Specific Instructions

Table of Contents

Period Covered

Enter the tax year in the space provided at the top of the form. For a calendar year, enter the last two digits of the calendar year in the first entry space. For a fiscal tax year return, fill in the tax year space at the top of the form.

Name and Address

Enter the fund's true name (as set forth in the charter or other legal document creating it), address, and EIN on the appropriate lines. Enter the address of the fund's principal office or place of business. Include the suite, room, or other unit number after the street address. If the post office does not deliver mail to the street address and the fund has a P.O. box, show the box number instead.

Note.

Do not use the address of the registered agent for the state in which the fund is incorporated. For example, if a fund is incorporated in Delaware or Nevada and the fund's principal office is located in Little Rock, AR, the fund should enter the Little Rock address.

If the return is filed by a trustee or disqualified person to report section 4951 taxes, enter that person's name and address in the address section.

If the fund receives its mail in care of a third party (such as an accountant or an attorney), enter on the street address line “C/O” followed by the third party's name and street address or P.O. box.

Item A. Employer Identification Number (EIN)

Enter the fund's EIN. If the fund does not have an EIN, it must apply for one. An EIN may be applied for online, by telephone, by fax, or by mail depending on how soon the fund needs to use the EIN. Use Form SS-4, Application for Employer Identification Number.

If the fund has not received its EIN by the time the return is due, write “Applied for” and the date the fund applied in the space for the EIN. For more details, see the Instructions for Form SS-4.

Item B. Identifying Number of Trustee or Disqualified Person

If the return is filed by a trustee or disqualified person to report section 4951 taxes, enter the identifying number of the trustee or disqualified person. For an individual trustee or disqualified person, enter the individual's social security number. If the trustee or disqualified person is not an individual, enter the EIN.

Note.

Do not complete item B if Form 1120-ND is filed to report the income, deductions, and income tax liability of the fund.

Item C. Fund, Trustee, or Disqualified Person

Check only the box that applies.

  1. When filed to report the income, deductions, and income tax liability of the fund, check the “Fund” box.

  2. When filed by a trustee who is liable for taxes under section 4951, check the “Trustee” box.

  3. When filed by a disqualified person who is liable for section 4951 tax, check the “Disqualified person” box.

Item D. Final Return, Name Change, Address Change, or Amended Return

Indicate a final return, name change, address change, or amended return by checking the appropriate box. If you are a trustee or disqualified person reporting section 4951 taxes, omit item D.

Note.

If a change in address occurs after the return is filed, use Form 8822, Change of Address, to notify the IRS of the new address.

Part I. Computation of Fund Income Tax

Income

Line 1. Taxable interest.   Enter the total taxable interest income received or accrued for the year, including any original issue discount. Do not include tax-exempt interest on line 1; but report it as an item of information on Schedule M, line 2d.

Line 2. Capital gain net income.   Every sale, exchange, or actual or deemed distribution of assets held by the fund must be reported in detail on Schedule D (Form 1120), Capital Gains and Losses, even if there is no gain or loss. The amount realized on an actual or deemed distribution is the fair market value of the assets as of the date of distribution.

Line 3. Other income.   Enter any other taxable income not reported on line 1 or line 2 and explain its nature on an attached schedule. If the fund had only one item of other income, describe it in parentheses on line 3.

Deductions

Note.

A deduction is not allowed for certain expenses allocable to tax-exempt income. See section 265. In addition, a deduction is not allowed for distributions made to electing taxpayers. Report such payments as an item of information on Schedule M, line 2c. Liabilities are not treated as incurred prior to the time economic performance takes place. See section 461(h).

Line 5. Trustee fees.   Enter the total deductible fees paid or incurred to the trustee(s) for administering the fund during the tax year.

Line 6. Taxes.   Enter deductible taxes paid or incurred during the tax year, including state and local income taxes. Do not deduct federal income taxes or taxes not imposed on the fund.

Line 8. Other deductions.   Attach a schedule listing by type and amount all allowable deductions that are not deducted elsewhere on Form 1120-ND. Include investment advisory fees, actuarial expenses, and other administrative expenses paid or incurred during the tax year, but do not include decommissioning costs.

Line 11. Net operating loss deduction.   Enter the amount of any net operating loss deduction allowed by Regulations section 1.468A-4(b)(4), and explain its computation on an attached schedule.

Line 14. Payments.   Generally, no payments are allowed other than those on lines 14a through 14d and the credit for backup withholding.

