HR 4971 IH
106th CONGRESS
2d Session
H. R. 4971
To amend the Internal Revenue Code of 1986 to facilitate competition
in the electric power industry.
IN THE HOUSE OF REPRESENTATIVES
July 26, 2000
Mr. Hayworth (for himself, Mr. English, Mr. Matsui, Mr. Weller, Mr. Neal of
Massachusetts, Mr. Ramstad, Mrs. Thurman, Mr. Herger, Mr. Watkins, Mrs. Johnson
of Connecticut, and Mr. Shaw) introduced the following bill; which was referred
to the Committee on Ways and Means
A BILL
To amend the Internal Revenue Code of 1986 to facilitate competition
in the electric power industry.
Be it enacted by the Senate and House of Representatives of the United
States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the `Electric Power Industry Tax Modernization
Act'.
SEC. 2. TAX-EXEMPT BOND FINANCING OF CERTAIN ELECTRIC FACILITIES.
(a) RULES APPLICABLE TO ELECTRIC OUTPUT FACILITIES- Subpart A of part IV
of subchapter B of chapter 1 of the Internal Revenue Code of 1986 (relating to
tax exemption requirements for State and local bonds) is amended by inserting
after section 141 the following new section:
`SEC. 141A. ELECTRIC OUTPUT FACILITIES.
`(a) ELECTION TO TERMINATE TAX-EXEMPT BOND FINANCING FOR CERTAIN ELECTRIC
OUTPUT FACILITIES-
`(1) IN GENERAL- A governmental unit may make an irrevocable election
under this paragraph to terminate certain tax-exempt financing for electric
output facilities. If the governmental unit makes such election,
then--
`(A) except as provided in paragraph (2), on or after the date of such
election the governmental unit may not issue with respect to an electric
output facility any bond the interest on which is exempt from tax under
section 103, and
`(B) notwithstanding paragraph (1) or (2) of section 141(a) or
paragraph (4) or (5) of section 141(b), no bond that was issued by such
unit with respect to an electric output facility before the date of
enactment of this subsection (or which is described in paragraph (2)(B),
(D), (E) or (F)) the interest on which was exempt from tax on such date,
shall be treated as a private activity bond.
`(2) EXCEPTIONS- An election under paragraph (1) does not apply to any
of the following bonds:
`(A) Any qualified bond (as defined in section 141(e)).
`(B) Any eligible refunding bond (as defined in subsection
(e)).
`(C) Any bond issued to finance a qualifying transmission facility or
a qualifying distribution facility.
`(D) Any bond issued to finance equipment or facilities necessary to
meet Federal or State environmental requirements applicable to an existing
generation facility.
`(E) Any bond issued to finance repair of any existing generation
facility. Repairs of facilities may not increase the generation capacity
of the facility by more than 3 percent above the greater of its nameplate
or rated capacity as of the date of enactment of this section.
`(F) Any bond issued to acquire or construct (i) a qualified facility,
as defined in section 45(c)(3), if such facility is placed in service
during a period in which a qualified facility may be placed in service
under such section, or (ii) any energy property, as defined in section
48(a)(3).
`(3) FORM AND EFFECT OF ELECTION-
`(A) An election under paragraph (1) shall be made in such a manner as
the Secretary prescribes and shall be binding on any successor in interest
to, or any related party with respect to, the electing governmental unit.
For purposes of this paragraph, a governmental unit shall be treated as
related to another governmental unit if it is a member of the same
controlled group.
`(B) A governmental unit that makes an election under paragraph (1)
shall be treated for purposes of section 141 as a person that is not a
governmental unit and that is engaged in a trade or business, with respect
to its purchase of electricity generated by an electric output facility
placed in service after such election, if such purchase is under a
contract executed after such election.
`(4) DEFINITIONS- For purposes of this subsection:
`(A) EXISTING GENERATION FACILITY- The term `existing generation
facility' means an electric generation facility in service on the date of
enactment of this subsection or construction of which commenced prior to
June 1, 2000.
`(B) QUALIFYING DISTRIBUTION FACILITY- The term `qualifying
distribution facility' means a distribution facility over which open
access distribution services described in subsection (b)(2)(C) are
provided.
