ML19308B852
| ML19308B852 | |
| Person / Time | |
|---|---|
| Site: | Crane  |
| Issue date: | 08/04/1979 |
| From: | NRC - NRC THREE MILE ISLAND TASK FORCE |
| To: | NRC - NRC THREE MILE ISLAND TASK FORCE |
| References | |
| TASK-TF, TASK-TMR NUDOCS 8001170442 | |
| Download: ML19308B852 (5) | |
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DRAFT MEM3 TO FILE August 4, 1979
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SUBJECT:
GPU Consolidated Tax Returns for 1977 and 1978 On Friday, At. gust 3,1979, Larry Vandenberg and I went to the offices of Shaw, Pitman Fox & Trowbridge to examine the consolidated tax returns of Geraral Public Utilities Company. By way of reference, these returns had been made available to Fox Trowbridge by GPU's fiew York taK counsel, Jim Liberman, after George Frampton of this Special Inquiry had requested the'ne production from Ernie Blake, also an attorney of Shaw Pitman.
(During the course of our visit to Shaw Pitman's offices, Fox Trowbridge showed us a copy of a letter sent to him by Liberman authorizing him to show SIG repr'esena-tives copies of the returns.)
Larry and I arrived at the offices shortly after 10:30 a.m. and i
spent about 2 hours2.314815e-5 days <br />5.555556e-4 hours <br />3.306878e-6 weeks <br />7.61e-7 months <br /> examining the return. Attached are typed portions of my rough notes on material taken from the 1978 return.
Trownridge would not allow us to photocopy portions of the return without checking with Liberman, so these represent the best infor-mation we could obtain.
In general these are my observations:
Both Larry and I were disappointed that more material was not i
available. Although we had understood that the detailed records which support the return would not be made available (although they are available in Parsippany, fl.J.; Liberman's letter said the stack of this computer printouts is 7 inches), the returns themselves are rather sparse without this material.
!!onetheless, we did see enough to provide some figures and raise some questions.
The questions follow:
- 1. What is the distinction between tax " flow through" and " pass through" treatment? (Larry suggest the former is the tax advantage in calculating book and tax depreciation by different methods; the latter being a regulatory requirement that these advantaaes be made available to the customer via lower rates.) (Again, I suggest Pretti in California might help shed some light on this.)
- 2. Did GPU claim progress payments on portions of the TMI-2 project under the ITC provisions? (Because the GPU return itself does not distinguish TMI related treatment from general matters,
'uestions such as this were impossible to answer; often Larry and I found ourselves guessing at the meaning.
I suggest calling the Pa. IRS people to see if they have audited the return.)
- 3. Were any ITC credits carried over or back from 1978? (The return speaks in terms of SS5m being the anticipated ITC but " limitations" reduce it to a total of $18m. What happens to the balance; is it simply lost, or is it
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carried over? Compare the Annual Report notation on this with the returns ambiguity on this point.)
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- 4. As noted abcVe, we found it impossible in many cases to determine what portions of claimed tax treatment represented TMI-2.
We should ask Liberman to identify a person who could-assist us in this regard.
The figures in this area are confusing.
For example, we found that adding up all the depreciation deductions for which TMI-2 appears responsible (we did this simply by using the new property added in 1978 figure, admitting there was more than TMI-2 added in the year) and the total $18 m in ITC (again, this figure is inflated by.the fact that GPU added more new property than TMI-2), we concluded GPU received a maximum tax benefit of $51m for TMI-2 in 1978.
(15m + 8M+ 10m = 33m 4 18m = 51m, - for all subsidiaries of GPU).
This is a very sizeable amount, although admittedly on the high side, and requires further investigation.
Our current approach will be the following:
- 1. Write Liberman and ask him to identify the people we should speak to on these matters, this per George's ipstruction to raise the issue with Trowbridge and the latters agreement that this was the only way to proceed.
- 2. Interview those people and the people who prepared the return.
- 3. Perhaps use Mitch Rogovin's connections to get IRS apsistance in reviewing GPU's more detailed records in N.J. i4 1-2 are not of assistance.
- 4. Again, using Rogovin's connections, get an informal REVRUL from the_ Commissioner _of IRS on the treatment TMI-2 would
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have received based upon dDr~ knowledge _of their situation.
tiOTE: The attached notes frn'" ""'r -^ urn shoulTb'e' treated with ex ie CONFIDENCE, light of the arrangement by w ' h GPU--h.
them available to us.
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TYPED fiOTES OF GPU ' CONSOLIDATED TAX RETURN FOR 1978:
Total assets 4,612,682,885 (instruction K) f Depreciation claimed 210,490,882 (line 21) investment tax credit 18,530,462 j
TOTAL T4X 4,759,424
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Capital gains / capital losses intercompany deferred gain--sale of TMI-I 385,026 j
intercompany deferred gain--sale of TMI-2 36,556
~~Q: What is this?
i (for depreciation table, see next page) i Ccmpany took election pursuant to Regulation 1.167(a)-12(b)(3)(iii)
(CHECK: to see what this means)
Company also elected half-year convention for depreciation treatment (per checkoff on form
).
Company received six months treatment i
for any property placed into service in last six months of year.
I Under CLADR guideline class table, company reported following:
i JCP&L class 49.12 (nuclear production class) current years additions 160,755,730 basis at years end (missing--I did not record) l depreciation on this yr additions 10,047,233 MET-ED class 49.12 current years additions 256,590,537 basis at yr end 417,350,372 depreciation this yr. add.
15,093,561 i
PENELEC class 49.12 4
current years additions 129,359,770 basis at yr end 223,914,901 deprec on yr, add.
8,084,987 t
(Q: Note if you add up all the " current additions" it comes to only 547m; the estimated cost of TMI-2 is $700m.
Why the difference?)
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t GPU 1978 C0flSOLIDATED TAX RETURf1 DEPRECIATI0ft TABLE (copied from D. Evans rough notes, omitting adjustnants to. total column, which peceeded " allowed" col.)
l COMPAllY Straight-line sum e r year's digits declining bal.
total allowed Met-Ed 3,261,701 57,550,337 69,909 60,881,947 60,658,740 3.
JCP&L 1,680,762 61,135,684 15,983,561 78,800,007 78,136,341 PEflELEC 5,244,022 55,017,621 11,016,354 71,277,997 70,918,876
' TOTAL 10,252,788 174,249,099 27,234,989 211,736,876 210,490,882 i
I ft.B. The various methods of calculating depreciation are not alternatives, but different methods used l
for different types of property, according to Larry Vandenberg.
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GPU CONSOLIDATED TAX RETURN of 1978
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i FORM 3468:' Computation of Investment Tax Credit i
New property of UL greater than l.
seven years.
COST or applicable QUAL.' INVESTMENT BASIS 5
new property (1978) 1 292,347,302 100 292,347,302-4 qualified progress paynents 1975,76,1977:
66,124,106 20 13,224,803.
1978:
94,210,182*
80 75,360,146 i
(THE TABLE AT THIS POINT ADDED IN PROPERTY WITH A UL LESS THAN SEVEN YEARS: ALL OF THIS WAS NEW PROPERTY, I SAW NO CLAIM FOR OLD PROPERTY ITC) 4 1
TOTAL:
395,840,759 359,840.759 10% of total 39,584,076 7% of certain property (4% for some public utility prop.)
10,833,382 4
carrover or carryback tenative investment credit 55,828,340 (limitations)
TOTAL CREDIT 18,530,462 4
QUESTIONS: What happened to carryover and carrybacks?
At what % was ITC calculated: 10, 7 or 4%?
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