176

PPL CORPORATION & SUBSIDIARIES, PETITIONER v. 

COMMISSIONER OF INTERNAL REVENUE, 

RESPONDENT

Docket No. 25393–07. Filed July 28, 2010. 

P’s subsdiary (S) is an operating electric utility engaged in 

the generation, transmission, and distribution of electricity. It 

provides various lighting services (e.g., street lighting) for 

public and private entities. Street light assets include the 

light fixtures, hardware to mount the fixtures, various types 

of poles, and wires. The parties dispute the length in years of 

the recovery period that S must use to calculate its annual 

depreciation deduction for street light assets. Held: Street 

light assets are neither assets used in the distribution of electricity for sale nor land improvements. Thus, street light 

assets do not fall within asset class 49.14, Electric Utility 

Transmission and Distribution Plant (with a recovery period 

of 20 years), or asset class 00.3, Land Improvements (with a 

recovery period of 15 years), specified in Rev. Proc. 87–56, 

1987–2 C.B. 674. Rather, street light assets are property without a class life, classified as ‘‘7-year property’’ (with a recovery 

period of 7 years) pursuant to sec. 168(e)(3)(C)(ii), I.R.C. 

(1997). 

Richard E. May, Mark B. Bierbower, and Timothy L. 

Jacobs, for petitioner. 

Melissa D. Arndt, Allan E. Lang, Michael C. Prindible, and

R. Scott Shieldes, for respondent. 

HALPERN, Judge: PPL Corp. (petitioner) is the common 

parent of an affiliated group of corporations (the group or 

affiliated group) making a consolidated return of income. By 

notice of deficiency (the notice), respondent determined a 

deficiency of $10,196,874 in the group’s Federal income tax 

(176) PPL CORP. & SUBS. v. COMMISSIONER 177

for its 1997 taxable (calendar) year and also denied a claim 

for refund of $786,804. The issues for decision are whether 

respondent properly (1) denied the claim for the refund, 

which is related to the creditability of the United Kingdom 

(U.K.) windfall tax paid by petitioner’s indirect U.K. subsidiary, (2) included as dividend income a distribution that 

petitioner received from the same indirect U.K. subsidiary, 

but which, within a few days, the subsidiary rescinded and 

petitioner repaid, and (3) denied depreciation deductions that 

petitioner’s U.S. subsidiary claimed for street and area 

lighting assets (the street light issue). We shall address the 

third issue in this report. A forthcoming report will address 

the first two issues. 

Unless otherwise stated, all section references are to the 

Internal Revenue Code in effect for 1997, and all Rule references are to the Tax Court Rules of Practice and Procedure. 

FINDINGS OF FACT 

Stipulations

The parties have entered into a first, second, and third 

stipulation of facts. The facts stipulated are so found. The 

stipulations, with accompanying exhibits, are incorporated 

herein by this reference. 

Petitioner’s Business

Petitioner is a Pennsylvania corporation that was known 

during 1997 as PP&L Resources, Inc. It is a global energy 

company. Through its subsidiaries, it produces electricity, 

sells wholesale and retail electricity, and delivers electricity 

to customers. It provides energy services in the United States 

(in the Mid-Atlantic and Northeast) and in the United 

Kingdom.

PP&L

During 1997, Pennsylvania Power & Light Co., also a 

Pennsylvania corporation, was petitioner’s direct subsidiary. 

On September 12, 1997, Pennsylvania Power & Light Co. 

changed its name to PP&L, Inc. (Hereinafter, we shall refer 

to that corporation, both before and after it changed its 

178 135 UNITED STATES TAX COURT REPORTS (176) 

name, as PP&L.) During 1997, PP&L was the operating electric utility company for the affiliated group and was engaged 

in the generation, transmission, and distribution of electricity. During that year, PP&L was petitioner’s principal 

subsidiary, with approximately 96 percent of the assets of 

petitioner’s affiliated group. 

Electricity Basics: Concepts and Definitions

Electricity is the flow of electric current. The rate of that 

flow is measured in amperes (or amps). The pressure that 

causes electricity to flow (voltage) is measured in volts. 

Resistance to the flow of electricity is measured in ohms. 

The combination of electromotive force (volts) and current 

(amperes) is the rate of work being done, measured in watts. 

One thousand watts are a kilowatt. If the rate of work is one 

kilowatt and that rate lasts an hour, then one kilowatt-hour 

of work is completed. The quantity of electricity used is commonly measured in kilowatt-hours. 

The Delivery of Electricity

There are three distinct stages in delivering electricity: 

generation, transmission, and distribution. Generation is the 

process of producing electricity. Transmission is the process 

of moving high voltage electricity from power plants to distribution substations. Distribution is the process of moving 

lower voltage electricity from distribution substations to customers. 

Distribution begins at the distribution substation, where 

transformers decrease the voltage of the incoming electricity. 

The outgoing electricity flows through primary distribution 

lines to distribution transformers, which further reduce its 

voltage. The electricity then flows through secondary distribution lines to service drops, street and highway lights, 

nonroadway lights, and traffic signals. A service drop is the 

connection between a secondary distribution line and a customer. A meter at the end of the service drop measures the 

electricity the customer uses, typically in kilowatt-hours. 

Street Light Assets

During 1997, and at other relevant times, PP&L provided 

street and highway lighting (street lighting) and nonroadway 

(176) PPL CORP. & SUBS. v. COMMISSIONER 179

1 Boulevard fiberglass poles (like aluminum and steel poles) are bolted to their foundations, 

whereas nonboulevard fiberglass poles are embedded approximately 5 feet in the ground and 

backfilled with cement, stone, and tamped earth. The distinction between boulevard fiberglass 

poles and nonboulevard fiberglass poles is relevant only to our discussion of whether street light 

assets are land improvements. See sec. V. of this report. 2We discuss the applicable statutory and regulatory framework in sec. II. of this report. 

lighting (area lighting) for public and private entities. We 

refer to the equipment used to provide street and area 

lighting as street light assets. Street light assets include the 

light fixtures (luminaires); the mast arms or brackets (used 

to mount the luminaires on wood poles or other structures); 

aluminum, steel, and fiberglass poles; and wires. 

Luminaires are generally mounted on (1) wood poles 

(which might also support secondary distribution lines, 

service drops, and distribution transformers attached to primary distribution lines), (2) aluminum, steel, or boulevard 

fiberglass poles connected underground to distribution transformers, (3) nonboulevard fiberglass poles, and (4) buildings, 

bridges, tunnels, and underpasses. 1 Wood poles are part of 

the distribution system. 

Street light assets convert electricity into light and can be 

disconnected from the distribution system without affecting 

any other part of that system. 

In 1997, PP&L charged for street and area lighting services 

but did not actively market or advertise those services. 

