Source: https://www.federalregister.gov/documents/2010/12/23/2010-32049/nuclear-decommissioning-funds
Timestamp: 2018-04-22 15:14:58
Document Index: 473082724

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A Rule by the Internal Revenue Service on 12/23/2010
80697-80716 (20 pages)
A. Definition of Nuclear Decommissioning Costs
2. Matters Relating to Special Transfers and Schedules of Deduction Amounts
B. Deemed Payment Date for Special Transfers
C. Extension of Deadline for Actual Payment of Special Transfers
D. Special Transfers With Respect to Nuclear Power Plants That Have Been Transferred
E. Special Transfer Over More Than One Year
F. Acceleration of Special Transfer Deduction
G. Basis of Property Contributed in a Special Transfer
H. Miscellaneous Special Transfer Issues
3. Transfers of Nuclear Power Plants and Their Associated Qualified Funds
A. Ambiguity Relating to a Plant That has Ceased Producing Electric Energy
B. Tax-Free Transfer of a Qualified Fund
A. Minor Changes in Wording To Reflect Deregulation in Certain Jurisdictions
B. New Schedule of Ruling Amounts When License is Extended
https://www.federalregister.gov/d/2010-32049 https://www.federalregister.gov/d/2010-32049
Effective Date: These regulations are effective on December 23, 2010.
Applicability Dates: For dates of applicability, see §§ 1.468A-9, 1.468A-3, and 1.468A-8.
The collection of information contained in these final regulations has Start Printed Page 80698been reviewed and approved by the Office of Management and Budget in accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) under control number 1545-2091. The collections of information in these final regulations are contained in §§ 1.468A-3, 1.468A-4, 1.468A-7, and 1.468A-8. Responses to these collections of information are required to obtain a tax benefit.
On December 31, 2007, the IRS and Treasury Department issued a notice of proposed rulemaking (REG-147290-05, 2008-10 IRB 576 [72 FR 74213]) regarding section 468A of the Internal Revenue Code of 1986 (Code). This proposed rulemaking consisted of a general updating of the prior regulations under section 468A and, in particular, reflected the changes to section 468A made by section 1310 of the Energy Policy Act of 2005 (the Energy Policy Act), Public Law 109-58 (119 Stat. 594).
Written, electronic, and oral comments responding to the notice of proposed rulemaking were received. A public hearing was held on June 17, 2008. After consideration of all of the comments received as well as those comments made at the hearing, these final regulations generally adopt the rules of the proposed regulations with certain clarifications and modifications. The significant comments and modifications are discussed in this preamble.
One commentator on the proposed regulations suggested that the definition of “nuclear decommissioning costs” be expanded to explicitly include two types of costs that have generally been recognized by the IRS in letter rulings to be included within the ambit of nuclear decommissioning costs. Those two types of costs are (1) costs to decommission structures, systems, and components from a nuclear power plant that continues to produce electric energy; and (2) costs to store spent nuclear fuel pending delivery to a permanent repository. The IRS and Treasury agree that changes such as those proposed by this commentator bring clarity to the final regulations. Accordingly, § 1.468A-1(b)(6) of the final regulations provides that costs for the final decommissioning of structures, systems, and components from a nuclear power plant that continues to produce electric energy and costs associated with facilities to store spent nuclear fuel pending delivery to a permanent repository are included within the definition of nuclear decommissioning costs.
Several commentators observed that the term “estimated useful life” was used for two different purposes in the proposed regulations, and that the date on which such estimated useful life would end might differ, depending on the purpose for which the term was used. Estimated useful life of a nuclear power plant is used to calculate the schedule of ruling amounts in § 1.468A-3(c)(1). In addition, the same term is used in § 1.468A-8(b)(1) and (c)(1) to determine the years over which a taxpayer may deduct a special transfer made under § 1.468A-8. One commentator suggested that the IRS add a provision recognizing that the term is used for more than one purpose and that the date of the end of such period may differ depending on the use of the term. The IRS and Treasury agree with this suggestion and have incorporated that change in § 1.468A-3(c)(2)(iii) of the final regulations.
One commentator suggested that the proposed requirement that a taxpayer obtain a schedule of deduction amounts with respect to a special transfer was not required by the statute and indeed such requirement constituted an impermissible overreaching by the IRS and Treasury. The commentator suggested that, in lieu of a schedule of deduction amounts, the final regulations simply provide that the IRS will rule on the maximum special transfer amount and allow the taxpayer to calculate the pro rata portion of that amount over the remaining estimated useful life of the nuclear power plant. The commentator expressed concern that the ruling from the IRS might provide a schedule of deduction amounts in excess of the actual appropriate deductible amounts or, alternatively, that the schedule would not allow a taxpayer to deduct more than a pro rata share of the amount that the taxpayer may choose to contribute, even if that amount is less than the maximum special transfer amount. The IRS and Treasury do not believe that these concerns justify a change in the regulations. Section 468A permits deduction of the amount of a special transfer and requires the taxpayer to obtain from the Secretary a new schedule of ruling amounts in connection with the transfer. The IRS and Treasury believe that the schedule of deduction amounts is an appropriate adjunct to the schedule of ruling amounts required in connection with the special transfer. Moreover, concerns regarding the deduction amounts provided in the schedule of deduction amounts are unwarranted. When the IRS issues a schedule of deduction amounts, that schedule allocates the requested special transfer amount (or the maximum allowable special transfer amount if the taxpayer has requested an excessive amount) over the remaining estimated useful life of the nuclear power plant. Thus, the schedule will not provide for deductions in excess of the actual appropriate deductible amounts. With respect to the commentator's alternative concern, the IRS and Treasury believe that the rule limiting deductions to a pro rata share of the amount of the special transfer (rather than a pro rata share of the maximum amount that could have been transferred) is consistent with section 468A(f)(2)(A), which provides that the deduction allowed “for any transfer” shall be allowed ratably over the remaining useful life.
Several commentators observed that the proposed regulations did not specify the deemed payment date for special transfers. While taxpayers generally assumed that the deemed payment date for special transfers was the same as that for the contributions of ruling amounts, they requested that the IRS resolve the ambiguity. The IRS and Treasury agree that this possible ambiguity should be resolved and, therefore, clarifying changes are included in §§ 1.468A-7(b)(4) and 1.468A-8(a).
Several commentators requested that the IRS and Treasury provide certain transitional relief for taxpayers seeking to make special transfers relating to taxable years in which taxpayers did not have the benefit of the clarifications provided in these regulations. The Start Printed Page 80699transitional relief requested included an extension of the time to request a ruling regarding the special transfer for a taxable year as well as a rule allowing the special transfer to relate back to that year. The final regulations provide the requested transitional relief. Under § 1.468A-8 (d)(1) the ruling request for a special transfer relating to a taxable year beginning in 2006, 2007, 2008, or 2009 is timely if filed with the IRS within 60 days after the date of publication of these final regulations in the Federal Register. Under § 1.468A-8(a), a special transfer that the taxpayer designates as relating to such a year is deemed made during the year provided that the special transfer amount is transferred to the qualified fund within 90 days after the taxpayer receives a ruling from the Secretary allowing such special transfer.
One commentator noted that the proposed regulations do not address the case of a taxpayer that has requested a schedule of deduction amounts from the IRS but has not received the necessary ruling prior to the payment deadline. Under § 1.468A-3(g), a taxpayer that has requested a ruling from the IRS on a schedule of ruling amounts may contribute the ruling amount proposed in its ruling request in those circumstances. The commentator requested a similar rule for special transfers. The final regulations provide such a rule for special transfers in § 1.468A-8(c).
