Reconciling Build Back Better with 5G Investment Goals

ACT | The App Association members strongly support federal policies that encourage the swift deployment of 5G networks. They are the leading edge of the software-driven transformation of core industries like public safety, digital health, and education. The transition to 5G will enable them to reach more patients, teleworkers, students, and first responders faster and with more powerful tools. The federal Infrastructure Investment and Jobs Act (IIJA) included an unprecedented $65 billion in broadband investment, which we hope will accelerate the deployment of these networks and enable better access to them by underserved communities.

Unfortunately, one provision of the reconciliation bill Congress is set to vote on over the next couple weeks includes a provision that unintentionally diminishes investment incentives and momentum behind 5G deployment. Specifically, the bill’s “corporate minimum tax” subjects all “book income” to a minimum 15 percent tax, which may unintentionally target spectrum investments with new tax burdens. Under current law, purchasers of spectrum licenses can amortize their investments over 15 years, so their tax liability is usually offset by 1/15 of the value of the investment each year for 15 years. But each year’s amortization is treated as “book income,” so it would be subject to the reconciliation bill’s new 15 percent minimum tax. So, the practical effect of the corporate minimum tax as applied to spectrum holders, therefore, would be to increase the spectrum holders’ costs by 15 percent of the amount that would have been amortized each year (in the first year, 1/15 of that investment). In this case, the amounts would be significant. The most recent auction of spectrum that can be used to deploy 5G, the C-band auction, brought in $80.9 billion from bidders. Collectively, the corporate minimum tax provision would cost the winning bidders 15 percent of $5.4 billion, or $813 million, in 2023 alone.

The added burden on investing in spectrum would require companies of any size to make different choices when it comes to purchasing spectrum licenses and deploying such capital-intensive infrastructure as 5G networks. Congress should consider providing an exception for spectrum investments to preserve its important goals set forth in IIJA and so that App Association members can continue revolutionizing the digital education, healthcare, remote work, and public safety services on which your constituents increasingly rely.