[Federal Register Volume 59, Number 247 (Tuesday, December 27, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-31428]
[[Page Unknown]]
[Federal Register: December 27, 1994]
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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
