Source: https://www.irs.gov/irb/2009-17_IRB
Timestamp: 2019-04-19 00:42:13+00:00

Document:
2008 section 45K inflation adjustment factor. This notice announces the inflation adjustment factor, the reference price, and the credit amount for the nonconventional source fuel credit for coke or coke gas (other than from petroleum based products) for the 2008 calendar year.
This notice solicits applications for allocations of the present total national bond volume limitation authority of $2.4 billion to issue new clean renewable energy bonds (New CREBs) under section 54C(a) of the Code to finance certain qualified projects described in section 45(d). This notice also provides related guidance on the following: (1) eligibility requirements that a project must meet to be considered for a volume cap allocation; (2) application requirements and the application form for requests for volume cap allocations; (3) the method that the IRS will use to allocate the volume cap; and (4) certain aspects of the applicable law and interim guidance in this area.
This notice provides the face amount of qualified school construction bonds (QSCBs) allocated by the Department of the Treasury to each state and large local education agency for 2009 under section 54F(d) of the Code. This notice also provides other limited interim guidance with respect to QSCBs.
This notice states that pursuant to the administration’s Home Affordable Modification Program (HAMP), the United States Government may make certain payments to a real estate mortgage investment conduit (REMIC). It also states that if those payments are “ contributions” subject to the 100 percent contribution tax set forth in section 860G(d)(1) of the Code and if none of the exceptions set forth in section 860G(d)(2) apply, then regulations will be issued that will provide an exception for such payments pursuant to section 860G(d)(2)(E).
This procedure describes the conditions under which modifications to residential mortgage loans pursuant to the administration’s Home Affordable Modification Program (HAMP) will not cause the IRS to challenge the tax status of real estate mortgage investment conducts (REMICs) or fixed investment trusts or to assert that those modifications to mortgages held by a REMIC give rise to a prohibited transaction.
Automobile owners and lessees. This procedure provides owners and lessees of passenger automobiles (including trucks and vans) with tables detailing the limitations on depreciation deductions for passenger automobiles first placed in service during calendar year 2009 and the amounts to be included in income for passenger automobiles first leased during calendar year 2009.
This notice extends the time for making claims pertaining to biodiesel and biodiesel mixtures that was certified under the old ASTM D6751 standard from April 1, 2009, set forth in Notice 2008-110, 2008-51 I.R.B. 1298, to September 30, 2009. Notice 2008-110 modified.
This notice publishes the nonconventional source fuel credit, inflation adjustment factor, and reference price under § 45K of the Internal Revenue Code for coke or coke gas (other than from petroleum based products) for calendar year 2008. The inflation adjustment factor and the reference price are used to determine the credit allowable under § 45K for coke or coke gas. The calendar year 2008 inflation-adjusted credit applies to the sales of barrel-of-oil equivalent of coke or coke gas sold by a taxpayer to an unrelated person during the 2008 calendar year, the domestic production of which is attributable to the taxpayer.
Section 45K(a) provides for a credit for producing fuel from a nonconventional source, measured in barrel-of-oil equivalent of qualified fuel, the production of which is attributable to the taxpayer and is sold by the taxpayer to an unrelated person during the taxable year. For calendar year 2008, the credit is available only for coke or coke gas. The credit amount for coke or coke gas is equal to the product of $3.00 and the appropriate inflation adjustment factor.
Section 45K(g)(2)(B) provides that in determining the amount of credit allowable to coke or coke gas sold after 2005, the credit shall be computed by substituting “2004” for “1979.” Accordingly, for purposes of § 45K(g), the inflation adjustment factor for a calendar year is a fraction the numerator of which is the GNP implicit price deflator for the calendar year and the denominator of which is the GNP implicit price deflator for calendar year 2004.
Section 45K(g)(2)(D) provides that the phase-out of the credit under § 45K(b)(1) does not apply in the case of facilities producing coke or coke gas.
The reference price for calendar year 2008 is $94.03.
The inflation adjustment factor for calendar year 2008 is 1.1183. The nonconventional source fuel credit is $3.36 per barrel-of-oil equivalent ($3.00 x 1.1183).
The principal author of this notice is Jennifer C. Bernardini of the Office of Associate Chief Counsel (Passthroughs & Special Industries). For further information regarding this notice, contact Jennifer C. Bernardini at (202) 622-3110 (not a toll-free call).
This notice solicits applications for allocations of the present total national bond volume limitation authority (“volume cap”) of $2.4 billion to issue new clean renewable energy bonds (“New CREBs”) under § 54C(a) of the Internal Revenue Code (the “Code”) to finance certain qualified renewable energy facilities described in § 45(d) of the Code (also referred to in this notice as a qualified “project” or “projects”). This notice also provides related guidance on the following: (1) eligibility requirements that a project must meet to be considered for a volume cap allocation; (2) application requirements and the application form for requests for volume cap allocations; (3) the method that the Internal Revenue Service (“IRS”) and the Treasury Department will use to allocate the volume cap; and (4) certain aspects of the applicable law and interim guidance in this area.
Applications for New CREB volume cap allocations pursuant to this notice must be filed in accordance with this notice by the following application deadline: August 4, 2009.
This notice will use the term “CREBs” for clean renewable energy bonds issued under § 54 and the term “New CREBs” for new clean renewable energy bonds issued under § 54C. To the extent that this notice refers generally to the clean renewable energy bond program, the term “CREB program” will be used.
Section 1303 of the Energy Tax Incentives Act of 2005, Pub. L. No. 109-58, 119 Stat. 594 (2005), added § 54 to the Code. Section 54 originally provided for a total national volume cap of $800 million for CREBs to finance eligible clean renewable energy projects and delegated to the Secretary the authority to allocate that volume cap, subject to the constraint that the Secretary could allocate no more than $500 million of that volume cap to qualified borrowers that were governmental bodies (with the balance to be allocated to qualified borrowers which were cooperative electric companies). Section 54 originally required that CREBs had to be issued by an expiration date of December 31, 2007.
Section 202 of the Tax Relief and Health Care Act of 2006, Pub. L. No. 109-432, 120 Stat. 2922 (2006) (the “2006 Act”), amended § 54 in three respects. First, the 2006 Act increased the total national bond volume cap for CREBs from $800 million to $1.2 billion. Second, the 2006 Act extended the expiration date for the issuance of CREBs under the total authorized national volume cap of $1.2 billion from December 31, 2007, to December 31, 2008. Third, the 2006 Act increased the maximum allocations or reallocations to qualified borrowers which are governmental bodies from $500 million to $750 million (with the balance to be allocated to cooperative electric companies). In 2007, the IRS completed the allocation with respect to the volume cap under § 54 of the Code, as amended.
Section 15316 of the Food, Conservation, and Energy Act of 2008, Pub. L. No. 110-246, 122 Stat. 1651 (2008) (the “2008 Food Act”), added new § 54A to the Code. Section 54A provides certain general program requirements and operating rules for qualified tax credit bonds. Section 54A(a) provides that a taxpayer that holds a qualified tax credit bond on one or more credit allowance dates of the bond occurring during any taxable year is allowed as a credit against Federal income tax for the taxable year an amount equal to the sum of the credits determined under § 54A(b) with respect to such dates.
Section 107 of the Energy Improvement and Extension Act of 2008, Division B of Pub. L. No. 110-343, 122 Stat. 3765 (2008) (the “2008 Energy Act”) (the 2008 Food Act and the 2008 Energy Act are referred to collectively as the “2008 Acts”), added new § 54C to the Code to provide for a new national volume cap of $800 million for New CREBs to finance qualified renewable energy facilities. Section 107(b) of the 2008 Energy Act amended § 54A(d)(1) of the Code to provide that the term qualified tax credit bond, in part, means a New CREB that is part of an issue that meets the requirements of § 54A(d)(2), (3), (4), (5), and (6) regarding expenditures of bond proceeds, information reporting, arbitrage, maturity limitations, and prohibitions on financial conflicts of interest, respectively. Section 107(d) of the 2008 Energy Act provides that amendments to the Code made by § 107 of the 2008 Energy Act apply to obligations issued after October 3, 2008.
