[Federal Register Volume 59, Number 247 (Tuesday, December 27, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-31428]


[[Page Unknown]]

[Federal Register: December 27, 1994]


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DEPARTMENT OF THE TREASURY
26 CFR Parts 1 and 602

[TD 8580]
RIN 1545-AN06

 

Disposition of an Interest in a Nuclear Power Plant

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations.

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SUMMARY: This document contains final regulations relating to certain 
Federal income tax consequences of a disposition of an interest in a 
nuclear power plant by a taxpayer that has maintained a nuclear 
decommissioning fund with respect to that plant. These regulations 
affect taxpayers that transfer or acquire interests in nuclear power 
plants by providing guidance on the tax consequences of these 
transfers. In addition, the final regulations extend the benefits of 
section 468A to electing taxpayers with an interest in a nuclear power 
plant under the jurisdiction of the Rural Electrification 
Administration. The regulations also make a number of other changes and 
clarifications to the existing regulations to aid in the administration 
of section 468A.

EFFECTIVE DATE: These regulations are effective December 27, 1994.

FOR FURTHER INFORMATION CONTACT: Peter C. Friedman, (202) 622-3110 (not 
a toll-free number).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

    The collections of information contained in these final regulations 
have been reviewed and approved by the Office of Management and Budget 
in accordance with the Paperwork Reduction Act (44 U.S.C. 3504(h)) 
under control number 1545-1378. With respect to Sec. 1.468A-3(h)(2) 
(xii) and (xiii), the estimated annual burden per respondent varies 
from 1 to 2 hours, depending on individual circumstances, with an 
estimated average of 1.5 hours.
    With respect to Sec. 1.468A-3(i)(1)(ii)(B), the estimated annual 
burden per respondent varies from 20 to 30 hours, depending on 
individual circumstances, with an estimated average of 25 hours.
    Comments concerning the accuracy of this burden estimate and 
suggestions for reducing this burden should be directed to the Internal 
Revenue Service, Attn: IRS Reports Clearance Officer, PC:FP, 
Washington, DC 20224, and to the Office of Management and Budget, Attn: 
Desk Officer for the Department of the Treasury, Office of Information 
and Regulatory Affairs, Washington, DC 20503.

Background

    This document contains amendments to the Income Tax Regulations (26 
CFR parts 1 and 602) under section 468A. Section 468A, relating to 
nuclear decommissioning costs, was added to the Internal Revenue Code 
by section 91(c) of the Tax Reform Act of 1984 (Pub. L. 98-369, 98 
Stat. 604). On November 20, 1992, the IRS published in the Federal 
Register a notice of proposed rulemaking (57 FR 54734) setting forth 
proposed amendments to the regulations under section 468A.
    Section 468A(c)(1)(B) authorizes the Secretary to issue regulations 
that prescribe the extent to which a taxpayer must include amounts from 
a nuclear decommissioning fund (a Fund) in gross income upon the 
disposition of an interest in a nuclear power plant to which the Fund 
relates. Section 1.468A-6T (TD 8094, 51 FR 25033) published in the 
Federal Register on July 10, 1986, treated such a disposition as a 
taxable distribution of assets in the Fund to the taxpayer transferring 
the interest. In response to generally adverse comments on this rule, 
final regulations (TD 8184, 53 FR 6800) published in the Federal 
Register on March 3, 1988, stated that guidance on the tax treatment of 
these dispositions would be provided at a later date. These regulations 
are issued to provide this guidance.

