Municipal utilities receipts from taxes

From the 2024 DOR Tax Exemption Study

Det. No. 00-080, 20 WTD 204 (2001) 205 NATURE OF ACTION: Bianchi, A.L.J. -- The taxpayer protests the assessment of public utility tax (PUT) on the portion of monthly service charges paid by the utility’s customers that is allocated toward the payment of bonds issued for capital facilities construction.1 BACKGROUND The taxpayer is a public utility that purchases water from the City of . . . and distributes it to its residents through a combined water distribution and sewer system. In 1967 and 1986, the taxpayer issued capital improvement bonds to finance system-wide capital improvements, including the construction of a reservoir and extensions of and improvements to its distribution system. The taxpayer refinanced these bonds in 1997. The municipal ordinances authorizing the issuance of the bonds required the taxpayer to segregate funds from the gross revenue of the utility sufficient to pay such debt service. From the water customer’s monthly payments for service, the taxpayer deducted and segregated into reserve accounts sufficient funds to pay the debt service on these bonds. Between 1989 and July 1, 1993, a public utility was able to deduct from its gross income the amount of m