[Federal Register Volume 61, Number 247 (Monday, December 23, 1996)]
[Proposed Rules]
[Pages 67510-67512]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-32122]


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DEPARTMENT OF THE TREASURY
26 CFR Part 1

[REG-209828-96]
RIN 1545-AU28


Nuclear Decommissioning Funds; Revised Schedules of Ruling 
Amounts

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking and notice of public hearing.

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SUMMARY: This document contains proposed regulations relating to 
requests for revised schedules of ruling amounts for nuclear 
decommissioning reserve funds. The proposed regulations would amend 
existing regulations to ease the burden on affected taxpayers by 
permitting them to adjust their ruling amounts under a formula or 
method rather than by filing a request for a revised schedule of ruling 
amounts. This document also provides notice of a public hearing on 
these proposed regulations.

DATES: Comments must be received by March 24, 1997. Requests to speak 
and outlines of oral comments to be discussed at the public hearing 
scheduled for May 13, 1997, at 10 a.m., must be received by April 22, 
1997.

ADDRESSES: Send submissions to CC:DOM:CORP:R [REG-209828-96], room 
5226, Internal Revenue Service, POB 7604, Ben Franklin Station, 
Washington, DC 20044. Submissions may be hand-delivered between the 
hours of 8 a.m. and 5 p.m. to: CC:DOM:CORP:R [REG-209828-96], Courier's 
Desk, Internal Revenue Service, 1111 Constitution Avenue, N.W., 
Washington, DC. Alternatively, taxpayers may submit comments 
electronically via the Internet by selecting the ``Tax Regs'' option on 
the IRS Home Page, or by submitting comments directly to the IRS 
Internet site at http://www.irs.ustreas.gov/prod/tax__regs/
comments.html. A public hearing will be held in the NYU Classroom, 
Second Floor, Room 2615, Internal Revenue Building, 1111 Constitution 
Avenue, N.W., Washington, DC.

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, 
Peter C. Friedman, (202) 622-3110 (not a toll-free number); concerning 
submissions and the hearing, Evangelista Lee, (202) 622-7190 (not a 
toll-free number).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

    The collection of information contained in this notice of proposed 
rulemaking has been submitted to the Office of Management and Budget 
for review in accordance with the Paperwork Reduction Act of 1995 (44 
U.S.C. 3507(d)). Comments on the collection of information should be 
sent 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, with copies to the Internal Revenue 
Service, Attn: IRS Reports Clearance Officer, T:FP, Washington, DC 
20224. Comments on the collection of information should be received by 
February 21, 1997. Comments are specifically requested concerning:
    Whether the proposed collection of information is necessary for the 
proper performance of the functions of the Internal Revenue Service, 
including whether the collection will have a practical utility;
    The accuracy of the estimated burden associated with the proposed 
collection of information (see below);

[[Page 67511]]

    How the quality, utility, and clarity of the information to be 
collected may be enhanced;
    How the burden of complying with the proposed collection of 
information may be minimized, including through the application of 
automated collection techniques or other forms of information 
technology; and
    Estimates of capital or start-up costs and costs of operation, 
maintenance, and purchase of service to provide information.
    The collection of information is in Sec. 1.468A-3. This information 
is required by the IRS to ensure compliance with the provisions of 
section 468A relating to deductions for payments made to nuclear 
decommissioning reserve funds. This information will be used by the IRS 
to support the issuance to taxpayers of schedules of ruling amounts 
under section 468A. The collection of information is voluntary to 
obtain a benefit. The likely recordkeepers are businesses or other for-
profit institutions. Estimated total annual recordkeeping burden: 100 
hours. Estimated average annual burden per recordkeeper: 5 hours. 
Estimated number of recordkeepers: 20.
    An agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information unless the collection of 
information displays a valid control number.
    Books or records relating to a collection of information must be 
retained as long as their contents may become material in the 
administration of any internal revenue law. Generally, tax returns and 
return information are confidential, as required by 26 U.S.C. 6103.