Section 1111 of Title I of Division B of the American Recovery and Reinvestment Act of 2009, Pub. L. No. 111-5, 123 Stat. 115 (2009) (the “2009 Act”), increased the national bond volume cap for New CREBs by $1.6 billion.
Section 107(c) of the 2008 Energy Act extends the expiration date for the issuance of CREBs under authority previously allocated by the IRS pursuant to § 54 of the Code from December 31, 2008, to December 31, 2009. In addition to providing for authority to issue New CREBs, the 2008 Acts amended certain provisions and requirements applicable to CREBs with respect to New CREBs authorized under §§ 54A and 54C of the Code. These amended requirements include: (1) requiring that 100 percent of the “available project proceeds” (as defined in § 54A(e)(4)) be used for capital expenditures incurred for one or more qualified renewable energy facilities; (2) reducing the amount of annual CREB credit under § 54C to 70 percent of the amount determined under the general rules of § 54A(b); (3) providing that not more than one-third of the national volume cap of $800 million may be allocated to qualified projects owned by each of three types of qualified owners, including public power providers, governmental bodies, and cooperative electric companies, respectively; (4) allowing unrestricted investments of available project proceeds during a prescribed three-year spending period and, subject to certain restrictions, allowing investments of certain sinking funds expected to be used to repay the CREBs within certain limitations; (5) permitting credit “stripping” or separation of the ownership of a qualified tax credit bond, including a New CREB, and the entitlement to the credit under § 54A with respect to a qualified tax credit bond under regulations to be promulgated by the Secretary; and (6) omitting the requirement that the New CREBs be repaid in equal annual installments.
Section 54C(a) provides that a “new clean renewable energy bond” or New CREB means any bond issued as part of an issue if: (1) 100 percent of the available project proceeds of such issue are to be used for capital expenditures incurred by qualified owners, including governmental bodies, public power providers, or cooperative electric companies, for one or more qualified renewable energy facilities; (2) the bond is issued by a qualified issuer; and (3) the issuer designates such bond for purposes of this section.
Section 54C(b) provides that the annual credit amount under § 54A(b) with respect to any New CREB issued under § 54C shall be 70 percent of the amount so determined without regard to § 54C(b).
Section 54C(d)(6) defines a “qualified issuer” as: (1) a public power provider; (2) a cooperative electric company; (3) a governmental body; (4) a clean renewable energy bond lender; or (5) a not-for-profit electric utility that has received a loan or loan guarantee under the Rural Electrification Act. Section 54C(d)(2) provides that the term “public power provider” means a State utility with a service obligation, as such terms are defined in § 217 of the Federal Power Act (as in effect on the date of the enactment of this paragraph). Section 54C(d)(3) provides that the term “governmental body” means any State (including the District of Columbia and any possession of the United States) or Indian tribal government, or any political subdivision thereof. Section 54C(d)(4) provides that the term “cooperative electric company” means a mutual or cooperative electric company described in § 501(c)(12) or § 1381(a)(2)(C). Section 54C(d)(5) provides that the term “clean renewable energy bond lender” means a lender that is a cooperative that is owned by, or has outstanding loans to, 100 or more cooperative electric companies and is in existence on February 1, 2002, and shall include any affiliated entity controlled by such lender.
Section 54C(d)(1) defines the term “qualified renewable energy facility” to mean any of the following qualified facilities (as determined under § 45(d) without regard to paragraphs (8) and (10) thereof and to any placed in service date) owned by a public power provider, a governmental body, or a cooperative electric company: (1) a wind facility under § 45(d)(1); (2) a closed-loop biomass facility under § 45(d)(2); (3) an open-loop biomass facility under § 45(d)(3); (4) a geothermal or solar energy facility under § 45(d)(4); (5) a small irrigation power facility under § 45(d)(5); (6) a landfill gas facility under § 45(d)(6); (7) a trash combustion facility under § 45(d)(7); (8) a qualified hydropower facility under § 45(d)(9); and (9) a marine and hydrokinetic renewable energy facility under § 45(d)(11).
Section 54C(c) provides that the national bond volume cap for New CREBs is $2.4 billion. Section 54C(c)(2) provides that the Secretary shall allocate no more than one third of the volume cap to qualified projects owned by public power providers, governmental bodies, and cooperative electric companies, respectively. Section 54C(c)(3)(A) provides that with respect to public power providers, after the Secretary identifies the qualified projects of public power providers that are appropriate for receiving an allocation of the CREB volume cap, the Secretary shall, to the maximum extent practicable, make allocations among such projects in such manner that the amount allocated to each such project bears the same ratio to the cost of such project as the portion of the CREB volume cap that may be allocated to public power providers bears to the cost of all such projects. Section 54C(c)(3)(B) provides that with respect to governmental bodies and cooperative electric companies, the Secretary shall make allocations of the respective CREB volume caps among qualified projects of governmental bodies and cooperative electric companies in such manner as the Secretary determines appropriate.
Each application for an allocation of the New CREBs volume cap under § 54C (“Application”) must be prepared and submitted in accordance with this section. In order for an Application to comply with this section, among other things, the Application must be prepared in substantially the form attached to this notice as Appendix A, subject to such minor changes or variations as the IRS and the Treasury Department may approve in their discretion. This notice, including Appendix A, may be found on the IRS web site at http://www.irs.gov/taxexemptbond/index.html or http://www.irs.gov/pub/irs-drop/. By submitting an Application, the applicant agrees to comply with the requirements of this notice.
a. Qualified issuer. An Application must be submitted by a qualified issuer within the meaning of § 54C(d)(6). A “qualified issuer” is: (1) a public power provider (as defined in § 54C(d)(2)); (2) a cooperative electric company (as defined in § 54C(d)(4)); (3) a governmental body (as defined in § 54C(d)(3)); (4) a New CREB lender (as defined in § 54C(d)(5)); or (5) a not-for-profit electric utility that has received a loan or loan guarantee under the Rural Electrification Act. An Application must identify the qualified issuer (including the qualified issuer’s Federal tax identification number) and must demonstrate that the entity constitutes a qualified issuer within the meaning of § 54C(d)(6).
b. Signatures. An Application must be signed and dated by, and must include the printed name and title of, an authorized official of the qualified issuer. For purposes of this notice, the term “authorized official of the qualified issuer” means an officer, board member, employee, or other official of the qualified issuer who is duly authorized to execute legal documents on behalf of the qualified issuer in connection with incurring debt of the qualified issuer ( e.g. , a mayor, chairperson of a city council, chairperson of a board of directors, county or city administrator or manager, chief executive officer or chief financial officer), similar to the kind of duly authorized official of an issuer who would be authorized to execute documents in connection with an issuer’s declaration of official intent to reimburse expenditures from the proceeds of a borrowing under § 1.150-2(e), Income Tax Regs.
c. Contact person. An Application must designate one or more persons with knowledge regarding the project that the qualified issuer duly authorizes to discuss with the IRS any information relating to the Application. The designation must include the designee’s name, title, telephone number, fax number, and mailing address. If a designee is not an official or officer of the issuer, the Application must include an executed Form 8821 (Taxpayer Information Authorization), authorizing the disclosure of taxpayer information specifically relating to the Application to the designee.
d. Addresses. An Application must be submitted by hard copy in duplicate accompanied by a copy of the Application in electronic format on compact disc (“CD”) by mail to the IRS, TEB CREBs Allocations, 1122 Town & Country Commons, St. Louis, Missouri 63017.
e. Due date. An Application must be filed with the IRS on or before the Application deadline of August 4, 2009.
f. Project description. Each Application must contain the information required by this subsection f.
(i) Qualified owner. Each Application must identify the public power provider, governmental body, or cooperative electric company expected to own the qualified renewable energy facility. A “public power provider” is a State utility with a service obligation, as such terms are defined in § 217 of the Federal Power Act (as in effect on October 3, 2008). A “governmental body” is any State or Indian Tribal government, or any political subdivision thereof (within the meaning of § 103 of the Code). A “cooperative electric company” is a mutual or cooperative electric company described in §§ 501(c)(12) or 1381(a)(2)(C) of the Code. The Application must demonstrate that the entity is a public power provider, governmental body, or cooperative electric company within the meaning of § 54C(d)(2), (3), and (4), respectively.
