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Questions

Answers

General

1.

What is the process for getting a section 48C tax credit?

See Notice 2009-72. In general, the steps in the process are these.

• The taxpayer applies for the credit.

• If approved, the IRS sends the taxpayer a letter allocating a credit to the taxpayer’s project.

• The taxpayer sends the IRS two signed copies of the required agreement (Appendix A of Notice 2009-72).

• The IRS signs the agreements and returns one to the taxpayer.

• Within 1 year of the date of the allocation letter, the taxpayer sends the IRS a request for certification of its project.

• If approved, the IRS sends the taxpayer a certification letter.

• Within 3 years of the date of the certification letter, the taxpayer completes its project and notifies the IRS.

See the FAQs below for information on each step of the process.

2.

Will any more section 48C credits be awarded?

At least one more allocation round will be held to allocate credits not used by the taxpayers to which they were allocated in the first round. See sections 9.02 and 9.03 of Notice 2009-72.

3.

When will that be?

That has not been determined yet.

4.

How can I find out?

The next allocation round will be announced in a notice similar to Notice 2009-72 which announced the first allocation round.

5.

Will the applications submitted for the last allocation round be considered in the next allocation round?

No, only new applications will be considered. However, applications for projects that were not allocated a credit in the first round may be submitted in the next allocation round.

6.

Will the application procedures be the same as in the first allocation round?

The notice which announces the next allocation round will contain the application procedures.

7.

What do I do if I change my project?

See the Changes section below.

8.

What do I do if I sell my project or transfer it to a related company?

See the answer to Agreement Question 9 below.

9.

How do I use the credit?

See the Using the Credit section below.

10.

May I get a tax credit under section 48, 48A or 48B of the Internal Revenue Code or a payment under section 1603 of the American Recovery and Reinvestment Act of 2009 for my project in addition to the section 48C credit?

Not for the same project. If you choose one of the other credits or a grant, you must forfeit this credit and notify the IRS by letter that you have chosen to forfeit this credit.

11.

Can I have someone represent me in dealing with the IRS about this credit?

Yes, you can authorize one or more persons to represent you by completing Form 2848, Power of Attorney and Declaration of Representative. You and the person(s) you authorize must sign the form. See the Instructions for Form 2848, Power of Attorney and Declaration of Representative.

Application

The application procedures for the next allocation round will be explained in this section when they are announced.

Will my application be public or confidential?

All correspondence with the IRS and all documents you send to the IRS related to this tax credit are confidential, just as your tax return is. See section 11 of Notice 2009-72 and section 6103 of the Internal Revenue Code. The only information the IRS is allowed to release to the public is an announcement of the names of taxpayers allocated credits and the amounts they are allocated. That announcement is required by section 48C(d)(5) of the Internal Revenue Code. See section 11.01 of Notice 2009-72. The applications for the credit are reviewed, recommended and ranked by the Department of Energy, which is also required to keep them confidential.

Agreement

When is the agreement due?

The due date for sending the agreement to the IRS in the second allocation round will be stated here when the notice announcing that allocation round is issued.

Is a separate agreement required for each project which was allocated a credit?

Yes

Who must sign the agreement?

The agreement must be signed and dated by a person authorized to bind the applicant such as an officer of a corporation, a general partner of a state-law partnership, a member-manager of a limited liability company, a trustee of a trust, or the proprietor of a sole proprietorship. An authorization to represent the taxpayer such as Form 2848, Power of Attorney and Declaration of Representative by itself does not authorize that representative to sign the agreement. Only original, ink signatures will be accepted. Stamped, faxed, scanned or other copied signatures will not be accepted.

Where do I send the agreement?

Send two (2) copies of the agreement, each with an original, dated signature, to this address:

Internal Revenue Service
Industry Director, Natural Resources and Construction
Attn: Executive Assistant (Technical)
1919 Smith Street, Floor P2
Stop 1000-HOU
Houston, TX 77002

Where can I find the agreement?

A link to a fillable template is on the Qualified Advanced Energy Project Credit page of www.irs.gov. The agreement also is contained in Appendix A of Notice 2009-72.

May I change the terms of the agreement?

No, the IRS will not accept an agreement that has been altered except for filling in the blanks.

