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 gasification project credit.

.02 The qualifying gasification project credit is provided under § 48B. Section 48B(a) provides that the qualifying gasification project credit for a taxable year is an amount equal to 20 percent of the qualified investment (as defined in § 48B(b)) for that taxable year in qualifying gasification projects.

.03 The term “qualifying gasification project” is defined in § 48B(c)(1) as meaning any project that (A) employs gasification technology, (B) will be carried out by an eligible entity (as defined in section 3.02 of this notice), and (C) includes a qualified investment of which an amount not to exceed $650 million is certified under the qualifying gasification program as eligible for credit under § 48B. Pursuant to § 48B(c)(2), gasification technology is

any process that converts a solid or liquid product from coal (as defined in section 3.01 of this notice), petroleum residue (as defined in § 48B(c)(8)), biomass (as defined in § 48B(c)(4)), or other materials that are recovered for their energy or feedstock value into a synthesis gas composed primarily of carbon monoxide and hydrogen for direct use or subsequent chemical or physical conversion.

.04 The qualifying gasification project credit generally is allowed in the taxable year in which the eligible property (as defined in § 48B(c)(3)) is placed in service (as defined in section 3.05 of this notice) by the taxpayer. Further, the at-risk rules in § 49 and the recapture and other special rules in § 50 apply to the qualifying gasification project credit.

.05 Section 48B(d)(1) provides that the Secretary, in consultation with the Secretary of Energy, shall establish a qualifying gasification project program to consider and award certifications for qualified investment eligible for credits under § 48B to qualifying gasification project sponsors. The Treasury Department and the Internal Revenue Service established this program in Notice 2006–25, 2006–11 I.R.B. 609. Pursuant to § 48B(d)(2), certificates of eligibility may be issued under the program only during the 10-year period beginning on October 1, 2005.

.06 This notice modifies the qualifying gasification project program established in Notice 2006–25 in a number of respects. The significant changes made by this notice include the following:

(1) Large and Mid-Size Business Division (LMSB) of the Service will allocate the qualifying gasification project credits. The filing instructions in section 5.04 provide LMSB addresses to reflect this change.

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

(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 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. Section 4.02(4) reflects this

change in the method by which credits under § 48B are allocated to projects.

(4) Section 4.02(8) provides that the period for submitting the application for § 48B 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 round. Changes also are made to the dates in sections 4.02(10) and (12) for accepting or rejecting a taxpayer’s application for § 48B 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(8) also clarifies that the DOE certification and ranking (for projects determined to be feasible) are provided to the Service.

(6) Section 4.02(12) 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 priority benefits of the project. Appendix B provides additional information regarding program policy factors. Applicants will no longer be required to submit independent financial reports.

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

(9) 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 § 48B certification (including the application for DOE certification).

(10) Section 6.02 provides more details on who may sign the penalties of perjury statement.

(11) Section 6.03 provides that the Service and the DOE must be informed if the plans for the project change in any signifi

June 25, 2007 1474 2007–26 I.R.B.

year in which the project is placed in a condition or state of readiness and availability for producing synthesis gas from the feedstocks identified in § 48B(c)(2).