This notice provides guidance with respect to facilities that may be
financed with the proceeds of clean renewable energy bonds under § 54(a)
of the Internal Revenue Code (the Code). In addition, this notice provides
guidance with respect to the entities that may own facilities financed with
the proceeds of clean renewable energy bonds and the entities that may issue
clean renewable energy bonds. This notice supplements Notice 2005-98, 2005-52
I.R.B. 1211, which was published on December 27, 2005.
Section 1303 of the Energy Tax Incentives Act of 2005, Pub. L. No. 109-58,
added § 54 to the Code. In general, § 54 authorizes up
to $800,000,000 of tax credit bonds to be issued by qualified issuers to finance
certain renewable energy projects described in § 45(d) of the Code.
Section 54(a) provides that a taxpayer that holds a “clean renewable
energy bond” on one or more credit allowance dates of the bond occurring
during any taxable year is allowed as a nonrefundable credit against Federal
income tax for the taxable year an amount equal to the sum of the credits
determined under § 54(b) with respect to such dates. Section 54(d)
provides that a “clean renewable energy bond” means any bond issued
as part of an issue if: (1) the bond is issued by a qualified issuer pursuant
to an allocation by the Secretary to the issuer of a portion of the national
clean renewable energy bond limitation under § 54(f)(2); (2) 95
percent or more of the proceeds of the issue are to be used for capital expenditures
incurred by qualified borrowers for one or more qualified projects; (3) the
qualified issuer designates the bond for purposes of § 54 and the
bond is in registered form; and (4) the issue meets certain requirements described
in § 54(h) with respect to the expenditure of bond proceeds.
Section 54(j)(4) defines a “qualified issuer” as: (1) a
clean renewable energy bond lender (as defined in § 54(j)(2)); (2)
a cooperative electric company (as defined in § 54(j)(1)); or (3)
a governmental body. Section 54(j)(3) defines the term “governmental
body” as any State, territory, possession of the United States, the
District of Columbia, Indian tribal government, or any political subdivision
thereof. Section 54(j)(5) provides that a “qualified borrower”
is: (1) a mutual or cooperative electric company described in § 501(c)(12)
or § 1381(a)(2)(C); or (2) a governmental body. Section 54(d)(2)(A)
defines the term “qualified project” as any of the qualified facilities
described in §§ 45(d)(1) through (d)(9) (determined without
regard to any placed in service date) owned by a qualified borrower.
Notice 2005-98 solicits applications for allocations of the $800,000,000
clean renewable energy bond limitation and provides guidance on certain other
matters under § 54.
SECTION 3. TEMPORARY REGULATIONS
The Treasury Department and the Internal Revenue Service intend to issue
temporary and proposed regulations (the “Temporary Regulations”)
under § 54 to provide guidance to holders and issuers of clean renewable
energy bonds. It is anticipated that the Temporary Regulations will provide,
in part, as follows:
1. For purposes of § 54, the term “qualified project”
includes any facility owned by a qualified borrower that is functionally related
and subordinate (as determined under § 1.103-8(a)(3) of the Income
Tax Regulations) to any qualified facility described in §§ 45(d)(1)
through (d)(9) (determined without regard to any placed in service date) and
owned by such borrower.
2. For purposes of § 54, the term “political subdivision”
will have the same meaning as in § 1.103-1.
3. A clean renewable energy bond may be issued on behalf of a State
or political subdivision within the meaning of § 1.103-1(b) under
rules similar to those for determining whether a bond issued on behalf of
a State or political subdivision, constitutes an obligation of that State
or political subdivision for purposes of § 103.
4. For purposes of § 54, the term “qualified borrower”
includes an instrumentality of a State or political subdivision (as determined
for purposes of § 103).
SECTION 4. DRAFTING INFORMATION
The principal authors of this notice are Timothy L. Jones and Aviva
M. Roth of the Office of Associate Chief Counsel (Tax Exempt & Government
Entities). However, other personnel from the IRS and the Treasury Department
participated in its development. For further information regarding this notice,
contact Timothy L. Jones or Aviva M. Roth at (202) 622-3980 (not a toll-free
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