Ezel / IRS Rulings / 200708061

Determination 200708061: Bond authority granted for some renewable projects and limited or denied for others

Number
200708061
Outcome
Mixed outcome
Document type
Determination Letter
IRS subject
Clean Renewable Energy Bonds
Topics
Income and deductions
Code sections
§ 45, § 54
Ruling dated
November 13, 2006
Publicly released
February 23, 2007
Source
View Official PDF

Apply this to your situation

This page covers one taxpayer's determination, issued in 2007, which can't be cited as precedent. Ask about your situation and see what the current Code and IRS guidance say, with citations.

Currency note: this determination was released in 2007
Statutory amendments, regulation changes, court decisions, or later IRS guidance may have changed the analysis since then. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, threshold, or position mentioned here.
Not precedent. Under 26 U.S.C. § 6110(k)(3), this written determination may not be used or cited as precedent. It resolved one taxpayer's situation on its specific facts, and identifying details were redacted by the IRS before release. The official IRS release (linked on this page as a PDF) is the authoritative source.
About this page: The plain-English summary and ruling snapshot below were written by Ezel based on the official IRS release. The full text is the IRS's own document.
View official IRS release (PDF)

Plain-English summary

An issuer applied for Clean Renewable Energy Bond authority for a group of renewable energy projects. The IRS granted allocations under IRC § 54 for the 45 projects in Appendix A and proposed a smaller, nonfinal allocation for the wind project in Appendix B because the allocation limit would be exhausted. The issuer had to accept that proposal or request an amendment no larger than the proposed amount by January 2, 2007; silence would withdraw that project’s application. Two projects in Appendix C received no allocation because smaller requests exhausted the limit. The open-loop biomass project in Appendix D was denied because the application did not demonstrate compliance with one or more applicable requirements. Bonds under a final allocation had to be issued by December 31, 2007, and the allocations did not establish eligibility for the separate IRC § 45 production credit.

Ruling snapshot

  • Question: Which of the issuer’s renewable energy projects could receive Clean Renewable Energy Bond authority?
  • Outcome: Mixed: 45 allocations granted, one reduced allocation proposed subject to a timely response, and three projects denied.
  • Key authorities: IRC § 54(f); Notices 2005-98 and 2006-7.

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224
Number: 200708061
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-146668-06

                                                           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.
PRESP-146668-06
2

Pursuant to section 54(f)(2) of the Internal Revenue Code (the Code) and Notice 2005- 98, 2005-52 I.R.B. 1211, and after review of your application submitted on April 19, 2006, including supplements thereto, we have determined that the projects described in Appendix A attached hereto are qualified for purposes of section 54 and will be owned by one or more qualified borrowers. We allocate authority to -----------------------------------
-------------------------------------------- (the Issuer), a qualified issuer under section 54, to issue up to $---------------- of Clean Renewable Energy Bonds (CREBs). Bonds issued pursuant to this allocation must be designated by the Issuer as bonds for purposes of section 54 for the projects described in Appendix A up to the amount allocated for each project described in Appendix A.

Further, we have determined that the project described in Appendix B attached hereto is qualified for purposes of section 54 and will be owned by a qualified borrower. However, an allocation of shares of the Limitation for the entire amount requested cannot be made with respect to that project because the proposed allocation combined with other allocations of smaller shares will exhaust the Limitation. We propose to allocate additional authority to the Issuer to issue up to $--------------- to finance the project described in Appendix B. The proposed allocation of $--------------- is not a final allocation and your response to this letter is required to receive the additional authority to issue CREBs. Please respond in writing by January 2, 2007, to inform us whether you accept the proposed allocation. If you do not accept the proposed allocation, you may submit a written request by January 2, 2007, for a different amount in the form of a request to amend your application. Your request for a different allocation must meet the requirements of Notice 2005-98. Your amended allocation request may not exceed the proposed allocation amount.

If we do not receive a written response by January 2, 2007, we will consider your application for the project described in Appendix B to be withdrawn. If we receive a timely response from you, we will review the information provided in your application, including supplements thereto, and notify you of your final allocation. Bonds issued pursuant to a final allocation must be designated by the Issuer as bonds for purposes of section 54 for the project described in Appendix B up to the amount so allocated.

