SECTION 3. RULE RELATED TO

SEPARATION AND SEQUESTRATION OF CARBON DIOXIDE EMISSIONS.

.01 In General . Section 48A(i) requires a recapture of the qualifying advanced coal project credit with respect to any project that fails to attain or maintain the separation and sequestration requirements of § 48A(e)(1)(G). Section 7.04 of Notice 2009–24 states that the § 48A credit allocated to a Phase II advanced coal project will be recaptured if, at any time during the applicable recovery period (as defined in § 168(c)) for such project, the project fails to attain or maintain the separation and sequestration requirements for such project under § 48A(e)(1)(G).

Similarly, § 48B(f) requires a recapture of the qualifying gasification project credit with respect to any project that fails to attain or maintain the separation and sequestration requirements for such project under § 48B(d)(1)(B). Section 6.04 of Notice 2009–23 provides that the § 48B credit allocated to a Phase II gasification project will be recaptured if, at any time during the applicable recovery period (as defined in § 168(c)) for such project, the project fails to attain or maintain the separation and sequestration requirements for such project under § 48B(d)(1)(B).

Additionally, credits allowed under § 48A and § 48B are subject to the recapture rules of § 50(a) as provided under section 2.12 of Notice 2009–24 and section 2.07 of Notice 2009–23, respectively. Section 50(a)(1) provides, generally, for recapture of the investment credit if, during any taxable year, investment tax credit property is disposed of or otherwise ceases to be investment credit property with respect to the taxpayer before the close of the recapture period. The recapture period under § 50(a) is the 5-year period beginning on the date the property is placed in service.

.02 Applicability of the Recapture Rule of § 50(a) . The Service recognizes that § 168(c) provides a wide range of recovery periods that apply to Phase II advanced coal projects or Phase II gasification projects. This may create uncertainty for taxpayers regarding which recovery period to use if a project fails to attain or

2011–14 I.R.B. 603 April 4, 2011

maintain the separation and sequestration requirements of § 48A and § 48B.

Moreover, different recapture periods provided under § 168(c) and § 50(a) may create further confusion and difficulty to taxpayers and to the Service. Therefore, the Service has determined that the recapture rules under § 50(a) will apply for all events that trigger recapture of the credits allowed under § 48A or § 48B, including a failure to attain or maintain the separation and sequestration requirements of § 48A(e)(1)(G) or § 48B(d)(1)(B).

.03 Annual Basis During Normal Plant Operations . For purposes of determining whether a project meets the requirements of § 48A(e)(1)(G) or § 48B(d)(1)(B), the amount of the project’s total CO emis2 sions and the amount of CO separated 2 and sequestered will be measured on an annual basis during normal plant operations. An annual period other than the taxpayer’s taxable year may be used for these purposes if the same period is consistently used. If a period other than the taxable year is used, any failure to meet the requirements of § 48A(e)(1)(G) or § 48B(d)(1)(B) will be treated as occurring in the taxable year that includes the last day of the annual period in which the failure occurs. The term “normal plant operations” is defined as operations other than during periods of initial plant certification, plant startup, plant shutdown, integrated gasifier shutdown for gasification system maintenance, or interruption of the coal supply to the project resulting from an event of force majeure (including an act of God, war, strike, or other similar event beyond the control of the taxpayer).