ARTICLE · 20 OCTOBER 2023

Condemned To Lose Your ADIT?

Holland & Knight

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In a private letter ruling, the IRS concluded that the condemnation of public utility property is in effect a "retirement" or "disposition" that requires the elimination of accumulated...

United StatesTax

Bradley M. Seltzer

Mary Kate Nicholson

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Highlights

In a private letter ruling, the IRS concluded that a condemnation of public utility property is effectively a "retirement" or "disposition" that requires the elimination of Accumulated Deferred Income Taxes (ADIT) associated with the condemned property.
The IRS also concluded that the so-called "consistency rules" of Section 168(i)(9) of the Internal Revenue Code (Code) mandate that the removal of condemned public utility property from rate base also requires that the associated ADIT be eliminated.
The IRS had not previously ruled on the normalization consequences of a condemnation of public utility property under Section 1033 of the Code.

In a private letter ruling,¹ the IRS concluded that the condemnation of public utility property is in effect a "retirement" or "disposition" that requires the elimination of accumulated deferred income taxes (ADIT) associated with the condemned property.

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