Tax Accounting

In December 1997, PP&L filed Form 3115, Application for 

Change in Accounting Method, making an automatic method 

change under Rev. Proc. 96–31, 1996–1 C.B. 714. In that 

Form 3115, PP&L reclassified its street light assets, 

removing them from asset class 49.14, Electric Utility Transmission and Distribution Plant, and classifying them as property without a class life. See Rev. Proc. 87–56, 1987–2 C.B. 

674, 675, 685. 2 As a result of that reclassification, for PP&L’s 

street light assets placed in service before 1997, petitioner 

claimed a negative adjustment to its 1997 taxable income 

under section 481(a) of $18,606,135. Consistent with that 

reclassification, PP&L classified street light assets it placed 

in service in 1997 as property without a class life. 

In the notice, respondent disallowed both the $18,606,135 

negative adjustment to petitioner’s 1997 taxable income and 

$1,476,120 of tax depreciation for 1997 attributable to

180 135 UNITED STATES TAX COURT REPORTS (176) 

the classification of PP&L’s street light assets as property 

without a class life rather than as property described in asset 

class 49.14. 

OPINION 

I. Introduction

The parties dispute the length in years of the recovery 

period that petitioner must use to calculate its annual depreciation deductions for street light assets. Respondent argues 

that the proper recovery period for those assets is 20 years; 

in the alternative, he argues that it is 15 years. Petitioner 

argues that it is 7 years. We agree with petitioner. 

II. Statutory and Administrative Provisions

Section 167(a) permits as a depreciation deduction a 

reasonable allowance for the exhaustion, wear and tear, and 

obsolescence of property used in a trade or business. For tangible property, section 168(a) provides that the depreciation 

deduction of section 167(a) is determined by using the 

applicable depreciation method, recovery period, and convention. 

Only the applicable recovery period is in issue. Under section 168(c) and (e), the classification of tangible property 

determines its recovery period. Section 168(i)(1) defines 

‘‘class life’’ as that ‘‘which would be applicable with respect 

to any property as of January 1, 1986, under subsection (m) 

of section 167’’. Repealed in 1990, section 167(m) provided for 

depreciation according to ‘‘the class life prescribed by the 

Secretary which reasonably reflects the anticipated useful 

life of that class property to the industry or other group.’’ 

Essentially, section 167(m) codified the Asset Depreciation 

Range system described in section 1.167(a)–11, Income Tax 

Regs., and in particular the system of asset guideline classes 

and periods (sometimes, class lives) found therein. See H. 

Rept. 92–533, at 30–35 (1971), 1972–1 C.B. 498, 514–516; S. 

Rept. 92–437, at 45–52 (1971), 1972–1 C.B. 559, 584–588. 

Section 167(m) confirmed the Secretary’s authority to prescribe class lives. Accordingly, section 1.167(a)–11(b)(4)(ii), 

Income Tax Regs., states: ‘‘Asset guideline classes and 

periods * * * [will] be established, supplemented, and 

revised * * *, and will be published in the Internal Revenue 

(176) PPL CORP. & SUBS. v. COMMISSIONER 181

3 Congress revoked the authority of the Secretary to prescribe new class lives in the Technical 

and Miscellaneous Revenue Act of 1988, Pub. L. 100–647, sec. 6253, 102 Stat. 3753. 

Bulletin.’’ The regulation refers to Rev. Proc. 72–10, 1972–1 

C.B. 721, as setting forth the applicable ‘‘asset guideline 

classes’’. See sec. 1.167(a)–11(b)(4)(ii), Income Tax Regs. Rev. 

Proc. 72–10, supra, was the first of several revenue procedures establishing asset guideline classes, each superseding 

its predecessor and culminating in Rev. Proc. 87–56, supra. 

Rev. Proc. 87–56, supra, established the asset guideline 

classes in effect for purposes of this case. 3

The specific asset guideline classes in issue are asset class 

49.14, Electric Utility Transmission and Distribution Plant, 

and asset class 00.3, Land Improvements. The former 

includes ‘‘assets used in the * * * distribution of electricity 

for sale’’, id., 1987–2 C.B. at 685; the latter includes 

‘‘improvements directly to or added to land’’, id., 1987–2 C.B. 

at 677. If placed in service after December 31, 1986, assets 

in asset class 49.14 have a recovery period of 20 years, id., 

1987–2 C.B. at 685, and assets in asset class 00.3 have a 

recovery period of 15 years, id., 1987–2 C.B. at 677. Property 

without a class life and not otherwise classified under section 

168(e)(2) and (3) is ‘‘7-year property’’. Sec. 168(e)(3)(C)(ii); 

Rev. Proc. 87–56, 1987–2 C.B. at 675. We sometimes refer to 

property without a class life as being in the residual class. 

The recovery period for 7-year property is 7 years. Sec. 

168(c)(1). 

Section 1.167(a)–11(b)(4)(iii)(b), Income Tax Regs., provides 

that 

property shall be included in the asset guideline class for the activity in 

which the property is primarily used. * * * Property shall be classified 

according to primary use even though the activity in which such property 

is primarily used is insubstantial in relation to all the taxpayer’s activities. 

***

III. The Positions of the Parties

We must first find whether street light assets are ‘‘primarily used’’, see sec. 1.167(a)–11(b)(4)(iii)(b), Income Tax 

Regs., in the ‘‘distribution of electricity for sale’’ and so properly classified under asset class 49.14, see Rev. Proc. 87–56, 

1987–2 C.B. at 685. If they are not, then we must find 

whether they are land improvements under asset class 00.3. 

182 135 UNITED STATES TAX COURT REPORTS (176) 

4The parties bifurcate their analyses of asset class 49.14, considering the question of the distribution of electricity separately from the question of the sale of electricity. We are not convinced, however, that the analysis involves two distinct questions. 

5To be clear, we find that no one uses street light assets in the distribution of electricity for 

sale. For that reason, we need not reconsider our holding in Clajon Gas Co., L.P. v. Commissioner, 119 T.C. 197 (2002) (Clajon I), revd. 354 F.3d 786 (8th Cir. 2004) (Clajon II), and Duke 

Energy Natural Gas Corp. v. Commissioner, 109 T.C. 416 (1997) (Duke Energy I), revd. 172 F.3d 

1255 (10th Cir. 1999) (Duke Energy II). Those cases involved essentially the same fact pattern; 

the taxpayer, the owner of gathering pipelines, transported natural gas under contract to operators of processing plants and transmission lines. Clajon I, 119 T.C. at 199–200; Duke Energy 

I, 109 T.C. at 417–418. In determining the proper asset guideline class for the gathering pipelines, we focused on the taxpayer’s use of those assets. Clajon I, 119 T.C. at 207–213; Duke Energy I, 109 T.C. at 421. The Courts of Appeals, however, focused on their use in the industry. 

