IRS Establishes Advanced Energy Project Program.

Part III -- Administrative, Procedural, and Miscellaneous

SECTION 1. PURPOSE

This notice establishes the qualifying advanced energy project program under § 48C(d) of the Internal Revenue Code and announces an initial allocation round of the qualifying advanced energy project credit under the qualifying advanced energy project program. The purpose of the qualifying advanced energy project program is to encourage taxpayers to re-equip, expand or establish manufacturing facilities for the production of certain energy related property.

SECTION 2. BACKGROUND

.01 Section 46 provides that the amount of the investment credit for any taxable year is the sum of the credits listed in § 46. That list includes the qualifying advanced energy project credit.

.02 The qualifying advanced energy project credit is provided under § 48C. Section 48C(a) provides that the qualifying advanced energy project credit for a taxable year is an amount equal to 30 percent of the qualified investment (as defined in § 48C(b)) for that taxable year with respect to the taxpayer's qualifying advanced energy project (as defined in § 48C(c)(1)). The qualifying advanced energy project credit with respect to any project for all taxable years may not exceed the amount of credit allocated to the project under section 5 of this notice.

.03 Section 48C(b)(1) provides that the qualified investment for any taxable year is the basis of eligible property that is placed in service by the taxpayer during such taxable year and is part of a qualifying advanced energy project.

.04 Section 48C(d)(1)(B) provides that the aggregate credits allowed under the qualifying advanced energy project program may not exceed $2.3 billion.

.05 Section 48C(d)(3) specifies the criteria that must be considered in determining which qualifying advanced energy projects are certified under § 48C(d).

.06 The at-risk rules in § 49 and the recapture and other special rules in § 50 apply to the qualifying advanced energy project credit. Further, the qualifying advanced energy project credit generally is allowed in the taxable year in which the eligible property (as defined in § 48C(c)(2)) is placed in service (as defined in section 4.04 of this notice) by the taxpayer. Pursuant to § 48C(d)(2)(C), a taxpayer that receives a certification under § 48C(d)(2) has 3 years from the date of issuance of certification to place the qualifying advanced energy project in service. If the taxpayer does not place the project in service by the end of that period, the certification is no longer valid. The Internal Revenue Service (Service) has no authority to extend that period.

SECTION 3. ESTABLISHMENT OF THE QUALIFYING ADVANCED ENERGY PROJECT PROGRAM

Section 48C(d)(1) provides that the Secretary of the Treasury or his delegate (the Secretary), in consultation with the Secretary of Energy, shall establish a qualifying advanced energy project program to consider and issue certifications for qualified investments eligible for the credit to qualifying advanced energy project sponsors. The Treasury Department and the Service hereby establish the qualifying advanced energy project program under the rules set forth in sections 5 through 12 of this notice.

SECTION 4. DEFINITIONS

The following definitions apply for purposes of § 48C and this notice:

.01 Qualifying Advanced Energy Project. A qualifying advanced energy project is a project that meets the following requirements:

(1) the project re-equips, expands or establishes a manufacturing facility (as defined in section 4.05 of this notice) for the production of specified advanced energy property or property that, after further manufacture, will become specified advanced energy property;

(2) the Service has certified pursuant to § 48C(d)(2) that part or all of the qualified investment in the project is eligible for a credit under § 48C; and

(3) the project does not produce any property which is used in the refining or blending of any transportation fuel (other than renewable fuels) (i.e., a qualifying advanced energy project can produce property which is used in the refining or blending of any transportation fuel only if the property is used solely in the refining or blending of transportation fuels that are renewable fuels).

