Nuclear-Waste Tax Case Battled at 11th Circuit

ATLANTA (CN) – With nearly $100 million in taxes on the line, the U.S. government urged the 11th Circuit on Wednesday to find that, when it comes to deductions, nuclear-waste disposal is not the same as decommissioning a nuclear plant.

“Not to be glib,” Justice Department attorney Ivan Dale said, “but if I rent an apartment, I have the obligation to get the waste out of the apartment before giving it over to the next renter. I may pay someone to move it out for me. But I can’t claim all of those fees I paid to the municipality every day I lived there as moving expenses.”

In Dale’s analogy, the tenant here is Nextera Energy, which operates several power companies in Florida that in turn operate nuclear power plants.

Nextera sued the United States in 2015 to get a tax refund on the hefty fees that it is required to pay the Department of Energy for its handling of nuclear waste.

The case turns on a provision of IRS code that allows taxpayers to carry back 10 years of excess tax deductions for a limited number of circumstances including limited liability loss. “Decommissioning a nuclear power plant (or any unit thereof)” is one such loss that the law mentions, but tax officials deny that nuclear-waste-disposal fees should qualify.

Nextera is pushing the federal appeals court here in Atlanta for a reversal after U.S. District Judge Robin Rosenberg ruled against it last year at summary judgment.

At Wednesday’s hearing before a three-judge panel, Morgan Lewis attorney David Salmons argued that Nextera is eligible for carry-back costs dating back to opening day of any power plant his client operates.

U.S. Circuit Judge Ronald Gilman, who is sitting on the panel by designation from the Sixth Circuit, pushed Salmons on this point.

“But from your definition, you’re decommissioning from the moment you open?” Gilman asked.

“The legal liability to fully decommission … arises from the moment you begin operating,” Salmons said.

Justice Department attorney Dale meanwhile offered another way to look at it.

“These fees are not decommissioning costs, they’re operational costs,” Dale said. “Both the IRS and nuclear regulations state these aren’t decommissioning costs. Those fees for the storage of spent fuel … was necessary.”

Gilman made a point to ask the attorney if other plant operators have brought claims similar to those of Nextera.

“No, it’s entirely novel,” Dale said.

The judge also noted that fees being paid here are distinct from other disposal costs.

“But the nuclear waste is not just gone,” Gilman said. “It will be around for thousands of years.”

Nextera’s tax-refund claim is said to be worth nearly $98 million.

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