Internal Revenue Bulletin 2009-16 (PDF rendition): IRS Notices

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Bulletin No. 200
9-16
April 20, 2009
HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
INCOME TAX
Notice 2009–23, page 802.
Qualifying gasification project program.This notice up-
dates the procedures for the allocation of credits for the quali-
fying gasification project program of section 48B of the Code
and announces a beginning of an allocation round of credits
for qualifying gasification projects. Notice 2007–53 clarified,
modified, and amplified.
Notice 2009–24, page 817.
Qualifying advanced coal project program.This notice
updates the procedures for the allocation of credits for the
qualifying advanced coal project program under section 48A
of the Code. The notice also announces the beginning of an
allocation round of credits in the amount of $1.25 billion for
qualifying advanced coal-based generation technology projects
under Phase II of the qualifying advanced coal project program.
Notice 2007–52 clarified, modified, and amplified.
Notice 2009–26, page 833.
This notice provides guidance on the new Build America Bonds
under § 54AA of the Code and the modified Build America Bond
program for Recovery Zone Economic Development Bonds un-
der § 1400U–2 of the Code. The notice also includes guidance
on the initial refundable credit payment procedures, required
elections, and information reporting for these bonds. The no-
tice also solicits public comments on the refundable credit pay-
ment procedures.
Notice 2009–29, page 849.
This notice sets forth the maximum face amount of qualified
energy conservation bonds (“QECBs”) that may be issued by
each state and large local government under section 54D(e)(1)
of the Code. The notice also provides limited regulatory guid-
ance for QECBs.
Notice 2009–30, page 852.
This notice sets forth the maximum face amount of Qualified
Zone Academy Bonds (“QZABs”) that may be issued for each
state for each of the calendar years 2008 and 2009 under
section 54E(c)(2) of the Code. This notice also provides certain
interim guidance for QZABs issued after October 3, 2008.
Rev. Proc. 2009–21, page 860.
Changes to cost-of-living adjustments for 2008 and
2009.This procedure reflects statutory amendments made
by the Tax Extenders and Alternative Minimum Tax Relief Act
of 2008 and the American Recovery and Reinvestment Tax
Act of 2009. The Acts establish amounts that are to be used
in certain sections of the Code in lieu of amounts that are
adjusted annually for inflation. Parts of Rev. Procs. 2007–66
and 2008–66 modified and superseded.
Rev. Proc. 2009–22, page 862.
This procedure provides guidance to individuals who fail to
meet the eligibility requirements of section 911(d)(1) of the
Code because adverse conditions in a foreign country preclude
the individual from meeting those requirements. A current list
of countries for tax year 2008 and the dates those countries
are subject to the section 911(d)(4) waiver is provided.
(Continued on the next page)
Finding Lists begin on page ii.

EMPLOYEE PLANS
Notice 2009–27, page 838.
This notice provides guidance under section 3001 of the Amer-
ican Recovery and Reinvestment Act of 2009 relating to the
premium reduction for individuals who were involuntarily termi-
nated and are electing COBRA continuation coverage under the
group health plan of their former employer.
Notice 2009–31, page 856.
Election and notice procedures for multiemployer plans
undersections204and205ofWRERA.This notice pro-
vides guidance for sponsors of multiemployer defined bene-
fit plans relating to the elections described in sections 204
and 205 of the Worker, Retiree, and Employer Recovery Act of
2008, P.L. 110–458 (WRERA), and on the notice required to
be provided if a plan sponsor makes an election under section
204.
EMPLOYMENT TAX
Notice 2009–27, page 838.
This notice provides guidance under section 3001 of the Amer-
ican Recovery and Reinvestment Act of 2009 relating to the
premium reduction for individuals who were involuntarily termi-
nated and are electing COBRA continuation coverage under the
group health plan of their former employer.
April 20, 20092009–16 I.R.B.

The IRS Mission
Provide Americ
a’s taxpayers top quality service by helping them
understand an
d meet their tax responsibilities and by applying
the tax law with
integrity and fairness to all.
Introduction
The Internal Revenue Bulletin is the authoritative instrument of
the Commissioner of Internal Revenue for announcing official
rulings and procedures of the Internal Revenue Service and for
publishing Treasury Decisions, Executive Orders, Tax Conven-
tions, legislation, court decisions, and other items of general
interest. It is published weekly and may be obtained from the
Superintendent of Documents on a subscription basis. Bulletin
contents are compiled semiannually into Cumulative Bulletins,
which are sold on a single-copy basis.
It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application of
the tax laws, including all rulings that supersede, revoke, mod-
ify, or amend any of those previously published in the Bulletin.
All published rulings apply retroactively unless otherwise indi-
cated. Procedures relating solely to matters of internal man-
agement are not published; however, statements of internal
practices and procedures that affect the rights and duties of
taxpayers are published.
Revenue rulings represent the conclusions of the Service on the
application of the law to the pivotal facts stated in the revenue
ruling. In those based on positions taken in rulings to taxpayers
or technical advice to Service field offices, identifying details
and information of a confidential nature are deleted to prevent
unwarranted invasions of privacy and to comply with statutory
requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned
against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—19
86 Code.
This part i
ncludes rulings and decisions based on provisions of
the Intern
al Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B, Leg-
islation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative Rul-
ings. Bank Secrecy Act Administrative Rulings are issued by
the Department of the Treasury’s Office of the Assistant Secre-
tary (Enforcement).
Part IV
.—Items of General Interest.
This par
t includes notices of proposed rulemakings, disbar-
ment an
d suspension lists, and announcements.
The last Bulletin for each month includes a cumulative index
for the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.
The c
ontents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
For sale by the Superintendent of Documents, U.S.Government Printing Office, Washington, DC 20402.
2009–16 I.R.B.April 20, 2009

April 20, 20092009–16 I.R.B.
Place missing child here.

Part I. Rulings
and Decisions Under the Internal Revenue Code
of 1986
Section 24.—C
hild Tax
Credit
The Service pr
ovides statutory changes to the in-
flation adjus
tments for the value used in determining
the amount of t
he credit that may be refundable for
taxable year
s beginning in 2008 and 2009. See Rev.
Proc. 2009-2
1, page 860.
Section 25A.—Hope and
Lifetime Learning Credits
For taxable years beginning in 2009, the Service
provides statutory changes to the inflation adjust-
ments for the amounts of qualified tuition and related
expenses that are taken into account in determining
the amount of the Hope Scholarship Credit, and for
the amount of a taxpayer’s modified adjusted gross
income that is taken into account in determining the
reductionint
he amount of the Hope Scholarship
Credit otherw
ise available. See Rev. Proc. 2009-21,
page 860.
Section 32.—Earned
Income
The Service provides statutory changes to the in-
flation adjustments to the limitations on the earned in-
come credit for taxable years beginning in 2009. See
Rev. Proc. 2009-21, page 860.
Section 132.—Certain
Fringe Benefits
The Service provides statutory changes to the in-
flation adjustments to the limitations on the exclusion
of income for certain qualified transportation fringe
benefits for t
axable years beginning in 2009. See Rev.
Proc. 2009-21
, page 860.
Section 179.—Election
to Expense Certain
Depreciable Business
Assets
The Service provides statutory changes to the in-
flation adjustments to the aggregate cost of section
179 property that a taxpayer may elect to treat as an
expense for taxable years beginning in 2009. See
Rev. Proc. 2009-21, page 860.
2009–16 I.R.B.801April 20, 2009

Part III. Administrative, Procedural, and Miscellaneous
Qualifying Gasification Project
Program
Notice 2009–23
SECTION 1. PURPOSE
This notice provides additional proce-
dures for the allocation of credits under the
qualifying gasification project program of
§ 48B of the Internal Revenue Code. The
procedures in this notice apply only to the
credits authorized under the amendments
made to § 48B by section 112 of the Energy
Improvement and Extension Act of 2008,
Pub. L. 110–343, 122 Stat. 3765 (October
3, 2008) (“the Act”). Section 112 of the
Act amended § 48B to provide for a second
phase of the qualifying gasification project
program in which $250 million of addi-
tional credits are authorized (“the Phase
II gasification program” and “the Phase II
gasification credit”). To be considered in
the first allocation round under the Phase
II gasification program, applications must
be submitted to the Department of Energy
(“DOE”) on or before November 2, 2009,
and to the Internal Revenue Service (“Ser-
vice”) before March 2, 2010. See section
5 of this notice for additional rules regard-
ing these applications.
Section 48B, as originally enacted, pro-
vided for the first phase of the qualifying
gasification project program and autho-
rized $350 million of credits (“the Phase
I gasification program” and “the Phase I
gasification credit”). The Service intends
to issue guidance in the future regarding
any Phase I gasification credits that are
subsequently forfeited.
SECTION 2. BACKGROUND AND
CHANGES
.01 Section 46 provides that the amount
of the investment credit for any taxable
year is the sum of the credits listed in § 46.
That list includes the qualifying gasifica-
tion project credit.
.02 The qualifying gasification project
credit is provided under § 48B, which was
expanded and modified by section 112 of
the Act.
.03 Section 48B(a) provides that the
qualifying gasification project credit for a
taxable year is an amount equal to (1) 20
percent of the qualified investment (as de-
fined in § 48B(b)) for that taxable year
in qualifying gasification projects (as de-
fined in § 48B(c)(1)) for which the credit
is allocated under § 48B(d)(1)(A), and (2)
30 percent of the qualified investment for
that taxable year in qualifying gasification
projects for which the credit is allocated
under § 48B(d)(1)(B).
.04 The term “qualifying gasification
project” is defined in § 48B(c)(1) as mean-
ing any project that (A) employs gasifi-
cation technology, (B) will be carried out
by an eligible entity (as defined in sec-
tion 3.02 of this notice), and (C) includes
a qualified investment of which an amount
not to exceed $650 million is certified un-
der the qualifying gasification program as
eligible for credit under § 48B. Pursuant
to § 48B(c)(2), gasification technology is
any process that converts a solid or liq-
uid product from coal (as defined in sec-
tion 3.01 of this notice), petroleum residue
(as defined in § 48B(c)(8)), biomass (as
defined in § 48B(c)(4)), or other materials
that are recovered for their energy or feed-
stock value into a synthesis gas composed
primarily of carbon monoxide and hydro-
gen for direct use or subsequent chemical
or physical conversion.
.05 Section 48B(d)(1) provides that (1)
$350 million of credits are to be allocated
to qualifying projects (“Phase I gasifica-
tion projects”), and (2) an additional $250
million of credits are to be allocated to
qualifying projects that include equipment
that separates and sequesters at least 75
percent of such project’s total CO
2
emis-
sions (“Phase II gasification projects”).
.06 Section 48B(d)(4) provides that (i)
highest priority is given to projects with
the greatest separation and sequestration
percentage of total CO
2
emissions, and (ii)
high priority is given to applicant partici-
pants who have a research partnership with
an eligible educational institution (as de-
fined in § 529(e)(5)). The effective date
of section 112 of the Act provides that this
rule applies only to Phase II gasification
projects.
.07 The at-risk rules in § 49 and the
recapture and other special rules in § 50
apply to the qualifying gasification project
credit. Further, the qualifying gasification
project credit generally is allowed in the
taxable year in which the eligible property
(as defined in § 48B(c)(3)) is placed in
service (as defined in section 3.05 of this
notice) by the taxpayer.
.08 Section 48B(f) provides that the
Secretary shall provide for recapturing
the benefit of any credit allowable un-
der § 48B(a) with respect to any project
that fails to attain or maintain the sepa-
ration and sequestration requirements of
§ 48B(d)(1).
.09 Section 48A(h) directs the Secre-
tary to modify the terms of any compet-
itive certification award and any associ-
ated closing agreement where such modi-
fication (i) is consistent with the objectives
of § 48B, (ii) is requested by the recipi-
ent, and (iii) involves moving the project
site to improve the potential to capture and
sequester CO
2
emissions, reduce costs of
transporting feedstock, and serve a broader
customer base. This directive does not ap-
ply if the Secretary determines that the dol-
lar amount of tax credits available to the
taxpayer under § 48B would increase as
a result of the modification or such mod-
ification would result in such project not
being originally certified. In addition, the
Secretary is required to consult with other
relevant Federal agencies, including the
Department of Energy, in considering any
modification under § 48A(h).
.10 Section 48A(d)(5) provides that the
Secretary shall, upon making a certifica-
tion under § 48B(d), publicly disclose the
identity of the applicant and the amount of
the credit certified with respect to such ap-
plicant.
.11 Section 48B(d)(1) provides that the
Secretary, in consultation with the Secre-
tary of Energy, shall establish a qualifying
gasification project program to consider
and award certifications for qualified in-
vestment eligible for credit under § 48B
to qualifying gasification project spon-
sors. The Treasury Department and the
Service established this program in Notice
2006–25, 2006–1 C.B. 609, as modified
and updated by Notice 2007–53, 2007–26
I.R.B. 1474. Pursuant to § 48B(d)(2),
certificates of eligibility may be issued
under the program only during the 10-year
period beginning on October 1, 2005.
.12 Notice 2007–53 provides that the
Service will consider a project under the
April 20, 20098022009–16 I.R.B.

qualifying gasification project program
only if the DOE provides a certification
of feasibility (“DOE certification”) and
ranking (if any) for the project. Under the
qualifying gasification project program, a
taxpayer must submit, for each qualifying
gasification project: (1) an application
for certification by DOE (“application for
DOE certification”), and (2) an applica-
tion for certification under § 48B(d)(1) by
the Service (“application for § 48B certifi-
cation”). Certifications will be issued and
the credit will be allocated by the Service
to projects in annual allocation rounds.
.13 The Phase I gasification pro-
gram under Notice 2006–25 and Notice
2007–53 provided for annual allocation
rounds. The initial allocation round was
conducted in 2006. Anadditional alloca-
tion round was conducted in 2007–08. The
entire Phase I gasification credit amount
of $350 million was allocated in these two
allocation rounds.
.14 This notice provides procedures for
the Phase II gasification program. The
guidance in this notice differs from the
guidance provided in Notices 2006–25 and
2007–53 for the Phase I gasification pro-
gram in a number of respects. The signifi-
cant differences include the following:
(1) Section 3.02 of this notice provides
that the definition of the term “eligible en-
tity” under § 48B(c)(7) includes any per-
son whose application for certification is
principally intended for use in a domestic
project that employs domestic gasification
applications related to transportation grade
liquid fuels.
(2) Section 3.06 provides a definition of
the term “separation and sequestration” for
purposes of § 48B.
(3) Section 4.02(3) provides that a tax-
payer who was allocated a credit under the
Phase I gasification program may re-sub-
mit an application for the same project if
the project is enhanced to meet the addi-
tional requirements for a qualifying project
under the Phase II gasification program.
(4) Section 4.02(8) provides that the
period for submitting the application for
§ 48B certification under Phase II gasifi-
cation program for the 2009–10 allocation
round begins on March 13, 2009, and ends
on March 1, 2010.
(5) Section 4.02(10) provides that
the deadline for taxpayers to submit ap-
plications for DOE certification for the
2009–10 allocation round is November
2, 2009, that the DOE will rank certified
projects, and that the due date for the DOE
to provide the Service with the certifica-
tion and ranking of these projects is March
1, 2010.
(6) The information required to be in-
cluded in the application for DOE cer-
tification is modified. Section 5.02 re-
quires submission of additional informa-
tion regarding CO
2
separation and seques-
tration. In addition, the program policy
factors listed in Appendix B have been
modified.
(7) Section 5.03 modifies the informa-
tion required to be included in the applica-
tion for § 48B certification.
(8) Section 6.04 provides for recaptur-
ing the benefit of any credit allowable un-
der the Phase II gasification program with
respect to any project that fails to attain or
maintain the separation and sequestration
requirements of § 48B(d)(1)(B).
(9) Section 9.01 provides that the Ser-
vice will announce the results of each al-
location round as required by § 48A(d)(5).
Accordingly, the notice does not include a
request that taxpayers submit with the ap-
plication for § 48B certification a decla-
ration consenting to the disclosure by the
Service of certain return information if the
taxpayer is awarded an allocation of quali-
fying gasification project credit or provide
the form of the declaration, as set forth in
Appendix C of Notice 2007–53.
SECTION 3. DEFINITIONS
The following definitions apply for pur-
poses of § 48B and this notice:
.01Coal. Section 48B(c)(6) defines the
term “coal” as meaning anthracite, bitumi-
nous coal, subbituminous coal, lignite, and
peat. Coal includes waste coal (that is, us-
able material that is a byproduct of the pre-
vious processing of anthracite, bituminous
coal, subbituminous coal, lignite, or peat).
Examples of waste coal include fine coal
of any of the listed ranks, coal of any of the
listed ranks obtained from a refuse bank
or slurry dam, anthracite culm, bituminous
gob, and lignite waste.
.02Eligible entity. Section 48B(c)(7)
defines “eligible entity” as meaning any
person whose application for certifica-
tion is principally intended for use in a
domestic project that employs domestic
gasification applications related to chem-
icals, fertilizers, glass, steel, petroleum
residues, forest products, agriculture (in-
cluding feedlots and dairy operations),
and transportation grade liquid fuels. For
purposes of § 48B, a qualifying gasifica-
tion project is carried out by an eligible
entity if the project supplies more than 50
percent of the thermal output in British
thermal units (“Btu”) from the gasification
process in the form of synthesis gas for
direct use or subsequent chemical or phys-
ical conversion in an application related
to one or more of the industries listed in
§ 48B(c)(7) or if more than 50 percent of
the fuel input in Btu to the gasification
process is supplied from one or more of
the industries listed in § 48B(c)(7).
.03Total synthesis gas capacity.The
total synthesis gas capacity of a project
is the total MMBtu (one million Btu) per
hour of the synthesis gas (higher heat-
ing value (HHV)) at the gasifier outlet of
the project. The synthesis gas must be
composed primarily of carbon monoxide
and hydrogen for direct use or subsequent
chemical or physical conversion.
.04Fuel Input.
(1)In general. The term “fuel input”
means, with respect to any type of fuel, the
amount of such fuel used during normal
plant operations. The amounts of the fuel
used are measured (i) in Btu on an energy
input basis and (ii) pursuant to applicable
standards prescribed by the American So-
ciety for Testing and Materials (“ASTM”).
For example, § 48B(d)(3)(D) provides that
the fuels identified in § 48B(c)(2) will at
all times cumulatively comprise at least 90
percent of the total fuels (fuels identified
in § 48B(c)(2) and any other fuel input)
required by the project. This requirement
is satisfied if, after completion and during
normal plant operations, the fuels identi-
fied in § 48B(c)(2) will cumulatively com-
prise at least 90 percent of the project’s to-
tal fuels measured in Btu on an energy in-
put basis and pursuant to applicable ASTM
standards.
(2)Only normal plant operations taken
into account. Only fuel used during nor-
mal plant operations is taken into account
for purposes of § 48B. Normal plant op-
erations are operations other than during
periods of initial plant certification, plant
startup, plant shutdown, interconnected
gasifier(s) shutdown for gasification sys-
tem maintenance, or interruptions of the
supply of fuels identified in § 48B(c)(2)
to the project resulting from an event of
2009–16 I.R.B.803April 20, 2009

