IRS Finally Excludes from Taxable Income Funds that an Interconnecting Generator Advances for Transmission Network Upgrades
Posted on: July 21, 2005 By: Bracewell LLP
With the issuance of a recent Revenue Procedure , the Internal Revenue Service has eliminated a long running source of discord in the negotiation of new (or expanded) generator interconnections. The new Revenue Procedure creates a "safe harbor" that exempts from taxable income the payments that a generator, pursuant to FERC open-access rules, advances to an operator or owner of the transmission system to which it proposes to interconnect for needed upgrades to the transmission network. Many transmission utilities treated these advances as taxable income to the utility and would insist that a...