Goto Section: 32.21 | 32.23 | Table of Contents
Revised as of September 1, 2021
Goto Year:2020 |
§ 32.22 Comprehensive interperiod tax allocation.
(a) Companies shall apply interperiod tax allocation (tax
normalization) to all book/tax temporary differences which would be
considered material for published financial report purposes.
Furthermore, companies shall also apply interperiod tax allocation if
any item or group of similar items when aggregated would yield debit or
credit entries which exceed or would exceed 5 percent of the gross
deferred income tax expense debits or credits during any calendar year
over the life of the temporary difference. The tax effects of book/tax
temporary differences shall be normalized and the deferrals shall be
included in the following accounts:
4100, Net Current Deferred Operating Income Taxes;
4110, Net Current Deferred Nonoperating Income Taxes;
4340, Net Noncurrent Deferred Operating Income Taxes;
4350, Net Noncurrent Deferred Nonoperating Income Taxes.
In lieu of the accounting prescribed herein, any company shall treat
the increase or reduction in current income taxes payable resulting
from the use of flow through accounting in prior years as an increase
or reduction in current tax expense.
(b) Supporting documentation shall be maintained so as to separately
identify the amount of deferred taxes which arise from the use of an
accelerated method of depreciation.
(c) Subsidiary records shall be used to reduce the deferred tax assets
contained in the accounts specified in paragraph (a) of this section
when it is likely that some portion or all of the deferred tax asset
will not be realized. The amount recorded in the subsidiary record
should be sufficient to reduce the deferred tax asset to the amount
that is likely to be realized.
(d) The records supporting the activity in the deferred income tax
accounts shall be maintained in sufficient detail to identify the
nature of the specific temporary differences giving rise to both the
debits and credits to the individual accounts.
(e) Any company that uses accelerated depreciation (or recognizes
taxable income or losses upon the retirement of property) for income
tax purposes shall normalize the tax differentials occasioned thereby
as indicated in paragraphs (e)(1) and (e)(2) of this section.
(1) With respect to the retirement of property the book/tax difference
between (i) the recognition of proceeds as income and the accrual for
salvage value and (ii) the book and tax capital recovery, shall be
(2) Records shall be maintained so as to show the deferred tax amounts
by vintage year separately for each class or subclass of eligible
depreciable telephone plant for which an accelerated method of
depreciation has been used for income tax purposes. When property is
transferred to nonregulated activities, the associated deferred income
taxes and unamortized investment tax credits shall also be identified
and transferred to the appropriate nonregulated accounts.
(f) The tax differentials to be normalized as specified in this section
shall also encompass the additional effect of state and local income
tax changes on Federal income taxes produced by the provision for
deferred state and local income taxes for book/tax temporary
differences related to such income taxes.
(g) Companies that receive the tax benefits from the filing of a
consolidated income tax return by the parent company, (pursuant to
closing agreements with the Internal Revenue Service, effective January
1, 1966) representing the deferred income taxes from the elimination of
intercompany profits for income tax purposes on sales of regulated
equipment, may credit such deferred taxes directly to the plant account
which contains such intercompany profit rather than crediting such
deferred taxes to the applicable accounts in paragraph (a) of this
section. If the deferred income taxes are recorded as a reduction of
the appropriate plant accounts, such reduction shall be treated as
reducing the original cost of the plant and accounted for as such.
[ 51 FR 43499 , Dec. 2, 1986, as amended at 59 FR 9418 , Feb. 28, 1994]
Goto Section: 32.21 | 32.23
Goto Year: 2020 |
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