Federal Register / Vol. 73, No. 132 / Wednesday, July 9, 2008 / Rules and Regulations 39227 

3The order limited the relief to marketing 

conduct directed towards persons whose 

description in terms of sophistication and assets 

was derived generally from the definition of 

‘‘qualified eligible participant’’ (‘‘QEP’’), as defined 

in Regulation 4.7(a)(1)(ii). In 2000, the Commission 

streamlined Regulation 4.7 by combining into a 

single definition those persons formerly defined as 

QEPs and ‘‘qualified eligible clients’’ (‘‘QECs’’). As 

a result of the revision, both QEPs and QECs are 

termed ‘‘qualified eligible persons.’’ 65 FR 47848, 

47849–50 (Aug. 4, 2000). 

4 59 FR 42156 (Aug. 17, 1994). 

5 72 FR 14413 (Mar. 28, 2007) (‘‘TAIFEX Order’’). 

6The Commission has delegated to NFA certain 

responsibilities, including the responsibility to 

receive requests for confirmation of Regulation 

30.10 relief on behalf of particular firms, to verify 

such firms’ fitness and compliance with the 

conditions of the appropriate Regulation 30.10 

Order and to grant exemptive relief from 

registration to qualifying firms. 62 FR 47792, 47793 

(Sept. 11, 1997). 

To provide the appropriate level of 

customer protection, the relief was 

limited to conduct directed towards 

certain institutions and governmental 

entities as described in Regulation 4.7.3

In addition, the Commission stated that 

any person who established a fixed 

location in the U.S. for the solicitation 

or acceptance of business, or whose 

marketing activities involved long or 

repeated periods within the U.S. that 

can be characterized as a de facto fixed 

presence, would be disqualified from 

Regulation 30.10 relief and would be 

required to register with the 

Commission. On August 4, 1994, the 

Commission issued an order expanding 

the category of persons to whom 

designated firms may direct limited 

marketing conduct to include all 

‘‘accredited investors,’’ as that term is 

defined in section 230.501(a) of 

Securities and Exchange Commission 

Regulation D issued pursuant to the 

Securities Act of 1933.4 The orders 

issued by the Commission in 1992 and 

1994 are collectively known as the 

Limited Marketing Orders. 

Pursuant to the terms set forth 

therein, a foreign regulatory or selfregulatory organization must obtain a 

written confirmation from the 

Commission that the Limited Marketing 

Orders apply to firms in its jurisdiction 

with confirmed Regulation 30.10 relief. 

On March 23, 2007, the Commission 

issued an order granting relief under 

Regulation 30.10 authorizing designated 

members of TAIFEX to solicit and 

accept orders from customers located in 

the U.S. for otherwise permitted 

transactions on TAIFEX.5 By letter 

dated April 16, 2008, counsel for 

TAIFEX petitioned the Commission to 

confirm that designated TAIFEX 

members may engage in limited 

marketing conduct with respect to 

foreign futures or options contracts 

within the U.S. through their employees 

or other representatives, as set forth in 

the Limited Marketing Orders. 

As previously stated, the Commission 

believes that certain contacts between 

firms with confirmed Regulation 30.10 

relief and certain sophisticated 

customers located in the U.S., who have 

a high degree of sophistication and 

financial resources, would not be 

contrary to the public interest. 

Accordingly, the Commission has 

determined to issue this order 

permitting designated TAIFEX members 

to engage in limited marketing conduct 

with respect to foreign futures or option 

contracts within the U.S. through their 

employees or other representatives, as 

set forth in the Limited Marketing 

Orders. 

Prior to engaging in any marketing 

activity in the U.S., a TAIFEX member 

must obtain confirmation of Regulation 

30.10 relief from the National Futures 

Association (‘‘NFA’’).6 Any TAIFEX 

member operating pursuant to this order 

will remain subject to all of the terms 

and conditions set forth in the Limited 

Marketing Orders and the TAIFEX 

Order. In particular, the Commission 

notes that every order granting 

Regulation 30.10 relief has required a 

firm seeking relief under such an order 

to consent to jurisdiction in the U.S. 

under the Commodity Exchange Act and 

file with NFA a valid and binding 

appointment of an agent in the U.S. for 

service of process. 

Dated: July 3, 2008. 

By the Commission 

David Stawick, 

Secretary of the Commission. 

[FR Doc. E8–15606 Filed 7–8–08; 8:45 am] 

BILLING CODE 6351–01–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Parts 1 and 602 

[TD 9412] 

RIN 1545–BF06 

Election To Expense Certain Refineries 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Temporary regulations. 

SUMMARY: This document contains 

temporary regulations relating to the 

election to expense qualified refinery 

property under section 179C of the 

Internal Revenue Code, and affects 

taxpayers who own refineries located in 

the United States. These temporary 

regulations reflect changes to the law 

made by the Energy Policy Act of 2005. 

The text of these temporary regulations 

also serves as the text of the proposed 

regulations set forth in the notice of 

proposed rulemaking on this subject in 

the Proposed Rules section in this issue 

of the Federal Register. 

DATES: Effective Date: These regulations 

are effective on July 9, 2008. 

Applicability Date: For dates of 

applicability, see § 1.179C–1T(g). 

FOR FURTHER INFORMATION CONTACT: 

Philip Tiegerman (202) 622–3110 (not a 

toll-free number). 

SUPPLEMENTARY INFORMATION: 

Paperwork Reduction Act 

These temporary regulations are being 

issued without prior notice and public 

procedure pursuant to the 

Administrative Procedure Act (5 U.S.C. 

553). For this reason, the collection of 

information contained in these 

regulations has been reviewed and, 

pending receipt and evaluation of 

public comments, approved by the 

Office of Management and Budget under 

control number (1545–2103). Responses 

to this collection of information are 

mandatory. 

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 OMB control number. 

