Internal Revenue Code:Sec. 54. Credit to holders of clean renewable energy bonds.

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Contents


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
       

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