||January 21, 1998
Nuclear Decommissioning Funds;
Revised Schedules of Ruling Amounts
DEPARTMENT OF THE TREASURY
Internal Revenue Service 26 CFR Parts 1 and 602 [TD 8758] RIN 1545-
TITLE: Nuclear Decommissioning Funds; Revised Schedules of Ruling
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final regulations.
SUMMARY: This document contains final regulations relating to
requests for revised schedules of ruling amounts for nuclear
decommissioning reserve funds. The regulations amend existing
regulations to ease the burden on affected taxpayers by permitting
electing taxpayers with qualifying interests in nuclear power plants
to adjust their ruling amounts under a formula or method rather than
by filing a request for a revised schedule of ruling amounts.
DATES: The final regulations are effective January 20, 1998.
FOR FURTHER INFORMATION CONTACT: Peter Friedman, (202) 622-3110 (not
a toll-free number).
Paperwork Reduction Act
The collection of information contained in these final regulations
has been reviewed and approved by the Office of Management and
Budget in accordance with the Paperwork Reduction Act (44 U.S.C.
3507) under the control number 1545-1511.
Responses to this collection of information are voluntary.
An agency may not conduct or sponsor, and a person is not required
to respond to, a collection of information unless the collection of
information displays a valid control number.
The estimated average annual burden per recordkeeper is 5 hoU.S.
Comments concerning the accuracy of this burden estimate and
suggestions for reducing this burden should be sent to the Internal
Revenue Service, Attn: IRS Reports Clearance Officer, T:FP,
Washington, DC 20024, and to the Office of Management and Budget,
Attn: Desk Officer for the Department of the Treasury, Office of
Information and Regulatory Affairs, Washington, DC 20503.
Books or records relating to a collection of information must be
retained as long as their contents may become material in the
administration of any internal revenue law. Generally, tax returns
and return information are confidential, as required by 26 U.S.C.
This document contains final regulations under section 468A of the
Internal Revenue Code. Section 468A was added to the Internal
Revenue Code by section 91(c) of the Tax Reform Act of 1984 (Public
Law 98-369). Significant amendments were made to section 468A by
section 1917 of the Energy Policy Act of 1992 (Public Law 102-486).
Section 468A(a) allows an electing taxpayer to deduct the amount of
payments made by the taxpayer to a nuclear decommissioning reserve
fund. Section 468A(b) limits the amount of these payments for any
taxable year to the lesser of the ruling amount or the amount of
decommissioning costs included in the taxpayer's cost of service for
ratemaking purposes for that taxable year.
Section 468A(d) provides that no deduction shall be allowed unless
the taxpayer requests, and receives, a schedule of ruling amounts
from the Secretary. A ruling amount is, with respect to any taxable
year, the amount determined by the Secretary as necessary to (1)
fund that portion of the nuclear decommissioning costs of the
taxpayer with respect to the nuclear power plant which bears the
same ratio to the total nuclear decommissioning costs with respect
to the nuclear power plant as the period for which the nuclear
decommissioning fund is in effect bears to the estimated useful life
of such nuclear power plant; and (2) prevent any excessive funding
of such costs or the funding of such costs at a rate more rapid than
level funding, taking into account such discount rates as the
Secretary deems appropriate.
Section 468A(d)(3) provides that the Secretary shall, at least once
during the useful life of the nuclear power plant (or more
frequently, upon the request of the taxpayer), review and, if
necessary, revise the schedule of ruling amounts.
Section 1.468A-3 sets forth the rules relating to the determination
of ruling amounts. The regulations permit the use of a formula or
method for determining a schedule of ruling amounts (in lieu of a
schedule of ruling amounts specifying a dollar amount for each
taxable year), but only if the public utility commission
establishing or approving the amount of decommissioning costs to be
included in cost of service for ratemaking does not estimate the
cost of decommissioning in future dollars.
The regulations contain provisions for the review and revision of
schedules of ruling amounts and set forth circumstances under which
a taxpayer must request a revision to its schedule of ruling
amounts. In general, a schedule of ruling amounts must be reviewed
at 10 year intervals. If the schedule is determined under a formula
or method, however, the period between reviews may not exceed 5
The regulations provide that a taxpayer may request an elective
review of its schedule of ruling amounts. A taxpayer seeking to
maximize its deductions under section 468A generally needs to
request an elective review of its schedule of ruling amounts each
time a public utility commission changes previously established
amounts of decommissioning costs. A notice of proposed rulemaking
(REG-209828-96) relating to these rules was published in the Federal
Register on December 23, 1996 (61 F.R.
