Opinion ID: 1443207
Heading Depth: 1
Heading Rank: 7

Heading: a ) Federal Income Tax Allowance :

Text: The Utility objects to the respondent's adjustment of its federal income tax savings, which result from filing a consolidated return (as noted in the historical prologue contained in this opinion, the Utility is a subsidiary of General Public Utilities Corporation). The respondent allowed the Utility only 50 per cent of the amount it claimed in this respect on the ground that it seems equitable to allocate 50 per cent of such savings to customers. The Utility contends that there is no evidence upon which to base any percentage and the principle applied is contrary to Law for the reason that customers have no equity in the funds of the company. See Board of P.U.C. v. New York Telephone Co., 271 U.S. 23, 31, 46 S.Ct. 363, 70 L.Ed. 808, 813 (1926). With this we agree, but the Utility is allowed a deduction from gross income for actual operating expenses only (or actual normalized operating expenses), and not for hypothetical expenses which did not and foreseeably will not occur. Thus it is entitled to an allowance for actual taxes and not for higher taxes that it would pay if it filed on a different basis. Compare Arkansas-Lousiana Gas Co. v. Texarkana, 17 F. Supp. 447, 464 ( D.C.W.D. Ark. 1936), affirmed 96 F. 2 d 179 (8 Cir., 1938), certiorari denied 305 U.S. 606, 59 S.Ct. 66, 83 L.Ed. 385 (1938); see also 97 F. 2 d 5 (5 Cir., 1938), reversed in part on other grounds, 306 U.S. 188, 59 S.Ct. 448, 83 L.Ed. 598 (1939). This results in a conclusion that the respondent's allowance to the Utility of even 50 per cent of the difference between actual and hypothetical taxes was in error. However, in view of the rising tax level now being experienced and the apparent satisfaction of the public with the existing rates of this public utility, and the fairness of the rate of return under the existing rates (hereinafter to be discussed) we find no reason in this case for reversal of the order of the respondent or reduction of the existing rates for the service rendered by the Utility.