At various times throughout United States tax history, Congress has enacted incentives for taxpayers to invest in the US economy. Two primary means of doing this have included accelerated depreciation and investment tax credits (ITCs). As capital intensive companies, regulated, public utilities would be primed to benefit from these incentives. However, Congress and regulated utilities have feared that utilities would not be able to benefit from these special incentives without protections from the possible regulatory treatment of accelerated depreciation and ITCs. We examine how a procedure issued by the IRS and Department of Treasury provides safe harbor for inadvertent normalization violations.
Revenue Procedure 2017-47 provides that assuming certain conditions are met, practices and procedures that are technically inconsistent with the federal tax normalization rules will not be deemed by the IRS to violate the federal tax normalization provisions.
This is designed to be a safe harbor that removes the need for a separate private letter ruling to the extent a regulated utility inadvertently accounts for an item within the domain of the federal tax normalization rules in a way that is inconsistent with them.