Pyle represents AEP in Washington on tax reform issues

On March 19, Mark Pyle, AEP vice president-tax, participated in a roundtable discussion with the U.S. House Ways and Means Energy Working Group on the issue of tax reform. In addition, he presented to Rep. Kevin Brady (R-Texas), chairman of the Energy Tax Reform Working Group, and Rep. Mike Thompson, (D-Calif.), vice chairman, and Rep. Mike Kelly (R-Pa.), also on tax reform.

Mark Pyle

As requested by the Working Group, Pyle’s presentation focused on three main issue areas:

1. The impact of current tax treatment and current tax priorities on AEP;
2. Key questions the committee should be asking as it pursues comprehensive tax reform; and
3. AEP’s recommendations for pro-growth tax reform.

While tax reform may be a multi-year initiative in Congress, this will be a critical year for the Congress as it considers specific options for reforming the U.S. Tax Code. The roundtable is a continuation of the tax writing committee’s efforts in the House to compile feedback from stakeholders — in this case from the energy sector — to help the committee identify issues or areas of concern as comprehensive tax reform efforts move forward.

Concerning the impact of current tax treatment and current tax priorities, Pyle provided examples of areas that are frustrating to utility taxpayers. He pointed out the challenges of obtaining grants and credits that are arbitrarily limited by budget caps and subjectively administered by the IRS and other federal agencies, like those for clean coal technology; incentives and deductions with expiration dates that are subject to an annual political debate like research and development credits/deductions and the wind production tax credits; and taxes that exact a toll rather than tax net income, like the tax on contributions in aid of construction in our transmission and distribution businesses.

“In approaching tax reform,” he said, “I suggested that the committee should be asking if there are issues which are unique to a particular industry that would require a transition rule to avoid being unintentionally disadvantaged. For example, do utilities need a special rule similar to the one the utility industry received in 1986 to normalize excess deferred taxes created by a federal corporate income tax rate reduction?”

Pyle said he was able to alert the committee to the fact that the industry was planning to submit similar legislative language in the near future. “AEP Tax, Legal and Federal Legislative Affairs teams have been working closely with other EEI (Edison Electric Institute) members to craft the required legislation and educate key legislators,” he noted.

“My recommendations were more in response to the issues with the current tax system, but seemed to resonate with the committee members and led to a philosophical discussion between the committee chair (Republican), Vice Chairman (Democrat) and me about tax code time horizons,” Pyle added. “I advised the committee that much of what we do as a utility occurs with a very long-term view and the short-term approach that Congress has taken with respect to tax code changes over the years makes tax planning overly complex and creates unnecessary uncertainty.”

Pyle said he suggested that tax reform changes be substantial, sustainable and administrable. In essence, make big changes one time (lowering the tax rate from 35 percent to 25 percent), make them lasting (not subject to annual extensions and renewals) and write legislation in a way that taxpayers and the IRS can agree on how to implement them without extensive regulation or litigation.

“The panel was engaged, interactive and seemed genuinely interested in getting input from all sectors of the industry before proceeding,” he concluded. “Contrary to what you see in the news every day, I get the sense from the staff members in the Senate and House, who we’ve met with recently, that corporate tax reform is still one of the focal points of the current Congressional agenda. The last major Tax Code overhaul, passed in 1986, took nearly two years to accomplish and I would expect a similar effort this time around.”