Extract to table

The objective of the gross-up is straightforward: if the pipeline's equity owners are authorized to earn a return of r on the equity component of the rate base, the pipeline must collect not only r but also the income taxes that will be owed on that return, so that after paying taxes, the equity owners receive the full authorized return

The denominator (1 − Effective Tax Rate) in the gross-up formula is necessary because the ITA itself is taxable income — that is, the pipeline must also pay income taxes on the additional revenue collected to cover the ITA

The revised policy reiterated the requirement that pass-through entities must make an affirmative showing that their partners or members bear an actual income tax liability on the pipeline income