§  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