For further information concerning 

this collection of information, and 

where to submit comments on the 

collection of information and the 

accuracy of the estimated burden, and 

suggestions for reducing this burden, 

please refer to the preamble to the crossreferencing notice of proposed 

rulemaking published in the Proposed 

Rules section in this issue of the Federal 

Register. 

Books or records relating to a 

collection of information must be 

retained as long as their contents may 

become material in the administration 

of any internal revenue law. Generally, 

tax returns and tax return information 

are confidential, as required by 26 

U.S.C. 6103. 

Background 

This document contains proposed 

amendments to 26 CFR part 1 to provide 

regulations under section 179C of the 

Internal Revenue Code (Code). Section 

179C was added to the Code by section 

1323(a) of the Energy Policy Act of 

2005, Public Law 109–58 (119 Stat. 594) 

to encourage the construction of new 

refineries and the expansion of existing 

refineries to enhance the nation’s 

refinery capacity. 


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39228 Federal Register / Vol. 73, No. 132 / Wednesday, July 9, 2008 / Rules and Regulations 

Section 179C(a) allows a taxpayer to 

elect to deduct 50 percent of the cost of 

any qualified refinery property. The 

remaining 50 percent of the taxpayer’s 

qualifying expenditures are generally 

recovered under section 168 and section 

179B, if applicable. The provisions of 

section 179C apply to qualified refinery 

property placed in service by a taxpayer 

after August 8, 2005, and before January 

1, 2012. All costs properly capitalized 

into qualified refinery property are 

includable in the cost of the qualified 

refinery property. 

Explanation of Provisions 

Scope 

The temporary regulations restate the 

provisions of section 179C and provide 

guidance on certain issues related to 

electing and determining the deduction 

allowable under section 179C(a). 

Specifically, the temporary regulations 

provide guidance on making elections 

under section 179C(a) and (g), and the 

associated reporting requirements 

contained in section 179C(h). Further, 

the temporary regulations provide 

guidance on determining and 

substantiating the production capacity 

requirement, as well as guidance 

addressing the availability of the 

deduction in certain sale-leaseback 

transactions. The temporary regulations 

generally interpret the statute in a 

manner consistent with existing 

statutory and regulatory principles and 

recognize that taxpayers have had to 

address section 179C issues for prior tax 

years in the absence of regulations. 

While these temporary regulations 

generally apply to taxable years ending 

on or after July 9, 2008 and terminate 

three years after the date they are 

published in the Federal Register, the 

temporary regulations may be applied 

by taxpayers to taxable years ending 

prior to July 9, 2008. These temporary 

regulations also provide procedures for 

claiming the section 179C(a) deduction 

for taxable years ending prior to July 9, 

2008. 

Property Eligible for the Section 179C 

Deduction 

Under section 179C(c), property must 

meet several requirements to be 

considered qualified refinery property 

eligible for the section 179C(a) 

deduction. These requirements include 

the following: (1) The property must be 

part of a qualified refinery; (2) the 

original use of the property must 

commence with the taxpayer; (3) the 

property must be placed in service 

within a specified time period; (4) the 

property must meet certain production 

capacity requirements; (5) the property 

must meet all applicable environmental 

laws; and (6) the property must meet 

certain construction and written binding 

contract requirements. 

Description of Qualified Refinery 

Section 179C(d) provides that a 

qualified refinery is a refinery located in 

the United States, whose primary 

purpose is to process liquid fuel from 

crude oil or qualified fuels. Section 

179C(f) provides that refinery property 

is ineligible for the section 179C(a) 

deduction if the primary purpose of the 

refinery is for use as a topping plant, 

asphalt plant, lube oil facility, crude or 

product terminal, or blending facility; or 

if the refinery property is built solely to 

comply with consent decrees or projects 

mandated by Federal, state, or local 

governments. 

Original Use Requirement 

Pursuant to the requirements under 

section 179C(c)(1)(A), the temporary 

regulations provide that the original use 

of qualified refinery property must 

commence with the taxpayer. The 

temporary regulations define original 

use as the first use to which the 

property is put, whether or not that use 

corresponds to the use of the property 

by the taxpayer, and provide certain 

exceptions for taxpayers that engage in 

certain sale-leaseback transactions. 

The temporary regulations provide 

that if a taxpayer incurs capital 

expenditures to recondition or rebuild 

property acquired or owned by the 

taxpayer, those capital expenditures 

will meet the original use requirement, 

and may qualify for deduction under 

section 179C(a). Consistent with the 

statute, the temporary regulations clarify 

that reconditioned or rebuilt property 

acquired by a taxpayer does not satisfy 

the original use requirement and is not 

qualified refinery property. The 

question of whether property is 

reconditioned or rebuilt property is a 

question of fact. 

Consistent with section 179C(c)(2), 

the temporary regulations also provide 

an exception to the original use 

requirement for certain sale-leaseback 

transactions. If property is originally 

placed in service by a person after 

August 8, 2005, and is sold to a 

taxpayer, and leased back to the person 

by the taxpayer within three months 

after the date the property was 

originally placed in service by the 

person, the original use of that property 

is considered to have commenced with 

the taxpayer-lessor. 

Placed in Service Requirements 

Section 179C(c)(1)(B) provides that 

qualified refinery property is property 

that is placed in service by the taxpayer 

after August 8, 2005, and before January 

1, 2012. 

Consistent with section 179C(c)(2), 

the temporary regulations provide that, 

for certain sale-leaseback transactions, if 

property is originally placed in service 

by a person after August 8, 2005, and is 

sold to a taxpayer and leased back to the 

person by the taxpayer within three 

months after the date the property was 

originally placed in service by the 

person, the new property is treated as 

originally placed in service by the 

taxpayer-lessor not earlier than the date 

on which the property is used by the 

lessee under the sale-leaseback. 

