13.	Income Taxes

The 2017 Tax Act among other things, reduces the federal statutory corporate tax rate for tax years beginning in 2018 from 34% to 21%, eliminates certain deductions, and eliminates bonus depreciation on qualified water and wastewater property.

The Company filed for a change in accounting method under the Internal Revenue Service tangible property regulations effective in 2014. Under the change in accounting method, the Company is permitted to deduct the costs of certain asset improvements that were previously being capitalized and depreciated for tax purposes as an expense on its income tax return. This ongoing deduction results in a reduction in the effective income tax rate, a net reduction in income tax expense, and a reduction in the amount of income taxes currently payable. It also results in increases to deferred tax liabilities and regulatory assets representing the appropriate book and tax basis difference on capital additions.

The Company's effective tax rate was 7.6% and 31.8% for the three months ended June 30, 2018 and 2017, respectively, and 16.2% and 29.7% for the six months ended June 30, 2018 and 2017, respectively. The Company's effective tax rate is lower for the three and six months ended June 30, 2018 compared to 2017, due to the lower Federal income tax rate and a higher level of eligible asset improvements that were placed in service. The effective tax rate will vary depending on the level of eligible asset improvements that are placed in service each period and the full implementation of the 2017 Tax Act.