EPA rules - Tax issues concerning boiler MACT, utility MACT regulations 

January 10: Environmental Protection Agency (EPA) rules providing “maximum achievable control technology” (MACT) standards applicable to certain boilers (“Boiler MACT”) and power plants (“Utility MACT”) could raise some important tax issues that industry participants need to be aware of.
  • Boiler MACT generally requires certain mostly industrial boilers to meet specific emissions standards. To meet these standards, many coal-fired facilities will have to switch to natural gas as a compliance strategy.
  • Utility MACT places similar emissions standards on power plants, and most affected coal-fired plants will also have to switch to natural gas to comply with the standards.

In general, the implementation dates for facilities that would have to switch to natural gas to comply start in 2016 for both Boiler MACT and Utility MACT, notwithstanding certain exceptions, extensions, and delays that may apply.

For most of the affected facilities, conversion to natural gas will require changes, upgrades or new installation of equipment. In addition, the local gas utility will need to construct the necessary natural gas infrastructure.

Typically, the gas utility will require a reimbursement from the boiler or power plant operator for the costs incurred on the infrastructure construction work. Overall capital investment related to the conversion could be substantial depending on the size and scope of the operation and the number of boilers.

The reimbursement to the utility is likely to be a “contribution in aid of construction” under section 118(b)—and paid by the facility operator to the utility, is gross income in the hands of the utility and therefore subject to tax.

Read a January 2014 report [PDF 74 KB] prepared by KPMG LLP that considers the federal and state tax consequences.

©2014 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.

The KPMG logo and name are trademarks of KPMG International.

KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever.

The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

Direct comments, including requests for subscriptions, to us-kpmgwnt@kpmg.com.
For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at:

+ 1 202 533 4366

1801 K Street NW
Washington, DC 20006.

Share this

Share this


Current and future KPMG clients may subscribe to TaxNewsFlash email alerts.

Email your contact information.

Other TaxNewsFlash publications

TaxNewsFlash-United States by year