force majeure (including an act of God,
war, strike, or other similar event beyond
the control of the taxpayer). For exam-
ple, the fuel input during the initial plant
certification may consist entirely of nat-
ural gas or other fuels not identified in
§ 48B(c)(2) because fuel used during ini-
tial plant certification is disregarded in
determining whether the requirement of
§ 48B(d)(3)(D) to use 90 percent of the
fuels identified in § 48B(c)(2) is satisfied.
.05Placed In Service. For purposes
of § 48B, property is placed in service in
the taxable year in which the property is
placed in a condition or state of readiness
and availability for a specifically assigned
function.See§ 1.46–3(d)(1)(ii) of the In-
come Tax Regulations. Thus, a qualifying
gasification project or eligible property (as
defined in § 48B(c)(3)) that is a part of the
project is placed in service in the taxable
year in which the project is placed in a con-
dition or state of readiness and availability
for producing synthesis gas from the feed-
stocks identified in § 48B(c)(2).
.06Separation and Sequestration.The
term “separation and sequestration” refers
to the separation and capture of a project’s
CO
2
emissions, and the placement of the
captured CO
2
into a repository in which
the CO
2
will remain permanently se-
questered.
SECTION 4. QUALIFYING
GASIFICATION PROJECT PROGRAM
.01In General. The Service will con-
sider a project under the Phase II gasifi-
cation program only if the DOE provides
a certification (“DOE certification”) and
ranking (if any) for the project. Accord-
ingly, a taxpayer must submit, for each
Phase II gasification project: (1) an ap-
plication for certification by DOE that the
project is technically and economically
feasible (“application for DOE certifica-
tion”), and (2) an application for certifi-
cation under § 48B(d)(1) by the Service
(“application for § 48B certification”).
Both applications may be submitted only
during the Phase II application period be-
ginning on March 13, 2009 and ending
on March 12, 2012. The Service will
issue certifications and allocate credits
to projects in annual allocation rounds.
The first allocation round for Phase II
gasification program will be conducted in
2009–10. If necessary, additional alloca-
tion rounds will be conducted in 2010–11,
and 2011–12.
.02Program Specifications.
(1) The Service determines the amount
of the Phase II gasification credits allo-
cated to a qualifying gasification project
at the time the Service accepts the applica-
tion for § 48B certification for that project
in accordance with section 4.02(12) of this
notice (see section 5 of this notice for the
requirements applicable to the application
for DOE certification and the application
for § 48B certification).
(2) The aggregate amount of the Phase
II gasification credit is $250 million, and
the certification for a Phase II gasification
project cannot applyto more than $650
million of the qualified investment in the
project. Thus, the maximum amount of the
Phase II gasification credit that will be al-
located to a project is $195 million. This
limitation applies to a qualifying project,
and rather than to the taxpayer holding in-
terests in the project. Therefore, the num-
ber or type of entities holding ownership
interests in a project does not change the
maximum amount of the Phase II gasifi-
cation credit that may be allocated to that
project. Conversely, a taxpayer holding
interests in multiple projects may be al-
located more than the maximum Phase II
gasification credit that may be allocated to
asingleproject.
(3) A taxpayer who was allocated a
Phase I gasification credit for a project
maysubmitanapplicationforaPhaseII
gasification credit for the same project if
the project meets the additional require-
ments for a qualifying project under the
Phase II gasification program. Thus, the
project must separate and sequester at least
75 percent of the project’s total CO
2
emis-
sions.
(a) The Phase II gasification credit will
be allowed with respect to the taxpayer’s
qualified investment in the project only
to the extent such investment exceeds the
qualified investment with respect to which
the Phase I gasification credit is allowable
but does not exceed $650 million. Thus,
if the qualified investment in a project is
$700 million and the Phase I gasification
credit was allowable with respect to $500
million of the qualified investment, the
Phase II gasification credit will be allowed
with respect to only $150 million ($650
million - $500 million) of the qualified in-
vestment. The Phase I gasification credit
allocated to a project is not allowable for
purposes of this section 4.02(3) to the ex-
tent the right to claim such credit has been
irrevocably waived in such manner as the
Commissioner may require.
(b) The Phase II gasification credit al-
located to a project will be forfeited if the
taxpayer fails to place the project in service
by the taxpayer within 7 years of the date
of acceptance of application under section
4.02(11) of this notice. The allocation of
a Phase II gasification credit does not de-
lay the taxpayer’s placed-in-service obli-
gations with respect to any Phase I gasi-
fication credit previously allocated to the
project. Accordingly, the Phase I gasifi-
cation credit allocate to the project will be
forfeited if the taxpayer fails to place the
project in service by the taxpayer within
7 years of the date of acceptance of appli-
cation under the Phase I gasification pro-
gram.
(4) DOE will rank the certified projects
in descending order (that is, first, second,
third, etc.) and the amount available for
allocation will be allocated as follows in
the 2009–2010 allocation round:
(a) If the requested allocation of credit
for projects that DOE has certified does not
exceed the amount available for allocation,
each certified project will be allocated the
full amount of credit requested.
(b) If the requested allocation of credit
for projects that DOE has certified exceeds
the amount available for allocation, the
amount available for allocation will be al-
located as follows:
(i) The project receiving the highest
ranking (that is, first) will be allocated
the full amount of credit requested (but
not exceeding the amount available for
allocation) before any credit is allocated
to a lower-ranked project. The amount
available for allocation is reduced by the
amount of credit so allocated and only the
remainder is available for allocation to a
lower-ranked project.
(ii) Second and lower-ranked projects
will be entitled to similar priority in the al-
location of credit and allocations to such
projects will similarly reduce the remain-
der of the amount available for allocation
until the amount available for allocation is
exhausted.
(5) If the amount available for alloca-
tion is not fully allocated in the 2009–10
allocation round, similar allocation rounds
will be conducted in 2010–11 and 2011–12
April 20, 20098042009–16 I.R.B.

until the available amount is fully allo-
cated. The results of each allocation round
will be announced. See section 9.01 of this
notice for further information about this
announcement.
(6) If the same project would otherwise
be allocated credit under both the qualify-
ing gasification project program of § 48B
and the qualifying advanced coal project
program of § 48A, the following rules ap-
ply:
(a) The qualifying gasification project
credit may not be allocated to the project
with respect to any qualified investment
under § 48B for which a qualifying ad-
vanced coal project credit is allowed under
§48A;and
(b) The qualifying gasification project
credit may be allocated to the project with
respect to the qualified investment under
§ 48B for which a qualifying advanced
coal project credit is not allowed under
§48A.
(7) For each allocation round, there will
be an annual application period during
which a taxpayer may file its application
for § 48B certification. The Service will
consider a project in an allocation round
only if the application for § 48B certifica-
tion for the project is submitted during the
application period for that round and the
DOE provides the DOE certification and
the DOE ranking (if any) for the project
before the end of thatapplication period.
(8) For the 2009–10 allocation round,
the application period for § 48B certifica-
tion begins on March 13, 2009, and ends
on March 1, 2010, and any completed ap-
plication for § 48B certification received
by the Service after March 12, 2009, and
before March 2, 2010, will be deemed to
be submitted by the taxpayer on March 1,
2010. For the 2010–11 allocation round
(if necessary), the application period for
§ 48B certification begins on March 2,
2010, and ends on March 1, 2011, and any
completed application for § 48A certifica-
tion received by the Service after March 1,
2010, and before March 2, 2011, will be
deemed to be submitted by the taxpayer on
March 1, 2011. For the 2011–12 allocation
round (if necessary), the application period
for § 48A certification begins on March 2,
2011, and ends on March 1, 2012, and any
completed application for § 48A certifica-
tion received by the Service after March 1,
2011,andbeforeMarch2,2012,willbe
deemed to be submitted by the taxpayer on
March 1, 2012.
(9) For purposes of this notice, an appli-
cation that is submitted by U.S. mail will
be treated as received by the Service on
the date of the postmark and an application
submittedbyaprivatedelivery service will
be treated as received by the Service on the
date recorded or the date marked in accor-
dance with § 7502(f)(2)(C).
(10) See section 5.02 of this notice and
Appendix B to this notice for the informa-
tion to be submitted to the DOE in an ap-
plication for DOE certification. Appendix
B to this notice also provides the instruc-
tions and address for filing the application
for DOE certification. The DOE will de-
termine the technical and economic feasi-
bility of the project and, if the project is
determined to be feasible, will provide a
DOE certification for the project to the Ser-
vice. If the DOE certifies two or more
projects, the DOE will rank each of the
projects it certifies (for example, first, sec-
ond, third, etc.) relative to other certi-
fied projects. If an application for DOE
certification is postmarked on or before
October 31 of a calendar year, the DOE
will determine the feasibility of the project
and (for projects determined to be feasi-
ble) provide the DOE certification and the
DOE ranking (if any) to the Service by
March 1 of the following calendar year.
Thus, after application of § 7503, relating
to the time for performance of acts when
the last day falls on a Saturday, Sunday,
or legal holiday, applications for DOE cer-
tificationmustbepostmarkedonorbe-
fore November 2, 2009, to be considered
in the 2009–10 allocation round, on or be-
fore November 1, 2010, to be considered
in the 2010–11 allocation round, and on or
before November 1, 2011, to be considered
in the 2011–12 allocation round.
(11) By April 30 of the calendar year
inwhichanapplicationfor§48Bcertifi-
cation is deemed to be submitted (as de-
termined under section 4.02(9) of this no-
tice), the Service will accept or reject the
taxpayer’s application for § 48B certifica-
tion and will notify the taxpayer, by letter,
of its decision.
(12) A taxpayer that receives an accep-
tance letter under section 4.02(11) of this
notice has 7 years from the date of the ac-
ceptance letter to place the project in ser-
vice and if the project is not placed in ser-
vice by the end of that period then the ac-
ceptance letter is void.
(13) If the taxpayer’s application for
§ 48B certification is accepted, the accep-
tance letter will state the amount of credit
allocated to the project and the amount of
qualified investment that is certified as el-
igible for the credit. If a credit is allocated
to a taxpayer’s project, the taxpayer will
be required to execute a closing agreement
in the form set forth in Appendix A to this
notice. By June 30 of the calendar year in
which an application for § 48B certifica-
tion is accepted (July 2 after application of
§ 7503 for applications accepted in 2012),
the taxpayer must execute and return the
closing agreement to the Service at the ap-
propriate address listed in section 5.04 of
this notice or listed in later guidance pub-
lished in the Internal Revenue Bulletin.
The Service will execute and return the
closing agreement to the taxpayer by Au-
gust 31 of such calendar year. The ex-
ecuted closing agreement applies only to
the accepted taxpayer. Accordingly, any
successor in interest must execute a new
closing agreement with the Service no later
than the due date (including extensions) of
the successor in interest’s Federal income
tax return for the taxable year in which the
transfer occurs. If the successor in interest
does not execute a new closing agreement,
the following rules apply:
(a) In the case of an interest acquired
at or before the time the qualifying gasi-
fication project is placed in service, any
credit allocated to the project (including
any credit allocated under the Phase I gasi-
fication program) will be fully forfeited
(and rules similar to the recapture rules
of § 50(a) apply with respect to qualified
progress expenditures); and
(b) In the case of an interest acquired
after the qualifying gasification project is
placed in service, the project ceases to be
investment credit property and the recap-
ture rules of § 50(a) (and similar rules with
respect to qualified progress expenditures)
apply.
(14) The closing agreement relating to
a credit allocation may be modified only if
the modification is consistent with the ob-
jectives of the qualifying gasification pro-
gram, is requested by the taxpayer that re-
ceived the credit allocation, involves mov-
ing the project site to improve the potential
to capture and sequester CO
2
emissions,
reduce costs of transporting feedstock, and
2009–16 I.R.B.805April 20, 2009

serve a broader customer base. The Ser-
vice will not modify aclosing agreement
if the dollar amount of tax credit avail-
able to the taxpayer under § 48B would
increase as a result of the modification or
if the project would not have been origi-
nally certified had such modification been
included in the taxpayer’s application. In
considering such modification, the Service
will consult with the DOE.
SECTION 5. APPLICATIONS FOR
CERTIFICATIONS
.01In General. An application for
§ 48B certification and a separate ap-
plication for DOE certification must be
submitted for each qualifying gasifica-
tion project. If an application for DOE
certification does not include all of the in-
formationrequiredbysection5.02ofthis
notice and meet the requirements in sec-
tions 6.01 and 6.02 of this notice, the DOE
may decline to accept the application. If
an application for §48B certification does
not include all of the information listed in
section 5.03 of this notice and meet the
requirements in sections 6.01 and 6.02
of this notice, the application will not be
accepted by the Service.
.02Information Required in the Appli-
cation for DOE Certification. An applica-
tion for DOE certification must include all
of the information requested in Appendix
B to this notice and all of the following:
(1) The name, address, and taxpayer
identification number of the taxpayer. If
the taxpayer is a member of an affiliated
group filing consolidated returns, also pro-
vide the name, address, and taxpayer iden-
tification number of the common parent of
the group.
(2) The name and telephone number of
a contact person.
(3) The name and address (or other
unique identifying designation) of the
qualifying gasification project.
(4) A statement specifying the projected
placed-in-service date of the qualifying
gasification project.
(5) The estimated total cost of the
project and the estimated total qualified
investment in the eligible property that
will be part of the project.
(6) The amount of the qualifying gasi-
fication project credit requested for the
project. The amount requested must not
exceed $195 million (the amount permit-
ted under § 48B(a) and (c)(1)(C)).
(7) If the taxpayer is or will be request-
ing an amount of the qualifying gasifica-
tion project credit under § 48A for the
same project, a statement specifying the
amount of credit the taxpayer is or will be
requesting under § 48A.
(8) The exact total synthesis gas capac-
ity(asdefinedinsection3.03ofthisno-
tice) of the project.
(9) A statement specifying whether the
project is entitled to priority for separa-
tion and sequestration of more than 75%
of such project’s total CO
2
emissions or
having a research partnership with an eli-
gible educational institution (as defined in
§ 529(e)(5)) and, if entitled to priority, a
statement identifying which of these prior-
ities apply to the project.
(10) Documentation or other evidence
establishing that the taxpayer is financially
viable without the receipt of additional
federal funding associated with the quali-
fying gasification project.
.03Information To Be Included in the
Application for § 48B Certification.An
application for § 48B certification must in-
clude all of the following:
(1) The name, address, and taxpayer
identification number of the taxpayer. If
the taxpayer is a member of an affiliated
group filing consolidated returns, also pro-
vide the name, address, and taxpayer iden-
tification number of the common parent of
the group.
(2) The name, telephone number, and
fax number of a contact person. For such
person, attach a properly executed power
of attorney, preferably on Form 2848,
Power of Attorney and Declaration of
Representative.
(3) One paper copy and one electronic
version on a floppy disc or a CD of the
completed application for DOE certifica-
tion submitted with respect to the project
in accordance with section 5.02 of this no-
tice.
(4) If the Phase I gasification credit was
allocated to the project, the estimated to-
tal cost of the Phase I project and the esti-
mated total qualifying investment in the el-
igible property (as represented in the appli-
cation for the Phase I gasification credit),
and the amount of the allocated Phase I
gasification credit.
.04Instructions and Address for Fil-
ing § 48B Application. One paper copy
and one electronic version on a floppy
disc or a CD of the application for § 48B
certification must be submitted. Appli-
cations for § 48B certification should be
marked: SECTION 48B APPLICATION
FOR CERTIFICATION. There is no user
fee for these applications.
(1) Applications submitted by U.S. mail
must be sent to:
Internal Revenue Service
Industry Director, Natural Resources
and Construction
Attn: Executive Assistant
1919 Smith Street
Stop HOU 1000
Houston, TX 77002
Applications submitted by a private de-
livery service must be sent to:
Internal Revenue Service
Industry Director, Natural Resources
and Construction
Attn: Executive Assistant
1919 Smith Street, Floor P2
Stop HOU 1000
Houston, TX 77002
(2) Applications may also be hand de-
livered Monday through Friday between
the hours of 8 a.m. and 4 p.m. Central time
to:
Internal Revenue Service
Industry Director, Natural Resources
and Construction
Attn: Executive Assistant
1919 Smith Street, Floor P2
Stop HOU 1000
Houston, TX 77002
SECTION 6. OTHER REQUIREMENTS
.01Signature. Each submission under
section 5 of this notice must be signed and
dated by the taxpayer. A stamped signa-
ture or faxed signature is not permitted.
.02Penalties of Perjury Statement.
(1) Each submission under section 5 of
this notice must be accompanied by the
following declaration: “Under penalties of
perjury, I declare that I have examined this
submission, including accompanying doc-
uments, and, to the best of my knowledge
and belief, all of the facts contained herein
are true, correct, and complete.”
(2) The declaration must be signed and
dated by the taxpayer. The person sign-
April 20, 20098062009–16 I.R.B.

ing for the taxpayer must have personal
knowledge of the facts. Further, the decla-
ration must be signed by an officer on be-
half of a corporation, a general partner on
behalf of a state-law partnership, a mem-
ber-manageronbehalfofalimitedliabil-
ity company, a trustee on behalf of a trust,
and the proprietor in the case a sole pro-
prietorship. If the taxpayer is a member of
an affiliated group filing consolidated re-
turns, the declaration also must be signed
by a duly authorized officer of the common
parent of the group. A stamped signature
or faxed signature is not permitted.
.03Significant Change in Plans.The
Service must be informed if the plans
for the project change in any significant
respect from the plans set forth in the
applications for § 48B or DOE certifica-
tion. Except as otherwise provided under
§ 48A(h), any significant change to the
plans set forth in the applications will have
the following effects:
(1)IftheServiceisinformedofthe
change after the date on which the appli-
cations for DOE certification were due
for the allocation round under section
4.02(10) of this notice and before the
Service accepts or rejects the taxpayer’s
application for § 48Bcertification under
section 4.02(11) of this notice, the Service
will not consider the project during the
allocation round; and
(2) Any acceptance provided by the
Service and any allocation or certification
based on that acceptance will be void un-
less the Service is informed of the change
before the date on which the acceptance
is provided under section 4.02(11) of this
notice.
.04Failure to Capture and Sequester
CO
2
Emissions. The Phase II gasification
credit allocated to a project will be recap-
tured if, at any time during the applicable
recovery period (as defined in § 168(c))
for such project, the project fails to attain
or maintain the separation and sequestra-
tion requirements for such project under
§48B(d)(1)(B).
.05Effect of an Acceptance or Alloca-
tion. An acceptance or allocation by the
Service under this notice is not a deter-
mination that a project qualifies for the
qualifying gasification project credit under
§ 48B. The Service may, upon examina-
tion (and after any appropriate consulta-
tion with DOE), determine that the project
does not qualify for this credit.
.06No Right to a Conference or Appeal.
A taxpayer does not have a right to a con-
ference relating to any matters under this
notice. Further, a taxpayer does not have
a right to appeal the decisions made under
this notice (including the acceptance or re-
jection of the application for DOE or § 48B
certification or the amount of credit allo-
cated to the project) to an Associate Chief
Counsel or any other official of the Ser-
vice.
.07DOE Debriefings. Although a tax-
payer does not have a right to a conference
relating to any matters under this notice,
the DOE will offer debriefings to all ap-
plicants that submitted an application for
DOE certification. The debriefing will be
held by the DOE after the Service has ac-
cepted the applications for § 48B certifica-
tion (as determined under section 4.02(11)
of this notice). The sole purpose of the
debriefing is to enable applicants to de-
velop better proposals in future allocation
rounds by providing DOE’s review of the
strengths and weaknesses of their applica-
tion for DOE certification. All requests for
debriefings must be submitted to the DOE
within 30 days of receipt of the Service’s
decision to accept or reject the application.
SECTION 7. REDUCTION OR
FORFEITURE OF ALLOCATED
CREDITS
.01 Under the closing agreement set
forthinAppendixAtothisnotice,the
qualifying gasification project credit allo-
cated under section 4 of this notice will be
reduced or forfeited in certain situations.
A taxpayer must notify the Service of the
amount of any reduction or forfeiture re-
quired under the closing agreement. This
notification must be sent to the appropriate
addresslistedinsection5.04ofthisnotice
or listed in later guidance published in the
Internal Revenue Bulletin.
.02 The amount of any reduction or for-
feiture of the allocated credit will be re-
turned and included in the aggregate credit
remaining to be allocated in the allocation
round following the reduction or forfei-
ture. If the reduction or forfeiture occurs
after the 2011–12 allocation round, future
guidance will prescribe procedures appli-
cable to applications for certification with
respect to the amount of returned credit.
SECTION 8. QUALIFIED PROGRESS
EXPENDITURES
.01 Section 48B(b)(3) provides that
rules similar to the rules of § 46(c)(4)
and (d) (as in effect on the day before the
enactment of the Revenue Reconciliation
Act of 1990) shall apply for purposes of
§ 48B. Former §§ 46(c)(4) and 46(d) pro-
vided the rules for claiming the investment
credit on qualified progress expenditures
(as defined in former § 46(d)(3)) made
by a taxpayer during the taxable year for
the construction of progress expenditure
property (as defined in former § 46(d)(2)).
.02 In the case of self-constructed prop-
erty (as defined in former § 46(d)(5)(A)),
former § 46(d)(3)(A) defined qualified
progress expenditures to mean the amount
that is properly chargeable (during the
taxable year) to capital account with re-
spect to that property. With respect to
a qualifying gasification project that is
self-constructed property, amounts paid or
incurred are chargeable to capital account
at the time and to the extent they are prop-
erly includible in computing basis under
the taxpayer’s method of accounting (for
example, after applying the requirements
of § 461, including the economic perfor-
mance requirement of § 461(h)).
.03 To claim the qualifying gasification
project credit on the qualified progress ex-
penditures paid or incurred by a taxpayer
during the taxable year for construction of
a qualifying gasification project, the tax-
payer must make an election under the
rules set forth in § 1.46–5(o) of the In-
come Tax Regulations. The taxpayer may
not make the qualified progress expendi-
tures election for a qualifying gasification
project until the taxpayer has received an
acceptance letter for the project under sec-
tion 4.02(11) of this notice.
.04 If a taxpayer makes the qualified
progress expenditures election pursuant to
section 8.03 of this notice, rules similar
to the recapture rules in § 50(a)(2)(A)–(D)
apply. In addition to the cessation events
listed in § 50(a)(2)(A), examples of other
events that will cause the project to cease
being a qualifying gasification project are:
(1) Failure to place the project in service
within 7 years from the date of the accep-
tance letter under section 4.02(11) of this
notice;
(2) A significant change to the plans for
the project as set forth in the applications
2009–16 I.R.B.807April 20, 2009

