SECTION 3. EXTENSION OF

TRANSITIONAL RULE

This guidance extends the transitional rule set forth in Section 2(c) of Notice 2008–110 through September 30, 2009. Therefore, if a taxpayer’s claim for biodiesel incentives relates to the production, sale, or use of biodiesel or a biodiesel mixture and the production, sale, or use occurs before October 1, 2009, a certification that the biodiesel covered by the claim meets the requirements of ASTM D6751 is valid if the biodiesel meets the requirements of ASTM D6751 as in effect either before or after the October 13, 2008 revision that added the cold soak filtration test for biodiesel. If a claim relates to the production, sale, or use of biodiesel or a biodiesel mixture and the production, sale, or use occurs on or after October 1, 2009, a certification that the biodiesel covered by the claim meets the requirements of ASTM D6751 is valid only if the biodiesel satisfies the requirements of ASTM D6751 as in effect after the October 13, 2008, revision that added the cold soak filtration test for biodiesel.

2009–17 I.R.B. 876 April 27, 2009

for school construction, a high level of enrollment growth, or such other factors as the Treasury deems appropriate.

Section 54F(d)(3) provides that the amount allocated under § 54F(d)(1) to any United States possession other than Puerto Rico is an amount that would have been allocated to such possession if all allocations under § 54F(d)(1) were made on the basis of respective populations of individuals below the poverty line (as defined by the Office of Management and Budget). Section 54F(d)(3) further provides that in making the other allocations, the amount to be allocated under § 54F(d)(1) to the States is reduced by the aggregate amount allocated under § 54F(d)(3) to the United States possessions.

Section 54F(d)(4) provides for additional calendar year volume cap amounts of $200 million for calendar year 2009 and $200 million for calendar year 2010 (each an “Indian tribal government calendar year volume cap” and together the “Indian tribal government volume cap”) to be allocated by the Secretary of Interior for purposes of the construction, rehabilitation, and repair of schools funded by the Bureau of Indian Affairs. This $ 200 million Indian tribal government calendar year volume cap allocated to the Indian tribal governments does not reduce the $11 billion calendar year volume cap allocated to the States and the large local educational agencies. Section 54F(d)(4) further provides that, for amounts of Indian tribal government volume cap allocated, Indian tribal governments (as defined in § 7701(a)(40)) are to be treated as qualified issuers.

Section 54F(e) provides that if for any calendar year, the amount of calendar year volume cap allocated under § 54(d) to any State or the amount of Indian tribal government calendar year volume cap allocated to an Indian tribal government exceeds the amount of QSCBs issued during the calendar year pursuant to such allocation, the amount of such excess shall to be carried over to the following calendar year and shall increase the calendar year volume cap or the Indian tribal government calendar year volume cap allocation for the following calendar year for the State or Indian tribal government.

123 Stat. 115 (2009) (“Act”) added new § 54F to the Code, setting forth program provisions for QSCBs. The Act amended § 54A(d)(1) to provide that the term “qualified tax credit bond” means, in part, a qualified school construction bond 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 against financial conflicts of interest, respectively. The Act also amended § 54A(d)(2) to provide that, for purposes of § 54A(d)(2)(C), the term “qualified purpose” for a QSCB means a purpose specified in § 54F(a)(1) described below.

The Act added § 54F(c) to provide a national bond limitation authorization for QSCBs of $11 billion for 2009 and $11 billion for 2010 (each, a “calendar year volume cap” and together “volume cap”). Section 54F(c)(3) provides that except for carryforwards provided for in § 54F(e), there is no calendar year volume cap for calendar years after 2010.

.02 QUALIFIED SCHOOL CONSTRUCTION BONDS UNDER § 54F

Section 54F(a) defines a “qualified school construction bond” to mean any bond issued as part of an issue if —

(1) 100 percent of the available project proceeds of such issue are to be used for the construction, rehabilitation, or repair of a public school facility or for the acquisition of land on which such a facility is to be constructed with part of the proceeds of such issue,

(2) the bond is issued by a State or local government within the jurisdiction of which such school is located, and

(3) the issuer designates such bond for purposes of this section.