Clajon II, 354 F.3d at 789–790; Duke Energy II, 172 F.3d at 1258–1259. Because we find that 

no one—not petitioner, not any municipality—uses street light assets primarily for the distribution of electricity for sale, we need not today address those conflicting approaches. 

See id., 1987–2 C.B. at 677. Respondent argues that street 

light assets fall within asset class 49.14; in the alternative, 

he argues that they fall within asset class 00.3. Petitioner 

argues that they fall within neither. First, we find that street 

light assets are not used in the distribution of electricity for 

sale. 4 Second, we find that they are not land improvements. 

Our analysis follows. 

IV. The Distribution of Electricity for Sale

A. Introduction

Petitioner bears the burden of proof, see Rule 142(a), and 

has carried that burden. Street light assets are ‘‘primarily 

used’’ to make light, not to distribute electricity. See sec. 

1.167(a)–11(b)(4)(iii)(b), Income Tax Regs. Moreover, that the 

activity of making light is insubstantial in relation to all 

petitioner’s activities is irrelevant. See id. We thus find that 

street light assets are not used in the distribution of electricity for sale. 5

B. Respondent’s Arguments

Respondent makes six arguments to the contrary, which 

we shall address in turn. 

1. The Distribution and the Sale of Electricity

Respondent argues that, under a plain reading of the 

statute, the regulations, and Treasury guidance, street light 

assets are used both in the distribution of electricity and in 

the sale of electricity. For that reason, notwithstanding that 

street light assets convert electricity to light, respondent conVerDate 0ct 09 2002 11:03 May 29, 2013 Jkt 372897 PO 20009 Frm 00007 Fmt 2847 Sfmt 2847 V:\FILES\PPL.135 SHEILA
(176) PPL CORP. & SUBS. v. COMMISSIONER 183

6The Edison Electric Institute Glossary of Electric Industry Terms (April 2005) provides additional support for that proposition by defining the following terms.

Distribution, Electric The process of delivering electricity from convenient points on the transmission system to consumers. 

* * * * * * *

Distribution System The network of wires and equipment that is dedicated to delivering electric energy from the transmission system to the customer’s premises. * * *

(We quote the April 2005 edition because that is the edition the parties filed as a joint exhibit.) 

7That some street light assets include convenience outlets does not make those street light 

assets distribution assets. Convenience outlets—18 feet above ground—are used mostly for decorative holiday lighting. They are, as intended, a convenience, and their presence does not transform street light assets into distribution assets. 

cludes that street light assets are used in the distribution of 

electricity for sale. 

a. The Distribution of Electricity

Respondent states that, because street and area lighting is 

an electric service and because ‘‘a distribution system will 

typically include all assets used to provide electric services’’, 

street light assets are part of the distribution system. That 

argument relies completely on the statement that ‘‘a distribution system will typically include all assets used to provide 

electric services’’, which respondent neither explains nor supports. For the following reasons, we are not convinced. 

The parties stipulated that distribution is ‘‘the delivery of 

electric energy to customers’’ and ‘‘the final utility step in the 

provision of electric service to customers’’. That is consistent 

with a standard definition of distribution as ‘‘the process by 

which commodities get to final consumers’’. Webster’s Fourth 

New World College Dictionary 418 (2007). We find that definition apposite and, well, illuminating. The distribution of 

electricity seems to us to be the process by which electricity 

(the commodity) gets to final consumers. 6 Respondent compares street light assets to service drops (the connection 

between a secondary distribution line and a customer). Yet 

service drops are fundamentally different from street light 

assets. Service drops are a part—the final part—of the distribution of electricity, for the simple reason that service 

drops facilitate the process by which electricity gets to final 

consumers. In contrast, whereas service drops get final consumers electricity, street light assets get them light. 7

Respondent, in the end, seems to suggest that simply 

because street light assets are connected to the distribution 

184 135 UNITED STATES TAX COURT REPORTS (176) 

system, they are necessarily a part thereof. We cannot agree. 

Street light assets are distinct from distribution assets; they 

have a different purpose and a different function. Moreover, 

street light assets can be disconnected from the distribution 

system without disturbing the distribution of electricity to 

any customer. Indeed, petitioner has sold street light assets 

to municipalities without affecting other customers in any 

way. 

Tenn. Natural Gas Lines, Inc. v. Commissioner, 71 T.C. 74 

(1978), and Ill. Cereal Mills, Inc. v. Commissioner, T.C. 

Memo. 1983–469, affd. on another ground 789 F.2d 1234 (7th 

Cir. 1986), both support petitioner. In Tenn. Natural Gas 

Lines, Inc. v. Commissioner, supra at 77, the taxpayer built 

a liquefied natural gas (LNG) storage facility to store gas in 

the summer (when demand is low) for use in the winter 

(when demand is high). The taxpayer argued that the liquefaction and vaporization equipment fell within asset class 

49.23, Natural gas production plant, because its function was 

‘‘similar to those of a natural gas production plant.’’ Id. at 93; 

see Rev. Proc. 72–10, 1972–1 C.B. at 730. Specifically, the 

taxpayer argued that ‘‘in the liquefaction process impurities 

are removed from the gas, just as impurities are removed 

from natural gas at the wellhead.’’ Tenn. Natural Gas Lines, 

Inc. v. Commissioner, supra at 93. The Commissioner argued 

that the liquefaction and vaporization equipment fell within 

asset class 49.24, Trunk pipelines and related storage facilities, because ‘‘the natural gas which enters the facility is 

already in a marketable state—further purification is needed 

for purposes of storage, not marketing’’; therefore, ‘‘the LNG

facility is nothing more than a complicated storage facility’’. 

Id.; see Rev. Proc. 72–10, 1972–1 C.B. at 730. The Court 

found for the Commissioner, stating: 

We note that * * * [section 1.167(a)–11(b)(4)(ii)(b), Income Tax Regs.] does 

not refer to the nature of the equipment or the manner in which it operates; rather, this regulation emphasizes the use to which the equipment 

is put. In this case, the sole use of the entire LNG facility is to make natural gas suitable for storage. Marketable natural gas enters the facility, 

is stored, and approximately the same volume of marketable natural gas 

leaves the facility when the gas is needed for consumption. In no way is 

a marketable product produced by the LNG facility—a marketable product 

is merely stored there. [Tenn. Natural Gas Lines, Inc. v. Commissioner, 

supra at 94.] 

