SECTION 2. BACKGROUND AND

CHANGES

.01 Section 46 provides that the amount of the investment credit for any taxable year is the sum of the credits listed in § 46. That list includes the qualifying advanced coal project credit.

.02 The qualifying advanced coal project credit is provided under § 48A.

June 25, 2007 1456 2007–26 I.R.B.

round. Changes also are made to the dates in sections 4.02(10) and (11) for accepting or rejecting a taxpayer’s application for § 48A certification and for executing closing agreements.

(5) Section 4.02(9) provides that the due date for the application for DOE certification is October 31, that DOE will rank certified projects, and that the due date for the DOE certification and ranking is March 1. Section 4.02(9) also clarifies that the DOE certification and ranking (for projects determined to be feasible) are provided to the Service.

(6) Section 4.02(11) provides that a successor in interest must execute a new closing agreement with the Service no later than the due date (including extensions) of the successor in interest’s Federal income tax return for the taxable year in which the transfer occurs.

(7) The information required to be included in the application for DOE certification is modified. Section 5.02 requires submission of additional information regarding the number and types of turbines to be used in the project and with respect to the sulfur dioxide removal. Appendix B provides additional information regarding program policy factors. Applicants will no longer be required to submit independent financial reports.

(8) Section 5.02(13) defines the term “substantially all” for purposes of determining whether a project’s subbituminous coal usage qualifies it for the modified sulfur dioxide removal test provided in § 48A(f)(1).

(9) Section 5.03 requests that a taxpayer submit with the application for § 48A certification a declaration consenting to the disclosure by the Service of certain return information if the taxpayer is awarded an allocation of qualifying advanced coal project credits. The form of the declaration is set forth in Appendix C.

(10) Sections 5.03(1) and 5.04 require that a taxpayer submit one paper copy and one electronic version on a floppy disc or a CD of the application for § 48A certification (including the application for DOE certification).

(11) Section 7.02 provides more details on who may sign the penalties of perjury statement.

(12) Section 7.03 provides that the Service and the DOE must be informed if the plans for the project change in any signifi

Section 48A(a) provides that the qualifying advanced coal project credit for a taxable year is an amount equal to (1) 20 percent of the qualified investment (as defined in § 48A(b)) for that taxable year in certified qualifying advanced coal projects (as defined in § 48A(c)(1) and (e)) using an integrated gasification combined cycle (IGCC) (as defined in § 48A(c)(7)), and (2) 15 percent of the qualified investment for that taxable year in other certified qualifying advanced coal projects.

.03 Section 48A(d)(3)(A) provides that the aggregate credits allowed under § 48A(a) may not exceed $1.3 billion. Section 48A(d)(3)(B) provides that (i) $800 million of credits are to be allocated to IGCC projects, and (ii) $500 million of credits are to be allocated to projects that use other advanced coal-based generation technologies (as defined in § 48A(c)(2) and (f)).

.04 Section 48A(e)(3)(A) provides that the credits for IGCC projects must be allocated in accordance with the procedures set forth in § 48A(d), and in relatively equal amounts to (i) projects using bituminous coal as a primary feedstock, (ii) projects using subbituminous coal as a primary feedstock, and (iii) projects using lignite as a primary feedstock. Further, § 48A(e)(3)(B) provides that IGCC projects that include (i) greenhouse gas capture capability (as defined in § 48A(c)(5)), (ii) increased by-product utilization, and (iii) other benefits must be given high priority in the allocation of credits for IGCC projects.

.05 Section 48A(f) prescribes the requirements that must be satisfied to qualify as an advanced coal-based generation technology. These include requirements that the unit be designed to attain specified standards for emissions or removal of certain pollutants. As originally enacted, § 48A(f) required that a unit be designed to achieve 99-percent removal of sulfur dioxide. Section 203(a) of the Tax Relief and Health Care Act of 2006, Pub. L. 109–432, 120 Stat. 2922 (December 20, 2006), modified this test for units designed for the use of feedstock substantially all of which is subbituminous coal. Such a unit satisfies the modified test if it achieves either 99-percent removal of sulfur dioxide or an emission level of not more than 0.04 pounds of sulfur dioxide per million Btu, determined on a 30-day average.

