SECTION 3. DETERMINATION OF

THE § 45J CREDIT

.01 In general . Under § 45J(a), (b)(1), and (c), the § 45J credit allowed to a taxpayer for a taxable year with respect to qualifying electricity is the lesser of:

(1) the tentative credit for the facility for the taxable year (determined under section 3.02(1) of this notice) multiplied by the taxpayer’s credit percentage (determined under section 3.02(2) of this notice), or

(2) $125,000,000 per 1,000 megawatts of the facility limitation determined under section 5.03(1) and (2) of this notice that is allocated to the taxpayer under section 5.03(3), (4), and (5) of this notice. .02 Tentative credit; credit percentage

(1) A facility’s tentative credit for the taxable year is equal to 1.8 cents multiplied by the kilowatt hours of qualifying electricity.

(2) The credit percentage for each taxpayer that has been allocated all or part of the amount of the facility limitation is determined by dividing the facility limitation that is allocated to the taxpayer under section 5.03(3), (4), and (5) of this notice by the nameplate capacity of the facility.

.03 Credit determination for partner- ships and S corporations . If a facility is owned by a partnership or S corporation, then the partnership or S corporation, and not the partners or shareholders, will be treated as the taxpayer that owns the facility for the purposes of this notice. In such cases, the § 45J credit must be allocated to the partners or shareholders in accordance with § 1.704-1(b)(4)(ii) of the Income Tax Regulations, in the case of partnerships, or § 1.1366-1(a)(2)(v) of the Income Tax Regulations, in the case of S corporations. If the facility is owned through an organization that has made a valid election under § 761(a) of the Code (§ 761(a) election), each member’s undivided ownership share in the facility will be treated for purposes of this notice as a separate facility owned by such member.

.04 Sale of Electricity to Unrelated Person . The § 45J credit is allowed only for qualifying electricity that the taxpayer produces and sells to an unrelated person, as defined in § 45(e)(4). Solely for purposes of § 45J, electricity will be treated as sold to an unrelated person if the ultimate purchaser of the electricity is not related to the person that produces the electricity. Thus, the requirement of a sale to an unrelated person will be treated as satisfied if the producer sells the electricity to a related person for resale by the related person to a person that is not related to the producer.

.05 Effect of Grants, Tax-Exempt Bond Proceeds, Subsidized Energy Financing, and Other Credits . The amount of the § 45J credit with respect to any facility for any taxable year is not reduced by the amount of any grants, tax-exempt bond proceeds, subsidized energy financing, or other credits (as described in § 45(b) (3)) used for, or in connection with, the facility.