Determination 200708056: Trash combustion project denied renewable energy bond authority

Plain-English summary

An issuer requested Clean Renewable Energy Bond authority for a trash combustion facility. The IRS denied the allocation because the application failed to demonstrate that one or more requirements of IRC § 54, Notice 2005-98, or Notice 2006-7 had been met. The letter described the program’s $800 million overall limit and $500 million limit for governmental borrowers, along with the rule allocating authority to smaller requests first. It did not identify the particular eligibility requirement the application failed to establish. The stated reason for this denial was the application’s failure to demonstrate compliance.

Ruling snapshot

• Question: Could the issuer receive Clean Renewable Energy Bond authority for its trash combustion facility?
• Outcome: Denied because the application did not demonstrate compliance with one or more program requirements.
• Key authorities: IRC § 54; Notices 2005-98 and 2006-7.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224
Number: 200708056
Third Party Communication: None
Release Date: 2/23/2007
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-145557-06
                                                      Date:
     -
                                                      November 13, 2006

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

This letter is in response to your application for an allocation of authority to issue $-------
----------------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 project owned by the borrower listed in Appendix A because the application failed to
PRESP-145557-06
2

demonstrate that one or more of the requirements of Notice 2005-98, Notice 2006-7, or section 54 of the Code have been met.

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.

This determination is directed only to the applicant named above. Section 6110(k)(3) of the Code provides that it may not be used or cited as precedent.

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-145557-06
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APPENDIX A

Borrower Name Project Type Project Location Amount
Requested
1 ------------------------------- Trash
-------------------------------- $-------------
------------------ combustion ----------
facility