Nextera Energy, Inc. v. United States
| Decision Date | 22 March 2017 |
| Docket Number | Case No. 9:15-CV-80484-ROSENBERG/BRANNON |
| Parties | NEXTERA ENERGY, INC., et al., Plaintiffs, v. UNITED STATES OF AMERICA, Defendant. |
| Court | U.S. District Court — Southern District of Florida |
This matter is before the Court on Plaintiffs', Nextera Energy, Inc., et al., Motion for Partial Summary Judgment [DE 56] and Defendant United States of America's Motion for Summary Judgment [DE 57]. Both motions have been fully briefed. For the reasons set forth below, Defendant's Motion for Summary Judgment is granted and Plaintiffs' Motion for Partial Summary Judgment is denied.
The core facts of this case are not in dispute. Nextera Energy, Inc. is a business entity that owns Florida power companies. Those Florida power companies operate nuclear power plants. Nuclear power plants utilize fuel in the form of rods of enriched uranium. DE 56-2 at 5. Those rods are inserted into a nuclear reactor core and, upon insertion, a nuclear fission reaction occurs. Id. That nuclear reaction produces heat, which produces steam, which rotates a turbine, which creates electricity. Id. When the fuel reaches the end of its useful life, the fuel is highly radioactive and must be disposed of carefully. This suit is about the tax treatment of the costs to dispose of spent nuclear fuel—nuclear waste.1
The disposal of radioactive nuclear waste is costly and difficult. To address this difficulty, Congress passed the Nuclear Waste Policy Act in 1983 ("Act"). That Act assigned the responsibility for nuclear waste disposal to the Department of Energy ("DOE"). The DOE was entrusted with the responsibility of taking possession of nuclear waste, transporting it to a carefully prepared location, and storing the waste. The Act also imposed fees on nuclear power plant operators which those operators had to pay to the DOE. This case is about those fees.
Plaintiff Nextera2 filed the instant suit on April 14, 2015, seeking a tax refund in connection with payments it made to the DOE over many years. Nextera's payments to the DOE are the subject of each of Nextera's fourteen counts. Each count corresponds to a different tax year and each count is premised on the same section of the Internal Revenue Code: 26 U.S.C. § 172(f). After substantial discovery, the parties filed cross motions for summary judgment on July 15, 2016. Both motions for summary judgment focus on the same legal issue—the proper tax treatment of fees paid by Nextera to the DOE for nuclear waste disposal under 26 U.S.C. § 172(f). Because each of Nextera's counts is premised on Section 172(f), the motions before the Court—and the Court's interpretation of Section 172(f)—are dispositive of this case.
Summary judgment is appropriate if "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P.56(a). The existence of a factual dispute is not by itself sufficient grounds to defeat a motion for summary judgment; rather, "the requirement is that there be no genuine issue of material fact." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). A dispute is genuine if "a reasonable trier of fact could return judgment for the non-moving party." Miccosukee Tribe of Indians of Fla. v. United States, 516 F.3d 1235, 1243 (11th Cir. 2008) (citing Anderson, 477 U.S. at 247-48). A fact is material if "it would affect the outcome of the suit under the governing law." Id. (citing Anderson, 477 U.S. at 247-48).
In deciding a summary judgment motion, the Court views the facts in the light most favorable to the non-moving party and draws all reasonable inferences in that party's favor. See Davis v. Williams, 451 F.3d 759, 763 (11th Cir. 2006). The Court does not weigh conflicting evidence. See Skop v. City of Atlanta, 485 F.3d 1130, 1140 (11th Cir. 2007). Thus, upon discovering a genuine dispute of material fact, the Court must deny summary judgment. See id.
The moving party bears the initial burden of showing the absence of a genuine dispute of material fact. See Shiver v. Chertoff, 549 F.3d 1342, 1343 (11th Cir. 2008). Once the moving party satisfies this burden, "the nonmoving party 'must do more than simply show that there is some metaphysical doubt as to the material facts.'" Ray v. Equifax Info. Servs., LLC, 327 F. App'x 819, 825 (11th Cir. 2009) (quoting Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986)). Instead, "[t]he non-moving party must make a sufficient showing on each essential element of the case for which he has the burden of proof." Id. (citing Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986)). Accordingly, the non-moving party must produce evidence, going beyond the pleadings, to show that a reasonable jury could find in favor of that party. See Shiver, 549 F.3d at 1343.
Nextera's suit is premised upon one provision of the Internal Revenue Code: 26 U.S.C. § 172. Section 172 covers the tax treatment of net operating losses. A net operating loss, under the Code, is defined as an excess of deductions for any given tax year. In other words, a net operating loss exists when a taxpayer has more available deductions than the taxpayer is permitted to take. 26 U.S.C. § 172(c). When a taxpayer has excess deductions (net operating losses), the taxpayer may "carryover" the deductions to a future tax year or "carryback" the deductions to a prior year, provided that the carryback is limited to the two prior tax years. 26 U.S.C. § 172(b)(1)(A). Under special circumstances, however, a taxpayer may carryback losses further into the past than two years. For example, a taxpayer may carryback a "specified liability loss" to each of the ten tax years preceding the year of the loss. 26 U.S.C. § 172(b)(1)(C). A "specified liability loss" is defined in 26 U.S.C. § 172(f) and it is this provision that is at the center of the matter before the Court.
A specified liability loss includes the sum of any "amount allocable as a deduction . . . which is in satisfaction of a liability under Federal or State Law requiring . . . the decommissioning of a nuclear power plant (or any unit thereof)." 26 U.S.C. § 172(f)(1)(B). Section 172(f) does not define "the decommissioning of a nuclear power plant (or any unit thereof)" and the parties disagree as to the meaning of this term. Nextera argues that the fees it pays to the DOE for the DOE's disposal of nuclear waste qualify as decommissioning expenses under Section 172(f) and, because it is required to pay those fees pursuant to the Nuclear Waste Policy Act, its payment of fees to the DOE is required by federal law. Thus, Nextera argues that its payments to the DOE qualify for Section 172(f) carryback treatment.
In response, Defendant argues that Nextera's payments to the DOE are not equivalent to decommissioning costs and, as a result, Nextera is not entitled to Section 172(f) carryback treatment. The Court therefore considers: (A) the meaning of "decommissioning costs" under Section 172(f); (B) whether Nextera's payments to the DOE qualify as decommissioning expenses mandated by federal law; and (C) other arguments raised by the parties in the motions before the Court. The relevant portions of Section 172(f) are set forth below:
Both Nextera and Defendant argue that the plain meaning of Section 172(f) supports their respective positions, citing solely to dictionary definitions. The Court addresses this matter first, below. Second, the Court addresses the single regulation relevant to nuclear plant decommissioning costs, which again the parties argue supports their respective interpretations of Section 172(f). Finally, the Court addresses Nextera's citation to private letter rulings from the Internal Revenue Service in support of its interpretation of Section 172(f).
Section 172(f) permits a taxpayer to take a carryback deduction for "the decommissioning of a nuclear power plant (or any unit thereof)." Nextera argues that it should be allowed a carryback deduction under Section 172(f) for liabilities incurred in connection with the disposal of spent nuclear fuel rods. Nextera argues nuclear rods are decommissioned, just as a nuclear power plant or a nuclear reactor is decommissioned. Defendant argues that the fuel rods are not decommissioned—they are disposed of as waste.
Section 172(f) does not define "decommissioning." As a result,...
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