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TITLE 26-INTERNAL REVENUE CODE flow-through method of accounting for its July 1969 accounting period. (3) Definitions For purposes of this subsection- (A) Public utility property The term "public utility property" means property used predominantly in the trade or business of the furnishing or sale of- (I) electrical energy, water, or sewage disposal services, (i) gas or steam through a local distri- bution system, (iII) telephone services, or other commu- nication services if furnished or sold by the Communications Satellite Corpora- tion for purposes authorized by the Com- munications Satellite Act of 1962 (47 U.S.C. 701), or (iv) transportation of gas or steam by pipeline, if the rates for such furnishing or sale, as the case may be, have been established or approved by a State or political subdivision thereof, by any agency or instrumentality of the United States, or by a public service or public utility commission or other similar body of any State or political subdivision thereof. (B) Pre-1970 public utility property The term "pre-1970 public utility proper- ty" means property which was public utility property in the hands of any person at any time before January 1, 1970. (C) Post-1969 public utility property The term "post-1969 public utility proper- ty" means any public utility property which is not pre-1970 public utility property, (D) Applicable 1968 method The term "applicable 1968 method" means, with respect to any public utility property- (i) the method of depreciation used on a return with respect to such property for the latest taxable year for which a return was filed before August 1, 1969, (ii) if clause (1) does not apply, the method used by the taxpayer on a return for the latest taxable year for which a return was filed before August 1, 1969, with respect to its public utility property of the same kind (or if there is no proper- ty of the same kind, property of the most similar kind) most recently placed in ser- vice, or (iii) if neither clause (i) nor (ii) applies, a subsection (1) method. In the case of any section 1250 property to which subsection (j) applies, the term "ap- plicable 1968 method" means the method permitted under subsection (j) which is most nearly comparable to the applicable 1968 method determined under the preced- ing sentence. (E) Applicable 1968 method in certain cases If the taxpayer evidenced the intent to use a method of depreciation (other than its applicable 1968 method or a subsection (1) method) with respect to any public utility property in a timely application for change of accounting method filed before August 1, 1969, or in the computation of its tax ex- pense for purposes of reflecting operating results in its regulated books of account for its July 1969 accounting period, such other method shall be deemed to be its applicable 1968 method with respect to such property and public utility property of the same (or similar) kind subsequently placed in service. (F) Subsection (1) method The term "subsection (1) method" means any method determined by the Secretary to result in a reasonable allowance under sub- section (a), other than (I) a declining bal- ance method, (ii) the sum of the years-digits method, or (iII) any other method allowable solely by reason of the application of sub- section (b)(4) or (J)(1)(C). (G) Normalization methpd of accounting In order to use a normalization method of accounting with respect to any public util- ity property- (1) the taxpayer must use the same method of depreciation to compute both its tax expense and its depreciation ex- pense for purposes of establishing its cost of service for ratemaking purposes and for reflecting operating results in its regulat- ed books of account, and (ii) if, to compute its allowance for de- preciation under this section, it uses a method of depreciation other than the method it used for the purposes described in clause (i), the taxpayer must make ad- Justments to a reserve to reflect the defer- ral of taxes resulting from the use of such different methods of depreciation. (H) Flow-through method of accounting The taxpayer used a "flow-through method of accounting" with respect to any public utility property if it used the same method of depreciation (other than a sub- section (1) method) to compute its allowance for depreciation under this section and to compute its tax expense for purposes of re- flecting operating results in its regulated books of account. () July 1969 accounting period The term "July 1969 accounting period" means the taxpayers latest accounting period ending before August 1, 1969, for which it computed its tax expense for pur- poses of reflecting operating results in its regulated books of account. For purposes of this paragraph, different de- clining balance rates shall be treated as dif- ferent methods of depreciation. (4) Special rules as to flow-through method (A) Election as to new property representing growth in capacity If the taxpayer makes an election under this subparagraph before June 29, 1970, in the manner prescribed by the Secretary, in the case of taxable years beginning after §167 Page 156