
The tax-exempt status means the co-op won’t have to pay federal income taxes, and can use those funds to provide rate relief to rate-payers who will be co-op members, said Gregg Gardiner, KIUC board chairman.
An investor-owned utility, as KE is now, has to pay taxes on income to the federal government. KIUC plans to provide rate relief up to about $20 million over 10 years, said Gardiner.
The county administration of Mayor Maryanne Kusaka, which in its preliminary position statement opposed the sale, said proof of the federal tax-exempt status was something it wanted to see to believe.
A letter from the Internal Revenue Service regarding KIUC’s federal income tax status, states, “we have determined you are exempt from federal income tax under section 501 (a) of the Internal Revenue Code.”
The tax-exempt determination is effective from the end of 1999, when KIUC was incorporated.
Receiving this IRS confirmation of KIUC’s tax-exempt status is an important step forward, said Gardiner, as the status will enhance the financial benefits KIUC can provide to its members, Gardiner said.
