Opinion ID: 2173310
Heading Depth: 1
Heading Rank: 2

Heading: Flow-through of Deferred State Income Taxes to Ratepayers

Text: In computing Continental's state income tax expense for rate-making purposes, the Commission flowed through the benefits of accelerated depreciation to the ratepayers. The issue of flow-through versus normalization of the benefits of accelerated depreciation has been the subject of considerable discussion by this Court in recent months. See Mars Hill & Blaine Water Co. v. Public Utilities Commission, Me., 397 A.2d 570, 578-81 (1979); New England Telephone & Telegraph Co. v. Public Utilities Commission, Me., 390 A.2d 8, 15-25 (1978); Central Maine Power Co. v. Public Utilities Commission, Me., 382 A.2d 302, 318-21 (1978); Mechanic Falls Water Co. v. Public Utilities Commission, Me., 381 A.2d 1080, 1100-03 (1977). Over twenty years ago, in Central Maine Power Co. v. Public Utilities Commission, 153 Me., 228, 246-49, 136 A.2d 726, 737-39 (1957), we held that the proper treatment of the benefits of accelerated depreciation lay within the reasoned judgment of the Commission. Our only concern since then has been the effect of section 167( l ) of the Internal Revenue Code, added by the Tax Reform Act of 1969, § 441(a). Mars Hill & Blaine Water Co. v. Public Utilities Commission, supra, 397 A.2d at 578-79. Continental argues that the flow-through of the benefits of accelerated depreciation for state income tax purposes violates federal and state income tax law and policy. We considered and rejected similar arguments in Central Maine Power Co. v. Public Utilities Commission, Me., 382 A.2d 302, 318-21 (1978). Our decision in that case compels resolution of this issue in the Commission's favor. See also Mars Hill & Blaine Water Co. v. Public Utilities Commission, supra, 397 A.2d at 579.