for § 48B and DOE certification if, under
section 6.03 of this notice, the Service’s
acceptance of the project is void as a result
of the change; or
(3) Failure of the project, at any time
during the applicable recovery period (as
defined in § 168(c)) for such project, to
attain or maintain the separation and se-
questration of CO
2
emissions required by
§ 48B(d)(1)(B).
SECTION 9. DISCLOSURE OF
INFORMATION
.01Announcement. Section 48A(d)(5)
provides that the Secretary shall, upon
making a certification under § 48A(d) and
§ 48B(d), publicly disclose the identity of
the applicant and the amount of the credit
certified with respect to such applicant.
Accordingly, the Service intends to pub-
lish the results of the allocation process,
and disclose the following return informa-
tion in the event a qualifying gasification
project credit is allocated to the taxpayer’s
project: (a) the name of the taxpayer and
(b) the amount of the qualifying gasifica-
tion project credit allocated to the project.
.02In general. An application for DOE
certification, an application for § 48B cer-
tification, any other documentation sub-
mitted by the taxpayer pursuant to section
5.02 of this notice, and any documenta-
tion generated by the Service or the DOE
as part of this process are return informa-
tion subject to § 6103. Except for the items
of information that § 48A(d)(5) authorizes
the Service to make available to the public,
the other material remains the applicant’s
confidential return information, which is
exempt from disclosure under the Freedom
of Information Act (“FOIA”), 5 U.S.C.
§ 552(b)(3), in conjunction with § 6103.
Other FOIA exemptions may also apply.
For example, FOIA includes exemptions
for trade secrets and commercial or fi-
nancial information (5 U.S.C. 552(b)(4)),
as well as personal information (5 U.S.C.
552(b)(6)).
.03FOIA requests. Anyone interested
in submitting a request for records under
the FOIA with respect to the qualifying
gasification project program under § 48B
should direct a request that conforms to
the Service’s FOIA regulations, found
at 26 C.F.R. § 601.702, to the following
address:
IRS FOIA Request
Baltimore Disclosure Office
Room 940
31 Hopkins Plaza
Baltimore, MD 21201
SECTION 10. EFFECT ON OTHER
DOCUMENTS
Notice 2007–53 is clarified, modified,
and amplified.
SECTION 11. EFFECTIVE DATE
This notice is effective March 13, 2009.
SECTION 12. PAPERWORK
REDUCTION ACT
The collection of information contained
in this notice has been reviewed and ap-
proved by the Office of Management and
Budget in accordance with the Paperwork
Reduction Act (44 U.S.C. § 3507) under
control number 1545–2002.
An agency may not conduct or sponsor,
and a person is not required to respond
to, a collection of information unless the
collection of information displays a valid
OMB control number.
The collections of information in this
notice are in sections 5, 6, 8, and Appen-
dix B of this notice. This information is
requiredtoobtainanallocationofquali-
fying gasification project credit. This in-
formation will be used by the Service to
verify that the taxpayer is eligible for the
qualifying gasification project credit. The
collection of information is required to ob-
tain a benefit. The likely respondents are
business or other for-profit institutions.
The estimated total annual reporting
burden is 1,700 hours.
The estimated annual burden per re-
spondent varies from 50 to 125 hours, de-
pending on individual circumstances, with
an estimated average of 85 hours. The es-
timated number of respondents is 20.
The estimated annual frequency of re-
sponses is on occasion.
Books or records relating to a collection
of information must be retained as long
as their contents may become material in
the administration of any internal revenue
law. Generally, tax returns and tax return
information are confidential, as required
by 26 U.S.C. § 6103.
SECTION 13. DRAFTING
INFORMATION
The principal author of this notice is
Jennifer C. Bernardini of the Office of
Associate Chief Counsel (Passthroughs
& Special Industries). For further in-
formation regarding this notice, con-
tact Jennifer C. Bernardini at (202)
622–3110 (not a toll-free call). For further
information regarding the application for
§ 48B certification, contact Tina Meaux,
Executive Assistant, Office of the
Industry Director, Natural Resources and
Construction, at (713) 209–4074 (not a
toll-free number).
April 20, 20098082009–16 I.R.B.

APPENDIX A
CLOSING AGREEMENT
Under § 7121 of the Internal Revenue Code, [insert taxpayer’s name, address, and identifying number] (“Taxpayer”) and the
Commissioner of Internal Revenue (“Commissioner”) make the following closing agreement:
WHEREAS:
1. On or before March [insert date and year], Taxpayer submitted to the Internal Revenue Service (“Service”), an application
for certification under the Phase II gasification program described in Notice 2009–23 (“Application for § 48B Certification”);
2. Taxpayer’s Application for § 48B Certification is for the qualifying gasification project (the“Project”) described below—
(1) The Project will be located at [insert address or other identifying designation];
(2) The Project will have a total synthesis gas capacity (as definedin section 3.03 of Notice 2009–23) of at least [insert number]
total MMBtu per hour of synthesis gas. The synthesis gas is composed primarily of carbon monoxide and hydrogen for direct use
or subsequent chemical or physical conversion;
(3) The fuels identified in § 48B(c)(2) will at all times cumulatively comprise at least 90 percent of the total fuel input (as defined
in section 3.04(1) of Notice 2009–23 and including fuels identified in § 48B(c)(2) and any other fuel input) required by the Project
for normal plant operations (as defined in section 3.04(2) of Notice 2009–23) for the production of chemical feedstocks, liquid
transportation fuels, or co-production of electricity; and
3. On [insert date of acceptance letter issued under section 4.02(11) of Notice 2009–23], the Service accepted Taxpayer’s Ap-
plication for § 48B Certification for the Project and allocated a qualifying gasification project credit under § 48B in the amount of
$[insert number] to the Project.
NOW IT IS HEREBY DETERMINED AND AGREED FOR FEDERAL INCOME TAX PURPOSES THAT:
1. The total amount of the qualifying gasification project credit to be claimed for the Projectunder § 48B(a) must not exceed
$[insert the number in WHEREAS clause #3].
2. If the Project is not placed in service by Taxpayer within 7 years of [insert the date in WHEREASclause #3], the qualifying
gasification project credit in the amount of$[insert the number in WHEREAS clause #3] allocated to the Project is fully forfeited.
3. If the Project fails, at any time during the applicable recovery period (as definedin§168(c))forsuchproject,toattainor
maintain the separation and sequestration of CO
2
emissions required by § 48B(d)(1)(B), thequalifying gasification project credit
in the amount of $[insert the number in WHEREAS clause #3] allocated to the Project is fully forfeited.
4. If the plans for the Project change in any significant respectfrom the plans set forth in the application for DOE certification
(as defined in section 5.02 of Notice 2009–23)andtheApplicationfor§48BCertification(asdefinedinsection5.03ofNotice
2009–23) and, under section 6.03 of Notice 2009–23, the acceptance of Taxpayer’s Application for § 48B Certification on [insert the
date in WHEREAS clause #3] is void, the qualifying gasification project credit in the amount of $[insert the number in WHEREAS
clause #3] allocated to the Project is fully forfeited.
5. (1) If the Project fails to use gasification technology as defined in § 48B(c)(2) or is not carried out by an eligible entity
(as defined in section 3.02 of Notice 2009–23), the qualifying gasification project credit in the amount of $[insert the number in
WHEREAS clause #3] allocated to the Project is fully forfeited.
(2) If, at any time, the fuels identifiedin § 48B(c)(2) with respect to the gasification technology for the Project do not cumu-
latively comprise at least 90 percent of the total fuel input (as defined in section 3.04(1) of Notice 2009–23 and including fuels
identified in § 48B(c)(2) and any other fuel input) required by the Project for normal plant operations(as defined in section 3.04(2)
of Notice 2009–23) for the production of chemical feedstocks, liquid transportation fuels, or co-production of electricity, the Project
ceases to be investment credit property and the recapture rules of § 50(a) apply.
6. Taxpayer will not claim the qualifyingadvanced coal project credit under § 48A for any qualified investment for which the
qualifying gasification projectcredit is allowed under § 48B.
7. If Taxpayer elects to claim the qualifying gasification projectcredit on the qualified progress expenditures paid or incurred
by Taxpayer during the taxable year(s) during which the Project is under construction and the Project ceases to be a qualifying
gasification project (whether before, at the time, or after the Project is placed in service), rules similar to the recapture rules in
§ 50(a)(2)(A) through (D) apply.
2009–16 I.R.B.809April 20, 2009

8. This agreement applies only to Taxpayer. Any successor in interest must execute a new closing agreement with the Service. If
the interest is acquired at or before the time the Project is placed in service and the successor in interest fails toexecute a new closing
agreement, the qualifying gasification project credit in the amount of $[insert the number in WHEREAS clause #3] allocated to the
Project is fully forfeited. If the interest is acquired after the time the Project is placed in service andthe successor in interest fails
to execute a new closing agreement, the Project ceases to be investment credit property and the recapture rules of § 50(a) apply.
THIS AGREEMENT IS FINAL AND CONCLUSIVE EXCEPT:
1. The matter it relates to may be reopened in the event of fraud, malfeasance, or misrepresentation of a material fact;
2. It is subject to the Internal Revenue Code sections that expressly provide that effect be given to their provisions (including
anystatedexceptionfor§7122)notwithstanding any law or rule of law; and
3. If it relates to a tax period ending after the date of this Closing Agreement, it is subject to any law enacted after such date,
whichappliestothetaxperiod.
By signing, the parties certify that they have readand agreed to the terms of this Closing Agreement.
Taxpayer: [insert name and identifying number]
By:
Date Signed:
[insert name]
Title:[insert title]
[insert taxpayer’s name]
Commissioner of Internal Revenue
By:
Date Signed:
[insert name]
Title:[insert title]
I have examined the specific matters involved and recommend the acceptance of the proposed agreement.
(Receiving Officer).................................................................................................
(Title) .............................................................................................................
DateSigned ........................................................................................................
I have reviewed the specific matters involved and recommend the acceptance of the proposed agreement.
(Receiving Officer).................................................................................................
(Title) .............................................................................................................
DateSigned ........................................................................................................
April 20, 20098102009–16 I.R.B.

APPENDIX B
APPLICATION FOR DOE CERTIFICATION
REQUEST FOR SUPPLEMENTAL APPLICATION INFORMATION FOR DOE
The Internal Revenue Service (“Service”) and the Department ofEnergy (“DOE”) seek to certify applications that demonstrate
a high likelihood of being successfully implemented by the applicants. To qualify, projects must be technically and economically
feasible and use the appropriate gasification technology.
This request for submission of supplemental application information:
•Describes the information to be provided by the applicant seeking a certification of feasibility from DOE, and
•Lists the evaluation criteria and Program Policy Factors to be used by DOEin the evaluation of applications.
If, after review by the DOE a project is determined to be feasible, DOE will provide a DOE certificate of feasibility to the Service.
The Service will then accept or reject the taxpayer’s application for certification of the tax credits.
In conducting this evaluation, the DOE may utilize assistance and advice from qualified personnel from other Federal agencies
and/or non-conflicted contractors. DOE will obtain assurances in advance from all evaluators that application information shall
be kept confidential and used only for evaluation purposes. DOE reserves the right to request clarifications and/or supplemental
information from some or all applicants through written submissions and/or oral presentations.
Notice is given that DOE may determine whether or not to provide acertification to the Service at any time after the application
has been received, without further exchanges or discussions. Therefore, all applicantsare advised to submit their most complete
and responsive application.
Applications will not be returned.
INFORMATION TO BE SUBMITTED FOR DOE CERTIFICATION APPLICATION
A. General
This request, together with the information in sections 5.02, 6.01, and 6.02 of Notice 2009–23 includes all the information
needed to complete an application for DOE certification. All applications shall be prepared in accordance with this request in order
to provide a standard basis for evaluation and to ensure that each application will be uniform as to format and sequence.
Each application should clearly demonstrate the applicant’scapability, knowledge, and experience in regard to the requirements
described herein.
Applicants should fully address the requirements of Notice 2009–23 and this request andnotrely on the presumed background
knowledge of reviewers. DOE may reject an application that does notfollow the instructions regarding the organization and content
of the application when the nature of the deviation and/oromission precludes meaningful review of the application.
B. Unnecessarily Elaborate Applications
Unnecessarily elaborate brochures or other presentations beyond those sufficient to present a complete andeffective application
are not desired. Elaborate art work, graphics andpictures are neither required nor encouraged.
C. Applicati
on Submission for DOE Certification
The application submission to DOE must include the information and documentation required by sections 5.02, 6.01, and 6.02
of Notice 2009–23.
An application will not be considered in the allocation round conducted in 2009–10 unless it is postmarked by November 2,
2009. (If allocation rounds are conducted in 2010–11 and 2011–12, applications must be postmarked by November 1 of the year in
which the allocation round begins.) One paper copy and one electronic version on a floppy disc or a CD of the Application must
be submitted to:
Melissa Robe
National Energy Technology Laboratory
3610 Collins Ferry Road
Morgantown, WV 26507
Note that under section 5.03(3) of Notice 2009–23, one paper copy and one electronic version must be sent to the Service as
part of the application for § 48B certification. The application for§ 48B certification will not be considered in the allocation round
conducted in 2009–10 unless it is submitted to the Service by March 1, 2010. (If allocation rounds are conducted in 2010–11 and
2011–12, applications must be postmarked by March 1 of the year in which the allocation round ends.)
2009–16 I.R.B.811April 20, 2009

THE INFORMATION REQUIRED BY THIS REQUEST MUST BE SUBMITTED USING THE FORMAT AND THE
HEADINGS OF THE PROJECT INFORMATION MEMORANDUM AS DESCRIBED BELOW.
To aid in evaluation, applications shall be clearly and concisely written and logically assembled. All pages of each part shall be
appropriately numbered and identified with the name of the applicant and the date.
The application, including the Project Information Memorandum, MUST be formatted in one of the following software appli-
cations:
•Microsoft Word
tm
2002 or later edition
•Microsoft Excel
tm
2002 or later edition
•Adobe Acrobat
t
m
PDF 6.0 or later edition
Financial models should be submitted using the Excel
tm
spreadsheet and must include calculation formulas and assumptions.
The applicant is responsible for the integrity and structure of the electronic files. The DOE will not be responsible for reformat-
ting, restructuring or converting any files submitted under this announcement.
The Project Information Memorandum,excluding Appendices, shall not exceed seventy-five (75) pages. Pages in excess of the
page limitation will not be considered for evaluation. All text shall be typed, single spaced, using 12 point font, 1 inch margins,
and unreduced 8–1/2-inch by 11-inch pages. Illustrations and charts shall be legible with all text in legible font. Pages shall be
sequentially numbered. Except as otherwise noted herein the page guidelines previously set forth constitute a limitation on the total
amount of material that may be submitted for evaluation. No material may be incorporated in any application by reference as a
means to circumvent the page limitation.
D. Project Inf
ormation Memorandum
1. Summary and Introduction
a. Description of the Project
b. Financing and Ownership Structure
c. Description of the main parties to the project, including background, ownership and related experience
d. Current Project Status and Schedule to Beginning of Construction
2. Technology and Technical Information
Provide a description of the proposed technology, including sufficient supporting information (such as vendor guarantees, process
flow diagrams, equipment descriptions, information on each major process unit and the total plant, compositions of major streams,
and the technical plan for achieving the goals proposed for theproject) as would be needed to allow DOE to confirm that the tech-
nical requirements of § 48B are met. Specifically, the applicant should:
•Provide evidence sufficient to demonstrate that the proposedtechnology will employ gasification technology as defined in
§ 48B(c)(2).
•Present information sufficient to justify the total amount of synthesis gas (as defined in § 48B(c)(2)) to be produced by the
project (synthesis gas capacity).
•Provide the total MMBtu/hr of the synthesis gas (HHV) at the gasifier outlet.
•Provide evidence sufficient to ensure that fuels identified in § 48B(c)(2) will comprise 90 percent of the total fuel input (fuels
identified in § 48B(c)(2) andany other fuel input) for the project. Provide the total quantities of CO, H2, CH4, CO
2
,and
water in the synthesis gas.
•Identify the domestic industry for which the proposed project is intended to be used.
•Identify the specific products and quantities produced by the proposed project, providing sufficient evidence to support
claims.
•Provide evidence that indicates, for projects using nonrenewable fuels, the gasification technology design reflects reason-
able consideration for, and is capable of,accommodating equipment necessary to capture CO
2
for later use or sequestration.
Include the project status and relevant information from ongoing engineering activities. Also include in an appendix any
engineering report or reports used by the applicant to developthe project and to estimate costs and operating performance.
•Provide evidence sufficient to demonstrate that the project includes equipment which separates and sequesters at least 75
percent of such project’s total carbon dioxide (CO
2
) emissions. The CO
2
separation, capture, sequestration, and emission
values shall be reported on metric tons per hour and metric tons per year basis under normal plant operating conditions. The
CO
2
separation and sequestration percentages shall be calculated based on the total CO
2
which would otherwise be released
into the atmosphere as industrial emission of greenhouse gas.
April 20, 20098122009–16 I.R.B.

