[Federal Register Volume 75, Number 246 (Thursday, December 23, 2010)]
[Rules and Regulations]
[Pages 80697-80716]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-32049]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 1 and 602

[TD 9512]
RIN 1545-BF08


Nuclear Decommissioning Funds

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations and removal of temporary regulations.

-----------------------------------------------------------------------

SUMMARY: This document contains final regulations under section 468A of 
the Internal Revenue Code relating to deductions for contributions to 
trusts maintained for decommissioning nuclear power plants. These final 
regulations affect taxpayers that own an interest in a nuclear power 
plant and reflect recent statutory changes. The corresponding temporary 
regulations are removed.

DATES: Effective Date: These regulations are effective on December 23, 
2010.
    Applicability Dates: For dates of applicability, see Sec. Sec.  
1.468A-9, 1.468A-3, and 1.468A-8.

FOR FURTHER INFORMATION CONTACT: Patrick S. Kirwan, (202) 622-3110 (not 
a toll-free number).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

    The collection of information contained in these final regulations 
has

[[Page 80698]]

been 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 Sec. Sec.  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.
    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 OMB 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 
tax return information are confidential, as required by 26 U.S.C. 6103.

Background

    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.

1. Definitional Matters

A. Definition of Nuclear Decommissioning Costs
    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, Sec.  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.
B. Estimated Useful Life
    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 Sec.  1.468A-3(c)(1). In addition, the same term 
is used in Sec.  1.468A-8(b)(1) and (c)(1) to determine the years over 
which a taxpayer may deduct a special transfer made under Sec.  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 Sec.  1.468A-3(c)(2)(iii) of the final regulations.

2. Matters Relating to Special Transfers and Schedules of Deduction 
Amounts

A. General Comment
    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.
B. Deemed Payment Date for Special Transfers
    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 Sec. Sec.  1.468A-7(b)(4) and 
1.468A-8(a).
C. Extension of Deadline for Actual Payment of Special Transfers
    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

[[Page 80699]]

transitional 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 Sec.  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 
Sec.  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 Sec.  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 Sec.  1.468A-8(c).
D. Special Transfers With Respect to Nuclear Power Plants That Have 
Been Transferred
    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 Sec.  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 Sec.  
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.
E. Special Transfer Over More Than One Year
    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 Sec.  1.468A-8(c)(2).
F. Acceleration of Special Transfer Deduction
    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.
G. Basis of Property Contributed in a Special Transfer
    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

[[Page 80700]]

provide 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.
H. Miscellaneous Special Transfer Issues
    (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 Sec.  1.468A-8.

3. Transfers of Nuclear Power Plants and Their Associated Qualified 
Funds

A. Ambiguity Relating to a Plant That has Ceased Producing Electric 
Energy
    The proposed regulations, at Sec.  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 Sec.  1.468A-6 are satisfied. That was the intended 
effect of the provision and it is retained in the final regulations.
B. Tax-Free Transfer of a Qualified Fund
    The proposed regulations, at Sec.  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.

4. Miscellaneous Matters

A. Minor Changes in Wording To Reflect Deregulation in Certain 
Jurisdictions
    The proposed regulations, in Sec. Sec.  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.
B. New Schedule of Ruling Amounts When License is Extended
    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.

Special Analyses

    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

[[Page 80701]]

was submitted to the Chief Counsel for Advocacy of the Small Business 
Administration for comment on their impact on small business.

Drafting Information

    The principal author of these regulations is Patrick S. Kirwan, 
Office of Associate 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.

Amendments to the Regulations

0
Accordingly, 26 CFR parts 1 and 602 are amended as follows:

PART 1--INCOME TAXES

0
Paragraph 1. The authority citation for part 1 is amended by adding an 
entry in numerical order to read in part as follows:

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

    Section 1.468A-5 also issued under 26 U.S.C. 468A(e)(5). * * *

1.468A-0T through 1.468A-9T   [Removed]

0
Par. 2. Sections 1.468A-0T through 1.468A-9T are removed.
0
Par. 3. Sections 1.468A-0 through 1.468A-9 are added to read as 
follows:


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

    This section lists the paragraphs contained in Sec. Sec.  1.468A-1 
through 1.468A-9.


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

    (a) Introduction.
    (b) Definitions.
    (c) Special rules applicable to certain experimental nuclear 
facilities.


Sec.  1.468A-2  Treatment of electing taxpayer.

    (a) In general.
    (b) Limitation on payments to a nuclear decommissioning fund.
    (1) In general.
    (2) Excess contributions not deductible.
    (c) Deemed payment rules.
    (1) In general.
    (2) Cash payment by customer.
    (d) Treatment of distributions.
    (1) In general.
    (2) Exceptions to inclusion in gross income.
    (i) Payment of administrative costs and incidental expenses.
    (ii) Withdrawals of excess contributions.
    (iii) Actual distributions of amounts included in gross income as 
deemed distributions.
    (e) Deduction when economic performance occurs.


Sec.  1.468A-3  Ruling amount.

    (a) In general.
    (b) Level funding limitation.
    (c) Funding period.
    (d) Decommissioning costs allocable to a fund.
    (1) General rule.
    (2) Total estimated cost of decommissioning.
    (3) Taxpayer's share.
    (e) Manner of requesting schedule of ruling amounts.
    (1) In general.
    (2) Information required.
    (3) Administrative procedures.
    (f) Review and revision of schedule of ruling amounts.
    (1) Mandatory review.
    (2) Elective review.
    (3) Determination of revised schedule of ruling amounts.
    (g) Special rule permitting payments to a nuclear decommissioning 
fund before receipt of an initial or revised ruling amount applicable 
to a taxable year.


Sec.  1.468A-4  Treatment of nuclear decommissioning fund.

    (a) In general.
    (b) Modified gross income.
    (c) Special rules.
    (1) Period for computation of modified gross income.
    (2) Gain or loss upon distribution of property by a fund.
    (3) Denial of credits against tax.
    (4) Other corporate taxes inapplicable.
    (d) Treatment as corporation for purposes of subtitle F.


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

    (a) Qualification requirements.
    (1) In general.
    (2) Limitation on contributions.
    (3) Limitation on use of fund.
    (i) In general.
    (ii) Definition of administrative costs and expenses.
    (4) Trust provisions.
    (b) Prohibitions against self-dealing.
    (1) In general.
    (2) Self-dealing defined.
    (3) Disqualified person defined.
    (c) Disqualification of nuclear decommissioning fund.
    (1) In general.
    (2) Exception to disqualification.
    (i) In general.
    (ii) Excess contribution defined.
    (iii) Taxation of income attributable to an excess contribution.
    (3) Effect of disqualification.
    (4) Further effects of disqualification.
    (d) Termination of nuclear decommissioning fund upon substantial 
completion of decommissioning.
    (1) In general.
    (2) Additional rules.
    (3) Substantial completion of decommissioning defined.


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 and schedule of 
deduction amounts for dispositions described in this section.
    (1) Transferor.
    (i) Taxable year of disposition.
    (ii) Taxable years after the disposition.
    (2) Transferee.
    (i) Taxable year of disposition.
    (ii) Taxable years after the disposition.
    (3) Examples.
    (f) Anti-abuse provision.


Sec.  1.468A-7  Manner of and time for making election.

    (a) In general.
    (b) Required information.


Sec.  1.468A-8  Special transfers to qualified funds pursuant to 
section 468A(f).

