SECTION 3. SCOPE

.01 In general. Only a taxpayer that meets both of the requirements of section 3.01(1) and (2) of this revenue procedure may choose to apply the NGSH Method.

(1) The taxpayer has a depreciable interest in natural gas transmission or dis

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tribution property described in section 4 of this revenue procedure.

(2) The taxpayer pays or incurs costs (other than costs described in section 3.03 of this revenue procedure) to maintain, repair, replace, or improve the particular property referenced in section 3.01(1) of this revenue procedure.

.02 Application to entities. The determination of whether a taxpayer satisfies the requirements of both section 3.01(1) and (2) of this revenue procedure is made separately with respect to each member of a consolidated group and with respect to each partnership, S corporation, or trust (other than a grantor trust).

.03 Exclusions. The NGSH Method does not apply to the following:

(1) The costs of property for the transmission, distribution, control, or storage of natural gas at a marine liquefied natural gas terminal capable of shipping or receiving liquid natural gas for import or export;

(2) The costs of enclosures or buildings suitable for occupation;

(3) The costs of non-linear property that is not specifically identified in Appendix A (for example, tools, fixtures, furniture, computer equipment, and other miscellaneous equipment);

(4) The costs of smart pipeline inspection gauges as defined in section 4.27 of this revenue procedure; and

(5) The costs of cleaning pipeline inspection gauges as defined in section 4.28 of this revenue procedure.