.02 Specified Advanced Energy Property. Specified advanced energy property means any of the following:

(1) property designed for use in the production of energy from the sun, wind, geothermal deposits (within the meaning of § 613(e)(2)), or other renewable resources;

(2) fuel cells, microturbines, or an energy storage system for use with electric or hybrid-electric motor vehicles;

(3) electric grids to support the transmission of intermittent sources of renewable energy, including property for the storage of such energy;

(4) property designed to capture and sequester carbon dioxide and sequester carbon dioxide emissions;

(5) property designed to refine or blend renewable fuels (but not fossil fuels) or to produce energy conservation technologies (including energy-conserving lighting technologies and smart grid technologies);

(6) new plug-in electric drive motor vehicles (as defined by § 30D), qualified plug-in electric vehicles (as defined by § 30(d)), or components that are designed specifically for use with such vehicles, including electric motors, generators, and power control units or;

(7) other property designed to reduce greenhouse gas emissions as may be determined by the Service.

.03 Eligible Property. Eligible property is any property (other than a building or its structural components) that meets the following requirements:

(1) The property is necessary for the production of specified advanced energy property described in § 48C(c)(1)(A)(i) or section 4.02 of this notice.

(2) The property is:

(a) tangible personal property; or

(b) other tangible property (not including a building or its structural components) that is used as an integral part of the qualifying advanced energy project.

(3) Depreciation (or amortization in lieu of depreciation) is allowable with respect to the property.

.04 Placed In Service. For purposes of § 48C, property is placed in service in the taxable year in which the property is placed in a condition or state of readiness and availability for a specifically assigned function. See § 1.46-3(d)(1)(ii) of the Income Tax Regulations. Thus, a qualifying advanced energy project is placed in service in the taxable year in which the project is placed in a condition or state of readiness and availability for its intended purpose. Eligible property (as defined in § 48C(c)(2)) that is a part of the project is placed in service in the taxable year in which the property is placed in a condition or state of readiness and availability for its intended purpose.

.05 Manufacturing Facilities. For purposes of § 48C, manufacturing facilities are facilities that make, or process raw materials into, finished products (or accomplish any intermediate stage in that process).

.06 Advanced Energy Property Designed To Reduce Greenhouse Gas Emissions. The Secretary may determine that a property is designed to reduce greenhouse gas emissions in published guidance or in the letter notifying a taxpayer that the Service has accepted the taxpayer's application for § 48C certification with respect to the property.

SECTION 5. QUALIFYING ADVANCED ENERGY PROJECT PROGRAM

.01 In General. The Service will consider a project under the qualifying advanced energy project program only if the U.S. Department of Energy (DOE) provides a recommendation and ranking for the project (DOE recommendation). DOE will provide a recommendation and ranking only if it determines that the project has a reasonable expectation of commercial viability and merits a recommendation based on the criteria in § 48C(d)(3)(B). Accordingly, a taxpayer must submit, for each project that it sponsors: (1) a preliminary application and a final application for recommendation by DOE (application for DOE recommendation), and (2) an application for certification under § 48C(d)(2) by the Service (application for § 48C certification). Certifications will be issued and credits will be allocated to projects in annual allocation rounds. The initial allocation round will be conducted in 2009-2010, and if necessary, an additional allocation round will be conducted in 2010-2011.

.02 Program Specifications.

(1) The Service determines the amount of the qualifying advanced energy project credit allocated to a qualifying advanced energy project at the time the Service accepts the application for certification for that project in accordance with section 5.02(8) of this notice (see section 6 of this notice for the requirements applicable to the application for DOE recommendation and the application for § 48C certification).

(2) The DOE recommendations will include a ranking of projects in descending order (that is, first, second, third, etc.). The project receiving the highest ranking (that is, first) will be allocated the full amount of credit requested before any credit is allocated to a lower-ranked project. The amount of credit allocated to a project reduces the amount of credit available to lower-ranked projects. The same process will apply to the second and lower-ranked projects until the amount available for allocation is exhausted. DOE will recommend and rank projects only to the extent necessary to exhaust the amount available for allocation.

(3) If the amount available for allocation is not fully allocated in the 2009-2010 allocation round, a similar allocation round will be conducted in 2010-2011. The Service will announce the results after the close of each allocation round.

(4) For each allocation round there will be an annual application period during which a taxpayer may file its application for certification. The Service will consider a project in an allocation round only if the application for certification for the project is submitted during the application period for that round and the DOE provides the DOE recommendation for the project.

