# The Connect America Now Act (CAN Act) Explained

This bill is designed to encourage companies that provide phone and internet service in rural areas to invest in better broadband infrastructure. It does this by offering significant tax breaks to rural telephone companies when they're sold and by providing tax credits for companies that upgrade their networks.

The main tax benefit works like this: when someone sells a rural phone company, they normally have to pay taxes on any profit they make from that sale. This bill says they don't have to pay federal income taxes on that profit—but only if the company serves rural areas where it was legally required to provide service to anyone who asked, regardless of cost. If the company also serves more urban areas, the tax break is reduced based on what percentage of its revenue comes from rural customers. This tax break is temporary and only applies to sales completed within five years of the bill becoming law.

However, there's a catch built into the law. If the new owner of the company doesn't invest in upgrading broadband speeds in those rural areas, they have to pay back part of the tax break they received. Specifically, starting in the fourth year after the sale, if the company isn't offering very fast broadband (at least 1,000 megabits per second) to at least 30 percent of locations in rural areas, they owe back one-sixth of the tax break they received. This percentage requirement increases to 40 percent in year five and 50 percent in year six, creating an incentive for new owners to actually improve service rather than just pocket the tax savings.

The bill also creates a 30 percent tax credit for rural phone companies that spend money upgrading their networks to provide better phone and broadband service. This credit applies to the first three years after a company is sold under this program. Additionally, the bill makes it easier for rural companies to raise money by increasing the amount of tax-exempt bonds they can issue and allowing those bonds to be used specifically for broadband infrastructure projects. The goal is straightforward: make it financially attractive for companies to buy rural phone companies and then invest heavily in bringing modern, high-speed internet to areas that currently lack it.

CAN Act

Ferguson, A. Drew

Connect America Now Act or the CAN Act This bill allows an exclusion from gross income, for income tax purposes, of gain from the sale or exchange of the entire interest in a wholly-owned rural incumbent local exchange carrier. A rural incumbent local exchange carrier is a carrier that serves (1) an area where it was required to provide communications services by a specified date to any customer regardless of cost, and (2) an area other than an urbanized area with not fewer than 50,000 people and a core where there are not fewer than 1,000 people per square mile. The bill requires recapture of tax for income from the sale or exchange of stock in a carrier not held for at least one year. The bill allows an investment tax credit for 30% of expenditures to purchase, maintain, or improve property to provide voice telephone service or broadband internet access in rural empowerment zones. The bill increases the volume cap for private activity bonds and allows the use of bond proceeds for infrastructure for broadband internet access service.