Federal Circuit: Nuclear decommissioning liabilities, economic performance

Federal Circuit: Nuclear decommissioning liabilities

The U.S. Court of Appeals for the Federal Circuit today affirmed a decision of the U.S. Court of Federal Claims, granting summary judgment for the government and holding that a taxpayer could not include future nuclear decommissioning liabilities (assumed on the purchase of three nuclear power plants) in the basis of the acquired assets.

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The case is: Amergen Energy Co., LLC v. United States, 2014-5067 (Fed. Cir. March 11, 2015)

Read the Federal Circuit’s decision [PDF 129 KB]

The claims court had found that because the nuclear power plants would not be decommissioned until years later, the claimed decommissioning liabilities did not satisfy the economic performance requirement of section 461(h).

The Federal Circuit agreed and today affirmed that these liabilities could not be included in the taxpayer’s tax returns for 2001 through 2003, on a finding that the claims court had correctly decided that section 461(h) applies in determining when and whether an accrual method taxpayer incurs future nuclear decommissioning liabilities for purposes of calculating the basis of an acquired nuclear power plant and associated assets.

The Federal Circuit thus concluded the taxpayer had not economically performed the decommissioning activities as of 2001 through 2003.

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