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, which was expanded and modified by section 112 of the Act.

.03 Section 48B(a) provides that the qualifying gasification project credit for a taxable year is an amount equal to (1) 20

percent of the qualified investment (as defined in § 48B(b)) for that taxable year in qualifying gasification projects (as defined in § 48B(c)(1)) for which the credit is allocated under § 48B(d)(1)(A), and (2) 30 percent of the qualified investment for that taxable year in qualifying gasification projects for which the credit is allocated under § 48B(d)(1)(B).

.04 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.

.05 Section 48B(d)(1) provides that (1) $350 million of credits are to be allocated to qualifying projects (“Phase I gasification projects”), and (2) an additional $250 million of credits are to be allocated to qualifying projects that include equipment that separates and sequesters at least 75 percent of such project’s total CO 2 emissions (“Phase II gasification projects”).

.06 Section 48B(d)(4) provides that (i) highest priority is given to projects with the greatest separation and sequestration percentage of total CO 2 emissions, and (ii) high priority is given to applicant participants who have a research partnership with an eligible educational institution (as defined in § 529(e)(5)). The effective date of section 112 of the Act provides that this rule applies only to Phase II gasification projects.

.07 The at-risk rules in § 49 and the recapture and other special rules in § 50 apply to the qualifying gasification project credit. Further, 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.

.08 Section 48B(f) provides that the Secretary shall provide for recapturing the benefit of any credit allowable under § 48B(a) with respect to any project that fails to attain or maintain the separation and sequestration requirements of § 48B(d)(1).

.09 Section 48A(h) directs the Secretary to modify the terms of any competitive certification award and any associated closing agreement where such modification (i) is consistent with the objectives of § 48B, (ii) is requested by the recipient, and (iii) involves moving the project site to improve the potential to capture and sequester CO emissions, reduce costs of 2 transporting feedstock, and serve a broader customer base. This directive does not apply if the Secretary determines that the dollar amount of tax credits available to the taxpayer under § 48B would increase as a result of the modification or such modification would result in such project not being originally certified. In addition, the Secretary is required to consult with other relevant Federal agencies, including the Department of Energy, in considering any modification under § 48A(h).

.10 Section 48A(d)(5) provides that the Secretary shall, upon making a certification under § 48B(d), publicly disclose the identity of the applicant and the amount of the credit certified with respect to such applicant.

.11 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 credit under § 48B to qualifying gasification project sponsors. The Treasury Department and the Service established this program in Notice 2006–25, 2006–1 C.B. 609, as modified and updated by Notice 2007–53, 2007–26 I.R.B. 1474. 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.

.12 Notice 2007–53 provides that the Service will consider a project under the

April 20, 2009 802 2009–16 I.R.B.

qualifying gasification project program only if the DOE provides a certification of feasibility (“DOE certification”) and ranking (if any) for the project. Under the qualifying gasification project program, a taxpayer must submit, for each qualifying gasification project: (1) an application for certification by DOE (“application for DOE certification”), and (2) an application for certification under § 48B(d)(1) by the Service (“application for § 48B certification”). Certifications will be issued and the credit will be allocated by the Service to projects in annual allocation rounds.

.13 The Phase I gasification program under Notice 2006–25 and Notice 2007–53 provided for annual allocation rounds. The initial allocation round was conducted in 2006. An additional allocation round was conducted in 2007–08. The entire Phase I gasification credit amount of $350 million was allocated in these two allocation rounds.

.14 This notice provides procedures for the Phase II gasification program. The guidance in this notice differs from the guidance provided in Notices 2006–25 and 2007–53 for the Phase I gasification program in a number of respects. The significant differences include the following:

(1) Section 3.02 of this notice provides that the definition of the term “eligible entity” under § 48B(c)(7) includes any person whose application for certification is principally intended for use in a domestic project that employs domestic gasification applications related to transportation grade liquid fuels.

(2) Section 3.06 provides a definition of the term “separation and sequestration” for purposes of § 48B.

(3) Section 4.02(3) provides that a taxpayer who was allocated a credit under the Phase I gasification program may re-submit an application for the same project if the project is enhanced to meet the additional requirements for a qualifying project under the Phase II gasification program.

(4) Section 4.02(8) provides that the period for submitting the application for § 48B certification under Phase II gasification program for the 2009–10 allocation round begins on March 13, 2009, and ends on March 1, 2010.

(5) Section 4.02(10) provides that the deadline for taxpayers to submit applications for DOE certification for the 2009–10 allocation round is November

2, 2009, that the DOE will rank certified projects, and that the due date for the DOE to provide the Service with the certification and ranking of these projects is March 1, 2010. (6) The information required to be included in the application for DOE certification is modified. Section 5.02 requires submission of additional information regarding CO 2 separation and sequestration. In addition, the program policy factors listed in Appendix B have been modified.

(7) Section 5.03 modifies the information required to be included in the application for § 48B certification.

(8) Section 6.04 provides for recapturing the benefit of any credit allowable under the Phase II gasification program with respect to any project that fails to attain or maintain the separation and sequestration requirements of § 48B(d)(1)(B).

(9) Section 9.01 provides that the Service will announce the results of each allocation round as required by § 48A(d)(5). Accordingly, the notice does not include a request that taxpayers 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 credit or provide the form of the declaration, as set forth in Appendix C of Notice 2007–53.