Nuclear power plant owners qualify potentially for tax credits of 1.8¢ a kilowatt hour on the electricity they produce | Norton Rose Fulbright
NUCLEAR POWER PLANT owners qualify potentially for tax credits of 1.8¢ a kilowatt hour on the electricity they produce, but must apply to the US government for an allocation. Tax credits are limited to plants with a total capacity of 6,000 megawatts.
The IRS explained in April how it plans to allocate the credits.
The agency set two deadlines. Projects must apply to the Nuclear Regulatory Commission for construction and operating licenses by December 31, 2007. This deadline will be extended until the NRC has received applications from at least 6,000 megawatts worth of plants. Then projects have another seven years — until January 31, 2014 — to apply for tax credits. The tax credit application must be sent to both the US Department of Energy and the IRS. Applicants will be informed by the end of 2014 whether they were awarded tax credits.
All plants whose applications are approved will share in credits. Thus, for example, if plants with a total capacity of 8,000 megawatts are approved, then each will be allowed to claim credits on three fourths of its electricity output. The IRS chose this approach at the request of the nuclear power industry, rather than rank projects and make full awards to plants with the highest rankings until the 6,000-megawatt cap is reached. The procedures for applications are in Notice 2006-40.
To qualify, a project must use a nuclear reactor design that was first approved for use by the Nuclear Regulatory Commission after 1993.
Construction must begin by January 2014 — before the government has informed projects whether they will be allowed tax credits. Construction is considered underway when safety-related concrete is poured for the nuclear reactor building. Each reactor is considered a separate project. The plant must be put into service no later than 2020.
The tax credits are claimed on the electricity output in the first eight years after a plant is put into service .However,no more than $750 million in total credits must be claimed. The cap is $125 million for each 1,000 in national megawatt limit that the IRS allocates to a project.
Twenty percent of US electricity is supplied currently from nuclear power plants. There are 113 such plants in operation in the United States. It takes approximately nine years to license and build a new plant. Nine companies or consortia are expected to apply in the next two years for licenses to build between 12 and 19 new nuclear reactors. These will be the first new nuclear plants built in the US in several decades.