IRS Establishes Second Phase of Advanced Energy Project Program

                           TABLE OF CONTENTS

Section 48C of the Internal Revenue Code provides for the qualifying advanced energy property project program and authorizes $2.3 billion of credits ("the § 48C Phase I program" and "the § 48C Phase I credit"). This notice reports the results of the § 48C Phase I program and, as provided by § 48C(d)(4), establishes a second phase of the qualifying advanced energy project program ("the § 48C Phase II program") to distribute the § 48C Phase I credits that are available for re-allocation after review of the § 48C Phase I program.

To be considered for an allocation of credits in the § 48C Phase II program, taxpayers must submit concept papers to the U.S. Department of Energy ("DOE") by April 9, 2013 and applications to DOE and the Internal Revenue Service ("Service") by July 23, 2013.

SECTION 2. BACKGROUND

.01 Section 46 provides that the amount of the investment credit for any taxable year is the sum of the credits listed in § 46. That list includes the qualifying advanced energy project credit under § 48C.

.02 Section 48C(d)(1) provides that the Secretary, in consultation with the Secretary of Energy, shall establish a qualifying advanced energy project program to consider and award certifications for qualified investments eligible for credits to qualifying advanced energy project sponsors. In 2009, the Treasury Department and the Service, in consultation with the Secretary of Energy, established the § 48C Phase I program in Notice 2009-72, 2009-37 I.R.B. 325.

.03 Pursuant to § 48C(d)(1)(B), the § 48C Phase I program provided for $ 2.3 billion of credits to be allocated to qualifying advanced energy projects. The Service fully allocated $2.3 billion of credits under the § 48C Phase I program in 2009-2010.

.04 Section 48C(d)(4) requires the Secretary to review the allocation of § 48C Phase I credits not later than the date that is 4 years after the date of enactment of § 48C. The Secretary may conduct an additional program for applications for certification if the Secretary determines that: (1) there is an insufficient quantity of qualifying applications for certification pending at the time of the review, or (2) any certification made pursuant to § 48C(d)(2) has been revoked pursuant to § 48C(d)(2)(B) because the project subject to the certification has been delayed as a result of third-party opposition or litigation.

.05 The Service has completed this review and has determined that § 48C Phase I credits in the total amount of $150,228,397.00 are available for reallocation under the § 48C Phase II program.

.06 Pursuant to § 48C(a) the qualifying advanced energy project credit for a taxable year is an amount equal to 30 percent of the qualified investment (as defined in § 48C(b)) for that taxable year with respect to the taxpayer's qualifying advanced energy project (as defined in § 48C(c)(1)).

.07 Section 48C(b)(1) provides that the qualified investment for any taxable year is the basis of eligible property that is placed in service by the taxpayer during such taxable year and is part of a qualifying advanced energy project.

.08 Section 48C(b)(3) provides that the qualified investment for all taxable years with respect to any qualifying advanced energy project is limited to the amount designated by the Secretary as eligible for the credit under § 48C.

.09 Section 48C(d)(3) specifies the criteria that must be considered in determining which qualifying advanced energy projects are certified under § 48C(d).

.10 The qualifying advanced energy project credit generally is allowed in the taxable year in which the eligible property (as defined in § 48C(c)(2)) is placed in service (as defined in section 3.04 of this notice) by the taxpayer. Pursuant to § 48C(d)(2)(C), a taxpayer that receives a certification under § 48C(d)(2) has 3 years from the date of issuance of certification to place the qualifying advanced energy project in service. If the taxpayer does not place the project in service by the end of that period, the certification is no longer valid.

.11 The at-risk rules in § 49 and the recapture and other special rules in § 50 apply to the qualifying advanced energy project credit.

.12 For further information regarding the qualifying advanced energy project program under § 48C, taxpayers may refer to http://www.irs.gov/Businesses/Advanced-Energy-Credit-for- Manufacturers-(IRC-48C). This website contains various information relating to the program, including answers to frequently asked questions.

