Disposition of an Interest in a Nuclear Power Plant

DEPARTMENT OF THE TREASURY

26 CFR Parts 1 and 602

[TD 8580]

RIN 1545-AN06

Disposition of an Interest in a Nuclear Power Plant

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations.

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SUMMARY: This document contains final regulations relating to certain

Federal income tax consequences of a disposition of an interest in a

nuclear power plant by a taxpayer that has maintained a nuclear

decommissioning fund with respect to that plant. These regulations

affect taxpayers that transfer or acquire interests in nuclear power

plants by providing guidance on the tax consequences of these

transfers. In addition, the final regulations extend the benefits of

section 468A to electing taxpayers with an interest in a nuclear power

plant under the jurisdiction of the Rural Electrification

Administration. The regulations also make a number of other changes and

clarifications to the existing regulations to aid in the administration

of section 468A.

EFFECTIVE DATE: These regulations are effective December 27, 1994.

FOR FURTHER INFORMATION CONTACT: Peter C. Friedman, (202) 622-3110 (not

a toll-free number).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

The collections of information contained in these final regulations

have been reviewed and approved by the Office of Management and Budget

in accordance with the Paperwork Reduction Act (44 U.S.C. 3504(h))

under control number 1545-1378. With respect to Sec. 1.468A-3(h)(2)

(xii) and (xiii), the estimated annual burden per respondent varies

from 1 to 2 hours, depending on individual circumstances, with an

estimated average of 1.5 hours.

With respect to Sec. 1.468A-3(i)(1)(ii)(B), the estimated annual

burden per respondent varies from 20 to 30 hours, depending on

individual circumstances, with an estimated average of 25 hours.

Comments concerning the accuracy of this burden estimate and

suggestions for reducing this burden should be directed to the Internal

Revenue Service, Attn: IRS Reports Clearance Officer, PC:FP,

Washington, DC 20224, and to the Office of Management and Budget, Attn:

Desk Officer for the Department of the Treasury, Office of Information

and Regulatory Affairs, Washington, DC 20503.

Background

This document contains amendments to the Income Tax Regulations (26

CFR parts 1 and 602) under section 468A. Section 468A, relating to

nuclear decommissioning costs, was added to the Internal Revenue Code

by section 91(c) of the Tax Reform Act of 1984 (Pub. L. 98-369, 98

Stat. 604). On November 20, 1992, the IRS published in the Federal

Register a notice of proposed rulemaking (57 FR 54734) setting forth

proposed amendments to the regulations under section 468A.

Section 468A(c)(1)(B) authorizes the Secretary to issue regulations

that prescribe the extent to which a taxpayer must include amounts from

a nuclear decommissioning fund (a Fund) in gross income upon the

disposition of an interest in a nuclear power plant to which the Fund

relates. Section 1.468A-6T (TD 8094, 51 FR 25033) published in the

Federal Register on July 10, 1986, treated such a disposition as a

taxable distribution of assets in the Fund to the taxpayer transferring

the interest. In response to generally adverse comments on this rule,

final regulations (TD 8184, 53 FR 6800) published in the Federal

Register on March 3, 1988, stated that guidance on the tax treatment of

these dispositions would be provided at a later date. These regulations

are issued to provide this guidance.

Explanation of Provisions

In General

The regulations prescribe certain federal income tax consequences

of the disposition of all or a portion of a qualifying interest in a

nuclear power plant to which a Fund relates. The regulations treat a

transfer of Fund assets in connection with such a disposition as a

nonrecognition event, provided certain requirements are satisfied. The

transferee of the interest is viewed as stepping into the shoes of the

transferor with respect to the amount of the assets in the transferor's

Fund that is proportionate to the interest transferred and with respect

to the transferor's ruling amount for the portion of the taxable year

that follows the disposition. These regulations also provide rules for

the calculation of schedules of ruling amounts for the transferee and

for a transferor that retains a portion of its original qualifying

interest.

The regulations also contain a general provision allowing the IRS

to treat a disposition occurring on or after December 27, 1994 as

satisfying the requirements of the regulations if the IRS decides that

this treatment is necessary or appropriate to carry out the purposes of

section 468A and the regulations thereunder. Another provision allows

the IRS, upon the request of an electing taxpayer, to apply these

regulations to a disposition of an interest in a nuclear power plant

occurring after July 17, 1984, and before December 27, 1994.

