Key Issues
Highlights of Nuclear Energy Provisions in Energy Policy Act of 2005
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Decommissioning Tax
The legislation updates the tax treatment of nuclear decommissioning funds to reflect the fact that many nuclear plants now operate in a competitive, unregulated market. Current tax law is based on a regulated, cost-of-service business model. The provision is valued at $1.3 billion. The legislation:
The industry has sought modified treatment of these funds since restructuring of the electric power industry started in the late 1990s. Eliminating the cost-of-service limitation is a significant benefit for merchant companies planning to build new nuclear plants.
Personnel and Training
The legislation exempts the nuclear energy industry from implementing Department of Labor training guidelines. The industry has already developed its own guidelines in accordance with NRC requirements.
Decommissioning Tax
The legislation updates the tax treatment of nuclear decommissioning funds to reflect the fact that many nuclear plants now operate in a competitive, unregulated market. Current tax law is based on a regulated, cost-of-service business model. The provision is valued at $1.3 billion. The legislation:
- Repeals the “cost-of-service” limitation in Section 468A of the Internal Revenue Code. Under this section, only companies that collect decommissioning funds subject to cost-of-service regulation can establish qualified decommissioning funds and make deductible contributions to those funds. The new law will allow all companies (regulated and unregulated) to establish qualified decommissioning trust funds and make deductible contributions to those funds.
- Allows companies to transfer monies in nonqualified decommissioning funds in-to their qualified funds. Companies will be able to claim a deduction for the monies transferred over the remaining life of the nuclear plant, and will pay a lower tax rate on earnings in the qualified funds. Nonqualified funds contain monies collected to satisfy pre-1984 decommissioning obligations and monies used to ensure the adequacy of decommissioning funds as part of a nuclear plant transaction.
The industry has sought modified treatment of these funds since restructuring of the electric power industry started in the late 1990s. Eliminating the cost-of-service limitation is a significant benefit for merchant companies planning to build new nuclear plants.
Personnel and Training
The legislation exempts the nuclear energy industry from implementing Department of Labor training guidelines. The industry has already developed its own guidelines in accordance with NRC requirements.