SECTION 3. DEFINITIONS

The following definitions apply for purposes of § 48C and this notice:

.01 Qualifying Advanced Energy Project. A qualifying advanced energy project is a project that meets the following requirements:

(1) the project re-equips, expands, or establishes a manufacturing facility (as defined in section 3.05 of this notice) for the production of specified advanced energy property or property that, after further manufacture, will become specified advanced energy property;

(2) the Service has certified pursuant to § 48C(d)(2) that part or all of the qualified investment in the project is eligible for a credit under § 48C; and

(3) the project does not produce any property which is used in the refining or blending of any transportation fuel (other than renewable fuels).

.02 Specified Advanced Energy Property. Specified advanced energy property means any of the following:

(1) property designed for use in the production of energy from the sun, wind, geothermal deposits (within the meaning of § 613(e)(2)), or other renewable resources;

(2) fuel cells, microturbines, or an energy storage system for use with electric or hybrid-electric motor vehicles;

(3) electric grids to support the transmission of intermittent sources of renewable energy, including property for the storage of such energy;

(4) property designed to capture and sequester carbon dioxide and sequester carbon dioxide emissions;

(5) property designed to refine or blend renewable fuels (but not fossil fuels) or to produce energy conservation technologies (including energy-conserving lighting technologies and smart grid technologies);

(6) new plug-in electric drive motor vehicles (as defined by § 30D), qualified plug-in electric vehicles (as defined by § 30(d)), or components that are designed specifically for use with such vehicles, including electric motors, generators, and power control units; or

(7) other property designed to reduce greenhouse gas emissions as may be determined by the Service as described in section 3.06 of this notice.

.03 Eligible Property. Eligible property is any property (other than a building or its structural components) that meets the following requirements:

(1) the property is necessary for the production of specified advanced energy property described in § 48C(c)(1)(A)(i) or section 3.02 of this notice;

(2) the property is

(a) tangible personal property, or

(b) other tangible property (not including a building or its structural components) that is used as an integral part of the qualifying advanced energy project; and

(3) depreciation (or amortization in lieu of depreciation) is allowable with respect to the property.

.04 Placed In Service. For purposes of § 48C, property is placed in service in the taxable year in which the property is placed in a condition or state of readiness and availability for a specifically assigned function. See § 1.46-3(d)(1)(ii) of the Income Tax Regulations. Thus, a qualifying advanced energy project is placed in service in the taxable year in which the project is placed in a condition or state of readiness and availability for its intended purpose. Eligible property (as defined in § 48C(c)(2) and section 3.03 of this notice) that is a part of the project is placed in service in the taxable year in which the property is placed in a condition or state of readiness and availability for its intended purpose.

.05 Manufacturing Facilities. For purposes of § 48C, manufacturing facilities are facilities that make, or process raw materials into, finished products (or accomplish any intermediate stage in that process).

.06 Advanced Energy Property Designed To Reduce Greenhouse Gas Emissions. Property may be determined to be designed to reduce greenhouse gas emissions either through published guidance or in the letter notifying a taxpayer that the Service has accepted the taxpayer's application for § 48C certification with respect to the property.

SECTION 4. SECTION 48C PHASE II PROGRAM

.01 In General. The Service will consider a project under the qualifying advanced energy project program only if DOE provides a recommendation and ranking for the project (DOE recommendation). DOE will provide a recommendation and ranking only if it determines that the project has a reasonable expectation of commercial viability and merits a recommendation based on the criteria in § 48C(d)(3)(B). Accordingly, a taxpayer must submit for each project that it sponsors: (1) a concept paper for DOE consideration; (2) an application for recommendation by DOE ("application for DOE recommendation"); and (3) an application for certification under § 48C(d)(2) by the Service ("application for § 48C certification") (collectively (2) and (3) are referred to herein as "the § 48C applications"). A taxpayer must submit a concept paper and the § 48C applications as specified in section 5 and Appendix B of this notice through the eXCHANGE website at https://eere-exchange.energy.gov. EXCHANGE is an online application portal used by the Office of Energy Efficiency & Renewable Energy, DOE, into which applicants may securely input their data and information for review by DOE and the Service. Applicants will be able to submit an application for DOE recommendation and an application for § 48C certification simultaneously using eXCHANGE.

