Primer on Bonus Depreciation

While bonus depreciation is not a new concept, the extension of bonus depreciation provisions as part of the $1.1 trillion tax extender bill passed in December 2015 was unexpected by some. Electric and gas utilities have since been weighing options and determining how to make the most of this development in lieu of their unique financial situations—with short decision timelines and potential impacts on cash flow, rate base, and earnings in the billions of dollars for the industry as a whole. The purpose of this document is to provide an overview of the issue of bonus depreciation and to illustrate a few potential impacts and implications that utilities may want to consider as they determine how to proceed.

Additional Contributing Author: Quentin Watkins

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