91552 Federal Register / Vol. 89, No. 224 / Wednesday, November 20, 2024 / Rules and Regulations 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 1 

[TD 10012] 

RIN 1545–BR09 

Election To Exclude Certain 

Unincorporated Organizations Owned 

by Applicable Entities From 

Application of the Rules on Partners 

and Partnerships 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Final regulations. 

SUMMARY: This document sets forth final 

regulations that modify existing 

regulations to allow certain 

unincorporated organizations that are 

owned in whole or in part by applicable 

entities to be excluded from the 

application of partnership tax rules. 

These regulations affect unincorporated 

organizations and their members, 

including tax-exempt organizations, the 

District of Columbia, State and local 

governments, Indian Tribal 

governments, Alaska Native 

Corporations, the Tennessee Valley 

Authority, rural electric cooperatives, 

and certain agencies and 

instrumentalities. The final regulations 

also update certain outdated language in 

the existing regulations. 

DATES: 

Effective date: These regulations are 

effective on January 19, 2025. 

Applicability date: For the date of 

applicability, see § 1.761–2(f). 

FOR FURTHER INFORMATION CONTACT: 

Concerning these final regulations, 

contact Cameron Williamson at (202) 

317–6684 (not a toll-free number). 

SUPPLEMENTARY INFORMATION: 

Authority 

This document contains amendments 

to the Income Tax Regulations (26 CFR 

part 1) under section 761(a) of the 

Internal Revenue Code (Code) issued by 

the Secretary of the Treasury (Secretary) 

pursuant to the authority granted under 

sections 761(a), 6031(a), 6417(d) and (h), 

and 7805(a) of the Code (final 

regulations). 

Section 761(a) provides, in part, an 

express grant of regulatory authority for 

section 761(a) stating, ‘‘[u]nder 

regulations the Secretary may, at the 

election of all the members of an 

unincorporated organization, exclude 

such organization from the application 

of all or a part of this subchapter.’’ 

Section 6031(a) provides an express 

grant of regulatory authority for the 

Secretary to prescribe in forms or 

regulations partnership reporting 

information required ‘‘for the purpose of 

carrying out the provisions of subtitle 

A.’’ 

Section 6417(d) provides several 

express delegations of authority to the 

Secretary to enforce requirements for 

elective payments of applicable credits 

under section 6417 and recapture 

excessive payments. Section 6417(h) 

provides an express delegation of 

authority with respect to elective 

payments under section 6417, stating, in 

part, that ‘‘[t]he Secretary shall issue 

such regulations or other guidance as 

may be necessary to carry out the 

purposes of this section.’’ 

Finally, section 7805(a) authorizes the 

Secretary to ‘‘prescribe all needful rules 

and regulations for the enforcement of 

[the Code], including all rules and 

regulations as may be necessary by 

reason of any alteration of law in 

relation to internal revenue.’’ 

Background 

I. Elective Payment of Applicable 

Credits 

Section 6417 was added to the Code 

by section 13801(a) of Public Law 117– 

169, 136 Stat. 1818, 2003 (August 16, 

2022), commonly referred to as the 

Inflation Reduction Act of 2022 (IRA). 

Section 6417 allows an ‘‘applicable 

entity’’ (including tax-exempt 

organizations, the District of Columbia, 

State and local governments, Indian 

Tribal governments, Alaska Native 

Corporations, the Tennessee Valley 

Authority, rural electric cooperatives, 

and certain agencies and 

instrumentalities) to make an election to 

treat an ‘‘applicable credit’’ (as defined 

in section 6417(b)) determined with 

respect to such entity as making a 

payment by such entity against the tax 

imposed by subtitle A of the Code, for 

the taxable year with respect to which 

such credit is determined, equal to the 

amount of such credit. Section 6417 also 

provides special rules relating to 

partnerships and directs the Secretary to 

provide rules for making elections 

under section 6417. Section 13801(g) of 

the IRA provides that section 6417 

applies to taxable years beginning after 

December 31, 2022. 

On March 11, 2024, the Department of 

the Treasury (Treasury Department) and 

the IRS published in the Federal 

Register (88 FR 40528) final regulations 

(TD 9988) providing guidance on the 

section 6417 elective payment election 

(section 6417 regulations). Section 

1.6417–2(a)(1)(iv) provides that 

partnerships are not applicable entities 

described in section 6417(d)(1)(A) or 

§ 1.6417–1(c), regardless of how many of 

their partners are themselves applicable 

entities. Accordingly, any partnership 

making an elective payment election 

must be an electing taxpayer (as defined 

in § 1.6417–1(g)), and, as such, the only 

applicable credits with respect to which 

the partnership could make an elective 

payment election would be credits 

determined under sections 45Q, 45V, 

and 45X for the time periods allowed in 

section 6417(d). However, § 1.6417– 

2(a)(1)(iii) provides that if an applicable 

entity is a co-owner in an applicable 

credit property (as defined in § 1.6417– 

1(e)), through an organization that has 

made a valid election under section 

761(a) (section 761(a) election) to be 

excluded from the application of the 

partnership tax rules of subchapter K of 

chapter 1 of the Code (subchapter K), 

then the applicable entity’s undivided 

ownership share of the applicable credit 

property is treated as a separate 

applicable credit property owned by 

such applicable entity. As a result, the 

applicable entity may make an elective 

payment election for the applicable 

credit(s) determined with respect to 

such applicable credit property. 

Also on March 11, 2024, the Treasury 

Department and the IRS published in 

the Federal Register (89 FR 17613) 

proposed amendments (REG–101552– 

24) to the regulations under section 

761(a) to carry out the purposes of 

section 6417 (proposed regulations). 

Generally, the proposed regulations 

would have amended certain provisions 

of § 1.761–2 as in effect and contained 

in 26 CFR part 1 to provide that 

unincorporated organizations meeting 

certain requirements (applicable 

unincorporated organizations) are 

eligible for certain modifications 

(referred to in the proposed regulations 

as ‘‘exceptions’’) to the existing 

requirements for making a section 

761(a) election. The provisions of the 

proposed regulations are explained in 

greater detail in the preamble to the 

proposed regulations. 

Concurrently with the publication of 

these final regulations, the Treasury 

Department and the IRS are publishing 

in the Proposed Rules section of this 

edition of the Federal Register a notice 

of proposed rulemaking (REG–116017– 

24) proposing to further add to and 

revise the provisions of § 1.761–2 

(November 2024 proposed regulations). 

The proposed revisions to the 

provisions of § 1.761–2 by the 

November 2024 proposed regulations 

are explained in greater detail in the 

preamble to the November 2024 

proposed regulations. 


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II. Overview of Section 761(a) and Prior 

§ 1.761–2(a)(3) 

Section 761(a) provides, in part, that 

under regulations the Secretary may, at 

the election of all of the members of an 

unincorporated organization, exclude 

such organization from the application 

of all or part of subchapter K if the 

organization is availed of: (1) for 

investment purposes only and not for 

the active conduct of a business, (2) for 

the joint production, extraction, or use 

of property, but not for the purpose of 

selling services or property produced or 

extracted, or (3) by dealers in securities 

for a short period for the purpose of 

underwriting, selling, or distributing a 

particular issue of securities, provided 

that the income of the members of the 

organization may be adequately 

determined without the computation of 

partnership taxable income. 

As discussed in the preamble to the 

proposed regulations, unincorporated 

organizations seeking to be excluded 

from the application of subchapter K so 

that one or more of their members can 

make an election under section 6417 are 

likely to be availed of for the purposes 

listed in section 761(a)(2), that is, for the 

joint production, extraction, or use of 

property, but not for the purpose of 

selling services or property produced or 

extracted. Pursuant to the authority in 

section 761(a), prior § 1.761–2(a)(3) 

provides additional requirements for an 

unincorporated organization to elect to 

be excluded from the application of 

subchapter K under section 761(a)(2). 

Specifically, prior § 1.761–2(a)(3) 

requires that the participants in the joint 

production, extraction, or use of 

property: (i) own the property as coowners, either in fee or under lease or 

other form of contract granting exclusive 

operating rights (co-ownership 

requirement), (ii) reserve the right 

separately to take in kind or dispose of 

their shares of any property produced, 

extracted, or used (severance 

requirement), and (iii) do not jointly sell 

services or the property produced or 

extracted (joint marketing requirement), 

although each separate participant may 

delegate authority to sell the 

participant’s share of the property 

produced or extracted for the time being 

for the participant’s account, but not for 

a period of time in excess of the 

minimum needs of the industry, and in 

no event for more than one year (oneyear exception). These additional 

regulatory requirements are hereinafter 

referred to as the ‘‘existing regulatory 

requirements’’ and, along with the 

previously discussed statutory 

requirements, are referred to herein as 

the ‘‘existing requirements’’ to be 

eligible to elect out of the application of 

subchapter K. 

As discussed in the Summary of 

Comments and Explanation of 

Revisions, the proposed regulations 

would have modified some of the 

existing regulatory requirements for 

unincorporated organizations that meet 

certain requirements. 

Summary of Comments and 

Explanation of Revisions 

The Treasury Department and the IRS 

received 11 written comments in 

response to the proposed regulations. 

The comments are available for public 

inspection at www.regulations.gov or 

upon request. A public hearing on the 

proposed regulations was scheduled for 

May 20, 2024. There were no requests 

to speak at the scheduled public 

hearing. Consequently, the public 

hearing was cancelled. See Election To 

Exclude Certain Unincorporated 

Organizations Owned by Applicable 

Entities From Application of the Rules 

on Partners and Partnerships; Hearing 

Cancellation, 89 FR 43349 (May 17, 

2024). After full consideration of the 

comments received, these final 

regulations adopt the proposed 

regulations with modifications in 

response to the comments described in 

this Summary of Comments and 

Explanation of Revisions. The 

provisions of § 1.761–2 as amended by 

the final regulations are referred to as 

‘‘revised § 1.761–2’’ in this Summary of 

Comments and Explanation of 

Revisions. 

