20180601Capitol Water Response.pdf

COLE IN FiLCEI\J'ED
Accounting & Consulting
May 29, 2018
Commission Secretary
ldaho Public Utilities Commission
PO Box 83720
Boise, lD 83720-00074
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Dennis R. Reinstein, CPAIABV ASA, CVA
S. Jason Coles, MBA, CPA,/PFS
Keith A. PinKerton, MBA, CFA, ASA
Susan M. Langley, CPA, CFE
Nate Lining, CPA
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RE: Notice of Filing of Utility Reports on lmpact of Tax-Law Changes
Dear Diane,
We are corresponding on behalf of Capitol Water Corporation in response to Order 33955 with regard to
the federal Tax Cuts and Jobs Act of 2017 and the decreased federal corporate rate structure. Capital
Water Corporation is a small operation that has historically had between 525,000 and 580,000 of net
income. Under the former tax structure for corporations, the first 550,000 of net income were taxed at
15%, the next 525,000 were taxed at 25%, and the next 525,000 were at 34%. Using these graduated
tax rates has, for Capitol Water, yielded a blended rate of somewhere between 15% and L9% in the past
because most of their income was in the 15% tax bracket. Now, under the Tax Reform of 2017, we have
a flat rate of 2\% on all net income. As such, it will result in a larger tax burden for Capital Water going
forward of between 3% and 6% of net income. As a result of this increase in the amount tax that will be
due, it would not be appropriate to decrease the rates the customers are being charged, and likely
should result in an increase in rates of around 7-2%lo maintain the profitability for the corporation.
Hopefully this analysis is helpful, but for corporations the size and having the profit levels of Capitol
Water, the change in the tax law actually is an increase in tax liability. Thank you for your consideration
of this informati
Sincerely,
SJ Coles,
closures
Member of American tnstitute of Certified Public Accountants and ldaho SocieU of Certified Public Accountants
University Plaza, 960 Broadway Ave., Suite 415, Boise, lD 83706 T 208.345.2350 F 208.3443019
Registered lnvestment Advisor