(5) For the 2009-2010 allocation round, the application period for certification begins on August 14, 2009, and ends on December 16, 2009. Any completed application for certification submitted to the Service after August 13, 2009, and before December 17, 2009, will be deemed to be submitted by the taxpayer on December 16, 2009.

(6) For the 2009-2010 allocation round, a preliminary application for DOE recommendation must be submitted by September 16, 2009. A final application for DOE recommendation must be submitted by October 16, 2009. If a final application for DOE recommendation is received on or before October 16, 2009, DOE will determine the feasibility of the project and (for projects determined to be feasible) provide the DOE recommendation to the Service by December 16, 2009. See section 6.02 of this notice and Appendix B to this notice for the information required to be submitted to DOE in an application for DOE recommendation. Also, see Appendix B to this notice for a discussion relating to the process for applying for DOE recommendation and the instructions and address for filing the preliminary and final applications for DOE recommendation.

(7) For purposes of determining the timeliness of submission of applications, § 7502 shall apply in determining the timeliness of any application for § 48C certification or DOE recommendation.

(8) For the 2009-2010 allocation round, the Service will accept or reject the taxpayer's application for § 48C certification by January 15, 2010, and will notify the taxpayer, by letter, of its decision. If the application is accepted, the date of this letter will be treated as the acceptance date.

(9) If the taxpayer's application for § 48C certification is accepted, the acceptance letter will state the amount of the credit allocated to the project. If a credit is allocated to a taxpayer's project, the taxpayer will be required to execute an agreement in the form set forth in Appendix A to this notice. For credits allocated in the 2009-2010 allocation round, the taxpayer must execute and return the agreement to the Service by March 15, 2010, at the appropriate address listed in section 6.04 of this notice or listed in later guidance published in the Internal Revenue Bulletin. The Service will execute and return the agreement to the taxpayer by April 16, 2010. The executed agreement applies only to the taxpayer who signed the agreement. Any successor in interest must execute a new agreement with the Service no later than the due date (including extensions) of the successor in interest's Federal income tax return for the taxable year in which the transfer occurs. If the successor in interest does not execute a new agreement, the following rules apply:

(a) In the case of an interest acquired at or before the time the qualifying advanced energy project is placed in service, any credit allocated to the project will be fully forfeited (and rules similar to the recapture rules of § 50(a) apply with respect to qualified progress expenditures); and

(b) In the case of an interest acquired after the qualifying advanced energy project is placed in service, the project ceases to be investment credit property and the recapture rules of § 50(a) (and similar rules with respect to qualified progress expenditures) apply.

.03 For qualifying advanced energy projects that re-equip or expand a manufacturing facility, the taxpayer's qualified investment is limited to property that re-equips or expands the facility to produce specified advanced energy property listed in section 4.02 of this notice.

.04 The qualifying advanced energy project credit will not be allocated to a project with respect to any qualified investment for which a credit is allowed under § 48, 48A, or 48B, or for which a payment is received under § 1603 of the American Recovery and Reinvestment Tax Act of 2009, Division B of Pub. L. 111-5, 123 Stat 115.

SECTION 6. APPLICATIONS FOR DOE RECOMMENDATION AND § 48C CERTIFICATION

.01 In General. An application for DOE recommendation and a separate application for § 48C certification must be submitted for each project that a taxpayer sponsors. If an application for DOE recommendation does not include all of the information required by section 6.02 of this notice and meet the requirements in sections 8.01 and 8.02 of this notice, DOE may decline to consider the application. If an application for § 48C certification does not include all of the information listed in section 6.03 of this notice and meet the requirements in sections 8.01 and 8.02 of this notice, the Service will not consider the application.

.02 Information Required in the Application for DOE Recommendation. A preliminary application and final application for DOE recommendation must include the information as requested in Appendix B to this notice.

.03 Information To Be Included in the Application for § 48C Certification.

