Definition of Contribution in Aid of
Construction Under Section 118(c)

DEPARTMENT OF THE TREASURY
Internal Revenue Service 26 CFR Part 1 [REG-106012-98] RIN 1545-AW17

TITLE: Definition of Contribution in Aid of Construction Under
Section 118(c)

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking and notice of public hearing.

SUMMARY: This document contains proposed regulations concerning the
definition of a contribution in aid of construction under section
118(c) and the adjusted basis of any property acquired with a
contribution in aid of construction. The proposed regulations affect
a regulated public utility that provides water or sewerage services
because a qualifying contribution in aid of construction is treated
as a contribution to the capital of the utility and excluded from
gross income. This document also provides notice of a public hearing
on these proposed regulations.

DATES: Written and electronic comments must be received by March 22,
2000.

Outlines of topics to be discussed at the public hearing scheduled
for April 27, 2000, must be received by April 6, 2000.

ADDRESSES: Send submissions to: CC:DOM:CORP:R (REG-106012-98), room
5226, Internal Revenue Service, POB 7604, Ben Franklin Station,
Washington, DC 20044. Submissions may be hand delivered Monday
through Friday between the hours of 8 a.m. and 5 p.m. to:
CC:DOM:CORP:R (REG-106012-98), Courier's Desk, Internal Revenue
Service, 1111 Constitution Avenue, NW., Washington, DC.

Alternatively, taxpayers may submit comments electronically via the
Internet by selecting the "Tax Regs" option on the IRS Home Page, or
by submitting comments directly to the IRS Internet site at
http://www.irs.ustreas.gov/tax_regs/regslist.html. The public
hearing will be held in room 2615, Internal Revenue Building, 1111
Constitution Avenue, NW., Washington, DC.

FOR FURTHER INFORMATION CONTACT: Concerning the regulations, Paul
Handleman, (202) 622-3040; concerning submissions, the hearing,
and/or to be placed on the building access list to attend the
hearing, LaNita Van Dyke, (202) 622-7180 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

The collection of information contained in this notice of proposed
rulemaking has been submitted to the Office of Management and Budget
for review in accordance with the Paperwork Reduction Act of 1995
(44 U.S.C. 3507(d)). Comments on the collection of information
should be sent to the Office of Management and Budget , Attn: Desk
Officer for the Department of the Treasury, Office of Information
and Regulatory Affairs, Washington, DC 20503, with copies to the
Internal Revenue Servi e , Attn: IRS Reports Clearance Officer,
OP:FS:FP, Washington, DC 20224.

Comments on the collection of information should be received by
February 18, 2000.

Comments are specifically requested concerning:

Whether the proposed collection of information is necessary for the
proper performance of the functions of the IRS, including whether
the information will have practical utility;

The accuracy of the estimated burden associated with the proposed
collection of information (see below);

How the quality, utility, and clarity of the information to be
collected may be enhanced; How the burden of complying with the
proposed collection of information may be minimized, including
through the application of automated collection techniques or other
forms of information technology; and Estimates of capital or start-
up costs and costs of operation, maintenance, and purchase of
services to provide information.

The requirement for the collection of information in this notice of
proposed rulemaking is in §1.118-2(e). The information is required
by the IRS to establish that a taxpayer has notified the IRS of
amounts to be treated as a contribution to capital under section
118(c). This information will be used to determine when the
statutory period for the assessment of any deficiency attributable
to any contribution to capital under section 118(c) expires. The
collection of information is mandatory. The likely respondents are
businesses and other for-profit organizations.

Estimated total annual reporting burden: 100 hoU.S. The estimated
annual burden per respondent varies from .5 hours to 5 hours,
depending on individual circumstances, with an estimated average of
1 hour.

Estimated number of respondents : 100.

Estimated annual frequency of responses: annually.

An agency may not conduct or sponsor, and a person is not required
to respond to, a collection of information unless the collection of
information displays a valid control number assigned by the Office
of Management and Budget.

Books or records relating to a collection of information must be
retained as long as their contents may become material in the
administration of any internal revenue law. Generally, tax returns
and tax return information are confidential, as required by 26
U.S.C. 6103.

