2017 Tax Reform and Jobs Act

Deck: 

Unique Challenges

Fortnightly Magazine - March 2018
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In December 2017, Congress passed the 2017 Tax Reform and Jobs Act, which will have significant and unique implications for the utility industry.

This new tax law, which cuts the corporate tax rate from thirty-five percent to twenty-one percent, will affect the electric industry in two ways. The revenue requirement and the deferred taxes for each company will decrease.

Because the electric industry is so plant-intensive, the deferred taxes caused by the timing difference in depreciation will be higher than in other industries.

The immediate effect has been to a company's mandatory revenue requirement. Because the tax rate is part of the calculation of the revenue requirement, the reduction in taxes will result in lower rates for a company's customers.

Implementing this adjustment to reflect the change in utility rates will cause some challenges for state public utility commissions, electric companies, and customers as they work through various processes.

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