`(C) QUALIFYING TRANSMISSION FACILITY- The term `qualifying
transmission facility' means a local transmission facility over which open
access transmission services described in subsection (b)(2)(A), (B), or
(E) are provided.
`(b) PERMITTED OPEN ACCESS ACTIVITIES AND SALES TRANSACTIONS NOT A PRIVATE
BUSINESS USE FOR BONDS THAT REMAIN SUBJECT TO PRIVATE USE RULES-
`(1) GENERAL RULE- For purposes of this section and section 141, the
term `private business use' shall not include a permitted open access
activity or a permitted sales transaction.
`(2) PERMITTED OPEN ACCESS ACTIVITIES- For purposes of this section, the
term `permitted open access activity' means any of the following
transactions or activities with respect to an electric output facility owned
by a governmental unit:
`(A) Providing nondiscriminatory open access transmissionservice and
ancillary services--
`(i) pursuant to an open access transmission tariff filed with and
approved by FERC, but, in the case of a voluntarily filed tariff, only
if the governmental unit voluntarily files a report described in 18 CFR
35.34(c) or (h) or successor provision (relating to whether or not the
issuer will join a regional transmission organization) not later than
the later of the applicable date prescribed in such sections or 60 days
after enactment of this section;
`(ii) under an independent system operator, regional transmission
organization or regional transmission group agreement approved by FERC;
or
`(iii) in the case of an ERCOT utility (as defined in section 212
(k) of the Federal Power Act), pursuant to a tariff approved by the
Public Utility Commission of Texas.
`(i) an independent system operator agreement,
`(ii) a regional transmission organization agreement, or
`(iii) a regional transmission group,
that has been approved by FERC, or by the Public Utility Commission of
Texas in the case of an ERCOT utility. Such participation may include
transfer of control of transmission facilities to an organization
described in clause (i), (ii), or (iii).
`(C) Delivery on a nondiscriminatory open access basis of electric
energy sold to end-users served by distribution facilities owned by such
governmental unit.
`(D) Delivery on a nondiscriminatory open access basis of electric
energy generated by generation facilities connected to distribution
facilities owned by such governmental unit.
`(E) Other transactions providing nondiscriminatory open access
transmission or distribution services under Federal, State, or local open
access, retail competition or similar programs, to the extent provided in
regulations prescribed by the Secretary.
`(3) PERMITTED SALES TRANSACTION- For purposes of this subsection, the
term `permitted sales transaction' means any of the following sales of
electric energy from existing generation facilities (as defined in
subsection (a)(4)(A)):
`(A) The sale of electricity to an on-system purchaser, if the seller
provides open access distribution service under paragraph (2)(C) and, in
the case of a seller that owns or operates transmission facilities, if
such seller provides open access transmission under paragraph (2)(A), (B),
or (E).
`(B) The sale of electricity to a wholesale native load purchaser or
in a wholesale stranded cost mitigation sale--
`(i) if the seller provides open access transmission service
described in paragraph (2)(A), (B), or (E), or
`(ii) if the seller owns or operates no transmission facilities and
transmission providers to the seller's wholesale native load purchasers
provide open access transmission service described in paragraph (2)(A),
(B), or (E).
`(4) DEFINITIONS AND SPECIAL RULES- For purposes of this
subsection:
`(A) ON-SYSTEM PURCHASER- The term `on-system purchaser' from a
governmental unit means a person whose electric facilities or equipment
are directly connected with transmission or distribution facilities that
are owned by such governmental unit, and who--
`(i) purchases electric energy from such governmental unit at retail
and either was within such unit's distribution area in the base year or
is a person as to whom the governmental unit has a service obligation,
or
`(ii) is a wholesale native load purchaser from such governmental
unit.
`(B) WHOLESALE NATIVE LOAD PURCHASER- The term `wholesale native load
purchaser' means a wholesale purchaser as to whom the governmental unit
had--
`(i) a service obligation at wholesale in the base year,
or
`(ii) an obligation in the base year under a requirements contract,
or under a firm sales contract that has been in effect for (or has an
initial term of) 10 years or more, but only to the extent in either case
such purchaser resells the electricity at retail to persons within the
purchaser's distribution area.
