Internal Revenue Code:Sec. 54. Credit to holders of clean renewable energy bonds.
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Location in Internal Revenue Code
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter A - Determination of Tax Liability
PART IV - CREDITS AGAINST TAX
Subpart H - Nonrefundable Credit to Holders of Certain Bonds
Statute
Sec. 54. CREDIT TO HOLDERS OF CLEAN RENEWABLE ENERGY BONDS.
(a) Allowance of Credit- If a taxpayer holds a clean renewable energy bond
on one or more credit allowance dates of the bond occurring during any
taxable year, there shall be allowed as a credit against the tax imposed
by this chapter for the taxable year an amount equal to the sum of the
credits determined under subsection (b) with respect to such dates.
(b) Amount of Credit-
(1) IN GENERAL- The amount of the credit determined under this
subsection with respect to any credit allowance date for a clean
renewable energy bond is 25 percent of the annual credit determined
with respect to such bond.
(2) ANNUAL CREDIT- The annual credit determined with respect to any
clean renewable energy bond is the product of—
(A) the credit rate determined by the Secretary under paragraph
(3) for the day on which such bond was sold, multiplied by
(B) the outstanding face amount of the bond.
(3) DETERMINATION- For purposes of paragraph (2), with respect to any
clean renewable energy bond, the Secretary shall determine daily or
cause to be determined daily a credit rate which shall apply to the
first day on which there is a binding, written contract for the sale
or exchange of the bond. The credit rate for any day is the credit
rate which the Secretary or the Secretary's designee estimates will
permit the issuance of clean renewable energy bonds with a specified
maturity or redemption date without discount and without interest cost
to the qualified issuer.
(4) CREDIT ALLOWANCE DATE- For purposes of this section, the term
'credit allowance date' means--
(A) March 15,
(B) June 15,
(C) September 15, and
(D) December 15.
Such term also includes the last day on which the bond is outstanding.
(5) SPECIAL RULE FOR ISSUANCE AND REDEMPTION- In the case of a bond
which is issued during the 3-month period ending on a credit allowance
date, the amount of the credit determined under this subsection with
respect to such credit allowance date shall be a ratable portion of
the credit otherwise determined based on the portion of the 3-month
period during which the bond is outstanding. A similar rule shall
apply when the bond is redeemed or matures.
(c) Limitation Based on Amount of Tax- The credit allowed under subsection
(a) for any taxable year shall not exceed the excess of--
(1) the sum of the regular tax liability (as defined in section 26(b))
plus the tax imposed by section 55, over
(2) the sum of the credits allowable under this part (other than
subpart C, section 1400N(1), and this section).
(d) Clean Renewable Energy Bond- For purposes of this section--
(1) IN GENERAL- The term `clean renewable energy bond' means any bond
issued as part of an issue if--
(A) the bond is issued by a qualified issuer pursuant to an
allocation by the Secretary to such issuer of a portion of the
national clean renewable energy bond limitation under
subsection (f)(2),
(B) 95 percent or more of the proceeds of such issue are to be used
for capital expenditures incurred by qualified borrowers for one
or more qualified projects,
(C) the qualified issuer designates such bond for purposes of this
section and the bond is in registered form, and
(D) the issue meets the requirements of subsection (h).
(2) QUALIFIED PROJECT; SPECIAL USE RULES-
(A) IN GENERAL- The term `qualified project' means any qualified
facility (as determined under section 45(d) without regard to
paragraph (10) and to any placed in service date) owned by a
qualified borrower.
(B) REFINANCING RULES- For purposes of paragraph (1)(B), a
qualified project may be refinanced with proceeds of a clean
renewable energy bond only if the indebtedness being refinanced
(including any obligation directly or indirectly refinanced by
such indebtedness) was originally incurred by a qualified
borrower after the date of the enactment of this section.
(C) REIMBURSEMENT- For purposes of paragraph (1)(B), a clean
renewable energy bond may be issued to reimburse a qualified
borrower for amounts paid after the date of the enactment of
this section with respect to a qualified project, but only if--
(i) prior to the payment of the original expenditure, the
qualified borrower declared its intent to reimburse such
expenditure with the proceeds of a clean renewable energy bond,
(ii) not later than 60 days after payment of the original
expenditure, the qualified issuer adopts an official intent to
reimburse the original expenditure with such proceeds, and
(iii) the reimbursement is made not later than 18 months after
the date the original expenditure is paid.