(176) PPL CORP. & SUBS. v. COMMISSIONER 185

Again, section 1.167(a)–11(b)(4)(iii)(b), Income Tax Regs., 

provides that ‘‘Property shall be classified according to primary use even though the activity in which such property is 

primarily used is insubstantial in relation to all the taxpayer’s activities.’’ Here, although wires within street light 

assets move electricity from distribution lines all the way to 

the luminaires, the sole purpose and primary use of the 

equipment is to produce light, not to distribute electricity. 

Tenn. Natural Gas Lines supports petitioner. 

In Ill. Cereal Mills, Inc. v. Commissioner, supra, the taxpayer was in the corn milling business and ‘‘purchased and 

processed vast amounts of shelled corn.’’ The taxpayer 

argued that the grain storage tanks owned by its subsidiary 

fell within asset class 01.1, Machinery and equipment, 

including grain bins and fences but no other land improvements. See Rev. Proc. 72–10, 1972–1 C.B. at 723. Asset class 

01.1 fell within the business-activity category 01.0, Agriculture, which included ‘‘only such assets as are * * * used 

in the production of crops * * * [or] the performance of agricultural * * * services.’’ Id. The Commissioner argued that 

the grain storage tanks did not fall within asset class 01.1 

because the taxpayer ‘‘primarily used [them] as storage for 

* * * raw materials for its manufacturing processes.’’ Ill. 

Cereal Mills, Inc. v. Commissioner, supra. The Court found 

for the taxpayer because the subsidiary operated the storage 

facility ‘‘in the same manner’’ as the previous owner. Id.

Moreover, even though the taxpayer purchased ‘‘between 45 

and 60 percent of the grain’’ that the subsidiary stored at the 

storage facility, the taxpayer ‘‘would do so regardless of who 

owned and operated the facility.’’ Id. The Court considered 

the grain storage business ‘‘at most * * * merely complementary’’ to the taxpayer’s corn milling and manufacturing operation. Id. Importantly, the Court doubted that the Commissioner would have challenged that the grain storage tanks 

were ‘‘used in the production of crops’’ or ‘‘the performance 

of agricultural * * * services’’ had the storage facility been 

‘‘owned and operated by someone other than’’ the taxpayer or 

its subsidiary. Id.

Similarly, we doubt that respondent would assert that 

street light assets were used in the distribution of electricity 

for sale were they owned and operated by some entity other 

than an electric utility. Ill. Cereal Mills supports petitioner. 

186 135 UNITED STATES TAX COURT REPORTS (176) 

8The middle term is the one (the sale of an electric service) that appears in both the major 

(first) and minor (second) premises. It is undistributed because neither premise describes every

sale of an electric service; rather, the premises describe subsets of those sales that do not necessarily coincide. Therefore, the middle term fails to connect the sale of street and area lighting 

to the sale of electricity; both kinds of sales could separately constitute sales of electric services. 

b. The Sale of Electricity

Respondent implicitly argues according to the following 

syllogism: (1) The sale of street and area lighting is the sale 

of an electric service; (2) the sale of electricity is the sale of 

an electric service; and, therefore, (3) the sale of street and 

area lighting is the sale of electricity. Even assuming the 

truth of the premises (which we do not), that syllogism is 

invalid; specifically, it is an example of the fallacy of the 

undistributed middle. 8 In other words, an answer to 

respondent’s argument is that not every sale of an electric 

service is the sale of electricity. 

The syllogistic fallacy notwithstanding, petitioner uses 

street light assets to sell light, not electricity. Electricity is 

simply the raw material street light assets use to make light. 

2. Analogy With Asset Class 49.21

Respondent asserts that asset class 49.14, Electric Utility 

Transmission and Distribution Plant, is analogous to asset 

class 49.21, Gas Utility Distribution Facilities, which 

‘‘[i]ncludes gas water heaters and gas conversion equipment 

installed by utility on customers’ premises on a rental basis’’. 

Rev. Proc. 87–56, 1987–2 C.B. at 685. Respondent argues 

that, if asset class 49.21 includes ‘‘gas conversion equipment’’, then, by analogy, asset class 49.14 includes ‘‘electricity conversion equipment’’ such as street light assets. 

Respondent’s argument is unconvincing; indeed, its logic 

cuts against him. The implicit premise of his argument is 

that the inclusion in asset class 49.21 of ‘‘gas water heaters 

and gas conversion equipment’’ was unnecessary. That is, 

asset class 49.21 would have encompassed those assets even 

without their explicit inclusion. Only that can explain 

respondent’s conclusion that asset class 49.14 includes ‘‘electricity conversion equipment’’ despite the lack of any reference thereto. 

Respondent seems to have the argument backward. Much 

more likely is that asset class 49.21 explicitly includes ‘‘gas 

conversion equipment’’ precisely because otherwise it would 

(176) PPL CORP. & SUBS. v. COMMISSIONER 187

not. (Respondent does not explain the reason asset class 

49.21 includes the superfluous ‘‘gas conversion equipment’’.) 

Therefore, respondent’s argument cuts in favor of petitioner, 

because the absence of any reference to ‘‘electricity conversion equipment’’ in asset class 49.14 suggests that asset class 

49.14 does not include such equipment. As petitioner 

observes, the Commissioner had the authority to include 

‘‘electricity conversion equipment’’ (or, even better, ‘‘street 

and area lights’’) in asset class 49.14, and he did not. 

3. The Business-Activity Category

Asset class 49.14 falls within the business-activity category 

titled ‘‘Electric, Gas, Water and Steam, Utility Services’’, see 

Rev. Proc. 87–56, 1987–2 C.B. at 685, which respondent 

asserts ‘‘broadly encompasses any activity involving the sale 

of electricity, gas, steam, or water services.’’ Rev. Proc. 87–

56, 1987–2 C.B. at 685, however, is not quite that broad, 

stating that the business-activity category in question 

‘‘[i]ncludes assets used in the production, transmission and 

distribution of electricity, gas, steam, or water for sale 

including related land improvements.’’ Respondent, at best, 

misquotes the business-activity category. Regardless, barring 

circular arguments, the actual business-activity category in 

question in no way supports respondent. 