Backup withholding.   If the fund had federal income tax withheld from any payments it received because, for example, it failed to give the payer its correct EIN, include the amount withheld in the total for line 14f. Write the amount withheld and the words “Backup Withholding” in the blank space above line 14f.

Line 15. Estimated tax penalty.   A fund that does not make estimated tax payments when due may be subject to an underpayment penalty for the period of underpayment. Use Form 2220, Underpayment of Estimated Tax by Corporations, to see if the fund owes a penalty and to figure the amount of the penalty. If Form 2220 is attached, check the box on line 15 and enter the amount of the penalty on that line.

Schedule L. Balance Sheets

The balance sheets should agree with the fund's books and records.

Schedule M. Other Information

Line 1.   The term “electing taxpayer” means an eligible taxpayer that elects the application of section 468A to deduct payments made to a nuclear decommissioning fund. See Regulations section 1.468A-7 for the rules concerning the election.

Line 5.   If you are a trustee or disqualified person (defined below) complete the items included in line 5 to determine if you have engaged in an act of self-dealing.

Part II. Initial Taxes on Self-Dealing (Section 4951)

Initial taxes on self-dealers

An initial tax of 10% of the amount involved (defined later) is imposed on each act of self-dealing between a disqualified person and a nuclear decommissioning fund for each tax year (or part of a tax year) in the taxable period. The tax is required to be paid by any disqualified person (other than a trustee acting only as a trustee of the trust) who participates in the act of self-dealing.

Initial taxes on trustee

A tax of 2½% of the amount involved is imposed on a trustee who participates in the act of self-dealing. The tax is not imposed if the trustee unwillingly or due to reasonable cause participated in the act. The tax is computed on all acts of self-dealing that occur within the taxable period. The tax is required to be paid by the trustee who participates in the act.

Exceptions.

The initial tax on the act of self-dealing of a disqualified person or a trustee is not imposed if the acts of self-dealing are corrected within the taxable period.

Definitions

Self-dealing.   When determining if an act is an act of self-dealing, treat the transfer of personal property by a disqualified person to the fund as a sale or exchange if the property is subject to a mortgage or similar lien. Otherwise, the term “self-dealing” means any direct or indirect:

  • Sale, exchange, or leasing of real or personal property between the fund and a disqualified person;

  • Lending of money or other extensions of credit between the fund and a disqualified person;

  • Furnishing of goods, services, or facilities between the fund and a disqualified person;

  • Payment of compensation (or payment or reimbursement of expenses) by the fund to a disqualified person; and

  • Transfers to, or use by or for the benefit of, a disqualified person of the income or assets of the fund.

Exceptions.   Acts of self-dealing do not include:

  1. The payment by the fund for the purposes of satisfying, in whole or in part, the liability of the electing taxpayer for decommissioning costs of the nuclear power plant.

  2. The withdrawal of excess contributions by the electing taxpayer in accordance with Regulations section 1.468A-5(c)(2).

  3. The withdrawal of amounts that have been treated as distributions to the electing taxpayer under Regulations section 1.468A-5(c)(3).

  4. The payment of amounts remaining in the fund to the electing taxpayer after the termination of the fund upon the substantial completion of decommissioning.

  5. The furnishing of goods, services, or facilities by a disqualified person to the fund if the furnishing is without charge and if the goods, services, or facilities so furnished are exclusively used for the purposes specified in section 468A(e)(4).

  6. The payment of compensation (and the payment or reimbursement of expenses) by the fund to a disqualified person for personal services that are reasonable and necessary to carry out the purposes of the fund and the compensation (or payment or reimbursement of expenses) is not excessive.

  7. A payment by the fund for the performance of trust functions and certain general banking services by a bank or trust company that is a disqualified person, if the banking services are reasonable and necessary to carry out the purposes of the fund and the compensation paid to the bank or trust company is not excessive (considering the fair market interest rate for the use of the funds by the bank or trust company).

  The allowable general banking services are:

  • Checking accounts, as long as the bank does not charge interest on any overwithdrawals;

  • Savings accounts, as long as the fund may withdraw its money after giving no more than 30 days notice, without losing interest for the period the money was on deposit; and

  • Safekeeping activities (for example, rental of a safe deposit box).

Taxable period.   For an act of self-dealing, the term “taxable period” means the period beginning on the date of the act of self-dealing and ending on the date of the earliest of—

  • The date of mailing of a notice of deficiency under section 6212 for the section 4951 tax,

  • The date on which the tax imposed by section 4951 is assessed, or

  • The date correction of the act of self-dealing is completed.

