Tax Issues for Electric Utilities: Impact of Tax Reform, FERC Ratemaking, ADITs, and Other Key Challenges

Interest Deductions, Expensing, NOL, IRS Normalization Rules and Safe Harbors, Regulated Trade or Business Carve-Outs

Note: CPE credit is not offered on this program

Recording of a 90-minute premium CLE webinar with Q&A


Conducted on Tuesday, February 25, 2020

Recorded event now available

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Program Materials

This CLE webinar will provide energy counsel, tax professionals, and advisers an in-depth analysis of complex tax issues for electric utilities. The panel will discuss the impact of tax reform on electric utilities, with a focus on utility accounting challenges and FERC rate making. The panel will also consider regulatory liabilities for excess accumulated deferred income tax (ADIT) balances, regulatory tax planning opportunities, and offer best practices in minimizing tax liabilities and compliance issues for electric utilities.

Description

Tax reform has had a significant impact on electric utilities requiring a careful analysis of its effect on investments, planning, and operations. An understanding of key provisions of the new tax law, such as the reduction in the corporate tax rate, elimination of the corporate alternative minimum tax (AMT), and the regulated trade or business carve-outs, is critical for electric utilities to properly comply with the tax laws, FERC rate-making rules and US GAAP and FERC accounting and reporting requirements.

The new tax law forces corporations and partnerships to consider methods to optimize capital structures to achieve the most favorable tax treatment. The most significant change under the new tax law is the reduction of the maximum corporate tax rate down to 21%, causing a ripple effect on the use of some deductions.

Also, electric utilities must focus on regulatory liabilities stemming from ADIT balances, including the financial statement consequences and impact to rate making and customers. In the context of electric utilities and other regulated trades or businesses, ADIT balances are considered "loans" from the government, requiring an adjustment to a utility's rate base. The reduction in the corporate tax rate requires adjustment to ADIT balances and, potentially, refunds to customers.

Also, counsel and tax professionals must be able to identify challenges relating to interest expense deductions, net operating losses, IRS normalization rules, and regulated trade or business carve-outs to advise electric utilities and ensure sufficient planning effectively.

Listen as our panel discusses the impact of tax reform on electric utilities and provides methods to optimize tax benefits and deductions and avoid pitfalls.

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Outline

  1. Key tax reform provisions impacting electric utilities
  2. FERC activities after tax reform impacting electric utilities
  3. ADIT balances within regulated trade or businesses (i.e. utilities)
  4. Other critical tax liability and compliance issues

Benefits

The panel will review these and other key issues:

  • What are the key tax reform provisions impacting electric utilities?
  • What are the available techniques to ensure compliance with applicable tax rules?
  • What are the IRS normalization rules and safe harbors (Rev. Rul. 2017-47 and Notice 2019-33)?
  • What is the impact of excess ADIT for electric utilities?
  • What actions have FERC taken in response to tax reform impacting electric utilities and what obligations have resulted?

Faculty

Chenoweth, James
James Chenoweth

Partner
Gibson, Dunn & Crutcher

Mr. Chenoweth is a partner and a member of the firm’s Tax, Private Equity and Energy and Infrastructure practice...  |  Read More

Jakubiak, Jeffrey
Jeffrey M. Jakubiak

Partner
Gibson, Dunn & Crutcher

Mr. Jakubiak is a member of Gibson Dunn’s Energy, Regulation and Litigation Practice Group. He counsels clients...  |  Read More

Johnston, Kimberly
Kimberly Johnston

Partner, Americas Power & Utilities
Ernst & Young

Ms. Johnston is a national tax partner of EY America’s Power & Utilities Tax Practice serving clients,...  |  Read More

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