A commentator suggested that the owner of a nuclear power plant that had a qualifying percentage of less than 100 percent under pre-2005 law should be allowed to make a special transfer so that the entire cost of decommissioning the plant can be covered by the qualified fund even if the current owner purchased the plant and was not the owner prior to the enactment of section 468A. The final regulations clarify that when § 1.468A-6 (relating to nonrecognition of gain or loss on certain fund transfers) applies to the transfer of a qualified fund (or part or all of its assets) the transferee succeeds to the transferor's qualifying percentage. If § 1.468A-6 does not apply to the transfer and the transferee's fund is treated as a completely new fund, the transferee cannot make a special transfer but the entire cost of decommissioning the plant can be funded by increasing annual deductible contributions over the remaining useful life of the plant through a schedule of ruling amounts that is determined without regard to the qualifying percentage limitation that applied under pre-2005 law.
A commentator suggested that the regulations should allow a taxpayer making a special transfer over several years to get a single ruling for the entire special transfer. It has been the ruling policy of the IRS to provide, in a single ruling, multiple schedules of deduction amounts where a taxpayer requests rulings on special transfers made over several years. The final regulations incorporate this ruling policy in § 1.468A-8(c)(2).
Although deductions for special transfers are generally allowed ratably over the plant's remaining useful life, a special rule applies if the fund is transferred before the end of the remaining useful life. In that case, the entire remaining deduction for the special transfer is allowed in the year the fund is transferred. This acceleration allows the taxpayer to close its books on the asset. Section 1.468A-8T(b)(3)(ii) of the temporary regulations provides that, in the case of a transfer of a qualified nuclear decommissioning fund to a related person, the transferee's ruling amounts will be adjusted to the extent necessary to offset the benefit provided by the acceleration of deductions. One commentator suggested that the acceleration of the special transfer deduction should be viewed as on offset to the timing detriment the transferor previously incurred because it was unable to fully fund decommissioning costs under pre-2005 law. The commentator further suggested that transfers to affiliates should not be treated less favorably than transfers to non-affiliates. The IRS and Treasury recognize that the transferor may have incurred a timing detriment, but section 468A clearly provides that this detriment is to be offset ratably over the remaining estimated useful life of the plant rather than all at once. While the statute provides for acceleration of the deduction when the fund is transferred, the IRS and Treasury continue to believe that such acceleration provides an inappropriate benefit to a taxpayer that directly or indirectly retains an interest in the plant and that failure to recapture the benefit in those circumstances would frustrate the intent of Congress in providing for the ratable deduction of the special transfer amount. Thus, the final regulations retain the limitation on the acceleration of the deduction for special transfers where the plant is transferred to an affiliated party.
Taxpayers may make special transfers of property other than cash. Section 468A(f)(2)(D) provides that no gain or loss is recognized on the transfer and that for transfers of appreciated property the amount of the deduction shall not exceed the adjusted basis of the property. The legislative history (footnote 16 of H. Rep. 109-45) includes the following discussion relating to such transfers:
A taxpayer recognizes no gain or loss on the contribution of property to a qualified fund under this special rule. The qualified fund will take a transferred (carryover) basis in such property. Correspondingly, a taxpayer's deduction (over the estimated life of the powerplant) is to be based on the adjusted tax basis of the property contributed rather than the fair market value of such property.
Although the legislative history does not distinguish between appreciated property and property with a value less than its basis (built-in loss property), the statutory language makes it clear that the rule basing the deduction on the property's adjusted tax basis applies only to appreciated property. Accordingly, the proposed regulations provided that the deduction for property contributed in a special transfer is limited to the lesser of fair market value or the transferor's adjusted basis in the property. One commentator disagreed with this rule and recommended that the regulations allow a deduction equal to basis for contributions of built-in loss property. The commentator noted that section 362, a nonrecognition provision similar to section 468A, provides for a stepped-down basis in the hands of the transferee for built-in loss property. The commentator argued for adoption of rules similar to those in section 362 so that the transferor would get a deduction of its adjusted basis in the property and the qualified fund would get a “stepped-down” basis of the fair market value at the time of transfer. The commentator also noted the unfairness of limiting the deduction for built-in loss property to fair market value where the transferee is taxed at a higher rate than the qualified fund.
The IRS and Treasury recognize that the transferor and the fund could achieve generally the same result as the commentator proposes by selling the loss property and contributing the proceeds to the qualified fund which could use the proceeds to repurchase the property. To eliminate the need for such transactions, the final regulations Start Printed Page 80700provide that the transferor may deduct the adjusted basis of built-in loss property contributed to a fund if the fund elects to treat the fair market value of the property as its adjusted basis. Further, the final regulations provide that this election may be made and a deduction equal to basis will be allowed for built-in loss property contributed before December 23, 2010. In such cases, the election may be made and the deduction equal to basis may be claimed by filing an amended tax return.
(i) One commentator noted that the schedule of deduction amounts is calculated based on the “pre-2005 nonqualifying amount” and recommends that this be changed to the pre-2006 nonqualifying amount. The commentator correctly notes that, while the changes to section 468A were made by the Energy Policy Act of 2005, those changes were effective for tax years beginning after December 31, 2005. The modifier “pre-2005” refers to the state of section 468A prior to the changes made by the Energy Policy Act of 2005. The pre-2005 nonqualifying amount referred to in the proposed regulations was fixed years before and was not determined by reference to the effective date of the Energy Policy Act of 2005. Thus, the modifier “pre-2005 nonqualifying amount” is retained in the final regulations.
(ii) Section 1.468A-3(f)(1)(iii) of the proposed regulations requires that a taxpayer request a new schedule of ruling amounts when requesting a schedule of deduction amounts. The revised schedule of ruling amounts must apply beginning with the first taxable year for which a deduction is allowed under the schedule of deduction amounts. One commentator suggested that the new schedule of ruling amounts should not apply until the following year because the special transfer may actually occur at any time during the first taxable year in which a deduction is allowed under the schedule of deduction amounts (and under the deemed payment rules may occur during the first two-and-a-half months of the following taxable year). Section 1.468A-3(f)(1)(iii) of the final regulations adopts this suggestion.
(iii) Section 1.468A-8(a)(2) of the proposed regulations provides that the present value of estimated future decommissioning costs is determined as of the first day of the taxable year of the taxpayer in which the special transfer is made. One commentator noted that the special transfer may be made after the first day of the taxable year and suggested that the regulations permit determinations of present value as of an alternative date. The final regulations permit the use of an alternative date that is not later than the date on which the special transfer is made if the taxpayer establishes that the determination of present value as of such date is reasonable and consistent with the principles and provisions of § 1.468A-8.
The proposed regulations, at § 1.468A-6(a), provide that, for purposes of determining the tax consequences of the transfer of a qualified fund associated with a nuclear power plant, a nuclear power plant includes a plant that previously qualified as a nuclear power plant but that has permanently ceased producing electric energy. One commentator notes that this provision apparently allows the tax-free transfer of a qualified fund associated with a plant that has permanently ceased producing electric energy if all the other requirements of § 1.468A-6 are satisfied. That was the intended effect of the provision and it is retained in the final regulations.
The proposed regulations, at § 1.468A-6(b)(3)(i), require that, in order to qualify as a tax-free transfer of a qualified fund, the transferee of a nuclear power plant and its associated qualified fund must acquire that portion of the qualified fund equal to the proportionate amount of the nuclear power plant acquired. One commentator expressed disagreement with this rule, arguing that the rule as it exists requires a choice between potential disqualification of the entire fund and over-funding the qualified fund.
The commentator's position would allow for the removal of assets at transfer when their value is high and perhaps leave the fund without sufficient assets to provide for decommissioning. This is contrary to the general rule of section 468A, which does not permit withdrawals from a qualified fund except to pay for decommissioning and the cost of administering the fund. The IRS and Treasury believe a primary purpose of section 468A is to ensure that adequate assets will be available to decommission the nuclear power plant. Given the long life of nuclear power plants and the variability of investment returns, what may appear to be overfunding in one decade may be inadequate in the next. Moreover, the IRS and Treasury believe that overfunding can be adequately addressed by reducing future payments to the qualified funds.