    (a) General rule.
    (1) In general.
    (2) Pre-2005 nonqualifying amount.
    (i) In general.
    (ii) Pre-2005 nonqualifying amount of transferee.
    (3) Transfers in multiple years.
    (4) Deemed payment rules.
    (i) In general.
    (ii) Special rule for certain transfers.
    (b) Deduction for amounts transferred.
    (1) In general.
    (2) Amount of deduction.
    (i) General Rule.
    (ii) Election.
    (A) In general.
    (B) Manner of making election.
    (C) Election allowed for property transferred prior to December 23, 
2010.
    (3) Denial of deduction for previously deducted amounts.
    (4) Transfers of qualified nuclear decommissioning funds.
    (5) Special rules.
    (i) Gain or loss not recognized on transfers to fund.

[[Page 80702]]

    (ii) Taxpayer basis in fund.
    (iii) Fund basis in transferred property.
    (A) In general.
    (B) Basis in case of election.
    (c) Schedule of deductions required.
    (1) In general.
    (2) Transfers in multiple taxable years.
    (3) Transfer of partial interest in fund.
    (4) Special transfer permitted before receipt of schedule.
    (d) Manner of requesting schedule of deduction amounts.
    (1) In general.
    (2) Information required.
    (3) Statement required.
    (4) Administrative procedures.


Sec.  1.468A-9  Effective/applicability date.

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

    (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 Sec.  
1.468A-7 is allowed a deduction (as determined under Sec.  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 Sec. Sec.  1.468A-1 through 1.468A-9:
    (1) The term eligible taxpayer means any taxpayer that possesses a 
qualifying interest in a nuclear power plant (including a nuclear power 
plant that is under construction).
    (2) The term qualifying interest means--
    (i) A direct ownership interest; and
    (ii) A leasehold interest in any portion of a nuclear power plant 
if--
    (A) The holder of the leasehold interest is primarily liable under 
Federal or State law for decommissioning such portion of the nuclear 
power plant; and
    (B) No other person establishes a nuclear decommissioning fund with 
respect to such portion of the nuclear power plant.
    (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 Sec.  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 
Sec.  1.468A-5. The term nonqualified fund means a fund that does not 
satisfy those requirements.
    (5) 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. Each unit (that is, 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.
    (6) The term nuclear decommissioning costs or decommissioning costs 
includes all otherwise deductible expenses to be incurred in connection 
with the entombment, decontamination, dismantlement, removal and 
disposal of the structures, systems and components of a nuclear power 
plant, whether that nuclear power plant will continue to produce 
electric energy or has permanently ceased to produce electric energy. 
Such term includes all otherwise deductible expenses to be incurred in 
connection with the preparation for decommissioning, such as 
engineering and other planning expenses, and all otherwise deductible 
expenses to be incurred with respect to the plant after the actual 
decommissioning occurs, such as physical security and radiation 
monitoring expenses. Such term also includes costs incurred in 
connection with the construction, operation, and ultimate 
decommissioning of a facility used solely to store, pending acceptance 
by the government for permanent storage or disposal, spent nuclear fuel 
generated by the nuclear power plant or plants located on the same site 
as the storage facility. Such term does not include otherwise 
deductible expenses to be incurred in connection with the disposal of 
spent nuclear fuel under the Nuclear Waste Policy Act of 1982 (Pub. L. 
97-425). An expense is otherwise deductible for purposes of this 
paragraph (b)(6) if it would be deductible under chapter 1 of the 
Internal Revenue Code without regard to section 280B.
    (7) The term public utility commission means any State or political 
subdivision thereof, any agency, instrumentality or judicial body of 
the United States, or any judicial body, commission or other similar 
body of the District of Columbia or of any State or any political 
subdivision thereof that establishes or approves rates for the 
furnishing or sale of electric energy.
    (8) The term ratemaking proceeding means any proceeding before a 
public utility commission in which rates for the furnishing or sale of 
electric energy are established or approved. Such term includes a 
generic proceeding that applies to two or more taxpayers that are 
subject to the jurisdiction of a single public utility commission.
    (9) The term special transfer means any transfer of funds to a 
qualified nuclear decommissioning fund pursuant to Sec.  1.468A-8.
    (c) Special rules applicable to certain experimental nuclear 
facilities. (1) The owner of a qualifying interest in an experimental 
nuclear facility possesses a qualifying interest in a nuclear power 
plant for purposes of paragraph (b) of this section if such person is 
engaged in the trade or business of the furnishing or sale of electric 
energy.
    (2) An owner of stock in a corporation that owns an experimental 
nuclear facility possesses a qualifying interest in a nuclear power 
plant for purposes of paragraph (b)(1) of this section if--
    (i) Such stockholder satisfies the conditions of paragraph (c)(1) 
of this section; and
    (ii) The corporation that directly owns the facility is not engaged 
in the trade or business of the furnishing or sale of electric energy.
    (3) For purposes of this paragraph (c), an experimental nuclear 
facility is a nuclear power reactor that is used predominantly for the 
purpose of conducting experimentation and research.


Sec.  1.468A-2  Treatment of electing taxpayer.

    (a) In general. An eligible taxpayer that elects the application of 
section 468A pursuant to the rules contained in Sec.  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 Sec.  1.468A-8. The amount 
of the deduction for any taxable year equals

[[Page 80703]]

the 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 Sec.  1.468A-8. The amount of a special transfer permitted 
under Sec.  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:
    (1) The construction of the nuclear power plant to which the 
nuclear decommissioning fund relates has commenced.
    (2) A ruling amount is applicable to the nuclear decommissioning 
fund (see Sec.  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 
Sec.  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 Sec.  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 Sec.  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 Sec.  
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 Sec.  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 Sec.  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--
    (i) To satisfy, in whole or in part, the liability of the electing 
taxpayer for decommissioning costs of the nuclear power plant to which 
the fund relates; and
    (ii) To pay administrative costs and other incidental expenses of 
the fund.
    (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 Sec.  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 Sec.  1.468A-
5(c)(2)(ii)) by an electing taxpayer pursuant to the rules of Sec.  
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.
    (iii) Actual distributions of amounts included in gross income as 
deemed distributions. If the amount of a deemed distribution is 
included in the gross income of the electing taxpayer for the taxable 
year in which the deemed distribution occurs, no further amount is 
required to be included in gross income when the amount of the deemed 
distribution is actually distributed by the nuclear decommissioning 
fund. The amount of a deemed distribution is actually distributed by a 
nuclear decommissioning fund as the first actual distributions are made 
by the nuclear decommissioning fund on or after the date of the deemed 
distribution.
    (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 Sec.  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.


Sec.  1.468A-3  Ruling amount.

    (a) In general. (1) Except as otherwise provided in paragraph (g) 
of this section or in Sec.  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 Sec.  
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

[[Page 80704]]