`(C) WHOLESALE STRANDED COST MITIGATION SALE- The term `wholesale
stranded cost mitigation sale' means one or more wholesale sales made in
accordance with clauses (i), (ii), and (iii).
`(i) A governmental unit's allowable sales under this subparagraph
during the recovery period may not exceed the sum of its annual load
losses for each year of the recovery period.
`(ii) The governmental unit's annual load loss for each year of the
recovery period is the amount (if any) by which--
`(I) sales in the base year to wholesale native load purchasers
that do not constitute a private business use, exceed
`(II) sales during that year of the recovery period to wholesale
native load purchasers that do not constitute a private business
use.
`(iii) If actual sales under this subparagraph during the recovery
period are less than allowable sales under clause (i), the amount not
sold (but not more than 10 percent of the aggregate allowable sales
under clause (i)) may be carried over and sold as wholesale stranded
cost mitigation sales in the calendar year following the recovery
period.
`(D) RECOVERY PERIOD- The recovery period is the 7 year period
beginning with the start-up year.
`(E) START-UP YEAR- The start-up year is whichever of the following
calendar years the governmental unit elects:
`(i) The year the governmental unit first offers open transmission
access.
`(ii) The first year in which at least 10 percent of the
governmental unit's wholesale customers' aggregate retail native load is
open to retail competition.
`(iii) The year of enactment of this section, if later than the year
described in clause (i) or (ii).
`(F) PERMITTED SALES TRANSACTIONS UNDER EXISTING CONTRACTS- A sale to
a wholesale native load purchaser (other than a person to whom the
governmental unit had a service obligation) under a contract that resulted
in private business use in the base year shall be treated as a permitted
sales transaction only to the extent that sales under the contract exceed
(i) in any year the private business use that resulted during the base
year, or (ii) the maximum amount of private business use that could occur
(absent the enactment of this section) without causing the bonds to be
private activity bonds, whichever is less. This subparagraph shall only
apply to the extent that the sale is allocable to bonds issued prior to
the date of enactment of this section (or bonds issued to refund such
bonds).
`(G) JOINT ACTION AGENCIES- A joint action agency, or a member of (or
a wholesale native load purchaser from) a joint action agency, that is
entitled to make a sale described in subparagraph (A) or (B) in a year may
transfer the entitlement to make that sale to the member (or purchaser),
or the joint action agency, respectively.
`(c) CERTAIN BONDS FOR TRANSMISSION AND DISTRIBUTION FACILITIES NOT TAX
EXEMPT-
`(1) GENERAL RULE- For purposes of this title, no bond the interest on
which is exempt from taxation under section 103 may be issued on or after
the date of enactment of this subsection if any of the proceeds of such
issue are used to finance (A) any transmission facility that is not a local
transmission facility, or (B) a start-up utility distribution
facility.
`(2) EXCEPTIONS- Paragraph (1) shall not apply to--
`(A) a qualified bond (as defined in section 141(e)),
`(B) an eligible refunding bond (as defined in subsection (d)(6)),
or
`(C) any bond issued to finance--
`(i) any repair of a transmission facility in service on the date of
enactment of this section, so long as the repair does not increase the
voltage level over its level in the base year or increase the thermal
load limit of the transmission facility by more than 3 percent over such
limit in the base year,
`(ii) any qualifying upgrade of a transmission facility in service
on the date of enactment of this section, or
`(iii) a transmission facility necessary to comply with an
obligation under a shared or reciprocal transmission agreement in effect
on the date of enactment of this section.
`(3) LOCAL TRANSMISSION FACILITY DEFINITIONS- For purposes of this
subsection--
`(A) LOCAL TRANSMISSION FACILITY- The term `local transmission
facility' means a transmission facility which is located within the
governmental unit's distribution area or which is, or will be, necessary
to supply electricity to serve retail native load or wholesale native load
of one or more governmental units. For purposes of this subparagraph, the
distribution area of a public power authority which was created in 1931 by
a State statute and which, as of January 1, 1999, owned at least one-third
of the transmission circuit miles rated at 230 kV or higher in the State,
shall be determined under regulations of the Secretary.
`(B) RETAIL NATIVE LOAD- A governmental unit's `retail native load' is
the electric load of end-users served by distribution facilities owned by
such governmental unit.