The regulations also allow rural electric cooperatives to qualify

as electing taxpayers; modify the information requirements that are

part of a request for a schedule of ruling amounts; create a new

mandatory review period for schedules of ruling amounts determined with

respect to a disposition of an interest in a nuclear power plant;

require that the trust agreement for each Fund contain a provision that

assets of the Fund may be used only in a manner that is authorized by

section 468A and the regulations thereunder; and provide that the

period within which a taxpayer must substantially comply with the

provisions requiring information to be submitted as part of a request

for a schedule of ruling amounts is the general period applicable to

requests for private letter rulings.

Comments Received

Comments received in response to the notice of proposed rulemaking

(57 FR 54734) can be divided into five general categories--rural

electric cooperatives, reduction in time to provide additional

information, trust provisions, disposition provisions, and self-dealing

rules.

Rural Electric Cooperatives

The proposed regulations extend the benefits of section 468A to

electing rural electric cooperatives. One commentator requested that

the IRS (1) not consider earnings on assets in Funds when determining

whether tax-exempt rural electric cooperatives satisfy the 85 percent

test of section 501(c)(12) (which requires at least 85 percent of the

cooperative's income to be from members); (2) specify the regulatory

authority (Rural Electrification Administration, Federal Energy

Regulatory Commission, or State Commission) that is charged with

approving cost of service amounts; and (3) allow rural electric

cooperatives to elect to apply section 468A retroactively for all open

taxable years.

The determination of whether earnings on nuclear decommissioning

funds (whether or not established under section 468A) count toward

satisfaction of the 85 percent test is an issue under section 501 and,

therefore, is outside the scope of this project. Further, it is the

responsibility of the regulatory authorities to decide which of the

authorities is responsible for approving cost of service amounts. These

issues, therefore, are not addressed in the final regulations.

Additionally, because sections 468A (a) and (g) require that payments

to a Fund for a taxable year be made no later than two and one-half

months after the close of that year, the IRS believes that retroactive

application of section 468A to rural electric cooperatives is not

permitted by the statute.

Time Period for Additional Information

The proposed regulations also reduce the time for submitting

additional information requested by the IRS concerning a request for a

schedule of ruling amounts from 60 to 30 days. Many commentators stated

that the abbreviated response time would be inadequate for a taxpayer

to gather, prepare, and submit requested information. Retaining the

requirements of the proposed regulations, the final regulations merely

conform the section 468A rules to the normal rules governing requests

for letter rulings to help expedite the rulings process. The final

regulations clarify, however, that the IRS may waive this deadline if

the taxpayer is making a good faith effort to comply with the deadline.

Trust Provisions

The proposed regulations also provide that each qualified nuclear

decommissioning trust agreement must require that assets of the Fund be

used as authorized by section 468A and the regulations thereunder and

that the agreement cannot be amended to violate section 468A or the

regulations thereunder. Commentators argued that this provision exceeds

the IRS's authority. It is apparent from section 468A(e)(4) (which

requires that amounts in a Fund be used exclusively for

decommissioning, associated expenses, or, when not currently needed for

those purposes, to make investments) and from the special section 468A

tax rules (including the preferential tax rates on Fund earnings for

taxable years beginning after December 31, 1993), that Congress

intended for amounts set aside in these Funds to be available for

decommissioning of nuclear power plants. The IRS believes it is

consistent with this Congressional intent, and with the IRS's

responsibilities for successfully administering the program, to require

that the trust agreements limit use of Fund assets to section 468A

purposes. Accordingly, the final regulations retain this requirement.

To ensure that taxpayers have sufficient time to modify their trust

agreements, the final regulations also retain the grace period of the

proposed regulations that allows until December 31, 1996, for the

inclusion of the required trust provisions.

Dispositions of an Interest in a Nuclear Power Plant

The proposed regulations generally treat transfers of assets in

Funds resulting from transfers of interests in nuclear power plants to

which the Funds relate as nonrecognition, transferred basis

transactions. Most of the comments favored the proposed rules. However,

commentators requested (1) additional guidance on how to determine

which Fund assets relate to a transferred interest in a nuclear power

plant and clarification that the regulations were not adopting a

tracing approach; (2) an option to treat these dispositions as

triggering a taxable transfer of related assets; (3) an option to

transfer an entire Fund rather than the assets in the Fund; and (4)

assurance that the proposed rules apply in the context of corporate

reorganizations.

