Sec.  65.450   Net income.

   (a) Net income shall consist of all revenues derived from the provision of
   interstate telecommunications services regulated by this Commission less
   expenses recognized by the Commission as necessary to the provision of these
   services. The calculation of expenses entering into the determination of net
   income shall include the interstate portion of plant specific operations
   (Accounts 6110–6441), plant nonspecific operations (Accounts 6510–6565),
   customer operations (Accounts 6610–6623), corporate operations (Accounts
   6720–6790), other operating income and expense (Account 7100), and operating
   taxes  (Accounts  7200–7250),  except  to  the  extent this Commission
   specifically provides to the contrary.

   (b) Gains and losses related to the disposition of plant in service items,
   shall be handled as follows:

   (1) Gains related to property sold to others and leased back under capital
   leases for use in telecommunications services shall be recorded in Account
   4300, Other long-term liabilities and deferred credits, and credited to
   Account 6563, Amortization expense—tangible, over the amortization period
   established for the capital lease;

   (2)  Gains  or  losses  related  to  the disposition of land and other
   nondepreciable items recorded in Account 7100 (Other operating income and
   expense)  shall be included in net income for ratemaking purposes, but
   adjusted to reflect the relative amount of time such property was used in
   regulated operations and included in the rate base; and

   (3) Proceeds related to the disposition of property depreciated on a group
   basis and used jointly in regulated and nonregulated activities, including
   sale-leaseback arrangements for property depreciated on a group basis, shall
   be  credited  to  the related reserves and attributed to regulated and
   nonregulated in proportion to the accumulated regulated and nonregulated
   depreciation for that group.

   (c) Gains or losses related to the disposition of property that was never
   included in the rate base shall not be considered for ratemaking purposes.

   (d) Except for the allowance for funds used during construction, reasonable
   charitable deductions and interest related to customer deposits, the amounts
   recorded as nonoperating income and expenses and taxes (Accounts 7300 and
   7400) and interest and related items (Account 7500) and extraordinary items
   (Account 7600) shall not be included unless this Commission specifically
   determines  that  particular items recorded in those accounts shall be
   included.

   [ 53 FR 1029 , Jan. 15, 1988, as amended at  60 FR 12139 , Mar. 6, 1995;  67 FR 5702 , Feb. 6, 2002;  69 FR 53652 , Sept. 2, 2004]

Subpart D—Interexchange Carriers