[Federal Register Volume 63, Number 12 (Tuesday, January 20, 1998)]
[Rules and Regulations]
[Pages 2892-2894]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-1177]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Parts 1 and 602
[TD 8758]
RIN 1545-AU28
Nuclear Decommissioning Funds; Revised Schedules of Ruling
Amounts
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final regulations.
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SUMMARY: This document contains final regulations relating to requests
for revised schedules of ruling amounts for nuclear decommissioning
reserve funds. The regulations amend existing regulations to ease the
burden on affected taxpayers by permitting electing taxpayers with
qualifying interests in nuclear power plants to adjust their ruling
amounts under a formula or method rather than by filing a request for a
revised schedule of ruling amounts.
DATES: The final regulations are effective January 20, 1998.
FOR FURTHER INFORMATION CONTACT: Peter Friedman, (202) 622-3110 (not a
toll-free number).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collection of information contained in these final regulations
has been reviewed and approved by the Office of Management and Budget
in accordance with the Paperwork Reduction Act (44 U.S.C. 3507) under
the control number 1545-1511. Responses to this collection of
information are voluntary.
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.
The estimated average annual burden per recordkeeper is 5 hours.
Comments concerning the accuracy of this burden estimate and
suggestions for reducing this burden should be sent to the Internal
Revenue Service, Attn: IRS Reports Clearance Officer, T:FP, Washington,
DC 20024, 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.
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 final 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 (Pub. L. 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 the 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
[[Page 2893]]
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. The regulations permit 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.
The regulations contain provisions for the review and revision of
schedules of ruling amounts and set 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 10 year
intervals. If the schedule is determined under a formula or method,
however, the period between reviews may not exceed 5 years.
The regulations provide that a taxpayer may request an elective
review of its schedule of ruling amounts. 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. A notice of proposed rulemaking (REG-209828-96)
relating to these rules was published in the Federal Register on
December 23, 1996 (61 FR 67510). The notice proposes to 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 and to
revise the mandatory review requirements.
Written comments were received in response to the notice of
proposed rulemaking, and a public hearing was held on May 13, 1997.
After considering the written comments and the statements made at the
public hearing, the proposed rules are adopted as modified by this
Treasury Decision.
Explanation of Provisions
The final 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 final regulations 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, 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. The commentators all
agreed with the expanded availability of ruling amounts based on
formulas or methods.
In addition, the final regulations modify the mandatory review
provisions applicable to schedules of ruling amounts determined under a
formula or method. The proposed regulations eliminate the rule
requiring review of those schedules after 5 years but make those
schedules subject to the general rule requiring review at 10 year
intervals. In addition, the proposed regulations require taxpayers 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. The commentators generally favored
either a retention of the 5 year review period without limits on
differences in ruling amounts or an increase in the percentage by which
ruling amounts are permitted to differ. In response to these
suggestions, the final regulations retain the 5 year review
requirement, increase the overall percentage by which ruling amounts
may differ, and eliminate the 10 percent limitation on changes from one
year to the next.
Some commentators suggested that all elements of a formula should
be permitted to be variable. Nothing in the proposed regulations was
meant to suggest otherwise. In order to afford different taxpayers
maximum flexibility in using a formula, the regulations do not specify
which elements must be fixed and which must be variable. Instead, the
formula, itself, will determine whether an element is fixed or
variable. A fixed element is one that is assumed to retain the same
value regardless of action by the applicable public utility commission.
Some commentators suggested that a taxpayer that recently received
a schedule of ruling amounts should be permitted to vary this schedule
using a formula or method that has not been approved by the Service.
This suggestion is inconsistent with the Service's obligation to issue
and review schedules of ruling amounts and is not adopted.
Several commentators requested that the existing user fee for
obtaining a schedule of ruling amounts under section 468A is excessive
and should be waived or reduced. Because this subject is not within the
scope of this regulations project, it is not addressed in the final
regulations.
Finally, some commentators suggested that the regulations should
address the situation where a taxpayer, based on a good faith but
erroneous calculation of the percentage limitations, fails to comply
with the mandatory review provisions. Partly in response to this
suggestion, the percentage limitation has been simplified.
Effective Date
These regulations are applicable for requests for schedules of
ruling amounts made on or after January 20, 1998.
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 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. It is hereby certified that the
collection of information in the regulation will not have a significant
impact on a substantial number of small entities. This certification is
based on the fact that taxpayers with qualifying interests in a nuclear
power plant are generally large entities. Thus, because the regulation
applies only to these taxpayers and 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, the notice of proposed rulemaking preceding these
regulations was submitted to the Chief Counsel for Advocacy of the
Small Business Administration for comment on its impact on small
business.
Drafting Information
The principal author of these regulations is Peter Friedman, Office
of Assistant Chief Counsel (Passthroughs and Special Industries).
However, other
[[Page 2894]]
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-2 is amended as follows:
1. The text of paragraph (f)(3) following the heading is designated
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 on or before the earlier of the deemed payment deadline for
the fifth 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
ruling amount for any earlier year since the most recent formula or
method was approved differ by more than 50 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.
* * * * *
Par. 4. Section 1.468A-8 is amended by adding paragraph (b)(12) to
read as follows:
Sec. 1.468A-8 Effective date and transitional rules.
* * * * *
(b) * * *
(12) Use of formula or method. Section 1.468A-2(f)(3)(ii) and
Sec. 1.468A-3(a)(4) (to the extent it permits a formula or method when
the applicable public utility commission estimates the cost of
decommissioning in future dollars), (e)(5), (i)(1)(ii)(A) (to the
extent it requires the taxpayer to file a request for a revised
schedule because of a substantial variation in ruling amounts), and
(i)(1)(iii)(C) apply only to requests for a formula or method submitted
on or after January 20, 1998 and to formulas and methods obtained in
response to those requests.
PART 602--OMB CONTROL NUMBERS UNDER THE PAPERWORK REDUCTION ACT
Par. 5. The authority citation for part 602 continues to read as
follows:
Authority: 26 U.S.C. 7805.
Par. 6. In Sec. 602.101(c), the entry for 1.468A-3 in the table is
revised to read as follows:
Sec. 602.101 OMB Control numbers.
* * * * *
(c) * * *
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Current OMB
CFR part or section where identified or described control No.
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* * * * *
1.468A-3................................................... 1545-1269
1545-1378
1545-1511
* * * * *
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Michael P. Dolan,
Deputy Commissioner of Internal Revenue.
Approved: January 9, 1998.
Donald C. Lubick,
Acting Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 98-1177 Filed 1-16-98; 8:45 am]
BILLING CODE 4830-01-U