.02 Program Specifications.

(1) The Service determines the amount of the qualifying advanced energy project credit allocated to a qualifying advanced energy project at the time the Service accepts the application for certification for that project in accordance with section 4.02(8) of this notice (see section 5 of this notice for the requirements applicable to the concept paper and the § 48C applications).

(2) Section 48C Phase II credits in the amount of $150,228,397.00 are available for allocation.

(3) The amount of the qualified investment that is eligible for the credit with respect to any project is limited to $100 million. Accordingly, the maximum amount of credits allocated per project will be $30 million.

(4) The DOE recommendations will include a ranking of projects in descending order (that is, first, second, third, etc.). The project receiving the highest ranking (that is, first) will be allocated the full amount of credit requested not to exceed $30 million before any credit is allocated to a lower-ranked project. The amount of credit allocated to a project reduces the amount of credit available to lower-ranked projects. The same process will apply to the second and lower-ranked projects until the amount available for allocation is exhausted. DOE will recommend and rank projects only to the extent necessary to exhaust the amount available for allocation.

(5) For the § 48C Phase II program, the application period for certification begins on February 7, 2013, and ends on July 23, 2013. All timely submitted applications will be evaluated and ranked on their merit regardless of when in the application period they are submitted.

(6) For the § 48C Phase II program, a concept paper for DOE consideration must be submitted by April 9, 2013. The § 48C applications must be submitted by July 23, 2013. If the § 48C applications are received on or before July 23, 2013, and otherwise meet the preliminary compliance review criteria, DOE will determine the merit of the project and (for projects determined to be meritorious) provide the DOE recommendation to the Service by October 11, 2013. See section 5.02 of this notice and Appendix B to this notice for the information required to be submitted to DOE in an application for DOE recommendation. Also, see Appendix B to this notice for a discussion relating to the process for applying for DOE recommendation and the instructions for filing concept papers and applications for DOE recommendation.

(7) Each applicant will receive an electronically generated confirmation of receipt upon submission of (a) the concept paper and (b) the § 48C applications. The timeliness of submission of the § 48C applications will be determined by the submittal date and time shown on the confirmation of receipt.

(8) For the § 48C Phase II program, the Service will accept or reject a taxpayer's application for § 48C certification by November 15, 2013, and it will notify the taxpayer, by letter, of its decision. If the application is accepted, the date of this letter will be treated as the acceptance date.

(9) If the taxpayer's application for § 48C certification is accepted, the acceptance letter will state the amount of the credit allocated to the project. The qualifying advanced energy project credit with respect to any project for all taxable years may not exceed the amount of credit allocated to the project under section 4 of this notice. If a credit is allocated to a taxpayer's project, the taxpayer will be required to execute an agreement in the form set forth in Appendix A to this notice. The taxpayer must execute and return the agreement to the Service by January 10, 2014, at the address listed in section 6.02 of this notice. The Service will execute and return the agreement to the taxpayer by March 14, 2014. The executed agreement applies only to the taxpayer that signed the agreement. The taxpayer must notify the Service within 90 days of the acquisition of the project by any other person (a successor in interest) or, if the taxpayer is a member of an affiliated group filing consolidated returns, a change in the common parent company of the affiliated group. A successor in interest that plans to claim the § 48C credit allocated to the project must request permission to execute a new agreement with the Service. If the request is granted, the new agreement must be executed no later than the due date (including extensions) of the successor in interest's Federal income tax return for the taxable year in which the transfer occurs. If the successor in interest does not execute a new agreement, the following rules apply:

(a) in the case of an interest acquired before the time the qualifying advanced energy project is placed in service, any credit allocated to the project will be fully forfeited (and rules similar to the recapture rules of § 50(a) apply with respect to qualified progress expenditures); and

(b) in the case of an interest acquired after the qualifying advanced energy project is placed in service, the project ceases to be investment credit property (and rules similar to the recapture rules of § 50(a) will apply with respect to qualified progress expenditures).

