Opinion ID: 1969060
Heading Depth: 1
Heading Rank: 1

Heading: Ordinary and Necessary Business Expenses.

Text: The PSC, acting as an arm of the state, has full jurisdiction under ch. 196, Stats., over taxpayer's depreciation charges, accounting, and gas rates. Pursuant to such authority, the PSC periodically, by order under sec. 196.09, Stats., finds the reasonable and proper expense which taxpayer, as a public utility, is required to charge against its income under the designation of depreciation and is required to record in the depreciation reserve on its books. Under sec. 196.09 (8), the amounts so recorded in its depreciation reserve can be used only to charge off losses on property actually retired from service. Under the PSC's rate-making methods, the exact amounts in the depreciation reserve are deducted directly from the original cost of taxpayer's property in determining the fair value of property on which taxpayer is allowed to earn a reasonable return. The annual depreciation charges found reasonable and proper by the PSC thus directly and exactly reduce the value of taxpayer's property since they decrease its earning ability. Because of these attributes of the regulatory power of the PSC over public utilities such as taxpayer, it necessarily follows that any amounts which PSC properly orders to be deducted as depreciation expense and which it orders to be included in a utility's depreciation reserve, are ordinary and necessary business expenses of such utility. Neither the circuit court nor the board made any finding that these depreciation expenses were not ordinary and necessary business expenses. The matter of the amount of a depreciation charge is one peculiarly within the province of the PSC and is not to be disturbed by a court except in a clear case. Wisconsin Telephone Co. v. Public Service Comm. (1939), 232 Wis. 371, 381, 287 N. W. 167.