Comments merely summarizing the 

statute or proposed regulations, 

recommending statutory revisions to 

section 761 or other statutes, addressing 

unrelated issues, or recommending 

changes to IRS forms or procedures are 

generally not addressed in this 

Summary of Comments and Explanation 

of Revisions or adopted in these final 

regulations. These comments included 

recommendations and questions 

regarding fact patterns specific to 

section 6417, the domestic content rules 

of section 45(b)(10), the credit for 

qualified commercial clean vehicles of 

section 45W, and the credit for 

alternative fuel vehicle refueling 

property of section 30C. While the 

Treasury Department and the IRS are 

studying some of those issues and 

intend to issue future guidance on those 

provisions, those recommendations and 

questions are unrelated to the purpose 

of these final regulations. Unless 

otherwise indicated in this Summary of 

Comments and Explanation of 

Revisions, provisions of the proposed 

regulations with respect to which no 

comments were received are adopted 

without substantive change. 

I. Overview 

Proposed § 1.761–2(a)(4)(ii) would 

have defined ‘‘applicable 

unincorporated organizations’’ as 

unincorporated organizations that meet 

several requirements. Proposed § 1.761– 

2(a)(4)(iii) would have modified the 

regulatory requirements in prior 

§ 1.761–2(a)(3)(i) and (iii) for an 

applicable unincorporated organization 

that also met the regulatory 

requirements of prior § 1.761–2(b) and 

(e). 

Part II of this Summary of Comments 

and Explanation of Revisions discusses 

comments received concerning the 

general effects of a section 761(a) 

election. Part III of this Summary of 

Comments and Explanation of Revisions 

discusses the comments received on the 

definition of an applicable 

unincorporated organization. Part IV of 

this Summary of Comments and 

Explanation of Revisions discusses the 

comments received on the modifications 

to the existing regulatory requirements. 

Part V of this Summary of Comments 

and Explanation of Revisions discusses 

the applicability date of these final 

regulations, the elimination of certain 

obsolete language, and certain 

administrative requirements that are 

under consideration for organizations 

taking advantage of the modifications to 

the existing regulatory requirements. 

Part VI of this Summary of Comments 

and Explanation of Revisions 

summarizes two comments not 

addressed in these final regulations. 

II. Effects of an Election Under Section 

761(a) 

A. General 

Subchapter K provides rules 

governing the taxation of partners and 

partnerships. When an unincorporated 

organization makes a valid section 

761(a) election out of subchapter K, the 

rules of subchapter K no longer apply to 

that organization. As a result, for 

purposes of subchapter K, the 

unincorporated organization ceases to 

be a partnership and each member of 

the unincorporated organization is 

generally treated as a co-owner, that is, 

as directly owning its proportionate 

share of the organization’s assets. 

For example, an unincorporated 

organization that has made a valid 

section 761(a) election is not subject to 

section 704, which provides the rules 

for determining a partner’s distributive 

share of a partnership’s tax items. 

Instead, each member of an 

unincorporated organization that has 


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made a valid section 761(a) election 

takes into account directly its 

ownership share of the organization’s 

tax items. Accordingly, if an 

unincorporated organization with a 

valid section 761(a) election purchases 

depreciable property, an owner of a 30 

percent interest in the organization may 

claim depreciation deductions as if it 

owned an undivided 30 percent interest 

in the organization’s property (provided 

the owner is otherwise eligible for such 

deductions). That member cannot claim 

depreciation deductions beyond that 

member’s ownership interest in the 

organization’s property. Thus, any 

agreement among the members to 

specially allocate one member’s 

depreciation deductions to another 

member would make the organization 

ineligible for a section 761(a) election. 

One commenter asked for clarification 

of whether the following fact pattern is 

compatible with an election under 

section 761(a). A church (an applicable 

entity) forms a partnership with a 

nonprofit investor and a for-profit 

developer. The church contributes a site 

for energy property, which generates 

electricity and reduces the church’s 

energy bill. The nonprofit investor 

makes grants and loans to the 

organization and is repaid by virtue of 

renewable energy credits or net 

metering from the clean energy 

property. The for-profit developer enters 

into a contract to maintain the system in 

exchange for a fee. 

The facts described in the comment 

letter do not provide sufficient 

information to determine whether this 

situation is compatible with a section 

761(a) election. If the investor receives 

all payments in its capacity as a lender 

and the for-profit developer receives its 

profits in its capacity as a third-party 

service provider, there might not be an 

unincorporated organization at all. If 

there is an unincorporated organization 

and it intends to make a section 761(a) 

election, each of its members must 

reserve the right separately to take in 

kind or dispose of their shares of any 

property produced, extracted, or used. If 

the investor or developer receives 

payments in excess of its pro rata 

ownership interests, this requirement 

will not be met. Moreover, if the 

contributions mentioned in this 

situation are intended to be nonrecognition transfers for Federal income 

tax purposes, the contributing members 

would generally need to make such 

contributions under section 721(a), 

which is part of subchapter K. However, 

if a section 761(a) election is made, the 

organization is not subject to subchapter 

K, and thus, section 721(a) is 

inapplicable to transfers to the 

organization. Without section 721(a), 

the transfers would generally be taxable 

events. 

One commenter asked how certain 

capital stacking combinations 

(including loans, forgivable loans, and 

grants) affect an organization’s 

eligibility to make a section 761(a) 

election. To make a valid section 761(a) 

election, an unincorporated 

organization must comply with the 

requirements of section 761(a) and 

revised § 1.761–2. Provided that those 

requirements are met, the structure of an 

organization’s capital stack would not 

appear to preclude it from making a 

valid section 761(a) election. Federal 

income tax law governs the treatment of 

these arrangements for purposes of 

determining whether an arrangement 

violates the requirements of section 

761(a). For example, loans between 

members of the organization will be 

treated as debt to the extent they are 

treated as debt under Federal income 

tax law. Likewise, loans by a member to 

an organization would not be treated as 

a partnership liability under section 

752, but a loan to each member of the 

organization in proportion to the 

member’s ownership interest. 

One commenter asked that applicable 

entities who are members in an 

applicable unincorporated organization 

that makes a 761(a) election be 

permitted to claim all applicable tax 

credit bonuses and adders. Bonus credit 

amounts, such as amounts for 

applicable credit properties located in 

energy communities, apply to property 

co-owned through an applicable 

unincorporated organization. The 

Treasury Department and the IRS have 

determined that no change to the final 

regulations is required to clarify this 

issue. 

B. Effect of a Section 761(a) Election on 

Sections of the Code Outside of 

Subchapter K 

One commenter requested a 

discussion of the effects of a section 

761(a) election on provisions of the 

Code outside of subchapter K that 

reference partnerships, including 

section 6417. A detailed discussion of 

the effects of a section 761(a) election on 

provisions of the Code outside of 

subchapter K would require a careful 

examination of numerous provisions of 

the Code apart from those relevant to 

these final regulations and is not 

necessary for purposes of these final 

regulations. However, the application of 

a section 761(a) election to section 6417 

is fundamental to the purpose of these 

final regulations, which is to carry out 

the purposes of section 6417 and thus, 

is addressed herein. 

An organization with a valid section 

761(a) election may be treated as a 

partnership for purposes of sections of 

the Code outside of subchapter K. In 

Bryant v. Commissioner, 46 T.C. 848 

(1966), aff’d, 399 F.2d 800 (5th Cir. 

1968), the Tax Court concluded that an 

organization that made a section 761(a) 

election was still a partnership for 

purposes of other parts of the Code, 

including the $50,000 investment tax 

credit limit on partnership assets 

provided by then section 48(c)(2)(D) of 

the Code. See also Cokes v. 

Commissioner, 91 T.C. 222 (1988) 

(section 761 election did not affect 

partnership status under the selfemployment tax provisions of section 

1402(a) of the Code); Madison Gas and 

Electric Company v. Commissioner, 72 

T.C. 521 (1979), aff’d, 633 F.2d 512 (7th 

Cir. 1980) (notwithstanding a section 

761 election, the startup costs of a joint 

venture were attributable to the 

partnership business and were not 

deductible under section 162(a) of the 

Code as the ordinary and necessary 

business expenses of the individual 

partners). 

Though section 6417 is not in 

subchapter K, a section 761(a) election 

affects whether an entity is treated as a 

partnership for purposes of section 

6417. Section 6417(h) provides that the 

Secretary shall issue such regulations or 

other guidance as may be necessary to 

carry out the purposes of section 6417. 

Pursuant to this broad authority, the 

Treasury Department and the IRS 

published § 1.6417–2(a)(1)(iii), which 

provides that if an applicable entity is 

a co-owner in an applicable credit 

property through an organization that 

has made a valid section 761(a) election, 

then the applicable entity’s undivided 

ownership share of the applicable credit 

property will be treated as a separate 

applicable credit property owned by 

such applicable entity, and the 

applicable entity may make an elective 

payment election for the applicable 

credits determined with respect to such 

applicable credit property. This means 

that a section 761(a) election effectively 

causes an unincorporated organization 

not to be treated as a partnership for 

purposes of section 6417, including 

section 6417(c). Thus, the effect of a 

valid section 761(a) election for 

purposes of section 6417 is that each 

member of the organization is treated as 

directly owning its proportionate share 

of the applicable credit property. As a 

result, each applicable entity member of 

the organization may make an elective 

payment election (or, if not an 

applicable entity member, a transfer 

election under section 6418) with 


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respect to its proportionate share of the 

applicable credit property. 

Another commenter requested 

confirmation that a Tribal Energy 

Development Organization that makes a 

section 761(a) election is not a 

partnership for purposes of sections 

168(h)(5) and (6) and 50(b)(3). 