.03 For qualifying advanced energy projects that re-equip or expand a manufacturing facility, the taxpayer's qualified investment is limited to property that re-equips or expands the facility to produce specified advanced energy property listed in section 3.02 of this notice.

.04 The qualifying advanced energy project credit will not be allocated to any qualified investment for which a credit is allowed under §§ 48, 48A, or 48B, or for which a payment is received under § 1603 of the American Recovery and Reinvestment Tax Act of 2009, Division B of Pub. L. 111-5, 123 Stat 115.

SECTION 5. CONCEPT PAPERS AND APPLICATIONS FOR DOE RECOMMENDATION AND § 48C CERTIFICATION

.01 In General. A taxpayer must submit for each project it sponsors (1) by April 9, 2013, a concept paper for DOE consideration and (2) if invited by DOE, by July 23, 2013, the § 48C applications. If an application for DOE recommendation does not (1) propose an eligible project or (2) include all of the information required by Appendix B to this notice, DOE may decline to consider the application. If DOE does not provide a recommendation for the application, the Service will not consider the application for § 48C certification.

.02 Information Required in the Concept Paper and Application for DOE Recommendation. A concept paper and application for DOE recommendation must include the information requested in Appendix B to this notice. Upon review of the concept paper, DOE will notify those applicants whose projects will be considered for DOE recommendation, and will invite the applicants to submit an application for DOE recommendation. An applicant who is not invited will not be permitted to submit an application for DOE recommendation or an application for § 48C certification.

.03 Information Required in the Application for § 48C Certification. By submitting an application through eXCHANGE, an applicant is submitting simultaneously an application for DOE recommendation and an application for § 48C certification. EXCHANGE will prompt an applicant to enter necessary information and will provide corresponding instructions regarding the requirements for the application for § 48C certification.

SECTION 6. ISSUANCE OF CERTIFICATION

.01 Requirements for Certification. Pursuant to § 48C(d)(2)(B), a taxpayer has one year from the date of acceptance of the application for § 48C certification during which to provide evidence that the requirements of the certification have been met in accordance with section 6.02 of this notice. If such evidence is not timely received, the allocated § 48C Phase II credits are forfeited. A project is eligible for certification only if the taxpayer has received all federal, state, and local permits, including environmental authorization or reviews necessary to commence construction of the project. Section 48C(d)(2)(C) provides that a taxpayer that receives a certification has three years from the date of issuance of the certification to place the project in service and that the certification is void if the project is not placed in service by the end of that three-year period.

.02 Satisfaction of Requirements for Certification. Within one year from the acceptance date (as determined in section 4.02(8) of this notice), the taxpayer must submit to the Service an electronic version on a USB flash drive or a CD of the documentation establishing that the certification requirements of section 6.01 of this notice are satisfied. The documentation must be formatted in one of the following software applications: Microsoft ® Word 2007 or later edition; Microsoft ® Excel 2007 or later edition; or Adobe ® Acrobat PDF 7.0 or later edition. The taxpayer should mark the package, "SECTION 48C CERTIFICATION REQUIREMENTS" and submit by U.S. mail, designated private delivery service, or hand delivery service (between the hours of 8 a.m. and 4 p.m. Central time, Monday through Friday) to:

(2) The taxpayer's submission (the letter including the perjury declaration and documentation) must be signed and dated by the taxpayer. The person signing for the taxpayer must have personal knowledge of the facts. Further, the submission must be signed by a person authorized under state law to bind the taxpayer, such as an officer on behalf of a corporation, a general partner of a state law partnership, a member-manager on behalf of a limited liability company, a trustee on behalf of a trust, or the proprietor in the case of a sole proprietorship. If the taxpayer is a member of an affiliated group filing consolidated returns, the submission also must be signed by a duly authorized officer of the common parent of the group. A stamped, scanned, faxed, or otherwise copied signature is not permitted.