Background

    This document contains proposed regulations under section 468A of 
the Internal Revenue Code. Section 468A was added to the Internal 
Revenue Code by section 91(c) of the Tax Reform Act of 1984 (Pub. L. 
98-369). Significant amendments were made to section 468A by section 
1917 of the Energy Policy Act of 1992 (Public Law 102-486).
    Section 468A(a) allows an electing taxpayer to deduct the amount of 
payments made by the taxpayer to a nuclear decommissioning reserve 
fund. Section 468A(b) limits the amount of these payments for any 
taxable year to the lesser of the ruling amount or the amount of 
decommissioning costs included in the taxpayer's cost of service for 
ratemaking purposes for that taxable year.
    Section 468A(d) provides that no deduction shall be allowed unless 
the taxpayer requests, and receives, a schedule of ruling amounts from 
the Secretary. A ruling amount is, with respect to any taxable year, 
the amount determined by the Secretary as necessary to (1) fund that 
portion of the nuclear decommissioning costs of the taxpayer with 
respect to the nuclear power plant which bears the same ratio to the 
total nuclear decommissioning costs with respect to such nuclear power 
plant as the period for which the nuclear decommissioning fund is in 
effect bears to the estimated useful life of such nuclear power plant; 
and (2) prevent any excessive funding of such costs or the funding of 
such costs at a rate more rapid than level funding, taking into account 
such discount rates as the Secretary deems appropriate. Section 
468A(d)(3) provides that the Secretary shall, at least once during the 
useful life of the nuclear power plant (or more frequently, upon the 
request of the taxpayer), review and, if necessary, revise the schedule 
of ruling amounts.
    Section 1.468A-3 sets forth the rules relating to the determination 
of ruling amounts. Section 1.468A-3(a)(4) permits the use of a formula 
or method for determining a schedule of ruling amounts (in lieu of a 
schedule of ruling amounts specifying a dollar amount for each taxable 
year), but only if the public utility commission establishing or 
approving the amount of decommissioning costs to be included in cost of 
service for ratemaking does not estimate the cost of decommissioning in 
future dollars.
    Section 1.468A-3(i) contains provisions for the review and revision 
of schedules of ruling amounts. Section 1.468A-3(i)(1) sets forth 
circumstances under which a taxpayer must request a revision to its 
schedule of ruling amounts. In general, a schedule of ruling amounts 
must be reviewed at ten-year intervals. If the schedule is determined 
under a formula or method, however, the period between reviews may not 
exceed five years.
    Section 1.468A-3(i)(2) provides that a taxpayer may request an 
elective review of its schedule of ruling amounts so long as such 
request is made in accordance with the rules of Sec. 1.468A-3(h). A 
taxpayer seeking to maximize its deductions under section 468A 
generally needs to request an elective review of its schedule of ruling 
amounts each time a public utility commission changes previously 
established amounts of decommissioning costs. These proposed 
regulations amend Sec. 1.468A-3(a)(4) by eliminating the restriction on 
the use of a formula or method for determining a schedule of ruling 
amounts. In addition, these proposed regulations revise the mandatory 
review requirements of Sec. 1.468A-3(i)(1).

Explanation of Provisions

    The proposed regulations provide that a taxpayer may request 
approval of a formula or method for determining a schedule of ruling 
amounts (rather than a schedule specifying a dollar amount for each 
taxable year) that is consistent with the principles and provisions of 
the rules relating to the determination of ruling amounts.
    The proposed regulation would ease the filing burden on taxpayers 
by permitting them to adjust their ruling amounts under a formula or 
method (rather than by filing a request for a revised schedule of 
ruling amounts). Thus, under the proposed regulations, a taxpayer may 
maximize its deductions under section 468A without requesting a revised 
schedule of ruling amounts each time a public utility commission 
changes the amount of decommissioning costs included in the taxpayer's 
cost of service if, under the taxpayer's formula or method, the 
commission's action results in a corresponding change in ruling 
amounts.
    In addition, the proposed regulations modify the mandatory review 
provisions applicable to schedules of ruling amounts determined under a 
formula or method. One modification eliminates the rule requiring 
review of those schedules after five years; the schedules will, 
however, be subject to the general rule requiring review at ten-year 
intervals. In addition, a taxpayer using a formula or method will be 
required to request a revised schedule of ruling amounts if, beginning 
with the second taxable year during which the most recently issued 
formula or method is in effect, the ruling amount for a taxable year 
(1) differs by more than 25 percent from the ruling amount for any 
preceding taxable year during which such formula or method was in 
effect; or (2) differs by more than 10 percent from the ruling amount 
for the immediately preceding taxable year. Under these circumstances a 
taxpayer must file a request for a revised schedule of ruling amounts 
on or before the deemed payment deadline for the next taxable year.

Proposed Effective Date

    The regulations are proposed to be effective for requests for 
schedules of ruling amounts made on or after the date that the final 
regulations are filed with the Federal Register.

