Td 9512

Part I. Rulings and Decisions Under the Internal Revenue Code
of 1986
Section 468A.—Special
Rules for Nuclear
Decommissioning Costs
26 CFR 1.468A–0: Nuclear decommissioning costs;
general rules.

T.D. 9512
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Part 1 and 602
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 §§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).

in §§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,
2008–1 C.B. 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.

SUPPLEMENTARY INFORMATION:
1. Definitional Matters
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 of 1995
(44 U.S.C. 3507(d)) under control number
1545–2091. The collections of information in these final regulations are contained

2011–7 I.R.B.

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

473

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,
§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 §1.468A–3(c)(1). In addition,
the same term is used in §1.468A–8(b)(1)
and (c)(1) to determine the years over
which a taxpayer may deduct a special
transfer made under §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 §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

February 14, 2011

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.

February 14, 2011

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
§§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 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 §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 §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 §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 spe-

474

cial transfers. The final regulations provide such a rule for special transfers in
§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 plants 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 §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
§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 §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

2011–7 I.R.B.

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.

2011–7 I.R.B.

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 steppeddown 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 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

475

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

February 14, 2011

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 §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
§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 §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
§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 avail-

February 14, 2011

able 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
§§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.

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 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.
*****
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 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]
Par. 2. Sections 1.468A–0T through
1.468A–9T are removed.
Par. 3. Sections 1.468A–0 through
1.468A–9 are added to read as follows:
§1.468A–0 Nuclear decommissioning
costs; table of contents.
This section lists the paragraphs contained in §§1.468A–1 through 1.468A–9.

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

476

§1.468A–1 Nuclear decommissioning
costs; general rules.
(a) Introduction.
(b) Definitions.

2011–7 I.R.B.

(c) Special rules applicable to certain
experimental nuclear facilities.
§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.
§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.
§1.468A–4 Treatment of nuclear
decommissioning fund.
(a) In general.
(b) Modified gross income.

2011–7 I.R.B.

(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.
§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.
§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.

477

(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.
§1.468A–7 Manner of and time for making
election.
(a) In general.
(b) Required information.
§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.
(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.

February 14, 2011

§1.468A–9 Effective/applicability date.
§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 §1.468A–7 is allowed a deduction (as determined under §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 §§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 §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

February 14, 2011

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 §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 (Public Law 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 ju-

478

dicial 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
§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.
§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 §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

2011–7 I.R.B.

a special transfer described in §1.468A–8.
The amount of the deduction for any taxable year equals 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 §1.468A–8. The
amount of a special transfer permitted under §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
§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 §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 §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 §1.468A–8 is not treated as a cash payment for purposes of this paragraph (b).

2011–7 I.R.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 §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 §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
§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 §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

479

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 §1.468A–5(c)(2)(ii)) by an electing taxpayer pursuant to the rules of
§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 §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.
§1.468A–3 Ruling amount.
(a) In general. (1) Except as otherwise provided in paragraph (g) of this section or in §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

February 14, 2011

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 §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 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 §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

February 14, 2011

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 consis-

480

tent 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—

2011–7 I.R.B.

(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
§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;
(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

2011–7 I.R.B.

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 §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 §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
§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 §1.468A–5
for rules relating to the number of nuclear

481

decommissioning funds that a taxpayer
can establish.)
(iii)
Except
as
provided
by
§§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 §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

February 14, 2011

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 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

February 14, 2011

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
§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

482

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 earn-

2011–7 I.R.B.

ings 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 §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

2011–7 I.R.B.

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.
(B) Any taxpayer that has determined
its ruling amount for any taxable year under a formula prescribed by §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 §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

483

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

February 14, 2011

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
§1.468A–5(c)(2)(ii)) for such taxable year.
(ii) The amount of the excess
contribution is not deductible (see
§1.468A–2(b)(2)) and must be withdrawn
by the taxpayer pursuant to the rules of
§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.
§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.

February 14, 2011

(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 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 de-

484

commissioning 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 §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 §§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

2011–7 I.R.B.

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
§1.468A–5(d)), the date that the entire
fund is disqualified (see §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
§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—

2011–7 I.R.B.

(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).
§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 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 decommission-

485

ing 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
§§1.468A–1 through 1.468A–4, this section and §§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 §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 §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 §1.468A–8
for a schedule of deduction amounts.
(2) Limitation on contributions. Except as otherwise provided in §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
§1.468A–2(a). Thus, for example, except in the case of a special transfer pursuant to §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 provid-

February 14, 2011

ing 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 §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 §§1.1468A–1 through
1.1468A–9 and that the agreement may
not be amended so as to violate section
468A or §§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

February 14, 2011

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
§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
§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;

486

(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
(iii) Safekeeping activities (see
§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 §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

2011–7 I.R.B.

