SECTION 2. BACKGROUND

.01 Introduction

Section 1303 of the Energy Tax Incentives Act of 2005, Pub. L. No. 109–58, 119 Stat. 594 (2005), added § 54 to the Code. Section 54 originally provided for a total national volume cap of $800 million for CREBs to finance eligible clean renewable energy projects and delegated to the Secretary the authority to allocate that volume cap, subject to the constraint that the Secretary could allocate no more than $500 million of that volume cap to qualified borrowers that were governmental bodies (with the balance to be allocated to qualified borrowers which were cooperative electric companies). Section 54 originally required that CREBs had to be issued by an expiration date of December 31, 2007. Section 202 of the Tax Relief and Health Care Act of 2006, Pub. L. No. 109–432, 120 Stat. 2922 (2006) (the “2006 Act”), amended § 54 in three respects. First, the 2006 Act increased the total national bond volume cap for CREBs from $800 million to $1.2 billion. Second, the 2006 Act extended the expiration date for the issuance of CREBs under the total authorized national volume cap of $1.2 billion from December 31, 2007, to December 31, 2008. Third, the 2006 Act increased the maximum allocations or reallocations to qualified borrowers which are governmental bodies from $500 million to $750 million (with the balance to be allocated to cooperative electric companies). In 2007, the IRS completed the allocation with respect to the volume cap under § 54 of the Code, as amended.

Section 15316 of the Food, Conservation, and Energy Act of 2008, Pub. L. No.

110–246, 122 Stat. 1651 (2008) (the “2008 Food Act”), added new § 54A to the Code. Section 54A provides certain general program requirements and operating rules for qualified tax credit bonds. Section 54A(a) provides that a taxpayer that holds a qualified tax credit bond on one or more credit allowance dates of the bond occurring during any taxable year is allowed as a credit against Federal income tax for the taxable year an amount equal to the sum of the credits determined under § 54A(b) with respect to such dates.

Section 107 of the Energy Improvement and Extension Act of 2008, Division B of Pub. L. No. 110–343, 122 Stat. 3765 (2008) (the “2008 Energy Act”) (the 2008 Food Act and the 2008 Energy Act are referred to collectively as the “2008 Acts”), added new § 54C to the Code to provide for a new national volume cap of $800 million for New CREBs to finance qualified renewable energy facilities. Section 107(b) of the 2008 Energy Act amended § 54A(d)(1) of the Code to provide that the term qualified tax credit bond, in part, means a New CREB that is part of an issue that meets the requirements of § 54A(d)(2), (3), (4), (5), and (6) regarding expenditures of bond proceeds, information reporting, arbitrage, maturity limitations, and prohibitions on financial conflicts of interest, respectively. Section 107(d) of the 2008 Energy Act provides that amendments to the Code made by § 107 of the 2008 Energy Act apply to obligations issued after October 3, 2008.

Section 1111 of Title I of Division B of the American Recovery and Reinvestment Act of 2009, Pub. L. No. 111–5, 123 Stat. 115 (2009) (the “2009 Act”), increased the national bond volume cap for New CREBs by $1.6 billion.

Section 107(c) of the 2008 Energy Act extends the expiration date for the issuance of CREBs under authority previously allocated by the IRS pursuant to § 54 of the Code from December 31, 2008, to December 31, 2009. In addition to providing for authority to issue New CREBs, the 2008 Acts amended certain provisions and requirements applicable to CREBs with respect to New CREBs authorized under §§ 54A and 54C of the Code. These amended requirements include: (1) requiring that 100 percent of the “available project proceeds” (as defined in § 54A(e)(4)) be used for capital expen

2009–17 I.R.B. 866 April 27, 2009

the term “public power provider” means a State utility with a service obligation, as such terms are defined in § 217 of the Federal Power Act (as in effect on the date of the enactment of this paragraph). Section 54C(d)(3) provides that the term “governmental body” means any State (including the District of Columbia and any possession of the United States) or Indian tribal government, or any political subdivision thereof. Section 54C(d)(4) provides that the term “cooperative electric company” means a mutual or cooperative electric company described in § 501(c)(12) or § 1381(a)(2)(C). Section 54C(d)(5) provides that the term “clean renewable energy bond lender” means a lender that is a cooperative that is owned by, or has outstanding loans to, 100 or more cooperative electric companies and is in existence on February 1, 2002, and shall include any affiliated entity controlled by such lender.

Section 54C(d)(1) defines the term “qualified renewable energy facility” to mean any of the following qualified facilities (as determined under § 45(d) without regard to paragraphs (8) and (10) thereof and to any placed in service date) owned by a public power provider, a governmental body, or a cooperative electric company: (1) a wind facility under § 45(d)(1); (2) a closed-loop biomass facility under § 45(d)(2); (3) an open-loop biomass facility under § 45(d)(3); (4) a geothermal or solar energy facility under § 45(d)(4); (5) a small irrigation power facility under § 45(d)(5); (6) a landfill gas facility under § 45(d)(6); (7) a trash combustion facility under § 45(d)(7); (8) a qualified hydropower facility under § 45(d)(9); and (9) a marine and hydrokinetic renewable energy facility under § 45(d)(11).

Section 54C(c) provides that the national bond volume cap for New CREBs is $2.4 billion. Section 54C(c)(2) provides that the Secretary shall allocate no more than one third of the volume cap to qualified projects owned by public power providers, governmental bodies, and cooperative electric companies, respectively. Section 54C(c)(3)(A) provides that with respect to public power providers, after the Secretary identifies the qualified projects of public power providers that are appropriate for receiving an allocation of the CREB volume cap, the Secretary shall, to the maximum extent practicable, make allocations among such projects in such

manner that the amount allocated to each such project bears the same ratio to the cost of such project as the portion of the CREB volume cap that may be allocated to public power providers bears to the cost of all such projects. Section 54C(c)(3)(B) provides that with respect to governmental bodies and cooperative electric companies, the Secretary shall make allocations of the respective CREB volume caps among qualified projects of governmental bodies and cooperative electric companies in such manner as the Secretary determines appropriate.