As interstate telecommunications providers plan for their FCC Form 499 reporting (Forms 499-A and 499-Q), it is important to pay careful attention to the treatment of USAC disbursements/subsidies for universal service programs, as the “Rules” embodied in the 499 Instructions (or more appropriately, USAC’s implementation of what it understands the FCC’s rules to require) are less than clear and not easy to discern.
If you have received support from USAC for any of the universal service programs, we recommend that you consult with the attorney assigned to your account on the appropriate treatment of such revenue. Keep in mind that disbursements for Lifeline and the High Cost programs are treated as non-assessable revenue while disbursements for schools & libraries and rural healthcare support (for telecom/VoIP services) are treated as assessable end-user revenue. If you did not report such receipts as assessable revenue in the past, you may also need to file a revised Form 499-A to address the reporting error. This is a complex issue and requires careful consideration. Unfortunately, the Form 499 instructions are not always clear on their face; therefore, it’s important that clients carefully evaluate these issues in consultation with counsel.