PLR 200707028: Two governmental solar projects denied bond allocations

Plain-English summary

An applicant requested Clean Renewable Energy Bond authority for two governmental solar energy facilities. IRC § 54 limited total allocations to $800 million and allocations for governmental borrowers to $500 million. Notice 2005-98 prioritized projects requesting smaller amounts. The IRS denied this application because smaller governmental requests had already exhausted the $500 million governmental limit.

Ruling snapshot

• Question: Could the applicant receive CREB authority for two governmental solar energy facilities?
• Outcome: Denied because smaller requests had exhausted the $500 million governmental allocation limit.
• Key authorities: IRC § 54(f)(1) and (2); Notice 2005-98, § 6.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224
Number: 200707028
Third Party Communication: None
Release Date: 2/16/2007
Date of Communication: Not Applicable
Index Number: 54.00-00
Person To Contact:

- -----------------------, ID No. -------------

                                                     Telephone Number:

------------------------------------- ---------------------

                                                     Refer Reply To:

                                                     CC:TEGE:EOEG:TEB

                                                     PRESP-142951-06
                                                     Date: November 13, 2006

     -

Dear ------------------

This letter is in response to your application for an allocation of authority to issue ---------
----------------in Clean Renewable Energy Bonds (CREBs) under section 54 of the Internal Revenue Code (the “Code”).

Section 54(f)(1) of the Code imposes a Limitation of $800,000,000 on the amount of CREBs which may be issued to finance qualified projects (the “Limitation”). Section 54(f)(2) provides that the Limitation is to be allocated by the Secretary of Treasury in such manner as the Secretary deems appropriate except that no more than
$500,000,000 of the Limitation may be allocated to finance qualified projects of qualified borrowers which are governmental bodies.

Section 6 of Notice 2005-98, 2005-52 I.R.B. 1211, provides that the Limitation will be allocated among qualified projects for which a share of such Limitation has been requested beginning with the project(s) requesting the smallest share (in dollar amount) and continuing with the project(s) requesting the next-smallest share until the total Limitation has been exhausted. However, in the event that $500,000,000 has been allocated to qualified projects of qualified borrowers that are governmental bodies, the remaining shares of the Limitation will be allocated, under the methodology described in the previous sentence, only to qualified projects of qualified borrowers that are not governmental bodies. For purposes of allocating the Limitation among projects, all qualified projects located at the same site and owned by the same qualified borrower are treated as a single project and each project is treated as requesting a single allocation.

An allocation of shares of the Limitation cannot be made with respect to the projects owned by the borrowers listed in Appendix A because such borrowers are governmental
PRESP-142951-06
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bodies and $500,000,000 has already been allocated to applications requesting a smaller share of the Limitation to finance qualified projects owned by qualified borrowers that are governmental bodies.

We appreciate your submission of the application for our consideration and encourage you to continue to pursue your plans for constructing a clean renewable energy project.

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

By: Timothy L. Jones
Senior Counsel
Tax-Exempt Bonds Branch
PRESP-142951-06
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APPENDIX A

Borrower Name Project Type Project Location Amount Requested 1 --------------------- Solar energy -------------------------------- ---------------
facility -----------

2 --------------------- Solar energy -------------------------------- --------------- facility --------------------------

Total
$-----------------