641
cluded in gross income of the taxpayer (or a
predecessor). For purposes of the preceding
sentence, a ratable portion of each transfer
shall be treated as being from previously de-
ducted or excluded amounts to the extent there-
of.
‘‘(C) TRANSFERS OF QUALIFIED FUNDS.—
If—
‘‘(i) any transfer permitted by this
subsection is made to any Fund to which
this section applies, and
‘‘(ii) such Fund is transferred there-
after,
any deduction under this subsection for taxable
years ending after the date that such Fund is
transferred shall be allowed to the transferor
for the taxable year which includes such date.
‘‘(D) SPECIAL RULES.—
‘‘(i) GAIN OR LOSS NOT RECOGNIZED
ON TRANSFERS TO FUND.—No gain or loss
shall be recognized on any transfer de-
scribed in paragraph (1).
‘‘(ii) TRANSFERS
OF
APPRECIATED
PROPERTY TO FUND.—If appreciated prop-
erty is transferred in a transfer described
642
in paragraph (1), the amount of the deduc-
tion shall not exceed the adjusted basis of
such property.
‘‘(3) NEW RULING AMOUNT REQUIRED.—Para-
graph (1) shall not apply to any transfer unless the
taxpayer requests from the Secretary a new schedule
of ruling amounts in connection with such transfer.
‘‘(4) NO
BASIS
IN
QUALIFIED
FUNDS.—Not-
withstanding any other provision of law, the tax-
payer’s basis in any Fund to which this section ap-
plies shall not be increased by reason of any transfer
permitted by this subsection.’’.
(2) NEW RULING AMOUNT TO TAKE INTO AC-
COUNT TOTAL COSTS.—Subparagraph (A) of section
468A(d)(2) (defining ruling amount) is amended to
read as follows:
‘‘(A) fund the total nuclear decommis-
sioning costs with respect to such power plant
over the estimated useful life of such power
plant, and’’.
(c) TECHNICAL AMENDMENTS.—Section 468A(e)(2)
(relating to taxation of Fund) is amended—
(1) by striking ‘‘rate set forth in subparagraph
(B)’’ in subparagraph (A) and inserting ‘‘rate of 20
percent’’,
643
(2) by striking subparagraph (B), and
(3) by redesignating subparagraphs (C) and
(D) as subparagraphs (B) and (C), respectively.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2005.
SEC. 1307. ARBITRAGE RULES NOT TO APPLY TO PREPAY-
MENTS FOR NATURAL GAS.
(a) IN GENERAL.—Subsection (b) of section 148 (re-
lating to higher yielding investments) is amended by add-
ing at the end the following new paragraph:
‘‘(4) SAFE
HARBOR
FOR
PREPAID
NATURAL
GAS.—
‘‘(A) IN GENERAL.—The term ‘investment-
type property’ does not include a prepayment
under a qualified natural gas supply contract.
‘‘(B) QUALIFIED
NATURAL
GAS
SUPPLY
CONTRACT.—For purposes of this paragraph,
the term ‘qualified natural gas supply contract’
means any contract to acquire natural gas for
resale by a utility owned by a governmental
unit if the amount of gas permitted to be ac-
quired under the contract by the utility during
any year does not exceed the sum of—
644
‘‘(i) the annual average amount dur-
ing the testing period of natural gas pur-
chased (other than for resale) by cus-
tomers of such utility who are located
within the service area of such utility, and
‘‘(ii) the amount of natural gas to be
used to transport the prepaid natural gas
to the utility during such year.
‘‘(C) NATURAL GAS USED TO GENERATE
ELECTRICITY.—Natural gas used to generate
electricity shall be taken into account in deter-
mining 
the 
average 
under 
subparagraph
(B)(i)—
‘‘(i) only if the electricity is generated
by a utility owned by a governmental unit,
and
‘‘(ii) only to the extent that the elec-
tricity is sold (other than for resale) to
customers of such utility who are located
within the service area of such utility.
‘‘(D) ADJUSTMENTS
FOR
CHANGES
IN
CUSTOMER BASE.—
‘‘(i) NEW
BUSINESS
CUSTOMERS.—
If—