Amount involved.   The term “amount involved” means the greater of the amount of money given (or received) and the fair market value of the other property given (or received). When services described in section 4951(d)(2)(C) are involved, the amount involved is only the excess compensation.

Note.

Fair market value is determined as of the date on which the act of self-dealing occurs and at the highest market value during the taxable period.

Correction and correct.   The terms “correction” and “correct” mean the undoing of an act of self-dealing, to the extent possible, but in any case returning the fund to a financial position no worse than it would have been if the disqualified person acted under the highest fiduciary relationship.

Disqualified person.   The term “disqualified person” means a person who is:

  1. A contributor to the fund.

  2. A trustee of the fund.

  3. An owner of more than 10% of (a) the total combined voting power of a corporation, (b) the profits interest of a partnership, or (c) the beneficial interest of a trust or unincorporated business that is a contributor to the fund.

  4. An officer, director, or employee of a person who is a contributor to the fund.

  5. The spouse, ancestor, or a lineal descendant, or a spouse of a lineal descendant of an individual described in (1) through (4) above.

  6. A corporation of which persons described in (1) through (5) above own more than 35% of the total combined voting power.

  7. A partnership of which persons described in (1) through (5) above own more than 35% of the profits interests.

  8. A trust or estate of which persons described in (1) through (5) above own more than 35% of the beneficial interest.

  For purposes of (3a) and (6) above, indirect stockholders would be taken into account under section 267(c), except that, for purposes of this paragraph, section 267(c)(4) will be treated as providing that the members of the family of an individual are only those individuals described in (5) above. For purposes of (3a), (3c), (7), and (8) above, the ownership of profits or beneficial interests will be determined by the rules of constructive ownership of stock provided in section 267(c) (other than paragraph (3) thereof), except that section 267(c)(4) will be treated as providing that the members of the family of an individual are only those individuals described in (5) above.

Dispositions of an Interest in a Nuclear Power Plant

There are federal income tax consequences when there is a transfer of assets of a nuclear decommissioning fund in connection with the sale, exchange, or other disposition of a transferor of all or a portion of its qualifying interest in a nuclear power plant to another taxpayer (transferee). If the requirements of Regulations section 1.468A-6(b) are met, the federal income tax consequences are the following:

  1. No gain or loss. If there is a disposition of an interest (wholly or partially) in a nuclear power plant, neither the transferor or the transferee (or either's fund) will recognize gain, loss, or otherwise take any income or deduction into account because of the transfer of all or some of the assets of the transferor's fund. Also, the transfer is not considered a payment or contribution of assets by the transferor's fund (or by the transferee to its fund).

  2. Basis. Transfers of assets of a fund to which Regulations section 1.468A-6 applies do not affect basis. The transferee's fund will have a basis in the assets received from the transferor equal to the transferor's basis in those assets immediately prior to the transfer.

  3. Tax year of disposition.

    A. Transferee. If a transferee does not file a request for a schedule of ruling amounts by the deemed payment deadline (2½ months after the end of the tax year of the disposition), the transferee's ruling amount for the interest acquired is determined by taking the amount contained in the transferor's current schedule of ruling amounts for that tax year and that plant multiplied by the product of:

    (1) The portion of the transferor's qualifying interest that is transferred, and

    (2) A fraction, the numerator of which is the number of days in the tax year of the transferor including and following the date of the disposition, and the denominator of which is the number of days in that tax year.

    B.Transferor. If a transferor does not file a request for a revised schedule of ruling amounts on or before the deemed payment deadline for the tax year of the transferor in which the disposition of its interest in the nuclear power plant occurred (that is, the date that is 2½ months after the close of that tax year), the transferor's ruling amount with respect to that plant for that year will equal the sum of:

    (1) The ruling amount contained in the transferor's current schedule of ruling amounts with respect to that plant for that tax year multiplied by the portion of qualifying interest that is retained, if any, and

    (2) The ruling amount contained in the transferor's current schedule of ruling amounts with respect to that plant for that tax year multiplied by the product of:

    (a) The portion of the transferor's qualifying interest that is disposed of and

    (b) A fraction, the numerator of which is the number of days in the tax year that precede the date of the disposition, and the denominator of which is the number of days in that tax year.

  4. Tax year after the year of disposition. A transferee of, or a transferor who retains, a qualifying interest in a nuclear power plant, must file a request for a revised schedule of ruling amounts for the interest by the deemed payment deadline (defined above). If the transferee (or the transferor) does not timely file such a request, the transferee's (or the transferor's) ruling amounts for the interest for that tax year will be zero.

For more information, see Regulations section 1.468A-6.

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