First, to make clear that the regulations do not adopt a tracing

approach, the final regulations refer to assets in a Fund that are

proportionate to the interest in the plant that is transferred, rather

than to assets that ``relate'' to the interest transferred. The final

regulations also clarify that a proportionate amount of the assets in a

Fund is considered transferred if, on the date the qualifying interest

is transferred, the percentage of the aggregate fair market value of

the assets transferred equals the percentage of the qualifying interest

transferred.

Second, the final regulations do not adopt the suggestion to

provide taxpayers with an option to treat the disposition as triggering

a taxable transfer of a proportionate amount of the assets. The

nonrecognition, transferred basis approach simplifies the tax rules for

dispositions and corresponds to the substance of these transactions.

Permitting taxpayers to elect taxable treatment would unnecessarily

complicate the tax rules.

Third, to minimize the role of form in these disposition

transactions, the final regulations clarify that when an interest in a

nuclear power plant is transferred, the associated assets must be

transferred to a Fund of the transferee or, if the transferee acquires

the transferor's entire interest in the plant, the transferor's Fund

may be transferred to the transferee. Such a transfer of the

transferor's Fund must not be prohibited by the transferor's trust

agreement or applicable local law. Regardless of whether the assets of

the transferor's Fund or the Fund itself is transferred, after the

transfer, the transferee must not violate Sec. 1.468A-5(a)(1)(ii),

which requires that an electing taxpayer maintain only one Fund for

each nuclear power plant. Similarly, after the transfer, the transferee

and the transferor that retains an interest must not violate

Sec. 1.468A-5(a)(1)(ii), which requires that each electing taxpayer

have a separate Fund for its interest in the same plant.

In addition, the final regulations provide that if a transferee

acquires an interest in a nuclear power plant in a transaction to which

Sec. 1.468A-6 (dispositions of an interest in a nuclear power plant)

applies, the transferee's qualifying percentage for the interest

acquired generally is the transferor's qualifying percentage with

respect to that interest immediately before the disposition.

Fourth, although the final regulations make no specific mention of

corporate reorganizations, they apply to all dispositions described in

the regulations, including those that occur in the context of corporate

reorganizations.

Self-Dealing

The proposed regulations also make a change to the rules

prohibiting a trustee or other disqualified person from engaging in an

act of self-dealing with a Fund. The change excepts deposits in trustee

institutions from the self- dealing rules if the deposits are made to

facilitate temporary investments or the payment of reasonable

administrative expenses. The change was intended to reduce

administrative costs associated with establishing an account with a

different institution for these purposes.

Commentators criticized the rule on the ground that it called into

question the permissibility of using Fund assets to pay investment

advisory and trustee fees. In response to these comments, the final

regulations provide that the proposed exception to the self-dealing

rules is an addition to, rather than a substitution for, the existing

exception for payment of fees.

Special Analyses

It has been determined that this Treasury decision is not a

significant regulatory action as defined in EO 12866. Therefore, a

regulatory assessment is not required. It also has been determined that

section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5)

and the Regulatory Flexibility Act (5 U.S.C. chapter 6) do not apply to

these regulations, and, therefore, a Regulatory Flexibility Analysis is

not required. Pursuant to section 7805(f) of the Internal Revenue Code,

the notice of proposed rulemaking preceding these regulations was

submitted to the Small Business Administration for comment on its

impact on small business.

Drafting Information

The principal author of these regulations is Peter C. Friedman,

Office of Assistant Chief Counsel (Passthroughs and Special

Industries). However, other personnel from the IRS and Treasury

Department participated in their development.

List of Subjects

26 CFR Part 1

Income taxes, Reporting and recordkeeping requirements.

26 CFR Part 602

Reporting and recordkeeping requirements.

Adoption of Amendments to the Regulations

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

PART 1--INCOME TAXES

Paragraph 1. The authority citation for part 1 continues to read in

part as follows:

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

Par. 2. Section 1.468A-0 is amended by:

1. Adding an entry for Sec. 1.468A-1, paragraph (d).

2. Adding an entry for Sec. 1.468A-5, paragraph (a)(4).

3. Revising the heading for Sec. 1.468A-6 and adding entries for

paragraphs (a) through (h).