[[Page 67512]]

Special Analyses

    It has been determined that this notice of proposed rulemaking is 
not a significant regulatory action as defined in EO 12866. Therefore, 
a regulatory assessment is not required. It has also been determined 
that section 553(b) of the Administrative Procedure Act (5 U.S.C. 
chapter 5) does not apply to these regulations, and because the 
regulation does not impose a collection of information on small 
entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not 
apply. Pursuant to section 7805(f) of the Internal Revenue Code, this 
notice of proposed rulemaking will be submitted to the Chief Counsel 
for Advocacy of the Small Business Administration for comment on its 
impact on small business.

Comments and Public Hearing

    Before these proposed regulations are adopted as final regulations, 
consideration will be given to any written comments (a signed original 
and eight (8) copies) that are submitted timely to the IRS. All 
comments will be available for public inspection and copying.
    A public hearing has been scheduled for May 13, 1997, in room 2615. 
Because of access restrictions, visitors will not be admitted beyond 
the Internal Revenue Building lobby more than 15 minutes before the 
hearing starts.
    The rules of 26 CFR 601.601(a)(3) apply to the hearing.
    Persons that wish to present oral comments at the hearing must 
submit comments by March 24, 1997 and submit an outline of the topics 
to be discussed and the time to be devoted to each topic by April 22, 
1997.
    A period of 10 minutes will be allotted to each person for making 
comments.
    An agenda showing the scheduling of the speakers will be prepared 
after the deadline for receiving outlines has passed. Copies of the 
agenda will be available free of charge at the hearing.

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 in 26 CFR Part 1

    Income Taxes, Reporting and recordkeeping requirements.

Proposed Amendments to the Regulations

    Accordingly, 26 CFR part 1 is proposed to be 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-2 is amended as follows:
    1. The text of paragraph (f)(3) is redesignated as paragraph 
(f)(3)(i).
    2. Paragraph (f)(3)(ii) is added.
    The addition reads as follows:


Sec. 1.468A-2  Treatment of electing taxpayer.

* * * * *
    (f) * * *
    (3) * * * (i) * * *
    (ii) The requirement of this paragraph (f)(3) does not apply if the 
taxpayer determines its schedule of ruling amounts under a formula or 
method obtained under Sec. 1.468A-3(a)(4) and the cost of service 
amount is a variable element of that formula or method.
* * * * *
    Par. 3. Section 1.468A-3 is amended as follows:
    1. Paragraph (a)(4) is revised.
    2. Paragraph (e)(5) is added.
    3. Paragraphs (i)(1)(ii)(A), (i)(1)(iii)(A)(3), and (i)(1)(iii)(B) 
are revised.
    4. Paragraph (i)(1)(iii)(C) is added.
    The revisions and additions read as follows:


Sec. 1.468A-3  Ruling amount.

    (a) * * *
    (4) The Internal Revenue Service will approve, at the request of 
the taxpayer, a formula or method for determining a schedule of ruling 
amounts (rather than a schedule specifying a dollar amount for each 
taxable year) that is consistent with the principles and provisions of 
this section. See paragraph (i)(1)(ii) of this section for a special 
rule relating to the mandatory review of ruling amounts that are 
determined pursuant to a formula or method.
* * * * *
    (e) * * *
    (5) A formula or method obtained under paragraph (a)(4) of this 
section may provide for changes in an estimated date described in 
paragraph (e)(1) or (2) of this section to reflect changes in the 
ratemaking assumptions used to determine rates (whether interim or 
final) that are established or approved by the applicable public 
utility commission after the filing of the request for approval of a 
formula or method.
* * * * *
    (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 must file a request for a revised 
schedule of ruling amounts on or before the deemed payment deadline for 
a taxable year if the period for which the most recently issued formula 
or method has been in effect (the ruling period) began at least two 
taxable years before such year and--
    (1) The ruling amount for the preceding taxable year and the ruling 
amount for any earlier taxable year in the ruling period differ by more 
than 25 percent of the smaller amount; or
    (2) The ruling amounts for the two most recent taxable years differ 
by more than 10 percent of the smaller amount.
* * * * *
    (iii) * * *
    (A) * * *
    (3) Reduces the amount of decommissioning costs to be included in 
cost of service for any taxable year;
    (B) The taxpayer's most recent request for a schedule of ruling 
amounts did not provide notice to the Internal Revenue Service of such 
action by the public utility commission; and
    (C) In the case of a taxpayer that determines its schedule of 
ruling amounts under a formula or method obtained under paragraph 
(a)(4) of this section, the item increased, adjusted, or reduced is a 
fixed (rather than a variable) element of that formula or method.
* * * * *
Margaret Milner Richardson,
Commissioner of Internal Revenue.
[FR Doc. 96-32122 Filed 12-20-96; 8:45 am]
BILLING CODE 3410-01-U