Section 168(h) describes tax-exempt 

use property (generally, certain property 

leased to a tax-exempt entity), the cost 

recovery of which is subject to special 

rules. Section 168(h)(5) generally 

provides that the determination of 

whether property leased to a 

partnership is tax-exempt use property 

shall be made by treating each taxexempt entity partner’s proportionate 

share as being leased to such partner. 

Section 168(h)(6) generally provides 

that, if any property which is not taxexempt use property is owned by a 

partnership that has as partners both a 

tax-exempt entity and a person who is 

not a tax-exempt entity, an amount 

equal to such tax-exempt entity’s 

proportionate share of such property is 

treated as tax-exempt use property. This 

rule applies only if any allocation to the 

tax-exempt entity of partnership items is 

not a ‘‘qualified allocation,’’ which (i) is 

consistent with such entity’s being 

allocated the same distributive share of 

each item of income, gain, loss, 

deduction, credit, and basis and such 

share remains the same during the 

entire period the entity is a partner in 

the partnership, and (ii) has substantial 

economic effect within the meaning of 

section 704(b)(2). See section 

168(h)(6)(B). Section 50(b)(3) and (4) 

preclude certain property used by taxexempt organizations, governmental 

entities, and foreign persons from 

qualifying for an investment tax credit. 

For these purposes, section 50(b)(4)(D) 

provides that rules similar to those in 

section 168(h)(5) and (6) apply. 

The existence of a partnership for 

purposes of these sections does not 

change the amount of depreciation 

deductions attributable to each member 

of an unincorporated organization that 

has validly made a section 761(a) 

election. A valid section 761(a) election 

requires the shares of property leased to 

or owned by an organization to be 

treated as leased to or owned by the 

members of the organization in 

proportion to their shares of the 

organization. This is how partnership 

property would be treated under section 

168(h)(5) and would cause all 

allocations to the partners to be treated 

as ‘‘qualified allocations’’ for purposes 

of section 168(h)(6). Similarly, the IRS 

has determined in other areas of the law 

that co-owners of property may make 

independent elections with respect to 

deductions affecting their taxable 

income. See Rev. Rul. 83–129, 1983–2 

C.B. 105, in which the IRS ruled that the 

co-owners of mineral leases that make a 

section 761(a) election may 

independently elect to deduct or 

capitalize their shares of mining 

development costs under section 616 of 

the Code; see also Rev. Rul. 81–261, 

1981–2 C.B. 60, where the IRS noted 

that if a partnership makes a section 

761(a) election, each partner is deemed 

to own directly its proportionate share 

of the partnership property for purposes 

of computing depreciation. Moreover, in 

the case of an applicable entity that 

makes an election under section 

6417(a), section 6417(d)(2)(A) provides 

that applicable credits are determined 

without regard to section 50(b)(3) and 

(4)(A)(i). 

III. Applicable Unincorporated 

Organizations 

A. Applicable Entity Owner 

Proposed § 1.761–2(a)(4)(ii)(A) would 

have required an applicable 

unincorporated organization to be 

owned, in whole or in part, by one or 

more applicable entities, as defined in 

section 6417(d)(1)(A) and § 1.6417–1(c). 

The Treasury Department and the IRS 

received no comments related to this 

section and adopt the proposed 

language without changes. 

B. Joint Operating Agreements 

Proposed § 1.761–2(a)(4)(ii)(B) would 

have provided that an applicable 

unincorporated organization must be an 

organization the members of which 

enter into a joint operating agreement 

(JOA) in which the members reserve the 

right separately to take in kind or 

dispose of their pro rata shares of the 

electricity produced, extracted, or used, 

and any associated renewable energy 

credits or similar credits. Proposed 

§ 1.761–2(a)(4)(ii)(C) would also have 

provided, in part, that an applicable 

unincorporated organization must be 

organized pursuant to a JOA. 

1. General 

Commenters requested more 

information about the types of JOAs 

required by these provisions. Some 

commenters requested examples of 

permissible JOAs, and another 

commenter requested identification of 

any JOA provisions that would ‘‘create 

issues’’ for a JOA. One commenter asked 

whether JOAs that satisfy the 

requirements of § 1.761–2(a)(3) would 

also satisfy the requirements of 

proposed § 1.761–2(a)(4)(ii)(B) and (C) 

and requested that any specific rules 

applicable to JOAs solely for purposes 

of the proposed regulations apply 

prospectively so as to avoid any 

uncertainty with respect to existing 

JOAs. 

As used in the proposed regulations, 

the term ‘‘joint operating agreement’’ is 

intended to refer to agreements similar 

to those used by organizations that 

made an election under section 761(a) 

prior to the proposed regulations. Such 

agreements typically provide the terms 

by which the members of the 

unincorporated organization will meet 

the existing requirements to make a 

section 761(a) election. JOAs should 

continue to serve this purpose under the 

final regulations, regardless of whether 

an applicable unincorporated 

organization holds its property in an 

entity organized under local law. 

Accordingly, as a general matter, a JOA 

that satisfies the requirements of revised 

§ 1.761–2(a)(1) and (3) will satisfy the 

requirements in revised § 1.761– 

2(a)(4)(ii)(B) and (C), provided that the 

organization to which that JOA applies 

satisfies the existing regulatory 

requirements, as modified by revised 

§ 1.761–2(a)(4)(iii), if applicable. 

Because the final regulations do not 

change the rules currently applicable to 

JOAs, these final regulations do not 

need to make such rules apply 

prospectively. For the same reason, 

further clarification of the JOA 

requirements is unnecessary. 

2. Right to Pro Rata Share 

Commenters requested clarification of 

how credits and ownership interests 

would be allocated when members of an 

unincorporated organization reserve the 

right separately to take in kind or 

dispose of their pro rata shares of the 

electricity produced, extracted, or used, 

and any associated renewable energy 

credits or similar credits. 

Pursuant to proposed § 1.761– 

2(a)(4)(ii)(B), each member of an 

applicable unincorporated organization 

would have been required to reserve the 

right separately to take in kind or 

dispose of their pro rata shares of any 

property produced, extracted, or used, 

and any associated renewable energy 

credits or similar credits. The 

determination of each member’s 

ownership interest of an unincorporated 

organization (and, accordingly, each 

member’s proportionate share of 

property produced, extracted, or used) 

must be made by the members and 

based on their ownership interests in 

the same manner as if they were coowners in the underlying properties. 

To illustrate, a co-owner of 40 percent 

of an unincorporated organization that 

has made a section 761(a) election must 

reserve the right separately to take in 


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kind or dispose of its 40 percent pro rata 

share of the property produced, 

extracted, or used by the co-owners. 

This is true even when the members of 

an applicable unincorporated 

organization own property through an 

entity, as permitted by revised § 1.761– 

2(a)(4)(iii)(A). Example 1 has been 

added in revised § 1.761–2(a)(5)(i) to 

illustrate the general rule. 

One commenter requested 

clarification that renewable energy 

certificates (RECs) produced through the 

generation of clean energy qualify as 

‘‘similar credits’’ for these purposes. 

The Treasury Department and the IRS 

clarify that RECs are included as 

‘‘renewable energy credits or similar 

credits’’ pursuant to revised § 1.761– 

2(a)(4)(ii)(B) and thus, each member of 

an unincorporated organization must 

reserve the right separately to take in 

kind or dispose of their pro rata shares 

of any RECs generated as a result of the 

organization’s activities. 

3. Joint Marketing 

Some commenters asked whether 

specific JOA provisions or activities 

would violate requirements that apply 

to applicable unincorporated 

organizations, including that the 

organization’s members do not jointly 

sell services or property produced or 

extracted. One commenter asked 

whether appointing a manager, creating 

an ownership committee, having 

expense-sharing agreements or incurring 

project-level debt would violate the 

existing requirements to make a section 

761(a) election. Another commenter 

requested clarification that a managing 

member or general partner-equivalent 

(presumably, if the unincorporated 

organization takes advantage of the 

modification in proposed § 1.761– 

2(a)(4)(iii)(A)) can conduct normal 

project management functions for an 

unincorporated organization without 

violating the joint marketing 

requirement. That commenter 

requested, in the alternative, a 

‘‘roadmap’’ setting forth how a 

managing member or general partner 

can comply with the joint marketing 

requirement in a practical manner. The 

same commenter also requested 

allowing representatives of an 

unincorporated organization to perform 

pre-filing and other ministerial services 

on behalf of the entities jointly owning 

applicable credit property. 

An applicable unincorporated 

organization must meet all applicable 

requirements, including the existing 

requirements with the modifications 

contained in these final regulations, to 

elect out of subchapter K under section 

761(a) and to maintain a section 761(a) 

election. Generally, the members of an 

unincorporated organization are 

permitted to have a representative 

handle management and ministerial 

duties typical of a managing member of 

a limited liability company (LLC) or 

general partner of a limited partnership 

without violating these requirements. 

The Treasury Department and the IRS 

understand that representatives with 

such duties may be required by local 

law for entities that may hold the 

organization’s property under § 1.761– 

2(a)(4)(iii)(A) of these final regulations. 

These final regulations, however, do not 

provide a ‘‘roadmap’’ for permissible 

arrangements or rights and duties of 

such representatives as the list would 

not be exhaustive and could cause 

unintentional inferences to be drawn. 

One commenter proposed allowing an 

applicable entity to direct some or all of 

its elective payments of applicable 

credit amounts under section 6417 to a 

separate account jointly owned by the 

applicable entity and other members of 

an applicable unincorporated 

organization to pay expenses directly 

related to the underlying applicable 

credit property’s co-ownership. The 

commenter suggested applying rules 

similar to those applicable to 

assignments of payments under section 

1603 (regarding grants for specified 

energy properties in lieu of tax credits) 

of the American Recovery and 

Reinvestment Act of 2009, Public Law 

111–5, 123 Stat. 115 (2009), including 

that each payment be assigned to a bank 

or other financing institution, that the 

assignment cover all amounts payable 

and not be subject to further assignment 

(except that any assignment may be 

made to one party acting as an agent or 

trustee for the co-owners), and that the 

assignee file a Notice of Assignment. 

