Nuclear Decommissioning Funds; Revised Schedules of Ruling Amounts

DEPARTMENT OF THE TREASURY

26 CFR Part 1

[REG-209828-96]

RIN 1545-AU28

Nuclear Decommissioning Funds; Revised Schedules of Ruling

Amounts

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking and notice of public hearing.

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SUMMARY: This document contains proposed regulations relating to

requests for revised schedules of ruling amounts for nuclear

decommissioning reserve funds. The proposed regulations would amend

existing regulations to ease the burden on affected taxpayers by

permitting them to adjust their ruling amounts under a formula or

method rather than by filing a request for a revised schedule of ruling

amounts. This document also provides notice of a public hearing on

these proposed regulations.

DATES: Comments must be received by March 24, 1997. Requests to speak

and outlines of oral comments to be discussed at the public hearing

scheduled for May 13, 1997, at 10 a.m., must be received by April 22,

1997.

ADDRESSES: Send submissions to CC:DOM:CORP:R [REG-209828-96], room

5226, Internal Revenue Service, POB 7604, Ben Franklin Station,

Washington, DC 20044. Submissions may be hand-delivered between the

hours of 8 a.m. and 5 p.m. to: CC:DOM:CORP:R [REG-209828-96], Courier's

Desk, Internal Revenue Service, 1111 Constitution Avenue, N.W.,

Washington, DC. Alternatively, taxpayers may submit comments

electronically via the Internet by selecting the ``Tax Regs'' option on

the IRS Home Page, or by submitting comments directly to the IRS

Internet site at http://www.irs.ustreas.gov/prod/tax__regs/

comments.html. A public hearing will be held in the NYU Classroom,

Second Floor, Room 2615, Internal Revenue Building, 1111 Constitution

Avenue, N.W., Washington, DC.

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations,

Peter C. Friedman, (202) 622-3110 (not a toll-free number); concerning

submissions and the hearing, Evangelista Lee, (202) 622-7190 (not a

toll-free number).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

The collection of information contained in this notice of proposed

rulemaking has been submitted to the Office of Management and Budget

for review in accordance with the Paperwork Reduction Act of 1995 (44

U.S.C. 3507(d)). Comments on the collection of information should be

sent 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, with copies to the Internal Revenue

Service, Attn: IRS Reports Clearance Officer, T:FP, Washington, DC

20224. Comments on the collection of information should be received by

February 21, 1997. Comments are specifically requested concerning:

Whether the proposed collection of information is necessary for the

proper performance of the functions of the Internal Revenue Service,

including whether the collection will have a practical utility;

The accuracy of the estimated burden associated with the proposed

collection of information (see below);

[[Page 67511]]

How the quality, utility, and clarity of the information to be

collected may be enhanced;

How the burden of complying with the proposed collection of

information may be minimized, including through the application of

automated collection techniques or other forms of information

technology; and

Estimates of capital or start-up costs and costs of operation,

maintenance, and purchase of service to provide information.

The collection of information is in Sec. 1.468A-3. This information

is required by the IRS to ensure compliance with the provisions of

section 468A relating to deductions for payments made to nuclear

decommissioning reserve funds. This information will be used by the IRS

to support the issuance to taxpayers of schedules of ruling amounts

under section 468A. The collection of information is voluntary to

obtain a benefit. The likely recordkeepers are businesses or other for-

profit institutions. Estimated total annual recordkeeping burden: 100

hours. Estimated average annual burden per recordkeeper: 5 hours.

Estimated number of recordkeepers: 20.

An agency may not conduct or sponsor, and a person is not required

to respond to, a collection of information unless the collection of

information displays a valid control number.

Books or records relating to a collection of information must be

retained as long as their contents may become material in the

administration of any internal revenue law. Generally, tax returns and

return information are confidential, as required by 26 U.S.C. 6103.

Background

This document contains proposed regulations under section 468A of

the Internal Revenue Code. Section 468A was added to the Internal

Revenue Code by section 91(c) of the Tax Reform Act of 1984 (Pub. L.

98-369). Significant amendments were made to section 468A by section

1917 of the Energy Policy Act of 1992 (Public Law 102-486).

Section 468A(a) allows an electing taxpayer to deduct the amount of

payments made by the taxpayer to a nuclear decommissioning reserve

fund. Section 468A(b) limits the amount of these payments for any

taxable year to the lesser of the ruling amount or the amount of

decommissioning costs included in the taxpayer's cost of service for

ratemaking purposes for that taxable year.

