Part III. — Internal Revenue Bulletin 2000-38

in which the taxable year begins. The reference price determined under § 29(d)(2)(C) for the 1999 calendar year is $15.56.

Table 1 contains the applicable percentages for marginal production for taxable years beginning in calendar years 1991 through 2000.

2000 Marginal Production Rates

Notice 2000–50

Section 613A(c)(6)(C) of the Internal Revenue Code defines the term “applicable percentage” for purposes of determining percentage depletion for oil and gas

produced from marginal properties. The applicable percentage is the percentage (not greater than 25 percent) equal to the sum of 15 percent, plus one percentage point for each whole dollar by which $20 exceeds the reference price (determined under § 29(d)(2)(C)) for crude oil for the calendar year preceding the calendar year

Notice 2000–50 Table 1 APPLICABLE PERCENTAGE FOR MARGINAL PRODUCTION

Calendar Year Applicable Percentage 1991 15 percent 1992 18 percent 1993 19 percent 1994 20 percent 1995 21 percent 1996 20 percent 1997 16 percent 1998 17 percent 1999 24 percent 2000 19 percent

The principal author of this notice is Brenda M. Stewart of the Office of Associate Chief Counsel (Passthroughs and Special Industries). For further information regarding this notice contact Ms. Stewart at (202) 622-3120 (not a toll-free call).

2000 Section 43 Inflation Adjustment

Notice 2000–51

Section 43(b)(3)(B) of the Internal Revenue Code requires the Secretary to publish

an inflation adjustment factor. The enhanced oil recovery credit under § 43 for any taxable year is reduced if the “reference price,” determined under § 29(d)(2)(C), for the calendar year preceding the calendar year in which the taxable year begins is greater than $28 multiplied by the inflation adjustment factor for that year.

The term “inflation adjustment factor” means, with respect to any calendar year, a fraction the numerator of which is the GNP implicit price deflator for the preceding calendar year and the denominator of which is the GNP implicit price deflator for 1990.

Because the reference price for the 1999 calendar year ($15.56) does not exceed $28 multiplied by the inflation adjustment factor for the 2000 calendar year, the enhanced oil recovery credit for qualified costs paid or incurred in 2000 is determined without regard to the phaseout for crude oil price increases.

Table 1 contains the GNP implicit price deflator used for the 2000 calendar year, as well as the previously published GNP implicit price deflators used for the 1991 through 1999 calendar years.

2000–38 I.R.B. 291 September 18, 2000

Notice 2000–51 Table 1

GNP IMPLICIT PRICE DEFLATORS

Calendar Year GNP Implicit Price Deflator

1990 112.9 (used for 1991) 1991 117.0 (used for 1992) 1992 120.9 (used for 1993) 1993 124.1 (used for 1994) 1994 126.0 (used for 1995) 1995 107.5 (used for 1996)* 1996 109.7 (used for 1997) 1997 112.35 (used for 1998)** 1998 112.64 (used for 1999) 1999 104.59 (used for 2000)***

Beginning in 1995, the GNP implicit price deflator was rebased relative to 1992. The 1990 GNP implicit price deflator used to compute the 1996 § 43 inflation adjustment factor is 93.6.

** Beginning in 1997, two digits follow the decimal point in the GNP implicit price defltor. The 1990 GNP price deflator used to compute the 1998 § 43 inflation adjustment factor is 93.63.

*** Beginning in 1999, the GNP implicit price deflator was rebased relative to 1996. The 1990 GNP implicit price deflator used to compute the 2000 § 43 inflation adjustment factor is 86.53.

Table 2 contains the inflation adjustment factor and the phase-out amount for taxable

years beginning in the 2000 calendar year as well as the previously published inflation

Notice 2000–51 Table 2

adjustment factors and phase-out amounts for the 1991 through 1999 calendar years.