(ii) Qualified project. Each Application must describe in reasonable detail the qualified renewable energy facility or facilities constituting the project to be financed with the proceeds of the New CREBs. The Application must demonstrate that each project will constitute a “qualified renewable energy facility” under § 54C(d)(1). The Application must indicate the expected date that the acquisition and construction of each project will commence and the expected date that each project will be placed in service.
The Application must contain a certification by an independent, licensed engineer that each project will meet the requirements for a “qualified facility” under § 45(d) (but without regard to § 45(d)(8) and (10) and to any placed in service date), and that the project will be technically viable and will produce electricity.
If the project is a qualified hydropower facility under § 45(d)(9) producing incremental hydropower production (as defined under § 45(c)(8)(B)), then the certification also must state that the project consists only of efficiency improvements or additions to capacity that produce additional production as described in § 45(c)(8)(B) based on a methodology that would meet Federal Energy Regulatory Commission (FERC) standards. If the project is a qualified hydropower facility under § 45(d)(9) for qualified hydropower production at a nonhydroelectric dam under § 45(c)(8)(C), then the certification also must state that: (i) the facility, when constructed, will meet FERC licensing requirements and other applicable environmental, licensing and regulatory requirements; and (ii) the facility will be operated so that the water surface elevation at any given location and time that would have occurred in the absence of the hydroelectric project is maintained, subject to any license requirements imposed under applicable law that change the water surface elevation for the purpose of improving environmental quality of the affected waterway.
(iii) Prior allocations and related projects. Each Application must describe the amount of CREB volume cap previously allocated to each project under § 54 of the Code described in the Application and to any “related projects.” For purposes of this notice and the Application, the term “related projects” means projects that are owned by the same entity, or a “related party” as defined in § 1.150-1(b), that are of the same type under § 45(d), located on the same site, and integrated, interconnected, or directly or indirectly dependent on each other, based on all the facts and circumstances (“Related Projects”). For purposes of the allocation methodology described in section 6 of this notice, a facility the construction of which causes an increase in capacity (measured in units of power) of a project for which an Applicant previously received an allocation under § 54 will not be treated as a Related Project with respect to such project.
(iv) Location of project. The Application must indicate the location of the project.
(v) Regulatory approvals. The Application must describe a plan to obtain all necessary Federal, state and local regulatory approvals for the project.
g. Plan of financing. The Application must contain a reasonably detailed description of the plan of financing for the project, including all reasonably expected sources and uses of financing and other funds, the status of such financing, the anticipated date of bond issuance, the sources of security and repayment for the bonds, the aggregate face amount of bonds expected to be issued for the project, and the issuer’s reasonably expected schedule for spending proceeds of New CREBs. If the owner intends to use the proceeds of New CREBs to reimburse amounts paid with respect to a qualified project, the Application must demonstrate that the requirements under § 54A(d)(2)(D) will be met.
h. Dollar amount of allocation requested. The Application must specify the dollar amount of the volume cap requested for the project.
In order to provide the public with information on how the volume cap authorized by Congress has been allocated and to facilitate oversight of the CREB program, the IRS intends to publish the results of the allocation process. The information will be the most useful to the public if it identifies the specific allocations awarded. Pursuant to § 6103, consent is required in order for the IRS to disclose identifying information with respect to applicants awarded an allocation. Therefore, the IRS requests that each applicant submit with the Application a declaration consenting to the disclosure by the IRS of the name of the applicant (issuer), the name of the qualified renewable energy facility owner (if other than the issuer), the type and location of the qualified renewable energy facility that is the subject of the Application, and the amount of the New CREBs volume cap allocation for such facility in the event the facility receives an allocation. To provide valid consent, the declaration must be in the form set forth in Appendix B. An applicant is not required to provide a declaration consenting to disclosure in order to receive an allocation. The IRS will not publish identifying information with respect to applications that are not awarded an allocation of volume cap or while applications are pending.
a. In general. New CREB volume cap under § 54C will be allocated in accordance with this section for qualified projects for which Applications meeting the requirements of this notice have been filed with the IRS on or before the Application deadline set forth in this notice. For purposes of this section 6, all Related Projects, as defined in section 3(f)(iii), will be treated as a single project.
b. Allocation methodology for governmental bodies and cooperative electric companies. Up to one-third of the total national volume cap will be allocated to qualified projects owned by governmental bodies and up to an additional one-third of the total national volume cap will be allocated to qualified projects owned by cooperative electric companies. With respect to each such category of qualified owners, the full amount of volume cap requested will be allocated beginning with the project for which the smallest dollar amount of volume cap has been requested and continuing with the project for which the next-smallest dollar amount of volume cap has been requested until the total amount of volume cap set aside for that category of qualified owners has been exhausted or until all applications from that category of qualified owners have been granted, whichever occurs first. For this purpose, except for projects consisting of increases in capacity as described in section 3(f)(iii) of this notice, any amount of the CREB volume cap previously allocated to a project under § 54 (for CREBs) of the Code will be taken into account by increasing the amount requested for that project in the Application submitted pursuant to this notice by the amount previously allocated to the project. A project that causes an increase in capacity of an existing project or of a project that was previously allocated CREB volume cap under § 54 will be treated as a separate, new project for purposes of the allocation of New CREBs volume cap under this section.
c. Allocation methodology for public power providers. Up to one-third of the total national volume cap will be allocated to qualified projects owned by public power providers using the pro rata allocation method described below. The amount of volume cap allocated to a project for a public power provider will bear the same proportion to the national volume cap allocated to public power providers as the amount of volume cap requested for that project bears to the total amount of volume cap requested for all projects by public power providers.
Generally, any allocation of CREBs or New CREBs volume cap is valid for purposes of § 54 or § 54C, respectively, with respect to bonds issued pursuant to such allocation that are used to finance qualified renewable energy facilities described in the application. An allocation of CREBs or New CREBs under §§ 54 and 54C, respectively, is also valid notwithstanding insubstantial deviations with respect to the information submitted in the Application. Whether a deviation with respect to the information submitted in the Application is insubstantial is determined based on all the facts and circumstances using criteria similar to those used under § 5f.103-2(f)(2) and Prop. Reg. § 1.147(f)-1(b)(6), as amended from time to time, relating to the insubstantial deviation in the information required for public approval of an issue of governmental bonds under § 147(f) of the Code. Applications for approval of specific insubstantial deviations must be submitted by hard copy and in electronic format on compact disk (“CD”) by mail to IRS, TEB CREBs Determinations, 1122 Town & Country Commons, St. Louis, Missouri 63017. An application for approval of a specific insubstantial deviation must include (a) a detailed description of the proposed deviation, (b) facts establishing the continued technical viability of the project and that no other taxpayer or the Government will be prejudiced, (c) a copy of the allocation letter issued by the IRS, and (d) a declaration pursuant to section 4 of this notice signed by an authorized person in accordance with section 3.b. of this notice.
Section 54A(d)(3) requires issuers of New CREBs to submit information reporting returns to the IRS similar to those required to be submitted under § 149(e) for tax-exempt State or local governmental bonds. These information reporting returns are required to be submitted at the same time and in the same manner as those under § 149(e) on such forms as shall be prescribed by the IRS for such purpose. Pending further guidance from the IRS regarding the applicable forms to be used for such information reporting for New CREBs, in the case of an issue of New CREBs, the issuer must submit to the IRS an information return on Form 8038, Information Return for Tax-Exempt Private Activity Bond Issues, at the same time and in the same manner as required under § 149(e), with modifications as described below. Issuers of New CREBs should complete Part II of Form 8038 by checking the box on Line 20c (Other), writing “New Clean Renewable Energy Bonds” or “New CREBs” in the space provided for the bond description, and entering the issue price of the New CREBs in the Issue Price column. For purposes of this notice, the term “issue” has the meaning used for tax-exempt bond purposes in § 1.150-1(c).
Pending the promulgation and effective date of applicable future regulations or other published administrative guidance, taxpayers may rely on the interim guidance provided in this notice and, to the extent not inconsistent with §§ 54A and 54C and this notice, taxpayers may also rely on Notice 2006-7, 2006-1 C.B. 559 (March 6, 2006), and Notice 2007-26, 2007-1 C.B. 870 (April 2, 2007).