.06 The at-risk rules in § 49 and the recapture and other special rules in § 50 apply to the qualifying advanced coal project credit. Further, the qualifying advanced coal project credit generally is allowed in the taxable year in which the eligible property (as defined in § 48A(c)(3)) is placed in service (as defined in section 3.04 of this notice) by the taxpayer. Pursuant to § 48A(d)(2)(E), a taxpayer that receives a certification under § 48A(d)(2)(D) has 5 years from the date of issuance of the certification to place the qualifying advanced coal project in service.

.07 Section 48A(d)(1) provides that the Secretary, in consultation with the Secretary of Energy, shall establish a qualifying advanced coal project program for the deployment of advanced coal-based generation technologies. The Treasury Department and the Internal Revenue Service established this program in Notice 2006–24, 2006–11 I.R.B. 595. .08 This notice modifies the qualifying advanced coal project program established in Notice 2006–24 in a number of respects. The significant changes made by this notice include the following:

(1) The Large and Mid-Size Business Division (LMSB) of the Service will allocate the advanced coal project credits and issue the certification under § 48A(d)(2). The filing instructions in section 5.04 provide LMSB addresses to reflect this change.

(2) Section 3 defines certain terms for purposes of § 48A.

(3) The method of allocation is modified for allocation rounds after 2006. Under the modified method of allocation, the DOE will rank a certified project relative to other certified projects in each pool and credits will be allocated to projects based on the DOE ranking. The modified allocation method will substantially favor projects that capture and sequester carbon dioxide emissions and will favor to a lesser extent projects optimized for future carbon dioxide capture. Sections 4.02(3) and (4) reflect this change in the method by which credits under § 48A are allocated to projects.

(4) Section 4.02(8) provides that the period for submitting the application for § 48A certification (i) ends on March 3, 2008, for the 2007–08 allocation round and (ii) begins on March 4, 2008, and ends on March 2, 2009, for the 2008–09 allocation

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by the Service (“application for § 48A certification”). Both applications may be submitted only during the 3-year period beginning on February 21, 2006. Certifications will be issued and credits will be allocated to projects in annual allocation rounds. The initial allocation round was conducted in 2006. Additional allocation rounds will be conducted in 2007–08 and, if necessary, in 2008–09.

.02 Program Specifications . (1) The Service determines the amount of the qualifying advanced coal project credits allocated to a qualifying advanced coal project at the time the Service accepts the application for § 48A certification for that project in accordance with section 4.02(10) of this notice (see section 5 of this notice for the requirements applicable to the application for DOE certification and the application for § 48A certification).

(2) The qualifying advanced coal project credits of $1.3 billion and the applications for certification are separated into the following four pools:

(a) Projects using an advanced coal-based generation technology other than IGCC. The aggregate amount of qualifying advanced coal project credit for this pool is $500 million. The maximum amount of credits that will be allocated to a project is $125 million. In the 2006 allocation round, $250 million of credits was allocated from this pool. Therefore, $250 million of credits is available for allocation from this pool in 2007–08.

(b) IGCC projects using bituminous coal as a primary feedstock. The aggregate amount of qualifying advanced coal project credit for this pool is $267 million. The maximum amount of credits that will be allocated to a project is $133.5 million. In the 2006 allocation round, $267 million of credits (the entire amount available) was allocated from this pool. Accordingly, no allocation round for this pool will be conducted in 2007–08.

(c) IGCC projects using subbituminous coal as a primary feedstock. The aggregate amount of qualifying advanced coal project credit for this pool is $267 million. The maximum amount of credits that will be allocated to a project is $133.5 million. In the 2006 allocation round, no credits were allocated from this pool. Therefore, $267 million of credits is available for allocation from this pool in 2007–08.

cant respect from the plans set forth in the applications for § 48A and DOE certification, and also provides the consequences of any significant change to the plans set forth in the applications.

(13) Section 7.06 provides that the DOE will offer debriefings to applicants that submitted an application for DOE certification.

(14) Section 10 provides guidance regarding Freedom of Information Act requests for records relating to the qualifying advanced coal project program.