Section 468A(d) provides that no deduction shall be allowed unless

the taxpayer requests, and receives, a schedule of ruling amounts from

the Secretary. A ruling amount is, with respect to any taxable year,

the amount determined by the Secretary as necessary to (1) fund that

portion of the nuclear decommissioning costs of the taxpayer with

respect to the nuclear power plant which bears the same ratio to the

total nuclear decommissioning costs with respect to such nuclear power

plant as the period for which the nuclear decommissioning fund is in

effect bears to the estimated useful life of such nuclear power plant;

and (2) prevent any excessive funding of such costs or the funding of

such costs at a rate more rapid than level funding, taking into account

such discount rates as the Secretary deems appropriate. Section

468A(d)(3) provides that the Secretary shall, at least once during the

useful life of the nuclear power plant (or more frequently, upon the

request of the taxpayer), review and, if necessary, revise the schedule

of ruling amounts.

Section 1.468A-3 sets forth the rules relating to the determination

of ruling amounts. Section 1.468A-3(a)(4) permits the use of a formula

or method for determining a schedule of ruling amounts (in lieu of a

schedule of ruling amounts specifying a dollar amount for each taxable

year), but only if the public utility commission establishing or

approving the amount of decommissioning costs to be included in cost of

service for ratemaking does not estimate the cost of decommissioning in

future dollars.

Section 1.468A-3(i) contains provisions for the review and revision

of schedules of ruling amounts. Section 1.468A-3(i)(1) sets forth

circumstances under which a taxpayer must request a revision to its

schedule of ruling amounts. In general, a schedule of ruling amounts

must be reviewed at ten-year intervals. If the schedule is determined

under a formula or method, however, the period between reviews may not

exceed five years.

Section 1.468A-3(i)(2) provides that a taxpayer may request an

elective review of its schedule of ruling amounts so long as such

request is made in accordance with the rules of Sec. 1.468A-3(h). A

taxpayer seeking to maximize its deductions under section 468A

generally needs to request an elective review of its schedule of ruling

amounts each time a public utility commission changes previously

established amounts of decommissioning costs. These proposed

regulations amend Sec. 1.468A-3(a)(4) by eliminating the restriction on

the use of a formula or method for determining a schedule of ruling

amounts. In addition, these proposed regulations revise the mandatory

review requirements of Sec. 1.468A-3(i)(1).

Explanation of Provisions

The proposed regulations provide that a taxpayer may request

approval of a formula or method for determining a schedule of ruling

amounts (rather than a schedule specifying a dollar amount for each

taxable year) that is consistent with the principles and provisions of

the rules relating to the determination of ruling amounts.

The proposed regulation would ease the filing burden on taxpayers

by permitting them to adjust their ruling amounts under a formula or

method (rather than by filing a request for a revised schedule of

ruling amounts). Thus, under the proposed regulations, a taxpayer may

maximize its deductions under section 468A without requesting a revised

schedule of ruling amounts each time a public utility commission

changes the amount of decommissioning costs included in the taxpayer's

cost of service if, under the taxpayer's formula or method, the

commission's action results in a corresponding change in ruling

amounts.

In addition, the proposed regulations modify the mandatory review

provisions applicable to schedules of ruling amounts determined under a

formula or method. One modification eliminates the rule requiring

review of those schedules after five years; the schedules will,

however, be subject to the general rule requiring review at ten-year

intervals. In addition, a taxpayer using a formula or method will be

required to request a revised schedule of ruling amounts if, beginning

with the second taxable year during which the most recently issued

formula or method is in effect, the ruling amount for a taxable year

(1) differs by more than 25 percent from the ruling amount for any

preceding taxable year during which such formula or method was in

effect; or (2) differs by more than 10 percent from the ruling amount

for the immediately preceding taxable year. Under these circumstances a

taxpayer must file a request for a revised schedule of ruling amounts

on or before the deemed payment deadline for the next taxable year.

Proposed Effective Date

The regulations are proposed to be effective for requests for

schedules of ruling amounts made on or after the date that the final

regulations are filed with the Federal Register.