For New CREBs issued under § 54C, the credit rate is determined as of the date that the issue of New CREBs is sold. The New CREB credit rate is published for that date by the Bureau of Public Debt on its Internet site for State and Local Government Series securities at: https://www.treasurydirect.gov. The credit rates will be determined by the Treasury Department in accordance with Notice 2009-15, 2009-6 I.R.B. 449 (February 9, 2009).
The maximum term for a New CREB is determined under § 54A(d)(5) by using a discount rate equal to 110 percent of the long-term adjusted AFR, compounded semi-annually, for the month in which the bond is sold. For purposes of this notice, a bond is “sold” on the first day on which there is a binding written contract for the sale or exchange of the bond. The maximum term for a New CREB is published daily by the Bureau of Public Debt on its Internet site for State and Local Government Series securities at: https://www.treasurydirect.gov.
Section 54A(d)(4)(C) provides that an issue shall not be treated as failing to meet the arbitrage requirements of § 148 by reason of any fund which is expected to be used to repay the issue if: (i) the fund is funded at a rate not more rapid than equal annual installments; (ii) the fund is funded in a manner reasonably expected to result in an amount not greater than an amount necessary to repay the issue; and (iii) the yield on such fund is not greater than the discount rate determined under § 54A(d)(5)(B) (the “permitted sinking fund yield”).
The permitted sinking fund yield is determined under § 54A(d)(5)(B) by using a rate equal to 110 percent of the long-term adjusted AFR, compounded semi-annually, for the month in which the bond is sold. The IRS publishes the long-term adjusted AFR, compounded semi-annually, each month in a revenue ruling published in the Internal Revenue Bulletin. The Bureau of Public Debt publishes the permitted sinking fund yield for each month on its Internet site for State and Local Government Series securities at: https://www.treasurydirect.gov.
Joint ownership of qualified renewable energy facilities financed with New CREBs will be recognized in a manner similar to the recognition of joint ownership of output projects under the private activity bond restrictions on tax-exempt bonds under § 141.
In determining whether all or a part of a facility will be eligible to be a qualified renewable energy facility for New CREBs purposes, allocation and accounting rules similar to those employed for mixed-use projects will be applied.
For purposes of the requirement under § 54C(a)(1) to use 100 percent of the available project proceeds of an issue of New CREBs for qualified costs to finance capital expenditures for qualified renewable energy facilities, available project proceeds used to finance a reserve, sinking, or replacement fund ( e.g. , a debt service reserve fund to secure the New CREBs), including a Qualified Tax Credit Bond sinking fund, will be treated as nonqualified costs. Except in limited circumstances involving reimbursements to which § 54A(d)(2)(D) applies, costs of acquiring existing facilities, including refinancing costs (as contrasted with costs of enhancements, repair, or rehabilitation of existing facilities), generally will be treated as nonqualified costs for purposes of the 100 percent use of proceeds test under § 54C(a)(1).
A qualified renewable energy facility under § 54C(d)(1) shall include a qualified facility under § 45(d)(6) without regard to the limitation under § 45(e)(9)(A) (which limitation disallows the renewable electricity production credit under § 45 for certain facilities which receive the nonconventional source production credit under § 45K), provided that the owner of the qualified renewable energy facility has not been allowed a credit under § 45K during any taxable year with respect to landfill gas to be used by the qualified renewable energy facility.
Cooperative electric companies under § 54C(d)(4) will be treated as “governmental persons” under § 1.141-1(b) for purposes of (1) applying the arbitrage investment restrictions under § 148, including the program investment definition under § 1.148-1(b), and (2) determining whether New CREBs are private activity bonds under § 141 in applying any particular arbitrage investment restriction that depends on whether bonds are private activity bonds.
An allocation of New CREBs volume cap is valid for 3 years after the date of the letter issuing the allocation (the “allocation date”). An allocation of unused volume cap will expire and revert back to the IRS on the first day following 3 years after the allocation date. Any bonds issued pursuant to such expired allocation will not be New CREBs for purposes of §§ 54A and 54C. Under a program to be announced, the IRS plans to reallocate any unallocated volume cap, and any allocated volume cap that has been relinquished or that has reverted to the IRS. For purposes of reallocation, relinquished volume cap means volume cap previously allocated to a qualified issuer to finance a qualified project for which the IRS has received written notice from a duly authorized official of the qualified issuer stating that the issuer will not issue CREBs pursuant to the allocation.
To facilitate reallocation of the unused New CREBs volume cap, a qualified issuer that determines it will not issue bonds within 3 years from the allocation date must notify the IRS of such determination in writing within 90 days after the determination is made. If no determination is made, a qualified issuer that fails to issue bonds pursuant to its allocation within the 3-year period must notify the IRS of such failure within 90 days after the end of the 3-year period. The notification must include a copy of the original allocation letter and must be submitted by hard copy and in electronic format on compact disk (“CD”) by mail to the IRS, TEB CREBs Forfeiture, 1122 Town & Country Commons, St. Louis, Missouri 63017.
Consistent with allocation requirements under § 54C(c)(2), any relinquished or reverted New CREB volume cap under § 54C will be reallocated only for a qualified project owned or to be owned by the same category of qualified owner as the owner that originally received the relinquished or reverted allocation. The IRS does not plan to reallocate any unused, relinquished, or unallocated portion of the CREB volume cap authorized under § 54 of the Code.
To the extent not amended by the 2008 Acts and 2009 Act, references to § 54 of the Code under Notice 2006-7 and Notice 2007-26 apply as if the references were to corresponding provisions of §§ 54A and 54C.
The principal authors of this notice are Zoran Stojanovic and Timothy L. Jones of the Office of Associate Chief Counsel (Financial Institutions and Products). However, other personnel from the IRS and the Treasury Department participated in its development. For further information regarding this notice and the Application, contact Janae Lemley at (636) 255-1202 (not a toll-free call).
(i) a “clean renewable energy lender” that is a cooperative owned by, or has outstanding loans to, 100 or more cooperative electrical companies and was in existence on February 1, 2002, or is an affiliate that is owned by such a lender, as demonstrated by the attached documents included as Exhibit D.
(ii) a “cooperative electric company” that is a mutual or cooperative electric company described in section 501(c)(12) or section 1381(a)(2)(C), as demonstrated by the attached documents included as Exhibit D, including a copy of the determination letter previously obtained from the IRS, if any (or other relevant documents).
(iv) a “public power provider” that is a State utility with a service obligation, as such terms are defined in section 217 of the Federal Power Act (as in effect on October 3, 2008), as demonstrated by the attached documents included as Exhibit D.
(v) a “not-for-profit electric utility which has received a loan or loan guarantee under the Rural Electrification Act,” as demonstrated by the attached documents included as Exhibit D. For this purpose, supporting documents should include copies of the articles of incorporation and bylaws of the not-for-profit electric utility, and of the loan or loan guarantee documents.
(i) a qualified owner under section 54C(d)(4) that is a mutual or cooperative electric company under section 501(c)(12) or section 1381(a)(2)(C), as demonstrated by the attached documents included as Exhibit D, including a copy of the determination letter previously obtained from the IRS, if any (or other relevant documents).
(iii) a qualified owner under section 54C(d)(2) that is a “public power provider” and is a State utility with a service obligation, as such terms are defined in section 217 of the Federal Power Act (as in effect on October 3, 2008), as demonstrated by the attached documents included as Exhibit D. For this purpose, supporting documents should include copies of the articles of incorporation and bylaws of the electric utility.
5. Name of Qualified Renewable Energy Facility.
(9) a marine and hydrokinetic renewable energy facility — a facility producing electricity from marine and hydrokinetic renewable energy (as defined in section 45(c)) with a nameplate capacity of at least 150 kilowatts.
8. Construction Commencement Date and Placed in Service Date. The Borrower begun or expects to begin the construction, installation and equipping of the Project on . The Borrower expects that the Project will be placed into service on or before .