The proposed regulations, in §§ 1.468A-3(a)(2)(i) and 1.468A-3(e)(2)(vi)(H), refer to “amounts collected for” the qualified fund. One commentator noted that in certain jurisdictions that have undergone deregulation, amounts are no longer collected for the qualified funds. The final regulations refer, instead, to the “assets of” the qualified fund.
Section 1.468A-3(f)(1)(iv) of the proposed regulations requires that a taxpayer request a revised schedule of ruling amounts by the deemed payment deadline for the year in which the operating license for the nuclear power plant is extended by the Nuclear Regulatory Commission (NRC). One commentator requested that the deadline for requesting a revised schedule of ruling amounts be extended to the deemed payment deadline for the year following the year in which the operating license is extended by the NRC. The commentator argued that the NRC could act late in the year and give the taxpayer little time to prepare the request for the revised schedule of ruling amounts. The IRS and Treasury believe that the deadline in the proposed regulations provides sufficient time to prepare and submit a request for a revised schedule of ruling amounts and it is retained in the final regulations.
It has been determined that this Treasury decision is not a significant regulatory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. It also has been determined that section 553(b) and (d) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations. It is hereby certified that this regulation will not have a significant economic impact on a substantial number of small entities. The proposed regulations do not impose a collection of information on small entities. Accordingly, a regulatory flexibility analysis is not required. Pursuant to section 7805(f) of the Code, the notice of proposed rulemaking preceding these regulations Start Printed Page 80701was submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on their impact on small business.
1.468A-0T through 1.468A-9T
§ 1.468A-0
This section lists the paragraphs contained in §§ 1.468A-1 through 1.468A-9.
§ 1.468A-2
§ 1.468A-3
§ 1.468A-4
§ 1.468A-7
§ 1.468A-8
(i) Gain or loss not recognized on transfers to fund.Start Printed Page 80702
§ 1.468A-9
(a) Introduction. Section 468A provides an elective method for taking into account nuclear decommissioning costs for Federal income tax purposes. In general, an eligible taxpayer that elects the application of section 468A pursuant to the rules contained in § 1.468A-7 is allowed a deduction (as determined under § 1.468A-2) for the taxable year in which the taxpayer makes a cash payment to a nuclear decommissioning fund. Taxpayers using an accrual method of accounting that do not elect the application of section 468A are not allowed a deduction for nuclear decommissioning costs prior to the taxable year in which economic performance occurs with respect to such costs (see section 461(h)).
(b) Definitions. The following terms are defined for purposes of section 468A and §§ 1.468A-1 through 1.468A-9:
(3) The term direct ownership interest includes an interest held as a tenant in common or joint tenant, but does not include stock in a corporation that owns a nuclear power plant or an interest in a partnership that owns a nuclear power plant. Thus, in the case of a partnership that owns a nuclear power plant, the election under section 468A must be made by the partnership and not by the partners. In the case of an unincorporated organization described in § 1.761-2(a)(3) that elects under section 761(a) to be excluded from the application of subchapter K, each taxpayer that is a co-owner of the nuclear power plant is eligible to make a separate election under section 468A.
(4) The terms nuclear decommissioning fund and qualified nuclear decommissioning fund mean a fund that satisfies the requirements of § 1.468A-5. The term nonqualified fund means a fund that does not satisfy those requirements.
(9) The term special transfer means any transfer of funds to a qualified nuclear decommissioning fund pursuant to § 1.468A-8.
(a) In general. An eligible taxpayer that elects the application of section 468A pursuant to the rules contained in § 1.468A-7 (an electing taxpayer) is allowed a deduction for the taxable year in which the taxpayer makes a cash payment (or is deemed to make a cash payment as provided in paragraph (c) of this section) to a nuclear decommissioning fund and for any taxable year in which a deduction is allowed for a special transfer described in § 1.468A-8. The amount of the deduction for any taxable year equals Start Printed Page 80703the total amount of cash payments made (or deemed made) by the electing taxpayer to a nuclear decommissioning fund (or nuclear decommissioning funds) during such taxable year under this section, plus any amount allowable as a deduction in that taxable year for a special transfer described in § 1.468A-8. The amount of a special transfer permitted under § 1.468A-8 is not treated as a cash payment for purposes of this paragraph (a), and a taxpayer making a special transfer is allowed a ratable deduction in each taxable year during the remaining useful life of the nuclear power plant for the special transfer. A payment may not be made (or deemed made) to a nuclear decommissioning fund before the first taxable year in which all of the following conditions are satisfied:
(2) A ruling amount is applicable to the nuclear decommissioning fund (see § 1.468A-3).
(b) Limitation on payments to a nuclear decommissioning fund—(1) In general. For purposes of paragraph (a) of this section, the maximum amount of cash payments made (or deemed made) to a nuclear decommissioning fund under paragraph (a) of this section during any taxable year shall not exceed the ruling amount applicable to the nuclear decommissioning fund for such taxable year (as determined under § 1.468A-3).
(2) Excess contributions not deductible. If the amount of cash payments made (or deemed made) to a nuclear decommissioning fund during any taxable year exceeds the limitation of paragraph (b)(1) of this section, the excess is not deductible by the electing taxpayer. In addition, see paragraph (c) of § 1.468A-5 for rules which provide that the Internal Revenue Service may disqualify a nuclear decommissioning fund if the amount of cash payments made (or deemed made) to a nuclear decommissioning fund during any taxable year exceeds the limitation of paragraph (b)(1) of this section.
(3) Special transfer disregarded. The amount of a special transfer permitted under § 1.468A-8 is not treated as a cash payment for purposes of this paragraph (b).
(c) Deemed payment rules—(1) In general. The amount of any cash payment made by an electing taxpayer to a nuclear decommissioning fund on or before the 15th day of the third calendar month after the close of any taxable year (the deemed payment deadline date) shall be deemed made during such taxable year if the electing taxpayer irrevocably designates the amount as relating to such taxable year on its timely filed Federal income tax return for such taxable year (see § 1.468A-7(b)(4)(iii) and (iv) for rules relating to such designation).
(2) Cash payment by customer. The amount of any cash payment made by a customer of an electing taxpayer to a nuclear decommissioning fund of such electing taxpayer shall be deemed made by the electing taxpayer if the amount is included in the gross income of the electing taxpayer in the manner prescribed by section 88 and § 1.88-1.
(d) Treatment of distributions—(1) In general. Except as otherwise provided in paragraph (d)(2) of this section, the amount of any actual or deemed distribution from a nuclear decommissioning fund shall be included in the gross income of the electing taxpayer for the taxable year in which the distribution occurs. The amount of any distribution of property equals the fair market value of the property on the date of the distribution. See § 1.468A-5(c) and (d) for rules relating to the deemed distribution of the assets of a nuclear decommissioning fund in the case of a disqualification or termination of the fund. A distribution from a nuclear decommissioning fund shall include an expenditure from the fund or the use of the fund's assets—
(2) Exceptions to inclusion in gross income—(i) Payment of administrative costs and incidental expenses. The amount of any payment by a nuclear decommissioning fund for administrative costs or other incidental expenses of such fund (as defined in § 1.468A-5(a)(3)(ii)) shall not be included in the gross income of the electing taxpayer unless such amount is paid to the electing taxpayer (in which case the amount of the payment is included in the gross income of the electing taxpayer under section 61).
(ii) Withdrawals of excess contributions. The amount of a withdrawal of an excess contribution (as defined in § 1.468A-5(c)(2)(ii)) by an electing taxpayer pursuant to the rules of § 1.468A-5(c)(2) shall not be included in the gross income of the electing taxpayer. See paragraph (b)(2) of this section, which provides that the payment of such amount to the nuclear decommissioning fund is not deductible by the electing taxpayer.