Explanation of Provisions

In General

    The regulations prescribe certain federal income tax consequences 
of the disposition of all or a portion of a qualifying interest in a 
nuclear power plant to which a Fund relates. The regulations treat a 
transfer of Fund assets in connection with such a disposition as a 
nonrecognition event, provided certain requirements are satisfied. The 
transferee of the interest is viewed as stepping into the shoes of the 
transferor with respect to the amount of the assets in the transferor's 
Fund that is proportionate to the interest transferred and with respect 
to the transferor's ruling amount for the portion of the taxable year 
that follows the disposition. These regulations also provide rules for 
the calculation of schedules of ruling amounts for the transferee and 
for a transferor that retains a portion of its original qualifying 
interest.
    The regulations also contain a general provision allowing the IRS 
to treat a disposition occurring on or after December 27, 1994 as 
satisfying the requirements of the regulations if the IRS decides that 
this treatment is necessary or appropriate to carry out the purposes of 
section 468A and the regulations thereunder. Another provision allows 
the IRS, upon the request of an electing taxpayer, to apply these 
regulations to a disposition of an interest in a nuclear power plant 
occurring after July 17, 1984, and before December 27, 1994.
    The regulations also allow rural electric cooperatives to qualify 
as electing taxpayers; modify the information requirements that are 
part of a request for a schedule of ruling amounts; create a new 
mandatory review period for schedules of ruling amounts determined with 
respect to a disposition of an interest in a nuclear power plant; 
require that the trust agreement for each Fund contain a provision that 
assets of the Fund may be used only in a manner that is authorized by 
section 468A and the regulations thereunder; and provide that the 
period within which a taxpayer must substantially comply with the 
provisions requiring information to be submitted as part of a request 
for a schedule of ruling amounts is the general period applicable to 
requests for private letter rulings.

Comments Received

    Comments received in response to the notice of proposed rulemaking 
(57 FR 54734) can be divided into five general categories--rural 
electric cooperatives, reduction in time to provide additional 
information, trust provisions, disposition provisions, and self-dealing 
rules.

Rural Electric Cooperatives

    The proposed regulations extend the benefits of section 468A to 
electing rural electric cooperatives. One commentator requested that 
the IRS (1) not consider earnings on assets in Funds when determining 
whether tax-exempt rural electric cooperatives satisfy the 85 percent 
test of section 501(c)(12) (which requires at least 85 percent of the 
cooperative's income to be from members); (2) specify the regulatory 
authority (Rural Electrification Administration, Federal Energy 
Regulatory Commission, or State Commission) that is charged with 
approving cost of service amounts; and (3) allow rural electric 
cooperatives to elect to apply section 468A retroactively for all open 
taxable years.
    The determination of whether earnings on nuclear decommissioning 
funds (whether or not established under section 468A) count toward 
satisfaction of the 85 percent test is an issue under section 501 and, 
therefore, is outside the scope of this project. Further, it is the 
responsibility of the regulatory authorities to decide which of the 
authorities is responsible for approving cost of service amounts. These 
issues, therefore, are not addressed in the final regulations. 
Additionally, because sections 468A (a) and (g) require that payments 
to a Fund for a taxable year be made no later than two and one-half 
months after the close of that year, the IRS believes that retroactive 
application of section 468A to rural electric cooperatives is not 
permitted by the statute.

Time Period for Additional Information

    The proposed regulations also reduce the time for submitting 
additional information requested by the IRS concerning a request for a 
schedule of ruling amounts from 60 to 30 days. Many commentators stated 
that the abbreviated response time would be inadequate for a taxpayer 
to gather, prepare, and submit requested information. Retaining the 
requirements of the proposed regulations, the final regulations merely 
conform the section 468A rules to the normal rules governing requests 
for letter rulings to help expedite the rulings process. The final 
regulations clarify, however, that the IRS may waive this deadline if 
the taxpayer is making a good faith effort to comply with the deadline.