(D) TREATMENT OF CHANGES IN USE- For purposes of paragraph (1)(B),
the proceeds of an issue shall not be treated as used for a
qualified project to the extent that a qualified borrower or
qualified issuer takes any action within its control which causes
such proceeds not to be used for a qualified project. The
Secretary shall prescribe regulations specifying remedial actions
that may be taken (including conditions to taking such remedial
actions) to prevent an action described in the preceding sentence
from causing a bond to fail to be a clean renewable energy bond.
(e) Maturity Limitations-
(1) DURATION OF TERM- A bond shall not be treated as a clean renewable
energy bond if the maturity of such bond exceeds the maximum term
determined by the Secretary under paragraph (2) with respect to such
bond.
(2) MAXIMUM TERM- During each calendar month, the Secretary shall
determine the maximum term permitted under this paragraph for bonds
issued during the following calendar month. Such maximum term shall
be the term which the Secretary estimates will result in the present
value of the obligation to repay the principal on the bond being
equal to 50 percent of the face amount of such bond. Such present
value shall be determined without regard to the requirements of
subsection (l)(6) and using as a discount rate the average annual
interest rate of tax-exempt obligations having a term of 10 years or
more which are issued during the month. If the term as so determined
is not a multiple of a whole year, such term shall be rounded to the
next highest whole year.
(f) Limitation on Amount of Bonds Designated-
(1) NATIONAL LIMITATION- There is a national clean renewable energy
bond limitation of $1,200,000,000.
(2) ALLOCATION BY SECRETARY- The Secretary shall allocate the amount
described in paragraph (1) among qualified projects in such manner as
the Secretary determines appropriate, except that the Secretary may
not allocate more than $750,000,000 of the national clean renewable
energy bond limitation to finance qualified projects of qualified
borrowers which are governmental bodies.
(g) Credit Included in Gross Income- Gross income includes the amount of
the credit allowed to the taxpayer under this section (determined
without regard to subsection (c)) and the amount so included shall be
treated as interest income.
(h) Special Rules Relating to Expenditures-
(1) IN GENERAL- An issue shall be treated as meeting the requirements
of this subsection if, as of the date of issuance, the qualified
issuer reasonably expects--
(A) at least 95 percent of the proceeds of such issue are to be
spent for one or more qualified projects within the 5-year
period beginning on the date of issuance of the clean energy bond,
(B) a binding commitment with a third party to spend at least 10
percent of the proceeds of such issue will be incurred within
the 6-month period beginning on the date of issuance of the clean
energy bond or, in the case of a clean energy bond the proceeds
of which are to be loaned to two or more qualified borrowers,
such binding commitment will be incurred within the 6-month
period beginning on the date of the loan of such proceeds to a
qualified borrower, and
(C) such projects will be completed with due diligence and the
proceeds of such issue will be spent with due diligence.
(2) EXTENSION OF PERIOD- Upon submission of a request prior to the
expiration of the period described in paragraph (1)(A), the Secretary
may extend such period if the qualified issuer establishes that the
failure to satisfy the 5-year requirement is due to reasonable cause
and the related projects will continue to proceed with due diligence.
(3) FAILURE TO SPEND REQUIRED AMOUNT OF BOND PROCEEDS WITHIN 5 YEARS-
To the extent that less than 95 percent of the proceeds of such issue
are expended by the close of the 5-year period beginning on the date
of issuance (or if an extension has been obtained under paragraph (2),
by the close of the extended period), the qualified issuer shall
redeem all of the nonqualified bonds within 90 days after the end of
such period. For purposes of this paragraph, the amount of the
nonqualified bonds required to be redeemed shall be determined in the
same manner as under section 142.
(i) Special Rules Relating to Arbitrage- A bond which is part of an issue
shall not be treated as a clean renewable energy bond unless, with
respect to the issue of which the bond is a part, the qualified issuer
satisfies the arbitrage requirements of section 148 with respect to
proceeds of the issue.