67510). The notice proposes to amend §1.468A-3(a)(4) by eliminating
the restriction on the use of a formula or method for determining a
schedule of ruling amounts and to revise the mandatory review
Written comments were received in response to the notice of proposed
rulemaking, and a public hearing was held on May 13, 1997. After
considering the written comments and the statements made at the
public hearing, the proposed rules are adopted as modified by this
Explanation of Provisions The final regulations provide that a
taxpayer may request approval of a formula or method for determining
a schedule of ruling amounts (rather than a schedule specifying a
dollar amount for each taxable year) that is consistent with the
principles and provisions of the rules relating to the determination
of ruling amounts.
The final regulations ease the filing burden on taxpayers by
permitting them to adjust their ruling amounts under a formula or
method (rather than by filing a request for a revised schedule of
ruling amounts). Thus, a taxpayer may maximize its deductions under
section 468A without requesting a revised schedule of ruling amounts
each time a public utility commission changes the amount of
decommissioning costs included in the taxpayer's cost of service if,
under the taxpayer's formula or method, the commission's action
results in a corresponding change in ruling amounts. The
commentators all agreed with the expanded availability of ruling
amounts based on formulas or methods.
In addition, the final regulations modify the mandatory review
provisions applicable to schedules of ruling amounts determined
under a formula or method. The proposed regulations eliminate the
rule requiring review of those schedules after 5 years but make
those schedules subject to the general rule requiring review at 10
year intervals. In addition, the proposed regulations require
taxpayers to request a revised schedule of ruling amounts if,
beginning with the second taxable year during which the most
recently issued formula or method is in effect, the ruling amount
for a taxable year (1) differs by more than 25 percent from the
ruling amount for any preceding taxable year during which such
formula or method was in effect; or (2) differs by more than 10
percent from the ruling amount for the immediately preceding taxable
year. The commentators generally favored either a retention of the 5
year review period without limits on differences in ruling amounts
or an increase in the percentage by which ruling amounts are
permitted to differ. In response to these suggestions, the final
regulations retain the 5 year review requirement, increase the
overall percentage by which ruling amounts may differ, and eliminate
the 10 percent limitation on changes from one year to the next.
Some commentators suggested that all elements of a formula should be
permitted to be variable. Nothing in the proposed regulations was
meant to suggest otherwise. In order to afford different taxpayers
maximum flexibility in using a formula, the regulations do not
specify which elements must be fixed and which must be variable.
Instead, the formula, itself, will determine whether an element is
fixed or variable. A fixed element is one that is assumed to retain
the same value regardless of action by the applicable public utility
Some commentators suggested that a taxpayer that recently received a
schedule of ruling amounts should be permitted to vary this schedule
using a formula or method that has not been approved by the Service.
This suggestion is inconsistent with the Service's obligation to
issue and review schedules of ruling amounts and is not adopted.
Several commentators requested that the existing user fee for
obtaining a schedule of ruling amounts under section 468A is
excessive and should be waived or reduced. Because this subject is
not within the scope of this regulations project, it is not
addressed in the final regulations.
Finally, some commentators suggested that the regulations should
address the situation where a taxpayer, based on a good faith but
erroneous calculation of the percentage limitations, fails to comply
with the mandatory review provisions. Partly in response to this
suggestion, the percentage limitation has been simplified.
These regulations are applicable for requests for schedules of
ruling amounts made on or after January 20, 1998.
It has been determined that this Treasury decision is not a
significant regulatory action as defined in EO 12866. Therefore, a
regulatory assessment is not required. It has also been determined
that section 553(b) of the Administrative Procedure Act (5 U.S.C.
chapter 5) does not apply to these regulations.
It is hereby certified that the collection of information in the
regulation will not have a significant impact on a substantial
number of small entities. This certification is based on the fact
that taxpayers with qualifying interests in a nuclear power plant
are generally large entities. Thus, because the regulation applies
only to these taxpayers and does not impose a collection of
information on small entities, the Regulatory Flexibility Act (5
U.S.C. chapter 6) does not apply. Pursuant to section 7805(f) of the
Internal Revenue Code, the notice of proposed rulemaking preceding
these regulations was submitted to the Chief Counsel for Advocacy of
the Small Business Administration for comment on its impact on small
The principal author of these regulations is Peter Friedman, Office
of Assistant Chief Counsel (Passthroughs and Special Industries).
However, other personnel from the IRS and Treasury Department
participated in their development.