Trust Provisions

    The proposed regulations also provide that each qualified nuclear 
decommissioning trust agreement must require that assets of the Fund be 
used as authorized by section 468A and the regulations thereunder and 
that the agreement cannot be amended to violate section 468A or the 
regulations thereunder. Commentators argued that this provision exceeds 
the IRS's authority. It is apparent from section 468A(e)(4) (which 
requires that amounts in a Fund be used exclusively for 
decommissioning, associated expenses, or, when not currently needed for 
those purposes, to make investments) and from the special section 468A 
tax rules (including the preferential tax rates on Fund earnings for 
taxable years beginning after December 31, 1993), that Congress 
intended for amounts set aside in these Funds to be available for 
decommissioning of nuclear power plants. The IRS believes it is 
consistent with this Congressional intent, and with the IRS's 
responsibilities for successfully administering the program, to require 
that the trust agreements limit use of Fund assets to section 468A 
purposes. Accordingly, the final regulations retain this requirement. 
To ensure that taxpayers have sufficient time to modify their trust 
agreements, the final regulations also retain the grace period of the 
proposed regulations that allows until December 31, 1996, for the 
inclusion of the required trust provisions.

Dispositions of an Interest in a Nuclear Power Plant

    The proposed regulations generally treat transfers of assets in 
Funds resulting from transfers of interests in nuclear power plants to 
which the Funds relate as nonrecognition, transferred basis 
transactions. Most of the comments favored the proposed rules. However, 
commentators requested (1) additional guidance on how to determine 
which Fund assets relate to a transferred interest in a nuclear power 
plant and clarification that the regulations were not adopting a 
tracing approach; (2) an option to treat these dispositions as 
triggering a taxable transfer of related assets; (3) an option to 
transfer an entire Fund rather than the assets in the Fund; and (4) 
assurance that the proposed rules apply in the context of corporate 
reorganizations.
    First, to make clear that the regulations do not adopt a tracing 
approach, the final regulations refer to assets in a Fund that are 
proportionate to the interest in the plant that is transferred, rather 
than to assets that ``relate'' to the interest transferred. The final 
regulations also clarify that a proportionate amount of the assets in a 
Fund is considered transferred if, on the date the qualifying interest 
is transferred, the percentage of the aggregate fair market value of 
the assets transferred equals the percentage of the qualifying interest 
transferred.
    Second, the final regulations do not adopt the suggestion to 
provide taxpayers with an option to treat the disposition as triggering 
a taxable transfer of a proportionate amount of the assets. The 
nonrecognition, transferred basis approach simplifies the tax rules for 
dispositions and corresponds to the substance of these transactions. 
Permitting taxpayers to elect taxable treatment would unnecessarily 
complicate the tax rules.
    Third, to minimize the role of form in these disposition 
transactions, the final regulations clarify that when an interest in a 
nuclear power plant is transferred, the associated assets must be 
transferred to a Fund of the transferee or, if the transferee acquires 
the transferor's entire interest in the plant, the transferor's Fund 
may be transferred to the transferee. Such a transfer of the 
transferor's Fund must not be prohibited by the transferor's trust 
agreement or applicable local law. Regardless of whether the assets of 
the transferor's Fund or the Fund itself is transferred, after the 
transfer, the transferee must not violate Sec. 1.468A-5(a)(1)(ii), 
which requires that an electing taxpayer maintain only one Fund for 
each nuclear power plant. Similarly, after the transfer, the transferee 
and the transferor that retains an interest must not violate 
Sec. 1.468A-5(a)(1)(ii), which requires that each electing taxpayer 
have a separate Fund for its interest in the same plant.
    In addition, the final regulations provide that if a transferee 
acquires an interest in a nuclear power plant in a transaction to which 
Sec. 1.468A-6 (dispositions of an interest in a nuclear power plant) 
applies, the transferee's qualifying percentage for the interest 
acquired generally is the transferor's qualifying percentage with 
respect to that interest immediately before the disposition.
    Fourth, although the final regulations make no specific mention of 
corporate reorganizations, they apply to all dispositions described in 
the regulations, including those that occur in the context of corporate 
reorganizations.

