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, which was expanded and modified by section 111 of the Act.

.03 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 qualifying advanced coal projects (as defined in § 48A(c)(1) and (e)) described in § 48A(d)(3)(b)(i), (2) 15 percent of the qualified investment for that taxable year in qualified advanced coal projects described in § 48A(d)(3)(b)(ii), and (3) 30 percent of the qualified investment for that taxable year in qualifying advanced coal projects described in § 48A(d)(3)(B)(iii). Section 48A(d)(3)(b)(i) describes integrated gasification combined cycle (“IGCC”) projects (as defined in § 48A(c)(7)) for which applications were submitted during the Phase I application period (“Phase I IGCC projects”). Section 48A(d)(3)(b)(ii) describes projects that use other advanced coal-based generation technologies (as defined in § 48A(c)(2) and (f)) and for which applications were submitted during the Phase I application period (“other Phase I advanced coal projects”). Section 48A(d)(3)(b)(iii) describes projects that use advanced coal-based generation technologies and for which applications are submitted during the Phase II application period (“Phase II advanced coal projects”). Phase II advanced coal projects include both IGCC projects and projects that use other advanced coal-based technologies. For this purpose, the Phase I application period is the 3-year period following the establishment of the qualifying advanced coal program on March 13, 2006, and the Phase II application period is the 3-year period beginning on March 13, 2009.

.04 Section 48A(d)(3)(A) provides that the aggregate credits allowed under § 48A(a) may not exceed $2.55 billion. Section 48A(d)(3)(B) provides that (1) $800 million of credits are to be allocated to Phase I IGCC projects, (2) $500 million of credits are to be allocated to other Phase I advanced coal projects, and (3) $1.25 billion of credits are to be allocated to Phase II advanced coal projects.

.05 Section 48A(d)(2)(A) provides that (i) applications for the credits allocated to Phase I IGCC projects and other Phase I advanced coal projects may be submitted only during the Phase I application period, and (ii) applications for the credits allocated to Phase II advanced coal projects may be submitted only during the Phase II application period.

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

.07 Section 48A(e)(1)(G) provides that any project the application for which is submitted during the Phase II application period must include equipment that separates and sequesters—

(1) At least 65 percent of such project’s total carbon dioxide (“CO ”) emissions in 2 the case of an application other than an application for reallocated credits under § 48A(d)(4); and

(2) At least 70 percent of such project’s total CO emissions in the case of an 2 application for reallocated credits under § 48A(d)(4).

.08 Section 48A(e)(3) provides the following rules for determining the projects to which credits are allocated:

(1) Section 48A(e)(3)(A) provides that the credits 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.

(2) Section 48A(e)(3)(B) provides that high priority must be given to projects that include (i) greenhouse gas capture capability (as defined in § 48A(c)(5)), (ii) increased by-product utilization, (iii) applicant participants who have a research partnership with an eligible educational institution (as defined in section 529(e)(5)), and (iv) other benefits.

(3) Section 48A(e)(3)(C) provides that the highest priority is given to projects with the greatest separation and sequestration percentage of total CO 2 emissions.

.09 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.

.10 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 § 48A, (ii) is requested by the recipi

2009–16 I.R.B. 817 April 20, 2009

request that taxpayers 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 credit or provide the form of the declaration, as set forth in Appendix C of Notice 2007–52.

(7) Section 7.04 provides for recapturing the benefit of any credit allowable under the Phase II advanced coal program with respect to any project that fails to attain or maintain the separation and sequestration requirements of § 48A(e)(1)(G).

(8) 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.