Nuclear Disposal Fees

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Publication April 6, 2017

Nuclear disposal fees that a nuclear plant owner paid to the US Department of Energy to dispose of spent fuel rods cannot be carried back 10 years for federal income tax purposes, a federal district court said.

The court, in south Florida, released its decision in late March. The case is NextEra Energy, Inc. v. United States.

A 1983 law requires nuclear power plant owners to pay the Department of Energy annual fees tied to the amount of nuclear electricity they produce. The government then takes responsibility for disposing of the spent fuel rods.

The fees are deductible for income tax purposes.

If a company has more deductions in a year than it can use, normally the extra deductions — called a net operating loss — can be carried back up to two years to recover any income taxes paid in the past and, if still not used fully, can be carried forward for up to 20 years.

However, any “specified liability loss” can be carried back up to 10 years in the past.

A “specified liability loss” is defined in section 172(f) of the US tax code as including amounts paid under a federal or state law requiring the “decommissioning of a nuclear power plant (or any unit thereof).”

The plant owner argued that the fees were “decommissioning” costs, if not of the entire plant, then at least of a “unit.”

The court disagreed.

It said the common dictionary understanding of decommissioning is to take a ship, airplane or nuclear reactor out of service. It said these items are commissioned and then later decommissioned. It said no one talks about “commissioning” a fuel rod. The court also said it believes the word “unit” in the statute refers to something like a reactor — nuclear power plants have multiple reactors — rather than a fuel rod.


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