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Commissioner v. Indianapolis Power and Light Company

United States Supreme Court
493 U.S. 203 (1990)


Indianapolis Power and Light Company (IPL) (plaintiff) required its customers with poor credit to pay a deposit. The deposit would remain idle unless it was (1) applied to a customer’s balance after missing a payment, (2) returned to a customer who demonstrated good credit, or (3) returned upon termination of service. The deposit would be returned as cash, a check, or statement credit at the customer’s direction. If IPL held the deposit long enough, IPL would pay a fixed interest on the deposit to the customer. IPL held the deposits in the same account as its other receipts. IPL treated these deposits as liabilities and did not report them as income on its tax returns. The commissioner of internal revenue (defendant) audited IPL’s tax returns and found that the deposits were advance payments for services and were subject to gross-income tax in the year obtained. IPL petitioned the United Stated Tax Court for a redetermination. The tax court found for IPL, and the United States Court of Appeals for the Seventh Circuit affirmed. The United Stated Supreme Court granted certiorari.

Rule of Law


Holding and Reasoning (Blackmun, J.)

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