Firm Comments on Transfers of Property to Regulated Utilities

We would like to thank the members of the Department of Treasury and the Internal Revenue Service for meeting with us on September 21, 2015, to discuss our concerns regarding Internal Revenue Code § 118 and the safe harbor guidance issued in Notice 88-129,¹ as amended by Notice 2001-82,² (the "Safe Harbor").

At the meeting, we discussed clarifications to the Safe Harbor regarding: (i) long-term interconnection agreements; (ii) contractual arrangements; (iii) computation of the 5 percent test ("Five Percent Test") under the Safe Harbor; (iv) derivative transactions; and (v) related parties. It was suggested that we submit proposed language to you with our suggested clarifications, and provide you with our other comments.

To clearly reflect our clarifications to the Safe Harbor, we consolidated all of the amplifications and modifications made to Notice 88-129 by Notices 90-60 and 2001-82 in one document, and we then inserted our comments. Our comments relate to interconnection agreements, contractual arrangements, the Five Percent Test, derivative transactions, and related parties. This letter and the attached draft of the consolidated Notices reflect our clarifications and comments.

We have also included as an attachment a checklist of the various requirements for the Safe Harbor, the language from the existing Notices related to each requirement, and proposed revised language.

We appreciate your consideration of these issues and our clarifying language. Please feel free to reach out to either (or both) of us if you have any additional questions.

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² 2001-2 C.B. 619, amplifying and modifying Notice 88-129, 1988-2 C.B. 541, as amplified and modified by Notice 90-60, 1990-2 C.B. 345.