`(C) WHOLESALE NATIVE LOAD- A governmental unit's `wholesale native
load' is the--
`(i) retail native load of such unit's wholesale native load
purchasers, and
`(ii) electric load of purchasers (not described in clause (i))
under wholesale requirements contracts that (I) do not constitute
private business use under the rules
in effect absent this subsection, and (II) were in effect in the base year.
`(D) NECESSARY TO SERVE LOAD- For purposes of determining whether a
transmission or distribution facility is, or will be, necessary to supply
electricity to retail native load or wholesale native load--
`(i) electric reliability standards or requirements of national or
regional reliability organizations, regional transmission organizations
and the Electric Reliability Council of Texas shall be taken into
account, and
`(ii) transmission, siting and construction decisions of regional
transmission organizations or independent system operators and state and
Federal agencies shall be presumptive evidence regarding whether
transmission facilities are necessary to serve native load.
`(E) QUALIFYING UPGRADE- The term `qualifying upgrade' means an
improvement or addition to transmission facilities in service on the date
of enactment of this section that is ordered or approved by a regional
transmission organization, by an independent system operator, or by a
state regulatory or siting agency.
`(4) START-UP UTILITY DISTRIBUTION FACILITY DEFINED- For purposes of
this subsection, the term `start-up utility distribution facility' means any
distribution facility to provide electric service to the public that is
placed in service, (A) by a governmental unit that did not operate an
electric utility on the date of enactment of this section, and (B) prior to
the date on which such governmental unit operates in a qualified service
area (as such term is defined in section 141(d)(3)(B)). A governmental unit
is deemed to have operated an electric utility on the date of enactment of
this section if it operates electric output facilities that were operated by
another governmental unit to provide electric service to the public on the
date of enactment of this section.
`(d) DEFINITIONS; SPECIAL RULES- For purposes of this section--
`(1) BASE YEAR- The term `base year' means the year of enactment of this
section or, at the election of the governmental unit, either of the two
calendar years immediately prior to the year of enactment.
`(2) DISTRIBUTION AREA- The term `distribution area' means the area in
which a governmental unit owns distribution facilities.
`(3) ELECTRIC OUTPUT FACILITY- The term `electric output facility' means
an output facility that is an electric generation, transmission, or
distribution facility.
`(4) DISTRIBUTION FACILITY- The term `distribution facility' means an
electric output facility that is not a generation or transmission
facility.
`(5) TRANSMISSION FACILITY- The term `transmission facility' means an
electric output facility (other than a generation facility) that operates at
an electric voltage of 69kV or greater, except that the owner of the
facility may elect to treat any output facility that is a transmission
facility for purposes of the Federal Power Act as a transmission facility
for purposes of this section.
`(6) ELIGIBLE REFUNDING BOND- The term `eligible refunding bond' means
State or local bonds issued after an election described in subsection (a)
that directly or indirectly refund tax exempt bonds (other than a qualified
bond) issued before such election, if the weighted average maturity of the
refunding bonds does not exceed the remaining weighted average maturity of
the bonds issued before the election. In applying such term for purposes of
subsection (c)(2)(B), the date of election shall be deemed to be the date of
enactment of this section.
`(7) FERC- The term `FERC' means the Federal Energy Regulatory
Commission.
`(8) GOVERNMENT-OWNED FACILITY- An electric output facility shall be
treated as `owned by a governmental unit' if it is an electric output
facility that either is--
`(A) owned or leased by such governmental unit, or
`(B) a transmission facility in which the governmental unit acquired
prior to the base year long-term firm capacity for the purposes of serving
customers to which the unit had at that time either (i) a service
obligation or (ii) an obligation under a requirements contract.
`(9) REPAIR- The term `repair' shall include replacement of components
of an electric output facility, but shall not include replacement of the
facility.
`(10) SERVICE OBLIGATION- The term `service obligation' means an
obligation under State or Federal law (exclusive of an obligation arising
solely from a contract entered into with such person) to provide electric
distribution services or electric sales service, as provided in such
law.
`(e) SAVINGS CLAUSE- Subsection (b) does not affect the applicability of
section 141 to (or the Secretary's authority to prescribe, amend, or rescind
regulations respecting) any transaction that is not a permitted open access
transaction or permitted sales transaction.'