Self-Dealing

    The proposed regulations also make a change to the rules 
prohibiting a trustee or other disqualified person from engaging in an 
act of self-dealing with a Fund. The change excepts deposits in trustee 
institutions from the self- dealing rules if the deposits are made to 
facilitate temporary investments or the payment of reasonable 
administrative expenses. The change was intended to reduce 
administrative costs associated with establishing an account with a 
different institution for these purposes.
    Commentators criticized the rule on the ground that it called into 
question the permissibility of using Fund assets to pay investment 
advisory and trustee fees. In response to these comments, the final 
regulations provide that the proposed exception to the self-dealing 
rules is an addition to, rather than a substitution for, the existing 
exception for payment of fees.

Special Analyses

    It has been determined that this Treasury decision is not a 
significant regulatory action as defined in EO 12866. Therefore, a 
regulatory assessment is not required. It also has been determined that 
section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) 
and the Regulatory Flexibility Act (5 U.S.C. chapter 6) do not apply to 
these regulations, and, therefore, a Regulatory Flexibility Analysis is 
not required. Pursuant to section 7805(f) of the Internal Revenue Code, 
the notice of proposed rulemaking preceding these regulations was 
submitted to the Small Business Administration for comment on its 
impact on small business.

Drafting Information

    The principal author of these regulations is Peter C. Friedman, 
Office of Assistant Chief Counsel (Passthroughs and Special 
Industries). However, other personnel from the IRS and Treasury 
Department participated in their development.

List of Subjects

26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

26 CFR Part 602

    Reporting and recordkeeping requirements.

Adoption of Amendments to the Regulations

    Accordingly, 26 CFR parts 1 and 602 are amended as follows:

PART 1--INCOME TAXES

    Paragraph 1. The authority citation for part 1 continues to read in 
part as follows:

    Authority: 26 U.S.C. 7805 * * *

    Par. 2. Section 1.468A-0 is amended by:
    1. Adding an entry for Sec. 1.468A-1, paragraph (d).
    2. Adding an entry for Sec. 1.468A-5, paragraph (a)(4).
    3. Revising the heading for Sec. 1.468A-6 and adding entries for 
paragraphs (a) through (h).
    4. The revision and additions read as follows:


Sec. 1.468A-0  Nuclear decommissioning costs; table of contents.

* * * * *

Sec. 1.468A-1  Nuclear decommissioning costs; general rules.

* * * * *
    (d)  Special rules for electing taxpayers whose rates are under 
the jurisdiction of the Rural Electrification Administration.
* * * * *

Sec. 1.468A-5  Nuclear decommissioning fund--miscellaneous 
provisions.

    (a) * * *
    (4) Trust provisions.
* * * * *

Sec. 1.468A-6  Disposition of an interest in a nuclear power plant.

(a) In general.
(b) Requirements.
(c) Tax consequences.
    (1) The transferor and its Fund.
    (2) The transferee and its Fund.
    (3) Basis.
(d) Determination of proportionate amount.
(e) Calculation of schedule of ruling amounts for dispositions 
described in this section.
    (1) Transferor.
    (2) Transferee.
    (3) Example.
(f) Calculation of the qualifying percentage after dispositions 
described in this section.
    (1) In general.
    (2) Special rule.
(g) Other.
(1) Anti-abuse provision.
    (2) Relief provision.
(h) Effective date.
* * * * *
    Par. 3. Section 1.468A-1 is amended as follows:
    1. The introductory text of paragraph (b) is revised.
    2. Paragraph (b)(4) is revised.
    3. Paragraph (d) is added.
    4. The added and revised provisions read as follows.


Sec. 1.468A-1  Nuclear decommissioning costs; general rules.