Production Capacity Requirements 

The production capacity requirement 

of section 179C(c)(1)(C) and (e) is met if 

any portion of qualified refinery 

property: (1) Enables an existing 

qualified refinery to increase its total 

volume output, determined without 

regard to asphalt or lube oil, by 5 

percent or more on an average daily 

basis; or (2) enables the existing 

qualified refinery to increase the 

percentage of total throughput 

attributable to processing qualified fuels 

to a rate that is at least 25 percent of 

total throughput on an average daily 

basis. Any reasonable method may be 

used to determine the appropriate 

baseline for measuring capacity 

increases and to demonstrate and 

substantiate that the capacity of the 

existing qualified refinery has been 

sufficiently increased. For example, the 

average annual output over a number of 

normal production years may provide a 

reasonable baseline for measuring an 

increase in capacity. The temporary 

regulations confirm that the existing 

qualified refinery is the refinery prior to 

the installation of qualified refinery 

property. The temporary regulations 

also confirm that the question of 

whether the qualified refinery property 

has sufficiently enabled output or 

throughput increases is properly 

evaluated as of the placed-in-service 

date of the qualified refinery property. 

Any Applicable Environmental Laws 

Requirement 

Section 179C(c)(1)(D) provides that 

qualified refinery property must meet 

all applicable Federal, state, and local 

environmental laws. However, the 

environmental compliance requirement 

applies only with respect to the laws in 

effect on the date that qualified refinery 

property is placed in service after 

August 8, 2005, and before January 1, 

2012. Furthermore, a refinery’s failure to 

meet applicable environmental laws 

with respect to a portion of the refinery 


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Federal Register / Vol. 73, No. 132 / Wednesday, July 9, 2008 / Rules and Regulations 39229 

that was in service prior to August 8, 

2005 will not disqualify the taxpayer 

from making the election under section 

179C(a) with respect to the otherwise 

qualifying refinery property. 

Section 179C(c)(1)(D) and (c)(3) 

provides that the property must comply 

with the Clean Air Act, notwithstanding 

any waiver received by the taxpayer 

under that Act. 

Consistent with section 179C(f)(2), the 

temporary regulations provide that the 

section 179C(a) election is not available 

for identifiable refinery property built 

solely to comply with state, locally or 

Federally mandated projects or consent 

decrees. For example, a taxpayer may 

not elect to expense the cost of a 

scrubber necessary for the refinery to 

comply with the Clean Air Act, even if 

the scrubber is installed as part of a 

larger project, if the scrubber itself does 

not otherwise enable an increase in 

production capacity. 

Construction and Written Binding 

Contract Requirements 

Under section 179C(c)(1), qualified 

refinery property will include otherwise 

qualified property that is placed in 

service by the taxpayer after August 8, 

2005, and before January 1, 2012, but 

only if no written binding contract for 

the construction of the property was in 

effect on or before June 14, 2005. 

Pursuant to section 179C(c)(1)(F), a 

taxpayer must take some action 

constituting a construction commitment 

before January 1, 2008. To meet this test, 

any of the following three acts is 

sufficient: (1) Entering into a written 

binding construction contract before 

January 1, 2008; (2) placing the property 

in service before January 1, 2008; or (3) 

in the case of self-constructed property, 

starting self-construction after June 14, 

2005, and before January 1, 2008. 

Consistent with existing section 

168(k) principles, in the case of selfconstructed property, the temporary 

regulations provide that construction 

begins when physical work (not 

including preliminary activities such as 

planning or designing, securing 

financing, exploring, or researching) of 

a significant nature begins. The 

determination of when work of a 

significant nature begins depends on the 

facts and circumstances. Cf. Treas. Regs. 

§ 1.168(k)–1(b)(4)(iii)(B). Recognizing 

that taxpayers have had to make some 

determinations as to whether selfconstructed property could qualify for 

the section 179C deduction in the 

absence of regulations, the temporary 

regulations provide that physical work 

of a significant nature will be deemed to 

have begun before January 1, 2008 for 

purposes of section 179C if the taxpayer 

performed some physical work before 

January 1, 2008 (such as clearing a site 

or excavation) and has performed 

physical work of a significant nature (as 

defined in Treas. Regs. § 1.168(k)–

1(b)(4)(iii)(B)) before October 7, 2008. 

Elections 

Section 179C provides two elections. 

The first election is provided under 

section 179C(a), which allows a 

taxpayer to elect to deduct an amount 

equal to 50 percent of the costs paid or 

incurred by the taxpayer for qualified 

refinery property in the year the 

property is placed in service. The 

election generally must be made by the 

due date (including extensions) for 

filing the taxpayer’s Federal income tax 

return for the taxable year in which the 

qualified refinery property is placed in 

service by the taxpayer. The taxpayer 

must make the election by entering the 

deduction claimed at the appropriate 

place on the taxpayer’s Federal income 

tax return. 

A taxpayer that did not claim the 

section 179C(a) deduction on a Federal 

income tax return filed for a taxable year 

ending prior to July 9, 2008 but wishes 

to claim the deduction for that taxable 

year may do so by properly making a 

section 179C(a) election under these 

proposed regulations on an amended 

return filed by December 31, 2008. 

In general, once an election is made 

under section 179C(a), it may not be 

revoked except with the written consent 

of the Commissioner. However, these 

temporary regulations provide that a 

taxpayer is deemed to have requested 

and been granted consent to revoke an 

election under section 179C(a) if the 

taxpayer revokes the election before the 

revocation deadline. The revocation 

deadline is the later of December 31, 

2008, or 24 months after the due date 

(including extensions) of the taxpayer’s 

Federal income tax return for the 

taxable year for which the election 

applies. The taxpayer revokes the 

election by attaching a statement to an 

amended return for the taxable year for 

which the election applies. A taxpayer 

is not permitted to revoke an election 

under section 179C(a) after the 

revocation deadline. The revocation 

deadline may not be extended under 

§ 301.9100–1. 

