WASHINGTON — The Supreme Court handed the Bush Administration a $300-million setback today, saying utility companies don't have to pay income tax on deposits charged customers to ensure payment of future bills.
The court unanimously ruled that an Indiana electric utility, Indianapolis Power & Light Co., does not have to pay taxes when collecting such deposits.
The Internal Revenue Service estimates that more than 150 such cases involving over $300 million in potential taxes are pending in lower courts or before the tax agency.
Writing for the court, Justice Harry A. Blackmun said the deposits do not amount to advance payments for electric service, and therefore are not income for tax purposes.
Although Indiana Power & Light does receive some economic benefit from the deposits, he said, "IPL's right to retain the money is contingent upon events outside its control."
The company requires the deposits from new customers whose credit worthiness is in doubt and existing customers with a record of late payment of their bills.