4. The revision and additions read as follows:

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

* * * * *

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

* * * * *

(d) Special rules for electing taxpayers whose rates are under

the jurisdiction of the Rural Electrification Administration.

* * * * *

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

provisions.

(a) * * *

(4) Trust provisions.

* * * * *

Sec. 1.468A-6 Disposition of an interest in a nuclear power plant.

(a) In general.

(b) Requirements.

(c) Tax consequences.

(1) The transferor and its Fund.

(2) The transferee and its Fund.

(3) Basis.

(d) Determination of proportionate amount.

(e) Calculation of schedule of ruling amounts for dispositions

described in this section.

(1) Transferor.

(2) Transferee.

(3) Example.

(f) Calculation of the qualifying percentage after dispositions

described in this section.

(1) In general.

(2) Special rule.

(g) Other.

(1) Anti-abuse provision.

(2) Relief provision.

(h) Effective date.

* * * * *

Par. 3. Section 1.468A-1 is amended as follows:

1. The introductory text of paragraph (b) is revised.

2. Paragraph (b)(4) is revised.

3. Paragraph (d) is added.

4. The added and revised provisions read as follows.

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

* * * * *

(b) Definitions. The following terms are defined for purposes of

section 468A and the regulations thereunder:

* * * * *

(4) 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, if the rates for the furnishing or sale, as

the case may be, either have been established or approved by a public

utility commission or are under the jurisdiction of the Rural

Electrification Administration. Each unit (i.e., 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.

* * * * *

(d) Special rules for electing taxpayers whose rates are under the

jurisdiction of the Rural Electrification Administration.

Notwithstanding any other provision of the regulations under section

468A, a schedule of ruling amounts may be provided to a taxpayer with

respect to a nuclear power plant if the rates for the furnishing or

sale of the plant's electricity are under the jurisdiction of the Rural

Electrification Administration. This schedule will be determined on the

basis of all facts and circumstances in a manner consistent with

section 468A. No taxpayer will be provided a schedule of ruling amounts

under section 468A for any taxable year unless the portion of the rates

attributable to the decommissioning costs of that taxpayer with respect

to such taxable year are treated by the taxpayer as though they were

subject to section 88.

Par. 4. Section 1.468A-3 is amended as follows:

1. Paragraph (h)(1)(v) is removed.

2. Paragraphs (h)(1)(vi) through (h)(1)(viii) are redesignated as

paragraphs (h)(1)(v) through (h)(1)(vii), respectively.

3. Newly designated paragraph (h)(1)(vii) is revised.

4. Paragraphs (h)(2) (xii) and (xiii) are added.

5. Paragraph (i)(1)(ii) is revised.

6. The revisions and additions read as follows:

Sec. 1.468A-3 Ruling amount.

* * * * *

(h) * * *

(1) * * *

(vii) (A) If a request does not comply substantially with the

requirements of this paragraph (h), the Internal Revenue Service will

notify the taxpayer of that fact. If the information or materials

necessary to comply substantially with the requirements of this

paragraph (h) are provided to the Internal Revenue Service within 30

days after this notification, the request will be considered filed on

the date of the original submission. If the information or materials

necessary to comply substantially with the requirements of this

paragraph (h) are not provided within 30 days after this notification,

the request will be considered filed on the date that all information

or materials necessary to comply with the requirements of this

paragraph (h) are provided.

(B) The Internal Revenue Service may waive the requirements of

paragraph (h)(1)(vii)(A) of this section if the Service determines that

the electing taxpayer is making a good faith effort to comply with the

deadline and if the waiver is consistent with the purposes of section

468A.

(2) * * *

(xii) A chart or table, based upon the assumed after-tax rate of

return to be earned by the assets of the nuclear decommissioning fund,

setting forth the years the fund will be in existence, the annual

contribution to the fund, the estimated annual earnings of the fund and

the cumulative total balance in the fund.

(xiii) If the request is for a revised schedule of ruling amounts,

a copy of the most recently issued schedule of ruling amounts for the

nuclear power plant to which the request relates that has been issued

to the taxpayer (or a predecessor in interest) making the request.

