20090612Decision Memo.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KEMPTON
COMMISSIONER SMITH
COMMISSIONER REDFORD
COMMISSION SECRETARY
LEGAL
WORKING FILE
FROM:GRACE SEAMAN
DATE:JUNE 11, 2009
RE:QWEST'S 2007 BROADBAND EQUIPMENT TAX CREDIT
APPLICATION; CASE NO. QWE-09-09.
BACKGROUND
In 2001 , House Bill 377 was enacted authorizing income tax credit for the installation of
qualifying broadband infrastructure in Idaho. Idaho Code ~ 63-3029B(3)(a)(ii). In particular
Section 63-30291 allows a taxpayer to receive an investment tax credit for eligible broadband
equipment installed during a calendar year.
Qualified broadband equipment" is defined as those network facilities capable of
transmitting signals at a rate of at least 200 000 bits per seconds (bps) to a subscriber and at least
125 000 bps from a subscriber. Idaho Code ~ 63-3029I(3)(b). To be eligible for the broadband
equipment tax credit, the taxpayer must obtain from the Commission an Order confirming that
installed equipment qualifies for capital investment credit. Procedural Order No. 28784 and
Idaho Code ~ 63-30291(4).
THE APPLICATION
On May 29 2009, the Commission received an Application from Qwest Corporation
(Qwest) seeking approval of equipment for the broadband tax credit. Qwest's Application
identifies the Company s broadband investments for calendar year 2007 as well as the 2007
retirements for 2003 2004 2005 , and 2006 investments. In the Application, Qwest listed
equipment associated with general broadband facilities (DSL and A TM services), dedicated line
facilities (private lines), and inter-office facilities. These services are capable of offering high-
DECISION MEMORANDUM - 1 -JUNE 11 , 2009
speed network access to the customers at transmission rates from 256 kilobits per second (Kbps)
to more than 100 megabits per second (Mbps). For state tax reporting purposes, Qwest stated
that it follows Part 32 of Federal Communications Commission Rules and Regulations by
capitalizing such items as labor, engineering, transportation and other overhead costs associated
with the installation of the broadband equipment. The Application included a signed affidavit
indicating the submitted investments qualified for the broadband tax credit. The Application
identified a net investment of approximately $7.3 million in 2007.
STAFF REVIEW AND RECOMMENDATION
Staff has reviewed the list of proposed broadband equipment submitted by Qwest and
believes the identified equipment qualifies for the investment tax credit pursuant to Procedural
Order No. 28784 and Idaho Code ~ 63-3029I(3)(b). Staff also believes that the expenditures
identified by Qwest, a telecommunications provider, were for equipment that is "necessary for
the provision of broadband services and an integral part of a broadband network." Staff
therefore, recommends acceptance of the Application and further recommends that the
Commission forward the approving Order along with a copy of the original Application to the
Idaho Tax Commission.
COMMISSION DECISION
Does the Commission wish to accept Qwest's Application for the broadband investment
tax credit?
race Seaman
i: udmemos/qwetO9-09btc
DECISION MEMORANDUM - 2 -JUNE 11 2009