fund 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 
Sec.  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.
    (2) Each schedule of ruling amounts must be consistent with the 
principles and provisions of this section and must be based on 
reasonable assumptions concerning--
    (i) The after-tax rate of return to be earned by the assets of the 
qualified nuclear decommissioning fund;
    (ii) The total estimated cost of decommissioning the nuclear power 
plant (see paragraph (d)(2) of this section); and
    (iii) The frequency of contributions to a nuclear decommissioning 
fund for a taxable year (for example, monthly, quarterly, semi-annual 
or annual contributions).
    (3) The Internal Revenue Service (IRS) shall provide a schedule of 
ruling amounts that is identical to the schedule of ruling amounts 
proposed by the taxpayer in connection with the taxpayer's request for 
a schedule of ruling amounts (see paragraph (e)(2)(viii) of this 
section), but no schedule of ruling amounts shall be provided unless 
the taxpayer's proposed schedule of ruling amounts is consistent with 
the principles and provisions of this section and is based on 
reasonable assumptions. If a proposed schedule of ruling amounts is not 
consistent with the principles and provisions of this section or is not 
based on reasonable assumptions, the taxpayer may propose an amended 
schedule of ruling amounts that is consistent with such principles and 
provisions and is based on reasonable assumptions.
    (4) The taxpayer bears the burden of demonstrating that the 
proposed schedule of ruling amounts is consistent with the principles 
and provisions of this section and is based on reasonable assumptions. 
If a public utility commission established or approved the currently 
applicable rates for the furnishing or sale by the taxpayer of 
electricity from the plant, the taxpayer can generally satisfy this 
burden of proof by demonstrating that the schedule of ruling amounts is 
calculated using the assumptions used by the public utility commission 
in its most recent order. In addition, a taxpayer that owns an interest 
in a deregulated nuclear plant may submit assumptions used by a public 
utility commission that formerly had regulatory jurisdiction over the 
plant as support for the assumptions used in calculating the taxpayer's 
proposed schedule of ruling amounts, with the understanding that the 
assumptions used by the public utility commission may be given less 
weight if they are out of date or were developed in a proceeding for a 
different taxpayer. The use of other industry standards, such as the 
assumptions underlying the taxpayer's most recent financial assurance 
filing with the NRC, are an alternative means of demonstrating that the 
taxpayer has calculated its proposed schedule of ruling amounts on a 
reasonable basis. Consistency with financial accounting statements is 
not sufficient, in the absence of other supporting evidence, to meet 
the taxpayer's burden of proof under this paragraph (a)(4).
    (5) The IRS will approve, at the request of the taxpayer, a formula 
or method for determining a schedule of ruling amounts (rather than 
providing a schedule specifying a dollar amount for each taxable year) 
if the formula or method is consistent with the principles and 
provisions of this section and is based on reasonable assumptions. See 
paragraph (f)(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.
    (6) The IRS may, in its discretion, provide a schedule of ruling 
amounts that is determined on a basis other than the rules of 
paragraphs (a) through (d) of this section if--
    (i) In connection with its request for a schedule of ruling 
amounts, the taxpayer explains the need for special treatment and sets 
forth an alternative basis for determining the schedule of ruling 
amounts; and
    (ii) The IRS determines that special treatment is consistent with 
the purpose of section 468A.
    (b) Level funding limitation. (1) Except as otherwise provided in 
paragraph (b)(3) of this section, the ruling amount specified in a 
schedule of ruling amounts for any taxable year in the funding period 
(as defined in paragraph (c) of this section) shall not be less than 
the ruling amount specified in such schedule for any earlier taxable 
year.
    (2) The ruling amount specified in a schedule of ruling amounts for 
a taxable year after the end of the funding period may be less than the 
ruling amount specified in such schedule for an earlier taxable year.
    (3) The ruling amount specified in a schedule of ruling amounts for 
the last taxable year in the funding period may be less than the ruling 
amount specified in such schedule for an earlier taxable year if, when 
annualized, the amount specified for the last taxable year is not less 
than the amount specified for such earlier taxable year. The amount 
specified for the last taxable year is annualized by--
    (i) Determining the number of days between the beginning of the 
taxable year and the end of the plant's estimated useful life;
    (ii) Dividing the amount specified for the last taxable year by 
such number of days; and
    (iii) Multiplying the result by the number of days in the last 
taxable year (generally 365).
    (c) Funding period--(1) In general. For purposes of this section, 
the funding period for a nuclear decommissioning fund is the period 
that--
    (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 Sec.  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
    (ii) Ends on the last day of the taxable year that includes the 
last day of the estimated useful life of the nuclear power plant to 
which the nuclear decommissioning fund relates.
    (2) Estimated useful life. The last day of the estimated useful 
life of a nuclear power plant is determined under the following rules:
    (i) Except as provided in paragraph (c)(2)(ii) of this section--
    (A) The last day of the estimated useful life of a nuclear power 
plant that has been included in rate base for ratemaking purposes in 
any ratemaking proceeding that established rates for a period before 
January 1, 2006, is the date used in the first such ratemaking 
proceeding as the estimated date on which the nuclear power plant will 
no longer be included in the taxpayer's rate base for ratemaking 
purposes;
    (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;

[[Page 80705]]

    (C) A taxpayer with an interest in a plant that is not described in 
paragraph (c)(2)(i)(A) of this section may use any reasonable method 
for determining the last day of such estimated useful life; and
    (D) A reasonable method for purposes of paragraph (c)(2)(i)(C) of 
this section may include use of the period for which a public utility 
commission has included a comparable nuclear power plant in rate base 
for ratemaking purposes.
    (ii) If it can be established that the estimated useful life of the 
nuclear power plant will end on a date other than the date determined 
under paragraph (c)(2)(i) of this section, the taxpayer may use such 
other date as the last day of the estimated useful life but is not 
required to do so. If the last day of the estimated useful life was 
determined under paragraph (c)(2)(i)(A) of this section and the most 
recent ratemaking proceeding used an alternative date as the estimated 
date on which the nuclear power plant will no longer be included rate 
base, the most recent ratemaking proceeding will generally be treated 
as establishing such alternative date as the last day of the estimated 
useful life.
    (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 Sec.  1.468A-8(b)(1) and (c)(1).
    (d) Decommissioning costs allocable to a fund. The amount of 
decommissioning costs allocable to a nuclear decommissioning fund is 
determined for purposes of this section by applying the following rules 
and definitions:
    (1) General rule. The amount of decommissioning costs allocable to 
a nuclear decommissioning fund is the taxpayer's share of the total 
estimated cost of decommissioning the nuclear power plant to which the 
fund relates.
    (2) Total estimated cost of decommissioning. Under paragraph (a)(2) 
of this section, the taxpayer must demonstrate the reasonableness of 
the assumptions concerning the total estimated cost of decommissioning 
the nuclear power plant.
    (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 Sec.  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 Sec.  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 Sec.  1.468A-5 for rules relating to 
the number of nuclear decommissioning funds that a taxpayer can 
establish.)
    (iii) Except as provided by Sec. Sec.  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.
    (iv) In the case of an affiliated group of corporations that join 
in the filing of a consolidated return, the common parent of the group 
may request a schedule of ruling amounts for each member of the group 
that possesses a qualifying interest in the same nuclear power plant by 
filing a single submission with the IRS.
    (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 Sec.  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.
    (vi) Except as provided in paragraph (e)(1)(vii) of this section, a 
request for a schedule of ruling amounts shall be considered filed only 
if such request complies substantially with the requirements of this 
paragraph (e).
    (vii) If a request does not comply substantially with the 
requirements of this paragraph (e), the IRS will notify the taxpayer of 
that fact. If the information or materials necessary to comply 
substantially with the requirements of this paragraph (e) are provided 
to the IRS within 30 days after this notification, the request will be 
considered filed on the date of the original submission. In addition, 
the request will be considered filed on the date of the original 
submission in a case in which the information and materials are 
provided more than 30 days after the notification if the IRS determines 
that the electing taxpayer made a good faith effort to provide the 
applicable information or materials within 30 days after notification 
and also determines that treating the request as filed on the date of 
the original submission is consistent with the purposes of section 
468A. In any other case in which the information or materials necessary 
to comply substantially with the requirements of this paragraph (e) are 
not provided within 30 days after the notification, the request will be 
considered filed on the date that all information or materials 
necessary to comply with the requirements of this paragraph (e) are 
provided.
    (2) Information required. A request for a schedule of ruling 
amounts must contain the following information:
    (i) The taxpayer's name, address, and taxpayer identification 
number.
    (ii) Whether the request is for an initial schedule of ruling 
amounts, a mandatory review of the schedule of ruling amounts (see 
paragraph (f)(1) of this section), or an elective review of the 
schedule of ruling amounts (see paragraph (f)(2) of this section).
    (iii) The name and location of the nuclear power plant with respect 
to which a schedule of ruling amounts is requested.
    (iv) A description of the taxpayer's qualifying interest in the 
nuclear power plant and the percentage of such nuclear power plant that 
the qualifying interest of the taxpayer represents.
    (v) Where applicable, an identification of each public utility 
commission that establishes or approves rates for the furnishing or 
sale by the taxpayer of electric energy generated by the nuclear power 
plant, and, for each public utility commission identified--
    (A) Whether the public utility commission has determined the amount 
of decommissioning costs to be included in the taxpayer's cost of 
service for ratemaking purposes;
    (B) The amount of decommissioning costs that are to be included in 
the taxpayer's cost of service for each taxable year under the current 
determination and amounts that otherwise are required to be included in 
the taxpayer's income under section 88 and the regulations thereunder;
    (C) A description of the assumptions, estimates and other factors 
used by the public utility commission to determine the amount of 
decommissioning costs;
    (D) A copy of such portions of any order or opinion of the public 
utility commission as pertain to the public

