20170113Decision Memo.pdf

TO:
FROM:
DATE:
RE:
DECISION MEMORANDUM
COMMISSIONER KJELLANDER
COMMISSIONER RAPER
COMMISSIONER ANDERSON
COMMISSION SECRET ARY
LEGAL
WORKING FILE
GRACE SEAMAN
JANUARY 11, 2017
FRONTIER COMMUNICATIONS NORTHWEST INC.'S 2015
BROADBAND EQUIPMENT TAX CREDIT APPLICATION;
CASE NO. VZN-T-16-02.
BACKGROUND
In 2001, House Bill 377 was enacted authorizing income tax credit for the
installation of qualifying broadband infrastructure in Idaho. Idaho Code § 63-
30298(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). If the equipment is
installed by a telecommunications carrier, it must also be "necessary to the provision of
broadband services and an integral part of a broadband network." Idaho Code § 63-
30291(3)(b)(i). To be eligible for the tax credit, the taxpayer must obtain from the
Commission an Order confirming that the installed equipment meets the statutory
definition of qualified broadband equipment. Procedural Order No. 28784 and Idaho
Code§ 63-30291(4). Once the Commission has determined the installed equipment is
eligible for the broadband equipment tax credit, an order along with the original
Application is forwarded to the Idaho Tax Commission.
DECISION MEMORANDUM JANUARY 11, 2017
THE APPLICATION
On December 27, 2016, Frontier Communications Northwest Inc. ("FC
Northwest") filed an application seeking approval of equipment for the broadband tax
credit. In the Application, FC Northwest states that it installed equipment associated with
Asymmetrical Digital Subscriber Line ("ADSL") services with transmission rates of up
to 640 Kbps "send" and 6 Mbps "receive" in 19 exchanges. FC Northwest asserts that
over 80% of its total customer base can be served by the broadband network. During
2015, the Company invested approximately $2.4 million in qualifying broadband
equipment.
STAFF REVIEW AND RECOMMENDATION
Staff has reviewed the list of proposed broadband equipment submitted by FC
Northwest and believes the identified equipment qualifies for the investment tax credit
pursuant to Procedural Order No. 28784 and Idaho Code § 63-30291(3)(b). Staff also
believes that the expenditures identified by the Company, a telecommunications provider,
were for equipment that is "necessary for the provision of broadband services and an
integral part of a broadband network." Thus, Staff recommends that the Commission
issue an Order confirming the equipment is qualified broadband equipment and forward
the approving Order along with the a copy of the original Application to the Idaho Tax
Commission.
COMMISSION DECISION
Does the Commission wish to issue an order confirming the equipment identified
in Case No. VZN-T-16-02 is qualified broadband equipment as defined in Idaho Code§
63-30291(3)(b), and forward it to the Idaho Tax Commission?
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DECISION MEMORANDUM 2 JANUARY 11, 2017