9. Independent Engineer’s Certificate: (If the Application is for more than one Project, a separate certificate must be included for each Project.) Attached as Exhibit B hereto is a certification by an independent, licensed engineer to the effect that the Project will be a “qualified renewable energy facility” within the meaning of section 54C(d)(1) and a “qualified facility” within the meaning of section 45(d) of the Code (without regard to section 45(d)(8) and (10) of the Code and to any placed in service date), and that the project is technically viable and will produce electricity.
b. that is a nonhydroelectric dam under section 45(c)(8)(C), then the engineering certificate also must state that the facility, when constructed, (a) will meet FERC licensing requirements and other applicable environmental, licensing and regulatory requirements, and (b) will be operated so that the water surface elevation at any given location and time that would have occurred in the absence of the hydroelectric project is maintained, subject to any license requirements imposed under applicable law that change the water surface elevation for the purpose of improving environmental quality of the affected waterway.
(Include as appropriate) The contact person is not an authorized official or officer of the Issuer and a properly executed Form 8821 is included with this Application that authorizes the disclosure by the IRS of information that relates to this Application and the Project(s) described above to the contact person.
13. Plan of Financing. Include a reasonably detailed description of the plan of financing for the Project, including all reasonably expected sources and uses of financing and other funds, the status of such financing, the anticipated date of bond issuance, the sources of security and repayment for the bonds, the aggregate face amount of bonds expected to be issued for the Project, and the issuer’s reasonably expected schedule for spending proceeds of New CREBs. Attached as Exhibit C is a plan of financing for the Project.
15. Dollar Amount of Allocation Requested for the Project. To finance the Project, the Applicant hereby requests a New CREB allocation in the amount of $.
17. Other Allocation Requests for Related Projects to the Project. Included below are descriptions of other projects that are Related Projects (as defined in paragraph 16 above) to the Project for which the applicant or other entities are applying for a CREB volume cap allocation. With respect to an applicant on a Related Project other than the Applicant, set forth below are the names, addresses, contact persons, and telephone numbers for any such applicant.
I hereby certify that I am an authorized officer or official of the Applicant and am duly authorized to execute legal documents on behalf of the Applicant in connection with incurring debt and that I am duly authorized to execute legal documents on behalf of the Application in making this Application. Under penalties of perjury, I declare that (i) I have knowledge of the relevant facts and circumstances relating to this Application and the Project(s), (ii) I have examined this Application, and (iii) to the best of my knowledge and belief, all of the facts contained in this Application are true, correct and complete.
1. I am an independent, licensed engineer, duly qualified to practice the profession of engineering under the laws of the State of and I am not an officer or employee of the Issuer or the Borrower.
2. I have reviewed the Application for a New CREBs volume cap allocation (including the exhibits thereto) of the Issuer of even date herewith describing the Project. To the best of my knowledge, information, and belief, the Project will meet the requirements to be a “qualified renewable energy facility” under section 54C(d)(1) of the Code and correspondingly a “qualified facility” under section 45(d) of the Code (determined without regard to section 45(d)(8) and (10) of the Code and without regard to any placed in service date).
3. To the best of my knowledge, information and belief, the Project is technically viable and, when constructed, will produce electricity.
IN WITNESS WHEREOF, I have hereunto affixed my official signature on the date of this Engineer’s Certificate.
In the event that the Application of [(Insert name of applicant here): ] (the “Applicant”) for an allocation of authority to issue new clean renewable energy bonds (“New CREBs”) under section 54C of the Internal Revenue Code is approved, the undersigned authorized representative of the Applicant hereby consents to the disclosure by the Internal Revenue Service through publication of a notice in the Internal Revenue Bulletin or a press release of the name of applicant (issuer), the name of the qualified renewable energy facility owner (if other than the issuer), the type and location of the facility that is the subject of the Application, and the amount of the allocation, if any, of volume cap authority to issue New CREBs for such facility. The undersigned understands that this information might be published, broadcast, discussed or otherwise disseminated in the public record.
This authorization shall become effective upon the execution thereof. Except to the extent disclosure is authorized herein, the returns and return information of the undersigned taxpayer are confidential and are protected by law under the Internal Revenue Code.
I certify that I have the authority to execute this consent to disclose on behalf of the taxpayer named below.
Note: Treasury Regulations require that the Internal Revenue Service must receive this consent within 60 days after it is signed and dated.
This notice extends the transitional rule set forth in Section 2(c) of Notice 2008-110, 2008-51 I.R.B. 1298, to September 30, 2009.
(1) Sections 40A, 6426, and 6427(e) of the Internal Revenue Code (Code) provide tax incentives for the production, sale, and use of biodiesel and biodiesel mixtures. Section 40A(d)(1) of the Code defines biodiesel as monoalkyl esters of long chain fatty acids derived from plant or animal matter which meet (i) the registration requirements for fuels and fuel additives established by the Environmental Protection Agency under section 211 of the Clean Air Act (42 U.S.C. 7545), and (ii) the requirements of ASTM D6751.
(2) Effective on October 13, 2008, the American Society of Testing and Materials revised the requirements of ASTM D6751 by adding a cold soak filtration test for biodiesel (the October 13, 2008 revision).
(3) Section 2(c) of Notice 2008-110 provides a transitional rule to address this new ASTM D6751 requirement. Under the transitional rule, if a taxpayer’s claim for biodiesel incentives is related to the production, sale, or use of biodiesel or a biodiesel mixture before April 1, 2009, a certification that the biodiesel covered by the claim meets the requirements of ASTM 6751 is valid if the biodiesel meets the requirements of ASTM 6751 as in effect either before or after the October 13, 2008, revision. However, if the claim is related to the production, sale, or use on or after April 1, 2009, the certification of the biodiesel covered by the claim is valid only if the biodiesel meets the requirements of ASTM 6751 as in effect after the October 13, 2008 revision.
This guidance extends the transitional rule set forth in Section 2(c) of Notice 2008-110 through September 30, 2009. Therefore, if a taxpayer’s claim for biodiesel incentives relates to the production, sale, or use of biodiesel or a biodiesel mixture and the production, sale, or use occurs before October 1, 2009, a certification that the biodiesel covered by the claim meets the requirements of ASTM D6751 is valid if the biodiesel meets the requirements of ASTM D6751 as in effect either before or after the October 13, 2008 revision that added the cold soak filtration test for biodiesel. If a claim relates to the production, sale, or use of biodiesel or a biodiesel mixture and the production, sale, or use occurs on or after October 1, 2009, a certification that the biodiesel covered by the claim meets the requirements of ASTM D6751 is valid only if the biodiesel satisfies the requirements of ASTM D6751 as in effect after the October 13, 2008, revision that added the cold soak filtration test for biodiesel.
The principal author of this notice is Charles J. Langley, Jr. of the Office of Associate Chief Counsel (Passthroughs and Special Industries). For further information regarding this notice, contact Charles J. Langley, Jr. at (202) 622-3130 (not a toll-free call).
This notice sets forth the maximum face amount of qualified school construction bonds (“QSCBs”) allocated by the Department of the Treasury (Treasury) to each State and large local educational agency for 2009 under § 54F(d) of the Internal Revenue Code (Code). For this purpose, § 54A(e)(3) provides that the term “State” includes the District of Columbia and any possession of the United States. This notice also provides interim guidance for QSCBs.
Section 1521(a) of Title I of Division B of the American Recovery and Reinvestment Act of 2009, Pub. L. No. 111-5, 123 Stat. 115 (2009) (“Act”) added new § 54F to the Code, setting forth program provisions for QSCBs. The Act amended § 54A(d)(1) to provide that the term “qualified tax credit bond” means, in part, a qualified school construction bond that is part of an issue that meets the requirements of §§ 54A(d)(2), (3), (4), (5), and (6) regarding expenditures of bond proceeds, information reporting, arbitrage, maturity limitations, and prohibitions against financial conflicts of interest, respectively. The Act also amended § 54A(d)(2) to provide that, for purposes of § 54A(d)(2)(C), the term “qualified purpose” for a QSCB means a purpose specified in § 54F(a)(1) described below.
The Act added § 54F(c) to provide a national bond limitation authorization for QSCBs of $11 billion for 2009 and $11 billion for 2010 (each, a “calendar year volume cap” and together “volume cap”). Section 54F(c)(3) provides that except for carryforwards provided for in § 54F(e), there is no calendar year volume cap for calendar years after 2010.