[[Page 80706]]

utility commission's most recent determination of the amount of 
decommissioning costs to be included in cost of service; and
    (E) A copy of each engineering or cost study that was relied on or 
used by the public utility commission in determining the amount of 
decommissioning costs to be included in the taxpayer's cost of service 
under the current determination.
    (vi) A description of the assumptions, estimates and other factors 
that were used by the taxpayer to determine the amount of 
decommissioning costs, including each of the following if applicable:
    (A) A description of the proposed method of decommissioning the 
nuclear power plant (for example, prompt removal/dismantlement, safe 
storage entombment with delayed dismantlement, or safe storage 
mothballing with delayed dismantlement).
    (B) The estimated year in which substantial decommissioning costs 
will first be incurred.
    (C) The estimated year in which the decommissioning of the nuclear 
power plant will be substantially complete (see Sec.  1.468A-5(d)(3) 
for a definition of substantial completion of decommissioning).
    (D) The total estimated cost of decommissioning expressed in 
current dollars (that is, based on price levels in effect at the time 
of the current determination).
    (E) The total estimated cost of decommissioning expressed in future 
dollars (that is, based on anticipated price levels when expenses are 
expected to be paid).
    (F) For each taxable year in the period that begins with the year 
specified in paragraph (e)(2)(vi)(B) of this section (the estimated 
year in which substantial decommissioning costs will first be incurred) 
and ends with the year specified in paragraph (e)(2)(vi)(C) of this 
section (the estimated year in which the decommissioning of the nuclear 
power plant will be substantially complete), the estimated cost of 
decommissioning expressed in future dollars.
    (G) A description of the methodology used in converting the 
estimated cost of decommissioning expressed in current dollars to the 
estimated cost of decommissioning expressed in future dollars.
    (H) The assumed after-tax rate of return to be earned by the assets 
of the qualified nuclear decommissioning fund.
    (I) A copy of each engineering or cost study that was relied on or 
used by the taxpayer in determining the amount of decommissioning 
costs.
    (vii) A proposed schedule of ruling amounts for each taxable year 
remaining in the funding period as of the date the schedule of ruling 
amounts will first apply.
    (viii) A description of the assumptions, estimates and other 
factors that were used in determining the proposed schedule of ruling 
amounts, including, if applicable--
    (A) The funding period (as such term is defined in paragraph (c) of 
this section);
    (B) The assumed after-tax rate of return to be earned by the assets 
of the nuclear decommissioning fund;
    (C) The fair market value of the assets (if any) of the nuclear 
decommissioning fund as of the first day of the first taxable year to 
which the schedule of ruling amounts will apply;
    (D) The amount expected to be earned by the assets of the nuclear 
decommissioning fund (based on the after-tax rate of return applicable 
to the fund) over the period that begins on the first day of the first 
taxable year to which the schedule of ruling amounts will apply and 
ends on the last day of the funding period;
    (E) The amount of decommissioning costs allocable to the nuclear 
decommissioning fund (as determined under paragraph (d) of this 
section);
    (F) The total estimated cost of decommissioning (as determined 
under paragraph (d)(2) of this section); and
    (G) The taxpayer's share of the total estimated cost of 
decommissioning (as such term is defined in paragraph (d)(3) of this 
section).
    (ix) If the request is for a revised schedule of ruling amounts, 
the after-tax rate of return earned by the assets of the nuclear 
decommissioning fund for each taxable year in the period that begins 
with the date of the initial contribution to the fund and ends with the 
first day of the first taxable year to which the revised schedule of 
ruling amounts applies.
    (x) If applicable, an explanation of the need for a schedule of 
ruling amounts determined on a basis other than the rules of paragraphs 
(a) through (d) of this section and a description of an alternative 
basis for determining a schedule of ruling amounts (see paragraph 
(a)(5) of this section).
    (xi) 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.
    (xii) If the request is for a revised schedule of ruling amounts, a 
copy of the schedule of ruling amounts that the revised schedule would 
replace.
    (xiii) If the request for a schedule of ruling amounts contains a 
request, pursuant to Sec.  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.
    (xiv) Any other information required by the IRS that may be 
necessary or useful in determining the schedule of ruling amounts.
    (3) Administrative procedures. The IRS may prescribe administrative 
procedures that supplement the provisions of paragraph (e)(1) and (2) 
of this section. In addition, the IRS may, in its discretion, waive the 
requirements of paragraph (e)(1) and (2) of this section under 
appropriate circumstances.
    (f) Review and revision of schedule of ruling amounts--(1) 
Mandatory review. (i) Any taxpayer that has obtained a schedule of 
ruling amounts pursuant to paragraph (e) of this section must file a 
request for a revised schedule of ruling amounts on or before the 
deemed payment deadline date for the 10th taxable year that begins 
after the taxable year in which the most recent schedule of ruling 
amounts was received. If the taxpayer calculated its most recent 
schedule of ruling amounts on any basis other than an order issued by a 
public utility commission, the taxpayer must file a request for a 
revised schedule of ruling amounts on or before the deemed payment 
deadline date for the 5th taxable year that begins after the taxable 
year in which the most recent schedule of ruling amounts was received.
    (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

[[Page 80707]]