Section 54F(b) provides that the maximum aggregate face amount of bonds issued during any calendar year that may be designated under § 54F(a) by any issuer shall not exceed the portion of the calendar year volume cap allocated to such issuer for the calendar year under § 54F(d).

Section 54F(d)1) provides that, except as provided in § 54F(d)(2)(C), the calendar year volume cap shall be allocated by the Treasury among the States in proportion to

the respective amounts each State is eligible to receive under § 1124 of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 6333) (the “Education Act”) for the most recent fiscal year ending before the calendar year. Section 54F(d)(1) further provides that the calendar year volume cap amount allocated to each State is to be further allocated by the State to the issuers within the State.

Section 54F(d)(2)(A) provides that 40 percent of the calendar year volume cap for any calendar year is to be allocated under § 54F(d)(2)(B) by the Treasury among local educational agencies that are large local agencies for the calendar year. Section 54F(d)(2)(B) provides that 40 percent of the calendar year volume cap is to be allocated among large local educational agencies in proportion to the respective amounts each such agency received under § 1124 of the Education Act for the most recent fiscal year ending before the calendar year.

Section 54F(d)(2)(C) provides that the allocation of calendar year volume cap to any State under § 54F(d)(1) is reduced by the aggregate amount of allocations under § 54F(d)(2) to large local educational agencies within the State.

Section 54F(d)(2)(D) provides the amount of calendar year volume cap allocated to a large local educational agency for any calendar year may be reallocated by such agency to the State in which such agency is located for the calendar year. Section 54F(d)(2)(D) further provides that any amount reallocated to a State by a large local educational agency may be further allocated by the State to issuers within the State.

Section 54F(d)(2)(E) defines a large local educational agency as any local educational agency if such agency is: (1) among the one hundred local educational agencies with the largest number of children aged 5 through 17 from families living below the poverty level, as determined by the Treasury using the most recent data available from the Department of Commerce that are satisfactory to the Treasury; or (2) one of not more than twenty-five additional local educational agencies that the Secretary of Education determines (based on the most recent data available satisfactory to the Treasury) are in particular need of assistance, based on a low level of resources

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an obligation of that State or political subdivision for purposes of § 103 and § 1.103–1(b), Income Tax Regs. Further, eligible issuers include otherwise-eligible issuers in conduit financing issues (as defined in § 1.150–1(b), Income Tax Regs.) An eligible issuer may issue QSCBs based on a volume cap allocation received by the eligible issuer itself or by a conduit borrower or other ultimate beneficiary of the issue of QSCBs. In all events, the eligible costs of public school facilities financed with the proceeds of an issue of QSCBs under § 54F(a)(1) must relate to public school facilities that are located within both the jurisdiction of the issuer of the QSCBs and the jurisdiction of the authorized entity that allocates volume cap to the issue of QSCBs for the financing of those public school facilities. Authorized entities that may allocate volume cap consist of those entities that receive volume cap allocations under § 54F(d). Thus, for example, a large local educational agency that has received a volume cap allocation under § 54F(d)(2) either may issue QSCBs with respect to that volume cap itself or it may be a beneficiary of proceeds of an issue issued by another eligible issuer with respect to that volume cap, provided that, in either event, the public school facilities to be financed with the proceeds of the issue of QSCBs are located within both the jurisdiction of the issuer of the QSCBs and the jurisdiction of the large local educational agency that allocated volume cap to the issue of QSCBs for the financing of those public school facilities.

SECTION 4. 2009 ALLOCATIONS OF NATIONAL BOND VOLUME CAP FOR QSCBs

The 2009 national bond volume cap for QSCBs is $11 billion. This amount is allocated among the States and large local educational agencies as set forth in this notice. The 2009 allocations to 100 large local educational agencies reflects the determination by the Secretary of Education to decline to select 25 additional large local educational agencies under § 54F(d)(2)(E)(ii) for such year. The first chart below allocates $6.6 billion of the $11 billion 2009 calendar year volume cap for QSCBs to States to be further allocated to the issuers within such State. The second chart below allocates $4.4 billion of the $11 billion