Any bonds designated pursuant to a final allocation must be issued on or before December 31, 2007. Please be aware that in order for bonds to be CREBs, the applicable requirements of the Code, including without limitation section 54, Notice 2005-98, and Notice 2006-7 must be met. Please note that CREB proceeds may be used to reimburse capital expenditures paid by qualified borrowers for qualified projects only if the provisions of section 54(d)(2)(C) are met.

An allocation of shares of the Limitation cannot be made with respect to the projects owned by the borrowers listed in Appendix C because the Limitation has been exhausted by allocation of shares to finance qualified projects owned by qualified borrowers requesting a smaller share of the Limitation.
PRESP-146668-06
3

An allocation of shares of the Limitation cannot be made with respect to the projects owned by borrowers listed in Appendix D because the application failed to demonstrate that one or more of the requirements of Notice 2005-98, Notice 2006-7, 2006-10 I.R.B. 559, or section 54 of the Code have been met.

For purposes of the renewable electricity production credit under section 45 of the Code, no inference may be drawn from this allocation that any project listed in the appendices attached hereto is a qualified facility or that electricity to be produced at such project(s) is electricity from a qualified energy resource at a qualified facility within the meaning of section 45.

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.

A copy of this letter must be attached to any Form 8038-G, Information Return for Tax- Exempt Governmental Obligations, filed for bonds issued pursuant to this allocation.

The allocation contained in this letter is based upon information and representations submitted by the applicant for the CREB allocation and accompanied by a penalty of perjury statement executed by an appropriate party. While this office has not verified any of the material submitted in support of the application for an allocation, it is subject to verification on examination.

Except as expressly provided herein, no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter.

We appreciate your submission of the application for our consideration and encourage you to continue to pursue your plans for constructing clean renewable energy projects. If you have any questions with respect to this allocation, please contact ---------------------
-------- or --------------------------- of the Office of Division Counsel/Associate Chief Counsel Tax-Exempt and Government Entities on -------------------- (not a toll-free call).

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-146668-06 4
PRESP-146668-06
5

APPENDIX A 

Borrower Name                       Project Type       Project Location                   Amount

Allocated
1 --------------------------------- Landfill gas -------------------------------- $-----------
------------------------- facility ------

2 --------------------------------- Solar energy -------------------------------- $----------- --------------------------------- facility --------- ---------.

3 --------------------------------- Solar energy -------------------------------- $----------- --------------------------------- facility -----------------
---------

4 --------------------------------- Solar energy -------------------------------- $----------- --------------------------------- facility ------------------ ---------.

5 --------------------------------- Solar energy -------------------------------- $----------- --------------------------------- facility ---------------------
---------

6 --------------------------------- Solar energy -------------------------------- $----------- --------------------------------- facility --------------
---------

7 --------------------------------- Solar energy -------------------------------- $----------- --------------------------------- facility ------------------------- ---------.

8 --------------------------------- Solar energy -------------------------------- $----------- --------------------------------- facility ----
---------

9 --------------------------------- Solar energy -------------------------------- $----------- --------------------------------- facility ----------------------
---------
PRESP-146668-06
6

10 --------------------------------- Solar energy -------------------------------- $-----------
--------------------------------- facility ------------------
---------.

11 --------------------------------- Solar energy -------------------------------- $-----------
--------------------------------- facility -----------------
---------

12 --------------------------------- Solar energy -------------------------------- $-----------
--------------------------------- facility --------------------------------
---------
--------------------------------
-----------------------------

13 --------------------------------- Solar energy -------------------------------- $-----------
--------------------------------- facility --------------------------------
---------.
------------------

14 --------------------------------- Solar energy -------------------------------- $-----------
--------------------------------- facility ---------------------------
---------

15 --------------------------------- Solar energy -------------------------------- $-----------
--------------------------------- facility --------------
---------

16 --------------------------------- Solar energy -------------------------------- $-----------
--------------------------------- facility --------------------------------
---------
--------------------------------
--------------------------------
---------------------

