When calculating loss, should we include “gross earnings tax” also called “utility tax”?

On January 6, 2022, the U.S. Department of the Treasury ("Treasury") issued the Coronavirus State and Local Fiscal Recovery Funds ("CSLFRF") Final Rule as part of the American Rescue Plan Act of 2021 ("ARP").

The Final Rule allows recipients to include revenue from government-operated utilities in general revenue if they so choose.[1] However, "for utilities or other entities (e.g., certain service districts) that are not part of the recipient government, a transfer from the utility to the recipient constitutes an intergovernmental transfer and must be included in the definition of 'general revenue.'"[2] Therefore, recipients may choose to include or not include government-operated utilities as general revenue, but non-government-operated utilities must be included as general revenue.

Additional information may be provided when Treasury issues new Frequently Asked Questions ("FAQ") specific to the Final Rule, as indicated in the Interim Final Rule FAQ update, which was provided simultaneously with the Final Rule's issuance.[3]

Last Updated: February 1, 2022

[1] Treas. Reg. 31 CFR 35 at 245, available at: https://home.treasury.gov/system/files/136/SLFRF-Final-Rule.pdf.

[2] Id.

[3] Coronavirus State and Local Fiscal Recovery Funds, Interim Final Rule Frequently Asked Questions, FAQ Introduction (as of January 6, 2022), available at: https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf.