IRS Issues Notice on Section 45 Open-Loop Biomass

Long-Awaited Guidance Addresses Co-Firing and Placement-In-Service Issues
Renewable Energy Update, October 3, 2006
Washington, D.C.

On September 26, 2006, the IRS issued Notice 2006-88 (the “Notice”) to address a number of unsettled questions relating to the application of the Section 45 production tax credit to open-loop biomass facilities. The Notice provides important guidance almost two years after Congress expanded the section 45 production tax credit to open-loop biomass facilities and more than a year after the IRS surprised the industry by refusing to issue private letter rulings under new section 45.

The Notice provides much needed guidance for owners and operators of open-loop biomass facilities on the following key issues:

Co-Firing
Definition of "Facility"
Placement-in-Service.

The IRS also announced that it will not issue any private letter rulings under section 45 with respect to open-loop biomass.

Curt Whittaker, Paul Burkett and Bill Ardinger summarize the Notice and examine its potential impacts on open-loop biomass projects in our most recent Renewable Energy Update. To read the full Update, please click on the link below.

RYP October 2006 Renewable Energy Update (FINAL 10-03-2006).pdf