PG&E Corporation (NYSE:PCG) is under the spotlight once again, this time caught up between the controversy over whether or not the company should be exempt from the taxes imposed on the $1.6 billion penalty.
The hefty penalty was imposed on the company after the September 2010 incident where part of the company’s pipeline exploded in San Bruno. The accident killed eight people and injured 66 others. The California Public Utilities Commission imposed the hefty $1.6 billion fine on PG&E, but there have been uncertainties as to whether the company should benefit from tax deductions for the fine amount. On Friday, two lawmakers proposed a bill to the California registry that would exempt PG&E Co. from accessing the state tax deductions on a large percentage of the fine.
The new bill will only exempt the company from tax deductions on $300 million out of the total $1.6 billion fine. PG&E said that it does not plan on appealing the penalty. State Sen. Jerry Hill together with Assembly member Kevin Mullin, D-San Mateo/Santa Clara counties and D-San Mateo proposed the bill SB 681. The bill was proposed in light of a letter sent by the president of the commission, Michael Picker. The letter was sent to the federal and state tax agencies stating that the fine was not intended to be punitive and not tax-deductible.
During a press briefing, Hill announced that it was still uncertain whether the tax agencies will bar the company from taking deductions for the penalties. He also said that the proposed bill will eliminate the ambiguity.
The fine package on PG&E Corporation (NYSE:PCG) includes $300 million that will be directed to the state’s general fund and $400 million for the customers. $850 million will be used for pipeline improvements and $50 million for improvements that had been identified prior to the occurrence of the accident. If the bill is not passed into law, the company will benefit from tax deductions worth up to $115 million. PG&E spokesman Nick Stimmel revealed that the firm believes that part of the fine is tax-deductible