(b) REPEAL OF EXCEPTION FOR CERTAIN NONGOVERNMENTAL ELECTRIC OUTPUT
FACILITIES- Section 141(d)(5) of such Code is amended by inserting `(except in
the case of an electric output facility that is a distribution facility),'
after `this section'.
(c) EFFECTIVE DATE, APPLICABILITY-
(1) EFFECTIVE DATE- The amendments made by this section take effect on
the date of enactment of this Act, except that a governmental unit may elect
to apply section 141A(b)(1) and (2), as added by subsection (a), with
respect to permitted open access activities entered into on or after April
14, 1996.
(2) CERTAIN EXISTING AGREEMENTS- The amendment made by subsection (b)
(relating to repeal of the exception for certain nongovernmental output
facilities) does not apply to any acquisition of
facilities made pursuant to an agreement that was entered into before the
date of enactment of this Act.
(3) APPLICABILITY- References in the Act to sections of the Internal
Revenue Code of 1986, shall be deemed to include references to comparable
sections of the Internal Revenue Code of 1954.
SEC. 3. INDEPENDENT TRANSMISSION COMPANIES.
(a) SALES OR DISPOSITIONS TO IMPLEMENT FEDERAL ENERGY REGULATORY
COMMISSION OR STATE ELECTRIC RESTRUCTURING POLICY-
(1) IN GENERAL- Section 1033 of the Internal Revenue Code of 1986 is
amended by redesignating subsection (k) as subsection (l) and by inserting
after subsection (j) the following new subsection:
`(k) SALES OR DISPOSITIONS TO IMPLEMENT FEDERAL ENERGY REGULATORY
COMMISSION OR STATE ELECTRIC RESTRUCTURING POLICY-
`(1) IN GENERAL- For purposes of this subtitle, if a taxpayer elects the
application of this subsection to a qualifying electric transmission
transaction and the proceeds received from such transaction are invested in
exempt utility property, such transaction shall be treated as an involuntary
conversion to which this section applies.
`(2) EXTENSION OF REPLACEMENT PERIOD- In the case of any involuntary
conversion described in paragraph (1), subsection (a)(2)(B) shall be applied
by striking `2 years' and inserting `4 years'.
`(3) QUALIFYING ELECTRIC TRANSMISSION TRANSACTION- For purposes of this
subsection, the term `qualifying electric transmission transaction' means
any sale or other disposition of property used in the trade or business of
electric transmission, or an ownership interest in a person whose primary
trade or business consists of providing electric transmission services, to
another person that is an independent transmission company.
`(4) INDEPENDENT TRANSMISSION COMPANY- For purposes of this subsection,
the term `independent transmission company' means--
`(A) a regional transmission organization approved by the Federal
Energy Regulatory Commission,
`(B) a person (i) who the Federal Energy Regulatory Commission
determines in its authorization of the transaction under section 203 of
the Federal Power Act is not a `market participant' within the meaning of
such Commission's rules applicable to regional transmission organizations,
and (ii) whose transmission facilities to which the election under this
subsection applies are placed under the operational control of a Federal
Energy Regulatory Commission-approved regional transmission organization
within the period specified in such order, but not later than the close of
the replacement period, or
`(C) in the case of facilities subject to the exclusive jurisdiction
of the Public Utility Commission of Texas, a person that is approved by
that commission as consistent with Texas State law regarding an
independent transmission organization.
`(5) EXEMPT UTILITY PROPERTY- For purposes of this subsection, the term
`exempt utility property' means--
`(A) property used in the trade or business of generating,
transmitting, distributing, or selling electricity or producing,
transmitting, distributing, or selling natural gas, or
`(B) stock in a person whose primary trade or business consists of
generating, transmitting, distributing, or selling electricity or
producing, transmitting, distributing, or selling natural gas.
`(6) SPECIAL RULES FOR CONSOLIDATED GROUPS-
`(A) INVESTMENT BY QUALIFYING GROUP MEMBERS- This subsection shall
apply to a qualifying electric transmission transaction engaged in by a
taxpayer if the proceeds are invested in exempt utility property by a
qualifying group member. A `qualifying group member' is any member of a
consolidated group within the meaning of section 1502 and the regulations
promulgated thereunder of which the taxpayer is also a member.