As already discussed, § 1.6417– 

2(a)(1)(iii) provides that if an applicable 

entity is a co-owner in an applicable 

credit property through an organization 

that has made a valid section 761(a) 

election, then the applicable entity’s 

undivided ownership share of the 

applicable credit property will be 

treated as a separate applicable credit 

property owned by such applicable 

entity, and the applicable entity may 

make an election under section 6417(a) 

for the applicable credits determined 

with respect to such applicable credit 

property. When an applicable entity 

makes an election under section 

6417(a), such entity is treated as making 

a payment against the tax imposed by 

subtitle A of the Code. If this payment 

causes the entity to have an 

‘‘overpayment’’ of tax in a taxable year, 

section 6402(a) generally provides that 

the entity may receive a refund equal to 

the amount of the overpayment over the 

entity’s tax liability. This refund must 

be made to the person who made the 

overpayment (i.e., the applicable entity). 

If that applicable member is a 

partnership or S corporation, section 

6417(c)(1)(A) specifies that the payment 

for such election is made to the 

partnership or S corporation that made 

the section 6417(a) election. 

Accordingly, similar to the general rule 

under section 6417(a), refunds or 

payments under section 6417(c) 

generally cannot be paid to accounts in 

the name of someone other than the 

entity making the election. A valid 

section 761(a) election does not affect 

the application of this general rule and, 

therefore, these final regulations do not 

adopt the commenter’s proposal. 

C. Purpose of Organization 

Proposed § 1.761–2(a)(4)(ii)(C) would 

have provided that an organization is an 

applicable unincorporated organization 

if it ‘‘is organized exclusively to 

produce electricity from its applicable 

credit property (as defined in § 1.6417– 

1(e)) and with respect to which one or 

more applicable credits listed in section 

6417(b)(2), (4), (8), (10), and (12) is 

determined.’’ The scope of this rule was 

intended to remove certain 

impediments for these types of 

applicable unincorporated organizations 

that would otherwise comply with 

existing requirements. The Treasury 

Department and the IRS sought 

comments on the scope and 

requirements of the proposed 

regulations, including whether 

modifications similar to those in 

proposed § 1.761–2(a)(4)(iii) are needed 

for applicable entities that own 

applicable credit properties that do not 

produce electricity. 

Commenters generally recommended 

that the modifications in proposed 

§ 1.761–2(a)(4)(iii) are also needed for 

organizations organized to own 

applicable credit property with respect 

to which any other applicable credit 

listed in section 6417(b) is determined. 

Some commenters requested clarity that 

certain facilities, especially battery 

storage facilities, ‘‘produce electricity’’ 

for purposes of the definition of an 

applicable unincorporated organization. 

One commenter asserted that the ‘‘nongenerative’’ credits from section 6417(b) 

that were not included in proposed 

§ 1.761–2(a)(4)(ii)(C) could be claimed 

by organizations ‘‘availed of . . . for the 

joint . . . use of property’’ and that such 

organizations should therefore be 

permitted to make a section 761(a) 

election if other existing requirements 

are met. The same commenter requested 

clarification that certain activities with 


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respect to applicable credits, including 

time-limited delegations of relevant 

powers, would not violate the existing 

requirements to make a section 761(a) 

election. Another commenter asked for 

clarification that common, nonelectricity revenue streams related to 

jointly owned projects, such as revenues 

from the sale of capacity and ancillary 

services, do not violate the requirement 

that an organization must be organized 

exclusively to produce electricity. 

The Treasury Department and the IRS 

agree that organizations formed to own 

applicable credit property with respect 

to which any applicable credits 

(including non-generative credits) are 

determined should be permitted to 

apply the modifications to the existing 

section 761(a) rules contained in the 

proposed regulations. Section 761(a)(2) 

refers to organizations availed of ‘‘for 

the joint production, extraction, or use 

of property,’’ which is not limited to 

activities that produce electricity. 

Accordingly, pursuant to the authority 

in sections 761(a) and 6417(h), the final 

regulations revise the definition of an 

applicable unincorporated organization 

to include organizations organized 

exclusively to own and operate 

applicable credit property (as defined in 

§ 1.6417–1(e)). The adoption in the final 

regulations of this definition of 

applicable unincorporated organization 

should not be read to imply that any 

particular factual arrangement permits a 

valid section 761(a) election. To make a 

valid section 761(a) election, an 

unincorporated organization, including 

an applicable unincorporated 

organization, must meet all the 

requirements of section 761(a) and the 

regulations thereunder. 

D. Section 6417 Election 

Proposed § 1.761–2(a)(4)(ii)(D) would 

have provided that an unincorporated 

organization is an applicable 

unincorporated organization only if one 

or more of its applicable entity members 

will make an elective payment election 

under section 6417(a) for the applicable 

credits determined with respect to its 

share of the applicable credit property. 

One commenter recommended 

extending the modifications in proposed 

§ 1.761–2(a)(4)(iii) to organizations for 

which no applicable entity member will 

make an election under section 6417. 

These final regulations are of limited 

scope and are promulgated, in part, 

pursuant to the authority in section 

6417(h) to carry out the purposes of 

section 6417 by facilitating jointownership arrangements of applicable 

credit property by applicable entities. 

These final regulations do not adopt this 

commenter’s recommendation because 

it is not necessary for purposes of these 

final regulations. 

E. Other Requirements 

Proposed § 1.761–2(a)(4)(ii) would 

have provided that an applicable 

unincorporated organization is an 

unincorporated organization described 

in prior § 1.761–2(a)(1) that meets the 

requirements of proposed § 1.761– 

2(a)(4)(ii)(A) through (D). The reference 

to prior § 1.761–2(a)(1) was intended to 

emphasize the statutory requirements 

under section 761(a) and prior § 1.761– 

2(a)(1) that: (1) the members of the 

unincorporated organization must be 

able to compute their income without 

the necessity of computing partnership 

income, and (2) the unincorporated 

organization must not be a syndicate, 

group, pool, or joint venture which is 

classifiable as an association, or operate 

under an agreement which creates an 

organization classifiable as an 

association. For clarity, the final 

regulations remove the reference to 

prior § 1.761–2(a)(1) in proposed 

§ 1.761–2(a)(4)(ii) and include the 

requirements of prior § 1.761–2(a)(1) as 

revised § 1.761–2(a)(4)(ii)(E) and (F). In 

the final regulations, therefore, an 

applicable unincorporated organization 

is an unincorporated organization that 

meets the requirements of revised 

§ 1.761–2(a)(4)(ii)(A) through (F). 

One commenter requested that a 

Tribal Energy Development 

Organization (TEDO) be permitted to 

make an elective payment election 

regardless of its partnership status and 

be permitted to make special 

allocations. A TEDO that is formed as a 

partnership and meets the requirements 

may make a 761(a) election. Section 761 

does not apply, however, to entities 

formed as corporations. In addition, 

special allocations are inconsistent with 

a section 761(a) election, which is 

available under the statute only to 

organizations that satisfy the severance 

requirement and the members of which 

can compute their income without the 

necessity of computing partnership 

taxable income. Accordingly, the final 

regulations do not adopt these requested 

changes. 

Another commenter requested clarity 

about the eligibility of a ‘‘partnership 

flip’’ structure to make a section 761(a) 

election. Generally, these structures 

involve allocations of income, gains, 

losses, deductions, or credits that 

change at some point after the 

partnership has been formed. In the 

commenter’s proposed structure, a 

taxable member of an unincorporated 

organization does not control the 

organization but owns a profits interest 

in the organization that allows the 

member to earn preferred returns over 

the course of its investment. The 

commenter suggested that this type of 

member should be permitted to 

individually elect out of partnership tax 

treatment under subchapter K, and then 

elect back into partnership treatment 

under subchapter K after it has 

recouped its investment. 

Partnership flip structures, such as 

the one described by the commenter, 

violate the existing statutory 

requirements for electing out of 

subchapter K, even as modified by 

proposed § 1.761–2(a)(4)(iii). This is 

because such structures provide 

members with disproportionate 

amounts of income, gains, losses, 

deductions, or credits and thereby 

require an unincorporated organization 

to compute partnership taxable income 

to determine each member’s share of the 

organization’s income. These 

arrangements are also incompatible with 

the severance requirement, under which 

members must reserve the right 

separately to take in kind or dispose of 

their shares of any property produced, 

extracted, or used because members do 

not have a determinate ‘‘share’’ of the 

applicable credit property. For these 

reasons, the Treasury Department and 

the IRS clarify that partnership flip 

structures are not eligible to make a 

section 761(a) election. 

IV. Specified Modifications for 

Applicable Unincorporated 

Organizations 

A. Modified Co-Ownership Requirement 

For applicable unincorporated 

organizations, proposed § 1.761– 

2(a)(4)(iii)(A) would have modified the 

co-ownership requirement such that the 

participants in the applicable 

unincorporated organization would be 

permitted to own applicable credit 

property through an unincorporated 

organization that is a legal entity, other 

than one treated as a corporation under 

any provision of the Code (modified coownership requirement). 

One commenter requested 

confirmation whether the following 

situation is compatible with an election 

under section 761(a). A tax-exempt 

entity forms an LLC to raise money and 

serve as a special purpose vehicle to 

own and operate a clean energy project. 

The tax-exempt entity then sells equity 

securities in the LLC to investors. Prior 

to submitting the pre-filing registration 

with the IRS, the LLC makes an election 

under section 761(a). The tax-exempt 

entity or operator then decides if, and 

when, investors should be paid 

dividends based on their fractional 

ownership. 


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This situation is inconsistent with the 

modified co-ownership requirement. 