Section 54F(d)1) provides that, except as provided in § 54F(d)(2)(C), the calendar year volume cap shall be allocated by the Treasury among the States in proportion to the respective amounts each State is eligible to receive under § 1124 of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 6333) (the “Education Act”) for the most recent fiscal year ending before the calendar year. Section 54F(d)(1) further provides that the calendar year volume cap amount allocated to each State is to be further allocated by the State to the issuers within the State.
Section 54F(d)(2)(D) provides the amount of calendar year volume cap allocated to a large local educational agency for any calendar year may be reallocated by such agency to the State in which such agency is located for the calendar year. Section 54F(d)(2)(D) further provides that any amount reallocated to a State by a large local educational agency may be further allocated by the State to issuers within the State.
Section 54F(d)(4) provides for additional calendar year volume cap amounts of $200 million for calendar year 2009 and $200 million for calendar year 2010 (each an “Indian tribal government calendar year volume cap” and together the “Indian tribal government volume cap”) to be allocated by the Secretary of Interior for purposes of the construction, rehabilitation, and repair of schools funded by the Bureau of Indian Affairs. This $ 200 million Indian tribal government calendar year volume cap allocated to the Indian tribal governments does not reduce the $11 billion calendar year volume cap allocated to the States and the large local educational agencies. Section 54F(d)(4) further provides that, for amounts of Indian tribal government volume cap allocated, Indian tribal governments (as defined in § 7701(a)(40)) are to be treated as qualified issuers.
Section 54F(e) provides that if for any calendar year, the amount of calendar year volume cap allocated under § 54(d) to any State or the amount of Indian tribal government calendar year volume cap allocated to an Indian tribal government exceeds the amount of QSCBs issued during the calendar year pursuant to such allocation, the amount of such excess shall to be carried over to the following calendar year and shall increase the calendar year volume cap or the Indian tribal government calendar year volume cap allocation for the following calendar year for the State or Indian tribal government.
For QSCBs issued under §§ 54A and 54F, the maximum maturity and the credit rate are determined as of the date that there is a binding, written contract for the sale or exchange of the bond. The applicable maximum maturity, the discount rate for determining the maturity, and QSCB credit rate are published for that date by the Bureau of Public Debt on its Internet site for State and Local Government Series securities at: https://www.treasurydirect.gov. For further information regarding the methodology and procedures that the Treasury uses to determine these credit rates, see Notice 2009-15, 2009-6 I.R.B. 449 (February 9, 2009).
Section 54A(d)(4)(C) provides that an issue shall not be treated as failing to meet the requirements of § 148 by reason of any fund that is expected to be used to repay the issue if: (i) the fund is funded at a rate not more rapid than equal annual installments; (ii) the fund is funded in a manner reasonably expected to result in an amount not greater than an amount necessary to repay the issue; and (iii) the yield on such fund is not greater than the discount rate determined under § 54A(d)(5)(B) (the “permitted sinking fund yield”).
The permitted sinking fund yield is determined under § 54A(d)(5)(B) by using a rate equal to 110 percent of the long-term adjusted federal rate (“AFR”), compounded semiannually, for the month in which the bond is sold. The IRS publishes the long-term adjusted AFR, compounded semiannually, each month in a revenue ruling published in the Internal Revenue Bulletin. The Bureau of Public Debt publishes the permitted sinking fund yield for each month on its Internet site for State and Local Government Series securities at: https://www.treasurydirect.gov.
Section 54A(d)(3) requires issuers of QSCBs to submit information reporting returns to the IRS similar to those required to be submitted under § 149(e) for tax-exempt State or local governmental bonds. These information reporting returns are required to be submitted at the same time and in the same manner as those under § 149(e) on such forms as shall be prescribed by the IRS for such purpose. Pending further guidance from the IRS regarding the applicable forms to be used for such information reporting for QSCBs, in the case of an issue of QSCBs, the issuer must submit to the IRS an information return on Form 8038, at the same time and in the same manner as required under § 149(e), with modifications as described below. Issuers of QSCBs should complete Part II of Form 8038 by checking Line 20c (Other), writing “QSCBs” in the space provided for the bond description, and entering the issue price of the QSCBs in the Issue Price column on Line 20c. For purposes of this notice, the term “issue” has the meaning used for tax-exempt bond purposes in § 1.150-1(c) of the Income Tax Regulations.
For purposes of the § 54F(a)(1) requirement that all available proceeds of QSCBs be spent on construction, rehabilitation, or repair of a public school facility or for the acquisition of land on which such a facility is to be constructed with part of the proceeds of such issue, eligible expenditures include, among other things, expenditures for costs of acquisition of equipment to be used in such portion or portions of the public school facility that is being constructed, rehabilitated, or repaired with the proceeds of QSCBs.
Eligible issuers of QSCBs include States, political subdivisions as defined for purposes of § 103, large local educational agencies that are State or local governmental entities, and entities empowered to issue bonds on behalf of any such entity under rules similar to those for determining whether a bond issued on behalf of a State or political subdivision constitutes an obligation of that State or political subdivision for purposes of § 103 and § 1.103-1(b), Income Tax Regs. Further, eligible issuers include otherwise-eligible issuers in conduit financing issues (as defined in § 1.150-1(b), Income Tax Regs.) An eligible issuer may issue QSCBs based on a volume cap allocation received by the eligible issuer itself or by a conduit borrower or other ultimate beneficiary of the issue of QSCBs. In all events, the eligible costs of public school facilities financed with the proceeds of an issue of QSCBs under § 54F(a)(1) must relate to public school facilities that are located within both the jurisdiction of the issuer of the QSCBs and the jurisdiction of the authorized entity that allocates volume cap to the issue of QSCBs for the financing of those public school facilities. Authorized entities that may allocate volume cap consist of those entities that receive volume cap allocations under § 54F(d). Thus, for example, a large local educational agency that has received a volume cap allocation under § 54F(d)(2) either may issue QSCBs with respect to that volume cap itself or it may be a beneficiary of proceeds of an issue issued by another eligible issuer with respect to that volume cap, provided that, in either event, the public school facilities to be financed with the proceeds of the issue of QSCBs are located within both the jurisdiction of the issuer of the QSCBs and the jurisdiction of the large local educational agency that allocated volume cap to the issue of QSCBs for the financing of those public school facilities.
The 2009 national bond volume cap for QSCBs is $11 billion. This amount is allocated among the States and large local educational agencies as set forth in this notice. The 2009 allocations to 100 large local educational agencies reflects the determination by the Secretary of Education to decline to select 25 additional large local educational agencies under § 54F(d)(2)(E)(ii) for such year. The first chart below allocates $6.6 billion of the $11 billion 2009 calendar year volume cap for QSCBs to States to be further allocated to the issuers within such State. The second chart below allocates $4.4 billion of the $11 billion 2009 calendar year volume cap for QSCBs to large local educational agencies.
The allocations of the national bond volume cap for QSCBs in Section 4 are effective for QSCBs issued, pursuant to an allocation of 2009 calendar year volume cap, after February 17, 2009, and before January 1, 2010.
The Department of the Interior is exclusively responsible for making the allocations of the Indian tribal government volume cap and inquiries about the process and timing for those allocations of Indian tribal government volume cap should be directed to John Rever, Director, Office of Management Support Services, Bureau of Indian Affairs, at (703) 390-6314 or John.rever@bia.gov.
(E) Other contributions permitted in regulations.
.03 The question has arisen whether some of the payments that may be made to REMICs under the HAMP are “contributions” that are described in section 860G(d)(1) and, if so, whether they are covered by the exceptions in section 860G(d)(2).
If a payment is made to a REMIC under the HAMP, if the payment is described in section 860G(d)(1), and if the payment is not covered by any of the exceptions in section 860G(d)(2), then regulations to be issued by the Service and Treasury will provide an exception for that payment. The regulations are expected to be effective for payments made on or after March 4, 2009. Pending the issuance of further guidance, taxpayers may rely on this notice and, accordingly, any payment made to a REMIC under the HAMP will not be subject to the 100 percent tax set forth in section 860G(d)(1).