(e) Deduction when economic performance occurs. An electing taxpayer using an accrual method of accounting is allowed a deduction for nuclear decommissioning costs no earlier than the taxable year in which economic performance occurs with respect to such costs (see section 461(h)(2)). The amount of nuclear decommissioning costs that is deductible under this paragraph (e) is determined without regard to section 280B (see § 1.468A-1(b)(6)). A deduction is allowed under this paragraph (e) whether or not a deduction was allowed with respect to such costs under section 468A(a) and paragraph (a) of this section for an earlier taxable year.
(a) In general. (1) Except as otherwise provided in paragraph (g) of this section or in § 1.468A-8 (relating to deductions for special transfers into a nuclear decommissioning fund), an electing taxpayer is allowed a deduction under section 468A(a) for the taxable year in which the taxpayer makes a cash payment (or is deemed to make a cash payment) to a nuclear decommissioning fund only if the taxpayer has received a schedule of ruling amounts for the nuclear decommissioning fund that includes a ruling amount for such taxable year. Except as provided in paragraph (a)(4) or (5) of this section, a schedule of ruling amounts for a nuclear decommissioning fund (schedule of ruling amounts) is a ruling (within the meaning of § 601.201(a)(2) of this chapter) specifying the annual payments (ruling amounts) that, over the taxable years remaining in the funding period as of the date the schedule first applies, will result in a projected balance of the nuclear decommissioning fund as of the last day of the funding period equal to (and in no event greater than) the amount of decommissioning costs allocable to the fund. The projected balance of a nuclear decommissioning Start Printed Page 80704fund as of the last day of the funding period shall be calculated by taking into account the fair market value of the assets of the fund as of the first day of the first taxable year to which the schedule of ruling amounts applies and the estimated rate of return to be earned by the assets of the fund after payment of the estimated administrative costs and incidental expenses to be incurred by the fund (as defined in § 1.468A-5(a)(3)(ii)), including all Federal, State and local income taxes to be incurred by the fund (the after-tax rate of return). See paragraph (c) of this section for a definition of funding period and paragraph (d) of this section for guidance with respect to the amount of decommissioning costs allocable to a fund.
(i) Begins on the first day of the first taxable year for which a deductible payment is made (or deemed made) to such nuclear decommissioning fund (see § 1.468A-2(a) for rules relating to the first taxable year for which a payment may be made (or deemed made) to a nuclear decommissioning fund); and
(B) The last day of the estimated useful life of a nuclear power plant that is not described in paragraph (c)(2)(i)(A) of this section is the last day of the estimated useful life of the plant determined as of the date it is placed in service;Start Printed Page 80705
(iii) The estimated useful life of a nuclear power plant determined for purposes of paragraph (c)(1) of this section may end on a different date from the estimated useful life of a nuclear power plant determined for purposes of § 1.468A-8(b)(1) and (c)(1).
(3) Taxpayer's share. The taxpayer's share of the total estimated cost of decommissioning a nuclear power plant equals the total estimated cost of decommissioning such nuclear power plant multiplied by the percentage of such nuclear power plant that the qualifying interest of the taxpayer represents. (See § 1.468A-1(b)(2) for circumstances in which a taxpayer possesses a qualifying interest in a nuclear power plant).
(e) Manner of requesting schedule of ruling amounts—(1) In general. (i) In order to receive a ruling amount for any taxable year, a taxpayer must file a request for a schedule of ruling amounts that complies with the requirements of this paragraph (e), the applicable procedural rules set forth in § 601.201(e) of this chapter (Statement of Procedural Rules), and the requirements of any applicable revenue procedure that is in effect on the date the request is filed.
(ii) A separate request for a schedule of ruling amounts is required for each nuclear decommissioning fund established by a taxpayer. (See paragraph (a) of § 1.468A-5 for rules relating to the number of nuclear decommissioning funds that a taxpayer can establish.)
(iii) Except as provided by §§ 1.468A-5(a)(1)(iv) (relating to certain unincorporated organizations that may be taxable as corporations) and 1.468A-8 (relating to a special transfer under section 468A(f)(1)), a request for a schedule of ruling amounts must not contain a request for a ruling on any other issue, whether the issue involves section 468A or another section of the Internal Revenue Code.
(v) The IRS will not provide or revise a ruling amount applicable to a taxable year in response to a request for a schedule of ruling amounts that is filed after the deemed payment deadline date (as defined in § 1.468A-2(c)(1)) for such taxable year. In determining the date when a request is filed, the principles of sections 7502 and 7503 shall apply.
(D) A copy of such portions of any order or opinion of the public utility commission as pertain to the public Start Printed Page 80706utility commission's most recent determination of the amount of decommissioning costs to be included in cost of service; and
(C) The estimated year in which the decommissioning of the nuclear power plant will be substantially complete (see § 1.468A-5(d)(3) for a definition of substantial completion of decommissioning).
(xiii) If the request for a schedule of ruling amounts contains a request, pursuant to § 1.468A-5(a)(1)(iv), that the IRS rule whether an unincorporated organization through which the assets of the fund are invested is an association taxable as a corporation for Federal tax purposes, a copy of the legal documents establishing or otherwise governing the organization.
(ii)(A) Any taxpayer that has obtained a formula or method for determining a schedule of ruling amounts for any taxable year under paragraph (a)(5) of this section must file a request for a revised schedule on or before the earlier of the deemed payment deadline for the 5th taxable year that begins after its taxable year in which the most recent formula or method was approved or the deemed payment deadline for the first taxable year that begins after a taxable year in which there is a substantial variation in the ruling amount determined under the most recent formula or method. There is a substantial variation in the ruling amount determined under the formula or method in effect for a taxable year if the ruling amount for the year and the Start Printed Page 80707ruling amount for any earlier year since the most recent formula or method was approved differ by more than 50 percent of the smaller amount.
(B) Any taxpayer that has determined its ruling amount for any taxable year under a formula prescribed by § 1.468A-6 (which prescribes ruling amounts for the taxable year in which there is a disposition of a qualifying interest in a nuclear power plant) must file a request for a revised schedule of ruling amounts on or before the deemed payment deadline for its first taxable year that begins after the disposition.
(iii) A taxpayer requesting a schedule of deduction amounts for a nuclear decommissioning fund under § 1.468A-8 must also request a revised schedule of ruling amounts for the fund. The revised schedule of ruling amounts must apply beginning with the first taxable year following the first year in which a deduction is allowed under the schedule of deduction amounts.
(i) The amount of the excess is an excess contribution (as defined in § 1.468A-5(c)(2)(ii)) for such taxable year.
(ii) The amount of the excess contribution is not deductible (see § 1.468A-2(b)(2)) and must be withdrawn by the taxpayer pursuant to the rules of § 1.468A-5(c)(2)(i).
(2) A deduction is allowed for the amount of administrative costs and other incidental expenses of the nuclear decommissioning fund (including taxes, legal expenses, accounting expenses, actuarial expenses and trustee expenses, but not including decommissioning costs) that are otherwise deductible and that are paid by the nuclear decommissioning fund to any person other than the electing taxpayer. An expense is otherwise deductible for purposes of this paragraph (b)(2) if it would be deductible under chapter 1 of the Code in determining the taxable income of a corporation. For example, because Federal income taxes are not deductible under chapter 1 of the Code in determining the taxable income of a corporation, the tax imposed by section 468A(e)(2) and paragraph (a) of this section is not deductible in determining the modified gross income of a nuclear decommissioning fund. Similarly, because certain expenses allocable to tax-exempt interest income are not deductible under section 265 in determining the taxable income of a corporation, such expenses are not deductible in determining the modified Start Printed Page 80708gross income of a nuclear decommissioning fund.
(c) Special rules—(1) Period for computation of modified gross income. The modified gross income of a nuclear decommissioning fund must be computed on the basis of the taxable year of the electing taxpayer. If an electing taxpayer changes its taxable year, each nuclear decommissioning fund of the electing taxpayer must change to the new taxable year. See section 442 and § 1.442-1 for rules relating to the change to a new taxable year.