Organizations that have made a section 

761(a) election do not pay dividends for 

Federal income tax purposes. Because 

each member of such organization is 

generally treated as directly owning its 

proportionate share of the organization’s 

assets, each member is entitled to 

payments or credits with respect to the 

member’s share of property produced, 

extracted, or used, regardless of whether 

any other member would have approved 

the distribution of such amounts. 

B. Joint Marketing Modification and 

Agent Delegation Rule 

For applicable unincorporated 

organizations, proposed § 1.761– 

2(a)(4)(iii)(B) would have modified the 

joint marketing requirement in prior 

§ 1.761–2(a)(3)(iii) to provide that a 

delegation of authority to sell the 

participant’s share of the property 

produced may allow the delegee to enter 

into contracts the duration of which 

exceeds the minimum needs of the 

industry and may be for longer than one 

year (the joint marketing modification), 

provided that the delegation of authority 

to act on behalf of the participant may 

not be for a period of time that exceeds 

the minimum needs of the industry, and 

in no event for more than one year (the 

agent delegation rule). Proposed 

§ 1.761–2(a)(4)(vi) would have provided 

an example illustrating this 

modification to the existing regulatory 

requirements, in which each member of 

an unincorporated organization grants 

to the same agent a one-year delegation 

(not exceeding the minimum needs of 

the industry) of the member’s authority 

to sell the member’s share of electricity 

produced by the organization. The agent 

commits each member to a 15-year 

power purchase agreement (PPA). 

Because the delegation of authority is 

for a period no longer than one year, the 

requirements of proposed § 1.761– 

2(a)(4)(iii)(B) are met. 

Commenters requested clarification 

on several issues relating to the joint 

marketing modification. Some 

commenters asked whether two or more 

members of an applicable 

unincorporated organization that has 

made a section 761(a) election may sell 

their share of the organization’s output 

in the same contract. Some commenters 

also asked whether the 15-year period 

for the contract in the example is 

intended to serve as a safe harbor or 

limitation on the duration of such 

agreements. 

Provided that the agent delegation 

rule and all other requirements under 

section 761(a) are satisfied, the joint 

marketing modification allows members 

of an applicable unincorporated 

organization to enter into contracts of 

any duration. Multiple members of the 

same applicable unincorporated 

organization may be party to the same 

contract. Members can also choose to 

sell their shares without a multi-year 

contract. The example merely illustrates 

the joint marketing modification and is 

not intended to be a safe harbor. No 

clarification is required to the joint 

marketing modification in the final 

regulations. 

Commenters also requested 

clarification of the agent delegation rule. 

One commenter asked whether an agent 

would be subject to the rule if it was an 

Indian Tribal government or other 

applicable entity. Some commenters 

suggested eliminating the one-year 

limitation on agent delegations or 

allowing agent delegations to 

automatically renew after each year. 

One commenter suggested that certain 

organizations would need to sell their 

output into an organized market rather 

than pursuant to a fixed PPA. In this 

situation, according to the commenter, 

authority to sell the output for each 

applicable entity may need to be 

pursuant to an agreement that 

automatically renews annually. Another 

commenter suggested that the one-year 

limitation on agent delegations will 

harm applicable entities without 

technical expertise because nonapplicable entities with their own 

expertise will not require an agent and 

could be able to take advantage of an 

applicable entity that is only able to use 

an agent for one year. Another 

commenter asked for clarification that a 

member of an unincorporated 

organization may delegate powers to an 

agent without limitation as long as no 

other member makes such a delegation. 

The purpose of the agent delegation 

rule is to fulfill the statutory 

requirement in section 761(a)(2) that no 

organization making a section 761(a) 

election is formed ‘‘for the purpose of 

selling services or property produced or 

extracted.’’ This is a prohibition on joint 

marketing; accordingly, any member of 

an unincorporated organization may 

have an agent for any duration of time, 

provided that the agent does not 

represent more than one member of the 

applicable unincorporated organization. 

The agent delegation rule applies to any 

person or group of people acting on 

behalf of more than one member of an 

unincorporated organization, regardless 

of their status as an applicable entity. 

The longstanding one-year exception 

to the joint marketing requirement in 

the existing regulations reflects a 

balancing of the statutory language with 

commercial necessities, and the 

proposed regulations reflected a similar 

balancing. Section 761(a)(2) does not 

permit an electing organization to 

conduct sales through an agent with 

indefinite authority on behalf of 

multiple members. Such a structure is 

necessarily ‘‘availed of . . . for the 

purpose of selling services or property 

produced or extracted’’ and is not 

eligible to elect out of subchapter K. 

These final regulations, therefore, do not 

adopt the suggestions to eliminate the 

agent delegation rule or allow agent 

delegations to automatically renew. 

However, in any given year, an agent 

may be delegated authority on terms 

identical to those in a past year, 

provided that the delegation of authority 

to act is not for a period of time that 

exceeds the minimum needs of the 

industry and each member delegating 

authority to that agent consents to those 

terms in writing at least once per year. 

Example 3 has been added in revised 

§ 1.761–2(a)(5)(iii) to illustrate this rule. 

One commenter requested that the 

phrase ‘‘minimum needs of the 

industry’’ be either clarified or deleted. 

That phrase is intended to be factsensitive; like the rest of the joint 

marketing requirement, the phrase is 

intended to balance statutory 

requirements with commercial 

necessities. These final regulations, 

therefore, do not adopt the commenter’s 

request to clarify or eliminate it. 

C. Specific Examples 

Several commenters generally asked 

for more examples showing applications 

of the proposed regulations. In response, 

the Treasury Department and the IRS 

have added two examples to the final 

regulations. 

V. Additional Information 

A. Applicability Date 

Except as provided in § 1.761–2(d), 

these final regulations apply to taxable 

years ending on or after March 11, 2024, 

the date on which the proposed 

regulations were published in the 

Federal Register. An applicable 

unincorporated organization that validly 

made a section 761(a) election meeting 

the requirements of these final 

regulations for a taxable year ending on 

or after March 11, 2024, will be treated 

as having made a valid section 761(a) 

election even if the election was made 

prior to the publication of these final 

regulations in the Federal Register. 

B. Administrative Requirements 

The preamble to the proposed 

regulations noted that the Treasury 

Department and the IRS were 

considering certain rules to prevent 


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abuse of the modifications in proposed 

§ 1.761–2(a)(4)(iii). One rule described 

in the preamble to the proposed 

regulations would have prevented the 

deemed election rules in prior § 1.761– 

2(b)(2)(ii) from applying to any 

unincorporated organization relying on 

a modification in proposed § 1.761– 

2(a)(4)(iii). One commenter 

recommended against adopting such a 

rule, which the commenter believed 

would be inconsistent with the goals of 

the proposed regulations and increase 

the likelihood of inadvertent 

disallowances of section 761(a) 

elections in non-abusive situations. 

Although these final regulations do 

not adopt any rules regarding deemed 

elections, more administrative guidance 

is needed under section 761(a) to fulfill 

the purposes of section 6417. As a 

result, concurrently with the 

publication of these final regulations, 

the Treasury Department and the IRS 

are publishing in the Proposed Rules 

section of this edition of the Federal 

Register the November 2024 proposed 

regulations under section 761(a) (REG– 

116017–24), which would provide rules 

affecting the validity of elections under 

section 761(a) by applicable 

unincorporated organizations whose 

elections would not have been valid 

without the application of revised 

§ 1.761–2(a)(4)(iii). 

C. Obsolete Language 

Section 1.761–2(b)(3)(i) provides, in 

part, that an application for permission 

to revoke a section 761(a) election must 

be submitted to the Commissioner of 

Internal Revenue, Attention: T:I, 

Washington, DC 20224, no later than 30 

days after the beginning of the first 

taxable year to which the revocation is 

to apply. This language no longer 

reflects the correct procedure for 

obtaining permission to revoke a section 

761(a) election and is therefore 

eliminated by these final regulations. 

The November 2024 proposed 

regulations would instead provide that 

such an application must be made by 

submitting a letter ruling request that 

complies with the requirements of Rev. 

Proc. 2024–1 or successor guidance. 

Section 1.761–2(b)(3)(i) also provides, in 

part, that a section 761(a) will be 

effective unless a member of the 

organization sends proper notice to the 

Commissioner ‘‘within 90 days after the 

formation of the organization (or by 

October 15, 1956, whichever is later) 

. . .’’. The final regulations would strike 

the parenthetical language to update 

and streamline the paragraph. 

VI. Comments That Are Not Addressed 

in These Final Regulations 

Two comments received were related 

to section 761 but outside the scope of 

these final regulations. These comments 

are summarized in this Part VI. 

A. Implementation 

One commenter asked for clarification 

of how audits of joint structures would 

take place, including by identifying the 

specific parts of Treasury and the IRS 

involved in such audits and the 

standard of review for such audits. 

Another commenter requested the 

development of educational materials, 

‘‘office hours,’’ and other guidance to 

improve understanding of the 

regulations and uptake of applicable 

credits. Another commenter requested 

that the Treasury Department and the 

IRS provide clear rules for the preregistration filing process for applicable 

credit property co-owned by taxpayers 

making transferability elections. These 

final regulations do not provide 

information about audit procedures or 

the development of further guidance, 

but the Treasury Department and the 

IRS will continue to monitor the 

elective payment process to determine 

whether there are areas in which more 

efficiencies can be created. 

B. Tribal Organizations 

One commenter noted that wholly 

owned Tribal corporations appear to be 

incapable of making an election under 

section 761(a) because such entities are 

corporations for Federal tax purposes. 

The treatment of entities wholly owned 

by Tribal governments is addressed by 

a separate rulemaking and is therefore 

outside the scope of these final 

regulations. For information on how to 

provide comments in response to that 

separate rulemaking, see the notice of 

proposed rulemaking (REG–113628–21), 

Entities Wholly Owned by Indian Tribal 

Governments, published in the Federal 

Register (89 FR 81871) on October 9, 

2024. 