`(B) COORDINATION WITH CONSOLIDATED RETURN PROVISIONS- A sale or other
disposition of electric transmission property or an ownership interest in
a qualifying electric transmission transaction, where an election is made
under this subsection, shall not result in the recognition of income or
gain under the consolidated return provisions of subtitle A, chapter 6,
subchapter A hereof. The Secretary shall prescribe such regulations as may
be necessary to provide for the treatment of any exempt utility property
received in a qualifying electric transmission transaction as successor
assets subject to the application of such consolidated return
provisions.
`(7) ELECTION- Any election made by a taxpayer under this subsection
shall be made by a statement to that effect in the return for the taxable
year in which the qualifying electric transmission transaction takes place
in such form and manner as the Secretary shall prescribe, and such election
shall be binding for that taxable year and all subsequent taxable
years.'
(2) SAVINGS CLAUSE- Nothing in section 1033(k) of the Internal Revenue
Code of 1986, as added by subsection (a), affects Federal or State
regulatory policy respecting the extent to which any acquisition premium
paid in connection with the purchase of an asset in a qualifying electric
transmission transaction can be recovered in rates.
(3) EFFECTIVE DATE- The amendments made by this subsection shall apply
to transactions occurring after the date of enactment of this Act.
(b) Distributions of Stock To Implement Federal Energy Regulatory
Commission or State Electric Restructuring Policy.
(1) IN GENERAL- Section 355(e)(4) of the Internal Revenue Code of 1986
is amended by redesignating subparagraphs (C), (D), and (E) as subparagraphs
(D), (E), and (F), respectively, and by inserting after subparagraph (B) the
following new subparagraph:
`(C) DISTRIBUTIONS OF STOCK TO IMPLEMENT FEDERAL ENERGY REGULATORY
COMMISSION OR STATE ELECTRIC RESTRUCTURING POLICY-
`(i) Paragraph (1) shall not apply to any distribution that is a
qualifying electric transmission transaction. For purposes of this
subparagraph, a `qualifying electric transmission transaction' means any
distribution of stock in a corporation whose primary trade or business
consists of providing electric transmission services, where such stock
is later acquired (or where the assets of such corporation are later
acquired) by another person that is an independent transmission
company.
`(ii) INDEPENDENT TRANSMISSION COMPANY- For purposes of this
subsection, the term `independent transmission company'
means--
`(I) a regional transmission organization approved by the Federal
Energy Regulatory Commission,
`(II) a person (x) who the Federal Energy Regulatory Commission
determines in its authorization of the transaction under section 203
of the Federal Power Act is not a `market participant' within the
meaning of such Commission's rules applicable to regional transmission
organizations, and (y) whose transmission facilities transferred as a
part of such qualifying electric transmission transaction are placed
under the operational control of a Federal Energy Regulatory
Commission-approved regional transmission organization within the
period specified in such order, but later than the close of the
replacement period (as defined in section 1033(k)(2)),
or
`(III) in the case of facilities subject to the exclusive
jurisdiction of the Public Utility Commission of Texas, a person that
is approved by that commission as consistent with Texas State law
regarding an independent transmission organization.'
(2) EFFECTIVE DATE- The amendments made by this subsection shall apply
to distributions occurring after the date of enactment of this Act.
SEC. 4. CERTAIN AMOUNTS RECEIVED BY ELECTRIC UTILITIES EXCLUDED FROM GROSS
INCOME AS CONTRIBUTIONS TO CAPITAL.
(a) IN GENERAL- Subsection (c) of section 118 of the Internal Revenue Code
of 1986 (relating to special rules for water and sewage disposal utilities) is
amended--
(1) in the heading, by striking `WATER AND SEWAGE DISPOSAL' and
inserting `CERTAIN'.
(A) in the lead-in for paragraph (1), by striking `water or,' and
inserting `electric energy, water, or', and
(B) in subparagraph (B), by striking `water or' and inserting
`electric energy (but not including assets used in the generation of
electricity), water, or',
(3) in paragraph (2)(A)(ii), by striking `water or' and inserting
`electric energy (but not including assets used in the generation of
electricity), water, or', and
(A) in subparagraph (A), by inserting `such term shall include amounts
paid as customer connection fees (including amounts paid to connect the
customer's line to an electric line or a main water or sewer line) and'
after `except that', and
(B) in subparagraph (C), by striking `water or' and inserting
`electric energy, water, or'.