4. The Regulatory Framework

In 1997, PP&L was a regulated utility subject to the 

National Electric Safety Code (NESC), the National Electric 

Code (NEC), the Occupational Safety and Health Administration (OSHA), the Federal Energy Regulatory Commission 

(FERC), and the Pennsylvania Public Utilities Commission 

(PUC). Respondent argues that the frameworks of all five support his classification of street light assets. 

a. The Safety Codes

Three safety codes apply to street and area lighting: the 

NESC, the NEC, and the OSHA standards and regulations (the 

OSHA work rules). The purpose of the NESC is ‘‘the practical 

safeguarding of persons during the installation, operation, or 

maintenance of electric supply and communication lines and 

associated equipment’’; the purpose of the NEC is ‘‘the pracVerDate 0ct 09 2002 11:03 May 29, 2013 Jkt 372897 PO 20009 Frm 00012 Fmt 2847 Sfmt 2847 V:\FILES\PPL.135 SHEILA
188 135 UNITED STATES TAX COURT REPORTS (176) 

tical safeguarding of persons and property from hazards 

arising from the use of electricity.’’ The transition point 

between the NESC and the NEC is the service point. In effect, 

the NESC governs assets (including street light assets) that 

electric utilities control, and the NEC governs assets 

(including street light assets) that customers control. The 

OSHA work rules have a similar internal division: One set of 

rules, 29 C.F.R. sec. 1910.269 (1997), applies to electric 

power generation, transmission, and distribution; and 

another, 29 C.F.R. sec. 1910.302 (1997), applies to electric 

utilization systems. Again, the dividing line is control. 

First, the NESC (and not the NEC) controls here because the 

NESC governs street light assets that PP&L controlled. Under 

the NESC, ‘‘utilization equipment’’ includes ‘‘[e]quipment, 

devices, and connected wiring that utilize electric energy for 

mechanical, chemical, heating, lighting, testing, or similar 

purposes and are not a part of supply equipment, supply 

lines, or communication lines.’’ ‘‘Electric supply equipment’’ 

includes ‘‘[e]quipment that produces, modifies, regulates, controls, or safeguards a supply of electric energy.’’ Respondent 

argues that street light assets are electric supply equipment 

because they ‘‘modify, regulate, and control the supply of 

electricity to customers.’’ Such a broad reading of electric 

supply equipment not only ignores but also guts the definition of utilization equipment. What could possibly fall within 

the latter given respondent’s broad reading of the former? 

Respondent is incorrect; we find that street light assets use 

‘‘electric energy for * * * lighting’’. For that reason, under 

the NESC, street light assets are utilization equipment. The 

NESC supports petitioner. 

Second, the OSHA work rules that govern street light assets 

that PP&L controlled are those that apply to electric power 

generation, transmission, and distribution. The two sets of 

OSHA work rules are intended to separate those assets that 

electric utilities generally control (‘‘electric power generation, 

control, transformation, transmission, and distribution lines 

and equipment’’, 29 C.F.R. sec. 1910.269(a)(1)(i)) from those 

assets that others generally control (‘‘electrical installations 

and utilization equipment installed or used within or on 

buildings, structures, and other premises’’, 29 C.F.R. sec. 

1910.302(a)(1)). Given the problem we here face, we find the 

OSHA work rules without probative—and certainly without 

(176) PPL CORP. & SUBS. v. COMMISSIONER 189

9 In Saginaw Bay Pipeline Co. v. United States, 338 F.3d 600, 605–606 n.9 (6th Cir. 2003), 

the Court of Appeals for the Sixth Circuit rejected the reliance of the trial court on a case of 

the Court of Appeals for the Fifth Circuit. In that case, the Court of Appeals for the Fifth

Circuit ‘‘had construed federal natural gas pipeline safety regulations to require that ‘gathering’ 

lines must attach directly to wellheads.’’ Id. The Court of Appeals for the Sixth Circuit not only 

found the construction of the safety regulation to be ‘‘facially open to question’’, but noted that 

‘‘any persuasive weight’’ the case might have ‘‘would be restricted to construction of the laws 

governing natural gas pipeline safety’’. Id. ‘‘No evident rationale supports the application of a 

safety regulation’s judicially-refined definition of ‘gathering pipeline’ to the income tax depreciation regulations, given the total dissimilarity of the purposes of the two sets of standards.’’ Id.

We are similarly reluctant to consider electric safety regulations relevant to those same income 

tax depreciation regulations. 

legal—value. 9 The OSHA work rules do not support 

respondent. 

b. The Accounting Regulations

The FERC Uniform System of Accounts sets forth a 

standard system of accounting used by public utilities and 

other entities that, among other things, enables Federal, 

State, and municipal regulators to compare those public utilities and to set retail and wholesale rates for electricity. FERC

regulated PP&L’s wholesale rates. (PUC regulated PP&L’s 

retail rates.) PP&L recorded street light assets used for street 

lighting under FERC account 373, Street Lighting and Signal 

Systems, and recorded street light assets used for area 

lighting under FERC account 371, Installations on Customers’ 

Premises. FERC accounts 371 and 373 both fall under the 

heading Distribution Plant. 

PP&L reported its street and area lighting as the sale of 

kilowatt-hours, the basic unit of measurement for the supply 

of electricity. PP&L charged retail customers according to the 

electric rates that the applicable Pennsylvania regulatory 

agencies (primarily, PUC) established. In 1997, PP&L charged 

so-called bundled rates, meaning that every rate included the 

cost of generation, transmission, distribution, and all other 

cost components; that is, PP&L did not charge separately for 

each cost component. In 1997, street and area lighting constituted approximately 0.6 percent of PP&L’s total electricity 

sales. 

Respondent insists that, although ‘‘not determinative’’, the 

inclusion of street light assets in FERC accounts under the 

heading Distribution Plant is ‘‘persuasive’’ that both the electric utility industry and FERC consider street light assets ‘‘to 

be primarily used for distribution.’’ In support, respondent 

190 135 UNITED STATES TAX COURT REPORTS (176) 

10The relevant FERC account is account 444, Public Street and Highway Lighting. There are 

two subheadings under the heading Operating Revenue; viz, (1) Sales of Electricity and (2) 

Other Operating Revenues. Account 444 is under the first subheading, Sales of Electricity. Account 444 ‘‘[includes] the net billing for electricity supplied and services rendered for the purposes of lighting streets, highways, parks and other public places * * * for municipalities or 

other divisions or agencies of state or Federal Governments.’’ That FERC included account 444 

under Sales of Electricity strikes us as sensible; electricity is the critical raw material required 

for street and area lighting, and reporting street and area lighting revenues as the sale of electricity surely simplifies the accounting. 

invokes Duke Energy Natural Gas Corp. v. Commissioner, 

172 F.3d 1255 (10th Cir. 1999), revg. 109 T.C. 416 (1997). In 

that case, the Court of Appeals for the Tenth Circuit found 

the ‘‘distinction that FERC makes between gathering and 

transmission lines * * * persuasive that the gas industry 

and the regulatory body overseeing it consider gathering systems to be used for the activity of production, rather than 

transportation.’’ Id. at 1262. 

Respondent has failed to convince us that the inclusion of 

street light assets in FERC accounts under the heading Distribution Plant suggests anything about the proper classification of those assets for purposes of depreciation. In 1922, the 

Federal Power Commission (FERC’s predecessor) adopted the 

first Uniform System of Accounts, which included account 

357, Street lighting equipment, under the heading Utilization 

Capital. In 1936, the Federal Power Commission revised the 

Uniform System of Accounts, eliminating the separate functional groupings for Utilization Capital (and for Joint Transmission and Distribution Capital). We are not convinced that 

the change represented anything more than an attempt to 

simplify the regulatory regime. 