Special Analyses 

I. Regulatory Planning and Review 

Pursuant to the Memorandum of 

Agreement, Review of Treasury 

Regulations under Executive Order 

12866 (June 9, 2023), tax regulatory 

actions issued by the IRS are not subject 

to the requirements of section 6 of 

Executive Order 12866, as amended. 

Therefore, a regulatory impact 

assessment is not required. 

II. Paperwork Reduction Act 

The Paperwork Reduction Act of 1995 

(44 U.S.C. 3501–3520) (PRA) generally 

requires that a federal agency obtain the 

approval of the Office of Management 

and Budget (OMB) before collecting 

information from the public, whether 

such collection of information is 

mandatory, voluntary, or required to 

obtain or retain a benefit. An agency 

may not conduct or sponsor, and a 

person is not required to respond to, a 

collection of information unless the 

collection of information displays a 

valid control number. 

These final regulations mention 

reporting and recordkeeping 

requirements that must be satisfied for 

unincorporated organizations to elect 

out of subchapter K. These collections 

of information are generally used by the 

IRS for tax compliance purposes and by 

taxpayers to facilitate proper reporting 

and recordkeeping. The likely 

respondents to these collections are 

businesses and tax-exempt 

organizations. 

Unincorporated entities meeting the 

requirements outlined in § 1.761–2(a)(4) 

of these final regulations satisfy relevant 

reporting requirements by submitting a 

statement attached to, or incorporated 

in, a properly executed partnership 

return, Form 1065, U.S. Return of 

Partnership Income, containing, in lieu 

of the information required by Form 

1065 and by the instructions relating 

thereto, only the name or other 

identification and the address of the 

organization together with information 

on the return, or in the statement 

attached to the return, showing the 

names, addresses, and identification 

numbers of all the members of the 

organization; a statement that the 

organization qualifies under § 1.761– 

2(a)(1) and either § 1.761–2(a)(2) or (3); 

a statement that all of the members of 

the organization elect that it be 

excluded from all of subchapter K; and 

a statement indicating where a copy of 

the agreement under which the 

organization operates is available (or if 

the agreement is oral, from whom the 

provisions of the agreement may be 

obtained). These requirements and 

associated forms are already approved 

by OMB under 1545–0123 for business 

filers. These final regulations are not 

changing or creating new collection 

requirements not already approved by 

OMB. 

The recordkeeping requirements 

mentioned in these final regulations are 

considered general tax records under 

§ 1.6001–1(e). These records are 

required for the IRS to validate that 

electing taxpayers have consistently met 

the regulatory requirements outlined in 

§ 1.761–2. For PRA purposes, general 

tax records are already approved by 

OMB under 1545–0123 for business 


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filers and 1545–0047 for tax-exempt 

organizations. 

III. Regulatory Flexibility Act 

The Secretary of the Treasury hereby 

certifies that the final regulations will 

not have a significant economic impact 

on a substantial number of small entities 

pursuant to the Regulatory Flexibility 

Act (5 U.S.C. chapter 6). 

These final regulations would affect 

unincorporated organizations that elect 

out of subchapter K in connection with 

an election under section 6417, as well 

as the members of such organizations. 

Data is not readily available about 

these organizations. Such organizations 

could not have made an election out of 

subchapter K under the preexisting 

regulations, so information about 

existing organizations that have made 

section 761(a) elections is not 

instructive. 

Even if these final regulations affect a 

substantial number of small entities, 

such impact will not be significant. The 

final regulations do not make it more 

costly to make or maintain an election 

under section 761(a). 

These final regulations do not change 

the procedural requirements under 

§ 1.761–2(b) for making an election 

under section 761(a). Other than to 

conform to modern formatting 

conventions, the final regulations would 

amend § 1.761–2(b) only by adding a 

parenthetical to clarify that in making a 

valid section 761 election, which 

requires attaching certain statements to 

a Form 1065 as required in accordance 

with the preexisting regulations, 

§ 1.761–2(a)(4) should be taken into 

account, as applicable, with regard to 

the required statement that the 

organization qualifies under § 1.761– 

2(a)(1) and either § 1.761–2(a)(2) or (3) 

‘‘(taking into account § 1.761–2(a)(4), as 

applicable)’’. Otherwise, an 

unincorporated organization making an 

election under these final regulations 

would not be required to submit 

anything additional or different than 

required under the preexisting version 

of § 1.761–2(b). 

These final regulations impose no 

new ongoing compliance costs. Though 

any unincorporated organization that 

has made an election under section 

761(a) should ensure that it remains 

qualified under § 1.761–2(a)(1) and 

either § 1.761–2(a)(2) or (3) (taking into 

account § 1.761–2(a)(4), as applicable), 

the final regulations do not add to this 

obligation. In fact, these final 

regulations could make it simpler for 

certain unincorporated organizations to 

stay qualified, given their joint 

operating agreements that satisfy the 

modified co-ownership and severance 

requirements and multi-year contracts 

that satisfy the modified joint marketing 

requirement. 

For the reasons stated, a regulatory 

flexibility analysis under the Regulatory 

Flexibility Act is not required. 

Pursuant to section 7805(f), the notice 

of proposed rulemaking preceding these 

regulations was submitted to the Chief 

Counsel for the Office of Advocacy of 

the Small Business Administration for 

comment on its impact on small 

business, and no comments were 

received. 

IV. Unfunded Mandates Reform Act 

Section 202 of the Unfunded Mandate 

Reform Act of 1995 requires that 

agencies assess anticipated costs and 

benefits and take certain other actions 

before issuing a final rule that includes 

any Federal mandate that may result in 

expenditures in any one year by a State, 

local, or Tribal government, in the 

aggregate, or by the private sector, of 

$100 million (updated annually for 

inflation). These final regulations do not 

include any Federal mandate that may 

result in expenditures by State, local, or 

Tribal governments or by the private 

sector in excess of that threshold. 

V. Executive Order 13132: Federalism 

Executive Order 13132 (Federalism) 

prohibits an agency from publishing any 

rule that has federalism implications if 

the rule either imposes substantial, 

direct compliance costs on State and 

local governments, and is not required 

by statute, or preempts State law, unless 

the agency meets the consultation and 

funding requirements of section 6 of the 

Executive order. These final regulations 

do not have federalism implications and 

do not impose substantial, direct 

compliance costs on State and local 

governments or preempt State law 

within the meaning of the Executive 

order. 

VI. Executive Order 13175: Consultation 

and Coordination With Indian Tribal 

Governments 

Executive Order 13175 (Consultation 

and Coordination With Indian Tribal 

Governments) prohibits an agency from 

publishing any rule that has Tribal 

implications if the rule either imposes 

substantial direct compliance costs on 

Indian Tribal governments, and is not 

required by statute, or preempts Tribal 

law, unless the agency meets the 

consultation and funding requirements 

of section 5 of the Executive order. 

These final rules do not have substantial 

direct effects on one or more federally 

recognized Indian tribes and do not 

impose substantial direct compliance 

costs on Indian Tribal governments 

within the meaning of the Executive 

order. 

Nevertheless, on April 5, 2024, the 

Treasury Department and the IRS held 

a consultation with Tribal leaders 

requesting assistance in addressing 

questions related to the section 761(a) 

proposed rules published on March 11, 

2024, which informed the development 

of these final regulations. 

VII. Executive Order 14112: Reforming 

Federal Funding and Support for Tribal 

Nations To Better Embrace Our Trust 

Responsibilities and Promote the Next 

Era of Tribal Self-Determination 

Executive Order 14112 (Reforming 

Federal Funding and Support for Tribal 

Nations to Better Embrace Our Trust 

Responsibilities and Promote the Next 

Era of Tribal Self-Determination) 

reaffirms the executive branch’s support 

for Tribal self-determination as the most 

effective policy for the economic growth 

of Tribal Nations and the economic 

well-being of Tribal citizens. Executive 

Order 14112 requires agency heads to 

take certain actions, consistent with 

applicable law and to the extent 

practicable, to increase access to 

‘‘Federal funding and support programs 

for Tribal Nations’’; provide Tribal 

Nations with the flexibility to improve 

economic growth and address the 

specific needs of their communities; and 

reduce administrative burdens. Section 

2(b) of the Executive order defines 

‘‘Federal funding and support programs 

for Tribal Nations’’ as including 

‘‘funding, programs, technical 

assistance, loans, grants, or other 

financial support or direct services that 

the Federal Government provides to 

Tribal Nations or Indians because of 

their status as Indians.’’ As section 1 of 

the Executive order explains, ‘‘As we 

continue to support Tribal Nations, we 

must respect their sovereignty by better 

ensuring that they are able to make their 

own decisions about where and how to 

meet the needs of their communities. No 

less than for any other sovereign, Tribal 

self-governance is about the 

fundamental right of a people to 

determine their own destiny and to 

prosper and flourish on their own 

terms.’’ These commitments build on a 

recognition of principles of sovereignty, 

sovereign immunity, and selfgovernance that have been repeatedly 

reaffirmed by the Supreme Court. See, 

e.g., Three Affiliated Tribes of the Fort 

Berthold Reservation v. Wold 

Engineering, P.C., et al., 476 U.S. 877, 

890–91 (1986); Oklahoma Tax Comm’n 

v. Citizen Band Potawatomi Indian 

Tribe of Oklahoma, 498 U.S. 505, 510 

(1991). The Treasury Tribal Advisory 

Committee has advised that Tribes 


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consider ‘‘financial support’’ in 

Executive Order 14112 to include tax 

matters that range from tax credits to 

Federal tax rules that regulate Tribal 

revenue. 

Consistent with Executive Order 

14112, the Treasury Department and the 

IRS recognize the importance of 

protecting and supporting Tribal 

sovereignty and self-determination. 