An application for certification must include all of the following:

(1) The name, address, and taxpayer identification number of the taxpayer. If the taxpayer is a member of an affiliated group filing consolidated returns, the taxpayer must also provide the name, address, and taxpayer identification number of the common parent of the group.

(2) The name, telephone number, email address, and fax number of a contact person. For such person, attach a properly executed power of attorney, preferably on Form 2848, Power of Attorney and Declaration of Representative.

(3) One electronic version on a CD of the completed application for DOE recommendation submitted with respect to the project in accordance with section 6.02 of this notice.

.04 Instructions and Address for Filing § 48C Application. Applications for certification should be marked: APPLICATION FOR § 48C CERTIFICATION. There is no user fee for these applications. Taxpayers may submit their application by U.S. mail, designated private delivery service (as prescribed in § 7501), or hand delivery (between the hours of 8 a.m. and 4 p.m. Central time, Monday through Friday) to:

.01 In General. Section 48C(d)(2)(B) provides that a taxpayer shall have 1 year from the date of acceptance of the § 48C application during which to provide evidence that the requirements of the certification have been met. Section 48C(d)(2)(C) provides that a taxpayer that receives a certification has 3 years from the date of issuance of the certification to place the project in service and that the certification is void if the project is not placed in service by the end of that three-year period.

.02 Requirements for Certification.

(1) Within 1 year from the acceptance date (as determined in section 5.02(8) of this notice), the taxpayer must submit to the Service documentation establishing the following:

(a) The taxpayer has received all federal, state, and local permits, including environmental authorization or reviews necessary to commence construction of the project.

(b) The taxpayer has completed all steps that must be accomplished during the 1-year period beginning on the acceptance date if the project is to be placed in service before the end of the 3-year period beginning on the date of issuance of the certification (assuming such certification will be issued on the one-year anniversary of the acceptance date).

(2) The taxpayer must also comply with the requirements of sections 8.01 and 8.02 of this notice. The taxpayer should mark the package, "SECTION 48C CERTIFICATION REQUIREMENTS" and send it to the appropriate address listed in section 6.04 of this notice or listed in later guidance published in the Internal Revenue Bulletin.

.03 Service's Action on Certification. After receiving the submission described in section 7.02 of this notice, the Service will decide whether or not to certify the project and will notify the taxpayer, by letter, of that decision. If the Service certifies the project, the date of this letter is the date of issuance of the certification.

SECTION 8. OTHER REQUIREMENTS

.01 Signature. Each submission under sections 6 and 7 of this notice must be signed and dated by the taxpayer. A stamped signature or faxed signature is not permitted.

.02 Penalties of Perjury Statement.

(1) Each submission under sections 6 and 7 of this notice must be accompanied by the following declaration: "Under penalties of perjury, I declare that I have examined this submission, including accompanying documents, and, to the best of my knowledge and belief, all of the facts contained herein are true, correct, and complete."

(2) The declaration must be signed and dated by the taxpayer. The person signing for the taxpayer must have personal knowledge of the facts. Further, the declaration must be signed by a person authorized to bind the taxpayer such as an officer on behalf of a corporation, a general partner on behalf of a state-law partnership, a member-manager on behalf of a limited liability company, a trustee on behalf of a trust, and the proprietor in the case of a sole proprietorship. If the taxpayer is a member of an affiliated group filing consolidated returns, the declaration also must be signed by a duly authorized officer of the common parent of the group. A stamped signature or faxed signature is not permitted.

.03 Significant Change in Plans. The taxpayer must inform the Service if the plans for the project change in any significant respect from the plans set forth in the applications for § 48C certification and DOE recommendation. A significant change is any change that a reasonable person would conclude might have influenced DOE in recommending or ranking the project or the Service in accepting the project application had they known about the change when they were considering the application. Any significant change to the plans set forth in the applications will have the following effects:

(1) If the Service is informed of the change after the date on which the final applications for DOE recommendation were due for the allocation round under section 5.02(6) of this notice and before the Service accepts or rejects the taxpayer's application for certification under section 5.02(8) of this notice, the Service will not consider the project during the allocation round; and

(2) If the Service is informed of the change after it has accepted the taxpayer's application for certification, any allocation or certification based on that acceptance is void.