The second election is provided in 

section 179C(g), which allows a 

taxpayer that is a subchapter T 

cooperative (cooperative taxpayer) and 

that has a subchapter T cooperative as 

one or more of its owners (cooperative 

owner(s)) to elect to allocate all or a 

portion of the deduction allowable 

under section 179C(a) for the taxable 

year to the cooperative owner(s). If a 

cooperative taxpayer makes an election 

under section 179C(g), the temporary 

regulations provide that this allocation 

is equal to the cooperative owner’s 

ratable share of the total amount 

allocated, determined on the basis of the 

cooperative owner’s ownership interest 

in the cooperative taxpayer at the 

beginning of the cooperative taxpayer’s 

taxable year. Under the temporary 

regulations, the section 179C(g) election 

must be made by the due date 

(including extensions) for filing the 

cooperative taxpayer’s original Federal 

income tax return for the taxable year 

for which the section 179C(a) election is 

made by the cooperative taxpayer. 

Under the temporary regulations, a 

cooperative taxpayer is required to make 

the election under section 179C(g) by 

attaching a statement to the cooperative 

taxpayer’s Federal income tax return 

providing the name and taxpayer 

identification number of the cooperative 

taxpayer, the amount of the deduction 

allowable to the cooperative taxpayer, 

the name and taxpayer identification 

number of each cooperative owner, and 

the amount of the deduction allocated to 

each of the cooperative owner(s). 

Consistent with section 179C(g)(3), the 

temporary regulations also require the 

cooperative taxpayer to notify any 

cooperative owner in writing, and on 

Form 1099–PATR, ‘‘Taxable 

Distributions Received from 

Cooperatives,’’ of the amount of the 

section 179C(a) deduction that is 

apportioned to that cooperative owner. 

The written notice must be provided to 

the cooperative owner(s) before the due 

date (including extensions) of the 

cooperative taxpayer’s original Federal 

income tax return. 

Consistent with section 179C(g)(2), 

once made, an election under section 

179C(g) may not be revoked. 

Consequently, a taxpayer that has made 

an irrevocable section 179C(g) election 

may not elect to revoke its section 

179C(a) election. 

Reporting Requirements 

Section 179C(h) provides that any 

taxpayer making a section 179C(a) 

election must submit a statement in 

order to claim the section 179C(a) 

deduction. The temporary regulations 

provide that in order to claim the 

section 179C(a) deduction on a tax 

return filed after July 23, 2008, the 

taxpayer must attach the statement to 

the taxpayer’s Federal income tax return 

for the taxable year in which the 

qualified refinery property is placed in 

service by the taxpayer. The taxpayer 

must identify the name and location of 

the qualified refinery property and 

provide an affirmation that the 


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39230 Federal Register / Vol. 73, No. 132 / Wednesday, July 9, 2008 / Rules and Regulations 

taxpayer’s refinery property meets the 

production capacity requirements of 

section 179C(e). The taxpayer also must 

provide the total cost basis of the 

qualified refinery property and the 

depreciation treatment of the capitalized 

portion of the qualified refinery 

property. If it has not already filed the 

statement, a taxpayer that has claimed 

the section 179C(a) deduction on a 

Federal income tax return filed prior to 

July 23, 2008, must attach a statement 

to its next Federal income tax return for 

each taxable year in which the taxpayer 

claimed the deduction but did not file 

a statement. 

Effective/Applicability Date 

These temporary regulations generally 

apply to taxable years ending on or after 

July 9, 2008, and terminate on July 1, 

2011. However, the proposed 

regulations may be relied upon by 

taxpayers for taxable years ending prior 

to July 9, 2008. 

Special Analyses 

It has been determined that this 

Treasury decision is not a significant 

regulatory action as defined in 

Executive Order 12866. Therefore, a 

regulatory assessment is not required. It 

also has been determined that section 

553(b) of the Administrative Procedure 

Act (5 U.S.C. chapter 5) does not apply 

to these regulations. For the 

applicability of the Regulatory 

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

to the Special Analyses section of the 

preamble to the cross-reference notice of 

proposed rulemaking published in the 

Proposed Rules section in this issue of 

the Federal Register. Pursuant to 

section 7805(f) of the Code, these 

regulations have been submitted to the 

Chief Counsel for Advocacy of Small 

Business Administration for comment 

on their impact on small business. 

Drafting Information 

The principal author of these 

regulations is Philip Tiegerman, Office 

of Associate Chief Counsel 

(Passthroughs and Special Industries). 

However, other personnel from the IRS 

and Treasury Department participated 

in their development. 

List of Subjects 

26 CFR Part 1 

Income taxes, Reporting and 

recordkeeping requirements. 

26 CFR Part 602 

Reporting and recordkeeping 

requirements. 

Amendments to the Regulations 

■ Accordingly, 26 CFR parts 1 and 602 

are amended as follows: 

PART 1—INCOME TAXES 

■ Paragraph 1. The authority for part 1 

continues to read in part as follows: 

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

■ Par. 2. Section 1.179C–1T is added to 

read as follows: 

§ 1.179C–1T Election to expense certain 

refineries (temporary). 

(a) Scope and definitions—(1) Scope. 

This section provides the rules for 

determining the deduction allowable 

under section 179C(a) for the cost of any 

qualified refinery property. The 

provisions of this section apply only to 

a taxpayer that elects to apply section 

179C in the manner prescribed under 

paragraph (d) of this section. 

(2) Definitions. For purposes of 

section 179C and this section, the 

following definitions apply: 

(i) Applicable environmental laws are 

any applicable Federal, state, or local 

environmental laws. 

(ii) Qualified fuels has the meaning 

set forth in section 45K(c). 

(iii) Cost is the unadjusted 

depreciable basis (as defined in 

§ 1.168(b)–1(a)(3), but without regard to 

the reduction in basis for any portion of 

the basis the taxpayer properly elects to 

treat as an expense under section 179C 

and this section) of the property. 

