Ord 1978-053 - Laserfiche WebLink

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8 The Company failed to apply this factor here although it did in its other payroll adjustments. The total of these two adjustments is to decrease other taxes $155. I Fringe Benefits - .Fringe Benefits that related to the payroll amount were increased due to the payroll adjustment. We ar>e decreasing this adjustment $148 to reflect our decrease of the payroll adjustment. I Federal Income Taxes - The interest expense to be deducted in calculating federal income taxes should be the debt portion of the rate base multiplied by the embedded cost rate. This amounts to a $26,640 interest deduction for tax purposes, while the Company I s use of another method of allocation re sulted in only $24,981. Additionally, for taxable years beginning after December 31, 1978 the corporate tax rate has decreased from 48% to 46% and the surtax credit has increased from $13,500 to $19,750. Therefore, we have decreased federal income taxes $1,339 to recognize these two items. The tax effect of our other adjustments requires an increase in income tax expense of $7,369. Rate of Return In "fair value" jurisdiction, such as Texas, rates are set based on a "fair value rate base" which is determined by fixing a reasonable balance between original cost less accumulated depreciation and re- production cost new less an adjustment for present age and condition. The rates of return allowed on a fair value basis have been lower that those allowed on original cost and the determination of the proper amount is highly subjective. Entex has determined its rate of return of 8% based on past Texas Railroad Commission positions. .