PLR 200551019: Earlier bond ruling amended to remove a fixed power capacity figure

Plain-English summary

A company asked the IRS to change a 1983 private letter ruling about bonds financing a public issuer's interest in an energy project. The earlier ruling contained a formula limiting the energy the company could receive, and the company asked to remove or amend a specific numerical reference to the project's nameplate capacity. The IRS replaced that sentence with one that retains the formula but removes the fixed megawatt figures. It said every other provision of the earlier ruling remained the same. This letter changes the wording of the prior ruling; it does not set out a new tax analysis.

Ruling snapshot

• Question: Would the IRS remove the specific nameplate capacity figures from its earlier bond ruling?
• Outcome: Approved. The IRS replaced the sentence and left the rest of the prior ruling intact.
• Key authorities: IRC § 103(b) of the 1954 Code, as cited in the letter.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224
Number: 200551019
Third Party Communication: None
Release Date: 12/23/2005
Date of Communication: Not Applicable
Index Number: 103.06-08 R 1986
Person To Contact:
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Telephone Number:
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Refer Reply To:
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CC:TEGE:EOEG:TEB
PLR-140975-05
Date:
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August 9, 2005
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Legend

Issuer = -----------------------------------------

Company = ------------------------------------------

Project = ------------------------------------------------------------------

Dear ---------------:

This letter responds to the Company’s letter dated July 18, 2005, requesting a modification of ruling letter dated April 8, 1983, Private Letter Ruling 8327090 (the “Prior Letter Ruling”) issued to Company. The Prior Letter Ruling addressed whether obligations to be issued by Issuer to finance the Issuer’s 80 percent undivided interest in the Project were industrial development bonds as defined in section 103(b) of the Internal Revenue Code of 1954 (the “Code”).

Company requests that we either amend or delete the specific numerical reference to the nameplate capacity of the Project in the Prior Letter Ruling. Accordingly, the Prior Letter Ruling is modified by deleting the following sentence:

However, Company’s right to receive 37.5 percent of Issuer’s 80 percent share will be suspended (although Company will have to continue making payments) if and when the receipt by Company of any additional amount of energy from Issuer would result in Company having received in excess of 25 percent of the product of (x) the nameplate capacity of Issuer’s 80 percent undivided interest in the Project, 979.2 MW (80 percent of 1224 MW), and (y) the number of years (including fractions) from the date

PLR-140975-05
2

Company first takes energy under the Agreement until the latest maturity date of any Debt Obligation.

and inserting in its place the following sentence:

However, Company’s right to receive 37.5 percent of Issuer’s 80 percent share will be suspended (although Company will have to continue making payments) if and when the receipt by Company of any additional amount of energy from Issuer would result in Company having received in excess of 25 percent of the product of (x) the nameplate capacity of Issuer’s 80 percent undivided interest in the Project, and (y) the number of years (including fractions) from the date Company first takes energy under the Agreement until the latest maturity date of any Debt Obligation.

All of the other provisions of the Prior Letter Ruling remain the same.

Sincerely,
Assistant Chief Counsel
(Exempt Organizations/Employment
Tax/Government Entities)

By: ________
Timothy L. Jones
Senior Counsel
Tax-Exempt Bond Branch