3. Applicant’s Capability to Accomplish the Technical Objectives
Provide a narrative supporting the applicant’s capability to accomplish the technical objectives of the proposed project, including
supporting documentation demonstrating that the applicant hasassembled a team that is formally committed to participate in the
proposed project.
Provide information to support that the applicant has assembled a team with the skills and resources needed to implement the
project as proposed.
Provide signed agreements or letters from team members demonstrating that the proposed team members are fully committed to
the project.
Provide information, including examples of prior similar projects completed by applicant, engineering-procurement-construction
(EPC) contractor, and suppliers of major subsystems or equipment, which support thecapabilities of the applicant and its team
members to design, construct, permit, andoperate the facility. The applicant should demonstratethat the team members have a
corporate history of successful completion of similar projects.
Provide information to support that key personnel of the applicant and its team members have knowledge, experience, and ade-
quate degree of involvement to successfully implement the project.
Include the project status and relevant information from ongoing engineering activities. Also include in an appendix any en-
gineering report or reports usedby the applicant to develop the project and to estimate costs andoperating performance. Include
copies of any signed agreements to support project status claims regarding preliminary design studies, front-end engineering design
(FEED), and EPC-type agreements.
4. Site Control and Ownership
Provide evidence that the applicant owns or controls a site in the United States of sufficient size to allow the proposed project to
be constructed and operated on a long-term basis. Documentation such as a deed demonstrating the applicant owns the project site,
a signed option to purchase the site from the site owner, or a letter of intent signed by the site owner and stating the site owner’s
intent to sell the site to the applicant should be provided.
Describe the current infrastructure at the site available to meet the needs of the project.
Provide documentation supporting applicant’s conclusion that the proposed site can fully meet all environmental, feedstock
supply, water supply, transportation and public policy requirements. Such documentation may include signed agreements, letters of
intent, or term sheets relating to feedstock supply, water supply, and product (e.g.CO
2
) transportation etc., and regulatory approvals
supporting the key claims.
Provide detailed plans, schedules and status updates, particularly for sites with pre-existing conditions that could impact the
proposed project. Pre-existing conditions may include, but are notlimited to, sites with mandated environmental remediation ef-
forts; brown-field sites that will require building demolition; or sites requiring substantial rerouting of existing roads, railroads, or
pipelines prior to the start of the project.
Applicants must select one “proposed site.” However, projects with key physical or logistical elements that require close inte-
gration with another system for the projectto succeed should provide information on allintegrated systems regardless of where
they are located. Example 1: a gasification plant designed to operate exclusively on coal from a to-be-opened mine should provide
supporting documentation for the new mine. Example 2: an oxygen-blown gasification plant planning to purchase oxygen from a
third party who will construct a plant exclusively for this project should provide documentation for the oxygen supplier. Example
3: an industrial gasification plant planning to sell CO
2
for enhanced oil recovery (EOR) should provide an agreement for such a
transaction indicating the annual CO
2
purchase quantity, expected project lifetime sales, CO
2
capacity of the site for EOR, and EOR
site ownership.
5. Utilization of Project Output
Provide evidence that a market exists for the products of the proposed project as evidenced by contracts or written statements
of intent from potential customers. Such documentation should be signed by authorizingofficials of both the buyer and seller, and
may include: Sales Agreements, Letters of Intent, Memoranda of Understanding, and Option Agreements.
Describe any sales arrangements that exist or that may be contemplated and summaries of their key terms and conditions.
Include as an appendix any independent Market Study that has been done in connection with this project, or if no independent
market study has been completed, provide a copy of the applicant-prepared market study.
2009–16 I.R.B.813April 20, 2009

6. Project Economics
Describe the project economics and provide satisfactory evidence of economic feasibility as demonstrated through the financial
forecast and the underlying project assumptions. The project economic and financial assumptions should be clearly stated and
explained.
Discuss the market potential for the proposed technology beyond the project proposed by the applicant.
Show calculation for the amount of tax credits applied for based on allowable cost.
7. Project Development and Financial Plan
Provide the total project budget and major plant costs (e.g., development, operating, capital, construction, and financing costs).
Provide the estimated annual budget for and source of project development costs from the time of the application until the beginning
of construction, including legal, engineering,financial, environmental, overhead, and other development costs. Describe the overall
approach to project development and financing sufficient to demonstrate project viability. Provide a complete explanation of the
source and amount of project equity. Provide a complete explanation of the source and amount of project debt. Provide the audited
financial statements for the applicant for the most recently ended three fiscal years, and the unaudited quarterly interim financial
statements for the current fiscal year for (a)the applicant, (b) for any of the project parties providing funding, and (c) for any third
party funding source. If the applicant or another party does not haveaudited financial statements, the applicant or the party should
provide equivalent financial statements prepared by the applicant or the party, in accordance with Generally Accepted Accounting
Principles, and certified as to accuracy and completeness by the Chief Financial Officer of the party providing the statements. Ap-
plicant should demonstrate that the award recipient is financially viable without the receipt of additional federal funding associated
with the proposed project.
For internally financed projects, provide evidence that the applicant has sufficient assets to fund the project with its own re-
sources. Identify any internal approvals required to commit such assets. Include in an appendix copies of any board resolution or
other approval authorizingthe applicant to commit fundsand proceed with the project.
For projects financed through debt instruments either unsecured or secured by assets other than the project, provide evidence
that the applicant has sufficient creditworthiness to obtain such financing along with a discussion of the status of such instruments.
Identify any internal approvals required to commit the applicant to pursue such financing. Include in an appendix, copies of any
board resolution or other approval authorizingtheapplicanttocommittosuchfinancing.
For projects financed through investor equity contributions, discuss the source and status of each contribution. Discuss each
investor’s financial capability to meet its commitments. Includein an appendix, copies of any executed investment agreements.
If financing through a public offering or private placement of either debtor equity is planned for the project, provide the expected
debt rating for the issue and an explanation of applicant’s justification for the rating. Describe the status of any discussions with
prospective investment bankers or other financial advisors.
For projects employing nonrecourse debt financing, provide a complete discussion of the approach to, and status of, such fi-
nancing. In an appendix: (1) provide an Excel based financial model of the project, with formulas, so that review of the model
calculations and assumptions may befacilitated; (2) provide pro-forma project financial, economic,capital cost, and operating as-
sumptions, including detail of all project capital costs, development costs, interest during construction, other operating expenses,
and all other costs and expenses.
8. Project Contract Structure
Describe the current status of each of the agreements set forth below. Include as an appendix copies of the contracts or summaries
of the key provisions of each ofthe following agreements:
•Raw Materi
al Input Supply: describe the source and price of raw material inputs for the project. Include as an appendix
any studie
s of price and amount of raw materials that have been prepared. Include a summary of any supply contracts and a
signed cop
y of the contracts.
•Transport
ation: explain the arrangements for transporting project inputs and outputs, including costs.
•Operation
s & Maintenance Agreement: include a summary of theterms and conditions of the contract and a copy of the
contract.
•Sharehold
ers Agreement: summarize key terms and include the agreement as an appendix.
•Engineeri
ng, Procurement and Construction Agreement: describethe key terms of the existing or expected EPC contract
arrangeme
nt, including firm price, liquidated damages, hold-backs, performance guarantees, etc.
•Water Supp
ly Agreement: confirm the amount,source, and cost of water supply.
April 20, 20098142009–16 I.R.B.

•If CO
2
is to be sold a third party for sequestration, provide a Sales Agreement and provide specifics, such as CO
2
sales (metric
tons per year), expected project lifetime sales (metric tons), potential CO
2
capacity of the site for sequestration (metric tons),
technology and site suitability for sequestration, and sequestration site ownership and operation.
9. Permits Including Environmental Authorizations
Provide a complete list of all federal, state, and local permits,including environmental authorizations or reviews, necessary to
commence construction of the project.
Explain what actions have been taken to date to satisfy the required authorizations and reviews, and the status of each.
Provide a description of the applicant’s plan to obtain and complete all necessary permits, and environmental authorizations and
reviews.
Existing permits and permit applications must be specific to theproject proposed. If existing permits are not specific for the
proposed project (i.e.permits for oil-fired or natural gas based systems), specific plans, procedures and schedules for reapplying,
modifying and/or renegotiatingpermits should be provided.
10. Project Schedule
Provide an overall project schedule which includes technical, business, financial, permitting and other factors to substantiate that
the project will meet the 7 year placed-in-service requirement.
The project schedule should be comprehensive and provide sufficient detail to demonstrate how applicant will meet the placed-
in-service requirement. The schedule should demonstrate that the applicant understands the required tasks, and has allowed realistic
times for accomplishing the technical and financial tasks. The schedule should include the milestone accomplishments needed to
obtain the financing for the project.
11. Appendices
a. Copy of internal or external engineering reports.
b. Copy of site plan, together with evidence that applicant owns or controls a site. Examples of evidence would include a
deed, or an executed contract to purchase or lease the site.
c. Information supporting applicant’s conclusion that the site is fully acceptable as the project site with respect to
environment, raw material supply, water supply, and public policy reasons.
d. Project Market Study.
e. Financial Model of project.
f. Financial statements for the applicant and other projectfunding sources for the most recently ended three fiscal years,
and the unaudited quarterly interim financial statements for the current fiscal year.
g. Expressions of interest or commitment letters from funding sources.
h. For each project contract, if no contract currently exists, provide a summaryof the expected terms and conditions.
i. List of all federal, state, and local permits, including environmental authorizations or reviews, necessary to commence
construction.
j. Copies of any contract or written statements from customers of intent to purchase project products.
E. Evaluation Criteria
Gasification projects will be evaluated on whether they meet all the requirements of § 48B.
Technical: will be evaluated on whether theapplicant has demonstrated the capability to accomplish the technical objectives.
Site: will be evaluated on the basis that the site requirement for ownership or control has been met, and that the site is suitable
for the proposed project.
Economic: will be evaluated on whether the project has demonstrated economic feasibility, taking into consideration the sub-
mitted financial and project development andstructural information and financial plan.
Schedule: will be evaluated on the applicant’s ability to meet the 7 year placed-in-service requirement.
F. Program Policy Factors To Be Used by DOE in the Evaluation of Applications
Section 48B identifies minimum requirements for consideration for the qualifying gasification project credit, including the
project’s technical feasibility, cost, and applicant’s ability. In the event that there are more qualified (certifiable) applications
than the available tax credits, the DOE will apply additional factors to rank eligible projects basedon their ability to advance the
deployment of industrial gasification technology beyond its current state.
2009–16 I.R.B.815April 20, 2009

If there are more certified applications than available credits, DOE will rank the certified projects based on evaluation of the
following Program Policy Factors. In ranking certified projects,highest priority will be given to the Primary Ranking Factor.
Secondary and Tertiary Ranking Factors will be taken into account to rank projects that are not clearly differentiated on the basis
of the Primary Ranking Factor, with higher priority given to the Secondary Ranking Factor than to Tertiary Ranking Factors.
Primary Ranking Factor:
•Capture and seq
uestration of more than 75 percent CO
2
emissions. Only projects that capture and sequester 75 percent or
more of the plan
t’s CO
2
emissions will be considered forDOE certification. Among the certified projects, highest rankings
will be given to
projects with the greatest separation andsequestration percentages of total CO
2
emissions.
Secondary Rank
ing Factor:
•Research partnership with an eligible educational institution as defined in §48B(d)(4)(B).
Tertiary Ranking Factors:
•Presentation of other environmental, economic, orperformance benefits Higher plant efficiency.
•Geographic distribution of potential markets.
•The ratio of total synthesis gas capacity (as defined insection 3.03 of Notice 2009–23) to requested tax credit.
•Diversity of technology approaches and methods.
G. Supplemental
Technical and Financial Guidance for Project Information Memorandum
Technology and Technical Information
It is important that the applicant select a specific gasification system for the project. Without that decision, it is difficult to
provide the necessary specific design information needed for DOE toevaluate the project feasibility with respect to performance,
emissions, outputs of major streams as well as capital and operating costs.
Project Economics
Applicants should demonstrate the project’seconomic feasibility and financial viability by providing a clear statement and ex-
planation of the economic and financial assumptions made by the applicant, and a financial forecast for the project. The financial
forecast should flow logically from the applicant’s assumptions and be consistent with them. Applicants should include assump-
tions regarding financial and economic issues that may not be included in the project costs but have a direct impact on the project.
The examples given in the “Site Control and Ownership” section are relevant here and their impact on the project economics should
be discussed here.
Project Devel
opment and Financial Plan
The informati
on provided by the applicant in this section should demonstrate that the applicant’s financial plan for developing
the project is
feasible and that the applicant will have access to necessaryfinancing. The applicant should explain the source and
timing for ob
taining all financing, including the project development costs. It is important that the applicant explain and provide
evidence tha
t it has the capacity to fund the pre-construction project development costs, together with a budget for and description
of those cost
s. Note that financial information is required for the applicant and for any other funding source.
Project Contract Structure
This section requires that the applicant demonstrate an understanding of the commercial contracting process and show progress in
establishing the framework of contracts and agreements that a project typically requires. Applicants should show that their intended
contract structure is reasonable and that their assumptions relative to price, terms, and conditions are consistent with current market
conditions. Evidence of final agreements, agreements in principle, or summaries of terms and conditions between the applicant and
contract counterparties should be provided, if available.
April 20, 20098162009–16 I.R.B.

Qualifying Advanced Coal
Project Program
Notice 2009–24
SECTION 1. PURPOSE
This notice provides additional proce-
dures for the allocation of credits under
the qualifying advanced coal project pro-
gram of § 48A of the Internal Revenue
Code. The procedures in this notice ap-
ply only to the credits authorized under
the amendments made to § 48A by sec-
tion 111 of the Energy Improvement and
Extension Act of 2008, Pub. L. 110–343,
122 Stat. 3765 (October 3, 2008) (“the
Act”). Section 111 of the Act amended
§ 48A to provide for a second phase of the
qualifying advancedcoal project program
in which $1.25 billion of additional cred-
its are authorized (“the Phase II advanced
coal program” and “the Phase II advanced
coal credit”). To be considered in the first
allocation round under the Phase II ad-
vanced coal program, applications must
be submitted to the Department of Energy
(“DOE”) on or before November 2, 2009,
and to the Internal Revenue Service (“Ser-
vice”) before March 2, 2010. See section
5 of this notice for additional rules regard-
ing these applications.
Section 48A, as originally enacted,
provided for the first phase of the quali-
fying advanced coal project program and
authorized $1.3 billion of credits (“the
Phase I advanced coal program” and
“the Phase I advanced coal credit”). The
Service intends to issue guidance in the
future regarding any Phase I advanced
coal credits that remain unallocated after
the 2008–2009 allocation round or that are
subsequently forfeited.
SECTION 2. BACKGROUND AND
CHANGES
.01 Section 46 provides that the amount
of the investment credit for any taxable
year is the sum of the credits listed in § 46.
That list includes the qualifying advanced
coal project credit.
.02 The qualifying advanced coal
project credit is provided under § 48A,
which was expanded and modified by sec-
tion 111 of the Act.
.03 Section 48A(a) provides that the
qualifying advancedcoal project credit
for a taxable year is an amount equal
to (1) 20 percent of the qualified in-
vestment (as defined in § 48A(b)) for
that taxable year in qualifying advanced
coal projects (as defined in § 48A(c)(1)
and (e)) described in§ 48A(d)(3)(b)(i),
(2) 15 percent of the qualified invest-
ment for that taxable year in qualified
advanced coal projects described in
§ 48A(d)(3)(b)(ii), and (3) 30 percent of
the qualified investment for that taxable
year in qualifying advanced coal projects
described in § 48A(d)(3)(B)(iii). Sec-
tion 48A(d)(3)(b)(i) describes integrated
gasification combined cycle (“IGCC”)
projects (as defined in § 48A(c)(7)) for
which applications were submitted during
the Phase I application period (“Phase I
IGCC projects”). Section 48A(d)(3)(b)(ii)
describes projects that use other advanced
coal-based generation technologies (as
defined in § 48A(c)(2) and (f)) and for
which applications were submitted dur-
ing the Phase I application period (“other
Phase I advanced coal projects”). Section
48A(d)(3)(b)(iii) describes projects that
use advanced coal-based generation tech-
nologies and for which applications are
submitted during the Phase II application
period (“Phase II advanced coal projects”).
Phase II advanced coal projects include
both IGCC projects and projects that use
other advanced coal-based technologies.
For this purpose, the Phase I application
period is the 3-year period following the
establishment of the qualifying advanced
coal program on March 13, 2006, and the
Phase II application period is the 3-year
period beginning on March 13, 2009.
.04 Section 48A(d)(3)(A) provides
that the aggregate credits allowed under
§ 48A(a) may not exceed $2.55 billion.
Section 48A(d)(3)(B) provides that (1)
$800 million of credits are to be allocated
to Phase I IGCC projects, (2) $500 mil-
lion of credits are to be allocated to other
Phase I advanced coal projects, and (3)
$1.25 billion of credits are to be allocated
to Phase II advanced coal projects.
.05 Section 48A(d)(2)(A) provides that
(i) applications for the credits allocated to
Phase I IGCC projects and other Phase I
advanced coal projects may be submitted
only during the Phase I application period,
and (ii) applications for the credits allo-
cated to Phase II advanced coal projects
may be submitted only during the Phase II
application period.
.06 Section 48A(d)(5) provides that the
Secretary shall, upon making a certifica-
tion under § 48A(d), publicly disclose the
identity of the applicant and the amount of
the credit certified with respect to such ap-
plicant.
.07 Section 48A(e)(1)(G) provides that
any project the application for which is
submitted during the Phase II application
period must include equipment that sepa-
rates and sequesters—
(1) At least 65 percent of such project’s
total carbon dioxide (“CO
2
”) emissions in
the case of an application other than an
application for reallocated credits under
§ 48A(d)(4); and
(2) At least 70 percent of such project’s
total CO
2
emissions in the case of an
application for reallocated credits under
§ 48A(d)(4).
.08 Section 48A(e)(3) provides the fol-
lowing rules for determining the projects
to which credits are allocated:
(1) Section 48A(e)(3)(A) provides that
the credits must be allocated in accor-
dance with the procedures set forth in
§ 48A(d) and in relatively equal amounts
to (i) projects using bituminous coal as a
primary feedstock, (ii) projects using sub-
bituminous coal as a primary feedstock,
and (iii) projects using lignite as a primary
feedstock.
(2) Section 48A(e)(3)(B) provides that
high priority must be given to projects that
include (i) greenhouse gas capture capa-
bility (as defined in § 48A(c)(5)), (ii) in-
creased by-product utilization, (iii) appli-
cant participants who have a research part-
nership with an eligible educational insti-
tution (as defined in section 529(e)(5)),
and (iv) other benefits.
(3) Section 48A(e)(3)(C) provides that
the highest priority is given to projects
with the greatest separation and sequestra-
tion percentage of total CO
2
emissions.
.09 Section 48A(f) prescribes the re-
quirements that must be satisfied to qual-
ify as an advanced coal-based generation
technology. These include requirements
that the unit be designed to attain specified
standards for emissions or removal of cer-
tain pollutants.
.10 Section 48A(h) directs the Secre-
tary to modify the terms of any compet-
itive certification award and any associ-
ated closing agreement where such modi-
fication (i) is consistent with the objectives
of § 48A, (ii) is requested by the recipi-
2009–16 I.R.B.817April 20, 2009

ent, and (iii) involves moving the project
site to improve the potential to capture and
sequester CO
2
emissions, reduce costs of
transporting feedstock, and serve a broader
customer base. This directive does not ap-
ply if the Secretary determines that the dol-
lar amount of tax credits available to the
taxpayer under § 48A would increase as
a result of the modification or such mod-
ification would result in such project not
being originally certified. In addition, the
Secretary is required to consult with other
relevant Federal agencies, including the
Department of Energy, in considering any
modification under § 48A(h).
.11 Section 48A(i) provides that the
Secretary shall provide for recapturing
the benefit of any credit allowable un-
der § 48A(a) with respect to any project
that fails to attain or maintain the sepa-
ration and sequestration requirements of
§ 48A(e)(1)(G).
.12 The at-risk rules in § 49 and the re-
capture and other special rules in § 50 ap-
ply to the qualifying advanced coal project
credit. Further, the qualifying advanced
coal project credit generally is allowed in
the taxable year in which the eligible prop-
erty (as defined in § 48A(c)(3)) is placed
in service (as defined in section 3.04 of
this notice) by the taxpayer. Pursuant to
§ 48A(d)(2)(E), a taxpayer that receives a
certification under § 48A(d)(2)(D) has 5
years from the date of issuance of the cer-
tification to place the qualifying advanced
coal project in service.
.13 Section 48A(d)(1) provides that the
Secretary, in consultation with the Secre-
tary of Energy, shall establish a qualify-
ing advanced coal project program for the
deployment of advanced coal-based gen-
eration technologies. The Treasury De-
partment and the Service established this
program in Notice 2006–24, 2006–1 C.B.
595, as modified and updated by Notice
2007–52, 2007–26 I.R.B. 1456.
.14 Notice 2007–52 provides that the
Service will consider a project under the
qualifying advancedcoal project program
only if the DOE provides a certification of
feasibility (“DOE certification”) and rank-
ing (if any) for the project. Under the qual-
ifying advanced coal project program, a
taxpayer must submit, for each qualifying
advanced coal project: (1) an application
for certification by DOE (“application for
DOE certification”), and (2) an application
for certification under § 48A(d)(2) by the
Service (“application for § 48A certifica-
tion”). Certifications will be issued and
credits will be allocated by the Service to
projects in annual allocation rounds.
.15 The Phase I advanced coal pro-
gram under Notice 2006–24 and Notice
2007–52 provided for three annual allo-
cation rounds. An initial allocation round
was conducted in 2006. A second alloca-
tion round was conducted in 2007–08, and
a special allocation round was conducted
in 2008. A third allocation round was
conducted in 2008–09.
.16 This notice provides procedures for
the Phase II advanced coal program. The
guidance in this notice differs from the
guidance provided in Notices 2006–24 and
2007–52 for the Phase I advanced coal pro-
gram in a number of respects. The signifi-
cant differences include the following:
(1) Section 3.05 provides a definition of
the term “separation and sequestration” for
purposes of § 48A.
(2) Section 4.02(2) provides that the
qualifying advancedcoal project credits
of $1.25 billion and the applications for
certification are separated into three pools
based on the feedstock coal used. There
are no separate pools for IGCC projects
and projects that use other advanced coal-
based generation technologies.
(3) Section 4.02(7) provides that the
period for submitting the application for
§ 48A certification under Phase II ad-
vanced coal program for the 2009–10
allocation round begins on March 13,
2009, and ends on March 1, 2010.
(4) Section 4.02(3) provides that a tax-
payer who was allocated a credit under
the Phase I advanced coal program may
re-submit an application for the same
project if the project is enhanced to meet
the additional requirements for a qualify-
ing project under the Phase II advanced
coal program.
(5) Section 4.02(10) provides that
the deadline for taxpayers to submit ap-
plications for DOE certification for the
2009–10 allocation round is November
2, 2009, that the DOE will rank certified
projects, and that the due date for the DOE
to provide the Service with the certifica-
tion and ranking of these projects is March
1, 2010.
(6) Section 10.01 provides that the Ser-
vice will announce the results of each al-
location round as required by § 48A(d)(5).
Accordingly, the notice does not include a
request that taxpayers submit with the ap-
plication for § 48A certification a decla-
ration consenting to the disclosure by the
Service of certain return information if the
taxpayer is awarded an allocation of qual-
ifying advanced coal project credit or pro-
vide the form of the declaration, as set forth
in Appendix C of Notice 2007–52.
(7) Section 7.04 provides for recaptur-
ing the benefit of any credit allowable un-
der the Phase II advanced coal program
with respect to any project that fails to at-
tain or maintain the separation and seques-
tration requirements of § 48A(e)(1)(G).
(8) The information required to be in-
cluded in the application for DOE cer-
tification is modified. Section 5.02 re-
quires submission of additional informa-
tion regarding CO
2
separation and seques-
tration. In addition, the program policy
factors listed in Appendix B have been
modified.
SECTION 3. DEFINITIONS
The following definitions apply for pur-
poses of § 48A and this notice:
.01Coal. Section 48A(c)(4) defines the
term “coal” as meaning anthracite, bitumi-
nous coal, subbituminous coal, lignite, and
peat. Coal includes waste coal (that is, us-
able material that is a byproduct of the pre-
vious processing of anthracite, bituminous
coal, subbituminous coal, lignite, or peat).
Examples of waste coal include fine coal
of any of the listed ranks, coal of any of the
listed ranks obtained from a refuse bank
or slurry dam, anthracite culm, bituminous
gob, and lignite waste.
.02Total Nameplate Generating Ca-
pacity.
(1) Except as provided in section
3.02(2) of this notice, the total nameplate
generating capacity of a project is the
aggregate of the numbers (in megawatts)
stamped on the nameplate of each genera-
tortobeusedintheproject.
(2) If the number stamped on the name-
plate of a generator is not determined at the
International Standard Organization (ISO)
optimal conditions of 59 degrees Fahren-
heit, 60% relative humidity, and 14.7 psia
at sea level, the number stamped on the
nameplate is disregarded and the genera-
tor’s capacity (in megawatts) determined
at such optimal conditions is used in its
place.
.03Fuel Input.
April 20, 20098182009–16 I.R.B.

(1)In general. The term “fuel input”
means, with respect to any type of fuel, the
amount of such fuel used during normal
plant operations. The amounts of the fuel
used are measured (i) in British thermal
units (Btus) on an energy input basis and
(ii) pursuant to applicable standards pre-
scribed by the American Society for Test-
ing and Materials (ASTM). For example,
§ 48A(e)(1)(B) provides that the fuel input
for the project, when completed, must be
at least 75 percent coal. This requirement
is satisfied if, after completion and during
normal plant operations, coal provides 75
percent of the project’s fuel measured in
Btus on an energy input basis and pursuant
to applicable ASTM standards.
(2)Only normal plant operations taken
into account. Onlyfuelusedduringnor-
mal plant operations is taken into account
for purposes of § 48A and sections 5.02(5)
and 5.02(13) of this notice. Normal plant
operations are operations other than during
periods of initial plantcertification, plant
startup, plant shutdown, integrated gasifier
shutdown for gasification system mainte-
nance, or interruption of the coal supply to
the project resulting from an event of force
majeure (including an act of God, war,
strike, or other similar event beyond the
control of the taxpayer). For example, the
fuel input during the initial plant certifica-
tion may consist entirely of natural gas or
other non-coal fuels because fuel used dur-
ing initial plant certification is disregarded
in determining whether the 75-percent coal
usage requirement of § 48A(e)(1)(B) is
satisfied.
.04Placed In Service. For purposes
of § 48A, property is placed in service in
the taxable year in which the property is
placed in a condition or state of readiness
and availability for a specifically assigned
function.See§ 1.46–3(d)(1)(ii) of the In-
come Tax Regulations. Thus, a qualifying
advanced coal project or eligible property
(as defined in § 48A(c)(3)) that is a part of
the project is placed in service in the tax-
able year in which the project is placed in
a condition or state of readiness and avail-
ability for producing electricity from coal.
.05Separation and SequestrationThe
term “separation and sequestration” refers
to the separation and capture of a project’s
CO
2
emissions and the placement of the
captured CO
2
into a repository in which
the CO
2
will remain permanently se-
questered.
SECTION 4. PHASE II QUALIFYING
ADVANCED COAL PROJECT
PROGRAM
.01In General. The Service will con-
sider a project under the Phase II advanced
coal program only if the DOE provides
a certification (“DOE certification”) and
ranking (if any) for the project. Accord-
ingly, a taxpayer must submit, for each
Phase II advanced coal project: (1) an
application for certification by DOE that
the project is technically and economically
feasible (“application for DOE certifica-
tion”), and (2) an application for certifica-
tion under § 48A(d)(2) by the Service (“ap-
plication for § 48A certification”). Both
applications may be submitted only during
the Phase II application period beginning
on March 13, 2009, and ending on March
12, 2012. The Service will issue certifica-
tions and allocate credits to projects in an-
nual allocation rounds. The first allocation
round for Phase II advanced coal program
will be conducted in2009–10. If neces-
sary, additional allocation rounds will be
conducted in 2010–11 and 2011–12.
.02Program Specifications.
(1) The Service determines the amount
of the Phase II advanced coal credits allo-
cated to a Phase II advanced coal project
at the time the Service accepts the applica-
tion for § 48A certification for that project
in accordance with section 4.02(11) of this
notice (see section 5 of this notice for the
requirements applicable to the application
for DOE certification and the application
for § 48A certification).
(2) The Phase II advanced coal cred-
its of $1.25 billion and the applications
for Phase II certifications will be separated
into the following three pools:
(a) Projects using an advanced coal-
based generation technology and using bi-
tuminous coal as a primary feedstock. For
the 2009–10 allocation round, the aggre-
gate amount of the Phase II advanced coal
credit for this pool is $417 million.
(b) Projects using an advanced
coal-based generation technology and
using subbituminous coal as a primary
feedstock. For the 2009–10 allocation
round, the aggregate amount of the Phase
II qualifying advancedcoal project credit
for this pool is $417 million.
(c) Projects using an advanced
coal-based generation technology and us-
ing lignite as a primary feedstock. For
the 2009–10 allocation round, the aggre-
gate amount of the Phase II advanced coal
credit for this pool is $416 million.
(3) A taxpayer who was allocated a
Phase I advanced coal credit for a project
maysubmitanapplicationforaPhaseII
advanced coal credit for the same project
if the project meets theadditional require-
ments for a qualifying project under the
Phase II advanced coal program. Thus, the
project must separate and sequester at least
65 percent of the project’s total CO
2
emis-
sions.
(a) The Phase II advanced coal credit
will be allowed with respect to the tax-
payer’s qualified investment in the project
only to the extent such investment exceeds
the qualified investment with respect to
which the Phase I advanced coal credit is
allowable. Thus, if a Phase I advanced
coal credit of $133.5 billion has been allo-
cated to an IGCC project, the Phase II ad-
vanced coal credit will be allowed only to
the extent the taxpayer’s qualified invest-
ment in the project exceeds $667.5 billion
(the amount that results in a $133.5 billion
credit when multiplied by the 20-percent
credit rate applicable to IGCC projects un-
der Phase I). The Phase I advanced coal
credit allocated to a project is not allow-
able for purposes of this section 4.02(3) to
the extent the right to claim such credit has
been irrevocably waived in such manner as
the Commissioner may require.
(b) The Phase II advanced coal credit
allocated to a project will be forfeited if
the taxpayer fails to satisfy the certification
requirements in § 48A(e)(2) within two
years from the date of acceptance of the ap-
plication under section 4.02(11) of this no-
tice, or fails to place the project in service
within 5 years of the date of issuance of
the certification (as determined under sec-
tion 6.03 of this notice). The allocation of
a Phase II advanced coal credit to a project
does not delay the taxpayer’s certification
and placed-in-service obligations with re-
spect to any Phase I advanced coal credit
previously allocatedto the project. Ac-
cordingly, the Phase I advanced coal credit
allocated to the project will be forfeited if
the taxpayer fails tosatisfy the certifica-
tion requirements within two years from
the date of acceptance under the Phase I
advanced coal program, or fails to place
the project in service within 5 years of the
date of issuance of the certification under
the Phase I advanced coal program.
2009–16 I.R.B.819April 20, 2009

(4) For each pool described in section
4.02(2) of this notice, DOE will rank the
certified projects in descending order (that
is, first, second, third, etc.). The amount
available for allocation from the pool will
be allocated as follows in the 2009–10 al-
location round:
(a) If the requested allocation of cred-
its for projects that DOE has certified for
a pool described in section 4.02(2) of this
notice does not exceed the amount avail-
able for allocation from that pool, each
certified project will be allocated the full
amount of credit requested.
(b)Iftherequestedallocationofcred-
its for projects that DOE has certified for
a pool described in section 4.02(2) of this
notice exceeds the amount available for al-
location from that pool, the amount avail-
able for allocation will be allocated as fol-
lows:
(i) The project receiving the highest
ranking (that is, first) will be allocated
the full amount of credit requested (but
not exceeding the amount available for
allocation from the pool) before any credit
is allocated to a lower-ranked project. The
amount available forallocation from the
pool is reduced by the amount of credit
so allocated and only the remainder is
available for allocation to a lower-ranked
project.
(ii) Second and lower-ranked projects
will be entitled to similar priority in the al-
location of credits and allocations to such
projects will similarly reduce the remain-
der of the amount available for allocation
from the pool until the amount available
for allocation from the pool is exhausted.
(5) If the amount available for alloca-
tion from a pool is not fully allocated in the
2009–10 allocation round, similar alloca-
tion rounds will be conducted in 2010–11
and 2011–12 until the available amount is
fully allocated. The results of each alloca-
tion round will be announced. See section
10.01 of this notice for further information
about this announcement.
(6) For each allocation round there will
be an annual application period during
which a taxpayer may file its application
for § 48A certification. The Service will
consider a project in an allocation round
only if the application for § 48A certifica-
tion for the project is submitted during the
application period for that round and the
DOE provides the DOE certification and
the DOE ranking (if any) for the project
before the end of the application period.
(7) For the 2009–10 allocation round,
the application period for § 48A certifica-
tion begins on March 13, 2009, and ends
on March 1, 2010, and any completed ap-
plication for § 48A certification received
by the Service after March 12, 2009, and
before March 2, 2010, will be deemed to
be submitted by the taxpayer on March 1,
2010. For the 2010–11 allocation round
(if necessary), the application period for
§ 48A certification begins on March 2,
2010, and ends on March 1, 2011, and any
completed application for § 48A certifica-
tion received by the Service after March 1,
2010, and before March 2, 2011, will be
deemed to be submitted by the taxpayer on
March 1, 2011. For the 2011–12 allocation
round (if necessary), the application period
for § 48A certification begins on March 2,
2011, and ends on March 1, 2012, and any
completed application for § 48A certifica-
tion received by the Service after March 1,
2011,andbeforeMarch2,2012,willbe
deemed to be submitted by the taxpayer on
March 1, 2012.
(8) If the same project would other-
wise be allocated credits under both the
qualifying advancedcoal project program
of § 48A and the qualifying gasification
project program of § 48B, the following
rules apply:
(a) The qualifying gasification project
credit may not be allocated to the project
with respect to any qualified investment
under § 48B for which a qualifying ad-
vanced coal project credit is allowed under
§48A;and
(b) The qualifying gasification project
credit may be allocated to the project with
respect to the qualified investment under
§ 48B for which a qualifying advanced
coal project credit is not allowed under
§48A.
(9) For purposes of this notice, an appli-
cation that is submitted by U.S. mail will
be treated as received by the Service on
the date of the postmark and an application
submittedbyaprivatedelivery service will
be treated as received by the Service on the
date recorded or the date marked in accor-
dance with § 7502(f)(2)(C).
(10) See section 5.02 of this notice and
Appendix B to this notice for the informa-
tion to be submitted to the DOE in an appli-
cation for DOE certification. Appendix B
to this notice also provides the instructions
and address for filing the application for
DOE certification. The DOE will deter-
mine the technical and economic feasibil-
ity of the project and, if the project is deter-
mined to be feasible, will provide a DOE
certification for the project to the Service.
If the DOE certifies two or more projects
in a pool described in section 4.02(2) of
this notice, the DOE also will rank each of
the projects it certifies (for example, first,
second, third, etc.) relative to other certi-
fied projects in the same pool and credits
will be allocated to projects based on the
DOE ranking. If an application for DOE
certification is postmarked on or before
October 31 of a calendar year, the DOE
will determine the feasibility of the project
and (for projects determined to be feasi-
ble) provide the DOE certification and the
DOE ranking (if any) to the Service by
March 1 of the following calendar year.
Thus, after application of § 7503, relating
to the time for performance of acts when
the last day falls on a Saturday, Sunday,
or legal holiday, applications for DOE cer-
tification must be postmarked on or be-
fore November 2, 2009, to be considered
in the 2009–10 allocation round, on or be-
fore November 1, 2010, to be considered
in the 2010–11 allocation round, and on or
before November 1, 2011, to be considered
in the 2011–12 allocation round.
(11) By April 30 of the calendar year
inwhichanapplicationfor§48Acertifi-
cation is deemed to be submitted (as de-
termined under section 4.02(7) of this no-
tice), the Service will accept or reject the
taxpayer’s application for § 48A certifica-
tion and will notify the taxpayer, by letter,
of its decision.
(12) If the taxpayer’s application for
§ 48A certification is accepted, the accep-
tance letter will state the amount of the
credit allocated to the project. If a credit is
allocated to a taxpayer’s project, the tax-
payer will be required to execute a clos-
ing agreement in the form set forth in Ap-
pendix A to this notice. By June 30 of
the calendar year in which an application
for § 48A certification is accepted (July
2 after application of § 7503 for applica-
tions accepted in 2012), the taxpayer must
execute and return the closing agreement
to the Service at the appropriate address
listed in section 5.04 of this notice or listed
in later guidance published in the Internal
Revenue Bulletin. The Service will exe-
cute and return the closing agreement to
April 20, 20098202009–16 I.R.B.

the taxpayer by August 31 of such calen-
dar year. The executed closing agreement
applies only to the accepted taxpayer. Ac-
cordingly, any successor in interest must
execute a new closing agreement with the
Service no later than the due date (includ-
ing extensions) of the successor in inter-
est’s Federal income tax return for the tax-
able year in which the transfer occurs. If
the successor in interest does not execute a
new closing agreement, the following rules
apply:
(a) In the case of an interest acquired
at or before the time the qualifying ad-
vanced coal project is placed in service,
any credit allocated to the project (includ-
ing any credit allocated under the Phase I
advanced coal program) will be fully for-
feited (and rules similar to the recapture
rules of § 50(a) apply with respect to qual-
ified progress expenditures); and
(b) In the case of an interest acquired af-
ter the qualifying advanced coal project is
placed in service, the project ceases to be
investment credit property and the recap-
ture rules of § 50(a) (and similar rules with
respect to qualified progress expenditures)
apply.
(13) The closing agreement relating
to a credit allocation may be modified
only if the modification is consistent with
the objectives of the qualifying advanced
coal project program, is requested by the
taxpayer that received the credit alloca-
tion, involves moving the project site
to improve the potential to capture and
sequester CO
2
emissions, reduce costs
of transporting feedstock, and serve a
broader customer base. The Service will
not modify a closing agreement if the dol-
lar amount of tax credits available to the
taxpayer under § 48A would increase as a
result of the modification or if the project
would not have been originally certified
had such modification been included in
the taxpayer’s application. In considering
such modification, the Service will consult
with the DOE.
SECTION 5. APPLICATIONS FOR
CERTIFICATIONS
.01In General. An application for
§ 48A certification and a separate ap-
plication for DOE certification must be
submitted for each qualifying advanced
coal project. If an application for DOE
certification does not include all of the in-
formationrequiredbysection5.02ofthis
notice and meet the requirements in sec-
tions 7.01 and 7.02 of this notice, the DOE
may decline to accept the application. If
an application for § 48A certification does
not include all of the information listed in
section 5.03 of this notice and meet the
requirements in sections 7.01 and 7.02
of this notice, the application will not be
accepted by the Service.
.02InformationRequiredintheAppli-
cation for DOE Certification. An applica-
tion for DOE certification must include all
of the information requested in Appendix
B to this notice and all of the following:
(1) The name, address, and taxpayer
identification number of the taxpayer. If
the taxpayer is a member of an affiliated
group filing consolidated returns, also pro-
vide the name, address, and taxpayer iden-
tification number of the common parent of
the group.
(2) The name and telephone number of
a contact person.
(3) The name and address (or other
unique identifying designation) of the
qualifying advanced coal project.
(4) A statement specifying whether the
project is an IGCC project or a qualifying
advanced coal project that uses another ad-
vanced coal-based technology.
(5) A statement specifying the type
of coal (bituminous coal, subbituminous
coal, or lignite) that will be the primary
feedstock. An application for DOE certi-
fication with respect to a project will not
be considered unless one of these types
of coal is the primary feedstock. For pur-
poses of § 48A(e)(3)(A), a type of coal is
the primary feedstock only if at all times
more than 50 percent of the cumulative
total fuel input (coal and any other fuel
input) used in normal plant operations (as
defined in section 3.03(2) of this notice) of
the project will consist of that type of coal.
(6) The estimated total cost of the
project and the estimated total qualified
investment in the eligible property that
will be part of the project.
(7) The amount of the qualifying ad-
vanced coal project credit requested for the
project.
(8) If the taxpayer is or will be request-
ing an amount of the qualifying gasifica-
tion project credit under § 48B for the same
project, a statement specifying the amount
of credit the taxpayer is or will be request-
ing under § 48B.
(9) A statement specifying whether the
project is a new electric generation unit
(as defined in § 48A(c)(6)), a retrofit of
an existing electric generation unit, or a
repower of an existing electric generation
unit.
(10) A statement specifying whether the
project is entitled to priority for green-
house gas capture capability (as defined in
§ 48A(c)(5)), increased by-product utiliza-
tion, or a research partnership with an eli-
gible educational institution (as defined in
§ 529(e)(5)) and, if entitled to priority, a
statement identifying which of these prior-
ities apply to the project.
(11) A statement specifying the number
and types of generators to be used in the
project (for example, two combustion tur-
bine generators and one steam turbine gen-
erator).
(12) The exact total nameplate generat-
ing capacity (as defined in section 3.02 of
this notice) of the project.
(13) In the case of a project that will not
achieve 99-percent removal of sulfur diox-
ide, a statement that the project is designed
for the use of a feedstock substantially
all of which is subbituminous coal and
will achieve an emission level of not more
than 0.04 pounds of sulfur dioxide per mil-
lion Btu, determined on a 30-day average.
For this purpose, a project is designed for
the use of feedstock substantially all of
which is subbituminous coal if at all times
80 percent or more of the cumulative to-
tal fuel input (coal and any other fuel in-
put) used in normal plant operations (as
definedinsection3.03(2)ofthisnotice)
of the project will be subbituminous coal.
Such a project meets the requirements in
§ 48A(f)(1) by achieving either 99-percent
removal of sulfur dioxide or an emission
level of not more than 0.04 pounds of sul-
fur dioxide per million Btu, determined on
a 30-day average. All other qualifying ad-
vanced coal projects must achieve 99-per-
cent removal of sulfur dioxide.
.03InformationToBeIncludedinthe
Application for § 48A Certification.Pur-
suant to § 48A(d)(2)(B), an application for
§ 48A certification must include all of the
following:
(1) The name, address, and taxpayer
identification number of the taxpayer. If
the taxpayer is a member of an affiliated
group filing consolidated returns, also pro-
vide the name, address, and taxpayer iden-
2009–16 I.R.B.821April 20, 2009

