Treasury/IRS Issues Notice on Clean Renewable Energy Bonds
The Internal Revenue Service (IRS) and Department of the Treasury (TD) issued a Notice (Notice 2005-98) concerning the Clean Renewable Energy Bonds (CREB) program. The Notice contains background on the program and a description of the legislative requirements, as well as preliminary information on how IRS/TD intends to implement the program.
The highlights are:
1. CREBs will be issued on a project-by-project basis.
2. Bonds will be allocated “to qualified projects for which applications meeting the requirements of this notice have been filed with the IRS on or before April 26, 2006.”
3. Qualified projects “will be allocated the full amount of clean renewable energy bond limitation requested beginning with the project(s) for which the smallest dollar amount of clean renewable energy bond limitation has been requested and continuing with the project(s) for which the next-smallest dollar amount of such limitation has been requested until the total amount of the clean renewable bond limitation has been exhausted.” The total amount authorized by Congress is $800 million, of which no more than $500 million can be allocated to “governmental entities”, including public power systems.
4. Both the maximum term and the credit rate will be set in a manner that is virtually identical to the methods used for Qualified Zone Academy Bonds (QZAB). This is not what APPA recommended and is less than ideal, but workable. We will continue to try to persuade IRS/TD to modify this approach.
5. The elements necessary for a qualified application to request an allocation of CREBs are laid out in detail.
In the Notice, IRS/TD indicate their intention to issue “temporary and proposed” regulations on the CREB program. “Temporary” means they are good for up to three years, and “proposed” means they can be modified by IRS/TD. These regulations are likely to be issued sometime after the first of the year. However, the Notice is provided in order to allow the program to begin on schedule and we encourage interested APPA members to begin the process of developing their applications based on the information in the Notice. The temporary and proposed regulations that are forthcoming will expand on some of the details in the Notice, but are not likely to modify major, substantive elements of the Notice.
