N.Y. Comp. Codes R. & Regs. tit. 16, § 661.13 – Comprehensive interperiod tax allocation.

(a) Companies shall apply interperiod tax allocation (tax normalization) to all book/tax timing differences which would be considered material for published financial report purposes. Furthermore, companies shall also apply interperiod tax allocation if any item or group of similar items when aggregated would yield debit or credit entries which exceed or would exceed five percent of the gross deferred income tax expense debits or credits during any calendar year over the life of the timing difference. Book/tax timing differences, other than those resulting from accelerated depreciation or waiver, however, shall be phased in over a period of five years as directed by this commission. The tax effects of all book/tax timing differences shall be normalized and the deferrals shall be included in the following accounts:
1360 Current Deferred Income Taxes—Dr
1510 Noncurrent Deferred Income Taxes—Dr
4100 Current Deferred Operating Income Taxes—Cr
4110 Current Deferred Nonoperating Income Taxes—Cr
4340 Noncurrent Deferred Operating Income Taxes—Cr
4350 Noncurrent Deferred Nonoperating Income Taxes—Cr
In lieu of the accounting prescribed herein, any company shall treat the increase/reduction in current income taxes payable resulting from the use of flow through accounting in prior years and the phase-in years as an increase/reduction in current income tax expense.
(b) Supporting documentation shall be maintained so as to separately identify the amount of deferred taxes which arise from the use of an accelerated method of depreciation.
(c) With respect to the tax differentials that are phased in, companies shall maintain underlying entries to and the balances in the above accounts so as to show that the deferred tax amounts are not greater than the phase-in percentage allowed by this commission.
(d) The records supporting the activity in the deferred income tax accounts shall be maintained in sufficient detail to identify the nature of the specific timing differences giving rise to both the debits and credits to the individual accounts.
(e) Any company that uses accelerated depreciation (or recognizes taxable income or losses upon the retirement of property) for income tax purposes shall normalize the tax differentials occasioned thereby as indicated in paragraphs (1) and (2) of this subdivision.
1. (1) With respect to the retirement of property the book/tax difference between (i) the recognition of proceeds as income and the accrual for salvage value and (ii) the book and tax capital recovery, shall be normalized.
2. (2) Records shall be maintained so as to show the deferred tax amounts by vintage year separately for each class or subclass of eligible depreciable telephone plant for which an accelerated method of depreciation has been used for income tax purposes. When property is transferred to nonregulated activities, the associated deferred income taxes shall also be identified and transferred to the appropriate nonregulated accounts. Accumulated deferred investment tax credits associated with deregulated assets shall be transferred with the related asset, unless otherwise directed by the commission.
(f) The tax differentials to be normalized as indicated herein shall also encompass the additional effect of state and local income tax changes on Federal income taxes produced by the provision for deferred state and local income taxes for book/tax timing differences related to such income taxes.
(g) Companies that receive the tax benefits from the filing of a consolidated income tax return by the parent company, (pursuant to closing agreements with the Internal Revenue Service, effective January 1, 1966) representing the deferred income taxes from the elimination of intercompany profits for income tax purposes on sales of regulated equipment, may credit such deferred taxes directly to the plant account which contains such intercompany profit rather than crediting such deferred taxes to the applicable accounts in subdivision (a) of this section. If the deferred income taxes are recorded as a reduction of the appropriate plant accounts, such reduction shall be treated as reducing the original cost of the plant and accounted for as such.