That FERC required PP&L to account for street and area 

lighting revenues as sales of electricity does not necessarily 

mean that service is best characterized as the sale of electricity; it could simply mean that the distinction was not 

sufficiently important to be made for regulatory purposes. 

Indeed, given that in 1997 street and area lighting constituted less than 1 percent of PP&L’s total electricity sales, 

the latter explanation strikes us as highly plausible. 10

The Supreme Court has long recognized ‘‘the vastly different objectives that financial and tax accounting have.’’ 

Thor Power Tool Co. v. Commissioner, 439 U.S. 522, 542 

(1979). 

(176) PPL CORP. & SUBS. v. COMMISSIONER 191

11That argument, if stated as a syllogism, is another example of the fallacy of the undistributed middle. See supra note 8 and accompanying text. 

The primary goal of financial accounting is to provide useful information 

to management, shareholders, creditors, and others properly interested; 

the major responsibility of the accountant is to protect these parties from 

being misled. The primary goal of the income tax system, in contrast, is 

the equitable collection of revenue; the major responsibility of the Internal 

Revenue Service is to protect the public fisc. * * * [Id.] 

We find the FERC Uniform System of Accounts to be of little 

relevance in answering the question before us. 

5. PP&L’s Treatment of Street Light Assets

Respondent argues that PP&L treated street light assets 

no differently from other distribution assets, and thus he 

concludes that street light assets are distribution assets. 11

First, ‘‘PP&L’s transmission and distribution personnel operated and maintained PP&L’s street and area lighting’’. 

Second, ‘‘PP&L’s distribution specifications and instruction 

manuals incorporate specifications and engineering instructions for street and area lighting.’’ Third, ‘‘PP&L warehouses 

its Street Light Assets at its System Facilities Center in 

Hazelton, Pennsylvania, and commingles the Street Light 

Assets with other distribution materials.’’ Fourth, ‘‘in identifying Street Light Assets * * * for internal use, PP&L 

groups Street Light Assets with its distribution facilities.’’ 

Surely what PP&L did was for convenience. Respondent’s 

argument is of no avail. 

6. The Intent of Treasury

Respondent argues: 

Treasury designed the asset classification system to be as comprehensive 

as possible. Electric utility street [and area] lighting predates the asset 

classification system by more than half a century. * * * It is unlikely that 

Treasury simply ignored street [and area] lighting or intended to exclude 

street [and area] lighting from the applicable classes. 

* * * * * * *

* * * the asset classification system addresses all the industry’s primary 

activities, including street and area lighting. * * * As a matter of historical fact and industry practice, street and area lighting is part of distribution. * * * Treasury therefore intended for the classification system to 

incorporate street and area lighting as part of a utility’s distribution 

activity. 

192 135 UNITED STATES TAX COURT REPORTS (176) 

Respondent makes a plausible argument yet presents no evidence in its support. Even if Treasury intended asset class 

49.14 to include street light assets, however, a preponderance 

of the evidence supports our conclusion that asset class 49.14 

does not include those assets. Again, had the Commissioner 

explicitly included ‘‘electricity conversion equipment’’ in asset 

class 49.14, just as he included ‘‘gas conversion equipment’’ 

in asset class 49.21, we might answer the question before us 

differently. See Rev. Proc. 87–56, 1987–2 C.B. at 685. For 

whatever reason, he did not. Because street light assets are, 

in fact, primarily used to provide a lighting service and not 

to distribute electricity for sale, to resolve any ambiguity 

about the intent of the Treasury against respondent is under 

the circumstances fair and proper. 

C. Conclusion

We find that petitioner has carried its burden of proof. 

Street light assets are ‘‘primarily used’’ to make light, not to 

distribute electricity. See sec. 1.167(a)–11(b)(4)(iii)(b), Income 

Tax Regs. Quite simply, street light assets provide light for 

public safety. Moreover, that that activity is insubstantial in 

relation to all petitioner’s activities is irrelevant. See id. We 

thus find that street light assets are not used in the distribution of electricity for sale. 

V. Land Improvements

A. Introduction

Although at trial respondent waived any argument that 

street light assets fell into any asset class other than asset 

class 49.14, on brief respondent suggested for the first time 

that ‘‘in the hands of a * * * taxpayer that does not sell electricity, Street Light Assets constitute a land improvement.’’ 

Because respondent appeared to raise a new argument on 

brief, we ordered the parties to address the question. 

In his supplemental brief, respondent argues that if street 

light assets do not fall within asset class 49.14, then they fall 

within asset class 00.3, Land Improvements, which includes 

‘‘improvements directly to or added to land’’. See Rev. Proc. 

87–56, 1987–2 C.B. at 677 (‘‘Examples of * * * [land 

improvements] might include sidewalks, roads, canals, waterways, drainage facilities, sewers * * *, wharves and docks, 

(176) PPL CORP. & SUBS. v. COMMISSIONER 193

bridges, fences, landscaping, shrubbery, or radio and television transmitting towers.’’). Petitioner denies that street 

light assets are land improvements. We agree with petitioner. 

Because he raises a new argument on brief that strikes us 

as contrary to his principal argument, respondent bears the 

burden of proving that, if street light assets do not fall 

within asset class 49.14, then they fall within asset class 

00.3. See Rule 142(a); see also Shea v. Commissioner, 112 

T.C. 183 (1999). Respondent does not argue otherwise. 

B. Analysis

In Trentadue v. Commissioner, 128 T.C. 91, 99 (2007), we 

described the standards applicable to classifying assets as 

land improvements. We stated: ‘‘Generally, the [applicable] 

class life categories cover two broad groupings—permanent 

improvements to real property, and machinery and equipment that is not a real property improvement.’’ Id. at 98. We 

addressed the proper classification of certain assets the taxpayers used in their vineyard: trellises for the grapevines, 

the drip irrigation system, and a well. Id. at 93–97. In our 

analysis, we applied the guidelines we had derived in 

Whiteco Indus., Inc. v. Commissioner, 65 T.C. 664 (1975) 

(finding that, for purposes of the investment tax credit, outdoor advertising signs constituted tangible personal property, 

not land improvements). Although the guidelines comprise 

six factors, 

their primary focus is the question of the permanence of depreciable property and the damage caused to it or to realty upon removal of the depreciable property. No one factor has been considered to be determinative, and 

the guidelines have been used merely as an aid to deciding whether a particular property is or is not a permanent improvement to real property. 

[Trentadue v. Commissioner, supra at 99.] 

