Full Description

Early in 2001, the Internal RevenueService released its new rules on contributionsin aid of construction(CIAC). CIAC provides water utilitiesa method of tax-free financing for plantimprovements, but only if the transactionsare structured to be consistent with the newrules. If a utility fails in some way to properlyconfigure the transaction, it may beexposed to an unexpected tax liability.In some cases, the liability could bequite large.The CIAC rules affect all economicallyregulated water utilities operating in the corporateform. Even though the rules can bequite beneficial to water utilities, few articleshave covered these financial managementissues. This article attempts to fill that void byproviding utility managers with informationnecessary to discuss and maximize the use ofnontaxable CIAC financing without inadvertentlytriggering income tax complications.Because these rulings are new, issued in2001, the management and advisors ofregulated investor-owned water companiesmust become acquainted with them to provideservice at the lowest cost. Kermodeprovides a detailed overview of the requirementsand accounting procedures for the newregulations. The article covers the sometimescomplex characteristics of CIAC and alsoaddresses in more depth the four types oftransactions that result in a qualified transferof CIAC. Includes 3 references, tables.

Product Details

Edition: Vol. 94 - No. 3 Published: 03/01/2002 Number of Pages: 7File Size: 1 file , 310 KB