Nuclear Decommissioning Tax Act of 1985

Nuclear Decommissioning Tax Act of 1985 - Amends the Internal Revenue Code to permit a deduction for amounts which are to be used to decommission a nuclear powerplant if the amounts are either: (1) deposited in a Nuclear Decommissioning Reserve Fund; or (2) recorded in an unfunded reserve on the financial books of account of the taxpayer during the taxable year.

Provides that the determination of whether the taxpayer uses the Reserve Fund or the unfunded reserve account shall be made by the applicable regulatory body that establishes the taxpayer's rates. Sets limits on the amounts which the taxpayer may pay into the fund or record in the unfunded reserve account.

Requires the taxpayer to include in gross income any amount distributed from the Reserve Fund or any unused balance in the unfunded reserve account which is not distributed or used to pay the cost of nuclear decommissioning of a powerplant.

Permits an additional deduction for any taxable year for the amount of the nuclear decommissioning costs with respect to which economic performance occurs during such taxable year.

Requires the taxpayer to obtain a ruling as to the amount of the deduction allowed for the Reserve Fund or recorded in the unfunded reserve account. Requires the Secretary of the Treasury to review, and revise if necessary, such amount at least once during the useful life of the nuclear powerplant.

Sets forth rules for the establishment and operation of a Nuclear Decommissioning Trust Fund or an unfunded reserve account.