17 --------------------------------- Solar energy -------------------------------- $-----------
--------------------------------- facility --------------------------------
---------
--------------------------------
--------------------------------
----------

18 --------------------------------- Solar energy -------------------------------- $-----------
--------------------------------- facility -------------------------
---------
PRESP-146668-06
7

19 --------------------------------- Solar energy -------------------------------- $-----------
--------------------------------- facility --------------------------------
---------.
-----------------------

20 --------------------------------- Hydropower -------------------------------- $-------------
---------- facility ----------

21 --------------------------------- Solar energy -------------------------------- $-------------
---------- facility ----

22 --------------------------------- Landfill gas -------------------------------- $-------------
---------------. facility ------------------

23 --------------------------------- Landfill gas -------------------------------- $--------------
------------------------- facility ------------------------------

24 --------------------------------- Solar energy -------------------------------- $-------------
--------------------------------- facility ---------

25 --------------------------------- Solar energy -------------------------------- $-------------
---------- facility ----

26 --------------------------------- Solar energy -------------------------------- $-------------
--------------------------------- facility --------------------------------
---------
--------------------------------
--------------------------------
--------------------------------
--------------------------------
--------------------------------
--------------------------------
--------------------------------
--------------------------------
------------------

27 --------------------------------- Wind facility -------------------------------- $-------------
--------------------
--------------------------------
-------------

28 --------------------------------- Wind facility -------------------------------- $-------------
---
----------------------------

29 --------------------------------- Landfill gas -------------------------------- $-------------
---------- facility --------------------
PRESP-146668-06
8

30 --------------------------------- Hydropower -------------------------------- $-------------
---------- facility ----------

31 --------------------------------- Landfill gas -------------------------------- $-------------
------------------------- facility --------------------------------
-------

32 ------------------------- Wind facility -------------------------------- $-------------
--------------------------------
--------------------------------
-----------

33 --------------------------------- Landfill gas --------------------------- $-------------
------------------------- facility

34 --------------------------------- Landfill gas -------------------------------- $-------------
------------------------- facility ---------------

35 --------------------------------- Landfill gas -------------------------------- $-------------
---------- facility ---------------------

36 --------------------------------- Landfill gas -------------------------------- $-------------
------------------------- facility ---------------

37 --------------------------------- Landfill gas -------------------------------- $-------------
------------------------- facility ------------

38 --------------------------------- Landfill gas -------------------------------- $-------------
------------------------- facility -------------

39 --------------------------------- Landfill gas -------------------------------- $-------------
--------------------------------- facility ----
---------

40 --------------------------------- Wind facility -------------------------------- $-------------
---------
---------------------

41 ------------------------------- Hydropower -------------------------------- $-------------
facility
--------------------------------
--------------
PRESP-146668-06
9

42 --------------------------------- Open-loop ----------------------------- $---------------
------------------------- biomass facility
43 --------------------------------- Solar energy -------------------------------- $---------------
---------- facility -----

44 --------------------------------- Hydropower -------------------------------- $---------------
---------- facility ----------------------------

45 --------------------------------- Wind facility -------------------------------- $---------------
--------------------
-------------------------------- -
--------------------------------
---------------
TOTAL
$---------------
PRESP-146668-06
10

APPENDIX B

Borrower Project Project Location Amount Proposed
Name Type Requested Allocation 1 ----------------- Wind facility ------------------------ $ ------------ $---------------
-----------------
------------------------
-----------------
------
-----------------
----
PRESP-146668-06
11

APPENDIX C 

Borrower Name             Project Type      Project Location                   Amount

Requested
1 ------------------------- Wind facility -------------------------------- $---------------
--------------------------------
--------------------------------
------------------

2 ------------------------------- Hydropower -------------------------------- $---------------
------------------- facility --------------------------------
--------------------------------
--------------------------------
--------------------------------
---------

TOTAL
$-----------------
PRESP-146668-06
12

APPENDIX D 

Borrower Name                   Project Type    Project Location                   Amount

Requested
1 ------------------------------- Open-loop -------------------------------- $--------------
--------------------- biomass -----
facility

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