The principal author of this notice is Diana Imholtz of the Office of Associate Chief Counsel (Financial Institutions and Products). For further information regarding this notice, contact Ms. Imholtz at 202-622-3930 (not a toll-free call).
This revenue procedure describes the conditions under which modifications to certain mortgage loans will not cause the Internal Revenue Service (Service) to challenge the tax status of certain securitization vehicles that hold the loans or to assert that those modifications give rise to prohibited transactions.
This revenue procedure provides certainty in the current economic environment with respect to certain potential tax issues that may be implicated by loan modifications made pursuant to the Home Affordable Modification Program (“HAMP”), described below. No inference should be drawn about whether similar consequences would obtain if a transaction falls outside the limited scope of this revenue procedure. Furthermore, there should be no inference that, in the absence of this revenue procedure, transactions within its scope would have impaired the tax status of securitization vehicles or would have given rise to prohibited transactions.
.02 The HAMP includes detailed protocols for identifying borrowers at risk of default. As is more fully set forth in the program documents, the HAMP is intended to reach borrowers with high mortgage debt service compared to income and other indications of being at risk of default. Delinquency is not a requirement for eligibility. Rather, because loan modifications are more likely to succeed if they are made before a borrower misses a payment, the HAMP is also intended to reach borrowers for whom default is imminent despite the fact that those borrowers are current on their mortgage payments. In determining whether default is imminent for a particular borrower, the HAMP takes into account a broad range of information, including whether the borrower has had a change in circumstances that causes financial hardship, or is facing a recent or imminent increase in the monthly mortgage payment that would likely create a financial hardship.
.03 The HAMP applies both to loans that investors hold directly and to those that are held through securitization vehicles such as investment trusts and real estate mortgage investment conduits (REMICs).
.01 REMICs are widely used securitization vehicles for mortgages. REMICs are governed by sections 860A through 860G of the Internal Revenue Code.
.02 For an entity to qualify as a REMIC, all of the interests in the entity must consist of one or more classes of regular interests and a single class of residual interests, see section 860D(a), and those interests must be issued on the startup day, within the meaning of § 1.860G-2(k) of the Income Tax Regulations.
.03 A regular interest is one that is designated as a regular interest and whose terms are fixed on the startup day. Section 860G(a)(1). In addition, a regular interest must (1) unconditionally entitle the holder to receive a specified principal amount (or other similar amount), and (2) provide that interest payments, if any, at or before maturity are based on a fixed rate (or to the extent provided in regulations, at a variable rate).
.04 An interest issued after the startup day does not qualify as a REMIC regular interest.
.05 Under section 860D(a)(4), an entity qualifies as a REMIC only if, among other things, as of the close of the third month beginning after the startup day and at all times thereafter, substantially all of its assets consist of qualified mortgages and permitted investments. This asset test is satisfied if the entity owns no more than a de minimis amount of other assets. See § 1.860D-1(b)(3)(i). As a safe harbor, the amount of assets other than qualified mortgages and permitted investments is de minimis if the aggregate of the adjusted bases of those assets is less than one percent of the aggregate of the adjusted bases of all of the entity’s assets. § 1.860D-1(b)(3)(ii).
.06 With limited exceptions, a mortgage loan is not a qualified mortgage unless it is transferred to the REMIC on the startup day in exchange for regular or residual interests in the REMIC. See section 860G(a)(3)(A)(i).
.07 The legislative history of the REMIC provisions indicates that Congress intended the provisions to apply only to an entity that holds a substantially fixed pool of real estate mortgages and related assets and that “has no powers to vary the composition of its mortgage assets.” S. Rep. No. 99-313, 99th Cong., 2nd Sess. 791-92, 1986-3 (Vol. 3) C.B. 791-92.
.08 Section 1.1001-3(c)(1)(i) defines a “modification” of a debt instrument as any alteration, including any deletion or addition, in whole or in part, of a legal right or obligation of the issuer or holder of a debt instrument, whether the alteration is evidenced by an express agreement (oral or written), conduct of the parties, or otherwise. Section 1.1001-3(e) governs which modifications of debt instruments are “significant.” Under § 1.1001-3(b), for most federal income tax purposes, a significant modification produces a deemed exchange of the original debt instrument for a new debt instrument.
.09 Under § 1.860G-2(b), related rules apply to determine REMIC qualification. Except as specifically provided in § 1.860G-2(b)(3), if there is a significant modification of an obligation that is held by a REMIC, then the modified obligation is treated as one that was newly issued in exchange for the unmodified obligation that it replaced. See § 1.860G-2(b)(1). For this purpose, the rules in § 1.1001-3(e) determine whether a modification is “significant.” See § 1.860G-2(b)(2). Thus, even if an entity initially qualifies as a REMIC, one or more significant modifications of loans held by the entity may terminate the qualification if the modifications cause less than substantially all of the entity’s assets to be qualified mortgages.
.10 Certain loan modifications, however, are not significant for purposes of § 1.860G-2(b)(1), even if the modifications are significant under the rules in § 1.1001-3. In particular, under § 1.860G-2(b)(3)(i), if a change in the terms of an obligation is “occasioned by default or a reasonably foreseeable default,” the change is not a significant modification for purposes of § 1.860G-2(b)(1), regardless of the modification’s status under § 1.1001-3.
.11 Section 860F(a)(1) imposes a tax on REMICs equal to 100 percent of the net income derived from “prohibited transactions.” The disposition of a qualified mortgage is a prohibited transaction unless the “disposition [is] pursuant to—(i) the substitution of a qualified replacement mortgage for a qualified mortgage . . . , (ii) a disposition incident to the foreclosure, default, or imminent default of the mortgage, (iii) the bankruptcy or insolvency of the REMIC, or (iv) a qualified liquidation.” Section 860F(a)(2)(A).
.01 Section 301.7701-2(a) of the Procedure and Administration Regulations defines a “business entity” as any entity recognized for federal tax purposes (including an entity with a single owner that may be disregarded as an entity separate from its owner under § 301.7701-3) that is not properly classified as a trust under § 301.7701-4 or otherwise subject to special treatment under the Code.
.02 Section 301.7701-4(a) provides that an arrangement is treated as a trust if the purpose of the arrangement is to vest in trustees responsibility for the protection and conservation of property for beneficiaries who cannot share in the discharge of this responsibility and, therefore, are not associates in a joint enterprise for the conduct of business for profit.
.03 Section 301.7701-4(c) provides that an “investment” trust is not classified as a trust if there is a power under the trust agreement to vary the investment of the certificate holders.
This revenue procedure applies to a modification made pursuant to the HAMP of a mortgage loan that is held by a REMIC or by an investment trust.
.04 The Service will not challenge a securitization vehicle’s qualification as a REMIC on the grounds that the modifications result in a deemed reissuance of the REMIC regular interests.
For the treatment of mortgage loans modified pursuant to certain foreclosure prevention programs, see Rev. Proc. 2008-47, 2008-31 I.R.B. 272, and Rev. Proc. 2008-28, 2008-23 I.R.B. 1054.
This revenue procedure is effective for loan modifications on or after March 4, 2009.
The principal author of this revenue procedure is Diana Imholtz of the Office of Associate Chief Counsel (Financial Institutions and Products). For further information, contact Ms. Imholtz at (202) 622-3930 (not a toll-free call).
.01 This revenue procedure provides: (1) limitations on depreciation deductions for owners of passenger automobiles first placed in service by the taxpayer during calendar year 2009, including a separate table of limitations on depreciation deductions for trucks and vans; and (2) the amounts to be included in income by lessees of passenger automobiles first leased by the taxpayer during calendar year 2009, including a separate table of inclusion amounts for lessees of trucks and vans.
.02 The tables detailing these depreciation limitations and lessee inclusion amounts reflect the automobile price inflation adjustments required by § 280F(d)(7) of the Internal Revenue Code.
.01 For owners of passenger automobiles, § 280F(a) imposes dollar limitations on the depreciation deduction for the year that the passenger automobile is placed in service by the taxpayer and each succeeding year. Section 280F(d)(7) requires the amounts allowable as depreciation deductions to be increased by a price inflation adjustment amount for passenger automobiles placed in service after 1988. The method of calculating this price inflation amount for trucks and vans placed in service in or after calendar year 2003 uses a different CPI “automobile component” (the “new trucks” component) than that used in the price inflation amount calculation for other passenger automobiles (the “new cars” component), resulting in somewhat higher depreciation deductions for trucks and vans. This change reflects the higher rate of price inflation that trucks and vans have been subject to since 1988.