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.
    (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.
    (iii) A taxpayer requesting a schedule of deduction amounts for a 
nuclear decommissioning fund under Sec.  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.
    (iv) If the operating license of the nuclear power plant to which a 
nuclear decommissioning fund relates is renewed, the taxpayer 
maintaining the fund must request a revised schedule of ruling amounts. 
The request for the revised schedule must be submitted on or before the 
deemed payment deadline for the taxable year that includes the date on 
which the operating license is renewed.
    (v) A request for a schedule of ruling amounts required by this 
paragraph (f)(1) must be made in accordance with the rules of paragraph 
(e) of this section. If a taxpayer does not properly file a request for 
a revised schedule of ruling amounts by the date provided in paragraph 
(f)(1)(i), (ii) or (iv) of this section (whichever is applicable), the 
taxpayer's ruling amount for the first taxable year to which the 
revised schedule of ruling amounts would have applied and for all 
succeeding taxable years until a new schedule is obtained shall be zero 
dollars, unless, in its discretion, the IRS provides otherwise in such 
new schedule of ruling amounts. Thus, if a taxpayer is required to 
request a revised schedule of ruling amounts under any provision of 
this section, and each ruling amount in the revised schedule would 
equal zero dollars, the taxpayer may, instead of requesting a new 
schedule of ruling amounts, begin treating the ruling amounts under its 
most recent schedule as equal to zero dollars.
    (2) Elective review. Any taxpayer that has obtained a schedule of 
ruling amounts pursuant to paragraph (e) of this section can request a 
revised schedule of ruling amounts. Such a request must be made in 
accordance with the rules of paragraph (e) of this section; thus, the 
IRS will not provide a revised 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 for such taxable year (see 
paragraph (e)(1)(vi) of this section).
    (3) Determination of revised schedule of ruling amounts. A revised 
schedule of ruling amounts for a nuclear decommissioning fund shall be 
determined under this section without regard to any schedule of ruling 
amounts for such nuclear decommissioning fund that was issued prior to 
such revised schedule. Thus, a ruling amount specified in a revised 
schedule of ruling amounts for any taxable year in the funding period 
can be less than one or more ruling amounts specified in a prior 
schedule of ruling amounts for a prior taxable year.
    (g) Special rule permitting payments to a nuclear decommissioning 
fund before receipt of an initial or revised ruling amount applicable 
to a taxable year. (1) If an electing taxpayer has filed a timely 
request for an initial or revised ruling amount for a taxable year 
beginning on or after January 1, 2006, and does not receive the ruling 
amount on or before the deemed payment deadline date for such taxable 
year, the taxpayer may make a payment to a nuclear decommissioning fund 
on the basis of the ruling amount proposed in the taxpayer's request. 
Thus, under the preceding sentence, an electing taxpayer may make a 
payment to a nuclear decommissioning fund for such taxable year that 
does not exceed the ruling amount proposed by the taxpayer for such 
taxable year in a timely filed request for a schedule of ruling 
amounts.
    (2) If an electing taxpayer makes a payment to a nuclear 
decommissioning fund for any taxable year pursuant to paragraph (g)(1) 
of this section and the ruling amount that is provided by the IRS is 
greater than the ruling amount proposed by the taxpayer for such 
taxable year, the taxpayer is not allowed to make an additional payment 
to the fund for such taxable year after the deemed payment deadline 
date for such taxable year.
    (3) If the payment or transfer that an electing taxpayer makes to a 
nuclear decommissioning fund for any taxable year pursuant to paragraph 
(g)(1) of this section exceeds the ruling amount that is provided by 
the IRS for such taxable year, the following rules apply:
    (i) The amount of the excess is an excess contribution (as defined 
in Sec.  1.468A-5(c)(2)(ii)) for such taxable year.
    (ii) The amount of the excess contribution is not deductible (see 
Sec.  1.468A-2(b)(2)) and must be withdrawn by the taxpayer pursuant to 
the rules of Sec.  1.468A-5(c)(2)(i).
    (iii) The taxpayer must withdraw the after-tax earnings on the 
excess contribution.
    (iv) If the taxpayer claimed a deduction for the excess 
contribution, the taxpayer should file an amended return for the 
taxable year.


Sec.  1.468A-4  Treatment of nuclear decommissioning fund.

    (a) In general. A nuclear decommissioning fund is subject to tax on 
all of its modified gross income (as defined in paragraph (b) of this 
section). The rate of tax is 20 percent for taxable years beginning 
after December 31, 1995. This tax is in lieu of any other tax that may 
be imposed under subtitle A of the Internal Revenue Code (Code) on the 
income earned by the assets of the nuclear decommissioning fund.
    (b) Modified gross income. For purposes of this section, the term 
modified gross income means gross income as defined under section 61 
computed with the following modifications:
    (1) The amount of any payment or special transfer to the nuclear 
decommissioning fund with respect to which a deduction is allowed under 
section 468A(a) or section 468A(f) is excluded from gross income.
    (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

[[Page 80708]]

gross income of a nuclear decommissioning fund.
    (3) A deduction is allowed for the amount of an otherwise 
deductible loss that is sustained by the nuclear decommissioning fund 
in connection with the sale, exchange or worthlessness of any 
investment. A loss is otherwise deductible for purposes of this 
paragraph (b)(3) if such loss would be deductible by a corporation 
under section 165(f) or (g) and sections 1211(a) and 1212(a).
    (4) A deduction is allowed for the amount of an otherwise 
deductible net operating loss of the nuclear decommissioning fund. For 
purposes of this paragraph (b), the net operating loss of a nuclear 
decommissioning fund for a taxable year is the amount by which the 
deductions allowable under paragraphs (b)(2) and (3) of this section 
exceed the gross income of the nuclear decommissioning fund computed 
with the modification described in paragraph (b)(1) of this section. A 
net operating loss is otherwise deductible for purposes of this 
paragraph (b)(4) if such a net operating loss would be deductible by a 
corporation under section 172(a).
    (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 Sec.  1.442-1 for rules 
relating to the change to a new taxable year.
    (2) Gain or loss upon distribution of property by a fund. A 
distribution of property by a nuclear decommissioning fund (whether an 
actual distribution or a deemed distribution) shall be considered a 
disposition of property by the nuclear decommissioning fund for 
purposes of section 1001. In determining the amount of gain or loss 
from such disposition, the amount realized by the nuclear 
decommissioning fund shall be the fair market value of the property on 
the date of disposition.
    (3) Denial of credits against tax. The tax imposed on the modified 
gross income of a nuclear decommissioning fund under paragraph (a) of 
this section is not to be reduced or offset by any credits against tax 
provided by part IV of subchapter A of chapter 1 of the Code other than 
the credit provided by section 31(c) for amounts withheld under section 
3406 (back-up withholding).
    (4) Other corporate taxes inapplicable. Although the modified gross 
income of a nuclear decommissioning fund is subject to tax at the rate 
specified by section 468A(e)(2) and paragraph (a) of this section, a 
nuclear decommissioning fund is not subject to the other taxes imposed 
on corporations under subtitle A of the Code. For example, a nuclear 
decommissioning fund is not subject to the alternative minimum tax 
imposed by section 55, the accumulated earnings tax imposed by section 
531, the personal holding company tax imposed by section 541, and the 
alternative tax imposed on a corporation under section 1201(a).
    (d) Treatment as corporation for purposes of subtitle F. For 
purposes of subtitle F of the Code and Sec. Sec.  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:
    (1) A nuclear decommissioning fund must file a return with respect 
to the tax imposed by section 468A(e)(2) and paragraph (a) of this 
section for each taxable year (or portion thereof) that the fund is in 
existence even though no amount is included in the gross income of the 
fund for such taxable year. The return is to be made on Form 1120-ND in 
accordance with the instructions relating to such form. For purposes of 
this paragraph (d)(1), a nuclear decommissioning fund is in existence 
for the period that--
    (i) Begins on the date that the first deductible payment is 
actually made to such nuclear decommissioning fund; and
    (ii) Ends on the date of termination (see Sec.  1.468A-5(d)), the 
date that the entire fund is disqualified (see Sec.  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.
    (2) For each taxable year of the nuclear decommissioning fund, the 
return described in paragraph (d)(1) of this section must be filed on 
or before the 15th day of the third month following the close of such 
taxable year unless the nuclear decommissioning fund is granted an 
extension of time for filing under section 6081. If such an extension 
is granted for any taxable year, the return for such taxable year must 
be filed on or before the extended due date for such taxable year.
    (3) A nuclear decommissioning fund must provide its employer 
identification number on returns, statements and other documents as 
required by the forms and instructions relating thereto. The employer 
identification number is obtained by filing a Form SS-4, Application 
for Employer Identification Number, in accordance with the instructions 
relating thereto.
    (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 Sec.  1.6302-1.
    (5) A nuclear decommissioning fund is subject to the addition to 
tax imposed by section 6655 in case of a failure to pay estimated 
income tax. For purposes of section 6655 and this section--
    (i) The tax with respect to which the amount of the underpayment is 
computed in the case of a nuclear decommissioning fund is the tax 
imposed by section 468A(e)(2) and paragraph (a) of this section; and
    (ii) The taxable income with respect to which the nuclear 
decommissioning fund's status as a large corporation is measured is 
modified gross income (as defined by paragraph (b) of this section).


