REGULATED COMPANIES.

SEC. 105. REGULATED COMPANIES. (a) Increase in Qualified Investment for Public Utility Property—Section 46(c) (3) (A) (relating to qualified investment in case of public utility property) is amended by striking out “3/7” and inserting in lieu thereof “47”. (b) Definition of Public Utility Property, Etc.—Section 46(c) (3) (relating to public utility property) is amended— (1) by inserting “or” at the end of clause (ii) of subparagraph (B), and by striking out clauses (iii) and (iv) of such subparagraph and inserting in lieu thereof the following: “(iii) telephone service, telegraph service by means of domestic telegraph operations (as defined in section 222(a) (5) of the Communications Act of 1934, as amended; 47 U.S.C., sec. 222(a)(5)). or other communication services (other than international telegraph service),”; (2) by adding at the end of subparagraph (B) the following new sentence: “Such term also means communication property of the type used by persons engaged in providing telephone or micro-wave communication services to which clause (iii) applies, if such property is used predominantly for communication purposes.”; and (3) by adding after subparagraph (B) the following new subparagraph: “(C) In the case of any interest in a submarine cable circuit used to furnish telegraph service between the United States and a point outside the United States of a taxpayer engaged in furnishing international telegraph service (if the rates for such furnishing have been established or approved by a governmental unit, agency, instrumentality, commission, or similar body described in subparagraph (B)), the qualified investment shall not exceed the qualified investment attributable to so much of the interest of the taxpayer in the circuit as does not exceed 50 percent of all interests in the circuit.” (c) Credit Not Available in Certain Cases—Section 46 (relating to amount of credit) is amended by adding at the end thereof the following new subsection: 85 Stat. 504 “(e) Limitation in Case of Certain Regulated Companies— “(1) General rule—Except as otherwise provided in this subsection, no credit shall be allowed by section 38 with respect to any property described in section 50 which is public utility property (as defined in paragraph (5)) of the taxpayer— “(A) Cost of service reduction—If the taxpayer’s cost of service for ratemaking purposes is reduced by reason of any portion of the credit allowable by section 38 (determined without regard to this subsection); or “(B) Rate base reduction—If the base to which the tax-payer’s rate of return for ratemaking purposes is applied is reduced by reason of any portion of the credit allowable by section 38 (determined without regard to this subsection). Subparagraph (B) shall not apply if the reduction in the rate base is restored not less rapidly than ratably. If the taxpayer makes an election under this sentence within 90 days after the date of the enactment of this paragraph in the manner prescribed by the Secretary or his delegate, the immediately preceding sentence shall not apply to property described in paragraph (5)(B) if any agency or instrumentality of the United States having jurisdiction for ratemaking purposes with respect to such taxpayer’s trade or business referred to in paragraph (5) (B) determines that the natural domestic supply of the product furnished by the taxpayer in the course of such trade or business is insufficient to meet the present and future requirements of the domestic economy. “(2) Special rule for ratable flow-through.— If the tax-payer makes an election under this paragraph within 90 days after the date of the enactment of this paragraph in the manner prescribed by the Secretary or his delegate, paragraph (1) shall not apply, out no credit shall be allowed by section 38 with respect to any property described in section 50 which is public utility property (as defined in paragraph (5)) of the taxpayer— “(A) Cost of service reduction.—If the taxpayer’s cost of service for ratemaking purposes or in its regulated books of account is reduced by more than a ratable portion of the credit allowable by section 38 (determined without regard to this subsection), or “(B) Rate base reduction—If the base to which the tax-payer’s rate of return for ratemaking purposes is applied is reduced by reason of any portion of the credit allowable by section 38 (determined without regard to this subsection). “(3) Special rule for immediate flow-through in certain cases—In the case of property to which section 167(1) (2) (C) applies, if the taxpayer makes an election under this paragraph within 90 days after the date of the enactment of this paragraph in the manner prescribed by the Secretary or his delegate, paragraphs (1) and (2) shall not apply to such property. “(4) Limitation— “(A) In general.— The requirements of paragraphs (1) and (2) regarding cost of service and rate base adjustments shall not be applied to public utility property of the taxpayer to disallow the credit with respect to such property before the first final determination which is inconsistent with paragraph (1) or (2) (as the case may be) is put into effect with respect to public utility property (to which this subsection applies) of the taxpayer. Thereupon, paragraph (1) or (2) shall apply to disallow the credit with respect to public utility property (to which this subsection applies) placed in service by the taxpayer— 85 Stat. 505 “(i) before the date that the first final determination, or a subsequent determination, which is inconsistent with paragraph (1) or (2) (as the case may be) is put into effect, and “(ii) on or after the date that a determination referred to in clause (i) is put into effect and before the date that a subsequent determination thereafter which is consistent with paragraph (1) or (2) (as the case may be) is put into effect. “(B) Determinations—For purposes of this paragraph, a determination is a determination made with respect to public utility property (to which this subsection applies) by a governmental unit, agency, instrumentality, or commission or similar body described in subsection (c)(3)(B) which determines the effect of the credit allowed by section 38 (determined without regard to this subsection)— “(i) on the taxpayer’s cost of service or rate base for ratemaking purposes, or “(ii) in the case of a taxpayer which made an election under paragraph (2), on the taxpayer’s cost of service for ratemaking purposes or in its regulated books of account or rate base for ratemaking purposes. “(C) Special rules—For purposes of this paragraph— “(i) a determination is final if all rights to appeal or to request a review, a rehearing, or a redetermination, have been exhausted or have lapsed, “(ii) the first final determination is the first final determination made after the date of the enactment of this subsection, and “(iii) a subsequent determination is a determination subsequent to a final determination. “(5) Public utility property—For purposes of this subsection, the term ‘public utility property’ means— “(A) property which is public utility property within the meaning of subsection (c) (3) (B), and “(B) property used predominantly in the trade or business of the furnishing or sale of (i) steam through a local distribution system or (ii) the transportation of gas or steam by pipeline, if the rates for such furnishing or sale are established or approved by a governmental unit, agency, instrumentality, or commission described in subsection (c) (3) (B). “(6) Ratable portion—For purposes of determining ratable restorations to base under paragraph (1) and for purposes of determining ratable portions under paragraph (2) (A), the period of time used in computing depreciation expense for purposes of reflecting operating results in the taxpayer’s regulated books of account shall be used. “(7) Reorganizations, assets acquisitions, etc.—If by reason of a corporate reorganization, by reason of any other acquisition of the assets of one taxpayer by another taxpayer, by reason of the fact that any trade or business of the taxpayer is subject to ratemaking by more than one body, or by reason of other circumstances, the application of any provisions of this subsection to any public utility property does not carry out the purposes of tins subsection, the Secretary or his delegate shall provide by regulations for the application of such provisions in a manner consistent with the purposes of this subsection.” (d) Effective Date—The amendments made by this section shall apply to property described in section 50 of the Internal Revenue Code of 1954. 85 Stat. 506 (e) Application of Section 203(e) of Revenue Act of 1964.—Section 203(e) of the Revenue Act of 1964 shall not apply to public utility property to which section 46(e) of the Internal Revenue Code of 1954 (as added by subsection (c)) applies.