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This report provides a background discussion of accelerated depreciation, the investment tax credit, and their required ratemaking treatment in the public utility industry. "Excess deferred taxes," which result from the tax rate decrease in the Tax Reform Act of 1986, are also discussed. The report summarizes the legislative history and discusses the extent to which the required ratemaking treatments are consistent with the underlying economic effects of the tax benefits. A final section provides data on the amounts of accumulated deferred income taxes and investment tax credits in the electric, telephone, and gas utility industries since enactment of the tax provisions.