As to street lights bolted to wood poles and area lights 

bolted to buildings, we find that, under the Whiteco Indus.

guidelines, those street light assets are not affixed to anything in an inherently permanent way. Cf. Standard Oil Co. 

v. Commissioner, 77 T.C. 349, 406 (1981) (‘‘Without extensive 

consideration, it is clear to us that, under the standards 

enunciated in the Whiteco case, the sign heads and light fixtures are not affixed to anything in an inherently permanent 

194 135 UNITED STATES TAX COURT REPORTS (176) 

12 Respondent cites Metro Natl. Corp. v. Commissioner, T.C. Memo. 1987–38, for the proposition that sprinkler heads are an essential part of an underground water system even though 

they are easily disconnected from that system. Because sprinkler heads are functionally ‘‘inseparable from, and give utility to, the underground pipes’’, they are part of the underground water 

system, an inherently permanent structure. Id. Respondent argues that street light assets are 

analogous to sprinkler heads. We disagree. Street light assets are not functionally inseparable 

from, and do not give utility to, distribution lines. (Service drops, however, are functionally inseparable from, and do give utility to, those lines. Thus, service drops, and not street light assets, are analogous to sprinkler heads. See supra sec. IV.B.1.a. of this report, in which we discuss the difference between service drops and street light assets.) 

13See infra note 14 for a discussion of nonboulevard fiberglass poles. 

way.’’); Musco Sports Lighting, Inc. v. Commissioner, T.C. 

Memo. 1990–331 (‘‘The lights in the instant case were merely 

bolted to the poles so, like the signs and lights in Standard 

Oil, they were not affixed to anything in an inherently 

permanent way.’’), affd. 943 F.2d 906 (8th Cir. 1991). 12 As to 

street lights mounted on aluminum, steel, and boulevard 

fiberglass poles, 13 we discuss each Whiteco Indus. factor in 

turn. 

1. ‘‘Is the property capable of being moved, and has it in 

fact been moved?’’ Whiteco Indus., Inc. v. Commissioner, 

supra at 672. 

Street light assets are capable of being moved, and they 

have in fact been moved. Aluminum, steel, and boulevard 

fiberglass poles are bolted to concrete foundations. The poles 

can be quickly removed by loosening the bolts and are generally reused in other installations. Indeed, petitioner’s 

engineering instructions for street and area lighting directs 

that ‘‘[l]ow-mounted fluted (boulevard) standards shall not be 

scrapped.’’ Moreover, in many cases the foundations are precast concrete ‘‘plugs’’ that can be reused. 

Street light assets have been moved and reused, and petitioner’s practice is to store used street light assets for future 

use. Accordingly, the first factor suggests that street light 

assets are not land improvements. Cf. Trentadue v. Commissioner, supra at 100 (finding that the first factor suggested 

that trellises were not land improvements because they had 

been moved and reused and the drip irrigation system was 

a land improvement because few of its components could be 

reused if removed); Standard Oil Co. v. Commissioner, supra

at 407 (finding that poles for service station signs and 

lighting ‘‘designed to be bolted to * * * concrete foundations 

were moved from place to place * * * [and] were certainly 

capable of being removed, stored, and reinstalled at other 

(176) PPL CORP. & SUBS. v. COMMISSIONER 195

locations’’); Whiteco Indus., Inc. v. Commissioner, supra at 

672 (finding that the first factor suggested the signs were not 

land improvements because they ‘‘are capable of being moved 

and have in fact been moved’’). 

2. ‘‘Is the property designed or constructed to remain 

permanently in place?’’ Whiteco Indus., Inc. v. Commissioner, 

supra at 672. 

Although street light assets can remain in place for their 

entire useful lives, they are both designed and constructed to 

be moved if necessary. Notwithstanding that street light 

assets are built to last, they are also built to be moved; they 

are not meant to remain permanently in place. Accordingly, 

the second factor suggests that street light assets are not 

land improvements. Cf. Trentadue v. Commissioner, supra at 

100–101 (finding that the second factor suggested that 

trellises were not land improvements because they were 

‘‘changed or modified to accommodate the growth or the 

feeding of the vines’’ and the drip irrigation system was a 

land improvement because, with a few exceptions, ‘‘removal 

of the pipes and tubes is not easily accomplished, and so, for 

all practical purposes, they are permanently embedded in the 

ground’’); Standard Oil Co. v. Commissioner, supra at 407–

408 (finding that poles ‘‘designed to be bolted to the appropriate concrete foundations were, because of such design, 

meant to be movable * * * [and thus] were not designed to 

remain permanently in place’’); Whiteco Indus., Inc. v. 

Commissioner, 65 T.C. at 672 (finding that the second factor 

suggested that the signs were not land improvements 

because they ‘‘are designed or constructed to last for the term 

of a contract * * * [(an average of 5 years), after which] the 

sign structure requires substantial renovation’’). 

3. ‘‘Are there circumstances which tend to show the 

expected or intended length of affixation, i.e., are there circumstances which show that the property may or will have 

to be moved?’’ Whiteco Indus., Inc. v. Commissioner, supra at 

672. 

Petitioner does not intend, and cannot realistically expect, 

street light assets to remain permanently in place. Petitioner 

often needs to move street light assets before the end of their 

useful lives, and thus the affixation of street light assets is 

inherently temporary. For example, street light assets are 

moved when streets and sidewalks are redone. Accordingly, 

196 135 UNITED STATES TAX COURT REPORTS (176) 

the third factor suggests that street light assets are not land 

improvements. Cf. Trentadue v. Commissioner, 128 T.C. at 

101 (finding that the third factor suggested that trellises and 

the drip irrigation system were land improvements because 

they were expected to service the grapevines during their 

useful lives); Standard Oil Co. v. Commissioner, 77 T.C. at 

408 (‘‘The poles designed to be bolted to the appropriate 

foundations were so designed because there are many circumstances that show that such poles might or would have 

to be moved.’’); Whiteco Indus., Inc. v. Commissioner, supra

at 672–673 (finding that the third factor suggested that the 

signs were not land improvements because the taxpayer 

‘‘does not intend, nor could it realistically expect, the signs 

to remain permanently in place’’). 

4. ‘‘How substantial a job is removal of the property and 

how time-consuming is it? Is it ‘readily removable’ ? ’’ Whiteco 

Indus., Inc. v. Commissioner, supra at 673. 

The removal of street light assets is a relatively quick and 

easy process. Aluminum, steel, and boulevard fiberglass poles 

need simply to be unbolted from their concrete foundations, 

which are themselves often easily removed from the ground. 