tification number of the common parent of
the group.
(2) The name, telephone number, and
fax number of a contact person. For such
person, attach a properly executed power
of attorney, preferably on Form 2848,
Power of Attorney and Declaration of
Representative.
(3) One paper copy and one electronic
versiononafloppydiscoraCDofthe
completed application for DOE certifica-
tion submitted with respect to the project
in accordance with section 5.02 of this no-
tice.
(4) If the Phase I advanced coal credit
was allocated to the project, the estimated
total cost and estimated total qualified
investment of the Phase I advanced coal
project (as represented in the application
for the Phase I advanced coal credit), and
the amount of the allocated Phase I ad-
vanced coal project credit.
.04Instructions and Address for Fil-
ing § 48A Application. One paper copy
and one electronic version on a floppy
disc or a CD of the application for § 48A
certification must be submitted. Appli-
cations for § 48A certification should be
marked: SECTION 48A APPLICATION
FOR CERTIFICATION. There is no user
fee for these applications.
(1) Applications submitted by U.S. mail
must be sent to:
Internal Revenue Service
Industry Director, Natural Resources
and Construction
Attn: Executive Assistant
1919 Smith Street
Stop HOU 1000
Houston, TX 77002
Applications submitted by a private de-
liveryservicemustbesentto:
Internal Revenue Service
Industry Director, Natural Resources
and Construction
Attn: Executive Assistant
1919 Smith Street, Floor P2
Stop HOU 1000
Houston, TX 77002
(2) Applications may also be hand de-
livered Monday through Friday between
the hours of 8 a.m. and 4 p.m. Central time
to:
Internal Revenue Service
Industry Director, Natural Resources
and Construction
Attn: Executive Assistant
1919 Smith Street, Floor P2
Stop HOU 1000
Houston, TX 77002
SECTION 6. ISSUANCE OF
CERTIFICATION
.01In General. Section 48A(d)(2)(D)
provides that a taxpayer shall have 2
years from the date of acceptance of the
§ 48A application during which to pro-
vide evidence that the criteria set forth in
§ 48A(e)(2) have been met. Pursuant to
§ 48A(e)(2), a project shall be eligible for
certification only if (A) the taxpayer has
received all federal and state environmen-
tal authorizations or reviews necessary
to commence construction of the project,
and (B) the taxpayer, except in the case
of a retrofit or repower of an existing
generation unit, has purchased or entered
into a binding contract for the purchase of
the main steam turbine or turbines for the
project, except that this contract may be
contingent upon receipt of a certification
under § 48A(d)(2). Section 48A(d)(2)(E)
provides that a taxpayer that receives a
certification has 5 years from the date of
issuance of the certification to place the
project in service and that the certification
is void if the project is not placed in ser-
vice by the end of that five-year period.
.02Requirements for Certification.
Within 2 years from the date that the Ser-
vice accepts the taxpayer’s application for
§ 48A certification under section 4.02(11)
of this notice, the taxpayer must submit
to the Service both a paper copy and an
electronic version on a floppy disc or a
CD of the documentation establishing
that the requirements of § 48A(e)(2) are
satisfied. The electronic version of the
documentation must be formatted in one
of the following software applications:
Microsoft Word
tm
2002 or later edition;
Microsoft Excel
tm
2002 or later edition; or
Adobe Acrobat
tm
PDF 6.0 or later edition.
See also sections 7.01 and 7.02 of this
notice for other requirements that must be
satisfied. The taxpayer should mark the
package “SECTION 48A CERTIFICA-
TION REQUIREMENTS” and send it to
the appropriate address listed in section
5.04 of this notice or listed in later guid-
ance published in the Internal Revenue
Bulletin.
.03Service’s Action on Certification.
After receiving the material described in
section 6.02 of this notice, the Service will
decide whether or not to certify the project
and will notify the taxpayer, by letter, of
that decision. If the Service certifies the
project, the date of this letter is the date of
issuance of the certification.
SECTION 7. OTHER REQUIREMENTS
.01Signature. Each submission un-
der sections 5 and 6 of this notice must
be signed and dated by the taxpayer. A
stamped signature or faxed signature is not
permitted.
.02Penalties of Perjury Statement.
(1) Each submission under sections 5
and 6 of this notice must be accompa-
nied by the following declaration: “Under
penalties of perjury, I declare that I have
examined this submission, including ac-
companying documents, and, to the best
of my knowledge and belief, all of the
facts contained herein aretrue,correct,and
complete.”
(2) The declaration must be signed and
dated by the taxpayer. The person sign-
ing for the taxpayer must have personal
knowledge of the facts. Further, the decla-
ration must be signed by an officer on be-
half of a corporation, a general partner on
behalf of a state-law partnership, a mem-
ber-manager on behalf of a limited liabil-
ity company, a trustee on behalf of a trust,
and the proprietor in the case of a sole pro-
prietorship. If the taxpayer is a member of
an affiliated group filing consolidated re-
turns, the declaration also must be signed
by a duly authorized officer of the common
parent of the group. A stamped signature
or faxed signature is not permitted.
.03Significant Change in Plans.The
Service must be informed if the plans for
the project change in any significant re-
spect from the plans set forth in the ap-
plications for § 48A and DOE certifica-
tion. Except as otherwise provided un-
der § 48A(h), any significant change to the
plans set forth in the applications will have
the following effects:
(1) If the Service is informed of the
change after the date on which the appli-
cations for DOE certification were due
for the allocation round under section
4.02(10) of this notice and before the
April 20, 20098222009–16 I.R.B.

Service accepts or rejects the taxpayer’s
application for § 48A certification under
section 4.02(11) of this notice, the Service
will not consider the project during the
allocation round; and
(2) Any acceptance provided by the
Service and any allocation or certification
based on that acceptance will be void un-
less the Service is informed of the change
before the date on which the acceptance
is provided under section 4.02(11) of this
notice.
.04Failure to Capture and Sequester
CO
2
Emissions. The Phase II advanced
coal credit allocated to a project will be re-
captured if, at any time during the applica-
ble recovery period (as defined in § 168(c))
for such project, the project fails to attain
or maintain the separation and sequestra-
tion requirements for such project under
§48A(e)(1)(g).
.05Effect of an Acceptance, Alloca-
tion, or Certification. An acceptance,
allocation, or certification by the Service
under this notice is not a determination
that a project qualifies for the qualifying
advanced coal project credit under § 48A.
The Service may, upon examination (and
after any appropriate consultation with
DOE), determine that the project does not
qualify for this credit.
.06No Right to a Conference or Appeal.
A taxpayer does not have a right to a con-
ference relating to any matters under this
notice. Further, a taxpayer does not have
a right to appeal the decisions made under
this notice (including the acceptance or re-
jection of the application for DOE or § 48A
certification, the amount of credit allocated
to the project, or whether or not to certify
the project) to an Associate Chief Counsel
or any other official of the Service.
.07DOE Debriefings. Although a tax-
payer does not have a right to a conference
relating to any matters under this notice,
the DOE will offer debriefings to all ap-
plicants that submitted an application for
DOE certification. This debriefing will be
held by the DOE after the Service has ac-
cepted the applications for § 48A certifica-
tion (as determined under section 4.02(11)
of this notice). The sole purpose of the
debriefing is to enable applicants to de-
velop better proposals in future allocation
rounds by providing DOE’s review of the
strengths and weaknesses of their applica-
tion for DOE certification. All requests
for debriefings must be submitted to DOE
within 30 days of receipt of the Service’s
decision to accept or reject the application.
SECTION 8. REDUCTION OR
FORFEITURE OF ALLOCATED
CREDITS
.01 Under the closing agreement set
forthinAppendixAtothisnotice,the
qualifying advanced coal project credit al-
located under section 4 of this notice will
be reduced or forfeited in certain situa-
tions. A taxpayer must notify the Service
of the amount of any reduction or forfei-
ture required under the closing agreement.
This notification must be sent to the appro-
priateaddresslistedinsection5.04ofthis
notice or listed in later guidance published
in the Internal Revenue Bulletin.
.02 The amount of any reduction or for-
feiture of the allocated credit will be re-
turned to the appropriate allocation pool
and included in the aggregate credit re-
maining to be allocated in the allocation
round following the reduction or forfei-
ture. If the reduction or forfeiture occurs
after the 2011–12 allocation round, future
guidance will prescribe procedures appli-
cable to applications for certification with
respect to the amount of returned credit.
SECTION 9. QUALIFIED PROGRESS
EXPENDITURES
.01 Section 48A(b)(3) provides that
rules similar to the rules of § 46(c)(4)
and (d) (as in effect on the day before the
enactment of the Revenue Reconciliation
Act of 1990) shall apply for purposes of
§ 48A. Former §§ 46(c)(4) and 46(d) pro-
vided the rules for claiming the investment
credit on qualified progress expenditures
(as defined in former § 46(d)(3)) made
by a taxpayer during the taxable year for
the construction of progress expenditure
property (as defined in former § 46(d)(2)).
.02 In the case of self-constructed prop-
erty (as defined in former § 46(d)(5)(A)),
former § 46(d)(3)(A) defined qualified
progress expenditures to mean the amount
that is properly chargeable (during the
taxable year) to capital account with re-
spect to that property. With respect to a
qualifying advanced coal project that is
self-constructed property, amounts paid or
incurred are chargeable to capital account
at the time and to the extent they are prop-
erly includible in computing basis under
the taxpayer’s method of accounting (for
example, after applying the requirements
of § 461, including the economic perfor-
mance requirement of § 461(h)).
.03 To claim the qualifying advanced
coal project credit on the qualified
progress expenditures paid or incurred
by a taxpayer during the taxable year for
construction of a qualifying advanced coal
project, the taxpayer must make an elec-
tion under the rules set forth in § 1.46–5(o)
of the Income Tax Regulations. A tax-
payer may not make the qualified progress
expenditures election for a qualifying
advanced coal project until the taxpayer
has received an acceptance letter for the
project under section 4.02(11) of this no-
tice.
.04 If a taxpayer makes the qualified
progress expenditures election pursuant to
section 9.03 of this notice, rules similar
to the recapture rules in § 50(a)(2)(A)–(D)
apply. In addition to the cessation events
listed in § 50(a)(2)(A), examples of other
events that will cause the project to cease
being a qualifying advanced coal project
are:
(1) Failure to satisfy any of the certifi-
cation requirements in § 48A(e)(2) within
2 years from the date that the Service ac-
cepted the taxpayer’s application for § 48A
certification for the project under section
4.02(11) of this notice;
(2) Failure to receive a certification for
the project in accordance with section 6.03
of this notice;
(3) Failure to place the project in service
within 5 years from the date of issuance of
the certification undersection 6.03 of this
notice;
(4) A significant change to the plans for
the project as set forth in the applications
for § 48A and DOE certification if, under
section 7.03 of this notice, the Service’s
acceptance of the project is void as a result
of the change; or
(5) Failure of the project, at any time
during the applicable recovery period (as
defined in § 168(c)) for such project, to
attain or maintain the separation and se-
questration of CO
2
emissions required by
§ 48A(e)(1)(G).
SECTION 10. DISCLOSURE OF
INFORMATION
.01Announcement. Section 48A(d)(5)
provides that the Secretary shall, upon
making a certification under § 48A(d) or
2009–16 I.R.B.823April 20, 2009

§ 48B(d), publicly disclose the identity of
the applicant and the amount of the credit
certified with respect to such applicant.
Accordingly, the Service intends to pub-
lish the results of the allocation process,
and disclose the following information
in the event a qualifying advanced coal
project credit is allocated to the taxpayer’s
project: (a) the name of the taxpayer and
(b) the amount of the qualifying advanced
coal project credit allocated to the project.
.02In general. An application for DOE
certification, an application for § 48A cer-
tification, any other documentation sub-
mitted by the taxpayer pursuant to section
6.02 of this notice, and any documentation
generated by the Service or DOE as part
of this process are return information sub-
ject to § 6103. Except for the items of
information that § 48A(d)(5) requires the
Service to make available to the public,
the other material remains the applicant’s
confidential return information, which is
exempt from disclosure under the Free-
dom of Information Act (“FOIA”), 5 USC
§ 552(b)(3), in conjunction with § 6103.
Other FOIA exemptions may also apply.
For example, FOIA includes exemptions
for trade secrets and commercial or finan-
cial information (5 USC § 552. (b)(4)),
as well as personal information (5 USC
§ 552(b)(6)).
.03FOIA requests. Anyone interested
in submitting a request for records under
the FOIA with respect to the qualifying ad-
vanced coal project program under § 48A
should direct a request that conforms to
the Service’s FOIA regulations, found
at 26 C.F.R. § 601.702, to the following
address:
IRS FOIA Request
Baltimore Disclosure Office
Room 940
31 Hopkins Plaza
Baltimore, MD 21201
SECTION 11. EFFECT ON OTHER
DOCUMENTS
Notice 2007–52 is clarified, modified,
and amplified.
SECTION 12. EFFECTIVE DATE
This notice is effective March 13, 2009.
SECTION 13. PAPERWORK
REDUCTION ACT
The collection of information contained
in this notice has been reviewed and ap-
proved by the Office of Management and
Budget in accordance with the Paperwork
Reduction Act (44 U.S.C. § 3507) under
control number 1545–2003.
An agency may not conduct or sponsor,
and a person is not required to respond
to, a collection of information unless the
collection of information displays a valid
OMB control number.
The collections of information in this
notice are in sections 4, 5, 6, 7, 8, and Ap-
pendix B of this notice. This information
is required to obtain an allocation of qual-
ifying advanced coal project credits. This
informationwillbeusedbytheServiceto
verify that the taxpayer is eligible for the
qualifying advancedcoal project credits.
The collection of information is required
to obtain a benefit. The likely respondents
are business or other for-profit institutions.
The estimated total annual reporting
burden is 4,950 hours.
The estimated annual burden per re-
spondent varies from 70 to 150 hours, de-
pending on individual circumstances, with
an estimated average of 110 hours. The es-
timated number of respondents is 45.
The estimated annual frequency of re-
sponses is on occasion.
Books or records relating to a collection
of information must be retained as long
as their contents may become material in
the administration of any internal revenue
law. Generally, tax returns and tax return
information are confidential, as required
by 26 U.S.C. § 6103.
SECTION 14. DRAFTING
INFORMATION
The principal author of this notice is
Julie V. Skeen of the Office of Associate
Chief Counsel (Passthroughs & Special In-
dustries). For furtherinformation regard-
ing this notice, contactJennifer Bernardini
at (202) 622–3110 (not a toll-free call).
For further information regarding the
application for § 48A certification, the
documentation to be submitted to the
Service establishing that the requirements
of § 48A(e)(2) are satisfied, and the
issuance of the certification that the
requirements of § 48A(e)(2) are satisfied,
contact Tina Meaux, Executive Assistant,
Office of the Industry Director, Natural
Resources and Construction, at (713)
209–4074 (not a toll-free number).
April 20, 20098242009–16 I.R.B.

APPENDIX A
CLOSING AGREEMENT
Under § 7121 of the Internal Revenue Code, [insert taxpayer’s name, address, and identifying number] (“Taxpayer”) and the
Commissioner of Internal Revenue (“Commissioner”) make the following closing agreement:
WHEREAS:
1. On or before March [insert date and year], Taxpayer submitted to the Internal Revenue Service (“Service”), an application
for certification under the Phase II advanced coal program described in Notice 2009–24 (“Application for § 48A Certification”);
2. Taxpayer’s Application for § 48A Certification is for the qualifying advanced coal project (the“Project”) described below—
(1) The Project will use an advanced coal-based generation technology (as defined in § 48A(c)(2) and (f));
(2) The Project will be located at [insert address or other identifying designation];
(3) The Project is [insert either: “a new electric generation unit (as defined in § 48A(c)(6))”; “a retrofit of an existing electric
generation unit (as defined in § 48A(c)(6))”; or “a repower of anexisting electric generation unit (as defined in § 48A(c)(6))”;
(4) The Project will have a total nameplate generating capacity (as defined in section 3.02 of Notice 2009–24) of at least [insert
number] megawatts;
(5) At all times more than 50 percent of the cumulative total fuel input (as defined in section 3.03(1) of Notice 2009–24 and
including coal and any other fuel input) used during normal plantoperations (as defined in section 3.03(2) of Notice 2009–24) for
the Project will be [insert either: “bituminous coal”; “subbituminous coal”; or “lignite”]; and
3. On [insert date of acceptance letter issued under section 4.02(11) of Notice 2009–24], the Service accepted Taxpayer’s Ap-
plication for § 48A Certification for the Project and allocated a qualifying advancedcoal project credit under § 48A in the amount
of $[insert number] to the Project.
NOW IT IS HEREBY DETERMINED AND AGREED FOR FEDERAL INCOME TAX PURPOSES THAT:
1. The total amount of the qualifying advanced coal project credit to be claimed forthe Project under § 48A(a) must not exceed
$[insert the number in WHEREAS clause #3].
2. If Taxpayer fails to satisfy any of the certification requirements in § 48A(e)(2) within the time specified in § 48A(d)(2)(D)
(2 years from [insert the date in WHEREAS clause #3]), or if the Service does not issue a certification for the Project under Notice
2009–24, the qualifying advanced coal project credit in the amount of $[insert the number in WHEREAS clause #3] allocated to
the Project is fully forfeited.
3. If the Project fails, at any time during the applicable recovery period (as definedin§168(c))forsuchproject,toattainor
maintain the separation and sequestration of CO
2
emissions required by § 48A(e)(1)(G), the qualifying advanced coal project credit
in the amount of $[insert the number in WHEREAS clause #3] allocated to the Project is fully forfeited.
4. If the Project is not placed in service by Taxpayer within 5 years of the date of issuance of the certification as determined under
section 6.03 of Notice 2009–24, the qualifying advanced coalproject credit in the amount of $[insert the number in WHEREAS
clause #3] allocated to the Project is fully forfeited.
5. If the plans for the Project change in any significant respectfrom the plans set forth in the application for DOE certification
(as defined in section 4.01 of Notice 2009–24) and the Applicationfor§48ACertification(asdefinedinsection4.01ofNotice
2009–24) and, under section 7.03 of Notice 2009–24, the acceptance of Taxpayer’s Application for § 48A Certification on [insert
the date in WHEREAS clause #3] is void, the qualifying advanced coal project credit in the amount of $[insert the number in
WHEREAS clause #3] allocated to the Project is fully forfeited.
6. (1) If the Project fails to satisfy any of the requirements in §48A(e)(1)(A), (C), (D), (E), and (F) for a qualifying advanced
coal project or, during normal plant operations (as defined in section 3.03(2) of Notice 2009–24), fails to satisfy the requirement in
§ 48A(e)(1)(B) for a qualifying advanced coal project—
(a) at the time the Project is placed in service, the qualifying advanced coal project credit in the amount of $[insert the number
in WHEREAS clause #3] allocated to the Project is fully forfeited; and
(b) after the Project is placed in service (and after satisfying all such requirements at the time the Project is placed in service),
the Project ceases to be investment credit property and the recapture rules of § 50(a) apply.
2009–16 I.R.B.825April 20, 2009

(2) If at any time more than 50 percent of the cumulative total fuel input (as defined in section 3.03(1) of Notice 2009–24 and
including coal and any other fuel input) used during normal plantoperations (as defined in section 3.03(2) of Notice 2009–24) is
not [insert the primary feedstock in WHEREAS clause #2(e)], the Project ceases to be investment credit property and the recapture
rules of § 50(a) apply.
7. Taxpayer will not claim the qualifying gasification projectcredit under § 48B for any qualified investment for which the
qualifying advanced coal projectcredit is allowed under § 48A.
8. If Taxpayer elects to claim the qualifying advanced coal project credit on the qualified progress expenditures paid or incurred
by Taxpayer during the taxable year(s) during which the Project is under construction and the Project ceases to be a qualifying
advanced coal project (whether before, at the time, or after the Project is placed in service), rules similar to the recapture rules in
§ 50(a)(2)(A) through (D) apply.
9. This agreement applies only to Taxpayer. Any successor in interest must execute a new closing agreement with the Service. If
the interest is acquired at or before the time the Project is placed in service and the successor in interest fails toexecute a new closing
agreement, the qualifying advanced coal project credit in the amount of $[insert the number in WHEREAS clause #3] allocated to
the Project is fully forfeited. If the interest is acquired after the time the Project is placed in service and the successor in interest fails
to execute a new closing agreement, the Project ceases to be investment credit property and the recapture rules of § 50(a) apply.
THIS AGREEMENT IS FINAL AND CONCLUSIVE EXCEPT:
1. The matter it relates to may be reopened in the event of fraud, malfeasance, or misrepresentation of a material fact;
2. It is subject to the Internal Revenue Code sections that expressly provide that effect be given to their provisions (including
anystatedexceptionfor§7122)notwithstanding any law or rule of law; and
3. If it relates to a tax period ending after the date of this Closing Agreement, it is subject to any law enacted after such date,
whichappliestothetaxperiod.
By signing, the parties certify that they have readand agreed to the terms of this Closing Agreement.
Taxpayer: [insert name and identifying number]
By:
Date Signed:
[insert name]
Title:[insert title]
[insert taxpayer’s name]
Commissioner of Internal Revenue
By:
Date Signed:
[insert name]
Title:[insert title]
I have examined the specific matters involved and recommend the acceptance of the proposed agreement.
(Receiving Officer).................................................................................................
(Title) .............................................................................................................
DateSigned ........................................................................................................
I have reviewed the specific matters involved and recommend the acceptance of the proposed agreement.
(Receiving Officer).................................................................................................
(Title) .............................................................................................................
DateSigned ........................................................................................................
April 20, 20098262009–16 I.R.B.

