| 1 | 1 | | 81R10104 TRH-F |
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| 2 | 2 | | By: Otto H.B. No. 3115 |
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| 3 | 3 | | |
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| 4 | 4 | | |
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| 5 | 5 | | A BILL TO BE ENTITLED |
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| 6 | 6 | | AN ACT |
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| 7 | 7 | | relating to the computation of income tax expense for electric |
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| 8 | 8 | | utilities. |
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| 9 | 9 | | BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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| 10 | 10 | | SECTION 1. The heading to Section 36.060, Utilities Code, |
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| 11 | 11 | | is amended to read as follows: |
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| 12 | 12 | | Sec. 36.060. COMPUTATION OF [CONSOLIDATED] INCOME TAX |
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| 13 | 13 | | EXPENSE [RETURNS]. |
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| 14 | 14 | | SECTION 2. Sections 36.060(a) and (b) are amended to read as |
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| 15 | 15 | | follows: |
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| 16 | 16 | | (a) An electric utility's income tax expense shall be |
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| 17 | 17 | | computed on a stand-alone basis using only the regulated utility |
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| 18 | 18 | | cost of service used to determine the electric utility's rates and |
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| 19 | 19 | | the applicable income tax rates. If an expense is disallowed or not |
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| 20 | 20 | | included in the utility's cost of service, or if an investment is |
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| 21 | 21 | | not included in the utility's rate base, the related income tax |
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| 22 | 22 | | deduction or benefit may not be included in the computation of |
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| 23 | 23 | | income tax expense for the purpose of reducing the utility's rates |
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| 24 | 24 | | [Unless it is shown to the satisfaction of the regulatory authority |
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| 25 | 25 | | that it was reasonable to choose not to consolidate returns, an |
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| 26 | 26 | | electric utility's income taxes shall be computed as though a |
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| 27 | 27 | | consolidated return had been filed and the utility had realized its |
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| 28 | 28 | | fair share of the savings resulting from that return, if: |
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| 29 | 29 | | [(1) the utility is a member of an affiliated group |
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| 30 | 30 | | eligible to file a consolidated income tax return; and |
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| 31 | 31 | | [(2) it is advantageous to the utility to do so]. |
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| 32 | 32 | | (b) The amount of income tax that a consolidated group of |
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| 33 | 33 | | which an electric utility is a member pays or saves through filing |
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| 34 | 34 | | a[, because the] consolidated return may not be considered directly |
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| 35 | 35 | | or indirectly for ratemaking purposes [eliminates the intercompany |
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| 36 | 36 | | profit on purchases by the utility from an affiliate, shall be |
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| 37 | 37 | | applied to reduce the cost of the property or service purchased from |
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| 38 | 38 | | the affiliate]. |
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| 39 | 39 | | SECTION 3. This Act takes effect September 1, 2009. |
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