Minor Memos

Minor Memos

January 13, 2009

The IRS confirmed that changes in how the California Independent System Operator — the independent operator of the state electricity grid — manages grid congestion will not cause transmission lines transferred to the ISO by municipal utilities in California to be considered put to “private business use.” Any such use could cause the municipal utilities to lose the tax exemptions on bonds they issued to finance their transmission lines. The ISO has moved to a nodal system. Users of the grid hold congestion revenue rights that may require them to pay money to the ISO or receive money depending on whether they are contributing or helping to relieve congestion by where on the grid they choose to send or receive electricity. This is the third private ruling the IRS has issued to address changes in California ISO policies. The agency made the latest ruling public in late December. It is PLR 200850003 . ...Lenders  are required to report any debts they cancel to the IRS on Form 1099-C. Any amount owed that has not been paid within 36 months of the due date is assumed to have been cancelled and must be reported unless the lender can show that it is making a significant effort to collect. This “36-month” rule applied in the past not only to financial institutions, credit unions and federal agencies, but also to any other company for whom lending money is a significant business. The IRS revised its regulations in November to require reporting under the 36-month rule only by financial institutions, credit unions and federal agencies. The regulations can be found under section 6050P of the US tax code.