Background

This document contains proposed amendments to the Income Tax
Regulations (26 CFR part 1) to provide regulations under section
118(c) of the Internal Revenue Code of 1986. Section 118(c) was
added to the Code by section 1613(a)(1)(B) of the Small Business Job
Protection Act of 1996 (SBJPA of 1996), 1996-3 C.B. 155, 248-250.
Under section 1613(a)(3) of the SBJPA of 1996, the amendments made
by section 1613(a) apply to amounts received after June 12, 1996.

Explanation of Provisions

Contribution to Capital

Section 118(a) generally provides that, in the case of a
corporation, gross income does not include any contribution to the
capital of the taxpayer. Under section 118(b), a contribution in aid
of construction generally is not a contribution to the capital of
the taxpayer and is not excluded from gross income under section
118(a).

However, for amounts received after June 12, 1996, section 118(c)
provides an exception to this rule.

Under section 118(c)(1), the term "contribution to the capital of
the taxpayer" includes any amount of money or other property
received from any person (whether or not a shareholder) by a
regulated public utility that provides water or sewerage disposal
services if the amount is a contribution in aid of construction. In
the case of a contribution of property other than water or sewerage
disposal facilities, the amount must meet the requirements of the
expenditure rule of section 118(c)(2) (which generally requires that
the amount is expended to acquire or construct water or sewerage
disposal facilities within the specified time period). Moreover, the
amount (or any property acquired or constructed with the amount)
cannot be included in the taxpayer's rate base for rate-making
purposes.

Contribution in Aid of Construction

Section 118(c)(3)(A) provides that, for purposes of section 118(c),
the term "contribution in aid of construction" shall be defined by
regulations prescribed by the Secretary, except that such term shall
not include amounts paid as service charges for starting or stopping
services.

Section 118(c) was added by the SBJPA of 1996 "to restore the
contribution in aid of construction provision that was repealed by
the Tax Reform Act of 1986 (1986 Act) for regulated public utilities
that provide water or sewerage disposal services." H.R. Conf. Rep.
No. 737, 104th Cong., 2d Sess. 316 (1996), 1996-3 C.B. 741, 1056.

Before the 1986 Act, former section 118(b) generally provided that a
contribution in aid of construction received by a regulated public
utility was treated as a contribution to the capital of the taxpayer
and was excluded from gross income. However, former section 118(b)
(3)(A) provided that the term "contribution in aid of construction"
did not include amounts paid as customer connection fees (including
amounts paid to connect the customer's line to an electric line, a
gas main, a steam line, or a main water or sewer line and amounts
paid as service charges for starting or stopping services). The
legislative history of the SBJPA of 1996 also states that "[p]rior
to the enactment of the Tax Reform Act of 1986 ... [a nontaxable]
contribution in aid of construction did not include a connection
fee." Id.

The nontaxable contribution in aid of construction provision in
former section 118(b) is derived from a line of cases, including
several Supreme Court cases, beginning with Edwards v. Cuba R.R.,
268 U.S. 628 (1925), IV-2 C.B. 122. In Edwards, the Supreme Court
held that subsidy payments by the Republic of Cuba to a railroad
company to induce the construction and operation of a railroad in
Cuba were not included in the recipient corporation's gross income
because the payments were not made for services rendered or to be
rendered. In Detroit Edison Co. v. Commissioner, 319 U.S. 98 (1943),
1943 C.B. 1019, the Supreme Court looked at the contributors'
motivation to determine whether payments by customers for extending
electrical service lines were nonshareholder contributions to
capital. Because the transferors received direct benefits in the
form of services as a result of the contributions, the Court held
that the payments were not contributions to capital, but the price
for receiving service.

The Supreme Court elaborated on the contributor's motivation in
Brown Shoe Co. v. Commissioner, 339 U.S. 583 (1950), 1950-1 C.B. 38,
when it held that, if the transferor did not anticipate any direct
benefit from the contribution, such as the receipt of services, but
expected only that the transaction would benefit the community at
large, the funds were contributions to capital. The lack of a direct
benefit to the transferor was considered indicative of an intent to
increase the transferee's capital. In United States v. Chicago,
Burlington & Quincy R.R., 412 U.S. 401 (1973), 1973-2 C.B.

428, the Supreme Court held that government payments received by a
railroad company for improvements at grade crossing and
intersections were not contributions to capital. In reaching its
holding, the Court set forth five characteristics of a
nonshareholder contribution to capital, including that the amounts
received must not constitute payments for specific, quantifiable
services provided for the transferor by the transferee.