(d) Treatment as corporation for purposes of subtitle F. For purposes of subtitle F of the Code and §§ 1.468A-1 through 1.468A-9, a nuclear decommissioning fund is to be treated as if it were a corporation and the tax imposed by section 468A(e)(2) and paragraph (a) of this section is to be treated as a tax imposed by section 11. Thus, for example, the following rules apply:
(ii) Ends on the date of termination (see § 1.468A-5(d)), the date that the entire fund is disqualified (see § 1.468A-5(c)), or the date that the electing taxpayer disposes of its entire qualifying interest in the nuclear power plant to which the nuclear decommissioning fund relates (other than in connection with the transfer of the entire fund to the person acquiring such interest), whichever is applicable.
(4) A nuclear decommissioning fund must deposit all payments of tax imposed by section 468A(e)(2) and paragraph (a) of this section (including any payments of estimated tax) with an authorized government depositary in accordance with § 1.6302-1.
(ii) A separate nuclear decommissioning fund is required for each electing taxpayer and for each Start Printed Page 80709nuclear power plant with respect to which an electing taxpayer possesses a qualifying interest. The Internal Revenue Service (IRS) will issue a separate schedule of ruling amounts with respect to each nuclear decommissioning fund, and each nuclear decommissioning fund must file a separate income tax return even if other nuclear decommissioning funds or nonqualified funds are established and maintained pursuant to the trust agreement governing such fund or the assets of other nuclear decommissioning funds or nonqualified funds are pooled with the assets of such fund.
(iii) An electing taxpayer can maintain only one nuclear decommissioning fund for each nuclear power plant with respect to which the taxpayer elects the application of section 468A. If a nuclear power plant is subject to the ratemaking jurisdiction of two or more public utility commissions and any such public utility commission requires a separate fund to be maintained for the benefit of ratepayers whose rates are established or approved by the public utility commission, the separate funds maintained for such plant (whether or not established and maintained pursuant to a single trust agreement) shall be considered a single nuclear decommissioning fund for purposes of section 468A and §§ 1.468A-1 through 1.468A-4, this section and §§ 1.468A-7 through 1.468A-9. Thus, for example, the IRS will issue one schedule of ruling amounts with respect to such nuclear power plant, the nuclear decommissioning fund must file a single income tax return (see § 1.468A-4(d)(1)), and, if the IRS disqualifies the nuclear decommissioning fund, the assets of each separate fund are treated as distributed on the date of disqualification (see paragraph (c)(3) of this section).
(iv) If assets of a nuclear decommissioning fund are (or will be) invested through an unincorporated organization, within the meaning of § 301.7701-2 of this chapter, the IRS will rule, if requested, whether the organization is an association taxable as a corporation for Federal tax purposes. A request for this ruling may be made by the electing taxpayer as part of its request for a schedule of ruling amounts or as part of a request under § 1.468A-8 for a schedule of deduction amounts.
(2) Limitation on contributions. Except as otherwise provided in § 1.468A-8 (relating to special transfers under section 468A(f)), a nuclear decommissioning fund is not permitted to accept any contributions in cash or property other than cash payments with respect to which a deduction is allowed under section 468A(a) and § 1.468A-2(a). Thus, for example, except in the case of a special transfer pursuant to § 1.468A-8, securities may not be contributed to a nuclear decommissioning fund even if the taxpayer or a fund established by the taxpayer previously held such securities for the purpose of providing funds for the decommissioning of a nuclear power plant.
(ii) Definition of administrative costs and expenses. For purposes of paragraph (a)(3)(i) of this section, the term administrative costs and other incidental expenses of a nuclear decommissioning fund means all ordinary and necessary expenses incurred in connection with the operation of the nuclear decommissioning fund. Such term includes the tax imposed by section 468A(e)(2) and § 1.468A-4(a), any State or local tax imposed on the income or the assets of the fund, legal expenses, accounting expenses, actuarial expenses and trustee expenses. Such term does not include decommissioning costs or the payment of insurance premiums on a policy to pay for the nuclear decommissioning costs of a nuclear power plant. Such term also does not include the excise tax imposed on the trustee or other disqualified person under section 4951 or the reimbursement of any expenses incurred in connection with the assertion of such tax unless such expenses are considered reasonable and necessary under section 4951(d)(2)(C) and it is determined that the trustee or other disqualified person is not liable for the excise tax.
(4) Trust provisions. Each qualified nuclear decommissioning fund trust agreement must provide that assets in the fund must be used as authorized by section 468A and §§ 1.468A-1 through 1.468A-9 and that the agreement may not be amended so as to violate section 468A or §§ 1.468A-1 through 1.468A-9.
(vi) Any act that is described in § 53.4951-1(c) of this chapter and is undertaken to facilitate the temporary investment of assets or the payment of reasonable administrative expenses of the nuclear decommissioning fund; or
(3) Disqualified person defined. For purposes of this paragraph (b), the term disqualified person includes each person described in section 4951(e)(4) and § 53.4951-1(d).
(ii) Savings accounts, as long as the fund may withdraw its funds on no more than 30 days' notice without subjecting itself to a loss of interest on its money for the time during which the money was on deposit; andStart Printed Page 80710
(iii) Safekeeping activities (see § 53.4941(d)-3(c)(2), Example 3, of this chapter).
(iii) Notice of disqualification. The IRS will notify the electing taxpayer of the disqualification of a nuclear decommissioning fund and the date of disqualification by registered or certified mail to the last known address of the electing taxpayer (the notice of disqualification). For further guidance regarding the definition of last known address, see § 301.6212-2 of this chapter.
(2) Exception to disqualification—(i) In general. A nuclear decommissioning fund will not be disqualified under paragraph (c)(1) of this section by reason of an excess contribution or the withdrawal of such excess contribution by an electing taxpayer if the amount of the excess contribution is withdrawn by the electing taxpayer on or before the date prescribed by law (including extensions) for filing the return of the nuclear decommissioning fund for the taxable year to which the excess contribution relates. In the case of an excess contribution that is the result of a payment made pursuant to § 1.468A-3(g)(1), a nuclear decommissioning fund will not be disqualified under paragraph (c)(1) of this section if the amount of the excess contribution is withdrawn by the electing taxpayer on or before the later of—
(ii) Excess contribution defined. For purposes of this section, an excess contribution is the amount by which cash payments made (or deemed made) to a nuclear decommissioning fund during any taxable year exceed the payment limitation contained in section 468A(b) and § 1.468A-2(b). The amount of a special transfer permitted under § 1.468A-8 is not treated as a cash payment for this purpose.
(iii) Taxation of income attributable to an excess contribution. The income of a nuclear decommissioning fund attributable to an excess contribution is required to be included in the gross income of the nuclear decommissioning fund under § 1.468A-4(b).
(3) Disqualification treated as distribution. If all or any portion of a nuclear decommissioning fund is disqualified under paragraph (c)(1) of this section, the portion of the nuclear decommissioning fund that is disqualified is treated as distributed to the electing taxpayer on the date of disqualification. Such a distribution shall be treated for purposes of section 1001 as a disposition of property held by the nuclear decommissioning fund (see § 1.468A-4(c)(2)). In addition, the electing taxpayer must include in gross income for the taxable year that includes the date of disqualification an amount equal to the fair market value of the distributable assets of the nuclear decommissioning fund multiplied by the fraction of the nuclear decommissioning fund that was disqualified under paragraph (c)(1) of this section. For this purpose, the fair market value of the distributable assets of the nuclear decommissioning fund is equal to the fair market value of the assets of the fund determined as of the date of disqualification, reduced by—
(ii) The amount of any deemed distribution that was not actually distributed before the date of disqualification (as determined under § 1.468A-2(d)(2)(iii)) if the amount of the deemed distribution was included in the gross income of the electing taxpayer for the taxable year in which the deemed distribution occurred; and
(4) Further effects of disqualification. Contributions made to a disqualified fund after the date of disqualification are not deductible under section 468A(a) and § 1.468A-2(a), or, if the fund is disqualified only in part, are deductible only to the extent provided in the notice of disqualification. In addition, if any assets of the fund that are deemed distributed under paragraph (c)(3) of this section are held by the fund after the date of disqualification (or if additional assets are acquired with nondeductible contributions made to the fund after the date of disqualification), the income earned by such assets after the date of disqualification must be included in the gross income of the electing taxpayer (see section 671) to the extent that such income is otherwise includible under chapter 1 of the Internal Revenue Code (Code). An electing taxpayer can establish a nuclear decommissioning fund to replace a fund that has been disqualified in its entirety only if the IRS specifically consents to the establishment of a replacement fund in connection with the issuance of an initial schedule of ruling amounts for such replacement fund.