(j) Cooperative Electric Company; Qualified Energy Tax Credit Bond Lender;
Governmental Body; Qualified Borrower- For purposes of this section--
(1) COOPERATIVE ELECTRIC COMPANY- The term `cooperative electric
company' means a mutual or cooperative electric company described in
section 501(c)(12) or section 1381(a)(2)(C), or a not-for-profit
electric utility which has received a loan or loan guarantee under
the Rural Electrification Act.
(2) CLEAN RENEWABLE ENERGY BOND LENDER- The term `clean renewable energy
bond lender' means a lender which is a cooperative which 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 which is controlled by such lender.
(3) GOVERNMENTAL BODY- The term `governmental body' means any State,
territory, possession of the United States, the District of Columbia,
Indian tribal government, and any political subdivision thereof.
(4) QUALIFIED ISSUER- The term `qualified issuer' means--
(A) a clean renewable energy bond lender,
(B) a cooperative electric company, or
(C) a governmental body.
(5) QUALIFIED BORROWER- The term `qualified borrower' means--
(A) a mutual or cooperative electric company described in
section 501(c)(12) or 1381(a)(2)(C), or
(B) a governmental body.
(k) Special Rules Relating to Pool Bonds- No portion of a pooled
financing bond may be allocable to any loan unless the borrower has
entered into a written loan commitment for such portion prior to the
issue date of such issue.
(l) Other Definitions and Special Rules- For purposes of this section--
(1) BOND- The term `bond' includes any obligation.
(2) POOLED FINANCING BOND- The term `pooled financing bond' shall
have the meaning given such term by section 149(f)(6)(A).
(3) PARTNERSHIP; S CORPORATION; AND OTHER PASS-THRU ENTITIES-
(A) IN GENERAL- Under regulations prescribed by the Secretary,
in the case of a partnership, trust, S corporation, or other
pass-thru entity, rules similar to the rules of section 41(g)
shall apply with respect to the credit allowable under
subsection (a).
(B) NO BASIS ADJUSTMENT- In the case of a bond held by a
partnership or an S corporation, rules similar to the rules
under section 1397E(l) shall apply.
(4) BONDS HELD BY REGULATED INVESTMENT COMPANIES- If any clean
renewable energy bond is held by a regulated investment company,
the credit determined under subsection (a) shall be allowed to
shareholders of such company under procedures prescribed by the
Secretary.
(5) RATABLE PRINCIPAL AMORTIZATION REQUIRED- A bond shall not be
treated as a clean renewable energy bond unless it is part of an
issue which provides for an equal amount of principal to be paid by
the qualified issuer during each calendar year that the issue is
outstanding.
(6) REPORTING- Issuers of clean renewable energy bonds shall submit
reports similar to the reports required under section 149(e).
(m) Termination- This section shall not apply with respect to any bond
issued after December 31, 2008.
Sources
2005 - Energy Policy Act of 2005, PL109-058, created this new Subpart H,
and new Section 54. Effective Date- The amendments made by this
section shall apply to bonds issued after December 31, 2005.
Miscellaneous
AMENDMENTS
2006 - Tax Relief and Health Care Act of 2006 (P.L. 109-432)
SEC. 202. CREDIT TO HOLDERS OF CLEAN RENEWABLE ENERGY BONDS.
(a) In General.--Section 54 is amended--
(1) by striking ``$800,000,000'' in subsection (f)(1) and
inserting ``$1,200,000,000'',
(2) by striking ``$500,000,000'' in subsection (f)(2) and
inserting ``$750,000,000'', and
(3) by striking ``December 31, 2007'' in subsection (m) and
inserting ``December 31, 2008''.
EFFECTIVE DATE OF 2006 AMENDMENT
2006 - Tax Relief and Health Care Act of 2006 (P.L. 109-432)
SEC. 202(b)Effective Dates.--
(2) Allocations.--The amendment made by subsection (a)(2)
shall apply to allocations or reallocations after December 31,
2006.
EFFECTIVE DATE
(e) Effective Dates.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to bonds issued
after December 31, 2005.
(2) Subsection (c).--The amendments made by subsection (c)
shall apply to taxable years beginning after December 31,
2005..
References
SECTION REFERRED TO IN OTHER SECTIONS
