SECTION 2. BACKGROUND

Section 5 of Rev. Proc. 2000–3 sets forth those areas under extensive study in which rulings or determination letters will not be issued until the Service resolves the issue through publication of a revenue ruling, revenue procedure, regulations, or otherwise.

The purpose of § 29 of the Internal Revenue Code is to reduce United States dependence on imported energy. S. Rep. No. 394, 96th Cong., 1st Sess. 87 (1979), 1980–3 C.B. 131, 205. Section 29 provides a credit against income tax for the production and sale of “qualified fuels” produced from a nonconventional source. Section 29(c)(1)(C) provides that qualified fuels include liquid, gaseous, or solid synthetic fuels produced from coal (including lignite).

Rev. Rul. 86–100, 1986–2 C.B. 3, adopts for purposes of § 29(c)(1)(C) the definition of synthetic fuel in § 1.48–9 (c)(5) of the Income Tax Regulations because of the similar purpose and language of § 29 and former § 48(l) of the Internal Revenue Code of 1954. Section 1.48–9(c)(5)(ii) provides that, to be “synthetic,” a fuel must differ significantly in chemical composition, as op

posed to physical composition, from the substance used to produce it.

The Service has issued a number of rulings that allow taxpayers to claim the § 29 credit with respect to coke and solid fuels produced from waste coal and coal fines. Concern has been raised that taxpayers are also claiming the § 29 credit for processing coal in other ways that may not have been intended by the Congress. The Treasury Department and the Service are seeking information concerning the processes currently used in producing solid fuel for which the credit is claimed.