When will the IRS return the agreement to me?

The date that the IRS plans to mail the signed agreements for the second allocation round will be stated here when the notice announcing that allocation round is issued. The IRS will mail the agreements by that date unless there is a problem with the agreement. If there is a problem, the IRS will contact you about it.

What will happen if I don’t sign the agreement?

You will forfeit the credit.

Must I sign the agreement if I have already placed my project in service?

Yes, you must sign the agreement or forfeit all of the credit allocated to the project.

If I sell or transfer the project, does the new owner need to execute an agreement for the credit with the IRS?

If you sell or transfer ownership of the project, you and the new owner must write to the IRS at the address in the answer to Agreement Question 4, describe the transaction in detail and enclose copies of key documents. The IRS will decide whether to execute an agreement with the new owner. In ownership changes reviewed to date, the IRS has executed new agreements with the new owners of facilities in the following situations.

• A corporate reorganization resulted in a different subsidiary of the same parent company owning the project.

• A project was transferred by one subsidiary to another subsidiary of the same parent company.

• A taxpayer engaged in a sale-leaseback transaction with an investor, as provided for in sections 50(d)(4) and 50(d)(5) of the Internal Revenue Code.

CAUTION: Every determination depends on the specific facts of the situation. In the ownership changes reviewed to date, the key to the IRS’s determination was that the change did not have an effect contrary to the purposes for which the section 48C credit was enacted. These determinations do NOT mean that the Service will execute new agreements with all new owners in these or similar situations. They mean that the Service will consider executing an agreement with a new owner to achieve the purposes for which section 48C was enacted.

Will the IRS tell me in advance whether it will execute a new agreement if I sell or transfer my project?

The process for obtaining a formal ruling on a future transaction is to apply for a letter ruling. See Revenue Procedure 2011-1 for those procedures. For an informal discussion of ownership changes, you can contact the office of the Industry Director, Natural Resources and Construction, at 713-209-3669.

Certification

What is certification?

Section 48C(d)(2) of the Internal Revenue Code requires taxpayers which were allocated credits to apply for certification within 1 year of the date of the allocation letter. To obtain certification, taxpayers must show that they have done certain things to implement their projects. If they are not implementing their projects, the Service will deny certification and those taxpayers will forfeit their credits. See section 7 of Notice 2009-72.

How do I apply for certification of my project?

As described in section 7 of Notice 2009-72, send a letter requesting certification of the credit for your project to the IRS at the address in the answer to Agreement Question 4. Please put “SECTION 48C CERTIFICATION REQUIREMENTS” in a prominent location in your letter and on the outside of the envelope or package. See section 7 of Notice 2009-72 for what the letter should contain. The letter must include this statement: “Under penalties of perjury, I declare that I have examined this submission, including accompanying documents, and, to the best of my knowledge and belief, all of the facts contained herein are true, correct, and complete.” The letter must be signed and dated by a person authorized to bind the taxpayer who has personal knowledge of the facts contained in the letter and accompanying documents. Examples of persons authorized to bind the taxpayer are an officer of a corporation, a general partner of a state-law partnership, a member-manager of a limited liability company, a trustee of a trust or the proprietor in the case of a sole proprietorship. An authorization to represent the taxpayer by a power of attorney such as Form 2848, Power of Attorney and Declaration of Representative, by itself does not authorize that representative to sign this letter. Only original, ink signatures will be accepted. Stamped, faxed, scanned or other copied signatures will not be accepted. Enclose copies of documents to show that you have met the requirements for certification.

When do I apply for certification?

You MUST apply for certification no later than 1 year after the date of the allocation letter the IRS sent you. Internal Revenue Code section 48C(d)(2)(B) sets this deadline and does not allow any extensions or exceptions. If you place your project in service less than 1 year after the date of the allocation letter, you may apply for certification as soon as you place it in service.

What records do I send to obtain certification of the credit for my project?

As explained in section 7 of Notice 2009-72, send (a) copies of all permits required to begin construction or installation and (b) copies of sufficient other documents to demonstrate that you are implementing your project according to the timetable in your application. Examples of documents to send to show that you are implementing your project are listed below. Taxpayers may have other types of documents which demonstrate progress implementing their projects. Those are equally acceptable. Send enough documents to demonstrate the progress you have made. Please limit the documents you send to those which are most important to showing your progress.