* * * * *
    (b) Definitions. The following terms are defined for purposes of 
section 468A and the regulations thereunder:
* * * * *
    (4) The term nuclear power plant means any nuclear power reactor 
that is used predominantly in the trade or business of the furnishing 
or sale of electric energy, if the rates for the furnishing or sale, as 
the case may be, either have been established or approved by a public 
utility commission or are under the jurisdiction of the Rural 
Electrification Administration. Each unit (i.e., nuclear reactor) 
located on a multi-unit site is a separate nuclear power plant. The 
term nuclear power plant also includes the portion of the common 
facilities of a multi-unit site allocable to a unit on that site.
* * * * *
    (d) Special rules for electing taxpayers whose rates are under the 
jurisdiction of the Rural Electrification Administration. 
Notwithstanding any other provision of the regulations under section 
468A, a schedule of ruling amounts may be provided to a taxpayer with 
respect to a nuclear power plant if the rates for the furnishing or 
sale of the plant's electricity are under the jurisdiction of the Rural 
Electrification Administration. This schedule will be determined on the 
basis of all facts and circumstances in a manner consistent with 
section 468A. No taxpayer will be provided a schedule of ruling amounts 
under section 468A for any taxable year unless the portion of the rates 
attributable to the decommissioning costs of that taxpayer with respect 
to such taxable year are treated by the taxpayer as though they were 
subject to section 88.
    Par. 4. Section 1.468A-3 is amended as follows:
    1. Paragraph (h)(1)(v) is removed.
    2. Paragraphs (h)(1)(vi) through (h)(1)(viii) are redesignated as 
paragraphs (h)(1)(v) through (h)(1)(vii), respectively.
    3. Newly designated paragraph (h)(1)(vii) is revised.
    4. Paragraphs (h)(2) (xii) and (xiii) are added.
    5. Paragraph (i)(1)(ii) is revised.
    6. The revisions and additions read as follows:


Sec. 1.468A-3  Ruling amount.

* * * * *
    (h) * * *
    (1) * * *
    (vii) (A) If a request does not comply substantially with the 
requirements of this paragraph (h), the Internal Revenue Service will 
notify the taxpayer of that fact. If the information or materials 
necessary to comply substantially with the requirements of this 
paragraph (h) are provided to the Internal Revenue Service within 30 
days after this notification, the request will be considered filed on 
the date of the original submission. If the information or materials 
necessary to comply substantially with the requirements of this 
paragraph (h) are not provided within 30 days after this notification, 
the request will be considered filed on the date that all information 
or materials necessary to comply with the requirements of this 
paragraph (h) are provided.
    (B) The Internal Revenue Service may waive the requirements of 
paragraph (h)(1)(vii)(A) of this section if the Service determines that 
the electing taxpayer is making a good faith effort to comply with the 
deadline and if the waiver is consistent with the purposes of section 
468A.
    (2) * * *
    (xii) A chart or table, based upon the assumed after-tax rate of 
return to be earned by the assets of the nuclear decommissioning fund, 
setting forth the years the fund will be in existence, the annual 
contribution to the fund, the estimated annual earnings of the fund and 
the cumulative total balance in the fund.
    (xiii) If the request is for a revised schedule of ruling amounts, 
a copy of the most recently issued schedule of ruling amounts for the 
nuclear power plant to which the request relates that has been issued 
to the taxpayer (or a predecessor in interest) making the request.
* * * * *
    (i) * * *
    (1) * * *
    (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)(4) of this section (which applies when a public utility 
commission estimates decommissioning costs in current dollars) must 
file a request for a revised schedule of ruling amounts on or before 
the deemed payment deadline for its fifth taxable year that begins 
after its taxable year in which the most recent formula or method was 
received.
    (B) Any taxpayer that has determined its ruling amount for any 
taxable year under a formula prescribed by Sec. 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.
* * * * *
    Par. 5. Section 1.468A-5 is amended as follows:
    1. Paragraph (a)(4) is added.
    2. Paragraph (b)(2)(v) is amended by removing ``or'' at the end 
thereof.
    3. Paragraph (b)(2)(vi) is redesignated as paragraph (vii).
    4. New paragraph (b)(2)(vi) is added.
    The additions read as follows:


Sec. 1.468A-5  Nuclear decommissioning fund qualification requirements; 
prohibitions against self-dealing; disqualification of nuclear 
decommissioning fund; termination of fund upon substantial completion 
of decommissioning.