List of Subjects
26 CFR Part 1 Income taxes, Reporting and recordkeeping
26 CFR Part 602 Reporting and recordkeeping requirements.
Adoption of Amendments to the Regulations Accordingly, 26 CFR parts
1 and 602 are amended as follows: PART 1--INCOME TAXES
Paragraph 1. The authority citation for part 1 continues to read in
part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 1.468A-2 is amended as follows:
1. The text of paragraph (f)(3) following the heading is designated
as paragraph (f)(3)(i).
2. Paragraph (f)(3)(ii) is added.
The addition reads as follows:
§1.468A-2 Treatment of electing taxpayer.
* * * * *
(f) * * *
(3) * * * (i) * * *
(ii) The requirement of this paragraph (f)(3) does not apply if the
taxpayer determines its schedule of ruling amounts under a formula
or method obtained under §1.468A-3(a)(4) and the cost of service
amount is a variable element of that formula or method.
* * * * *
Par. 3. Section 1.468A-3 is amended as follows:
1. Paragraph (a)(4) is revised.
2. Paragraph (e)(5) is added.
3. Paragraphs (i)(1)(ii)(A), (i)(1)(iii)(A)(3), and (i)(1)(iii)(B)
4. Paragraph (i)(1)(iii)(C) is added.
The revisions and additions read as follows:
§1.468A-3 Ruling amount.
(a) * * * (4) The Internal Revenue Service will approve, at the
request of the taxpayer, a formula or method for determining a
schedule of ruling amounts (rather than a schedule specifying a
dollar amount for each taxable year) that is consistent with the
principles and provisions of this section. See paragraph (i)(1)(ii)
of this section for a special rule relating to the mandatory review
of ruling amounts that are determined pursuant to a formula or
* * * * *
(e) * * *
(5) A formula or method obtained under paragraph (a)(4) of this
section may provide for changes in an estimated date described in
paragraph (e)(1) or (2) of this section to reflect changes in the
ratemaking assumptions used to determine rates (whether interim or
final) that are established or approved by the applicable public
utility commission after the filing of the request for approval of a
formula or method.
* * * * *
(i) * * *
(1) * * *
(ii)(A) Any taxpayer that has obtained a formula or method for
determining a schedule of ruling amounts for any taxable year under
paragraph (a)(4) of this section must file a request for a revised
schedule on or before the earlier of the deemed payment deadline for
the fifth taxable year that begins after its taxable year in which
the most recent formula or method was approved or the deemed payment
deadline for the first taxable year that begins after a taxable year
in which there is a substantial variation in the ruling amount
determined under the most recent formula or method. There is a
substantial variation in the ruling amount determined under the
formula or method in effect for a taxable year if the ruling amount
for the year and the ruling amount for any earlier year since the
most recent formula or method was approved differ by more than 50
percent of the smaller amount.
* * * * *
(iii) * * *
(A) * * *
(3) Reduces the amount of decommissioning costs to be included in
cost of service for any taxable year;
(B) The taxpayer's most recent request for a schedule of ruling
amounts did not provide notice to the Internal Revenue Service of
such action by the public utility commission; and
(C) In the case of a taxpayer that determines its schedule of ruling
amounts under a formula or method obtained under paragraph (a)(4) of
this section, the item increased, adjusted, or reduced is a fixed
(rather than a variable) element of that formula or method.
* * * * *
Par. 4. Section 1.468A-8 is amended by adding paragraph (b)(12) to
read as follows: §1.468A-8 Effective date and transitional rules.
* * * * *
(b) * * *
(12) Use of formula or method. Section 1.468A-2(f)(3)(ii) and
§1.468A-3(a)(4) (to the extent it permits a formula or method when
the applicable public utility commission estimates the cost of
decommissioning in future dollars), (e)(5), (i)(1)(ii)(A) (to the
extent it requires the taxpayer to file a request for a revised
schedule because of a substantial variation in ruling amounts), and
(i)(1)(iii)(C) apply only to requests for a formula or method
submitted on or after January 20, 1998, and to formulas and methods
obtained in response to those requests.
PART 602--OMB CONTROL NUMBERS UNDER THE PAPERWORK REDUCTION ACT Par.
5. The authority citation for part 602 continues to read as follows:
Authority: 26 U.S.C. 7805.
Par. 6. In §602.101(c), the entry for 1.468A-3 in the table is
revised to read as follows:
§602.101 OMB Control numbers.
* * * * *
(c) * * *
CFR part or section where Current OMB identified or described
* * * * *
* * * * *
Michael P. Dolan
Deputy Commissioner of Internal Revenue
Donald C. Lubick
Acting Assistant Secretary of the Treasury (Tax Policy)
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