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) Qualification requirements--(1) In general. (i) A nuclear 
decommissioning fund must be established and maintained at all times in 
the United States pursuant to an arrangement that qualifies as a trust 
under State law. Such trust must be established for the exclusive 
purpose of providing funds for the decommissioning of one or more 
nuclear power plants, but a single trust agreement may establish 
multiple funds for such purpose. Thus, for example--
    (A) Two or more nuclear decommissioning funds can be established 
and maintained pursuant to a single trust agreement; and
    (B) One or more funds that are to be used for the decommissioning 
of a nuclear power plant and that do not qualify as nuclear 
decommissioning funds under this paragraph (a) can be established and 
maintained pursuant to a trust agreement that governs one or more 
nuclear decommissioning funds.
    (ii) A separate nuclear decommissioning fund is required for each 
electing taxpayer and for each

[[Page 80709]]

nuclear 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 Sec. Sec.  1.468A-1 through 1.468A-4, this section and 
Sec. Sec.  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 Sec.  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 
Sec.  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 Sec.  1.468A-8 for a schedule of 
deduction amounts.
    (2) Limitation on contributions. Except as otherwise provided in 
Sec.  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 Sec.  1.468A-
2(a). Thus, for example, except in the case of a special transfer 
pursuant to Sec.  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.
    (3) Limitation on use of fund--(i) In general. The assets of a 
nuclear decommissioning fund are to be used exclusively--
    (A) To satisfy, in whole or in part, the liability of the electing 
taxpayer for decommissioning costs of the nuclear power plant to which 
the nuclear decommissioning fund relates;
    (B) To pay administrative costs and other incidental expenses of 
the nuclear decommissioning fund; and
    (C) To the extent that the assets of the nuclear decommissioning 
fund are not currently required for the purposes described in paragraph 
(a)(3)(i)(A) or (B) of this section, to make investments.
    (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 Sec.  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 Sec. Sec.  1.468A-1 through 1.468A-9 and 
that the agreement may not be amended so as to violate section 468A or 
Sec. Sec.  1.468A-1 through 1.468A-9.
    (b) Prohibitions against self-dealing--(1) In general. Except as 
otherwise provided in this paragraph (b), the excise taxes imposed by 
section 4951 shall apply to each act of self-dealing between a 
disqualified person and a nuclear decommissioning fund.
    (2) Self-dealing defined. For purposes of this paragraph (b), the 
term self-dealing means any act described in section 4951(d), except--
    (i) A payment by a nuclear decommissioning fund for the purpose of 
satisfying, in whole or in part, the liability of the electing taxpayer 
for decommissioning costs of the nuclear power plant to which the 
nuclear decommissioning fund relates;
    (ii) A withdrawal of an excess contribution by the electing 
taxpayer pursuant to the rules of paragraph (c)(2) of this section;
    (iii) A withdrawal by the electing taxpayer of amounts that have 
been treated as distributed under paragraph (c)(3) of this section;
    (iv) A payment of amounts remaining in a nuclear decommissioning 
fund to the electing taxpayer after the termination of such fund (as 
determined under paragraph (d) of this section);
    (v) Any act described in section 4951(d)(2)(B) or (C);
    (vi) Any act that is described in Sec.  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
    (vii) A payment by a nuclear decommissioning fund for the 
performance of trust functions and certain general banking services by 
a bank or trust company that is a disqualified person if the banking 
services are reasonable and necessary to carry out the purposes of the 
fund and the compensation paid to the bank or trust company for such 
services, taking into account the fair interest rate for the use of the 
funds by the bank or trust company, is not excessive.
    (3) Disqualified person defined. For purposes of this paragraph 
(b), the term disqualified person includes each person described in 
section 4951(e)(4) and Sec.  53.4951-1(d).
    (4) General banking services. The general banking services allowed 
by paragraph (b)(2)(vii) of this section are--
    (i) Checking accounts, as long as the bank does not charge interest 
on any overwithdrawals;
    (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; and

[[Page 80710]]

    (iii) Safekeeping activities (see Sec.  53.4941(d)-3(c)(2), Example 
3, of this chapter).
    (c) Disqualification of nuclear decommissioning fund--(1) In 
general--(i) Disqualification events. Except as otherwise provided in 
paragraph (c)(2) of this section, the IRS may, in its discretion, 
disqualify all or any portion of a nuclear decommissioning fund if at 
any time during a taxable year of the fund--
    (A) The fund does not satisfy the requirements of paragraph (a) of 
this section; or
    (B) The fund and a disqualified person engage in an act of self-
dealing (as defined in paragraph (b)(2) of this section).
    (ii) Date of disqualification. (A) Except as otherwise provided in 
this paragraph (c)(1)(ii), the date on which a disqualification under 
this paragraph (c) will take effect (date of disqualification) is the 
date that the fund does not satisfy the requirements of paragraph (a) 
of this section or the date on which the act of self-dealing occurs, 
whichever is applicable.
    (B) If the IRS determines, in its discretion, that the 
disqualification should take effect on a date subsequent to the date 
specified in paragraph (c)(1)(ii)(A) of this section, the date of 
disqualification is such subsequent date.
    (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 Sec.  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 Sec.  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--
    (A) 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; or
    (B) The date that is 30 days after the date that the taxpayer 
receives the ruling amount for such taxable year.
    (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 Sec.  
1.468A-2(b). The amount of a special transfer permitted under Sec.  
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 Sec.  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 Sec.  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--
    (i) The amount of any excess contribution that was not withdrawn 
before the date of disqualification if no deduction was allowed with 
respect to such excess contribution;
    (ii) The amount of any deemed distribution that was not actually 
distributed before the date of disqualification (as determined under 
Sec.  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
    (iii) The amount of any tax that--
    (A) Is imposed on the income of the fund;
    (B) Is attributable to income taken into account before the date of 
disqualification or as a result of the disqualification; and
    (C) Has not been paid as of the date of disqualification.
    (4) Further effects of disqualification. Contributions made to a 
disqualified fund after the date of disqualification are not deductible 
under section 468A(a) and Sec.  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 
Sec.  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; and

[[Page 80711]]

    (ii) The amount of any tax that--
    (A) Is imposed on the income of the fund;
    (B) Is attributable to income taken into account before the 
termination date or as a result of the termination; and
    (C) Has not been paid as of the termination date.
    (2) Additional rules. Contributions made to a nuclear 
decommissioning fund after the termination date are not deductible 
under section 468A(a) and Sec.  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 Sec.  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).
    (3) Substantial completion of decommissioning and termination date. 
(i) The substantial completion of the decommissioning of a nuclear 
power plant occurs on the date that the maximum acceptable 
radioactivity levels mandated by the Nuclear Regulatory Commission with 
respect to a decommissioned nuclear power plant are satisfied (the 
substantial completion date). Except as otherwise provided in paragraph 
(d)(3)(ii) of this section, the substantial completion date is also the 
termination date.
    (ii) If a significant portion of the total estimated 
decommissioning costs with respect to a nuclear power plant are not 
incurred on or before the substantial completion date, an electing 
taxpayer may request, and the IRS will issue, a ruling that designates 
a date subsequent to the substantial completion date as the termination 
date. The termination date designated in the ruling will not be later 
than the last day of the third taxable year after the taxable year that 
includes the substantial completion date. The request for a ruling 
under this paragraph (d)(3)(ii) must be filed during the taxable year 
that includes the substantial completion date and must comply with the 
procedural rules in effect at the time of the request.


