SECTION 5. COMPUTATION OF

CREDIT

.01 In General . The Refueling Property Credit is equal to 30 percent of the cost of any property that the taxpayer places in service as QAFV refueling property during the taxable year. The credit is limited to $30,000 per property for property of a character subject to the allowance

2007–22 I.R.B. 1318 May 29, 2007

(ii) Neither the storage tank nor the fuel tanker truck is QAFV refueling property within the meaning of section 4.01(1) of this notice. The storage tank is used to store alternative fuel, but it does not store the fuel at the point where the fuel is delivered into the fuel tank of a motor vehicle that is propelled by alternative fuel within the meaning of section 4.01(7) of this notice. Similarly, the fuel tanker truck is used to dispense alternative fuel, but it does not dispense the fuel into the fuel tank of a motor vehicle that is propelled by alternative fuel.

.02 Example 2 . (i) The facts are the same as in Example 1, except that X also acquires a pump that is used to dispense alternative fuel from the storage tank into the fuel tanks of X ’s fuel tanker trucks. The storage tank has the same capacity as the tank that would have been used for the sole purpose of storing the alternative fuel that is supplied to X ’s customers.

(ii) The pump is QAFV refueling property within the meaning of section 4.01(1) of this notice because it is used to dispense alternative fuel into the fuel tanks of X ’s fuel tanker trucks. Accordingly, the cost of the pump is taken into account in determining X ’s Refueling Property Credit.

(iii) The storage tank is also QAFV refueling property because it is used to store alternative fuel at the point where the fuel is delivered into the fuel tanks of the fuel tanker trucks. In addition, however, the storage tank is dual-use property described in section 6.02(2). Under section 6.02, the cost of the storage tank is taken into account in computing the Refueling Property Credit only to the extent that cost exceeds the cost of the storage tank that would have been used for the sole purpose of storing the alternative fuel that is supplied to X ’s customers. Because no increase in the capacity of the storage tank is needed, none of the storage tank’s cost is taken into account in computing the amount of the Refueling Property Credit.

.03 Example 3 . (i) Y is a retail seller of gasoline. In Year 1, Y acquires and places in service conventional refueling property consisting of a gasoline storage tank. Y claims the allowable depreciation deduction with respect to the gasoline storage tank on its federal income tax return for Year 1. In Year 2, Y incurs costs of $10,000 to convert the gasoline storage tank into an alternative fuel storage tank and begins using the converted property as QAFV refueling property.

(ii) If, under the principles of § 1.48–2, the storage tank is treated as reconditioned or rebuilt property, only the $10,000 incurred to convert the gasoline tank into QAFV refueling property is taken into account for purposes of determining Y ’s Refueling Property Credit for Year 2. If, on the other hand, the converted storage tank is treated, under the principles of § 1.48–2, as being put to original use when first used as QAFV refueling property, the adjusted basis of the storage tank immediately before its conversion into QAFV refueling property also is taken into account for purposes of determining the credit.