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later years, lowered the maximum Federal corporate income tax
rates to 39.95 percent in 1987 and 34 percent in 1988. As a
result, Florida Power’s accumulated deferred income tax balance
on December 31, 1986, exceeded the amount of Federal income tax
that Florida Power would be expected to pay to the Government in
later years. As of December 31, 1986, all deferred Federal
income tax expense collected by Florida Power from its retail
customers in years prior to 1975 had been completely reversed.
Both the FPSC and the FERC reserve the power to order
refunds of excess amounts collected for deferred income taxes.
However, TRA section 203(e), 100 Stat. 2146, provides that the
normalization provisions of sections 167 and 168 of the Internal
Revenue Code would be violated if a utility were to reduce its
excess deferred income tax reserve more rapidly than as provided
under the average rate assumption method (ARAM). TRA section
203(e) applies to excess deferred income taxes attributable to
timing differences related to depreciation and described in
sections 167(l) and 168(e)(3) of the Internal Revenue Code
(protected excess deferred taxes). Under ARAM, protected excess
deferred income taxes can be reversed only as the timing
differences that created them reverse.
In addition to protected excess deferred taxes, Florida
Power had accumulated excess amounts of deferred income tax for
other timing differences not subject to TRA section 203(e)
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Last modified: May 25, 2011