Consistent with the above Supreme Court cases, a customer connection
fee would not have qualified as a nonshareholder contribution to the
capital of the utility under section 118(a) because the fee clearly
is paid as a prerequisite for obtaining services. In addition, the
IRS' position prior to the enactment of former section 118(b) as
articulated in Rev. Rul. 75-557, 1975-2 C.B. 33, was that customer
connection fees charged by a water utility were not excludable from
income. In 1976, Congress enacted former section 118(b) to treat
contributions in aid of construction to water or sewerage disposal
facilities as excludable contributions to capital. This legislation
specifically excluded customer connection fees from the definition
of nontaxable contributions in aid of construction. As explained by
the court in Florida Progress Corp.

v. United States, M.D. Fla., No. 93-246-CIV-T-25A, 9/2/98, Congress
enacted former section 118(b) in 1976 to codify the already existing
case law with regard to contributions in aid of construction to
water and sewerage disposal facilities.

Thereafter, payments made to a utility to encourage the extension of
facilities into new areas benefitting a large number of people would
be given tax free status; however, as held by the Supreme Court in
Detroit Edison, payments made to a utility as a prerequisite to
receiving water or sewerage service would be treated as taxable
income to the utility.

The proposed regulations define the term "contribution in aid of
construction," for purposes of section 118(c), as meaning any amount
of money or other property contributed to a regulated public utility
that provides water or sewerage disposal services to the extent that
the purpose of the contribution is to provide for the expansion,
improvement, or replacement of the utility's water or sewerage
disposal facilities. However, to restore the contribution in aid of
construction provision that existed before the 1986 Act for
regulated public utilities providing water and sewerage disposal
services as well as to be consistent with the Supreme Court cases
discussed above, the proposed regulations exclude customer
connection fees from the definition of contribution in aid of
construction.

A customer connection fee is defined in the proposed regulations as
any amount of money or property contributed to the utility
representing the cost of installing a connection or service line
(including the cost of meters and piping) from the utility's main
water or sewer lines to the line owned by the customer or potential
customer.

However, money or property contributed for a connection or service
line from the utility's main line to the customer 's or potential
customer's line is not a customer connection fee if the connection
or service line does serve, or is designed to serve, more than one
customer. The proposed regulations also define a customer connection
fee as including any amount paid as a service charge for stopping or
starting service.

The proposed regulations indicate that a contribution in aid of
construction may include an amount of money or other property
contributed to a regulated public utility for a water or sewerage
disposal facility subject to a contingent obligation to repay, in
whole or in part, the amount to the contributor (commonly referred
to as an "advance").

However, no inference is intended as to whether an amount subject to
such a repayment obligation is a contribution or loan. Whether an
advance is a contribution or a loan is determined under general
principles of federal tax law based on all the facts and
circumstances.

Adjusted Basis Section 118(c)(4) provides that notwithstanding any
other provision of subtitle A, no deduction or credit shall be
allowed for, or by reason of, any expenditure which constitutes a
contribution in aid of construction to which section 118(c) applies.
The adjusted basis of any property acquired with a contribution in
aid of construction to which section 118(c) applies shall be zero.

Consistent with section 118(c)(4), the proposed regulations provide
rules for adjusting the basis of water or sewerage disposal
facilities acquired as, or acquired or constructed with any money
received as, a contribution in aid of construction.

Statute of Limitations

Section 118(d)(1) provides that if the taxpayer for any taxable year
treats an amount as a contribution to the capital of the taxpayer
described in section 118(c), then the statutory period for the
assessment of any deficiency attributable to any part of the amount
does not expire before the expiration of 3 years from the date the
Secretary is notified by the taxpayer (in such manner as the
Secretary may prescribe) of the amount of the expenditure referred
to in section 118(c)(2)(A), of the taxpayer's intention not to make
the expenditures referred to in section 118(c)(2)(A), or of a
failure to make the expenditure within the period described in
section 118(c)(2)(B). Section 118(d)(2) provides that the deficiency
may be assessed before the expiration of such 3-year period
notwithstanding the provisions of any other law or rule of law which
would otherwise prevent assessment. The proposed regulations provide
the time and manner for taxpayers to notify the Secretary with
respect to its contributions in aid of construction under section
118(d)(1).

Proposed Effective Date

The regulations are proposed to be applicable for any money or other
property received by a regulated public utility that provides water
or sewerage disposal services on or after the date final regulations
are published in the Federal Register.

Special Analyses

It has been determined that this notice of proposed rulemaking is
not a significant regulatory action as defined in Executive Order
12866. Therefore, a regulatory assessment is not required. It is
hereby certified that the collection of information in these
regulations will not have a significant economic impact on a
substantial number of small entities. This certification is based
upon the fact that any burden on taxpayers is minimal. Accordingly,
a Regulatory Flexibility Analysis under the Regulatory Flexibility
Act (5 U.S.C. chapter 6) is not required. Pursuant to section
7805(f) of the Internal Revenue Code, this notice of proposed
rulemaking will be submitted to the Chief Counsel for Advocacy of
the Small Business Administration for comment on its impact on small
business.

Comments and Public Hearing

Before these proposed regulations are adopted as final regulations,
consideration will be given to any written comments (a signed
original and eight (8) copies) or electronic comments that are
submitted timely to the IRS. The IRS and Treasury Department
specifically request comments on the clarity of the proposed rule
and how it may be made easier to understand. All comments will be
available for public inspection and copying.

A public hearing has been scheduled for Thursday, April 27, 2000, at
10 a.m. in room 2615, Internal Revenue Building, 1111 Constitution
Avenue, NW., Washington DC. Due to building security procedures,
visitors must enter at the 10 th Street entrance, located between
Constitution and Pennsylvania Avenues, NW. In addition, all visitors
must present photo identification to enter the building. Because of
access restrictions, visitors will not be admitted beyond the
immediate entrance area more than 15 minutes before the hearing
starts. For information about having your name placed on the
building access list to attend the hearing, see the "FOR FURTHER
INFORMATION CONTACT" section of this preamble.

The rules of 26 CFR 601.601(a)(3) apply to the hearing.

Persons who wish to present oral comments at the hearing must submit
an outline of the topics to be discussed and the time to be devoted
to each topic (signed original and eight (8) copies) by April 6,
2000.

A period of 10 minutes will be allotted to each person for making
comments.

An agenda showing the scheduling of the speakers will be prepared
after the deadline for receiving outlines has passed. Copies of the
agenda will be available free of charge at the hearing.

Drafting Information

The principal author of these regulations is Paul F. Handleman,
Office of the Assistant Chief Counsel (Passthroughs and Special
Industries), IRS. However, other personnel from the IRS and Treasury
Department participated in their development.

List of Subjects in 26 CFR Part 1

Income taxes, Reporting and recordkeeping requirements.

Proposed Amendments to the Regulations

Accordingly, 26 CFR part 1 is proposed to be amended as follows:

PART 1--INCOME TAXES

Paragraph 1. The authority citation for part 1 is amended by adding
an entry in numerical order to read in part as follows:

Authority: 26 U.S.C. 7805 * * *

Section 1.118-2 also issued under 26 U.S.C. 118(c)(3)(A); * * *

Par. 2. Section 1.118-2 is added to read as follows:

§1.118-2 Contribution in aid of construction.

(a) Special rule for water and sewerage disposal utilities--(1) In
general. For purposes of section 118, the term "contribution to the
capital of the taxpayer" includes any amount of money or other
property received from any person (whether or not a shareholder) by
a regulated public utility that provides water or sewerage disposal
services if--

(i) The amount is a contribution in aid of construction under
paragraph (b) of this section;

(ii) In the case of a contribution of property other than water or
sewerage disposal facilities, the amount satisfies the expenditure
rule under paragraph (c) of this section; and

(iii) The amount (or any property acquired or constructed with the
amount) is not included in the taxpayer's rate base for ratemaking
purposes.

(2) Definitions--(i) Regulated public utility has the meaning given
such term by section 7701(a)(33), except that such term does not
include any utility which is not required to provide water or
sewerage disposal services to members of the general public in its
service area.

(ii) Water or sewerage disposal facility is defined as tangible
property described in section 1231(b) that is used predominately
(i.e., 80% or more) in the trade or business of furnishing water or
sewerage disposal services.

