00-4072 WICOR, Inc. v. U.S.

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“We cannot think of any fundamental or economic objection to the restatement proposed by the gas company, which would eliminate any difference in taxation between a utility’s being forced by the regulators to reduce its rates and its being forced to give its customers a credit in the same amount. Because of customer turnover, the people affected by the different actions will not be identical, but why should that matter? It matters because we can’t locate any provision in the Internal Revenue Code that allows a seller to take a deduction for a discount, and section 1341 is applicable only if ‘a deduction is allowable’ in y + 1. 26 U.S.C. sec. 1341(a)(2). Just the other day we noted the infeasibility and inappropriateness of courts’ ‘undertaking to achieve global equity in taxation.’ Kenseth v. Commissioner, No. 00-3705, slip op. at 6, 2001 WL 881479, at *3 (7th Cir. Aug. 7, 2001). When a company reduces its price, this event is reflected on its income tax return not by including the old price as taxable income and the difference between the old and the new price as a deduction, but as reducing taxable income to the new price. When that is done for the gas company in y + 1, there is nothing to deduct. Taxable income has fallen from $300 to $200. That is all. Unlike the situation in Dominion Resources, Inc. v. United States, supra, 219 F.3d at 368-70, where the utility ‘allocate[d] refunds [ordered by the regulatory authorities] to actual customers who had made the overpayments but fail[ed] to make a perfect match only because it was “not possible” to do so,’ the gas company made no effort to refund overpayments to particular customers, thus bringing this case within the grasp of Roanoke Gas Co. v. United States, 977 F.2d 131, 135-37 (4th Cir. 1992), and Iowa Southern Utilities Co. v. United States, 841 F.2d 1108, 1113-14 (Fed. Cir. 1988), and making it unnecessary for us to consider the significance of ‘appeared’ in the section (‘because it appeared that the taxpayer had an unrestricted right to such item’).”

Affirmed.

Appeal from the United States District Court for the Eastern District of Wisconsin, Goodstein, Mag. J., Posner, J.