T.C. Memo. 1999-77
UNITED STATES TAX COURT
LYKES ENERGY, INC. AND SUBSIDIARIES, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket Nos. 7685-96; 4979-97. Filed March 11, 1999.
S, a gas utility company, collected funds from its
customers which were earmarked for legislatively
mandated energy conservation programs. The State
required S to account separately for the funds and
monitored program expenditures. S could not retain the
unexpended amounts and was charged interest on the
funds that exceeded expenditures. The largest
expenditure was subsidies paid to purchasers of gas
appliances from S. S' sales, customer base, and rate
base increased as a result of the programs. Held: S'
gross income includes the funds. Held, further, S must
capitalize the expenditures, less the amount paid as
subsidies, which is currently deductible.
Nathan B. Simpson and Matthew J. Foster, for petitioners.
William A. Goss and Benjamin A. DeLuna, for respondent.
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