On May 7, 2019, the IRS released Notice 2019-33 which formally announced the agency’s intent to issue additional guidance regarding the normalization requirements of excess deferred income taxes which resulted from the decrease in the corporate income tax rate. The notice summarizes the normalization requirements included in the Tax Cuts and Jobs Acts (TCJA), discusses the stated requirement of utilizing the Average Rate Assumption Method (ARAM), and aligns the allowed alternative method with the Reverse South Georgia Method (RSGM) which was first provided in Rev. Proc. 88-12.

The notice further requests comments on at least seven specific topics related to the application of these normalization requirements:

Reasonableness Test: In situations where there is a cost or effort to assemble the underlying vintage-level books and records to support ARAM, should a “reasonable” test be provided whereby the use of the alternative method is permissible when the cost is excessive?
Continuity of Methods: Can a taxpayer utilize an alternative method in other scenarios, including when the taxpayer’s current method is RSGM?
NOL Impacts: For depreciation-related NOL carryforwards and their associated deferred tax assets, should the related excess deferred income taxes be subject to the same normalization requirements as those excess deferred income taxes related to the depreciation that gave rise to them?
Dispositions: What should be the treatment of book-only retirements and tax dispositions related to significant transactions versus ordinary transactions and their impact on the normalization requirements for excess deferred income taxes?
Interim Rates: How should the implementation of interim rates to reflect the reduced corporate rate be treated, and how should the phrase “reduces the excess tax reserve more rapidly or to a greater extent than such reserve would be reduced under ARAM” be applied?
Future Test Periods and Proration: Should proration be applied to the amortization of excess deferred tax reserves related to customer refunds when the company uses a future test period or partial future test period.
Protected vs Unprotected Reversals: What should be the methodology for reversing protected vs unprotected accumulated deferred income taxes after TCJA.

The IRS requests that comments be submitted by July 29, 2019.

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Utilities face uncertainty on tax normalization