(b) Contribution in aid of construction--(1) In general. For
purposes of section 118(c) and this section, the term "contribution
in aid of construction" means any amount of money or other property
contributed to a regulated public utility that provides water or
sewerage disposal services to the extent that the purpose of the
contribution is to provide for the expansion, improvement, or
replacement of the utility's water or sewerage disposal facilities.

(2) Advances. A contribution in aid of construction may include an
amount of money or other property contributed to a regulated public
utility for a water or sewerage disposal facility subject to a
contingent obligation to repay the amount, in whole or in part, to
the contributor (commonly referred to as an "advance"). For example,
an amount received by a utility from a developer to construct a
water facility pursuant to an agreement under which the utility will
pay the developer a percentage of the receipts from the facility
over a fixed period may constitute a contribution in aid of
construction.

Whether an advance is a contribution or a loan is determined under
general principles of federal tax law based on all the facts and
circumstances. For the treatment of any amount of a contribution in
aid of construction that is repaid by the utility to the
contributor, see paragraphs (c)(2)(ii) and (d)(2) of this section.

(3) Customer connection fee. A customer connection fee is not a
contribution in aid of construction under this paragraph (b) and is
includible in income. The term "customer connection fee" includes
any amount of money or other property transferred to the utility
representing the cost of installing a connection or service line
(including the cost of meters and piping) from the utility's main
water or sewer lines to the line owned by the customer or potential
customer. However, money or other property contributed for a
connection or service line from the utility's main line to the
customer's or potential customer's line is not a customer connection
fee if the connection or service line does serve, or is designed to
serve, more than one customer. A customer connection fee also
includes any amount paid as a service charge for stopping or
starting service.

(4) Binding agreement to reimburse utility for a facility previously
placed in service. If a water or sewerage disposal facility is
placed in service by the utility before an amount is contributed to
the utility, the contribution is not a contribution in aid of
construction under this paragraph (b) with respect to the cost of
the facility unless, at the time the facility is placed in service
by the utility, there is an agreement, binding under local law
between the prospective contributor and the utility, that the
utility is to receive the amount as reimbursement for the cost of
acquiring or constructing the facility. If such an agreement exists,
the basis of the facility must be reduced by the amount of the
contribution at the time the facility is placed in service.

(5) Classification by ratemaking authority. The fact that the
applicable ratemaking authority classifies any money or other
property received by a utility as a contribution in aid of
construction is not conclusive as to its treatment under this
paragraph (b).

(c) Expenditure rule--(1) In general. An amount satisfies the
expenditure rule of section 118(c)(2) if the amount is expended for
the acquisition or construction of property described in section
118(c)(2)(A), the amount is paid or incurred before the end of the
second taxable year after the taxable year in which the amount was
received as required by section 118(c)(2)(B), and accurate records
are kept of contributions and expenditures as provided in section
118(c)(2)(C).

(2) Excess amount--(i) Includible in the utility's income. An amount
received by a utility as a contribution in aid of construction that
is not expended for the acquisition or construction of water or
sewerage disposal facilities as required by paragraph (c)(1) of this
section (the excess amount) is not a contribution to the capital of
the taxpayer under paragraph (a) of this section. Except as provided
in paragraph (c)(2)(ii) of this section, such excess amount is
includible in the utility's income in the taxable year in which the
amount was received.

(ii) Repayment of excess amount. If the excess amount described in
paragraph (c)(2)(i) of this section is repaid, in whole or in part,
either--

(A) Before the end of the time period described in paragraph (c)(1)
of this section, the repayment amount is not includible in the
utility's income; or

(B) After the end of the time period described in paragraph (c)(1)
of this section, the repayment amount may be deducted by the utility
in the taxable year in which it is paid or incurred to the extent
such amount was included in income.

(3) Example. The application of this paragraph (c) is illustrated by
the following example:

Example. M, a calendar year regulated public utility that provides
water services, received a $1,000,000 contribution in aid of
construction in 1999 for the purpose of constructing a water
facility. To the extent that the $1,000,000 exceeded the actual cost
of the facility, the contribution was subject to being returned. In
2000, M built the facility at a cost of $700,000 and returned
$200,000 to the contributor. As of the end of 2001, M had not
returned the remaining $100,000. Assuming accurate records are kept,
the requirement under section 118(c)(2) is satisfied for $700,000 of
the contribution. Because $200,000 of the contribution was returned
within the time period during which qualifying expenditures could be
made, this amount is not includible in M's income. However, the
remaining $100,000 is includible in M's income for its 1999 taxable
year (the taxable year in which the amount was received) because the
amount was neither spent nor repaid during the prescribed time
period. To the extent M repays the remaining $100,000 after year
2001, M would be entitled to a deduction in the year such repayment
is paid or incurred.