These final regulations would further 

Tribal self-determination and selfgovernance and reduce administrative 

burdens by providing Tribes the ability 

to directly make section 6417 elections 

for applicable credit property held 

through applicable unincorporated 

organizations provided all applicable 

statutory and regulatory requirements 

are satisfied. 

VIII. Congressional Review Act 

Pursuant to the Congressional Review 

Act (5 U.S.C. 801 et seq.), the Office of 

Information and Regulatory Affairs has 

designated this rule as a ‘‘major rule,’’ 

as defined by 5 U.S.C. 804(2). 

Statement of Availability of IRS 

Documents 

IRS notices and other guidance cited 

in this preamble are published in the 

Internal Revenue Bulletin (or 

Cumulative Bulletin) and are available 

from the Superintendent of Documents, 

U.S. Government Publishing Office, 

Washington, DC 20402, or by visiting 

the IRS website at https://www.irs.gov. 

Drafting Information 

The principal author of these final 

regulations is Cameron Williamson. 

However, other personnel from the 

Treasury Department and the IRS 

participated in their development. 

List of Subjects in 26 CFR Part 1 

Income taxes, Reporting and 

recordkeeping requirements. 

Amendments to the Regulations 

Accordingly, the Treasury Department 

and the IRS amend 26 CFR part 1 as 

follows: 

PART 1—INCOME TAXES 

■ Paragraph 1. The authority citation 

for part 1 is amended by revising the 

entry for § 1.761–2 to read in part as 

follows: 

Authority: 26 U.S.C. 7805 * * * 

* * * * * 

Section 1.761–2 also issued under 26 

U.S.C. 446(b), 761(a), 6031(a), 6417(d), and 

6417(h). 

* * * * * 

■ Par. 2. Section 1.761–2 is amended 

by: 

■ a. Revising and republishing 

paragraphs (a)(1), (a)(2)(i), and (a)(3)(i); 

■ b. Adding paragraphs (a)(4) and (5); 

■ c. Revising and republishing 

paragraphs (b)(1) and (2), (b)(3)(i), (c), 

and (e); and 

■ d. Adding paragraph (f). 

The revisions and additions read as 

follows: 

§ 1.761–2 Exclusion of certain 

unincorporated organizations from the 

application of all or part of subchapter K of 

chapter 1 of the Internal Revenue Code. 

(a) * * * 

(1) In general. Under the conditions 

set forth in this section, an 

unincorporated organization described 

in paragraph (a)(2) or (3) of this section 

(taking into account paragraph (a)(4) of 

this section, as applicable) may be 

excluded from the application of all or 

a part of the provisions of subchapter K 

of chapter 1 of the Internal Revenue 

Code (subchapter K). Such organization 

must be availed of for investment 

purposes only and not for the active 

conduct of a business, or for the joint 

production, extraction, or use of 

property, but not for the purpose of 

selling services or property produced or 

extracted. The members of such 

organization must be able to compute 

their income without the necessity of 

computing partnership taxable income. 

Any syndicate, group, pool, or joint 

venture which is treated as a 

corporation for Federal tax purposes 

does not fall within the provisions in 

this paragraph (a)(1). 

(2) * * * 

(i) Own the property as co-owners; 

* * * * * 

(3) * * * 

(i) Own the property as co-owners, 

either in fee or under lease or other form 

of contract granting exclusive operating 

rights; and 

* * * * * 

(4) Modifications for certain joint 

ownership arrangements of applicable 

credit property—(i) Scope. Paragraph 

(a)(4)(iii) of this section provides certain 

modifications to specified rules in 

paragraph (a)(3) of this section in the 

case of an applicable unincorporated 

organization meeting the requirements 

of paragraph (a)(4)(ii) of this section. 

(ii) Applicable unincorporated 

organization. For purposes of this 

section, an applicable unincorporated 

organization is an unincorporated 

organization: 

(A) That is owned, in whole or in 

part, by one or more applicable entities, 

as defined in section 6417(d)(1)(A) and 

§ 1.6417–1(c); 

(B) The members of which enter into 

a joint operating agreement in which the 

members reserve the right separately to 

take in kind or dispose of their pro rata 

shares of any property produced, 

extracted, or used, and any associated 

renewable energy credits or similar 

credits; 

(C) That, pursuant to the joint 

operating agreement, is organized 

exclusively to own and operate 

applicable credit property (as defined in 

§ 1.6417–1(e)); 

(D) For which one or more of the 

applicable entities will make an elective 

payment election under section 6417(a) 

for the applicable credits determined 

with respect to its share of the 

applicable credit property; 

(E) The members of which are able to 

compute their income without the 

necessity of computing partnership 

taxable income; and 

(F) Which is not a syndicate, group, 

pool, or joint venture which is 

classifiable as an association, or any 

group operating under an agreement 

which creates an organization 

classifiable as an association. 

(iii) Specified modifications for 

applicable unincorporated 

organizations. Solely for purposes of an 

election under section 761(a) by an 

applicable unincorporated organization 

that meets the requirements of 

paragraphs (b) and (e) of this section: 

(A) The requirement in paragraph 

(a)(3)(i) of this section is modified such 

that the participants are permitted to 

own the applicable credit property 

through an unincorporated organization 

that is an entity, other than one that is 

treated as a corporation for Federal tax 

purposes; and 

(B) The requirement in paragraph 

(a)(3)(iii) of this section is modified 

such that the delegation of authority to 

sell the participant’s share of the 

property produced or used may allow 

the delegee to enter into contracts the 

duration of which exceeds the 

minimum needs of the industry and 

may be for more than one year, provided 

that the delegation of authority to act on 

behalf of the participant may not be for 

a period of time that exceeds the 

minimum needs of the industry, and in 

no event for more than one year. 

(5) Examples. The following examples 

are intended to illustrate the principles 

of this section. 

(i) Example 1—(A) Facts. G and H 

enter into a joint operating agreement to 

own and operate a facility that will 

produce solar energy. G, an applicable 

entity, is entitled under the joint 

operating agreement to take in kind or 

dispose of 40% of the energy produced 

by the unincorporated organization and 

H, which is not an applicable entity, is 

entitled to the remaining 60%. G and H 


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91562 Federal Register / Vol. 89, No. 224 / Wednesday, November 20, 2024 / Rules and Regulations 

form LLC, a limited liability company, 

to hold the solar energy property that G 

and H intend to operate pursuant to the 

joint operating agreement. In accordance 

with the joint operating agreement, G 

owns a 40% ownership interest in LLC 

and H owns the remaining 60% 

ownership interest. G will sell its share 

of energy produced by the facility in a 

manner designed to generate applicable 

credits under section 45(a) and will 

make an election under section 6417(a) 

with respect thereto. LLC makes a valid 

election under section 761(a) to be 

excluded from subchapter K. 

(B) Analysis. G will be entitled to any 

credits under section 45(a) generated by 

its sale of energy produced by LLC that 

G has the right to take in kind or dispose 

of (which, under the joint operating 

agreement, is 40% of the energy 

produced by LLC). Assuming all other 

requirements are met, G will be able to 

make an elective payment election 

under section 6417 for the applicable 

credits determined with respect to its 

ownership share of the solar energy 

property. 

(ii) Example 2—(A) Facts. T is an 

Indian Tribal government as defined in 

§ 1.6417–1(c) and an applicable entity. 

Through a limited liability company 

organized under T’s Tribal law (TLLC), 

T and Y own and operate applicable 

credit property that will generate 

electricity the sale of which will 

generate applicable credits under 

section 45(a). TLLC is not treated as an 

association taxable as a corporation for 

Federal tax purposes and no election 

under § 301.7701–3 of this chapter has 

been made to treat TLLC as such. T and 

Y enter into a joint operating agreement 

with respect to the ownership and 

operation of the applicable credit 

property in which each of T and Y 

reserve the right separately to take in 

kind or dispose of their pro rata shares 

of property produced, extracted, or used 

and any associated renewable energy 

credits or similar credits. TLLC is 

formed exclusively to own and operate 

an applicable credit property with 

respect to which section 45(a) credits 

will be determined. On January 1st of 

year 1, T and Y enter into delegation 

agreements with Q that delegate T’s and 

Y’s authority to Q to sell the electricity 

generated by T’s and Y’s shares of the 

applicable credit property. The term of 

the delegation agreements is one year, 

which does not exceed the minimum 

needs of the industry. On June 1st of 

year 1, Q enters into a power purchase 

agreement with Utility on T’s and Y’s 

behalf that commits T and Y to sell the 

electricity produced from their shares of 

the applicable credit property to Utility 

for a term of 15 years. At the end of the 

day on December 31st of year 1, the 

delegation agreements terminate. 

(B) Analysis. Because T and Y did not 

delegate authority for a period of more 

than one year to sell the output from 

their shares of the applicable credit 

property, the requirements of paragraph 

(a)(3)(iii) of this section (as modified by 

paragraph (a)(4)(iii)(B) of this section) 

are met. Assuming that TLLC otherwise 

qualifies as an applicable 

unincorporated organization, TLLC is an 

organization described in paragraph 

(a)(4)(iii)(A) of this section and can 

make an election under paragraphs (b) 

and (e) of this section to be excluded 

from the application of all of subchapter 

K under section 761(a). As such, T can 

make an elective payment election for 

the applicable credits determined with 

respect to its share of the applicable 

credit property held by TLLC, assuming 

the requirements of section 6417 are 

otherwise met. The analysis in this 

example would be the same whether Y 

is also an Indian Tribal government, 

another applicable entity, or some other 

person. 

(iii) Example 3—(A) Facts. The facts 

are the same as in paragraph (a)(5)(ii)(A) 

of this section (Example 2), except that 

at the end of the day on December 31, 

T and Y each agree, in writing, to a new 

agent delegation agreement with Q with 

substantively identical terms as the 

agent delegation agreement in effect 

during year 1. 

