Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 76-61

1976-1 C.B. 12

Section 61
Section 118
Section 7805

IRS Headnote

Public utility; connection "transactions." The nonretroactivity of Rev. Rul. 75-557, holding that connection fees are includible in a public utility's gross income, is applicable to a written or unwritten legally enforceable contract between the regulated public utility and its customer entered into before February 2, 1976; Rev. Rul. 75-557 clarified.

Full Text

Rev. Rul. 76-61 [fn1]

The Internal Revenue Service has been asked to clarify the meaning of the phrase "transactions entered into" on or before February 1, 1976 as that phrase is used in  Rev. Rul. 75-557, 1975-2 C.B. 33 released as TIR 1423.

In Rev. Rul. 75-557 the Service announced that in light of the recent decisions in United States v. Chicago, Burlington and Quincy Railroad Co., 412 U.S. 401 (1973), and Irving J. Hayutin, 31 CCH Tax Ct. Mem. 509, it would no longer recognize the public utility distinction applied by Rev. Rul. 58-555, 1958-2 C.B. 25, with respect to transactions entered into after February 1, 1976.

For purposes of Rev. Rul. 75-557, a transaction entered into on or before February 1, 1976, means a binding contract, whether written or unwritten, which on or before that date was legally enforceable against the regulated public utility under applicable law. Moreover, the binding contract referred to herein, which is the transaction referred to in Rev. Rul. 75-557, is a contract between the regulated public utility and the customer.

Accordingly, Rev. Rul. 75-557, insofar as it embodies the Service's rejection of the public utility distinction applied in Rev. Rul. 58-555, will not apply to binding contracts as defined herein, entered into on or before February 1, 1976.

Rev. Rul. 75-557 is clarified.

[fn1] Also released as TIR 1440, dated Jan. 30, 1976.