APPENDIX B
APPLICATION FOR DOE CERTIFICATION
REQUEST FOR SUPPLEMENTAL APPLICATION INFORMATION FOR DOE
The Internal Revenue Service (“Service”) and the Department ofEnergy (“DOE”) seek to certify applications that demonstrate
a high likelihood of being successfully implemented by the applicants. To qualify, projects must be technically and economically
feasible and use the appropriate clean coal technology.
This request for submission of supplemental application information:
•Describes the information to be provided by the applicant seeking a certification of feasibility from DOE, and
•Lists the evaluation criteria and Program Policy Factors to be used by DOEin the evaluation of applications.
If after review by the DOE a project is determined to be feasible, DOE will provide a DOE certification of feasibility to the
Service. The Service will then accept or reject the taxpayer’s application for certification of tax credit.
In conducting this evaluation the DOE may utilize assistance and advice from qualified personnel from other Federal agencies
and/or non-conflicted contractors. DOE will obtain assurances in advance from all evaluators that application information shall
be kept confidential and used only for evaluation purposes. DOE reserves the right to request clarifications and/or supplemental
information from some or all applicants through written submissions and/or oral presentations.
Notice is given that DOE may determine whether or not to provide acertification to the Service at any time after the application
has been received, without further exchanges or discussions. Therefore, all applicantsare advised to submit their most complete
and responsive application.
Applications will not be returned.
INFORMATION TO BE SUBMITTED FOR DOE CERTIFICATION APPLICATION
A. General
This request, t
ogether with the information in relevant sections of Notice 2009–24 includes all the information needed to com-
plete an appli
cation for DOE certification. All applications shall be prepared in accordance with this request in order to provide a
standard basi
s for evaluation and to ensure that each application will be uniform as to format and sequence.
Each applicat
ion should clearly demonstrate the applicant’s capability, knowledge, and experience in regard to the requirements
described her
ein.
Applicants sh
ould fully address the requirements of Notice 2009–24 and this request andnotrely on the presumed background
knowledge of r
eviewers. DOE may reject an application that does not followthe instructions regarding the organization and content
of the applica
tion when the nature of the deviation and/or omission precludes meaningful review of the application.
B. Unnecessarily Elaborate Applications
Unnecessarily elaborate brochures or other presentations beyond those sufficient to present a complete andeffective application
are not desired. Elaborate art work, graphics andpictures are neither required nor encouraged.
C. Application Submission for DOE Certification
The application submission to DOE must include the information and documentation required by relevant sections of Notice
2009–24.
An application to DOE will not be considered in the allocation round conducted in 2009–10 unless it is postmarked by November
2, 2009. (If allocation rounds are conducted in 2010–11 and 2011–12, applications must be postmarked by November 1 of the year
in which the allocation round begins.) One paper copy and one electronic version on a floppy disc or a CD of the application must
be submitted to:
Melissa Robe
National Energy Technology Laboratory
3610 Collins Ferry Road
Morgantown, WV 26507
2009–16 I.R.B.827April 20, 2009

Note that under section 5.03(1) of Notice 2009–24, one paper copy and one electronic version ofthe application for DOE certi-
fication must be sent to the Service as part of the application for §48A certification. The application for §48A certification will not
be considered in the allocation round conducted in 2009–10 unlessit is submitted to the Service by March 1, 2010. (If allocation
rounds are conducted in 2010–11 and 2011–12, applications must be postmarked by March 1 of the year in which the allocation
round ends.)
THE INFORMATION REQUIRED BY THIS REQUEST MUST BE SUBMITTED USING THE FORMAT AND THE
HEADINGS OF THE “PROJECT INFORMATION MEMORANDUM” AS DESCRIBED BELOW.
To aid in evaluation, applications shall be clearly and concisely written and logically assembled. All pages of each part shall be
appropriately numbered and identified with the name of the applicant and the date.
The application, including the Project Information Memorandum, MUST be formatted in one of the following software appli-
cations:
•Microsoft Word
tm
2002 or later edition
•Microsoft Excel
tm
2002 or later edition
•Adobe Acrobat
tm
PDF 6.0 or later edition
Financial models should be submitted using the Excel
tm
spreadsheet and must include calculation formulas and assumptions.
The applicant is responsible for the integrity and structure of the electronic files. The DOE will not be responsible for reformat-
ting, restructuring or converting any files submitted under this announcement.
The Project In
formation Memorandum,excluding Appendices, shall not exceed seventy-five (75) pages. Pages in excess of the
page limitati
on will not be considered for evaluation. All text shall betyped, single spaced, using 12 point font, 1 inch margins,
and unreduced
8–1/2-inch by 11-inch pages. Illustrations and charts shall be legible with all text in legible font. Pages shall be
sequentially
numbered. Except as otherwise noted herein the page guidelines previously set forth constitute a limitation on the total
amount of mat
erial that may be submitted for evaluation. No materialmay be incorporated in any application by reference as a
means to circ
umvent the page limitation.
D. Project Information Memorandum
1. Summary and Introduction
a. Description of the Project
b. Financing and Ownership Structure
c. Description of the main parties to the project, including background, ownership and related experience
d. Current Project Status and Schedule to Beginning of Construction
2. Technology
and Technical Information
Provideadesc
ription of the proposed technology, including sufficient supporting information (such asvendor guarantees, process
flow diagram
s, equipment descriptions, information on each major process unit and the totalplant, compositions of major streams,
and the techn
ical plan for achieving the goals proposed for the project) as would be needed to allow DOE to confirm that the tech-
nical requir
ements of § 48A are met. Specifically the applicant should:
•Provide evidence sufficient to demonstrate that the proposed technology meets the definition of “Advanced Coal-Based Gen-
eration Technology,” either as integrated gasification combined cycle (“IGCC”) technology, or other advanced coal-based
electric generation technology meeting theheat rate requirement of 8530 Btu/kWh.
•For advanced coal-basedelectric generation:
•The applicant must provide evidence sufficient to justify the actual heat rate and heat rate corrected to conditions specified
in § 48A(f)(2).
•For projects including existing units, theapplicant must provide evidence sufficient to justify that the proposed technology
meets heat rate requirements specified in § 48A(f)(3).
•Provide evidence sufficient to justify that the proposed projectis designed to meet the following performance requirements:
•SO
2
(subbituminous coal is 80 percent or more of fuel input)........99 percent removal or emissions not more than 0.04
lbs/MMBTU
•SO
2
(subbituminous coal is not more than 80 percent of fuel input)..........99 percent removal
•SO
2
(for all projects other thansubbituminous coal projects)..........99 percent removal
•NOx emissions...............0.07 lbs / MMBTU
•PM emissions.................0.015 lbs / MMBTU
April 20, 20098282009–16 I.R.B.

•Hg percent removal..........90 percent
•Provide evidence sufficient to demonstrate that the project meets the requirements for qualifying advanced coal projects as
specified under § 48A(e)(1) including:
•The project will power a new electric generation unit or retrofit/repower an existing electric generation unit. At least 50%
of the useful output of the project is electrical power.
•The fuel for the project is at least 75% coal (as defined in§ 48A(c)(4) and section 3.01 of Notice 2009–24), on an energy
input basis.
•The project is located at one site and has a total nameplate electric power generating capacity (as defined in section 3.02
of Notice 2009–24) of at least 400 MW.
•The project includes equipment which separates and sequesters at least 65 percent of such project’s total carbon dioxide
(“CO
2
”) emissions. The CO
2
separation, capture, sequestration, and emission values shall be reported on metric tons
per hour and metric tons per year basis under normal plant operating conditions. The CO
2
separation and sequestration
percentages shall be calculated based on the total CO
2
which would otherwise be released into the atmosphere as industrial
emission of greenhouse gas.
3. Applicant’s Capability to Accomplish the Technical Objectives
Provide a narrative supporting the Applicant’s capability to accomplish the technical objectivesof the proposed project, including
supporting documentation demonstrating that the applicant hasassembled a team that is formally committed to participate in the
proposed project.
Provide information to support that the applicant has assembled a team with the skills and resources needed to implement the
project as proposed. Provide signed agreements or letters from team members demonstrating that the proposed team members are
fully committed to the project.
Provide information, including examples of prior similar projects completed by applicant, engineering-procurement-construction
(“EPC”) contractor, and suppliers of majorsubsystems or equipment, which support thecapabilities of the applicant and its team
members to design, construct, permit, andoperate the facility. The applicant should demonstratethat the team members have a
corporate history of successful completion of similar projects.
Provide information to support that key personnel of the applicant and its team members have knowledge, experience, and ade-
quate degree of involvement to successfully implement the project.
Include the project status and relevant information from ongoing engineering activities. Also include in an appendix any en-
gineering report or reports usedby the applicant to develop the project and to estimate costs andoperating performance. Include
copies of any signed agreements to support project status claims regarding preliminary design studies, front-end engineering design
(“FEED”), and EPC-type agreements.
4. Priority for Qualifying Advanced Coal Projects
The applicant must submit information sufficient for categorization andprioritization of projects for certification, including
documentation pertaining to the following:
•Identificat
ionoftheprimaryfeedstock(asdefinedinsection5.02(5) of Notice 2009–24), and all other feedstocks.
•High priorit
y project factors:
•Greenhouse g
as capture capability.
•Increased by
-product utilization, if applicable.
•Research par
tnership with an eligible educational institution as defined in §48A(e)(3)(B)(iii), if applicable.
•Highest prio
rity factor: Separation and sequestration percentage of total CO
2
emissions.
5. Site Control and Ownership
Provide evidence that demonstrates the overall feasibility of implementing the project at the proposed site.
Provide evidence that the applicant owns or controls a site in the United States of sufficient size to allow the proposed project to
be constructed and operated on a long-term basis. Documentation such as a deed demonstrating the applicant owns the project site,
a signed option to purchase the site from the site owner, or a letter of intent signed by the site owner and stating the site owner’s
intent to sell the site to the applicant should be provided.
Describe the current infrastructure at the site available to meet the needs of the project.
2009–16 I.R.B.829April 20, 2009

Provide documentation supporting applicant’s conclusion that the proposed site can fully meet all environmental, coal supply,
water supply, transmission interconnect, and public policy requirements. Such documentation may include signed agreements,
letters of intent, or term sheets relating to coal supply, water supply, and product (e.g.CO
2
) transportation etc., and regulatory
approvals supporting the key claims.
Provide detailed plans, schedules and status updates, particularly for sites with pre-existing conditions that could impact the
proposed project. Pre-existing conditions may include, but are notlimited to, sites with mandated environmental remediation ef-
forts; brown-field sites that will require building demolition; or sites requiring substantial rerouting of existing roads, railroads,
transmission lines or pipelines prior to the start of the project.
Applicants must select one “proposed site.” However, projects with key physical or logistical elements that require close integra-
tion with another system for the project to succeed should provide information on all integrated systems regardless of where they
are located. Example 1: a power plant designed to operate exclusively on coal from a to-be-opened mine should provide supporting
documentation for the new mine. Example 2: an oxygen-blown IGCC plant planning to purchase oxygen from a third party who
will construct a plant exclusively for this project should provide documentation for the oxygen supplier. Example 3: an IGCC plant
planning to sell CO
2
for enhanced oil recovery (“EOR”) should provide an agreement for such a transaction indicating the annual
CO
2
purchase quantity, expectedproject lifetime sales, CO
2
capacity of the site for EOR, and EOR site ownership.
6. Utilization of Project Output
Provide evidence that demonstrates that a majority of the project output is reasonably expected to be acquired or utilized.
Provide a projection of the anticipated costs of electricity and other marketable by-products produced by the plant.
Provide documentation establishing that a majority of the output of the plant is reasonably expected to be acquired or utilized.
Such documentation should be signed by authorizing officials ofboth the buyer and seller, and may include: Sales Agreements,
Letters of Intent, Memoranda of Understanding, Option Agreements, and Power Purchase Agreements.
Describe any energy sales arrangements that exist or that may be contemplated (e.g., a Power Purchase Agreement or Energy
Sales Agreement) and summarizetheir key terms and conditions.
Include as an appendix any independent Energy Price Market Study that has been done in connection with this project, or if no
independent market study has been completed, provide a copy of the applicant-prepared market study.
Identify and describe any firm arrangements to sell non-power output, such as CO
2
, and provide any evidence of such arrange-
ments. If the project produces a product in addition to power, include as an appendix any related market study of price and volume
of sales expected for that product.
7. Project Economics
Describe the project economics and provide satisfactory evidence of economic feasibility as demonstrated through the financial
forecast and the underlying project assumptions. The project economic and financial assumptions should be clearly stated and
explained.
Show calculation of the amount of tax credit applied for based on allowable cost.
8. Project Development and Financial Plan
Provide the total project budget and major plant costs (e.g., development, operating, capital, construction, and financing costs).
Provide the estimated annual budget for and source of project development costs from the time of the application until the beginning
of construction, including legal, engineering,financial, environmental, overhead, and other development costs. Describe the overall
approach to project development and financing sufficient to demonstrate project viability. Provide a complete explanation of the
source and amount of project equity. Provide a complete explanation of the source and amount of project debt. Provide the audited
financial statements for the most recently ended three fiscal years and quarterly interim financial statements for the current fiscal
year for (a) the applicant, (b) for any of the project parties providing funding, and (c) for any third party funding source. If the
applicant or another party does not have audited financial statements, the applicant or theparty should provide equivalent financial
statements prepared by the applicant or the party, in accordancewith Generally Accepted Accounting Principles, and certified as
to accuracy and completeness by the Chief FinancialOfficer of the party providing the statements.
For internally financed projects, provide evidence that the applicant has sufficient assets to fund the project with its own re-
sources. Identify any internal approvals required to commit such assets. Include in an appendix copies of any board resolution or
other approval authorizingthe applicant to commit fundsand proceed with the project.
For projects financed through debt instruments either unsecured or secured by assets other than the project, provide evidence
that the applicant has sufficient creditworthiness to obtain such financing along with a discussion of the status of such instruments.
Identify any internal approvals required to commit the applicant to pursue such financing. Include in an appendix copies of any
board resolution or other approval authorizingtheapplicanttocommittosuchfinancing.
April 20, 20098302009–16 I.R.B.

For projects financed through investor equity contributions, describe the source and status of each contribution. Discuss each
investor’s financial capability to meet its commitments. Includein an appendix, copies of any executed investment agreements.
If financing through a public offering or private placement of either debtor equity is planned for the project, provide the expected
debt rating for the issue and an explanation of applicant’s justification for the rating. Describe the status of any discussions with
prospective investment bankers or other financial advisors.
Include as an appendix copies of any existing funding commitments or expressions of interest from funding sources for the
project.
For projects employing non-recourse or limited recourse debt financing, provide a complete discussion of the approach to, and
status of, such financing. In an appendix: (1) provide an Excel based financial model of the project, with formulas, so that review of
the model calculations and assumptions may be facilitated; and (2) provide pro-forma project financial, economic, capital cost, and
operating assumptions, including detail of all project capital costs, development costs, interest during construction, transmission
interconnection costs, other operating expenses, and all other costs and expenses.
9. Project Contract Structure
Describe the current status of each of the agreements set forth below. Include as an appendix copies of the contracts or summaries
of the key provisions of each ofthe following agreements:
•Power Purchase Agreement (if not fully explained in section 5 above)
•Coal Supply: describe the source and price of coal supply for the project. Includeas an appendix any studies of coal supply
price and amount that have been prepared. Include a summary of the coal supply contract and a signed copy of the contract.
•Coal Transportation: explain the arrangements for transporting coal, including costs.
•Operations & Maintenance Agreement:include a summary of the terms and conditions of the contract and a copy of the
contract.
•Shareholders Agreement: summarize key terms and include the agreement as an appendix.
•Engineering, Procurement and Construction Agreement: describe the key terms of the existing or expected EPC contract
arrangement, including firm price, liquidated damages, hold-backs, performance guarantees, etc.
•Water Supply Agreement: confirm the amount, source, and cost of water supply.
•Transmission Interconnection Agreement: explain the requirements to connectto the system and the current status of nego-
tiations in this respect.
•If CO
2
is to be sold a third party for sequestration, provide a Sales Agreement and provide specifics, such as CO
2
sales (metric
tons per year), expected project lifetime sales (metric tons), potential CO
2
capacity of the site for sequestration (metric tons),
technology and site suitability for sequestration, and sequestration site ownership and operation.
10. Permits Including Environmental Authorizations
Provide a complete list of all federal, state, and local permits,including environmental authorizations or reviews, necessary to
commence construction of the project.
Explain what actions have been taken to date to satisfy the required authorizations and reviews, and the status of each.
Provide a description of the applicant’s plan to obtain and complete all necessary permits, and environmental authorizations and
reviews.
11. Steam Turb
ine Purchase
If applicant p
lans to purchase a steam turbine or turbines for the project, indicate the prospective vendors for the turbine and
explain the cu
rrent status of purchase negotiations, and provide a timeline for negotiation and purchase with expected purchase date.
12. Project Schedule
Provide an overall project schedule which includes technical, business, financial, permitting and other factors to substantiate that
the project will meet the 2 year project certification and 5 year placed-in-service requirement.
The project schedule should be comprehensive and provide sufficient detail to demonstrate howapplicant will meet the certifi-
cation and placed-in-service requirements. The schedule should demonstrate that the applicant understands the required tasks, and
has allowed realistic times for accomplishing the technical and financial tasks. The schedule should includethe milestone accom-
plishments needed to obtain the financing for the project.
2009–16 I.R.B.831April 20, 2009

