MCI Telecommunications Corp. v. Public Service Commission

STEWART, Justice:

In 1985, the Public Service Commission (Commission) granted Mountain States Telephone and Telegraph Co., now U.S. West Corp. (U.S. West),1 a $22 million general rate increase and established 14.2% as its authorized rate of return on equity. In granting the increase, the Commission assumed that U.S. West would pay a federal corporate income tax of 46%, the then-existing rate.

On October 22, 1986, Congress enacted the Tax Reform Act of 1986 (Act), which provided a two-step reduction in the federal corporate income tax rate, from 46% to 40% effective June 1987, and then to 34%…