ABA PUCAT Taxation & Accounting Committee Fall 2011 Report

ABA PUCAT Taxation & Accounting Committee Fall 2011 Report



This report reviews significant tax law developments relevant to the Section of Public Utility, Communications and Transportation Law. On September 12, 2011, President Obama submitted the American Jobs Act of 2011 (S. 1549 and H.R. 2911) (the "Jobs Act") to Congress. 1 The Jobs Act primarily addresses certain tax relief measures for individuals and small businesses, such as reducing taxes on families and small businesses, providing tax incentives for hiring veterans or expanding employment or wages, extending unemployment benefits, and reducing high-income tax subsidies. However, the act also contains several important energy-related provisions, such as the extension of 100-percent bonus depreciation for an additional year, temporary payroll tax reductions, repeal of favorable oil and gas provisions, and the taxation of carried interest. In connection with the Jobs Act, on September 19, 2011, President Obama submitted his "Plan for Economic Growth and Deficit Reduction" (the "Plan") to the Joint Select Committee on Deficit Reduction ("JSC"). 2 The Plan will reportedly pay for the Jobs Act. Of particular interest in the Plan is the proposal to reauthorize the decontamination and decommissioning fee payable by domestic nuclear utilities.

This report also covers the changing environment of tax audits between the Internal Revenue Service (the "IRS") and taxpayers as a result of developments relating to tax accrual workpapers, the new reporting regime for uncertain tax positions, and the codification of the economic substance doctrine in section 7701(o) of the Code. Finally, this report covers guidance issued by the IRS regarding section 199 and telecommunication services, the safe harbor method of accounting for determining whether costs relating to electric and distribution property should be capitalized, the carryback period of specified losses, the grant pursuant to Section 1603 of the American Recovery and Reinvestment Tax Act of 2009, and investment tax credits with respect to solar property. 

n1 As we went to press, Congress had not yet taken any action respecting the Jobs Act.

n2 The JSC is a bi-partisan panel of 12 Representatives and Senators created in late July to allow the Federal Government to raise the federal debt ceiling. The JSC is charged with reducing the Federal budget deficits by at least $1.5 trillion over 10 years. The JSC has a deadline of November 23, 2011 to develop its plan which Congress must then act upon by December 23, 2011.ABOUT THE AUTHOR(S):

This report is excerpted from the Fall 2011 Report of the Taxation & Accounting Committee of the American Bar Association's Section of Public Utility, Communications and Transportation Law. The American Bar Association Section of Public Utility, Communications and Transportation Law is the leading professional organization for those interested in the rapidly changing legal environment in the communications, cable TV, internet, electricity, gas, oil pipelines, aviation, motor carriers, railroads, and water industries. Its members include attorneys from private law firms, in-house counsel, trade and professional organizations, federal and state government agencies, as well as judges, professors and law students. We provide an outstanding assortment of programs, publications, discussion groups and timely updates on recent developments in all facets of public utility, communications and transportation law. The third oldest Section in the ABA, the Section was established in 1917 when public interest demanded regulation of these fields.

The Taxation & Accounting Committee prepares semiannual reports focused on developments in federal income taxation that are particularly relevant to companies in regulated and previously regulated industries. These companies face unique tax issues resulting from industry-specific taxation, as well as unique issues arising from the application of general tax principles. The committee also focuses on the tax and accounting issues associated with the corporate transactions of these companies as they respond to the deregulation and internationalization of their industries with mergers, acquisitions, spinoffs and global expansion. In addition, the committee monitors certain state law issues, including the application of state income taxes and other taxes to such companies, and the treatment of tax expense in cost of service determinations for rate regulation purposes.

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