Accordingly, the fourth factor suggests that street light 

assets are not land improvements. Cf. Trentadue v. Commissioner, supra at 102 (finding that the fourth factor was neutral as to trellises and the drip irrigation system because the 

removal of both ‘‘would be time consuming if the components 

were being salvaged for future use’’ but otherwise would be 

‘‘quick and inexpensive’’); Standard Oil Co. v. Commissioner, 

supra at 409 (finding that poles that took up to ‘‘24 manhours of jobsite labor’’ to remove were ‘‘readily removable’’); 

Whiteco Indus., Inc. v. Commissioner, supra at 673 (finding 

that the fourth factor suggested that the signs were not land 

improvements because the ‘‘disassembly and removal of a 

sign is a relatively quick and easy process’’); JFM, Inc. & 

Subs. v. Commissioner, T.C. Memo. 1994–239 (‘‘Although the 

[gasoline pump] canopy components are collectively formidable, the whole structure can be erected * * * or dismantled and moved in a few days.’’). 

5. ‘‘How much damage will the property sustain upon its 

removal?’’ Whiteco Indus., Inc. v. Commissioner, supra at 

673. 

(176) PPL CORP. & SUBS. v. COMMISSIONER 197

The removal of street light assets does not damage them. 

Removing aluminum, steel, and boulevard fiberglass poles 

from concrete foundations involves simply loosening the 

bolts. No damage to street light assets or to any other property occurs. After the removal of the precast concrete ‘‘plugs’’, 

the resulting hole is filled with earth. Any disturbance is 

minimal. Accordingly, the fifth factor suggests that street 

light assets are not land improvements. Cf. Trentadue v. 

Commissioner, supra at 103 (finding that the fifth factor was 

neutral as to trellises and the drip irrigation system because 

their careful removal would mean great cost and small damage, and their quick removal would mean small cost and 

great damage); Whiteco Indus., Inc. v. Commissioner, supra

at 673 (finding that the fifth factor suggested that the signs 

were not land improvements because ‘‘[m]uch of the sign 

assembly is not damaged when it is moved’’); Fox Photo, Inc. 

v. Commissioner, T.C. Memo. 1990–348 (finding that modular, 1-hour photo labs, located predominantly in shopping 

center parking lots, ‘‘could be moved in 12 to 18 hours by five 

men in 2 to 3 days sustaining damage that was cheaper to 

repair than building a new lab’’). 

6. ‘‘What is the manner of affixation of the property to the 

land?’’ Whiteco Indus., Inc. v. Commissioner, supra at 673. 

Aluminum, steel, and boulevard fiberglass poles are bolted 

to concrete foundations; they are not permanently affixed to 

the land. Accordingly, the sixth factor suggests that street 

light assets are not land improvements. Cf. Trentadue v. 

Commissioner, supra at 103 (finding that the sixth factor 

suggested that the trellises, not set in concrete and so easily 

removed, were not land improvements and that the drip 

irrigation system, buried in the ground and not easily 

removed, was a land improvement); Whiteco Indus., Inc. v. 

Commissioner, supra at 673 (finding that the sixth factor 

suggested that the signs were not land improvements 

because, even though the poles were set in concrete, the 

poles ‘‘can easily be removed from the ground, and as a 

matter of practice, they are so removed’’). 

C. Conclusion

Every Whiteco Indus. factor suggests that street light 

assets bolted to concrete foundations are not land improveVerDate 0ct 09 2002 11:03 May 29, 2013 Jkt 372897 PO 20009 Frm 00022 Fmt 2847 Sfmt 2847 V:\FILES\PPL.135 SHEILA
198 135 UNITED STATES TAX COURT REPORTS (176) 

14 Nonboulevard fiberglass poles are embedded approximately 5 feet in the ground and 

backfilled with cement, stone, and tamped earth. The cement foundations cannot be reused. 

Whether the fiberglass poles themselves can be reused is not clear. In Standard Oil Co. v. Commissioner, 77 T.C. 349, 407–409 (1981), we faced an almost identical situation, albeit in the context of the investment tax credit. In that case, in the absence of evidence, we stated that poles 

‘‘embedded in concrete were probably movable’’, ‘‘seem as capable of being moved as those in 

Weirick v. Commissioner, [62 T.C. 446 (1974)]’’, ‘‘were possibly readily removable’’, and would 

sustain ‘‘possibly minimal’’ damage upon removal. Standard Oil Co. v. Commissioner, supra at 

407–409. We found that the taxpayer had 

failed to prove that the poles and * * * the concrete into which the [poles were] embedded are 

not ‘‘inherently permanent structures,’’ though, with proof such as that which the Court of 

Claims had before it in * * * [Southland Corp. v. United States, 222 Ct. Cl. 22, 611 F.2d 348 

(1979) (involving 20-foot poles holding signs outside ‘‘7-Eleven’’ stores)], we would likely find 

that they are not ‘‘inherently permanent structures.’’ [Id. at 409.] 

ments. There is not much evidence regarding nonboulevard 

fiberglass poles. 14 Yet respondent bears the burden of proof 

as to whether street light assets fall within asset class 00.3, 

and the parties address all street light assets as one indivisible group. We thus find that, for all street light assets, 

respondent has failed to carry his burden. We find that street 

light assets are not land improvements and that is consistent 

with our findings in several other cases. See Trentadue v. 

Commissioner, 128 T.C. at 106–107 (finding that trellises 

were not land improvements, but that the drip irrigation 

system was a land improvement); Standard Oil Co. v. 

Commissioner, 77 T.C. at 409 (finding that poles bolted to 

concrete foundations that held signs (ranging from 15 to 17 

feet and 90 to 110 feet) and lights were not land improvements); Whiteco Indus., Inc. v. Commissioner, 65 T.C. at 673 

(finding that wood advertising signs were not land improvements); JFM, Inc. & Subs. v. Commissioner, supra (finding 

that large gasoline pump canopies were not land improvements); Fox Photo, Inc. v. Commissioner, supra (finding that 

modular, one-hour photo labs were not land improvements). 

VI. Conclusion

Street light assets are neither assets used in the distribution of electricity for sale nor land improvements. Thus, 

street light assets do not fall within asset class 49.14 or asset 

class 00.3; rather, street light assets fall within the residual 

class. Street light assets are property without a ‘‘class life’’ 

and not otherwise classified under section 168(e)(2) and (3); 

they are, therefore, ‘‘7-year property’’. See sec. 

168(e)(3)(C)(ii); Rev. Proc. 87–56, 1987–2 C.B. at 675. As 

such, street light assets have a recovery period of 7 years. 

(176) PPL CORP. & SUBS. v. COMMISSIONER 199

See sec. 168(c)(1). For that reason, PP&L properly reclassified 

street light assets, and respondent incorrectly disallowed 

petitioner’s negative adjustment and depreciation consistent 

therewith. 

f