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A BILL TO BE ENTITLED
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AN ACT
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relating to the treatment of income tax expenses in rate |
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proceedings for water and sewer utilities. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Section 13.185(f), Water Code, is amended to |
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read as follows: |
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(f) If an expense is allowed to be included in utility rates |
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or an investment is included in the utility rate base, the related |
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income tax benefit must be included in the computation of income tax |
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expense to reduce the rates. If an expense is not allowed to be |
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included in utility rates or an investment is not included in the |
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utility rate base, the related income tax benefit may not be |
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included in the computation of income tax expense to reduce the |
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rates. The income tax expense shall be computed using the statutory |
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income tax rates. The amount of income tax that a consolidated |
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group of which a utility is a member saves, because the consolidated |
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return eliminates the intercompany profit on purchases by the |
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utility from an affiliate, shall be applied to reduce the cost of |
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the property or service purchased from the affiliate. [If the |
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utility is a member of an affiliated group that is eligible to file |
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a consolidated income tax return and if it is advantageous to the |
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utility to do so, income taxes shall be computed as though a |
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consolidated return had been filed and the utility had realized its |
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fair share of the savings resulting from the consolidated return, |
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unless it is shown to the satisfaction of the regulatory authority |
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that it was reasonable to choose not to consolidate returns. The |
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amounts of income taxes saved by a consolidated group of which a |
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utility is a member due to the elimination in the consolidated |
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return of the intercompany profit on purchases by the utility from |
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an affiliate shall be applied to reduce the cost of those |
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purchases.] The investment tax credit allowed against federal |
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income taxes to the extent retained by the utility shall be applied |
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as a reduction in the rate-based contribution of the assets to which |
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the credit applies to the extent and at the rate as allowed by the |
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Internal Revenue Code. |
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SECTION 2. The changes in law made by this Act apply only to |
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a rate proceeding under Chapter 13, Water Code, that begins on or |
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after the effective date of this Act. A rate proceeding that begins |
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before the effective date of this Act is governed by the law in |
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effect on the date the rate proceeding began, and the former law is |
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continued in effect for that purpose. |
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SECTION 3. This Act takes effect September 1, 2023. |