SECTION 4. QUALIFYING

GASIFICATION PROJECT PROGRAM

.01 In General . The Service will consider a project under the Phase II gasification program only if the DOE provides a certification (“DOE certification”) and ranking (if any) for the project. Accordingly, a taxpayer must submit, for each Phase II gasification project: (1) an application for certification by DOE that the project is technically and economically feasible (“application for DOE certification”), and (2) an application for certification under § 48B(d)(1) by the Service (“application for § 48B certification”). Both applications may be submitted only during the Phase II application period beginning on March 13, 2009 and ending on March 12, 2012. The Service will issue certifications and allocate credits to projects in annual allocation rounds. The first allocation round for Phase II gasification program will be conducted in 2009–10. If necessary, additional alloca

tion rounds will be conducted in 2010–11, and 2011–12.

.02 Program Specifications . (1) The Service determines the amount of the Phase II gasification credits allocated to a qualifying gasification project at the time the Service accepts the application for § 48B certification for that project in accordance with section 4.02(12) of this notice (see section 5 of this notice for the requirements applicable to the application for DOE certification and the application for § 48B certification).

(2) The aggregate amount of the Phase II gasification credit is $250 million, and the certification for a Phase II gasification project cannot apply to more than $650 million of the qualified investment in the project. Thus, the maximum amount of the Phase II gasification credit that will be allocated to a project is $195 million. This limitation applies to a qualifying project, and rather than to the taxpayer holding interests in the project. Therefore, the number or type of entities holding ownership interests in a project does not change the maximum amount of the Phase II gasification credit that may be allocated to that project. Conversely, a taxpayer holding interests in multiple projects may be allocated more than the maximum Phase II gasification credit that may be allocated to a single project.

(3) A taxpayer who was allocated a Phase I gasification credit for a project may submit an application for a Phase II gasification credit for the same project if the project meets the additional requirements for a qualifying project under the Phase II gasification program. Thus, the project must separate and sequester at least 75 percent of the project’s total CO 2 emissions.

(a) The Phase II gasification credit will be allowed with respect to the taxpayer’s qualified investment in the project only to the extent such investment exceeds the qualified investment with respect to which the Phase I gasification credit is allowable but does not exceed $650 million. Thus, if the qualified investment in a project is $700 million and the Phase I gasification credit was allowable with respect to $500 million of the qualified investment, the Phase II gasification credit will be allowed with respect to only $150 million ($650 million - $500 million) of the qualified investment. The Phase I gasification credit

allocated to a project is not allowable for purposes of this section 4.02(3) to the extent the right to claim such credit has been irrevocably waived in such manner as the Commissioner may require.

(b) The Phase II gasification credit allocated to a project will be forfeited if the taxpayer fails to place the project in service by the taxpayer within 7 years of the date of acceptance of application under section 4.02(11) of this notice. The allocation of a Phase II gasification credit does not delay the taxpayer’s placed-in-service obligations with respect to any Phase I gasification credit previously allocated to the project. Accordingly, the Phase I gasification credit allocate to the project will be forfeited if the taxpayer fails to place the project in service by the taxpayer within 7 years of the date of acceptance of application under the Phase I gasification program.

(4) DOE will rank the certified projects in descending order (that is, first, second, third, etc.) and the amount available for allocation will be allocated as follows in the 2009–2010 allocation round:

(a) If the requested allocation of credit for projects that DOE has certified does not exceed the amount available for allocation, each certified project will be allocated the full amount of credit requested.

(b) If the requested allocation of credit for projects that DOE has certified exceeds the amount available for allocation, the amount available for allocation will be allocated as follows:

(i) The project receiving the highest ranking (that is, first) will be allocated the full amount of credit requested (but not exceeding the amount available for allocation) before any credit is allocated to a lower-ranked project. The amount available for allocation is reduced by the amount of credit so allocated and only the remainder is available for allocation to a lower-ranked project.

(ii) Second and lower-ranked projects will be entitled to similar priority in the allocation of credit and allocations to such projects will similarly reduce the remainder of the amount available for allocation until the amount available for allocation is exhausted.

(5) If the amount available for allocation is not fully allocated in the 2009–10 allocation round, similar allocation rounds will be conducted in 2010–11 and 2011–12

April 20, 2009 804 2009–16 I.R.B.

vice by the end of that period then the acceptance letter is void.

