Daniel Strickland

The Federal Energy Regulatory Commission (FERC) had been on a potential collision course with the IRS concerning the proper treatment of intercompany tax allocation payments under the tax normalization rules in a case involving a regulated transmission company. However, an interagency conflict was averted when FERC granted the transmission company's motion for rehearing and issued a June 30, 2025, decision agreeing to abide by the position adopted by the IRS in three private letter rulings.

The IRS recently issued three related private letter rulings (PLRs) determining that a utility's net operating loss carryforward (NOLC) cannot be reduced by intercompany tax allocation payments under the normalization rules. The rulings involved three affiliated utilities that had incurred net operating losses attributable to the use of accelerated depreciation for federal income tax purposes.