(d) Termination of nuclear decommissioning fund upon substantial completion of decommissioning—(1) In general. Upon substantial completion of the decommissioning of a nuclear power plant to which a nuclear decommissioning fund relates, such nuclear decommissioning fund shall be considered terminated and treated as having distributed all of its assets on the date the termination occurs (the termination date). Such a distribution shall be treated for purposes of section 1001 as a disposition of property held by the nuclear decommissioning fund (see § 1.468A-4(c)(2)). In addition, the electing taxpayer shall include in gross income for the taxable year in which the termination occurs an amount equal to the fair market value of the assets of the fund determined as of the termination date, reduced by—
(i) The amount of any deemed distribution that was not actually distributed before the termination date if the amount of the deemed distribution was included in the gross income of the electing taxpayer for the taxable year in which the deemed distribution occurred; andStart Printed Page 80711
(2) Additional rules. Contributions made to a nuclear decommissioning fund after the termination date are not deductible under section 468A(a) and § 1.468A-2(a). In addition, if any assets are held by the fund after the termination date, the income earned by such assets after the termination date must be included in the gross income of the electing taxpayer (see section 671) to the extent that such income is otherwise includible under chapter 1 of the Code. Finally, under § 1.468A-2(e), an electing taxpayer using an accrual method of accounting is allowed a deduction for nuclear decommissioning costs that are incurred during any taxable year even if such costs are incurred after substantial completion of decommissioning (for example, expenses incurred to monitor or safeguard the plant site).
(a) In general. This section describes the Federal income tax consequences of a transfer of the assets of a nuclear decommissioning fund (Fund) within the meaning of § 1.468A-1(b)(4) in connection with a sale, exchange, or other disposition by a taxpayer (transferor) of all or a portion of its qualifying interest in a nuclear power plant to another taxpayer (transferee). This section also explains how a schedule of ruling amounts will be determined for the transferor and transferee. For purposes of this section, a nuclear power plant includes a plant that previously qualified as a nuclear power plant and that has permanently ceased to produce electricity.
(b) Requirements. This section applies if—
(2) Immediately after the disposition—
(3) In connection with the disposition, either—
(4) The transferee continues to satisfy the requirements of § 1.468A-5(a)(1)(iii), which permits an electing taxpayer to maintain only one Fund for each plant.
(c) Tax consequences. A disposition that satisfies the requirements of paragraph (b) of this section will have the following tax consequences at the time it occurs:
(1) The transferor and its Fund. (i) Except as provided in paragraph (c)(1)(ii) of this section, neither the transferor nor the transferor's Fund will recognize gain or loss or otherwise take any income or deduction into account by reason of the transfer of a proportionate amount of the assets of the transferor's Fund to the transferee's Fund (or by reason of the transfer of the transferor's entire Fund to the transferee). For purposes of §§ 1.468A-1 through 1.468A-9, this transfer (or the transfer of the transferor's Fund) will not be considered a distribution of assets by the transferor's Fund.
(ii) Notwithstanding paragraph (c)(1)(i) of this section, if the transferor has made a special transfer under § 1.468A-8 prior to the transfer of the Fund or Fund assets, any deduction with respect to that special transfer allowable under section 468A(f)(2) for a taxable year ending after the date of the transfer of the Fund or Fund assets (the unamortized special transfer deduction) is allowed under section 468A(f)(2)(C) for the taxable year that includes the date of the transfer of the Fund or Fund assets. If the taxpayer transfers only a portion of its interest in a nuclear power plant, only the corresponding portion of the unamortized special transfer deduction qualifies for the acceleration under section 468A(f)(2)(C).
(2) The transferee and its Fund. Neither the transferee nor the transferee's Fund will recognize gain or loss or otherwise take any income or deduction into account by reason of the transfer of a proportionate amount of the assets of the transferor's Fund to the transferee's Fund (or by reason of the transfer of the transferor's Fund to the transferee). For purposes of §§ 1.468A-1 through 1.468A-9, this transfer (or the transfer of the transferor's Fund) will not constitute a payment or a contribution of assets by the transferee to its Fund.
(3) Basis. Transfers of assets of a Fund to which this section applies do not affect basis. Thus, the transferee's Fund will have a basis in the assets received from the transferor's Fund that is the same as the basis of those assets in the transferor's Fund immediately before the disposition.
(d) Determination of proportionate amount. For purposes of this section, a transferor of a qualifying interest in a nuclear power plant is considered to transfer a proportionate amount of the assets of its Fund to a Fund of a transferee of the interest if, on the date of the transfer of the interest, the percentage of the fair market value of the Fund's assets attributable to the assets transferred equals the percentage of the transferor's qualifying interest that is transferred.
(e) Calculation of schedule of ruling amounts and schedule of deduction amounts for dispositions described in this section—(1) Transferor. If a transferor disposes of all or a portion of its qualifying interest in a nuclear power plant in a transaction to which this section applies, the transferor's schedule of ruling amounts with respect to the interests disposed of and retained (if any) and, if applicable, the amount allowable as a deduction for a special transfer under § 1.468A-8 will be determined under the following rules:
(i) Taxable year of disposition; ruling amount. If the transferor does not file a Start Printed Page 80712request for a revised schedule of ruling amounts on or before the deemed payment deadline for the taxable year of the transferor in which the disposition of its interest in the nuclear power plant occurs (that is, the date that is two and one-half months after the close of that year), the transferor's ruling amount with respect to that plant for that year will equal the sum of—
(B) The ruling amount contained in the transferor's current schedule of ruling amounts with respect to that plant for that taxable year multiplied by the product of—
(ii) Taxable year of disposition; deduction under § 1.468A-8. If the transferor has elected to make a special transfer under section 468A(f), the amount allowable as a deduction under § 1.468A-8 for the taxable year in which it transfers a portion of its interest in the nuclear plant is equal to the deduction amount for that taxable year from its existing schedule of deduction amounts multiplied by the percentage of its interest that it retains. This deduction is in addition to the deduction described in paragraph (c)(1)(ii) of this section.
(iii) Taxable years after the year of disposition. A transferor that retains a qualifying interest in a nuclear power plant must file a request for a revised schedule of ruling amounts (and, if applicable, a revised schedule of deduction amounts) with respect to that interest on or before the deemed payment deadline for the first taxable year of the transferor beginning after the disposition. See §§ 1.468A-3(f)(1)(ii)(B) and 1.468A-8(c)(3). If the transferor does not timely file such a request, the transferor's ruling amount and the transferor's deduction amount under § 1.468A-8 with respect to that interest for the affected year or years will be zero, unless the Internal Revenue Service (IRS) waives the application of this paragraph (e)(1)(iii) upon a showing of good cause for the delay.