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)(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--
    (1) Immediately before the disposition, the transferor maintained a 
Fund with respect to the interest disposed of;
    (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;
    (3) In connection with the disposition, either--
    (i) The transferee acquires part or all of the transferor's 
qualifying interest in the plant and a proportionate amount of the 
assets of the transferor's Fund (all such assets if the transferee 
acquires the transferor's entire qualifying interest in the plant) is 
transferred to a Fund of the transferee; or
    (ii) The transferee acquires the transferor's entire qualifying 
interest in the plant and the transferor's entire Fund is transferred 
to the transferee; and
    (4) The transferee continues to satisfy the requirements of Sec.  
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 Sec. Sec.  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 Sec.  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 Sec. Sec.  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 Sec.  1.468A-8 will be determined under the following rules:
    (i) Taxable year of disposition; ruling amount. If the transferor 
does not file a

[[Page 80712]]

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 year of disposition; deduction under Sec.  1.468A-8. 
If the transferor has elected to make a special transfer under section 
468A(f), the amount allowable as a deduction under Sec.  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 Sec. Sec.  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 Sec.  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--
    (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(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.
    (3) Examples. The following examples illustrate the provisions of 
this paragraph (e):

    Example 1. (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, 2010, 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 2005 through 2025. For 2010, 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 2010 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 2010 is calculated as 
follows: $10,000,000 x .60 x 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.
    Example 2. 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 $100x, and the remaining useful 
life of the plant is 20 years. Y obtains a schedule of deduction 
amounts under Sec.  1.468A-8T(c) permitting a $5x deduction each 
year over the 20-year remaining useful life, and deducts $5x 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 
$80x or $20x). 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 $5x or $3.75x). 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 Sec. Sec.  1.468A-1 through 1.468A-9.


Sec.  1.468A-7  Manner of and time for making election.

    (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 Sec.  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 Sec.  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 Sec.  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 Sec.  1.468A-3 to the taxpayer's Federal 
income tax return (or, in the

[[Page 80713]]

case 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.
    (b) Required information. The Election Statement must include the 
following information:
    (1) The legend ``Election Under Section 468A'' typed or legibly 
printed at the top of the first page.
    (2) The electing taxpayer's name, address and taxpayer 
identification number (or, in the case of an affiliated group of 
corporations that join in the filing of a consolidated return, the 
name, address and taxpayer identification number of each electing 
taxpayer).
    (3) The taxable year for which the election is made.
    (4) For each nuclear decommissioning fund for which an election is 
made--
    (i) The name and location of the nuclear power plant to which the 
fund relates;
    (ii) The name and employer identification number of the nuclear 
decommissioning fund;
    (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 Sec.  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 Sec.  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 Sec.  1.468A-8 
during the taxable year that were not treated as deemed transfers under 
Sec.  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 Sec.  
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 Sec.  1.468A-8(b)(5)(iii)(A) or Sec.  1.468A-8(b)(5)(iii)(B).


Sec.  1.468A-8  Special transfers to qualified funds pursuant to 
section 468A(f).

    (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 Sec.  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 Sec.  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
    (B) The percentage of decommissioning costs transferred in any 
previous special transfer (that is, the amount transferred as a 
percentage of the present value of the estimated future costs of 
decommissioning as of the first day of the taxable year in which such 
previous transfer was made).
    (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 Sec.  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.
    (3) Transfers in multiple years. A taxpayer making a special 
transfer is not required to transfer the entire eligible amount in a 
single year. The requirements of paragraph (c) of this section apply 
separately to each year in which a special transfer is made. In 
calculating the amount of any subsequent transfer, the taxpayer must 
reduce the pre-2005 nonqualifying percentage under paragraph (a)(2) of 
this section to take into account all previous transfers. For example, 
if a taxpayer has a pre-2005 nonqualifying percentage of 40 percent, 
and transfers half of the eligible amount in a special transfer, any 
subsequent transfer must be calculated on the basis of a pre-2005 
nonqualifying percentage of 20 percent.
    (4) Deemed payment rules--(i) In general. The amount of any special 
transfer (whether in cash or property) described in Sec.  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 Sec.  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

[[Page 80714]]

Secretary 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 Sec.  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 Sec.  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.
    (C) Election allowed for property transferred prior to December 23, 
2010. The election described in paragraph (b)(2)(ii)(A) of this section 
may be made and a deduction equal to adjusted basis will be allowed for 
property contributed in a special transfer prior to December 23, 2010. 
The election in such a case may be made on an amended return of the 
fund for the taxable year in which the property is contributed to the 
fund and the transferor may amend previously filed returns to claim a 
deduction calculated by reference to the adjusted basis of the 
property.
    (3) Denial of deduction for previously deducted amounts. If a 
deduction (other than a deduction under section 468A) has been allowed 
to the taxpayer (or a predecessor) on account of expected 
decommissioning costs for a nuclear power plant (a nonconforming 
deduction) or an amount otherwise includible in income has been 
excluded from the gross income of the taxpayer (or a predecessor) on 
account of such expected decommissioning costs (a nonconforming 
exclusion), the deduction allowed for a special transfer to the nuclear 
decommissioning fund maintained with respect to the plant is reduced. 
In the case of a single special transfer of the full eligible amount, 
the reduction is equal to the aggregate amount of all nonconforming 
deductions and nonconforming exclusions. In the case of a transfer of 
less than the full eligible amount, the reduction is a ratable portion 
of such aggregate amount.
    (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 Sec.  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 Sec.  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--
    (A) The acceleration amount is the difference between the deduction 
allowed under this paragraph (b)(4) and the present value as of the 
beginning of the acceleration period of the deductions that, but for 
the transfer, would have been allowed under this paragraph (b) for 
taxable years during the acceleration period;
    (B) The acceleration amount is recaptured if the aggregate present 
value of the ruling amounts at the beginning of the acceleration period 
is equal to the amount by which the aggregate present value of the 
ruling amounts that would have been approved but for this paragraph 
(b)(4)(ii) exceeds the acceleration amount;
    (C) The acceleration period is the period from the first day of the 
transferor's first taxable year beginning after the date of the 
transfer until the end of the plant's remaining useful life;
    (D) Present values will be determined using the assumptions that 
are used in determining the transferee's first schedule of ruling 
amounts; and
    (E) A transferor and a transferee are related if their relationship 
is specified in section 267(b) or section 707(b)(1) or they are treated 
as a single taxpayer under section 41(f)(1)(A) or (B).
    (5) Special rules--(i) Gain or loss not recognized on transfers to 
fund. No gain or loss will be recognized on any special transfer.
    (ii) Taxpayer basis in fund. Notwithstanding any other provision of 
the Internal Revenue Code (Code) and regulations, the taxpayer's basis 
in the fund is not increased by reason of the 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.
    (B) Basis in case of election. If a fund makes the election 
described in paragraph (b)(2)(ii) of this section, the fund's basis in 
the property transferred is the fair market value of the property on 
the date of 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 Sec.  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

[[Page 80715]]