    (a) * * *
    (4) Trust provisions. By December 31, 1996, each qualified nuclear 
decommissioning fund trust agreement must provide that assets in the 
fund must be used as authorized by section 468A and the regulations 
thereunder and that the agreement may not be amended so as to violate 
section 468A or the regulations thereunder.
    (b) * * *
    (2) * * *
    (vi) Any act described in Sec. 53.4951-1(c) of this chapter only if 
undertaken to facilitate the temporary investment of assets or the 
payment of reasonable administrative expenses of the nuclear 
decommissioning fund; or
* * * * *
    Par. 6. Section 1.468A-6 is amended by adding text to read as 
follows:


Sec. 1.468A-6  Disposition of an interest in a nuclear power plant.

    (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 Sec. 1.468A-1(b)(3) 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.
    (b) Requirements. This section applies if--
    (1) Immediately before the disposition, the transferor maintained a 
Fund with respect to the interest disposed of; and
    (2) Immediately after the disposition--
    (i) The transferee maintains a Fund with respect to the interest 
acquired;
    (ii) The interest acquired is a qualifying interest of the 
transferee in the nuclear power plant;
    (iii) Either a proportionate amount (which could include all) of 
the assets of the transferor's Fund is transferred to a Fund of the 
transferee, or the transferor's entire Fund is transferred to the 
transferee, provided in the latter case (or if the transferee receives 
all of the assets in the transferor's Fund, but not the transferor's 
Fund) that the transferee acquires the transferor's entire qualifying 
interest in the plant; and
    (iv) The transferee continues to satisfy the requirements of 
Sec. 1.468A-5(a)(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. 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 the regulations under 
section 468A, this transfer (or the transfer of the transferor's Fund) 
will not be considered a distribution of assets by the transferor's 
Fund.
    (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 the regulations under section 
468A, 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 that are transferred equals the percentage of the 
transferor's qualifying interest that is transferred.
    (e) Calculation of schedule of ruling 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 
accordance with this section, the transferor's schedule of ruling 
amounts with respect to the interests disposed of and retained (if any) 
will be determined in accordance with paragraphs (e)(1) (i) and (ii) of 
this section.
    (i) Taxable year of disposition. If a transferor does not file a 
request 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--
    (A) 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 portion of the qualifying interest that is 
retained (if any); and
    (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--
    (1) The portion of the transferor's qualifying interest that is 
disposed of; and
    (2) A fraction, the numerator of which is the number of days in 
that taxable year that precede the date of disposition, and the 
denominator of which is the number of days in that taxable year.
    (ii) 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 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 
Sec. 1.468A-3(i)(1)(ii)(B). If the transferor does not timely file such 
a request, the transferor's ruling amount with respect to that interest 
for the affected year or years will be zero, unless the Internal 
Revenue Service waives the application of this paragraph (e)(1)(ii) 
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 under this 
section, the transferee's schedule of ruling amounts with respect to 
the interest acquired will be determined under paragraphs (e)(2) (i) 
and (ii) of this section.
    (i) Taxable year of disposition. If a 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 the amount described in the following sentence. This amount is 
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--
    (A) The portion of the transferor's qualifying interest that is 
transferred; and
    (B) A fraction, the numerator of which is the number of days in the 
taxable year of the transferor including and following the date of 
disposition, and the denominator of which is the number of days in that 
taxable year.
    (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 Sec. 1.468A-
3(i)(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 Internal Revenue 
Service waives the application of this paragraph (e)(2)(ii) upon a 
showing of good cause for the delay.
    (3) Example. The following example illustrates the provisions of 
this paragraph (e).