.04 Effect of an Acceptance, Allocation, or Certification. An acceptance, allocation, or certification by the Service under this notice is not a determination that a project is eligible for the qualifying advanced energy project credit under § 48C or that any property that is part of the project is an eligible property under § 48C(c)(2). The Service may, upon examination (and after any appropriate consultation with DOE), determine that the project does not qualify for this credit or that the property is not an eligible property for purposes of this credit.

.05 No Right to a Conference or Appeal. A taxpayer does not have a right to a conference relating to any matters under this notice. Further, a taxpayer does not have a right to appeal the decisions made under this notice (including the acceptance or rejection of the application for DOE recommendation or § 48C certification, the amount of credit allocated to the project, or whether or not to certify the project) to any official of DOE or the Service.

SECTION 9. FUTURE ALLOCATION ROUNDS

.01 2010-2011 Allocation Round. If, after the allocation round in 2009-2010, the entire credit under the qualifying advanced energy project is not fully subscribed (that is, the aggregate credit for the program has not been fully allocated), the Service will conduct an additional allocation round in 2010-2011. Future guidance will prescribe the procedures applicable to applications in the 2010-2011 allocation round.

.02 Review and Redistribution of Credits. Pursuant to § 48C(d)(4)(A), the Service will review credits allocated under § 48C not later than February 17, 2013. Under § 48C(d)(4)(B), credits available under § 48C(d)(1)(B) may be reallocated if (i) there is an insufficient quantity of qualifying applications for certification pending at the time of the review, or (ii) any certification made pursuant to § 48C(d)(2) has been revoked pursuant to § 48C(d)(2)(B). If credits under § 48C(d) are available for reallocation, § 48C(d)(4)(C) authorizes the Service to conduct an additional program for applications for certification. Future guidance will prescribe the procedures applicable to applications in this program.

.03 Reduction or forfeiture of allocated credits. Under the agreement set forth in Appendix A to this notice, the qualifying advanced energy project credits allocated under section 5 of this notice will be reduced or forfeited in certain situations. A taxpayer must notify the Service of the amount of any reduction or forfeiture required under the agreement. This notification must be sent to the appropriate address listed in section 6.04 of this notice or listed in later guidance published in the Internal Revenue Bulletin. The amount of any reduction or forfeiture of the allocated credits will be returned and included in the aggregate credit remaining to be allocated in the 2010-2011 allocation round (if the reduction or forfeiture occurs before that allocation round) and under the procedures prescribed pursuant to section 9.02 of this notice (if the reduction or forfeiture occurs after the 2010-2011 allocation round).

SECTION 10. QUALIFIED PROGRESS EXPENDITURES

.01 Section 48C(b)(2) provides that rules similar to the rules of § 46(c)(4) and (d) (as in effect on the day before the enactment of the Revenue Reconciliation Act of 1990) shall apply for purposes of § 48C. Former § 46(c)(4) and (d) provided the rules for claiming the investment credit on qualified progress expenditures (as defined in former § 46(d)(3)) made by a taxpayer during the taxable year for the construction of progress expenditure property (as defined in former § 46(d)(2)).

.02 In the case of self-constructed property (as defined in former § 46(d)(5)(A)), former § 46(d)(3)(A) defined qualified progress expenditures to mean the amount that is properly chargeable (during the taxable year) to the capital account with respect to that property. With respect to a qualifying advanced energy project that is self-constructed property, amounts paid or incurred are chargeable to the capital account at the time and to the extent they are properly includible in computing basis under the taxpayer's method of accounting (for example, after applying the requirements of § 461, including the economic performance requirement of § 461(h)).