(d) Adjusted basis--(1) Exclusion from basis. Except for a repayment
described in paragraph (d)(2) of this section, to the extent that a
water or sewerage disposal facility is acquired or constructed with
an amount received as a contribution to the capital of the taxpayer
under paragraph (a) of this section, the basis of the facility is
reduced by the amount of the contribution. To the extent the water
or sewerage disposal facility is acquired as a contribution to the
capital of the taxpayer under paragraph (a) of this section, the
basis of the contributed facility is zero.

(2) Repayment of contribution. If a contribution to the capital of
the taxpayer under paragraph (a) of this section is repaid to the
contributor, either in whole or in part, then the repayment amount
is a capital expenditure in the taxable year in which it is paid or
incurred, resulting in an increase in the property's adjusted basis
in such year.

(3) Allocation of contributions. An amount treated as a capital
expenditure under this paragraph (d) is to be allocated
proportionately to the adjusted basis of each property acquired or
constructed with the contribution based on the relative cost of such
property.

(4) Example. The application of this paragraph (d) is illustrated by
the following example:

Example. A, a calendar year regulated public utility that provides
water services, received a $1,000,000 contribution in aid of
construction in 1999 as an advance from B, a developer, for the
purpose of constructing a water facility. To the extent that the
$1,000,000 exceeds the actual cost of the facility, the contribution
is subject to being returned. Under the terms of the advance, A
agrees to pay to B a percentage of the receipts from the facility
over a fixed period, but limited to the cost of the facility. In
2000, A builds the facility at a cost of $700,000 and returns
$300,000 to B. In 2001, A pays $20,000 to B out of the receipts from
the facility. Assuming accurate records are kept, the $700,000
advance is a contribution to the capital of A under paragraph (a) of
this section and is excludable from A's income. The basis of the
$700,000 facility constructed with this contribution to capital is
zero. The $300,000 excess amount is not a contribution to the
capital of A under paragraph (a) of this section because it does not
meet the expenditure rule described in paragraph (c)(1) of this
section. However, this excess amount is not includible in A's income
pursuant to paragraph (c)(2)(ii) of this section since the amount is
repaid to B within the required time period. The repayment of the
$300,000 excess amount to B in 2000 is not treated as a capital
expenditure by A. The $20,000 payment to B in 2001 is treated as a
capital expenditure by A in 2001 resulting in an increase in the
adjusted basis of the water facility from zero to $20,000.

(e) Statute of limitations--(1) Extension of statute of limitations.
Under section 118(d)(1), the statutory period for assessment of any
deficiency attributable to a contribution to capital under paragraph
(a) of this section does not expire before the expiration of 3 years
after the date the taxpayer notifies the Secretary in the time and
manner prescribed in paragraph (e)(2) of this section.

(2) Time and manner of notification. Notification is made by
attaching a statement to the taxpayer's federal income tax return
for the taxable year in which any of the reportable items in
paragraphs (e)(2)(i) through (iii) of this section occur. The
statement must contain the taxpayer's name, address, employer
identification number, taxable year and the following information
with respect to contributions of property other than water or
sewerage disposal facilities that are subject to the expenditure
rule described in paragraph (c) of this section:

(i) The amount of contributions in aid of construction expended
during the taxable year for property described in section 118(c)(2)
(A) (qualified property) as required under paragraph (c)(1) of this
section, identified by taxable year in which the contributions were
received.

(ii) The amount of contributions in aid of construction that the
taxpayer does not intend to expend for qualified property as
required under paragraph (c)(1) of this section, identified by
taxable year in which the contributions were received.

(iii) The amount of contributions in aid of construction that the
taxpayer failed to expend for qualified property as required under
paragraph (c)(1) of this section, identified by taxable year in
which the contributions were received.

(f) Effective date. This section is applicable for any money or
other property received by a regulated public utility that provides
water or sewerage disposal services on or after the date final
regulations are published in the Federal Register .

Robert E. Wenzel
Deputy Commissioner of Internal Revenue.

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