.02 Section 168(k)(1)(A) provides a 50 percent additional first year depreciation deduction for certain new property acquired by a taxpayer after December 31, 2007, and before January 1, 2010, if no written binding contract for the acquisition of the property existed before January 1, 2008. Section 168(k)(2)(F)(i) increases the first year depreciation allowed under § 280F(a)(1)(A) by $8,000 for passenger automobiles to which the 50 percent additional first year depreciation deduction applies.
.03 Section 168(k)(2)(D)(i) provides that the 50 percent additional first year depreciation deduction does not apply to any property required to be depreciated under the alternative depreciation system of § 168(g), including property described in § 280F(b)(1). Section 168(k)(2)(D)(iii) permits a taxpayer to elect to not claim the 50 percent additional first year depreciation deduction for any class of property. Section 168(k)(4) permits a corporation to elect to not claim the 50 percent additional first year depreciation deduction for all eligible qualified property (that is extension property or that is not extension property, as applicable) and instead to increase the business credit limitation under § 38(c) or the alternative minimum tax credit limitation under § 53(c). Accordingly, this revenue procedure provides tables for passenger automobiles for which the 50 percent additional depreciation deduction applies and tables for passenger automobiles for which the 50 percent additional first year depreciation deduction does not apply, including passenger automobiles in a class of property for which the taxpayer “elects out” of the 50 percent additional first year depreciation deduction or passenger automobiles that are eligible qualified property to which the § 168(k)(4) election applies.
.04 For leased passenger automobiles, § 280F(c) requires a reduction in the deduction allowed to the lessee of the passenger automobile. The reduction must be substantially equivalent to the limitations on the depreciation deductions imposed on owners of passenger automobiles. Under § 1.280F-7(a) of the Income Tax Regulations, this reduction requires a lessee to include in gross income an inclusion amount determined by applying a formula to the amount obtained from a table. One table applies to lessees of trucks and vans and another table applies to all other passenger automobiles. Each table shows inclusion amounts for a range of fair market values for each taxable year after the passenger automobile is first leased.
.01 The limitations on depreciation deductions in section 4.02(2) of this revenue procedure apply to passenger automobiles (other than leased passenger automobiles) that are placed in service by the taxpayer in calendar year 2009, and continue to apply for each taxable year that the passenger automobile remains in service.
.02 The tables in section 4.03 of this revenue procedure apply to leased passenger automobiles for which the lease term begins during calendar year 2009. Lessees of these passenger automobiles must use these tables to determine the inclusion amount for each taxable year during which the passenger automobile is leased. See Rev. Proc. 2002-14, 2002-1 C.B. 450, for passenger automobiles first leased before January 1, 2003, Rev. Proc. 2003-75, 2003-2 C.B. 1018, for passenger automobiles first leased during calendar year 2003, Rev. Proc. 2004-20, 2004-1 C.B. 642, for passenger automobiles first leased during calendar year 2004, Rev. Proc. 2005-13, 2005-1 C.B. 759, for passenger automobiles first leased during calendar year 2005, Rev. Proc. 2006-18, 2006-1 C.B. 645, for passenger automobiles first leased during calendar year 2006, Rev. Proc. 2007-30, 2007-1 C.B. 1104, for passenger automobiles first leased during calendar year 2007, and Rev. Proc. 2008-22, 2008-12 I.R.B. 658, for passenger automobiles first leased during calendar year 2008.
(1) Limitations on depreciation deductions for certain automobiles. The limitations on depreciation deductions for passenger automobiles placed in service by the taxpayer for the first time during calendar year 2009 are in Tables 1 through 4 in section 4.02(2) of this revenue procedure.
(2) Inclusions in income of lessees of passenger automobiles. A taxpayer first leasing a passenger automobile during calendar year 2009 must determine the inclusion amount that is added to gross income using Tables 5 and 6 in section 4.03 of this revenue procedure. In addition, the taxpayer must follow the procedures of § 1.280F-7(a).
.02 Limitations on Depreciation Deductions for Certain Automobiles.
(1) Amount of the inflation adjustment.
(a) Passenger automobiles (other than trucks or vans). Under § 280F(d)(7)(B)(i), the automobile price inflation adjustment for any calendar year is the percentage (if any) by which the CPI automobile component for October of the preceding calendar year exceeds the CPI automobile component for October 1987. The term “CPI automobile component” is defined in § 280F(d)(7)(B)(ii) as the “automobile component” of the Consumer Price Index for all Urban Consumers published by the Department of Labor. The new car component of the CPI was 115.2 for October 1987 and 134.837 for October 2008. The October 2008 index exceeded the October 1987 index by 19.637. The Internal Revenue Service has, therefore, determined that the automobile price inflation adjustment for 2009 for passenger automobiles (other than trucks and vans) is 17.05 percent (19.637/115.2 x 100%). This adjustment is applicable to all passenger automobiles (other than trucks and vans) that are first placed in service in calendar year 2009. The dollar limitations in § 280F(a) therefore must be multiplied by a factor of 0.1705, and the resulting increases, after rounding to the nearest $100, are added to the 1988 limitations to give the depreciation limitations applicable to passenger automobiles (other than trucks and vans) for calendar year 2009.
(b) Trucks and vans. To determine the dollar limitations applicable to trucks and vans first placed in service during calendar year 2009, the new truck component of the CPI is used instead of the new car component. The new truck component of the CPI was 112.4 for October 1987 and 133.640 for October 2008. The October 2008 index exceeded the October 1987 index by 21.24. The Service has, therefore, determined that the automobile price inflation adjustment for 2009 for trucks and vans is 18.90 percent (21.24/112.4 x 100%). This adjustment is applicable to all trucks and vans that are first placed in service in calendar year 2009. The dollar limitations in § 280F(a) therefore must be multiplied by a factor of 0.1890, and the resulting increases, after rounding to the nearest $100, are added to the 1988 limitations to give the depreciation limitations applicable to trucks and vans.
(2) Amount of the limitation. For passenger automobiles placed in service by the taxpayer in calendar year 2009, Tables 1 through 4 contain the dollar amount of the depreciation limitation for each taxable year. Use Table 1 for a passenger automobile (other than a truck or van) placed in service by the taxpayer in calendar year 2009, for which the 50 percent additional first year depreciation deduction does not apply, including a passenger automobile (other than a truck or van) in a class of property for which the taxpayer elects out of the 50 percent additional first year depreciation deduction or a passenger automobile that is eligible qualified property to which the § 168(k)(4) election applies. Use Table 2 for a passenger automobile (other than a truck or van) placed in service by the taxpayer in calendar year 2009, for which the 50 percent additional first year depreciation deduction applies. Use Table 3 for a truck or van placed in service by the taxpayer in calendar year 2009, for which the 50 percent additional first year depreciation deduction does not apply, including a truck or van in a class of property for which the taxpayer elects out of the 50 percent additional first year depreciation deduction or a truck or van that is eligible qualified property to which the § 168(k)(4) election applies. Use Table 4 for a truck or van placed in service by the taxpayer in calendar year 2009, for which the 50 percent additional first year depreciation deduction applies.
.03 Inclusions in Income of Lessees of Passenger Automobiles.
The inclusion amounts for passenger automobiles first leased in calendar year 2009 are calculated under the procedures described in § 1.280F-7(a). Lessees of passenger automobiles other than trucks and vans should use Table 5 of this revenue procedure in applying these procedures, while lessees of trucks and vans should use Table 6 of this revenue procedure.
This revenue procedure applies to passenger automobiles (other than leased passenger automobiles) that are first placed in service by a taxpayer during calendar year 2009, and to leased passenger automobiles that are first leased by a taxpayer during calendar year 2009.
The principal author of this revenue procedure is Bernard P. Harvey of the Office of Associate Chief Counsel (Income Tax & Accounting). For further information regarding this revenue procedure, contact Mr. Harvey at (202) 622-4930 (not a toll-free call).

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