SECTION 10. QUALIFIED

PROGRESS EXPENDITURES

.01 Section 48C(b)(2) provides that rules similar to the rules of § 46(c)(4) and (d) (as in effect on the day before the enactment of the Revenue Reconcili­ ation Act of 1990) apply for purposes of § 48C. Former § 46(c)(4) and (d) provided the rules for claiming the investment tax credit on qualified progress expenditures (as defined in former § 46(d)(3)) made by a taxpayer during the taxable year for the construction of progress expenditure property (as defined in former § 46(d)(2)).

.02 In the case of self-constructed property (as defined in former § 46(d) (5)(A)), former § 46(d)(3)(A) defined qualified progress expenditures to mean the amount that is properly chargeable (during the taxable year) to the capital ac­ count with respect to that property. With

respect to a qualifying advanced energy project that is self-constructed property, amounts paid or incurred are chargeable to the capital account at the time and to the extent they are properly includible in computing basis under the taxpayer’s method of accounting (for example, af­ ter applying the requirements of § 461, including the economic performance re­ quirement of § 461(h)).

.03 To claim the § 48C credit with respect to the qualified progress expen­ ditures paid or incurred by a taxpayer during the taxable year for construction of a qualifying advanced energy project, the taxpayer must make an election (Qualified Progress Expenditures Election) under the rules set forth in § 1.46-5(o) of the In­ come Tax Regulations (26 C.F.R. part 1). A taxpayer may not make the Qualified Progress Expenditures Election for a qual­ ifying advanced energy project until the taxpayer has received a Certification Let­ ter for the project under section 5.02(10) of this notice.

.04 If a taxpayer makes a Qualified Progress Expenditures Election pursuant to section 10.03 of this notice, rules sim­ ilar to the recapture rules in § 50(a)(2) (A) through (D) apply. In addition to the cessation events listed in § 50(a)(2)(A), examples of other events that will cause the project to cease being a qualifying ad­ vanced energy project are:

(1) Failure to place the project in ser­ vice within 2 years from the date of the Certification Letter; or

(2) A significant change to the plans for the project as set forth in the § 48C(e) application if, under section 8.01 of this notice, the allocation is void as a result of the change.