(13) If the taxpayer’s application for § 48B certification is accepted, the acceptance letter will state the amount of credit allocated to the project and the amount of qualified investment that is certified as eligible for the credit. If a credit is allocated to a taxpayer’s project, the taxpayer will be required to execute a closing agreement in the form set forth in Appendix A to this notice. By June 30 of the calendar year in which an application for § 48B certification is accepted (July 2 after application of § 7503 for applications accepted in 2012), the taxpayer must execute and return the closing agreement to the Service at the appropriate address listed in section 5.04 of this notice or listed in later guidance published in the Internal Revenue Bulletin. The Service will execute and return the closing agreement to the taxpayer by August 31 of such calendar year. The executed closing agreement applies only to the accepted taxpayer. Accordingly, any 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. If the successor in interest does not execute a new closing agreement, the following rules apply:

(a) In the case of an interest acquired at or before the time the qualifying gasification project is placed in service, any credit allocated to the project (including any credit allocated under the Phase I gasification program) will be fully forfeited (and rules similar to the recapture rules of § 50(a) apply with respect to qualified progress expenditures); and

(b) In the case of an interest acquired after the qualifying gasification project is placed in service, the project ceases to be investment credit property and the recapture rules of § 50(a) (and similar rules with respect to qualified progress expenditures) apply.

(14) The closing agreement relating to a credit allocation may be modified only if the modification is consistent with the objectives of the qualifying gasification program, is requested by the taxpayer that received the credit allocation, involves moving the project site to improve the potential to capture and sequester CO emissions, 2 reduce costs of transporting feedstock, and

until the available amount is fully allocated. The results of each allocation round will be announced. See section 9.01 of this notice for further information about this announcement.

(6) If the same project would otherwise be allocated credit under both the qualifying gasification project program of § 48B and the qualifying advanced coal project program of § 48A, the following rules apply:

(a) The qualifying gasification project credit may not be allocated to the project with respect to any qualified investment under § 48B for which a qualifying advanced coal project credit is allowed under § 48A; and

(b) The qualifying gasification project credit may be allocated to the project with respect to the qualified investment under § 48B for which a qualifying advanced coal project credit is not allowed under § 48A.

(7) For each allocation round, there will be an annual application period during which a taxpayer may file its application for § 48B certification. The Service will consider a project in an allocation round only if the application for § 48B certification for the project is submitted during the application period for that round and the DOE provides the DOE certification and the DOE ranking (if any) for the project before the end of that application period.

(8) For the 2009–10 allocation round, the application period for § 48B certification begins on March 13, 2009, and ends on March 1, 2010, and any completed application for § 48B certification received by the Service after March 12, 2009, and before March 2, 2010, will be deemed to be submitted by the taxpayer on March 1, 2010. For the 2010–11 allocation round (if necessary), the application period for § 48B certification begins on March 2, 2010, and ends on March 1, 2011, and any completed application for § 48A certification received by the Service after March 1, 2010, and before March 2, 2011, will be deemed to be submitted by the taxpayer on March 1, 2011. For the 2011–12 allocation round (if necessary), the application period for § 48A certification begins on March 2, 2011, and ends on March 1, 2012, and any completed application for § 48A certification received by the Service after March 1, 2011, and before March 2, 2012, will be

deemed to be submitted by the taxpayer on March 1, 2012.

(9) For purposes of this notice, an application that is submitted by U.S. mail will be treated as received by the Service on the date of the postmark and an application submitted by a private delivery service will be treated as received by the Service on the date recorded or the date marked in accordance with § 7502(f)(2)(C).

(10) See section 5.02 of this notice and Appendix B to this notice for the information to be submitted to the DOE in an application for DOE certification. Appendix B to this notice also provides the instructions and address for filing the application for DOE certification. The DOE will determine the technical and economic feasibility of the project and, if the project is determined to be feasible, will provide a DOE certification for the project to the Service. If the DOE certifies two or more projects, the DOE will rank each of the projects it certifies (for example, first, second, third, etc.) relative to other certified projects. If an application for DOE certification is postmarked on or before October 31 of a calendar year, the DOE will determine the feasibility of the project and (for projects determined to be feasible) provide the DOE certification and the DOE ranking (if any) to the Service by March 1 of the following calendar year. Thus, after application of § 7503, relating to the time for performance of acts when the last day falls on a Saturday, Sunday, or legal holiday, applications for DOE certification must be postmarked on or before November 2, 2009, to be considered in the 2009–10 allocation round, on or before November 1, 2010, to be considered in the 2010–11 allocation round, and on or before November 1, 2011, to be considered in the 2011–12 allocation round.

(11) By April 30 of the calendar year in which an application for § 48B certification is deemed to be submitted (as determined under section 4.02(9) of this notice), the Service will accept or reject the taxpayer’s application for § 48B certification and will notify the taxpayer, by letter, of its decision.

(12) A taxpayer that receives an acceptance letter under section 4.02(11) of this notice has 7 years from the date of the acceptance letter to place the project in service and if the project is not placed in ser

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serve a broader customer base. The Service will not modify a closing agreement if the dollar amount of tax credit available to the taxpayer under § 48B would increase as a result of the modification or if the project would not have been originally certified had such modification been included in the taxpayer’s application. In considering such modification, the Service will consult with the DOE.