Commissioner of Internal Revenue v. Indianapolis Power & Light Company

PETITIONER: Commissioner of Internal Revenue
RESPONDENT: Indianapolis Power & Light Company
LOCATION: Buie Residence

DOCKET NO.: 88-1319
DECIDED BY: Rehnquist Court (1988-1990)
LOWER COURT: United States Court of Appeals for the Seventh Circuit

CITATION: 493 US 203 (1990)
ARGUED: Oct 31, 1989
DECIDED: Jan 09, 1990

ADVOCATES:
Larry J. Stroble - on behalf of the Respondent
Lawrence G. Wallace - on behalf of the Petitioner

Facts of the case

Question

Media for Commissioner of Internal Revenue v. Indianapolis Power & Light Company

Audio Transcription for Oral Argument - October 31, 1989 in Commissioner of Internal Revenue v. Indianapolis Power & Light Company

Audio Transcription for Opinion Announcement - January 09, 1990 in Commissioner of Internal Revenue v. Indianapolis Power & Light Company

William H. Rehnquist:

The opinions of the Court in two cases will be announced by Justice Blackmun.

Harry A. Blackmun:

The first of these cases is No. 88-1319, Commissioner of Internal Revenue against the Indianapolis Power & Light Company.

As the title indicates, it is an income tax case, the respondent, the utility is a regulated Indiana utility and it is also an accrual basis tax payer.

It requires customers having suspect credit to make deposits with it to assure prompt payment of future electric bills.

Deposits at all times are subject, however, to the company’s use and control.

It does not treat them as income at receipt but carries them on its books as current liabilities.

And the issue in the case is whether the deposits are advance payments for electricity and therefore are taxable to the utility in the year of receipt.

The Tax Court ruled that the principal purpose of the deposits was to serve as security rather than as prepayment of income.

The Court of Appeals for the Seventh Circuit agreed and affirmed.

And because of the conflict, the direct conflict with the Eleventh Circuit, we took the case.

In an opinion filed with the Clerk today, we affirm the judgment of the Court of Appeals and hold that the deposits are not advance payments for electricity and therefore, do not constitute taxable income to the utility upon receipt.

The decision is unanimous.