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 §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
§1.468A–2(b). The amount of a special
transfer permitted under §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
§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
§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

2011–7 I.R.B.

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 §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
§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

487

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
§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
(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
§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
§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

February 14, 2011

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.
§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 §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—

February 14, 2011

(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 §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 §§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 §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

488

Fund to the transferee’s Fund (or by reason of the transfer of the transferor’s
Fund to the transferee). For purposes
of §§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 §1.468A–8 will be
determined under the following rules:
(i) Taxable year of disposition; ruling
amount. If the transferor does not file a
request for a revised schedule of ruling
amounts on or before the deemed payment
deadline for the taxable year of the transferor in which the disposition of its interest
in the nuclear power plant occurs (that is,
the date that is two and one-half months after the close of that year), the transferor’s
ruling amount with respect to that plant for
that year will equal the sum of—
(A) The ruling amount contained in
the transferor’s current schedule of ruling
amounts with respect to that plant for that
taxable year multiplied by the portion of
the qualifying interest that is retained (if
any); and

2011–7 I.R.B.

(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 §1.468A–8. If the transferor has
elected to make a special transfer under
section 468A(f), the amount allowable as a
deduction under §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 §§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 §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

2011–7 I.R.B.

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
§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

489

deduction amounts under §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 7.

(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 §§1.468A–1 through 1.468A–9.
§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 §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 §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 §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 §1.468A–3 to the taxpayer’s Federal income tax return (or, in the 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

February 14, 2011

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 §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 §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 §1.468A–8 during the taxable year
that were not treated as deemed transfers
under §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 §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 §1.468A–8(b)(5)(iii)(A) or
§1.468A–8(b)(5)(iii)(B).

February 14, 2011

§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 §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 §1.468A–3(d)(4) as in effect on December 31, 2005) used in determining the taxpayer’s last schedule of

490

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 §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
§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,

2011–7 I.R.B.

in the case of special transfers described in
paragraph (a)(4)(ii) of this section, on an
amended return for such taxable year (see
§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 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 §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

2011–7 I.R.B.

and a statement that the fund is making an
election under §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 §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 §468A–6(c) for additional rules concerning transfers of decommissioning funds, including the transfer of a portion of the taxpayer’s interest in

491

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,

February 14, 2011

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 §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 §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 §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

February 14, 2011

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 §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 §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 §1.468A–5(a) for rules
relating to the number of nuclear decommissioning funds that a taxpayer can establish).
(iii)
Except
as
provided
by
§1.468A–5(a)(1)(iv) (relating to certain
unincorporated organizations that may be
taxable as corporations) and §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.

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(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:

2011–7 I.R.B.

(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 §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
§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 (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

2011–7 I.R.B.

(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 §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 §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

493

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.
§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
§1.468A–8(a)(4)(ii), apply with respect to
such taxable years. In addition, a taxpayer
may apply the provisions of §§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
Par. 4. The authority citation for part
602 continues to read as follows:
Authority: 26 U.S.C. 7805.
Par. 5. In §602.101, paragraph (b) is
amended as follows:
1. The following entries to the table are
removed:
§602.101 OMB Control numbers.
*****
(b) * * *

February 14, 2011

CFR part or section where
identified and described
*****
1.468A–3T
*****
1.468A–4T
*****
1.468A–7T
*****
1.468A–3T(h),
1.468A–7T, and
1.468A–8T(d)
*****

Current OMB
Control No.
...........................................................

1545–1269
1545–1378
1545–1511

...........................................................

1545–0954

...........................................................

1545–0954
1545–1511

...........................................................

1545–2091

2. The following entries are revised in
the table:

§602.101 OMB Control numbers.

(b) * * *

*****

CFR part or section where
identified and described
*****
1.468A–7

Current OMB
Control No.
...........................................................

1545–0954
1545–1511

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

§602.101 OMB Control numbers.

(b) * * *

*****

CFR part or section where
identified and described
*****
1.468A–3(h), 1.468A–7,
and 1.468A–8(d)
*****

Current OMB
Control No.
...........................................................

Steven T. Miller,
Deputy Commissioner for
Services and Enforcement.

Michael Mundaca,
Assistant Secretary of
the Treasury (Tax Policy).

1545–2091

(Filed by the Office of the Federal Register on December 22,
2010, 8:45 a.m., and published in the issue of the Federal
Register for December 23, 2010, 75 F.R. 80697)

Approved November 1, 2010.

February 14, 2011

494

2011–7 I.R.B.