.03 Service's Action on Certification. After receiving the submission described in section 6.02 of this notice, the Service will decide whether or not to certify the project and will notify the taxpayer, by letter, of that decision. If the Service certifies the project, the date of this letter is the date of issuance of the certification.

SECTION 7. OTHER REQUIREMENTS

.01 Significant Change in Plans. The taxpayer must inform the Service if the plans for the project change in any significant respect from the plans set forth in the § 48C applications. A significant change is any change that a reasonable person would conclude might have adversely influenced DOE in recommending or ranking of the project or the Service in accepting the application had they known about the change when they were considering the application. If the Service is informed of the change after the date on which the § 48C applications are due under section 4.02(6) of this notice:

(1) the Service will give no further consideration to the project; and

(2) any acceptance provided by the Service and any allocation or certification based on that acceptance will be void.

.02 Recapture of the § 48C Phase II Credits. Section 48C Phase II credits are subject to the recapture rules of § 50. Section 50(a)(1) provides, generally, for recapture of the investment credit if, during any taxable year, investment tax credit property is disposed of or otherwise ceases to be investment credit property with respect to the taxpayer before the close of the recapture period. The recapture period under § 50(a) is the 5-year period beginning on the date the property is placed in service.

.03 Effect of an Acceptance, Allocation, or Certification. An acceptance, allocation, or certification by the Service under this notice is not a determination that a project is eligible for the qualifying advanced energy project credit under § 48C or that any property that is part of the project is an eligible property under § 48C(c)(2). The Service may, upon examination (and after any appropriate consultation with DOE), determine that the project does not qualify for this credit or that the property is not an eligible property for purposes of this credit.

.04 No Right to a Conference or Appeal. A taxpayer does not have a right to a conference relating to any matters under this notice. Further, a taxpayer does not have a right to appeal the decisions made under this notice (including the acceptance or rejection of the application for § 48C certification, the amount of credit allocated to the project, or whether or not to certify the project) to any official of DOE or the Service.

.05 Submissions by U.S. Mail. For purposes of this notice, any information submitted to the Service pursuant to sections 4.02(9), 6.02, 7.01, or 8 of this notice that is submitted by U.S. mail will be treated as received by the Service on the date of the postmark and any information submitted by a private delivery service will be treated as received by the Service on the date recorded or the date marked in accordance with § 7502.

SECTION 8. REDUCTION OR FORFEITURE OF ALLOCATED CREDITS

Under the provisions of this notice and the agreement set forth in Appendix A to this notice, the § 48C Phase II credits allocated under section 4 of this notice will be reduced or forfeited in certain situations. A taxpayer must notify the Service of the amount of any reduction or forfeiture required under the agreement. This notification must be sent to the address listed in section 6.02 of this notice.

SECTION 9. QUALIFIED PROGRESS EXPENDITURES

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

.02 In the case of self-constructed property (as defined in former § 46(d)(5)(A)), former § 46(d)(3)(A) defined qualified progress expenditures to mean the amount that is properly chargeable (during the taxable year) to capital account with respect to that property. With respect to a qualifying advanced energy project that is self-constructed property, amounts paid or incurred are chargeable to capital account at the time and to the extent they are properly includible in computing basis under the taxpayer's method of accounting (for example, after applying the requirements of § 461, including the economic performance requirement of § 461(h)).

.03 To claim the advanced energy project credit with respect to the qualified progress expenditures paid or incurred by a taxpayer during the taxable year for construction of a qualifying advanced energy project, the taxpayer must make an election under the rules set forth in § 1.46-5(o) of the Income Tax Regulations. A taxpayer may not make the qualified progress expenditures election for a qualifying advanced energy project until the taxpayer has received an acceptance letter for the project under section 4.02(8) of this notice.