(2) Transferee. If a transferee acquires all or a portion of a transferor's qualifying interest in a nuclear power plant in a transaction to which this section applies, the transferee's schedule of ruling amounts with respect to the interest acquired will be determined under the following rules:
(i) Taxable year of disposition. If the transferee does not file a request for a schedule of ruling amounts on or before the deemed payment deadline for the taxable year of the transferee in which the disposition occurs (that is, the date that is two and one-half months after the close of that year), the transferee's ruling amount with respect to the interest acquired in the nuclear power plant for that year is equal to the amount contained in the transferor's current schedule of ruling amounts for that plant for the taxable year of the transferor in which the disposition occurred, multiplied by the product of—
(ii) Taxable years after the year of disposition. A transferee of a qualifying interest in a nuclear power plant must file a request for a revised schedule of ruling amounts with respect to that interest on or before the deemed payment deadline for the first taxable year of the transferee beginning after the disposition. See § 1.468A-3(f)(1)(ii)(B). If the transferee does not timely file such a request, the transferee's ruling amount with respect to that interest for the affected year or years will be zero, unless the IRS waives the application of this paragraph (e)(2)(ii) upon a showing of good cause for the delay.
(ii) Under paragraph (e)(1)(i) of this section, X's ruling amount for 2010 is calculated as follows: ($10,000,000 × .40) + ($10,000,000 × .60 × 146/365)=$6,400,000. Under paragraph (e)(2)(i) of this section, Y's ruling amount for 2010 is calculated as follows: $10,000,000 × .60 × 219/365=$3,600,000. Under paragraphs (e)(1)(iii) and (e)(2)(ii) of this section, X and Y must file requests for revised schedules of ruling amounts by March 15, 2012.
Y Corporation, the sole owner of a nuclear power plant, is a calendar year taxpayer. In year 1, Y elects to make a special transfer under section 468A(f)(1) to the nuclear decommissioning fund Y maintains with respect to the plant. The amount of the special transfer is $100×, and the remaining useful life of the plant is 20 years. Y obtains a schedule of deduction amounts under § 1.468A-8T(c) permitting a $5× deduction each year over the 20-year remaining useful life, and deducts $5× of the special transfer amount in year 1, year 2, year 3, and year 4. On the first day of year 5, Y transfers a 25% interest in the plant to an unrelated party. Under paragraph (c)(1)(ii) of this section, Y may deduct in Year 5 the unamortized special transfer deduction corresponding to the portion of the plant transferred (25 percent of $80× or $20×). In addition, under paragraph (e)(1)(ii) of this section, Y may deduct the portion of the deduction amount for year 5 from the schedule of deduction amounts corresponding to its retained interest in the plant (75 percent of $5× or $3.75×). Pursuant to paragraph (e)(1)(iii) of this section, Y must file a request for a revised schedule of ruling amounts by March 15 of year 6.
(f) Anti-abuse provision. The IRS may treat a disposition as satisfying the requirements of this section if the IRS determines that this treatment is necessary or appropriate to carry out the purposes of section 468A and §§ 1.468A-1 through 1.468A-9.
(a) In general. An eligible taxpayer is allowed a deduction for the taxable year in which the taxpayer makes a cash payment (or is deemed to make a cash payment) to a nuclear decommissioning fund or for a special transfer under § 1.468A-8 only if the taxpayer elects the application of section 468A. A separate election is required for each nuclear decommissioning fund and for each taxable year with respect to which payments are to be deducted under section 468A or a special transfer is made under § 1.468A-8. In the case of an affiliated group of corporations that join in the filing of a consolidated return for a taxable year, the common parent must make a separate election on behalf of each member whose payments to a nuclear decommissioning fund during such taxable year are to be deducted under section 468A and each member that makes a special transfer under § 1.468A-8 with respect to such year. The election under section 468A for any taxable year is irrevocable and must be made by attaching a statement (Election Statement) and a copy of the schedule of ruling amounts provided pursuant to the rules of § 1.468A-3 to the taxpayer's Federal income tax return (or, in the Start Printed Page 80713case of an affiliated group of corporations that join in the filing of a consolidated return, the consolidated return) for such taxable year. The return to which the Election Statement and a copy of the schedule of ruling amounts is attached must be filed on or before the time prescribed by law (including extensions) for filing the return for the taxable year with respect to which payments are to be deducted under section 468A.
(iii) The total amount of actual cash payments made to the nuclear decommissioning fund during the taxable year that were not treated as deemed cash payments under § 1.468A-2(c)(1) for a prior taxable year;
(iv) The total amount of cash payments deemed made to the nuclear decommissioning fund under § 1.468A-2(c)(1) for the taxable year;
(v) The total amount of any special transfers (whether in cash or property) made to the nuclear decommissioning fund under § 1.468A-8 during the taxable year that were not treated as deemed transfers under § 1.468A-8(a)(4) for a prior taxable year;
(vi) The total amount of any special transfers (whether in cash or property) deemed made to the nuclear decommissioning fund under § 1.468A-8(a)(4) for the taxable year; and
(vii) For each item of property included in the amounts described in paragraph (b)(4)((v) or (vi) of this section, the amount of the item of property and whether the basis of the item of property is determined under § 1.468A-8(b)(5)(iii)(A) or § 1.468A-8(b)(5)(iii)(B).
(a) General rule—(1) In general. Under section 468A(f), a taxpayer maintaining a qualified nuclear decommissioning fund with respect to a nuclear power plant may transfer cash or property into the fund (a special transfer). The special transfer is not subject to the ruling amount limitation in section 468A(b) and is not treated as a cash payment for purposes of that limitation. Thus, a taxpayer may, in the same taxable year, pay the ruling amount and make a special transfer into the fund. A special transfer may be made in cash, property, or both cash and property. The amount of a special transfer (that is, the amount of cash and the fair market value of property transferred) may not exceed the present value of the pre-2005 nonqualifying amount of nuclear decommissioning costs with respect to the nuclear power plant. The taxpayer is entitled to a deduction against income for a special transfer, as described in paragraph (b) of this section. A special transfer may not be made to a nuclear decommissioning fund before the first taxable year in which a deduction amount is applicable to the nuclear decommissioning fund (see paragraph (c) of this section).
(2) Pre-2005 nonqualifying amount—(i) In general. The present value of the pre-2005 nonqualifying amount of nuclear decommissioning costs with respect to a nuclear power plant is the amount equal to the pre-2005 nonqualifying percentage of the present value of the estimated future decommissioning costs (as defined in § 1.468A-1(b)(6)) with respect to the nuclear power plant as of the first day of the taxable year of the taxpayer in which the special transfer is made or deemed made (or a later date that is on or before the date on which the special transfer is expected to be made if the taxpayer establishes to the satisfaction of the IRS that the determination of present value as of such date is reasonable and consistent with the principles and provisions of this section). For this purpose, the pre-2005 nonqualifying percentage for the plant is 100 percent reduced by the sum of—
(A) The qualifying percentage (within the meaning of § 1.468A-3(d)(4) as in effect on December 31, 2005) used in determining the taxpayer's last schedule of ruling amounts for the nuclear decommissioning fund under the law in effect before the enactment of the Energy Policy Act of 2005 (that is, the percentage of the plant's total nuclear decommissioning costs that were permitted to be funded through the fund under the law in effect before the enactment of the Energy Policy Act of 2005); and
(ii) Pre-2005 nonqualifying amount of transferee. If there is a transfer of a nuclear decommissioning fund or part or all of its assets and § 1.468A-6 applies to the transfer, the pre-2005 nonqualifying amount determined with respect to the transferee is equal to the pre-2005 nonqualifying amount (or a proportionate part of the pre-2005 nonqualifying amount) that would have been determined with respect to the transferor but for such transfer.
(4) Deemed payment rules—(i) In general. The amount of any special transfer (whether in cash or property) described in § 1.468A-8 and made by an electing taxpayer to a nuclear decommissioning fund on or before the 15th day of the third calendar month after the close of any taxable year (the deemed payment deadline date) shall be deemed made during such taxable year if the electing taxpayer irrevocably designates the amount as relating to such taxable year on its timely filed Federal income tax return for such taxable year or, in the case of special transfers described in paragraph (a)(4)(ii) of this section, on an amended return for such taxable year (see § 1.468A-7(b)(4)(v) and (vi) for rules relating to such designation).
