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1986 pursuant to TRA. The taxpayer was forced by regulatory law
to reduce its rates in subsequent years to offset the excess
deferred Federal income tax.
A deductible expense is required by section 1341(a)(2) to
qualify for relief under the statute. This Court held that the
taxpayer’s method of decreasing its deferred Federal income tax
account resembled a reduction in rates rather than a deductible
expense. Factors that led to this Court’s conclusion were:
First, the taxpayer had returned excess deferred income tax to
customer classes based upon current energy consumption, not upon
amounts each individual customer actually overpaid during the
years of overcollection; second, no interest component was
included with the refunds; and, third, the taxpayer set off the
amount to be refunded against future amounts owed for goods and
services on customers’ bills, rather than actually returning
money to customers. This Court decided that the taxpayer “was
not repaying its customers the excess deferred Federal income tax
that it collected in prior years. Rather, the rate reductions
served only to reduce income in future years and did not directly
compensate * * * [the taxpayer’s] customers for prior
overcollection.” Id. at ___ (slip op. at 26). Because these
same factors are present in the case at hand, we conclude that
Florida Power’s return of excess deferred Federal income tax
resembles a reduction in rates rather than a deductible expense.
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