INFLATION ADJUSTMENT FACTORS AND PHASE-OUT AMOUNTS

Calendar Inflation Adjustment Phase-out Year Factor Amount

1991 1.0000 0 1992 1.0363 0 1993 1.0708 0 1994 1.0992 0 1995 1.1160 0 1996 1.1485 0 1997 1.1720 0 1998 1.1999 0 1999 1.2030 0 2000 1.2087 0

DRAFTING INFORMATION

Renewable Electricity Production Credit, Publication of Inflation Adjustment Factor and Reference Prices for Calendar Year 2000

Notice 2000–52

This notice publishes the inflation adjustment factor and reference prices for calendar

year 2000 for the renewable electricity production credit under § 45(a) of the Internal Revenue Code. The 2000 inflation adjustment factor and reference prices are used in determining the availability of the credit. The 2000 inflation adjustment factor and reference prices apply to calendar year 2000 sales of kilowatt-hours of electricity produced in the United States or a possession thereof from qualified energy resources.

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BACKGROUND

Section 45(a) provides that the renewable electricity production credit for any tax year is an amount equal to the product of 1.5 cents multiplied by the kilowatt-hours of specified electricity produced by the taxpayer and sold to an unrelated person during the tax year. This electricity must be produced from qualified energy resources and at a qualified facility during the 10-year period beginning on the date the facility was originally placed in service.

Section 45(b)(1) provides that the amount of the credit determined under § 45(a) is reduced by an amount that bears the same ratio to the amount of the credit as (A) the amount by which the reference price for the calendar year in which the sale occurs exceeds 8 cents bears to (B) 3 cents. Under § 45(b)(2), the 1.5 cents in § 45(a) and the 8 cents in § 45(b)(1) are each adjusted by multiplying the amount by the inflation adjustment factor for the calendar year in which the sale occurs.

Section 45(c)(1) defines qualified energy resources as wind, closed-loop biomass, and poultry waste. Section 45(c)(3) defines a qualified facility as any facility owned by the taxpayer that originally is placed in service after December 31, 1993 (December 31, 1992, in the case of a facility using closed-loop biomass to produce electricity and December 31, 1999, in the case of a facility using poultry waste to produce electricity), and before January 1, 2002. See § 45(d)(7) for rules relating to the inapplicability of the credit to electricity sold to utilities under certain contracts.

Section 45(d)(2)(A) requires the Secretary to determine and publish in the Federal Register each calendar year the inflation adjustment factor and the reference prices for the calendar year. The inflation adjustment factor and the reference prices for the 2000 calendar year were published in the Federal Register on August 29, 2000, (168 Fed. Reg. 52474). Section 45(d)(2)(B) defines the inflation adjustment factor for a calendar year as the fraction the numerator of which is the GDP implicit price deflator for the preceding calendar year and the denominator of which is the GDP implicit price deflator for the calendar year 1992. The term “GDP implicit price deflator” means the most recent revision of the implicit price deflator for the gross domestic product as computed and published by the De

partment of Commerce before March 15 of the calendar year.

Section 45(d)(2)(C) provides that the reference price is the Secretary’s determination of the annual average contract price per kilowatt hour of electricity generated from the same qualified energy resource and sold in the previous year in the United States. Only contracts entered into after December 31, 1989, are taken into account.

INFLATION ADJUSTMENT FACTOR AND REFERENCE PRICES

The inflation adjustment factor for calendar year 2000 is 1.1382. The reference prices for calendar year 2000 are 4.95 cents per kilowatt-hour for facilities producing electricity from wind energy resources and 0 cents per kilowatt-hour for facilities producing electricity from closed-loop biomass and poultry waste energy resources.

PHASE-OUT CALCULATION

Because the 2000 reference prices for electricity produced from wind, closedloop biomass, and poultry waste energy resources do not exceed 8 cents per kilowatt hour multiplied by the inflation adjustment factor, the phaseout of the credit provided in § 45(b)(1) does not apply to electricity produced from wind, closedloop biomass, or poultry waste energy resources sold during calendar year 2000.

