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September 9, 2020

IRS final regulations clarify deductions related to trust funds for decommissioning nuclear power plants

The IRS released final regulations (TD 9906) under IRC Section 468A clarifying tax deductions related to trust funds maintained for decommissioning nuclear power plants. The final regulations follow the approach of the proposed regulations (REG-112800-16) with some modifications based on comments. The final regulations are effective September 4, 2020.


IRC Section 468A allows taxpayers with ownership interests in nuclear power plants to elect to currently deduct the future decommissioning costs related to those plants. The IRC Section 468A deductions facilitate the Nuclear Regulatory Commission (NRC) rules requiring nuclear plant owners to demonstrate that a trust fund with sufficient financial resources will be available for these decommissioning costs. Generally, these deductions offset the income inclusion that occurs when the money is distributed from the trust fund for the costs of decommissioning activities when they are actually performed. Treas. Reg. Section 1.468A1(b)(6) defines which amounts can be considered nuclear decommissioning costs for this purpose. In 2016, the IRS published proposed regulations under IRC Section 468A.

According to the regulations' Preamble, decommissioning activity has increased in conjunction with new technology; as such, the final regulations address new decommissioning costs and categories that have arisen.

Final regulations

The final regulations broaden the definition of nuclear decommissioning costs in Treas. Reg. Section 1.468A1(b)(6) by:

  • Including expenses related to spent fuel storage in independent spent fuel storage installations (ISFSIs) both at the nuclear power plant that generates the spent fuel and offsite
  • Clarifying that the definition of nuclear decommissioning costs includes those recoverable through depreciation or amortization, as well as currently deductible costs
  • Including "all land improvements and otherwise deductible expenses to be incurred in connection with the entombment, decontamination, dismantlement, removal, and disposal of the structures, systems and components of a nuclear power plant," for both active and inactive nuclear power plants

The final regulations also broaden the exemption from the self-dealing rules. Under the existing regulations, reimbursement of decommissioning costs by the fund to a disqualified person is not an act of self-dealing. A fund may designate as decommissioning costs its payment or reimbursement of expenses to someone that would normally be disqualified under the self-dealing rules for personal services that are reasonable and necessary if that payment would ordinarily be paid for like services by like enterprises under like circumstances.

The final regulations expand the types of expenses permitted to be reimbursed under the self-dealing rules to include direct or indirect overhead and a reasonable profit element.

The final regulations also adopted the proposed regulations' clarification that the substantial completion date is when all federal, state, local and contractual decommissioning liabilities are fully satisfied. Under the existing regulations, the definition of the substantial completion date of the nuclear decommissioning is "the date that the maximum acceptable radioactivity levels mandated by the [NRC] with respect to a decommissioned nuclear power plant are satisfied." At that time, the fund should be terminated.


These final regulations provide welcome clarity around the type of decommissioning costs that may be deducted under IRC Section 468A. By broadening the scope of qualified decommissioning costs that are reimbursable (and deductible) from the trust fund, utilities may have improved cash-flow.


Contact Information
For additional information concerning this Alert, please contact:
Americas Power and Utilities Tax Group
   • Mike Reno (
   • Ginny Norton (
Americas Energy Tax Group
   • Greg Matlock (