(ii) Special rule for certain special transfers. Special transfers that the electing taxpayer designates as relating to a taxable year beginning after December 31, 2005, and ending before January 1, 2010, which are actually made within 90 days after the electing taxpayer receives a ruling from the Start Printed Page 80714Secretary relating to the special transfer are deemed made during the taxable year designated as the year to which the special transfer relates.
(b) Deduction for amounts transferred—(1) In general. (i) Except as provided in this paragraph (b), the deduction for any special transfer is allowed ratably over the remaining useful life of the nuclear power plant. The amount of the deduction for any taxable year is the deduction amount for such year specified in the schedule of deduction amounts required under paragraph (c) of this section.
(ii) For purposes of this paragraph (b), the remaining useful life of the nuclear power plant is the period beginning on the first day of the taxable year during which the transfer is made and ending on the last day of the taxable year that includes the last day of the estimated useful life of the nuclear power plant. The last day of the estimated useful life of the nuclear power plant is determined for this purpose under the rules of § 1.468A-3(c)(2).
(2) Amount of deduction—(i) General rule. Except as provided in this paragraph (b)(2), the deduction for property contributed in a special transfer is limited to the lesser of the fair market value of the property contributed or the taxpayer's basis in that property.
(ii) Election—(A) In general. If the fair market value of the property contributed is less than the taxpayer's adjusted basis in such property as of the date the property is contributed and the fund elects to treat the fair market value of the property as its adjusted basis in the property, the taxpayer may deduct an amount equal to the adjusted basis of the contributed property.
(B) Manner of making election. The election described in paragraph (b)(2)(ii)(A) of this section is made for property contributed in a special transfer by attaching a description of the property and a statement that the fund is making an election under § 1.468A-8(b)(2)(ii) with respect to the property to the return of the fund for the taxable year in which the property is contributed to the fund.
(4) Transfers of qualified nuclear decommissioning funds. (i) If a special transfer is made to any qualified nuclear decommissioning fund, there is a subsequent transfer of the fund or the assets of the fund (a fund transfer), and § 1.468-6 applies to the fund transfer, any amount of the deduction under paragraph (b) of this section allocable to taxable years ending after the date of the fund transfer will be allowed as a current deduction to the transferor for the taxable year that includes the date of the fund transfer. See § 468A-6(c) for additional rules concerning transfers of decommissioning funds, including the transfer of a portion of the taxpayer's interest in a nuclear power plant. If a taxpayer transfers only part of the fund or the fund's assets, the rules in this paragraph (b)(4) apply only to the corresponding portion of the deduction under paragraph (b) of this section.
(ii) If a deduction is allowed to the transferor under paragraph (b)(4)(i) of this section and the transferee is related to the transferor, the Internal Revenue Service (IRS) will not approve the transferee's schedule of ruling amounts for taxable years beginning after the date of the transfer unless the ruling amounts are deferred in a manner that results in recapture of the acceleration amount. For this purpose—
(5) Special rules—(i) Gain or loss not recognized on transfers to fund. No gain or loss will be recognized on any special transfer.
(iii) Fund basis in transferred property—(A) In general. Except as provided in paragraph (b)(5)(iii)(B) of this section, the fund's basis in any property transferred in a special transfer is the same as the transferor's basis in the property immediately before the transfer.
(c) Schedule of deductions required—(1) In general. A taxpayer may not make a special transfer to a qualified nuclear decommissioning fund unless the taxpayer requests from the IRS a schedule of deduction amounts in connection with such transfer. A schedule of deduction amounts for a nuclear decommissioning fund (schedule of deduction amounts) is a ruling (within the meaning of § 601.201(a)(2) of this chapter) specifying the annual deductions (deduction amounts) that, over the taxable years in the remaining useful life of the nuclear power plant, will result in the deduction of the entire amount of the special transfer. Such a request may be combined with a request for a schedule of ruling amounts under Start Printed Page 80715§ 1.468A-3(a). In the case of a combined request, the schedule of deduction amounts requested under this paragraph (c)(1) must be stated separately from the schedule of ruling amounts requested under § 1.468A-3(a) and approval of the schedule of deduction amounts under this section will constitute a separate ruling. A request for a schedule of deduction amounts must comply with all provisions of paragraph (d) of this section.
(4) Special transfer permitted before receipt of schedule. If an electing taxpayer has filed a timely request for a schedule of deduction amounts in connection with a special transfer for a taxable year and does not receive the schedule of deduction amounts before the deemed payment deadline for such taxable year, the taxpayer may make a special transfer to the nuclear decommissioning fund on the basis of the special transfer amount proposed in the taxpayer's request. If the schedule of deduction amounts provided by the Secretary is based on a special transfer amount that differs from the special transfer amount proposed in the taxpayer's request, rules similar to the rules of § 1.468A-3(g)(2) and (3) shall apply.
(d) Manner of requesting schedule of deduction amounts—(1) In general. (i) In order to receive a deduction amount for any taxable year, a taxpayer must file a request for a schedule of deduction amounts that complies with the requirements of this paragraph (d), the applicable procedural rules set forth in § 601.201(e) of this chapter (Statement of Procedural Rules) and the requirements of any applicable revenue procedure that is in effect on the date the request is filed.
(ii) A separate request for a schedule of deduction amounts is required for each nuclear decommissioning fund established by a taxpayer (see § 1.468A-5(a) for rules relating to the number of nuclear decommissioning funds that a taxpayer can establish).
(iii) Except as provided by § 1.468A-5(a)(1)(iv) (relating to certain unincorporated organizations that may be taxable as corporations) and § 1.468A-3 (relating to a request for a schedule of ruling amounts), a request for a schedule of deduction amounts must not contain a request for a ruling on any other issue, whether the issue involves section 468A or another section of the Code.
(v) The present value of the estimated future decommissioning costs (as defined in § 1.468A-1(b)(6)) with respect to the taxpayer's qualifying interest in the nuclear power plant as of the first day of the taxable year of the taxpayer in which a transfer is made under this section.
(D) The total estimated cost of decommissioning expressed in current dollars (that is, based on price levels in Start Printed Page 80716effect at the time of the current determination).
(ix) If the request is for a subsequent schedule of deduction amounts, the amount of the previous special transfer and the present value of the estimated future decommissioning costs (as defined in § 1.468A-1(b)(6)) with respect to the taxpayer's qualifying interest in the nuclear power plant as of the first day of the taxable year of the taxpayer in which the previous special transfer was made.
(xi) If the request for a schedule of deduction amounts contains a request, pursuant to § 1.468A-5(a)(1)(iv), that the IRS rule whether an unincorporated organization through which the assets of the fund are invested is an association taxable as a corporation for Federal tax purposes, a copy of the legal documents establishing or otherwise governing the organization.
Sections 1.468A-1 through 1.468A-8 are effective on December 23, 2010 and apply with respect to taxable years ending after such date. Special rules that are provided for taxable years ending on or before such date, such as the special rule for certain special transfers contained in § 1.468A-8(a)(4)(ii), apply with respect to such taxable years. In addition, a taxpayer may apply the provisions of §§ 1.468A-1 through 1.468A-8 with respect to a taxable year ending on or before December 23, 2010 if all such provisions are consistently applied.
1.468A-3T 1545-1269
1.468A-4T 1545-0954
1.468A-7T 1545-0954
1.468A-3T(h), 1.468A-7T, and 1.468A-8T(d) 1545-2091
2. The following entries are revised in the table:
1.468A-7 1545-0954
3. The following entry is added in numerical order to the table:
1.468A-3(h), 1.468A-7, and 1.468A-8(d) 1545-2091
[FR Doc. 2010-32049 Filed 12-22-10; 8:45 am]