Sec.  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 Sec.  
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.
    (2) Transfers in multiple taxable years. A taxpayer making a 
special transfer in more than one taxable year pursuant to paragraph 
(a)(3) of this section must request a separate schedule of deduction 
amounts in connection with each special transfer. More than one 
schedule of deduction amounts can be requested in a single ruling 
request to the Secretary and the Secretary will provide, in a single 
ruling, separate schedules of deduction amounts for each of a series of 
special transfers provided that each request for a separate schedule of 
deduction amounts complies with all requirements of this paragraph.
    (3) Transfer of partial interest in fund. If a taxpayer transfers 
part of a fund or a fund's assets and is allowed a deduction under 
paragraph (b)(3) of this section, the taxpayer must request a new 
schedule of deduction amounts in connection with the transfer.
    (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 Sec.  
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 Sec.  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 Sec.  1.468A-5(a) for rules relating to the number of 
nuclear decommissioning funds that a taxpayer can establish).
    (iii) Except as provided by Sec.  1.468A-5(a)(1)(iv) (relating to 
certain unincorporated organizations that may be taxable as 
corporations) and Sec.  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.
    (iv) In the case of an affiliated group of corporations that join 
in the filing of a consolidated return, the common parent of the group 
may request a schedule of deduction amounts for each member of the 
group that possesses a qualifying interest in the same nuclear power 
plant by filing a single submission with the IRS.
    (v) Except as provided in paragraph (d)(1)(vi) of this section, the 
IRS will not provide or revise a deduction amount applicable to a 
taxable year in response to a request for a schedule of deduction 
amounts that is filed after the deemed payment deadline date (as 
defined in paragraph (a)(4) of this section) for such taxable year.
    (vi) For special transfers relating to taxable years beginning 
after December 31, 2005, and before January 1, 2010, the IRS will not 
provide a deduction amount in response to a request for a schedule of 
deduction amounts that is filed after February 22, 2011.
    (vii) Except as provided in paragraph (d)(1)(viii) of this section, 
a request for a schedule of deduction amounts shall be considered filed 
only if such request complies substantially with the requirements of 
this paragraph (d). In determining the date when a request is filed, 
the principles of sections 7502 and 7503 shall apply.
    (viii) If a request does not comply substantially with the 
requirements of this paragraph (d), the IRS will notify the taxpayer of 
that fact. If the information or materials necessary to comply 
substantially with the requirements of this paragraph (d) are provided 
to the IRS within 30 days after this notification, the request will be 
considered filed on the date of the original submission. In addition, 
the request will be considered filed on the date of the original 
submission in a case in which the information and materials are 
provided more than 30 days after the notification if the IRS determines 
that the electing taxpayer made a good faith effort to provide the 
applicable information or materials within 30 days after notification 
and also determines that treating the request as filed on the date of 
the original submission is consistent with the purposes of section 
468A. In any other case in which the information or materials necessary 
to comply substantially with the requirements of this paragraph (d) are 
not provided within 30 days after the notification, the request will be 
considered filed on the date that all information or materials 
necessary to comply with the requirements of this paragraph (d) are 
provided.
    (2) Information required. A request for a schedule of deduction 
amounts must contain the following information:
    (i) The taxpayer's name, address and taxpayer identification 
number.
    (ii) Whether the request is for an initial schedule of deduction 
amounts or a schedule of deduction amounts for a subsequent special 
transfer.
    (iii) The name and location of the nuclear power plant with respect 
to which a schedule of deduction amounts is requested.
    (iv) A description of the taxpayer's qualifying interest in the 
nuclear power plant and the percentage of such nuclear power plant that 
the qualifying interest of the taxpayer represents.
    (v) The present value of the estimated future decommissioning costs 
(as defined in Sec.  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.
    (vi) A description of the assumptions, estimates and other factors 
that were used by the taxpayer to determine the amount of 
decommissioning costs, including each of the following if applicable:
    (A) A description of the proposed method of decommissioning the 
nuclear power plant (for example, prompt removal/dismantlement, safe 
storage entombment with delayed dismantlement, or safe storage 
mothballing with delayed dismantlement).
    (B) The estimated year in which substantial decommissioning costs 
will first be incurred.
    (C) The estimated year in which the decommissioning of the nuclear 
power plant will be substantially complete (see Sec.  1.468A-5(d)(3) 
for a definition of substantial completion of decommissioning).
    (D) The total estimated cost of decommissioning expressed in 
current dollars (that is, based on price levels in

[[Page 80716]]

effect at the time of the current determination).
    (E) The total estimated cost of decommissioning expressed in future 
dollars (that is, based on anticipated price levels when expenses are 
expected to be paid).
    (F) For each taxable year in the period that begins with the year 
specified in paragraph (d)(2)(vi)(B) of this section (the estimated 
year in which substantial decommissioning costs will first be incurred) 
and ends with the year specified in paragraph (d)(2)(vi)(C) of this 
section (the estimated year in which the decommissioning of the nuclear 
power plant will be substantially complete), the estimated cost of 
decommissioning expressed in future dollars.
    (G) A description of the methodology used in converting the 
estimated cost of decommissioning expressed in current dollars to the 
estimated cost of decommissioning expressed in future dollars.
    (H) The assumed after-tax rate of return to be earned by the 
amounts collected for decommissioning.
    (I) A copy of each engineering or cost study that was relied on or 
used by the taxpayer in determining the amount of decommissioning 
costs.
    (vii) The taxpayer's pre-2005 nonqualifying percentage (as defined 
in paragraph (a)(2) of this section).
    (viii) The estimated useful life of the nuclear power plant (as 
such term is defined in paragraph (b)(1)(ii) or (iii) of this section).
    (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 
Sec.  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.
    (x) If the request is for a subsequent schedule of deduction 
amounts, a copy of all schedules of deduction amounts that relate to 
the nuclear power plant to which the request relates and that were 
previously issued to the taxpayer making the request.
    (xi) If the request for a schedule of deduction amounts contains a 
request, pursuant to Sec.  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.
    (xii) Any other information required by the IRS that may be 
necessary or useful in determining the schedule of deduction amounts.
    (3) Statement required. A taxpayer requesting a schedule of 
deduction amounts under this paragraph (d) must submit a statement that 
any nonconforming deductions and nonconforming exclusions have reduced 
the deduction allowed for the special transfer in accordance with 
paragraph (b)(2) of this section.
    (4) Administrative procedures. The IRS may prescribe administrative 
procedures that supplement the provisions of paragraphs (d)(1) and (2) 
of this section. In addition, the IRS may, in its discretion, waive the 
requirements of paragraphs (d)(1) and (2) of this section under 
appropriate circumstances.


Sec.  1.468A-9  Effective/applicability date.

    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 Sec.  1.468A-8(a)(4)(ii), apply with respect to such 
taxable years. In addition, a taxpayer may apply the provisions of 
Sec. Sec.  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.

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

0
Par. 4. The authority citation for part 602 continues to read as 
follows:

    Authority: 26 U.S.C. 7805.


0
Par. 5. In Sec.  602.101, paragraph (b) is amended as follows:
0
1. The following entries to the table are removed:


Sec.  602.101  OMB Control numbers.

* * * * *
    (b) * * *

------------------------------------------------------------------------
                                                            Current OMB
   CFR part or section where identified and described       control No.
------------------------------------------------------------------------
 
                                * * * * *
1.468A-3T...............................................       1545-1269
                                                               1545-1378
                                                               1545-1511
 
                                * * * * *
1.468A-4T...............................................       1545-0954
 
                                * * * * *
1.468A-7T...............................................       1545-0954
                                                               1545-1511
 
                                * * * * *
1.468A-3T(h), 1.468A-7T, and 1.468A-8T(d)...............       1545-2091
 
                                * * * * *
------------------------------------------------------------------------



0
2. The following entries are revised in the table:


Sec.  602.101  OMB Control numbers.

* * * * *
    (b) * * *

------------------------------------------------------------------------
                                                            Current OMB
   CFR part or section where identified and described       control No.
------------------------------------------------------------------------
 
                                * * * * *
1.468A-7................................................       1545-0954
                                                               1545-1511
 
                                * * * * *
------------------------------------------------------------------------



0
3. The following entry is added in numerical order to the table:


Sec.  602.101  OMB Control numbers.

* * * * *
    (b) * * *

------------------------------------------------------------------------
                                                            Current OMB
   CFR part or section where identified and described       control No.
------------------------------------------------------------------------
 
                                * * * * *
1.468A-3(h), 1.468A-7, and 1.468A-8(d)..................       1545-2091
 
                                * * * * *
------------------------------------------------------------------------


Steven T. Miller,
Deputy Commissioner for Services and Enforcement.
    Approved: November 1, 2010.
Michael Mundaca,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2010-32049 Filed 12-22-10; 8:45 am]
BILLING CODE 4830-01-P