March 17, 2014

SHOULD ENERGYSOLUTIONS PAY MORE TAXES ON CLIVE REVENUE?

By ExchangeMonitor

Utah should adopt a new radioactive waste tax structure that would reduce the risk of uncollected tax revenues, a state legislature’s audit recommended yesterday. Currently, EnergySolutions is taxed based on gross receipts at the company’s Clive, Utah disposal facility. However, if the state moved toward a tax based on curies, or a combination of curies and volumes, the state could gain tax revenue more in line with how EnergySolutions is operating. Utah “is distinct in that no other state has a private, vertically integrated company that owns and runs the site receiving the waste,” the audit committee reported. “Utah should have a tax solution that effectively accounts for these differences.” The report lists three options: Impose a straight tax based on millicurie rather than on gross receipts; Impose a hybrid tax based on both volume and millicurie; or, make no change to the tax, but require greater accountability by those paying the tax.

When EnergySolutions charges reduced Clive disposal rates to its other business units—like its Bear Creek processing facility in Tennessee or its ZionSolutions decommissioning project outside of Chicago—the company “can then decide what amount of revenue it wants to recognize in the state,” the report states. “The price disparity can reduce the revenue recognized in Utah and, thereby, reduce tax collections received by the state.” Mark Walker, spokesman with EnergySolutions, said yesterday: “We abide by all tax laws applicable to the disposal of the waste. … And we would welcome an audit by the state tax commission should they decide to do one.”

EnergySolutions is also able to minimize tax payments to the state by deciding when to volume reduce shipments coming in to Clive, the report states. The Utah legislature placed a 10 percent tax on processed waste coming to the Clive site, as opposed to only 5 percent on non-treated waste, to counteract reduced volumes that result from waste being processed and reduced prior to shipment. But since EnergySolutions charges by volume, lower volumes achieved through volume reduction or processing translate to lower revenue earned by EnergySolutions in Utah and, therefore, less tax revenue collected on gross receipts tax. In addition, the audit report states, no one besides EnergySolutions is able to verify that the company is correctly applying the 5 or 10 percent tax on waste shipments. “We are unable to obtain independent source documents that verified which shipments were processes or unprocessed,” the report states.

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