(iv) Throughput is a volumetric rate 

measuring the flow of crude oil or 

qualified fuels processed over a given 

period of time, typically referenced on 

the basis of barrels per calendar day. 

(v) Barrels per calendar day is the 

amount of fuels that a facility can 

process under usual operating 

conditions, expressed in terms of 

capacity during a 24-hour period and 

reduced to account for down time and 

other limitations. 

(vi) United States has the same 

meaning as that term is defined in 

section 7701(a)(9). 

(b) Qualified refinery property—(1) In 

general. Qualified refinery property is 

any property that meets the 

requirements set forth in paragraphs 

(b)(2) through (b)(7) of this section. 

(2) Description of qualified refinery 

property—(i) In general. Property that 

comprises any portion of a qualified 

refinery may be qualified refinery 

property. For purposes of section 179C 

and this section, a qualified refinery is 

any refinery located in the United States 

that is designed to serve the primary 

purpose of processing crude oil or 

qualified fuels. 

(ii) Nonqualified refinery property. 

Refinery property is not qualified 

refinery property for purposes of this 

paragraph (b)(2) if—

(A) The primary purpose of the 

refinery property is for use as a topping 

plant, asphalt plant, lube oil facility, 

crude or product terminal, or blending 

facility; or 

(B) The refinery property is built 

solely to comply with consent decrees 

or projects mandated by Federal, state or 

local governments. 

(3) Original use—(i) In general. For 

purposes of the deduction allowable 

under section 179C(a), refinery property 

will meet the requirements of this 

paragraph (b)(3) if the original use of the 

property commences with the taxpayer. 

Except as provided in paragraph 

(b)(3)(ii) of this section, original use 

means the first use to which the 

property is put, whether or not that use 

corresponds to the use of the property 

by the taxpayer. Thus, if a taxpayer 

incurs capital expenditures to 

recondition or rebuild property acquired 

or owned by the taxpayer, only the 

capital expenditures incurred by the 

taxpayer to recondition or rebuild the 

property acquired or owned by the 

taxpayer satisfy the original use 

requirement. However, the cost of 

reconditioned or rebuilt property 

acquired by a taxpayer does not satisfy 

the original use requirement. Whether 

property is reconditioned or rebuilt 

property is a question of fact. For 

purposes of this paragraph (b)(3)(i), 

acquired or self-constructed property 

that contains used parts will be treated 

as reconditioned or rebuilt only if the 

cost of the used parts is more than 20 

percent of the total cost of the property. 

(ii) Sale-leaseback. If any new portion 

of a qualified refinery is originally 

placed in service by a person after 

August 8, 2005, and is sold to a taxpayer 

and leased back to the person by the 

taxpayer within three months after the 

date the property was originally placed 

in service by the person, the taxpayerlessor is considered the original user of 

the property. 

(4) Placed-in-service date—(i) In 

general. Refinery property will meet the 

requirements of this paragraph (b)(4) if 

the property is placed in service by the 

taxpayer after August 8, 2005, and 

before January 1, 2012. 

(ii) Sale-leaseback. If a new portion of 

refinery property is originally placed in 

service by a person after August 8, 2005, 

and is sold to a taxpayer and leased 

back to the person by the taxpayer 

within three months after the date the 

property was originally placed in 

service by the person, the property is 

treated as originally placed in service by 


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Federal Register / Vol. 73, No. 132 / Wednesday, July 9, 2008 / Rules and Regulations 39231 

the taxpayer-lessor not earlier than the 

date on which the property is used by 

the lessee under the leaseback. 

(5) Production capacity—(i) In 

general. Refinery property is considered 

qualified refinery property if—

(A) It enables the existing qualified 

refinery to increase the total volume 

output, determined without regard to 

asphalt or lube oil, by at least five 

percent on an average daily basis; or 

(B) It enables the existing qualified 

refinery to increase the percentage of 

total throughput attributable to 

processing qualified fuels to a rate that 

is at least 25 percent of total throughput 

on an average daily basis. 

(ii) When production capacity is 

tested. The production capacity 

requirement of this paragraph (b)(5) is 

determined as of the date the property 

is placed in service by the taxpayer. Any 

reasonable method may be used to 

determine the appropriate baseline for 

measuring capacity increases and to 

demonstrate and substantiate that the 

capacity of the existing qualified 

refinery has been sufficiently increased. 

(iii) Multi-stage projects. In the case of 

multi-stage projects, a taxpayer must 

satisfy the reporting requirements of 

paragraph (f)(2) of this section, 

sufficient to establish that the 

production capacity requirements of 

this paragraph (b)(5) will be met as a 

result of the taxpayer’s overall plan. 

(6) Applicable environmental laws—

(i) In general. The environmental 

compliance requirement applies only 

with respect to refinery property, or any 

portion of refinery property, that is 

placed in service after August 8, 2005. 

A refinery’s failure to meet applicable 

environmental laws with respect to a 

portion of the refinery that was in 

service prior to August 8, 2005 will not 

disqualify a taxpayer from making the 

election under section 179C(a) with 

respect to otherwise qualifying refinery 

property. 

(ii) Waiver under the Clean Air Act. 

Refinery property must comply with the 

Clean Air Act, notwithstanding any 

waiver received by the taxpayer under 

that Act. 

(7) Construction of property—(i) In 

general. Qualified property will meet 

the requirements of this paragraph (b)(7) 

if—

(A) The property is placed in service 

by the taxpayer after August 8, 2005, 

and before January 1, 2012; and 

(B) No written binding contract for the 

construction of the property was in 

effect before June 14, 2005. 

(ii) Definition of binding contract—(A) 

In general. A contract is binding only if 

it is enforceable under state law against 

the taxpayer or a predecessor, and does 

not limit damages to a specified amount 

(for example, by use of a liquidated 

damages provision). For this purpose, a 

contractual provision that limits 

damages to an amount equal to at least 

5 percent of the total contract price will 

not be treated as limiting damages to a 

specified amount. In determining 

whether a contract limits damages, the 

fact that there may be little or no 

damages because the contract price does 

not significantly differ from fair market 

value will not be taken into account. 

