MINOR MEMOS. The IRS is taking a harder line on whether utilities can avoid paying taxes on amounts they receive from developers to move gas mains and power lines out of the way of

MINOR MEMOS. The IRS is taking a harder line on whether utilities can avoid paying taxes on amounts they receive from developers to move gas mains and power lines out of the way of

November 01, 2006

MINOR MEMOS. The IRS is taking a harder line on whether utilities can avoid paying taxes on amounts they receive from developers to move gas mains and power lines out of the way of new construction and from municipalities to bury power lines, according to a letter the Edison Electric Institute sent the Treasury in September. The letter also complains that utilities are having to report contributions from neighboring utilities to help pay for upgrades to their grids. For example, utility X might find it in its interest to help utility Y add to Y’s grid so that more electricity can be transmitted by both utilities. The Treasury is considering whether it should get involved. The EEI letter focuses on one possible legal basis the utilities have for not reporting the amounts as income. The IRS does not believe it applies. However, the EEI letter overlooks two other legal bases with which the IRS has no problem. The other legal bases apply in some, but not all, of the cases . . . . The IRS added Barbados to a list of countries from which dividends qualify for a 15% tax rate. The United States taxes individuals on their dividend income at a 15% rate. The rate only applies to dividends received from domestic corporations and from foreign corporations in countries that the IRS has announced have acceptable tax treaties with the United States. Barbados has a tax treaty, but failed in the past to make the list. The IRS added it on October 30.


Keith Martin