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.
Continue Reading UPDATE! Developers Beware! Water lines may cost more thanks to the Tax Cut and Jobs Act – Part 3 (Potentially good news for developers!)