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We find that the underwater intrusion system is separate
property for purposes of TRA section 203(b)(1)(B). We disagree
with petitioner that Steelcase supports a finding that the
underwater intrusion system is entitled to an ITC under the self-
constructed property rule.
Although Steelcase acknowledges that a taxpayer may modify
construction plans and still qualify for an ITC for its self-
constructed property, we do not think that this case applies to
FPL’s underwater intrusion system. In Steelcase, the taxpayer
redesigned the “Corporate Development Center” in the early stages
of construction and before the building operated as the
corporation’s headquarters. Petitioner, however, redesigned the
underwater intrusion system after St. Lucie Units 1 and 2 became
operational.
St. Lucie was placed in service and functioned as a power
plant before the underwater intrusion system was redesigned and
installed; therefore, the redesigned system was not integral or
necessary to the operation of the plant. See Armstrong World
Indus., Inc. v. Commissioner, 974 F.2d at 434-435. Because the
redesigned underwater intrusion system was not essential for St.
Lucie to produce power, we find that the system constitutes
separate property. See Haw. Indep. Refinery, Inc. v. United
States, 697 F.2d at 1069; Consumers Power Co. v. Commissioner, 89
T.C. at 726. Because we have found that the redesigned
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