• Contracts for financing of the project

• Contracts for significant purchases of land, goods or services

• Contracts for significant purchases of raw materials the project will use

• Invoices for significant goods or services purchased

• Payment documents for significant purchases of land, goods or services

• Recent reports on the progress of construction or installation

• Recent reports on the amount of time your employees have spent on the project

• Recent reports on costs incurred

• Significant contracts for sales of the goods the project will produce

• Inspection reports

• Certificates of occupancy

• Photographs of the site or equipment

• Any other significant documents which demonstrate your progress implementing your project.

What if I can’t obtain all the permits within 1 year of the date of the allocation letter?

Send copies of all the permits you have obtained along with a list of the other permits you will obtain and an explanation as to why you did not obtain them within 1 year and an estimate of when you will obtain them.

What if I have fallen behind schedule implementing my project?

Explain the reason(s) you have fallen behind schedule, send copies of documents which show what you have accomplished, and provide your revised estimated completion date.

Should the copies be printed or electronic?

Documents may be either printed or in Adobe Acrobat format on CD(s). If you send a CD, be sure that it is not encrypted, password-protected or redacted. Please label it with your company’s name and “48C certification request.”

Will the documents I send be public or confidential?

All correspondence with the IRS and all documents you send to the IRS related to this tax credit are confidential, just as your tax return is. See section 11 of Notice 2009-72 and section 6103 of the Internal Revenue Code. The only information the IRS is allowed to release to the public is an announcement of the names of taxpayers allocated credits and the amounts they are allocated. That announcement is required by section 48C(d)(5) of the Internal Revenue Code. See section 11.01 of Notice 2009-72. The applications for the credit are reviewed, recommended and ranked by the Department of Energy, which is required to keep them equally confidential.

What kind of certification will the IRS send?

The Service will send you a letter certifying the allocation of credit for the project described in your application for the credit.

What will happen if I don’t send the documents to the IRS or the IRS doesn’t send me a letter of certification?

You will forfeit all of the credit allocated to the project.

What if the IRS is not satisfied with my letter or the documents?

The staff which reviews certification requests will contact you to ask any questions it has and/or ask for copies of additional documents.

What if the IRS is not satisfied with the progress I have made implementing my project?

The staff will contact you to discuss your progress and give you an opportunity to provide more evidence that you are implementing your project on time.

When will I receive my certification letter?

The Service will review all the requests as soon as it can. Because all the certification requests are due on the same date, it may take several weeks or months to review all of the requests and respond to all of them.

How will I know if my project is not certified?

If the IRS determines that you have not met the requirements for certification, it will send you a letter stating that and stating that your credit is forfeited.

Must I request certification if I have already completed my project?

Yes, Internal Revenue Code section 48C(d)(2)(B) requires certification of all projects. You must obtain a letter of certification even if you have already completed the project, or else you will forfeit all of the credit allocated to the project.

Must I request certification if I have decided not to implement my project?

No, but please notify the IRS by letter that you have decided not to implement your project. Send your letter to the address in the answer to Agreement Question 4 above.

Changes

What do I do if I change my project?

Section 8.03 of Notice 2009-72 and paragraph 5 of the agreement discussed in the Agreement section above require you to inform the IRS if the plans for the project change in any significant respect from the plans you submitted in your application for the credit. If the change is a “significant change in plans” as defined in Notice 2009-72, you will forfeit the credit.

How do I inform the IRS?

Describe the change(s) in the project in detail in a letter to the IRS asking it to determine whether the change in your project is a “significant change in plans.” Enclose appropriate documents to fully describe the change(s). The letter should describe the effects of the change(s) on each of the Eligibility Criteria, Evaluation Criteria and Public Policy Factors as described in sections F and G of Appendix B of Notice 2009-72. The IRS will evaluate the significance of the change(s) and reply with a letter telling you its decision. Send your letter to the address in the answer to Agreement Question 4.

What is a “significant change in plans?”