(B) Analysis. Because each of T and Y 

have agreed, in writing, to engage Q in 

an agency relationship lasting no longer 

than one year, the results are the same 

as in paragraph (a)(5)(ii)(B) of this 

section (Example 2). In contrast, if the 

agent delegation agreement renewed 

automatically, T and Y have effectively 

entered into an agent delegation 

agreement lasting longer than one year 

and have violated the requirements of 

paragraph (a)(4)(iii)(B) of this section. In 

that case, TLLC would not be eligible to 

make or maintain an election under 

section 761(a). As such, T could not 

make an elective payment election for 

the applicable credits determined with 

respect to its share of the applicable 

credit property held through TLLC. 

(b) * * * 

(1) Time for making election for 

exclusion. Any unincorporated 

organization described in paragraph 

(a)(1) of this section and either 

paragraph (a)(2) or (3) of this section 

(taking into account paragraph (a)(4) of 

this section, as applicable) that wishes 

to be excluded from all of subchapter K 

must make the election provided in 

section 761(a) not later than the time 

prescribed by § 1.6031(a)–1(e) 

(including extensions thereof) for filing 

the partnership return for the first 

taxable year for which exclusion from 

subchapter K is desired. 

Notwithstanding the prior sentence, 

such organization may be deemed to 

have made the election in the manner 

prescribed in paragraph (b)(2)(ii) of this 

section. 

(2) Method of making election—(i) In 

general. Except as provided in 

paragraph (b)(2)(ii) of this section, any 

unincorporated organization described 

in paragraph (a)(1) of this section and 

either paragraph (a)(2) or (3) of this 

section (taking into account paragraph 

(a)(4) of this section, as applicable) 

which wishes to be excluded from all of 

subchapter K must make the election 

provided in section 761(a) in a 

statement attached to, or incorporated 

in, a properly executed partnership 

return, Form 1065, U.S. Return of 

Partnership Income, which must 

contain the information required in this 

paragraph (b)(2)(i). Such return must be 

filed with the Internal Revenue Service 

Center where the partnership return, 

Form 1065, would be required to be 

filed if no election were made. To 

determine the appropriate Internal 

Revenue Service Center, the principal 

office or place of business of the person 

filing the return will be considered the 

principal office or place of business of 

the organization. The partnership return 

must be filed not later than the time 

prescribed § 1.6031(a)–1(e) (including 

extensions thereof) for filing the 

partnership return with respect to the 

first taxable year for which exclusion 

from subchapter K is desired. Such 

partnership return must contain, in lieu 

of the information required by Form 

1065 and by the instructions relating 

thereto, only the name or other 

identification and the address of the 

organization together with information 

on the return, or in the statement 

attached to the return, showing the 

names, addresses, and taxpayer 

identification numbers of all the 

members of the organization; a 

statement that the organization qualifies 

under paragraph (a)(1) of this section 

and either paragraph (a)(2) or (3) of this 

section (taking into account paragraph 

(a)(4) of this section, as applicable); a 

statement that all of the members of the 

organization elect that it be excluded 

from all of subchapter K; and a 

statement indicating where a copy of the 

agreement under which the organization 

operates is available (or if the agreement 

is oral, from whom the provisions of the 

agreement may be obtained). 

(ii) Deemed election rule. If an 

unincorporated organization described 

in paragraph (a)(1) of this section and 

either paragraph (a)(2) or (3) of this 


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Federal Register / Vol. 89, No. 224 / Wednesday, November 20, 2024 / Rules and Regulations 91563 

section (taking into account paragraph 

(a)(4) of this section, as applicable) does 

not make the election provided in 

section 761(a) in the manner prescribed 

by paragraph (b)(2)(i) of this section, it 

will nevertheless be deemed to have 

made the election if it can be shown 

from all the surrounding facts and 

circumstances that it was the intention 

of the members of such organization at 

the time of its formation to secure 

exclusion from all of subchapter K 

beginning with the first taxable year of 

the organization. Although the 

following facts are not exclusive, either 

one of such facts may indicate the 

requisite intent: 

(A) At the time of the formation of the 

organization there is an agreement 

among the members that the 

organization be excluded from 

subchapter K beginning with the first 

taxable year of the organization; or 

(B) The members of the organization 

owning substantially all of the capital 

interests report their respective shares of 

the items of income, deductions, and 

credits of the organization on their 

respective returns (making such 

elections as to individual items as may 

be appropriate) in a manner consistent 

with the exclusion of the organization 

from subchapter K beginning with the 

first taxable year of the organization. 

(3) * * * 

(i) In general. An election under this 

section to be excluded will be effective 

unless within 90 days after the 

formation of the organization any 

member of the organization notifies the 

Commissioner that the member desires 

subchapter K to apply to such 

organization, and also advises the 

Commissioner that the member has so 

notified all other members of the 

organization by registered or certified 

mail. Such election is irrevocable as 

long as the organization remains 

qualified under paragraph (a)(1) of this 

section and either paragraph (a)(2) or (3) 

of this section (taking into account 

paragraph (a)(4) of this section, as 

applicable), or unless approval of 

revocation of the election is secured 

from the Commissioner. 

* * * * * 

(c) Partial exclusion from subchapter 

K. An unincorporated organization 

which wishes to be excluded from only 

certain sections of subchapter K must 

submit to the Commissioner, no later 

than 90 days after the beginning of the 

first taxable year for which partial 

exclusion is desired, a request for 

permission to be excluded from certain 

provisions of subchapter K. The request 

must set forth the sections of subchapter 

K from which exclusion is sought and 

must state that such organization 

qualifies under paragraph (a)(1) of this 

section and either paragraph (a)(2) or (3) 

of this section (taking into account 

paragraph (a)(4) of this section, as 

applicable), and that the members of the 

organization elect to be excluded to the 

extent indicated. Such exclusion will be 

effective only upon approval of the 

election by the Commissioner and 

subject to the conditions the 

Commissioner may impose. 

* * * * * 

(e) Cross reference. For requirements 

with respect to the filing of a return on 

Form 1065 by a partnership, see 

§ 1.6031(a)–1. 

(f) Applicability date. Except as 

provided in paragraph (d) of this 

section, this section applies to taxable 

years ending on or after March 11, 2024. 

Heather C. Maloy, 

Acting Deputy Commissioner. 

Approved: November 6, 2024. 

Aviva R. Aron-Dine, 

Deputy Assistant Secretary of the Treasury 

(Tax Policy). 

[FR Doc. 2024–26944 Filed 11–19–24; 8:45 am] 

BILLING CODE 4830–01–P 

DEPARTMENT OF HOMELAND 

SECURITY 

Coast Guard 

33 CFR Part 100 

[Docket Number USCG–2024–0869] 

RIN 1625–AA08 

Special Local Regulation; Lake 

Havasu, Lake Havasu City, AZ 

AGENCY: Coast Guard, DHS. 

ACTION: Temporary final rule. 

SUMMARY: The Coast Guard is 

establishing a special local regulation 

for the 2024 Lake Havasu City Christmas 

Parade of Lights that will be held on the 

navigable waters of Lake Havasu, AZ. 

This action is necessary to provide for 

the safety of life on these navigable 

waters of Lake Havasu during a vessel 

parade. This rule would prohibit 

spectators from anchoring, blocking, 

loitering, or transiting through the area 

of a predetermined parade route unless 

authorized by the Captain of the Port 

San Diego or a designated 

representative. 

DATES: This rule is effective from 4 p.m. 

through 9 p.m. on December 14, 2024. 

ADDRESSES: To view documents 

mentioned in this preamble as being 

available in the docket, go to https://

www.regulations.gov, type USCG–2024– 

0869 in the search box and click 

‘‘Search.’’ Next, in the Document Type 

column, select ‘‘Supporting & Related 

Material.’’ 

FOR FURTHER INFORMATION CONTACT: If 

you have questions on this rule, call or 

email Lieutenant Shelley Turner, 

Waterways Management, U.S. Coast 

Guard Sector San Diego, CA; telephone 

(619) 278–7656, email 

MarineEventsSD@uscg.mil. 

SUPPLEMENTARY INFORMATION: 

I. Table of Abbreviations 

CFR Code of Federal Regulations 

DHS Department of Homeland Security 

FR Federal Register 

NPRM Notice of proposed rulemaking 

§ Section 

U.S.C. United States Code 

II. Background Information and 

Regulatory History 

The Coast Guard is issuing this 

temporary rule under the authority in 5 

U.S.C. 553(b)(B). This statutory 

provision authorizes an agency to issue 

a rule without prior notice and 

opportunity to comment when the 

agency for good cause finds that those 

procedures are ‘‘impracticable, 

unnecessary, or contrary to the public 

interest.’’ The Coast Guard finds that 

good cause exists for not publishing a 

notice of proposed rulemaking (NPRM) 

with respect to this rule because we 

must establish this special local 

regulation by December 14, 2024. The 

Coast Guard did not receive sufficient 

notice of the parade in time to publish 

an NPRM. As such, it is impracticable 

to publish an NPRM because we lack 

sufficient time to provide a reasonable 

comment period and then consider 

those comments before issuing the rule. 

This regulation is necessary to ensure 

the safety of life on the navigable waters 

of Lake Havasu during the marine event. 

Also, under 5 U.S.C. 553(d)(3), the 

Coast Guard finds that good cause exists 

for making this rule effective less than 

30 days after publication in the Federal 

Register. Delaying the effective date of 

this rule would be contrary to public 

interest because immediate action is 

needed to ensure the safety of life on the 

navigable waters of Lake Havasu during 

the marine event on December 14, 2024. 

III. Legal Authority and Need for Rule 

The Coast Guard is issuing this rule 

under authority in 46 U.S.C. 70041. The 

Captain of the Port Sector San Diego 

(COTP) has determined that the large 

presence of vessels in Lake Havasu 

associated with the 2024 Lake Havasu 

City Christmas Parade of Lights on 

December 14, 2024, poses a potential 


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