(B) Conditions. A contract is binding 

even if subject to a condition, as long as 

the condition is not within the control 

of either party or the predecessor of 

either party. A contract will continue to 

be binding if the parties make 

insubstantial changes in its terms and 

conditions, or if any term is to be 

determined by a standard beyond the 

control of either party. A contract that 

imposes significant obligations on the 

taxpayer or a predecessor will be treated 

as binding, notwithstanding the fact that 

insubstantial terms remain to be 

negotiated by the parties to the contract. 

(C) Options. An option to either 

acquire or sell property is not a binding 

contract. 

(D) Supply agreements. A binding 

contract does not include a supply or 

similar agreement if the payment 

amount and design specification of the 

property to be purchased have not been 

specified. 

(E) Components. A binding contract to 

acquire one or more components of a 

larger property will not be treated as a 

binding contract to acquire the larger 

property. If a binding contract to acquire 

a component does not satisfy the 

requirements of this paragraph (b)(7), 

the component is not qualified refinery 

property. 

(iii) Self-constructed property—(A) In 

general. Except as provided in 

paragraph (b)(7)(iii)(B) of this section, if 

a taxpayer manufactures, constructs, or 

produces property for use by the 

taxpayer in its trade or business (or for 

the production of income by the 

taxpayer), the construction of property 

rules in this paragraph (b)(7) are treated 

as met for qualified refinery property if 

the taxpayer began manufacturing, 

constructing, or producing the property 

after June 14, 2005, and before January 

1, 2008. Property that is manufactured, 

constructed or produced for the 

taxpayer by another person under a 

written binding contract (as defined in 

paragraph (b)(7)(ii) of this section) that 

is entered into prior to the manufacture, 

construction, or production of the 

property for use by the taxpayer in its 

trade or business (or for the production 

of income) is considered to be 

manufactured, constructed, or produced 

by the taxpayer. 

(B) When construction begins. For 

purposes of this paragraph (b)(7)(iii), 

construction of property generally 

begins when physical work of a 

significant nature begins. Physical work 

does not include preliminary activities 

such as planning or designing, securing 

financing, exploring, or researching. The 

determination of when physical work of 

a significant nature begins depends on 

the facts and circumstances. 

Nevertheless, physical work of a 

significant nature will be deemed to 

have begun for purposes of this 

paragraph (b)(7)(iii)(B), and the 

construction of the property will be 

deemed to have met the requirements of 

paragraph (b)(7)(iii)(A) of this section, if 

the taxpayer performed some physical 

work before January 1, 2008 (such as 

clearing a site or excavation) and has 

performed physical work of a significant 

nature (as defined in Treas. Regs. 

§ 1.168(k)–1(b)(4)(iii)(B)) before October 

7, 2008. 

(C) Components of self-constructed 

property—(1) Acquired components. If a 

binding contract (as defined in 

paragraph (b)(7)(ii) of this section) to 

acquire a component of self-constructed 

property is in effect on or before June 

14, 2005, the component does not 

satisfy the requirements of paragraph 

(b)(7)(i) of this section, and is not 

qualified refinery property. However, if 

construction of the self-constructed 

property begins after June 14, 2005, the 

self-constructed property may be 

qualified refinery property if it meets all 

other requirements of section 179C and 

this section (including paragraph 

(b)(7)(i) of this section), even though the 

component is not qualified refinery 

property. If the construction of selfconstructed property begins before June 

14, 2005, neither the self-constructed 

property nor any component related to 

the self-constructed property is 

qualified refinery property. If the 

component was acquired before January 

1, 2008, but the construction of the selfconstructed property begins after 

December 31, 2007, the component may 

qualify as qualified refinery property 

even if the self-constructed property is 

not qualified refinery property. 

(2) Self-constructed components. If 

the manufacture, construction, or 

production of a component fails to meet 

any of the requirements of paragraph 

(b)(7)(iii) of this section, the component 

is not qualified refinery property. 

However, if the manufacture, 

construction, or production of a 

component fails to meet any of the 

requirements provided in paragraph 

(b)(7)(iii) of this section, but the 


dwashington3 on PRODPC61 with RULES
39232 Federal Register / Vol. 73, No. 132 / Wednesday, July 9, 2008 / Rules and Regulations 

construction of the self-constructed 

property begins after June 14, 2005, the 

self-constructed property may qualify as 

qualified refinery property if it meets all 

other requirements of section 179C and 

this section (including paragraph 

(b)(7)(i) of this section). If the 

construction of the self-constructed 

property begins before June 14, 2005, 

neither the self-constructed property nor 

any components related to the selfconstructed property are qualified 

refinery property. If the component was 

self-constructed before January 1, 2008, 

but the construction of the selfconstructed property begins after 

December 31, 2007, the component may 

qualify as qualified refinery property, 

although the self-constructed property is 

not qualified refinery property. 

(c) Computation of expense deduction 

for qualified refinery property. In 

general, the allowable deduction under 

paragraph (d) of this section for 

qualified refinery property is 

determined by multiplying by 50 

percent the cost of the qualified refinery 

property paid or incurred by the 

taxpayer. 

(d) Election—(1) In general. A 

taxpayer may make an election to 

deduct as an expense 50 percent of the 

cost of any qualified refinery property. 

A taxpayer making this election takes 

the 50 percent deduction for the taxable 

year in which the qualified refinery 

property is placed in service. 

(2) Time and manner for making 

election—(i) Time for making election. 

An election specified in this paragraph 

(d) generally must be made not later 

than the due date (including extensions) 

for filing the original Federal income tax 

return for the taxable year in which the 

qualified refinery property is placed in 

service by the taxpayer. However, a 

taxpayer that did not claim the section 

179C(a) deduction on a Federal income 

tax return filed for a taxable year ending 

prior to July 9, 2008 but wishes to claim 

the deduction for that taxable year may 

do so by properly making a section 

179C(a) election under this paragraph 

(d) on an amended return filed by 

December 31, 2008. 