    Example. (i) X Corporation is a calendar year taxpayer engaged 
in the sale of electric energy generated by a nuclear power plant. 
The plant is owned entirely by X. On May 27, 1995, X transfers a 60 
percent qualifying interest in the plant to Y Corporation, a 
calendar year taxpayer. Before the transfer, X had received a 
schedule of ruling amounts containing an annual ruling amount of $10 
million for the taxable years 1993 through 2013. For 1995, neither X 
nor Y files a request for a revised schedule of ruling amounts.
    (ii) Under paragraph (e)(1)(i) of this section, X's ruling 
amount for 1995 is calculated as follows: ($10,000,000 x 40%) + 
($10,000,000 x 60% x 146/365)=$6,400,000. Under paragraph (e)(2)(i) 
of this section, Y's ruling amount for 1995 is calculated as 
follows: $10,000,000 x 60% x 219/365=$3,600,000. Under paragraphs 
(e)(1)(ii) and (e)(2)(ii) of this section, X and Y must file 
requests for revised schedules of ruling amounts by March 15, 1997.

    (f) Calculation of the qualifying percentage after dispositions 
described in this section--(1) In general. If a transferee acquires an 
interest in a nuclear power plant in a transaction that satisfies the 
requirements of this section, the transferee's qualifying percentage 
(within the meaning of Sec. 1.468A-3(d)(4)) for the interest acquired 
is the transferor's qualifying percentage for that interest immediately 
before the disposition. If the Internal Revenue Service has not 
approved a qualifying percentage for the transferor with respect to the 
interest transferred, the qualifying percentage for that interest is 
determined under Sec. 1.468A-3(d)(4).
    (2) Special rule. The Internal Revenue Service may, in its 
discretion, determine a qualifying percentage for an interest in a 
nuclear power plant acquired by a transferee on a basis other than the 
rule set forth in paragraph (f)(1) of this section if--
    (i) In connection with its first request for a schedule of ruling 
amounts after the disposition, the transferee requests special 
treatment, explains the need for such treatment, and sets forth an 
alternative basis for determining the qualifying percentage; and
    (ii) The Internal Revenue Service determines that the special 
treatment is consistent with the purposes of section 468A.
    (g) Other--(1) Anti-abuse provision. The Internal Revenue Service 
may treat a disposition occurring on or after December 27, 1994 as 
satisfying the requirements of this section if the Internal Revenue 
Service determines that this treatment is necessary or appropriate to 
carry out the purposes of section 468A and the regulations thereunder.
    (2) Relief provision. Upon request of the electing taxpayer, the 
Internal Revenue Service may treat a disposition occurring after July 
17, 1984, and before December 27, 1994 as satisfying the requirements 
of this section if the Internal Revenue Service determines that this 
treatment is necessary or appropriate to carry out the purposes of 
section 468A and the regulations thereunder.
    (h) Effective date. Section 1.468A-6 is effective for a disposition 
of an interest in a nuclear power plant on or after December 27, 1994.

PART 602--OMB CONTROL NUMBERS UNDER THE PAPERWORK REDUCTION ACT

    Par. 7. The authority citation for part 602 continues to read as 
follows:

    Authority: 26 U.S.C. 7805.

    Par. 8. Section 602.101(c) is amended by revising the entry for 
1.468A-3 to read as follows:


Sec. 602.101  OMB Control Numbers.

* * * * *
    (c) * * *

------------------------------------------------------------------------
                                                                Current 
                                                                  OMB   
      CFR part or section where identified or described         control 
                                                                  No.   
------------------------------------------------------------------------
                                                                        
                                  *****                                 
1.468A-3....................................................   1545-1269
                                                               1545-1378
                                                                        
                                  *****                                 
------------------------------------------------------------------------

Margaret Milner Richardson,
Commissioner of Internal Revenue.

    Approved: December 8, 1994.
Cynthia G. Beerbower,
Deputy Assistant Secretary of the Treasury.
[FR Doc. 94-31428 Filed 12-23-94; 8:45 am]
BILLING CODE 4830-01-U