Late last spring we discussed how the 2017 Tax Cuts and Jobs Act (“TCJA”) negatively affected development by increasing the costs incurred by developers to install water and wastewater infrastructure (Part I and Part II). Effective January 1, 2018, the TCJA required that water companies include advances for construction (“Advances”) and Contributions in Aid of Construction (“CIAC”) in taxable income. Of course, water companies do not want to incur the tax directly, so it is passed on to developers thereby making their cost to install water and wastewater infrastructure even higher.

On February 28, 2019 the Pennsylvania Public Utility Commission (“PUC”) granted Pennsylvania American Water’s (“PAW”) Petition for Reconsideration of its order in Docket Nos. R-2018-3002502/R-2018-3002504. The order requires developers or builders to pay for the TCJA-imposed tax on CIAC and Advances. As a result of the PUC’s grant of reconsideration, there was a cautiously optimistic sigh of relief that the PUC might take a broader and deeper look at the positive impact of new development on the entire base of customers and spread the tax to all customers, not just the developer that installed the improvements.
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When you order something online, you can immediately begin tracking the package and continue to track it until it arrives at your doorstep. Imagine if the same process was possible with all state permit applications. That is what House Bill No. 1959 (the “Bill”) intends to do. The Bill, also known as the Permit Administration Act, would implement a tracking system for state permit applications. It would create an accessible tracking system for state permit applications that would allow applicants to see the status of their applications during each step of the process. The main goal of the Bill is to make the permit application process more transparent and to provide for more timely action on state permit applications.
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This is the second post in a two-post series on the 2017 Tax Cuts and Jobs Act (“TCJA”), with which developers and water companies see the return of a tax policy with negative consequences for development.  Effective this year, advances for construction (“Advances”) and Contributions in Aid of Construction (“CIAC”) for water systems are treated as taxable income.  Essentially, water companies must include in taxable income the contributed property or cash needed to connect a development to a water system.  This tax adds significant costs to developers when water companies pass the tax to developers.  At the same time, more work is created for water companies which must gross up Advances and CIAC (together, “A/CIAC”) and later recalculate those costs based on the actual cost of construction and gross up refunds.  This post provides insight on ways to mitigate the negative effects of the TCJA on development in Pennsylvania.
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With the 2017 Tax Cuts and Jobs Act (“TCJA”), developers and water and wastewater companies see the return of a tax policy that has significant consequences for both groups.  This is the first post in a two-post series discussing the history of “Advances” and “CIAC” and the practical effect of the TCJA on construction, dedication and utilization of water lines in Pennsylvania.  In short, the cost of doing business just increased for developers, while water companies once again are saddled with additional work.  This post provides background and history while a second post will provide insight on working through the issues.
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