(ii) Manner of making election. The 

taxpayer makes an election under 

section 179C(a) and this paragraph (d) 

by entering the amount of the deduction 

at the appropriate place on the 

taxpayer’s timely filed original Federal 

income tax return for the taxable year in 

which the qualified refinery property is 

placed in service (or on the amended 

return, as provided in paragraph (d)(2)(i) 

of this section), and attaching a report 

as specified in paragraph (f) of this 

section to the taxpayer’s timely filed 

original Federal income tax return for 

the taxable year in which the qualified 

refinery property is placed in service (or 

on the amended return, as provided in 

paragraph (d)(2)(i) of this section). 

(3) Revocation of election—(i) In 

general. An election made under section 

179C(a) and this paragraph (d), and any 

specification contained in such election, 

may not be revoked except with the 

consent of the Commissioner of Internal 

Revenue. 

(ii) Revocation prior to the revocation 

deadline. A taxpayer is deemed to have 

requested, and to have been granted, 

consent of the Commissioner to revoke 

an election under section 179C(a) and 

this paragraph (d) if the taxpayer 

revokes the election before the 

revocation deadline. The revocation 

deadline is the later of December 31, 

2008, or 24 months after the due date 

(including extensions) for filing the 

taxpayer’s Federal income tax return for 

the taxable year for which the election 

applies. An election under section 

179C(a) and this paragraph (d) is 

revoked by attaching a statement to an 

amended return for the taxable year for 

which the election applies. The 

statement must specify the name and 

address of the refinery for which the 

election applies and the amount 

deducted on the taxpayer’s original 

Federal income tax return for the 

taxable year for which the election 

applies. 

(iii) Revocation after the revocation 

deadline. An election under section 

179C(a) and this paragraph (d) may not 

be revoked after the revocation 

deadline. The revocation deadline may 

not be extended under § 301.9100–1. 

(iv) Revocation by cooperative 

taxpayer. A taxpayer that has made an 

election to allocate the section 179C 

deduction to cooperative owners under 

section 179C(g) and paragraph (e) of this 

section may not revoke its election 

under section 179C(a). 

(e) Election to allocate section 179C 

deduction to cooperative owners—(1) In 

general. If a cooperative taxpayer makes 

an election under section 179C(g) and 

this paragraph (e), the cooperative 

taxpayer may elect to allocate all, some, 

or none of the deduction allowable 

under section 179C(a) for that taxable 

year to the cooperative owner(s). This 

allocation is equal to the cooperative 

owner(s)’ ratable share of the total 

amount allocated, determined on the 

basis of each cooperative owner’s 

ownership interest in the cooperative 

taxpayer. For purposes of this section, a 

cooperative taxpayer is an organization 

to which part I of subchapter T applies, 

and in which another organization to 

which part I of subchapter T applies 

(cooperative owner) directly holds an 

ownership interest. No deduction shall 

be allowed under section 1382 for any 

amount allocated under this paragraph 

(e). 

(2) Time and manner for making 

election—(i) Time for making election. 

A cooperative taxpayer must make the 

election under section 179(g) and this 

paragraph (e) by the due date (including 

extensions) for filing the cooperative 

taxpayer’s original Federal income tax 

return for the taxable year to which the 

cooperative taxpayer’s election under 

section 179C(a) and paragraph (d) of this 

section applies. 

(ii) Manner of making election. An 

election under this paragraph (e) is 

made by attaching to the cooperative 

taxpayer’s timely filed Federal income 

tax return for the taxable year (including 

extensions) to which the cooperative 

taxpayer’s election under section 

179C(a) and paragraph (d) of this section 

applies a statement providing the 

following information: 

(A) The name and taxpayer 

identification number of the cooperative 

taxpayer. 

(B) The amount of the deduction 

allowable to the cooperative taxpayer 

for the taxable year to which the 

election under section 179C(a) and 

paragraph (d) of this section applies. 

(C) The name and taxpayer 

identification number of each 

cooperative owner to which the 

cooperative taxpayer is allocating all or 

some of the deduction allowable. 

(D) The amount of the allowable 

deduction that is allocated to each 

cooperative owner listed in paragraph 

(e)(2)(ii)(C) of this section. 

(3) Written notice to owners. If any 

portion of the deduction allowable 

under section 179C(a) is allocated to a 

cooperative owner, the cooperative 

taxpayer must notify the cooperative 

owner of the amount of the deduction 

allocated to the cooperative owner in a 

written notice, and on Form 1099–

PATR, ‘‘Taxable Distributions Received 

from Cooperatives.’’ This notice must be 

provided on or before the due date 

(including extensions) of the 

cooperative taxpayer’s original Federal 

income tax return for the taxable year 

for which the cooperative taxpayer’s 

election under section 179C(a) and 

paragraph (d) of this section applies. 

(4) Irrevocable election. A section 

179C(g) election, once made, is 

irrevocable. 

(f) Reporting requirement—(1) In 

general. A taxpayer may not claim a 

deduction under section 179C(a) for any 

taxable year unless the taxpayer files a 

report with the Secretary containing 

information with respect to the 

operation of the taxpayer’s refineries. 


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Federal Register / Vol. 73, No. 132 / Wednesday, July 9, 2008 / Rules and Regulations 39233 

(2) Information to be included in the 

report. The taxpayer must specify—

(i) The name and address of the 

refinery; 

(ii) Under which production capacity 

requirement under section 179C(e) and 

paragraph (b)(5)(i)(A) and (B) of this 

section the taxpayer’s qualified refinery 

qualifies; 

(iii) Whether the refinery is qualified 

refinery property under section 179C(d) 

and paragraph (b)(2) of this section, 

sufficient to establish that the primary 

purpose of the refinery is to process 

liquid fuel from crude oil or qualified 

fuels. 

