IRS Releases Indian Coal Credit Inflation Adjustment Factor

Credit for Indian Coal Production and Inflation Adjustment Factor for Calendar Years 2018 and 2019

This notice publishes the inflation adjustment factor for calendar years 2018 and 2019 for the Indian coal production credit under section 45 of the Internal Revenue Code. The 2018 inflation adjustment factor is used in determining the availability of the credit and applies to calendar year 2018 sales of Indian coal produced in the United States or a possession thereof. The 2019 inflation adjustment factor is used in determining the availability of the credit and applies to calendar year 2019 sales of Indian coal produced in the United States or a possession thereof. The inflation adjustment factor for Indian coal for calendar years 2018 and 2019 was published in the Federal Register on January 21, 2020. Section 128 of Division Q of the Further Consolidated Appropriations Act, 2020 (Pub. L. No. 116-94) extends the cred-it period for the Indian coal production credit from a 12-year period beginning on January 1, 2006, to a 15-year period beginning on January 1, 2006. This pro-vision is effective for coal produced in the United States or a possession thereof after December 31, 2017.

BACKGROUND

For calendar years 2018 and 2019, section 45(e)(10)(A) provides in the case of a producer of Indian coal, the credit determined under section 45 for any tax-able year is an amount equal to the applicable dollar amount per ton of Indian coal (i) produced by the taxpayer at an Indian coal production facility during the 15-year period beginning on January 1, 2006, and (ii) sold by the taxpayer (I) to an unrelated person, and (II) during such 15-year period and such taxable year. Section 45(e)(10)(B)(i) defines “applicable dollar amount” for any taxable year as (I) $1.50 in the case of calendar years 2006 through 2009, and (II) $2.00 in the case of calendar years beginning after 2009.

Section 45(d)(10) defines “Indian coal production facility” as a facility that produces Indian coal. Section 45(c)(9) defines “Indian coal” as coal which is produced from coal reserves which, on June 14, 2005 — (i) were owned by an Indian tribe, or (ii) were held in trust by the Unit-ed States for the benefit of an Indian tribe or its members.

Section 45(e)(2)(B) defines the inflation adjustment factor for a calendar year as a fraction the numerator of which is the GDP implicit price deflator for the preceding calendar year and the denominator of which is the GDP implicit price deflator for the calendar year 1992. The term “GDP implicit price deflator” means the most recent revision of the implicit price deflator for the gross domestic product as computed and published by the Department of Commerce before March 15 of the calendar year.

Under section 45(e)(10)(B)(ii), in the case of any calendar year after 2006, each of the dollar amounts under section 45(e)(10)(B)(i) shall be equal to the product of such dollar amount and the inflation adjustment factor determined under section 45(e)(2)(B) for the calendar year, except that section 45(e)(2)(B) shall be applied by substituting 2005 for 1992.

INFLATION ADJUSTMENT FACTOR

The inflation adjustment factor for calendar year 2018 for Indian coal production is 1.2330. The inflation adjustment factor for calendar year 2019 for Indian coal is 1.2627.

CREDIT AMOUNT FOR INDIAN COAL PRODUCTION

The credit for Indian coal production for calendar year 2018 under section 45(e)(10)(B) is $2.466 per ton on the sale of Indian coal. The credit for Indian coal production for calendar year 2019 under section 45(e)(10)(B) is $2.525 per ton on the sale of Indian coal.

DRAFTING AND CONTACT INFORMATION

The principal author of this notice is Charles Hyde of the Office of Associate Chief Counsel (Passthroughs & Special Industries). For further information regarding this notice contact Mr. Hyde at (202) 317-6853 (not a toll-free number).