CREDIT AMOUNT

As required by § 45(b)(2), the 1.5¢ amount in § 45(a)(1) is adjusted by multiplying such amount by the inflation adjustment factor for the calendar year in which the sale occurs. If any amount as increased under the preceding sentence is not a multiple of 0.1¢, such amount is rounded to the nearest multiple of 0.1¢. Under the calculation required by § 45(b)(2), the renewable electricity production credit for calendar year 2000 is 1.7¢ per kilowatt hour on the sale of electricity produced from wind energy, closed-loop bionass, and poultry waste resources.

DRAFTING INFORMATION CONTACT

The principal author of this notice is David A. Selig of the Office of Associate

Chief Counsel (Passthroughs and Special Industries). For further information regarding this notice contact Mr. Selig at (202) 622-3040 (not a toll-free call).

SRLY Election

Notice 2000–53

This notice announces that the Treasury Department and the Internal Revenue Service intend to issue regulations permitting certain taxpayers to elect not to apply certain provisions of Treas. Reg. §§ 1.1502–15, – 21, and – 22 issued on June 25, 1999, and published in the Federal Register on July 2, 1999 (64 F.R. 36091). The notice also provides taxpayers a mechanism for making the election before the regulations are issued.

Treasury Regulations §§ 1.1502–15, –21, and –22 provide rules for computing the limitation with respect to separate return limitation year (SRLY) losses, and the carryover or carryback of losses to consolidated and separate return years. In §§ 1.1502–15(g), –21(g), and –22(g), the “overlap rule” eliminates the application of the SRLY rules in certain circumstances in which the rules of §§ 382 or 383 of the Internal Revenue Code also apply. The overlap rule, and consequently the elimination of the SRLY rules, is effective for tax years for which the due date of the return is after June 25, 1999. The elimination of SRLY could increase the amount of net operating loss carryovers that a consolidated group could absorb.

Treasury and the Service have been made aware that the application of the overlap rule has resulted in adverse tax consequences with respect to certain acquisitions of corporations from consolidated groups that occurred during a taxable year of the consolidated group to which the June 1999 regulations applied but prior to the actual issuance of those regulations (the “interim period”). Treasury and the Service believe that certain of these adverse tax consequences are inappropriate.

Accordingly, this notice announces that Treasury and the Service intend to issue regulations that provide an election to allow a corporation that ceased to be a member of a consolidated group as a result of a qualified stock purchase (as defined in § 338(d)(3)) in the interim period

2000–38 I.R.B. 293 September 18, 2000

(the “departing member”) to avoid the application of the overlap rule of §§ 1.1502–15(g), –21(g), and –22(g) while it was in the former group. The election will be available to a departing member of a consolidated group that would otherwise be affected by the application of the overlap rule and that ceased to be a member of the consolidated group before June 26, 1999, or pursuant to a binding contract that was in effect before June 26, 1999.

The election will allow a departing member to determine the amount of its net operating loss and capital loss carryovers (including the amount of net operating loss carryovers treated as arising under § 1.1502–15(a)) to taxable years beginning after it ceases to be a member of the

group by treating §§ 1.1502–15(g), –21(g), and –22 (g) as not applying with respect to that corporation (or to a subgroup in which it was included) while it was a member of the group. The election will be made solely by the departing member (or, under § 1.1502–77, its new common parent if it joins another consolidated group). The election will not require any action by the departing member’s former consolidated group and will have no effect on the consolidated return filed by that group for the taxable year for which the due date of the return was after June 25, 1999, or any subsequent taxable year. To make the election under this notice, a corporation must write “Election Pursuant to Notice 2000–53” across the top of page 1 of its original or amended tax

return for the first taxable year (whether separate or consolidated) after it ceases to be a member of the group and file the return in accordance with the election as if §§ 1.1502–15(g), –21(g), and –22(g) did not apply while it was a member of the former group.

Treasury and the Service intend to amend the regulations under § 1502 to incorporate the guidance set forth in this notice. Until the regulations are amended, taxpayers may rely on the guidance set forth in this notice.

For further information regarding this notice contact David Kessler or Christopher M. Bass of the Office of Associate Chief Counsel (Corporate) at (202) 6227770 (not a toll-free call).

September 18, 2000 294 2000–38 I.R.B.