Section 8.03 of Notice 2009-72 defines it as “any change that a reasonable person would conclude might have influenced the Department of Energy (DOE) in recommending or ranking the project or the Service in accepting the project application had they known about the change when they were considering the application.”

What factors might have influenced DOE in recommending or ranking the project or the Service in accepting the project application?

Section F of Appendix B of Notice 2009-72 lists the ten factors which affect the recommending, ranking and accepting of applications. Those are:

Eligibility Criteria:

1. Qualification as an advanced energy project

2. Reasonable expectation of commercial viability

Evaluation Criteria:

1. Greatest domestic job creation (both direct and indirect) during the credit period (February 17, 2009, through February 17, 2013)

2. Greatest net impact in avoiding or reducing air pollutants or anthropogenic emissions of greenhouse gases

3. Greatest potential for technological innovation and commercial deployment, as indicated by:
   
   (i) Production of new or significantly improved technologies
   
   (ii) Improvements in levelized costs and performance
   
   (iii) Manufacturing significance and value

4. Shortest project time from certification to completion

Program Policy Factors:

1. Geographic diversity

2. Technological diversity

3. Project size diversity

4. Regional economic development.

Is a change in a project which results in a change in any of these aspects a “significant change in plans?”

It may be. Follow the procedures in the answer to Changes Question 2. The IRS has determined that certain changes resulting in a mixture of improvements in some of the ten factors and diminishments in others were not “significant changes in plans” for those projects.

CAUTION: Every determination depends on the specific facts of the situation. In the changes reviewed to date, the key to the IRS’s determination was the overall effect on the ten factors listed in the answer to Changes Question 4, not the effect on any single factor. These determinations do NOT mean that all changes which result in improving one or more factors and/or diminishing one or more factors will be determined not to be a “significant change in plans.” They do mean that a change in a project which results in diminishing one or more of the ten factors is not necessarily a “significant change in plans.”

Is a change of location of the project a “significant change in plans?”

It may be. Follow the procedures in the answer to Changes Question 2. In several changes reviewed to date, the IRS has determined that location changes from one county to another within the same state and from one state to another state were not “significant changes in plans” for those projects.

CAUTION: Every determination depends on the specific facts of the situation. In the changes reviewed to date, the key to the IRS’s determination was the overall effect on the ten factors listed in the answer to Changes Question 4, not location alone. These determinations do NOT mean that all location changes will be determined not to be a “significant change in plans.” They do mean that a change of location is not necessarily a “significant change in plans.”

Is a cost overrun a “significant change in plans?”

No, not as long as the facilities are the same as described in the application for the credit. Regardless of cost overruns, the amount of credit allocated to the project may not exceed the amount in the allocation letter. If this is the only change from the application for the credit, the taxpayer does not need to notify the IRS of this change.

If the project costs less than estimated in the application for the credit is that a “significant change in plans?”

No, not as long as the facilities are the same as described in the application for the credit. Remember that the credit is limited to the lesser of (1) 30% of the qualified investment or (2) the amount allocated to the project in the allocation letter. If this is the only change from the application for the credit, the taxpayer does not need to notify the IRS of this change.

Is a change in the cost, size or type of component parts of the project a “significant change in plans?”

A change in the cost of component parts alone is not a “significant change in plans.” A change in the size or type of component parts may be a “significant change in plans” if it affects any of the ten criteria in the answer to Changes Question 4. For example, a change from using one type of pipe to using a less expensive type with no effect on the facility’s output or performance is not a “significant change in plans,” so the taxpayer would not need to notify the IRS. However, a change from installing one type of heating equipment to installing a different type which produces more greenhouse gas may be a “significant change in plans,” so the taxpayer should follow the procedure in the answer to Changes Question 2. Similarly, a change from installing two production lines to installing only one may be a “significant change in plans,” so the taxpayer should follow the procedure in the answer to Changes Question 2.

Is a change to production of a different product a “significant change in plans?”

It may be. Follow the procedures in the answer to Changes Question 2.

Is a change in size or capacity of the whole project a “significant change in plans”?

It may be. Follow the procedures in the answer to Changes Question 2.

Will the IRS tell me before I make a change whether it would be a “significant change in plans?”