[[Page 67512]]

Special Analyses

It has been determined that this notice of proposed rulemaking is

not a significant regulatory action as defined in EO 12866. Therefore,

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

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

chapter 5) does not apply to these regulations, and because the

regulation does not impose a collection of information on small

entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not

apply. Pursuant to section 7805(f) of the Internal Revenue Code, this

notice of proposed rulemaking will be submitted to the Chief Counsel

for Advocacy of the Small Business Administration for comment on its

impact on small business.

Comments and Public Hearing

Before these proposed regulations are adopted as final regulations,

consideration will be given to any written comments (a signed original

and eight (8) copies) that are submitted timely to the IRS. All

comments will be available for public inspection and copying.

A public hearing has been scheduled for May 13, 1997, in room 2615.

Because of access restrictions, visitors will not be admitted beyond

the Internal Revenue Building lobby more than 15 minutes before the

hearing starts.

The rules of 26 CFR 601.601(a)(3) apply to the hearing.

Persons that wish to present oral comments at the hearing must

submit comments by March 24, 1997 and submit an outline of the topics

to be discussed and the time to be devoted to each topic by April 22,

1997.

A period of 10 minutes will be allotted to each person for making

comments.

An agenda showing the scheduling of the speakers will be prepared

after the deadline for receiving outlines has passed. Copies of the

agenda will be available free of charge at the hearing.

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 in 26 CFR Part 1

Income Taxes, Reporting and recordkeeping requirements.

Proposed Amendments to the Regulations

Accordingly, 26 CFR part 1 is proposed to be amended as follows:

PART 1--INCOME TAXES

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

part as follows:

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

Par. 2. Section 1.468A-2 is amended as follows:

1. The text of paragraph (f)(3) is redesignated as paragraph

(f)(3)(i).

2. Paragraph (f)(3)(ii) is added.

The addition reads as follows:

Sec. 1.468A-2 Treatment of electing taxpayer.

* * * * *

(f) * * *

(3) * * * (i) * * *

(ii) The requirement of this paragraph (f)(3) does not apply if the

taxpayer determines its schedule of ruling amounts under a formula or

method obtained under Sec. 1.468A-3(a)(4) and the cost of service

amount is a variable element of that formula or method.

* * * * *

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

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

2. Paragraph (e)(5) is added.

3. Paragraphs (i)(1)(ii)(A), (i)(1)(iii)(A)(3), and (i)(1)(iii)(B)

are revised.

4. Paragraph (i)(1)(iii)(C) is added.

The revisions and additions read as follows:

Sec. 1.468A-3 Ruling amount.

(a) * * *

(4) The Internal Revenue Service will approve, at the request of

the taxpayer, a formula or method for determining a schedule of ruling

amounts (rather than a schedule specifying a dollar amount for each

taxable year) that is consistent with the principles and provisions of

this section. See paragraph (i)(1)(ii) of this section for a special

rule relating to the mandatory review of ruling amounts that are

determined pursuant to a formula or method.

* * * * *

(e) * * *

(5) A formula or method obtained under paragraph (a)(4) of this

section may provide for changes in an estimated date described in

paragraph (e)(1) or (2) of this section to reflect changes in the

ratemaking assumptions used to determine rates (whether interim or

final) that are established or approved by the applicable public

utility commission after the filing of the request for approval of a

formula or method.

* * * * *

(i) * * *

(1) * * *

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

determining a schedule of ruling amounts for any taxable year under

paragraph (a)(4) of this section must file a request for a revised

schedule of ruling amounts on or before the deemed payment deadline for

a taxable year if the period for which the most recently issued formula

or method has been in effect (the ruling period) began at least two

taxable years before such year and--

(1) The ruling amount for the preceding taxable year and the ruling

amount for any earlier taxable year in the ruling period differ by more

than 25 percent of the smaller amount; or

(2) The ruling amounts for the two most recent taxable years differ

by more than 10 percent of the smaller amount.

* * * * *

(iii) * * *

(A) * * *

(3) Reduces the amount of decommissioning costs to be included in

cost of service for any taxable year;

(B) The taxpayer's most recent request for a schedule of ruling

amounts did not provide notice to the Internal Revenue Service of such

action by the public utility commission; and

(C) In the case of a taxpayer that determines its schedule of

ruling amounts under a formula or method obtained under paragraph

(a)(4) of this section, the item increased, adjusted, or reduced is a

fixed (rather than a variable) element of that formula or method.

* * * * *

Margaret Milner Richardson,

Commissioner of Internal Revenue.

[FR Doc. 96-32122 Filed 12-20-96; 8:45 am]

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