.03 To claim the advanced energy project credit on the qualified progress expenditures paid or incurred by a taxpayer during the taxable year for construction of a qualifying advanced energy project, the taxpayer must make an election under the rules set forth in § 1.46-5(o) of the Income Tax Regulations. A taxpayer may not make the qualified progress expenditures election for a qualifying advanced energy project until the taxpayer has received an acceptance letter for the project under section 5.02(8) of this notice.

.04 If a taxpayer makes the qualified progress expenditures election pursuant to section 10.03 of this notice, rules similar to the recapture rules in § 50(a)(2)(A) through (D) apply. In addition to the cessation events listed in § 50(a)(2)(A), examples of other events that will cause the project to cease being a qualifying advanced energy project are:

(1) Failure to receive a certification for the project in accordance with section 7 of this notice;

(2) Failure to place the project in service within 3 years from the date of issuance of the certification under section 7.01 of this notice; or

(3) A significant change to the plans for the project as set forth in the applications for § 48C certification or DOE recommendation if, under section 8.03 of this notice, the Service's acceptance of the project is void as a result of the change.

SECTION 11. DISCLOSURE OF INFORMATION

.01 Announcement. Section 48C(d)(5) provides that the Service shall, upon making a certification, publicly disclose the identity of the applicant and the amount of the credit certified with respect to such applicant. Accordingly, the Service will publish the results of the allocation process, and disclose the following information in the event a qualifying advanced energy project credit is allocated to the taxpayer's project: (a) the name of the taxpayer and (b) the amount of the qualifying advanced energy project credit allocated to the project.

.02 In General. An application for DOE recommendation, an application for § 48C certification, any other documentation submitted by the taxpayer pursuant to section 7.02 of this notice, and any documentation generated by the Service or DOE as part of this process are return information subject to § 6103. Except for the items of information that § 48C(d)(5) requires the Service to make available to the public, the other material remains the applicant's confidential return information, which is exempt from disclosure under the Freedom of Information Act (FOIA), 5 USC § 552(b)(3), in conjunction with § 6103. Other FOIA exemptions may also apply. For example, FOIA includes exemptions for trade secrets and commercial or financial information (5 USC § 552 (b)(4)), as well as personal information (5 USC § 552(b)(6)).

.03 FOIA requests. Anyone interested in submitting a request for records under the FOIA with respect to the qualifying advanced energy project program under § 48C (including a request for records relating to the application for DOE recommendation) should direct a request that conforms to the Service's FOIA regulations, found at 26 C.F.R. § 601.702, to the following address:

This notice is effective August 14, 2009.

SECTION 13. PAPERWORK REDUCTION ACT

The collection of information contained in this notice has been reviewed and approved by the Office of Management and Budget (OMB) in accordance with the Paperwork Reduction Act (44 U.S.C. § 3507) under control number 1545-2151.

An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number.

The collections of information in this notice are in sections 5, 6, 7, 8, and Appendix B of this notice. This information is required to obtain an allocation of qualifying advanced energy project credits. This information will be used by the Service to verify that the taxpayer is eligible for the qualifying advanced energy project credits. The collection of information is required to obtain a benefit. The likely respondents are business or other for-profit institutions.

The estimated total annual reporting burden is 110 hours.

The estimated annual burden per respondent varies from 70 to 150 hours, depending on individual circumstances, with an estimated average of 110 hours. The estimated number of respondents is 1000.

The estimated annual frequency of responses is on occasion.

Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and return information are confidential, as required by 26 U.S.C. § 6103.

SECTION 14. DRAFTING INFORMATION

The principal author of this notice is Philip Tiegerman of the Office of Associate Chief Counsel (Passthroughs & Special Industries). For further information regarding this notice contact Philip Tiegerman at (202) 622-3110 (not a toll-free number). For further information regarding the application for certification, the documentation to be submitted to the Service establishing that the requirements of § 48C(d)(2) are satisfied, and the issuance of the certification that the requirements of § 48C(d)(2) are satisfied, contact Tina Meaux, Executive Assistant, Office of the Industry Director, Natural Resources and Construction, at (713) 209-3615 (not a toll-free number).