(iv) The total cost basis of the 

qualified refinery property at issue for 

the taxpayer’s current taxable year; and 

(v) The depreciation treatment of the 

capitalized portion of the qualified 

refinery property. 

(3) Time and manner for submitting 

report—(i) Time for submitting report. 

The taxpayer is required to submit the 

report specified in this paragraph (f) not 

later than the due date (including 

extensions) of the taxpayer’s Federal 

income tax return for the taxable year in 

which the qualified refinery property is 

placed in service. A taxpayer that has 

made a section 179C(a) election for a 

prior taxable year by claiming the 

section 179C(a) deduction on a Federal 

income tax return filed prior to July 23, 

2008, but has not already filed a report 

for that year, must attach a report to its 

next Federal income tax return for each 

taxable year the taxpayer claimed the 

deduction but did not file a report. 

(ii) Manner of submitting report. The 

taxpayer must attach the report 

specified in this paragraph (f) to the 

taxpayer’s timely filed original Federal 

income tax return for the taxable year in 

which the qualified refinery property is 

placed in service. 

(g) Effective/applicability date. This 

section is applicable for taxable years 

ending on or after July 9, 2008. 

(h) Expiration date. The applicability 

of this section expires on or before July 

1, 2011. 

PART 602—OMB CONTROL NUMBERS 

UNDER THE PAPERWORK 

REDUCTION ACT 

■ Par. 3. The authority citation for part 

602 continues to read as follows: 

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

■ Par. 4. In § 602.101, paragraph (b) is 

amended by adding the following entry 

in numerical order to the table to read 

as follows: 

§ 602.101 OMB Control numbers. 

* * * * * 

(b) * * * 

CFR part or section where 

identified and described 

Current OMB 

Control No. 

* * * * * 

1.179C–1T .............................. 1545–2103 

* * * * * 

Approved: July 3, 2008. 

Linda E. Stiff, 

Deputy Commissioner for Services and 

Enforcement. 

Eric Solomon, 

Assistant Secretary of the Treasury (Tax 

Policy). 

[FR Doc. 08–1423 Filed 7–3–08; 3:33 pm] 

BILLING CODE 4830–01–P 

DEPARTMENT OF HOMELAND 

SECURITY 

Coast Guard 

33 CFR Part 100 

[Docket No. USCG–2008–0031] 

RIN 1625–AA08 

Regattas and Marine Parades; Great 

Lake Annual Marine Events 

AGENCY: Coast Guard, DHS. 

ACTION: Final rule. 

SUMMARY: The Coast Guard is amending 

special local regulations for annual 

regattas and marine parades in the 

Captain of the Port Lake Michigan zone. 

This rule will place restrictions on 

vessel movement in portions of the 

Calumet Sag Channel and the Little 

Calumet River during the annual 

Southland Regatta. The Southland 

Regatta is a university rowing race that 

will be held annually during the first 

weekend of November. This rule is 

intended to ensure safety of life on the 

navigable waters immediately prior to, 

during, and immediately after regattas 

or marine parades. 

DATES: This rule is effective August 8, 

2008. 

ADDRESSES: Comments and material 

received from the public, as well as 

documents indicated in this preamble as 

being available in the docket, are part of 

docket USCG–2008–0031 and are 

available online at 

http:www.regulations.gov. This material 

is also available for inspection or 

copying at two locations: the Docket 

Management Facility (M–30), U.S. 

Department of Transportation, West 

Building Ground Floor, Room W12–140, 

1200 New Jersey Avenue, SE., 

Washington, DC 20590, between 9 a.m. 

and 5 p.m., Monday through Friday, 

except Federal holidays and the U.S. 

Coast Guard Sector Lake Michigan, 2420 

South Lincoln Memorial Drive, 

Milwaukee, WI 53207, between 8 a.m. 

and 3 p.m., Monday through Friday, 

except Federal holidays. 

FOR FURTHER INFORMATION CONTACT: If 

you have questions on this rule, call 

Lieutenant Commander Kimber Bannan, 

Prevention Department, Coast Guard 

Sector Lake Michigan, Milwaukee, WI, 

414–747–7159. If you have questions on 

viewing the docket, call Renee V. 

Wright, Program Manager, Docket 

Operations, telephone 202–493–0402. 

SUPPLEMENTARY INFORMATION: 

Regulatory Information 

On February 6, 2008, we published a 

notice of proposed rulemaking (NPRM) 

entitled Regattas and Marine Parades; 

Great Lake Annual Marine Events in the 

Federal Register (73 FR 6859). We 

received one letter commenting on the 

proposed rule. No public meeting was 

requested, and none was held. 

Background and Purpose 

This rule will add a subpart to 33 CFR 

Part 100 that will place restrictions on 

the portions of the Calumet Sag Channel 

and the Little Calumet River during the 

annual Southland Regatta. The 

Southland Regatta is a university rowing 

race that will be held annually during 

the first weekend of November. 

Discussion of Comments and Changes 

One comment was received regarding 

this rule. The comment endorsed the 

rule stating that it would enable the 

Southland Regatta contestants to focus 

on the competition without the threat of 

danger, collision, and injury from 

vessels and recreational boaters on the 

water before, during, and after the event. 

Regulatory Evaluation 

This rule is not a ‘‘significant 

regulatory action’’ under section 3(f) of 

Executive Order 12866, Regulatory 

Planning and Review, and does not 

require an assessment of potential costs 

and benefits under section 6(a)(3) of that 

Order. The Office of Management and 

Budget has not reviewed this rule under 

that Order. 

The Coast Guard’s use of these special 

local regulations will be periodic, of 

short duration, and designed to 

minimize the impact on navigable 

waters. These special local regulations 

will only be enforced immediately 

before, during, and immediately after 

the time the marine events occur. 

Furthermore, these special local 


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