* * * * *

(i) * * *

(1) * * *

(ii) (A) Any taxpayer that has obtained a formula or method for

determining a schedule of ruling amounts for any taxable year under

paragraph (a)(4) of this section (which applies when a public utility

commission estimates decommissioning costs in current dollars) must

file a request for a revised schedule of ruling amounts on or before

the deemed payment deadline for its fifth taxable year that begins

after its taxable year in which the most recent formula or method was

received.

(B) Any taxpayer that has determined its ruling amount for any

taxable year under a formula prescribed by Sec. 1.468A-6 (which

prescribes ruling amounts for the taxable year in which there is a

disposition of a qualifying interest in a nuclear power plant) must

file a request for a revised schedule of ruling amounts on or before

the deemed payment deadline for its first taxable year that begins

after the disposition.

* * * * *

Par. 5. Section 1.468A-5 is amended as follows:

1. Paragraph (a)(4) is added.

2. Paragraph (b)(2)(v) is amended by removing ``or'' at the end

thereof.

3. Paragraph (b)(2)(vi) is redesignated as paragraph (vii).

4. New paragraph (b)(2)(vi) is added.

The additions read as follows:

Sec. 1.468A-5 Nuclear decommissioning fund qualification requirements;

prohibitions against self-dealing; disqualification of nuclear

decommissioning fund; termination of fund upon substantial completion

of decommissioning.

(a) * * *

(4) Trust provisions. By December 31, 1996, each qualified nuclear

decommissioning fund trust agreement must provide that assets in the

fund must be used as authorized by section 468A and the regulations

thereunder and that the agreement may not be amended so as to violate

section 468A or the regulations thereunder.

(b) * * *

(2) * * *

(vi) Any act described in Sec. 53.4951-1(c) of this chapter only if

undertaken to facilitate the temporary investment of assets or the

payment of reasonable administrative expenses of the nuclear

decommissioning fund; or

* * * * *

Par. 6. Section 1.468A-6 is amended by adding text to read as

follows:

Sec. 1.468A-6 Disposition of an interest in a nuclear power plant.

(a) In general. This section describes the federal income tax

consequences of a transfer of the assets of a nuclear decommissioning

fund (Fund) within the meaning of Sec. 1.468A-1(b)(3) 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.

(b) Requirements. This section applies if--

(1) Immediately before the disposition, the transferor maintained a

Fund with respect to the interest disposed of; and

(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;

(iii) Either a proportionate amount (which could include all) of

the assets of the transferor's Fund is transferred to a Fund of the

transferee, or the transferor's entire Fund is transferred to the

transferee, provided in the latter case (or if the transferee receives

all of the assets in the transferor's Fund, but not the transferor's

Fund) that the transferee acquires the transferor's entire qualifying

interest in the plant; and

(iv) The transferee continues to satisfy the requirements of

Sec. 1.468A-5(a)(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. 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 the regulations under

section 468A, this transfer (or the transfer of the transferor's Fund)

will not be considered a distribution of assets by the transferor's

Fund.

(2) The transferee and its Fund. Neither the transferee nor the

transferee's Fund will recognize gain or loss or otherwise take any

income or deduction into account by reason of the transfer of a

proportionate amount of the assets of the transferor's Fund to the

transferee's Fund (or by reason of the transfer of the transferor's

Fund to the transferee). For purposes of the regulations under section

468A, 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 that are transferred equals the percentage of the

transferor's qualifying interest that is transferred.

(e) Calculation of schedule of ruling 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

accordance with this section, the transferor's schedule of ruling

amounts with respect to the interests disposed of and retained (if any)

will be determined in accordance with paragraphs (e)(1) (i) and (ii) of

this section.

(i) Taxable year of disposition. If a 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

(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 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 with respect to that

interest on or before the deemed payment deadline for the first taxable

year of the transferor beginning after the disposition. See

Sec. 1.468A-3(i)(1)(ii)(B). If the transferor does not timely file such

a request, the transferor's ruling amount with respect to that interest

for the affected year or years will be zero, unless the Internal

Revenue Service waives the application of this paragraph (e)(1)(ii)

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 under this

section, the transferee's schedule of ruling amounts with respect to

the interest acquired will be determined under paragraphs (e)(2) (i)

and (ii) of this section.

