The proposed revenue procedure provides a safe harbor that allows a utility taxpayer that inadvertently uses a practice or procedure that is inconsistent with the normalization rules (such as failure to use the proration methodology) to correct that practice or procedure at the next available opportunity and be considered not to have violated the normalization rules by their inadvertent error without requiring the taxpayer to obtain a private letter ruling from the Service regarding the inadvertent error.
We initially submitted the proposed revenue procedure for OMB approval through the standard procedure on November 28, 2016, but due to the untimely death of the Serviceâs OMB Liaison, the package was not processed in a timely manner. As a result, we are now requesting emergency OMB approval to publish the proposed revenue procedure. The timely publication of this document will provide timely and critical relief to utility taxpayers that have inadvertently used an accounting procedure which, if not corrected, could lead to extremely negative tax consequences, as well as avoiding the delay and expense of seeking a private letter ruling from the Service.
Branch 6 of the Office of Associate Chief Counsel (PSI) issued several private ruling letters concluding that utility companies using Federal Energy Regulatory Commission (FERC) formula rates are required to use the âproration formulaâ provided in § 1.167(l)-1(h)(6) of the Income Tax Regulations in calculating the amount of deferred taxes subject to exclusion from rate base. While the conclusion reached in these PLRs is correct and undisputed by industry authorities, it has come as a surprise to many in the utilities industry.
We have been informed by utility industry representatives and attorneys familiar with normalization issues that virtually every utility that uses FERC formula rates has calculated their deferred taxes without using the proration formula. Many of these taxpayers either are currently seeking private letter rulings from the IRS or will be forced to incur the cost of seeking such rulings so that their failure to use the proration formula does not result in the imposition of sanctions for a normalization violation.
The proposed revenue procedure provides a safe harbor that allows a utility taxpayer that inadvertently uses a practice or procedure that is inconsistent with the normalization rules (such as failure to use the proration methodology) to correct that practice or procedure at the next available opportunity and be considered not to have violated the normalization rules by their inadvertent error without requiring the taxpayer to obtain a private letter ruling from the Service regarding the inadvertent error.
US Code:
26 USC 50(d)(2)
Name of Law: Certain rules made applicable
US Code:
26 USC 168(i)(9)
Name of Law: Accelerated cost recovery system; Definitions and special rules ; Normalization rules
This is a new information collection request for a new revenue procedure.
$0
No
No
No
No
No
No
Uncollected
Jennifer C Bernardini 202 317-6853
No
On behalf of this Federal agency, I certify that the collection of information encompassed by this request complies with 5 CFR 1320.9 and the related provisions of 5 CFR 1320.8(b)(3).
The following is a summary of the topics, regarding the proposed collection of information, that the certification covers:
(i) Why the information is being collected;
(ii) Use of information;
(iii) Burden estimate;
(iv) Nature of response (voluntary, required for a benefit, or mandatory);
(v) Nature and extent of confidentiality; and
(vi) Need to display currently valid OMB control number;
If you are unable to certify compliance with any of these provisions, identify the item by leaving the box unchecked and explain the reason in the Supporting Statement.
Normalization Rev Proc OMB submission 11-17 (2).docx
Rev Proc XXXX-XX / Safe Harbor for Inadvertent Normalization Violations