(b) EFFECTIVE DATE- The amendments made by subsection (a) shall apply to
amounts received after the date of enactment of this Act.
SEC. 5. TAX TREATMENT OF NUCLEAR DECOMMISSIONING FUNDS.
(a) INCREASE IN AMOUNT PERMITTED TO BE PAID INTO NUCLEAR DECOMMISSIONING
RESERVE FUND- Subsection (b) of section 468A of the Internal Revenue Code of
1986 is amended to read as follows:
`(b) LIMITATION ON AMOUNTS PAID INTO FUND-
`(1) IN GENERAL- The amount which a taxpayer may pay into the Fund for
any taxable year during the funding period shall not exceed the level
funding amount determined pursuant to subsection (d), except--
`(A) where the taxpayer is permitted by Federal or State law or
regulation (including authorization by a public service commission) to
charge customers a greater amount for nuclear decommissioning costs, in
which case the taxpayer may pay into the Fund such greater amount,
or
`(B) in connection with the transfer of a nuclear powerplant, where
the transferor or transferee (or both) is required pursuant to the terms
of the transfer to contribute a greater amount for nuclear decommissioning
costs, in which case the transferor or transferee (or both) may pay into
the Fund such greater amount.
`(2) CONTRIBUTIONS AFTER FUNDING PERIOD- Notwithstanding any other
provision of this section, a taxpayer may make deductible payments to the
Fund in any taxable year between the end of the funding period and the
termination of the license
issued by the Nuclear Regulatory Commission for the nuclear powerplant to
which the Fund relates provided such payments do not cause the assets of the
Fund to exceed the nuclear decommissioning costs allocable to the taxpayer's
current or former interest in the nuclear powerplant to which the Fund relates.
The foregoing limitation shall be applied by taking into account a reasonable
rate of inflation for the nuclear decommissioning costs and a reasonable
after-tax rate of return on the assets of the Fund until such assets are
anticipated to be expended.'
(b) DEDUCTION FOR NUCLEAR DECOMMISSIONING COSTS WHEN PAID- Paragraph (2)
of section 468A(c) of such Code is amended to read as follows:
`(2) DEDUCTION OF NUCLEAR DECOMMISSIONING COSTS- In addition to any
deduction under subsection (a), nuclear decommissioning costs paid or
incurred by the taxpayer during any taxable year shall constitute ordinary
and necessary expenses in carrying on a trade or business under section
162.'
(c) LEVEL FUNDING AMOUNTS- Subsection (d) of section 468A of such Code is
amended to read as follows:
`(d) LEVEL FUNDING AMOUNTS-
`(1) ANNUAL AMOUNTS- For purposes of this section, the level funding
amount for any taxable year shall equal the annual amount required to be
contributed to the Fund in each year remaining in the funding period in
order for the Fund to accumulate the nuclear decommissioning costs allocable
to the taxpayer's current or former interest in the nuclear powerplant to
which the Fund relates. The annual amount described in the foregoing
sentence shall be calculated by taking into account a reasonable rate of
inflation for the nuclear decommissioning costs and a reasonable after-tax
rate of return on the assets of the Fund until such assets are anticipated
to be expended.
`(2) FUNDING PERIOD- The funding period for a Fund shall end on the last
day of the last taxable year of the expected operating life of the nuclear
powerplant.
`(3) NUCLEAR DECOMMISSIONING COSTS- For purposes of this section, the
term `nuclear decommissioning costs' shall mean all costs to be incurred in
connection with entombing, decontaminating, dismantling, removing, and
disposing of a nuclear powerplant, and shall include all associated
preparation, security, fuel storage, and radiation monitoring costs. The
taxpayer may identify such costs by reference either to a site-specific
engineering study or to the financial assurance amount calculated pursuant
to section 50.75 of title 10 of the Code of Federal Regulations. The term
shall include all such costs which, outsie of the decommissioning context,
might otherwise be capital expenditures.'
(d) EFFECTIVE DATE- The amendments made by this section shall apply to
amounts paid after June 30, 2000, in taxable years ending after such date.
END