.04 If a taxpayer makes the qualified progress expenditures election pursuant to section 9.03 of this notice, rules similar to the recapture rules in § 50(a)(2)(A) through (D) apply. In addition to the cessation events listed in § 50(a)(2)(A), examples of other events that will cause the project to cease being a qualifying advanced energy project are:

(1) Failure to receive a certification for the project in accordance with section 6 of this notice;

(2) Failure to place the project in service within 3 years from the date of issuance of the certification under section 6.01 of this notice; or

(3) A significant change to the plans for the project as set forth in the § 48C applications if, under section 7.01 of this notice, the Service's acceptance of the project is void as a result of the change.

SECTION 10. DISCLOSURE OF INFORMATION

.01 Announcement. Section 48C(d)(5) provides that the Service shall, upon making a certification, publicly disclose the identity of the applicant and the amount of the credit certified with respect to such applicant. Accordingly, the Service will publish the results of the allocation process, and disclose the following information in the event a qualifying advanced energy project credit is allocated to the taxpayer's project: (1) the name of the taxpayer and (2) the amount of the § 48C Phase II credit allocated to the project.

.02 Voluntary disclosure. Applicants may authorize the government to release additional information by completing and signing the voluntary disclosure waiver in the Disclosure Waiver section of the Taxpayer Data Spreadsheet. An applicant's decision to disclose or to withhold additional information does not influence the selection process either by DOE or by the Service.

.03 In General. A concept paper, the § 48C applications, and any other documentation submitted by the taxpayer pursuant to section 6.02 of this notice, and any documentation generated by the Service or DOE as part of this process are return information subject to § 6103. Except for the items of information that § 48C(d)(5) requires the Service to make available to the public or any other information that the applicant consents to disclose pursuant to section 10.02 of this notice, the other material remains the applicant's confidential return information, which is exempt from disclosure under the Freedom of Information Act (FOIA), 5 USC § 552(b)(3), in conjunction with § 6103. Other FOIA exemptions may also apply. For example, FOIA includes exemptions for trade secrets and commercial or financial information (5 USC § 552(b)(4)), as well as personal information (5 USC § 552(b)(6)).

.04 FOIA requests. Anyone interested in submitting a request for records under the FOIA with respect to the qualifying advanced energy project program under § 48C should direct a request that conforms to the Service's FOIA regulations, found at 26 C.F.R. § 601.702, to the following address:

This notice is effective on February 7, 2013.

SECTION 12. PAPERWORK REDUCTION ACT

The collection of information contained in this notice has been reviewed and approved by the Office of Management and Budget (OMB) in accordance with the Paperwork Reduction Act (44 U.S.C. § 3507) under control number 1545-2151.

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.

The collections of information in this notice are in sections 4, 5, 6, 7, and Appendix B of this notice. This information is required to obtain an allocation of qualifying advanced energy project credits. This information will be used by the Service to verify that the taxpayer is eligible for the qualifying advanced energy project credits. The collection of information is required to obtain a benefit. The likely respondents are business or other for-profit institutions.

The estimated total annual reporting burden is 55,000 hours.

The estimated annual burden per respondent varies from 70 to 150 hours, depending on individual circumstances, with an estimated average of 110 hours. The estimated number of respondents is 500.

The estimated annual frequency of responses is on occasion.

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 return information are confidential, as required by 26 U.S.C. § 6103.

SECTION 13. DRAFTING INFORMATION

The principal author of this notice is Philip Tiegerman of the Office of Associate Chief Counsel (Passthroughs & Special Industries). For further information regarding this notice, contact Philip Tiegerman at (202) 622-3110 (not a toll-free number). For further information regarding the § 48C applications, the documentation to be submitted to the Service establishing that the requirements of § 48C(d)(2) are satisfied, and the issuance of the certification that the requirements of § 48C(d)(2) are satisfied, contact Marc Bernabo, 48C Program Manager, Office of the Industry Director, Natural Resources and Construction, at (713) 209-3669 (not a toll-free number).