(i) Taxable year of disposition. If a transferee does not file a

request for a schedule of ruling amounts on or before the deemed

payment deadline for the taxable year of the transferee in which the

disposition occurs (that is, the date that is two and one-half months

after the close of that year), the transferee's ruling amount with

respect to the interest acquired in the nuclear power plant for that

year is the amount described in the following sentence. This amount is

the amount contained in the transferor's current schedule of ruling

amounts for that plant for the taxable year of the transferor in which

the disposition occurred, multiplied by the product of--

(A) The portion of the transferor's qualifying interest that is

transferred; and

(B) A fraction, the numerator of which is the number of days in the

taxable year of the transferor including and following the date of

disposition, and the denominator of which is the number of days in that

taxable year.

(ii) Taxable years after the year of disposition. A transferee of a

qualifying interest in a nuclear power plant must file a request for a

revised schedule of ruling amounts with respect to that interest on or

before the deemed payment deadline for the first taxable year of the

transferee beginning after the disposition. See Sec. 1.468A-

3(i)(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 Internal Revenue

Service waives the application of this paragraph (e)(2)(ii) upon a

showing of good cause for the delay.

(3) Example. The following example illustrates the provisions of

this paragraph (e).

Example. (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, 1995, 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 1993 through 2013. For 1995, 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 1995 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 1995 is calculated as

follows: $10,000,000 x 60% x 219/365=$3,600,000. Under paragraphs

(e)(1)(ii) and (e)(2)(ii) of this section, X and Y must file

requests for revised schedules of ruling amounts by March 15, 1997.

(f) Calculation of the qualifying percentage after dispositions

described in this section--(1) In general. If a transferee acquires an

interest in a nuclear power plant in a transaction that satisfies the

requirements of this section, the transferee's qualifying percentage

(within the meaning of Sec. 1.468A-3(d)(4)) for the interest acquired

is the transferor's qualifying percentage for that interest immediately

before the disposition. If the Internal Revenue Service has not

approved a qualifying percentage for the transferor with respect to the

interest transferred, the qualifying percentage for that interest is

determined under Sec. 1.468A-3(d)(4).

(2) Special rule. The Internal Revenue Service may, in its

discretion, determine a qualifying percentage for an interest in a

nuclear power plant acquired by a transferee on a basis other than the

rule set forth in paragraph (f)(1) of this section if--

(i) In connection with its first request for a schedule of ruling

amounts after the disposition, the transferee requests special

treatment, explains the need for such treatment, and sets forth an

alternative basis for determining the qualifying percentage; and

(ii) The Internal Revenue Service determines that the special

treatment is consistent with the purposes of section 468A.

(g) Other--(1) Anti-abuse provision. The Internal Revenue Service

may treat a disposition occurring on or after December 27, 1994 as

satisfying the requirements of this section if the Internal Revenue

Service determines that this treatment is necessary or appropriate to

carry out the purposes of section 468A and the regulations thereunder.

(2) Relief provision. Upon request of the electing taxpayer, the

Internal Revenue Service may treat a disposition occurring after July

17, 1984, and before December 27, 1994 as satisfying the requirements

of this section if the Internal Revenue Service determines that this

treatment is necessary or appropriate to carry out the purposes of

section 468A and the regulations thereunder.

(h) Effective date. Section 1.468A-6 is effective for a disposition

of an interest in a nuclear power plant on or after December 27, 1994.

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

Par. 7. The authority citation for part 602 continues to read as

follows:

Authority: 26 U.S.C. 7805.

Par. 8. Section 602.101(c) is amended by revising the entry for

1.468A-3 to read as follows:

Sec. 602.101 OMB Control Numbers.

* * * * *

(c) * * *

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

Current

OMB

CFR part or section where identified or described control

No.

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

*****

1.468A-3.................................................... 1545-1269

1545-1378

*****

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

Margaret Milner Richardson,

Commissioner of Internal Revenue.

Approved: December 8, 1994.

Cynthia G. Beerbower,

Deputy Assistant Secretary of the Treasury.

[FR Doc. 94-31428 Filed 12-23-94; 8:45 am]

BILLING CODE 4830-01-U