Spare parts are placed in service when they are delivered to the taxpayer, even if he waits a while to put them to use

Spare parts are placed in service when they are delivered to the taxpayer | Norton Rose Fulbright

September 01, 1998 | By Keith Martin in Washington, DC

Northern States Power Company won another round in a long-running battle with the IRS over when it can start depreciating nuclear fuel assemblies. The IRS argued the utility had to wait until the rods were installed in the reactor core. Equipment is considered in service when it is ready for the intended use. The US court of appeals for the 8th circuit said recently that this occurs in the case of nuclear fuel rods at delivery to the taxpayer. There is no need to wait for actual use.

A GOOD IDEA IF IT WORKS . . . Orbital Sciences Corporation expects to save $2 million on state sales taxes in Virginia by having the local industrial development authority in Loudon County act as its “general purchasing agent” in connection with a $50 million expansion in the county. State and local agencies are exempted from paying sales taxes. The Virginia Department of Taxation has yet to approve the arrangement.

NICE TRY . . . PP&L lost an argument in a Pennsylvania court last month over whether it had to pay state gross receipts taxes on interest received from customers on late payments on utility bills. The state gross receipts tax applies only to revenue from “sales of electricity.” The utility argued that interest is not technically electricity revenue. The state supreme court disagreed.

LOONY TUNES . . . The federal government offers a so-called section 29 tax credit as an inducement to look for fuel in unusual places. The credit is $1.052 per mmBtu for most qualifying fuels.

Two Pennsylvania gas producers claim they have “dual credit” gas. They argue they should be able to claim the credit twice on the same gas because the gas was certified by federal and state authorities as coming from both tight sands and Devonian shale. The case is before the US tax court.