The process for obtaining a formal ruling in advance is to apply for a letter ruling. See Revenue Procedure 2011-1 for those procedures. For an informal discussion of changes, you can contact the office of the Industry Director, Natural Resources and Construction, at 713-209-3669.

Completion

Must I report completion of my project to the IRS?

Yes, paragraph 3 of the agreement discussed in the Agreement section requires you to notify the IRS in writing when you place your project in service.

How do I report completion of my project?

Notify the IRS by letter that you have placed your project in service. Include the date you placed it in service and the actual amount of your qualified investment. Send the letter to the address in the answer to Agreement Question 4.

What does “placed in service” mean?

It means “placed in a condition or state of readiness and availability for a specifically assigned function.” See section 4.04 of Notice 2009-72 and section 1.46-3(d)(1)(ii) of the Income Tax Regulations.

What is the deadline for placing my project in service?

The deadline is 3 years after the date of the certification letter the IRS sends you.

What if I do not place the project in service by the deadline?

You forfeit the full amount of the credit. Notify the IRS of this by letter sent to the address in the answer to Agreement Question 4.

What if I decide not to complete my project?

Notify the IRS of that by letter sent to the address in the answer to Agreement Question 4.

How do I forfeit the credit if I have already used part or all of it on tax returns?

You forfeit any unused part of the credit, and you must recapture the credit used on tax returns you have filed. See the following:

• Form 4255, Recapture of Investment Credit

• The “Recapture of Credit” section of the Instructions for Form 3468 and

• Section 50(a)(2) of the Internal Revenue Code.

How long must I use the project after I place it in service?

You must use the project for 5 years. If you do not use it for that long, you must recapture part or all of the credit. See the following:

• Form 4255, Recapture of Investment Credit

• The “Recapture of Credit” section of the Instructions for Form 3468 and

• Section 50(a)(2) of the Internal Revenue Code.

Using the Credit

How do I use the tax credit?

Report your qualified investment in the project made after February 17, 2009, on Form 3468, Investment Credit. See the Qualifying Advanced Energy Project Credit section of the Instructions for Form 3468.

When may I use the credit?

The default method is to use the credit when you place the project in service. You also may elect to use the credit as you make qualified progress expenditures. If you elect the qualified progress expenditures method, you may not change to the default method later. See the “Qualified Progress Expenditures” section of the Instructions for Form 3468 and section 10 of Notice 2009-72 for information on qualified progress expenditures. Under either method, only expenses incurred after February 17, 2009, may be included in qualified investment.

When may I begin using the credit?

Taxpayers which received an allocation letter from the IRS and either completed their project or made progress expenditures may claim the credit as early as their first tax year which includes February 17, 2009.

How do I compute the amount of the credit?

Under the default method, the credit amount is 30% of the qualified investment you made in the project after February 17, 2009. If you elect to use the credit as you make qualified progress expenditures, the credit for each year is 30% of the amount of your qualified progress expenditures made during that year which are qualified investment and are made after February 17, 2009. Under either method, your total credit is limited to the amount in the allocation letter the IRS sent you.

What is qualified investment?

Qualified investment generally is your basis in eligible property which is part of the project for which you were allocated the credit. Eligible property generally is tangible personal property (other than a building or its structural components) which is:

• Depreciable or amortizable

• Used as an integral part of the project for which you were allocated the credit and

• Necessary for the production of one of the seven categories of property described in section 4.02 of Notice 2009-72.

Qualified investment and eligible property are described in more detail in the Qualifying Advanced Energy Project Credit section of the Instructions for Form 3468. Qualified investment also is defined in section 2.03 of Notice 2009-72 and section 48C(b) of the Internal Revenue Code. Eligible property also is defined in section 4.03 of Notice 2009-72 and section 48C(c)(2) of the Internal Revenue Code.

Is the credit refundable?

No, but if you do not use the credit in the year you report it on your return you may carry it back or forward. See the next question.

If I don’t use the credit in the year I report it on my return, may I carry it back or forward?

Yes, you may carry any unused part of the credit back 1 year – but only to tax years ending on or after February 17, 2009 – by amending your previous return. If you still have not used all of the credit, you may carry the unused portion forward for 20 years until it is used. After 20 years, any unused portion expires.