Applicants should document their progress toward meeting the 2 year completion of permitting deadline. Existing permits and
permit applications must be specific to the project proposed. If existing permits are not specific forthe proposed coal-based project
(e.g.the permits are for oil-fired or natural gas based units), specific plans, procedures and schedules for reapplying, modifying
and/or renegotiating permits should be provided. Any local, state or federal permitting schedules which may impact the overall
project schedule should be included.
Applicant should document their progress toward obtaining engineering design information (i.e., FEED) to initiate permitting
activities and to finalize the turbine generator purchase specification within the 2 year window. Most often, this requires final site,
technology, process selection. Signed FEED and/or EPC-type agreements, if available, should be provided.
13. Appendices
a. Copy of internal or external engineering reports.
b. Copy of site plan, together with evidence that applicant owns or controls a site. Examples of evidence would include a
deed, or an executed contract to purchase or lease the site.
c. Information supporting applicant’s conclusion that the site is fully acceptable as the project site with respect to
environment, coal supply, water supply, transmission interconnect, and public policy reasons.
d. Power Purchase or Energy Sales Agreement.
e. Energy Market Study.
f. Market Study for non-power output.
g. Financial Model of project.
h. Financial statements for the applicant and other project funding sources for the most recently ended three fiscal years,
and the unaudited quarterly interim financial statements for the current fiscal year.
i. Expressions of interest or commitment letters from funding sources.
j. For each project contract, if no contract currently exists, provide a summaryof the expected terms and conditions.
k. List of all federal, state, and local permits, including environmental authorizations or reviews, necessary to commence
construction.
E. Evaluation Criteria
Advanced coal projects will be evaluated on whether they meet all the requirements of § 48A.
Technical: will be evaluated on whether theapplicant has demonstrated the capability to accomplish the technical objectives.
Site: will be evaluated on the basis that the site requirement for ownership or control has been met, and that the site is suitable
for the proposed project.
Economic: will be evaluated on whether the project has demonstrated economic feasibility, taking into consideration the sub-
mitted financial and project development andstructural information and financial plan.
Schedule: will be evaluated on the applicant’s ability to meetthe 2 year project certification and the 5 year placed-in-service
requirement.
F. Program Policy Factors To Be Used by DOE in the Evaluation of Applications
Section 48A identifies minimum requirements for consideration for the qualifying advanced coal project credit, including the
project’s technical feasibility, cost, and applicant’s ability. In theevent that there are more qualified(certifiable) applications than
there are available amount of tax credit, the DOE will apply additional factors to rank eligibleAdvanced Coal Projects based on
their ability to advance coal technology beyond its current state.
If there are more certified applications than available amount of credit for a pool described in section 4.02(2) of Notice 2009–24,
DOE will rank the certified projects based onevaluation of the following Program Policy Factors. In rankingcertified projects,
highest priority will be given to the Primary Ranking Factor. Secondary and Tertiary Ranking Factors will be taken into account to
rank projects that are not clearly differentiated on the basis of thePrimary Ranking Factor, with higher priority given to Secondary
Ranking Factors than to Tertiary Ranking Factors.
Primary Ranking Factor:
•Capture and sequestration of more than 65 percent CO
2
emissions. Only projects that capture and sequester 65 percent or
more of the plant’s CO
2
emissions will be considered forDOE certification. Among the certified projects, highest rankings
will be given to projects with the greatest separation and sequestration percentages of total CO
2
emissions.
April 20, 20098322009–16 I.R.B.

Secondary Ranking Factors:
•Greenhouse gas c
apture capability.
•Increased by-pr
oduct utilization.
•Research partne
rship with an eligible educational institution as defined in §48A(e)(3)(B)(iii).
Tertiary Rankin
g Factors:
•Presentation of other environmental, economic, or performance benefits
•Higher plant efficiency.
•Geographic distribution of potential markets.
•The ratio of total nameplate generating capacity (as definedin section 3.02 of Notice 2009–24) to requested tax credit.
•Diversity of technology approaches and methods.
G. Supplemental Technical and Financial Guidance for Project Information Memorandum
Technology and Technical Information
It is important that the applicant select a specific gasification system for the project. Without that decision, it is difficult to
provide the necessary specific design information needed for DOE toevaluate the project feasibility with respect to performance,
emissions, outputs of major streams as well as capital and operating costs.
The Applicant’s capability to meet the legislated heat rate and/orenvironmental targets should be supported with design infor-
mation, and or vendor guarantees which are project, site and coal specific.
Project Economics
Applicants should demonstrate the project’seconomic feasibility and financial viability by providing a clear statement and ex-
planation of the economic and financial assumptions made by the applicant, and a financial forecast for the project. The financial
forecast should flow logically from the applicant’s assumptions and be consistent with them. Applicants should include assump-
tions regarding financial and economic issues that may not be included in the project costs but have a direct impact on the project.
The examples given in the “Site Control and Ownership” section are relevant here and their impact on the project economics should
be discussed here.
Project Development and Financial Plan
The information provided by the applicant in this section should demonstrate that the applicant’s financial plan for developing
the project is feasible and that the applicant will have access to necessary financing. The applicant should explain the source and
timing for obtaining all financing, including the project development costs. It is important that the applicant explain and provide
evidence that it has the capacity to fund the pre-construction project development costs, together with a budget for and description
of those costs. Note that financial information is required for the applicant and for any other funding source.
Project Contract Structure
This section requires that the applicant demonstrate an understanding of the commercial contracting process and show progress in
establishing the framework of contracts and agreements that a project typically requires. Applicants should show that their intended
contract structure is reasonable and that their assumptions relative to price, terms, and conditions are consistent with current market
conditions. Evidence of final agreements, agreements in principle, or summaries of terms and conditions between the applicant and
contract counterparties should be provided, if available.
Build America Bonds and
Direct Payment Subsidy
Implementation
Notice 2009–26
SECTION 1. PURPOSE
This notice provides guidance on the
new Build America Bonds under § 54AA
of the Internal Revenue Code (“Code”)
and the implementation plans for the re-
fundable credit payment procedures for
these bonds. This notice includes guid-
ance on the modifiedBuild America Bond
program for Recovery Zone Economic
Development Bonds under § 1400U–2 of
the Code. This notice provides guidance
on the initial refundable credit payment
procedures, required elections, and in-
formation reporting. This notice solicits
public comments on the refundable credit
payment procedures for these bonds. This
notice is intended to facilitate prompt im-
plementation of the Build America Bond
program and to enable state and local gov-
ernments to begin issuing these bonds for
authorized purposes to promote economic
recovery and job creation.
SECTION 2. RELEVANT
PROVISIONS
2.1Introduction.
Section 1531 of Title I of Division B
of the American Recovery and Reinvest-
ment Act of 2009, Pub. L. No. 111–5,
123 Stat. 115 (2009) (enacted February
17, 2009) (“ARRA”), added § 54AA to the
Code, authorizing state and local govern-
2009–16 I.R.B.833April 20, 2009

ments, at their option, to issue two general
types of Build America Bonds as taxable
governmental bonds with Federal subsi-
dies for a portion of their borrowing costs.
The subsidies take the form of either tax
credits provided to holders of the bonds
or refundable tax credits paid to state and
local governmental issuers of the bonds.
Build America Bonds have different levels
of Federal subsidies and program require-
ments depending on the particular type of
bond.
The first type of Build America Bond
provides a Federal subsidy through Fed-
eral tax credits to investors in the bonds in
an amount equal to 35 percent of the to-
tal coupon interest payable by the issuer
on taxable governmental bonds (net of the
tax credit), which represents a Federal sub-
sidy to the state or local governmental is-
suer equal to approximately 25 percent of
the total return to the investor (including
the coupon interest paid by the issuer and
the tax credit). This type of Build Amer-
ica Bond will be referred to in this notice
as “Build America Bonds (Tax Credit).”
The second type of Build America
Bond provides a Federal subsidy through a
refundable tax credit paid to state or local
governmental issuers by the Treasury De-
partment and the Internal Revenue Service
(“IRS”) in an amount equal to 35 percent
of the total coupon interest payable to in-
vestors in these taxable bonds. This type
of Build America Bond will be referred
to in this notice as “Build America Bonds
(Direct Payment).” The level of the 35
percent Federal interest subsidy on Build
America Bonds (Direct Payment) is deeper
than the corresponding approximately 25
percent Federal interest subsidy on Build
America Bonds (Tax Credit).
In addition, § 1401 of ARRA, which
added § 1400U–2 of the Code, provides for
a third type of Build America Bond (Direct
Payment) known as “Recovery Zone Eco-
nomic Development Bonds,” which pro-
vides for a deeper Federal subsidy through
a refundable tax credit paid to state or local
governmental issuers in an amount equal
to 45 percent of the total coupon inter-
est payable to investors in these taxable
bonds. This type of Build America Bond
will be referred to in this notice as “Recov-
ery Zone Economic Development Bonds
(Direct Payment).”
2.2Build America Bonds (Tax Credit).
Section 54AA(d) defines the term Build
America Bond to mean any taxable state or
local governmental bond (excluding a pri-
vate activity bond under § 141) that meets
the following requirements: (1) the inter-
est on such bond would (but for § 54AA)
be excludable from gross income under
§ 103; (2) the bond is issued before Jan-
uary 1, 2011; and (3) the issuer makes an
irrevocable election to have § 54AA apply.
In general, Build America Bonds (Tax
Credit) may be issued to finance any gov-
ernmental purpose for which tax-exempt
governmental bonds (excluding private ac-
tivity bonds under § 141) could be issued
under § 103 (“tax-exempt governmental
bonds”) and must comply with all require-
ments applicable to the issuance of tax-ex-
empt governmental bonds. Accordingly,
Build America Bonds (Tax Credit) may
be issued to finance the same kinds of ex-
penditures (e.g., capital expenditures and
working capital expenditures) and may
involve the same kinds of financings (e.g.,
original new money financings, current
refundings, and one advance refunding)
as tax-exempt governmental bonds. Sim-
ilarly, Build America Bonds (Tax Credit)
may not be issued for any purposes for
which tax-exempt governmental bonds
could not be issued under § 103 (e.g.,pro-
hibited second advance refunding issues
or pension annuity issues).
Section 54AA(a) provides that if a
taxpayer holds a Build America Bond on
one or more interest payment dates of the
bond during any taxable year, there shall
be allowed as a credit against the tax im-
posed by chapter 1 for the taxable year an
amount equal to the sum of the credits de-
termined under § 54AA(b) with respect to
such dates. Section 54AA(b) provides that
the amount of the credit determined with
respect to any interest payment date for a
Build America Bond is 35 percent of the
amount of interest payable by the issuer
with respect to such date. Section 54AA(e)
provides that the term “interest payment
date” means any date on which the holder
of record of the Build America Bond is en-
titled to a payment of interest under such
bond. Accordingly, the tax credit that a
taxpayer may claim with respect to a Build
America Bond (Tax Credit) is determined
by multiplying the interest payment that a
bondholder is entitledto receive from the
issuer (i.e., the bond coupon interest pay-
ment) by 35 percent. See H. R. Conf. Rep.
111–16, 111
th
Cong., 1
st
Sess. (February
12, 2009) (“ARRA Conference Report”)
at 594; see alsoid.at 593, n. 146 (original
issue discount is not treated as a payment
of interest for purposes of determining the
credit).
Section 54AA(c)(1) provides that the
credit allowed under § 54AA(a) for any
taxable year shall not exceed the excess
of (1) the sum of the regular tax liability
(as defined in § 26(b)) plus the tax im-
posed by § 55, over (2) the sum of the
credits allowable under part IV of sub-
chapter A of chapter 1 (other than sub-
part C and subpart J). Section 54AA(c)(2)
provides that if the credit allowable under
§ 54AA(a) exceeds the limitation imposed
by § 54AA(c)(1) for such taxable year,
such excess shall be carried to the succeed-
ing taxable year and added to the credit
allowable under § 54AA(a) for such tax-
able year (determined before the applica-
tion of § 54AA(c)(1) for such succeeding
taxable year). Unused credit may be car-
ried forward to succeeding taxable years.
See ARRA Conference Report at 593.
Section 54AA(d)(2)(A) provides that,
for purposes of the restrictions against
Federal guarantees of tax-exempt bonds
under § 149(b), a Build America Bond
is not treated as Federally guaranteed by
reason of the credit under §§ 54AA(a) or
§ 6431.
Section 54AA(d)(2)(B) provides that,
for purposes of applying the arbitrage
restrictions under § 148, the yield on a
Build America Bond shall be determined
without regard to the credit allowed un-
der § 54AA(a). Accordingly, issuers
should calculate the yield on Build Amer-
ica Bonds (Tax Credit) for purposes of
the arbitrage rules by applying the rules
contained in § 148 and the regulations
thereunder without an adjustment for the
tax credit taken by bondholders. See
ARRA Conference Report at 593.
Section 54AA(d)(2)(C) provides that a
bond shall not be treated as a Build Amer-
ica Bond if the issue price has more than
ade minimisamount (determined under
rules similar to the rules of § 1273(a)(3)) of
premium over the stated principal amount
of the bond. See ARRA Conference Re-
port at 593. This restriction applies to
both Build America Bonds (Tax Credit)
April 20, 20098342009–16 I.R.B.

and Build America Bonds (Direct Pay-
ment).
Section 54AA(f)(1) provides that, for
purposes of the Code, interest on any Build
America Bond shall be includible in gross
income. Under § 54AA(f)(2), rules simi-
lartotherulesof§54A(f),(g),(h),and
(i) shall apply for purposes of the credit al-
lowed under § 54AA(a). Briefly, the refer-
enced provisions under § 54A treat credits
as interest includable in gross income, pro-
vide special rules for S corporations and
partnerships, provide special rules for reg-
ulated investment companies and real es-
tate investment trusts, and authorize the
Department of the Treasury to promulgate
regulations to allow for “stripping” (which
is the separation of the ownership of these
bonds and the associated tax credits under
principles based on § 1286).
Section 54AA(h) grants to the Depart-
ment of the Treasury broad regulatory au-
thority to prescribe such regulations and
other guidance as may be necessary or ap-
propriate to carry out the provisions for
Build America Bonds under § 54AA and
the refundable credit provisions for these
bonds under § 6431.
2.3Build America Bonds (Direct
Payment).
Section 54AA(g) authorizes Build
America Bonds (Direct Payment) that
meet the definition of “qualified bonds” to
receive a refundablecredit under § 6431
in lieu of tax credits under § 54AA and
imposes different program requirements.
Section 54AA(g)(2) defines the term
“qualified bond” to mean a bond that is
issued as part of an issue that meets the
following requirements: (1) the bond is
a Build America Bond; (2) the bond is
issued before January 1, 2011; (3) 100
percent of the excess of (i) the available
project proceeds (as defined in § 54A to
mean sale proceeds of such issue less not
more than two percent of such proceeds
used to pay issuance costs plus investment
proceeds thereon), over (ii) the amounts in
a reasonably required reserve fund (within
the meaning of § 150(a)(3)) with respect
to such issue, are to be used for capital
expenditures; and (4) the issuer makes an
irrevocable election to have this subsec-
tion apply.
In determining a reasonably required
reserve fund for purposes of this provision,
the rules under § 148(d)(2) apply. Ac-
cordingly, a Build America Bond (Direct
Payment) will be an arbitrage bond if the
amount of the sale proceeds of such an is-
sue that is part of any reserve or replace-
ment fund exceeds 10 percent of the pro-
ceeds. As such, the interest on such bond
would not be tax-exempt under § 103 and
thus would not be a qualified bond for pur-
poses of this provision. ARRA Confer-
ence Report at 596, n. 150.
The eligible uses of proceeds and types
of financing for Build America Bonds
(Direct Payment) are more limited than
for Build America Bonds (Tax Credit).
In general, Build America Bonds (Direct
Payment) may be issued to finance gov-
ernmental purposes for which tax-exempt
governmental bonds (excluding private
activity bonds under § 141) could be is-
sued under § 103, but — pursuant to
§ 54AA(g)(2)(A) — the excess of avail-
able project proceeds over amounts in a
reasonably required reserve fund may be
used to finance only capital expenditures
(as defined in Treas. Reg. § 1.150–1(b)),
as contrasted with working capital expen-
ditures.SeeARRA Conference Report at
594, n. 147. For this purpose, an eligible
financing of capital expenditures includes
a reimbursement of capital expenditures
under the reimbursement rules contained
in Treas. Reg. § 1.150–2. By contrast,
Build America Bonds (Direct Payment)
generally may not be issued to refinance
capital expenditures in “refunding issues”
(as defined in Treas. Reg. § 1.150–1).
Further, for this purpose, Build America
Bonds (Direct Payment) may be used to
reimburse otherwise-eligible capital ex-
penditures under Treas. Reg. § 1.150–2
that were paid or incurred after the effec-
tive date of ARRA and that were financed
originally with temporary short-term fi-
nancing issued after the effective date of
ARRA, and such reimbursement will not
be treated as a refunding issue under Treas.
Reg. §§ 1.150–1(d) or 1.150–2(g).
Section 6431(a) provides that, for Build
America Bonds (Direct Payment) issued
before January 1, 2011, the issuer of such
bond shall be allowed a credit with re-
spect to each interest payment under such
bond which shall be payable by the Sec-
retary. Section § 6431(b) provides that
the Department of the Treasury shall pay
(contemporaneously with each interest
payment date under such bond) to the is-
suer of such bond (or to any person who
makes such interest payments on behalf
of the issuer) 35 percent of the interest
payable under such bond on such date.
Section 6431(d) provides that the term
“interest payment date” means each date
on which interest is payable by the issuer
under the terms of bonds. The ARRA
Conference Report indicates that the pay-
ment by the Secretary is to be made either
in advance or as reimbursement. ARRA
Conference Report at 595.
The amount of refundable credit that
a state or local governmental issuer may
claim with respect to a Build America
Bond (Direct Payment) is determined by
multiplying the interest payment that is
payable by the issuer on an interest pay-
ment date (i.e., the bond coupon interest
payment) by 35 percent (or 45 percent in
the case of Recovery Zone Economic De-
velopment Bonds (Direct Payment)). See
ARRA Conference Report at 594 and n.
148 (original issue discount is not treated
as a payment of interest for purposes of
calculating the refundable credit under this
provision).
Section 6431(c) states that for purposes
of the arbitrage investment restrictions un-
der § 148, the yield on Build America
Bonds (Direct Payment) is reduced by the
credit allowed under this section. Accord-
ingly, issuers should calculate the yield
on Build America Bonds (Direct Payment)
forpurposesofthearbitrage rules by ap-
plying the rules contained in § 148 and the
regulations thereunder, but by reducing the
amount of interest paid on the bond by the
amount of credit payments received pur-
suant to § 6431. See ARRA Conference
Report at 595.
2.4Recovery Zone Economic
Development Bonds (Direct Payment).
Section1401ofARRAadded
§ 1400U–2 to the Code to authorize state
and local governments to issue Recovery
Zone Economic Development Bonds (Di-
rect Payment). These bonds are treated
as qualified bonds for purposes of § 6431
and they have a deeper refundable credit
subsidy than Build America Bonds (Direct
Payment) equal to 45 percent of the total
coupon interest payable to investors in
these taxable bonds.
In particular, § 1400U–2(b) defines the
term “recovery zone economic develop-
2009–16 I.R.B.835April 20, 2009

ment bond” to mean a bond that is issued
as part of an issue that meets the follow-
ing requirements: (1) the bond is a Build
America Bond; (2) the bond is issued be-
fore January 1, 2011; (3) 100 percent of the
excess of (i) the available project proceeds
(as defined in § 54A to mean sale proceeds
of such issue less not more than two per-
cent of such proceeds used to pay issuance
costs plus investment proceeds thereon),
over (ii) the amounts in a reasonably re-
quired reserve fund (within the meaning of
§ 150(a)(3)) with respect to such issue, are
to be used for one or more “qualified eco-
nomic development purposes” (as defined
in § 1400U–2(c)); and (4) the issuer desig-
nates such bond for this purpose.
The Treasury Department and the IRS
expect to issue separate guidance on Re-
covery Zone Economic Development
Bonds (Direct Payment), including guid-
ance on the allocation of the $10 billion
national bond volume cap for these bonds
under § 1400U–1.
SECTION 3. SCOPE AND
APPLICATION OF REFUNDABLE
CREDIT PROCEDURES FOR BUILD
AMERICA BONDS
3.1Refundable Credit Implementation
Plans for 2009.
(a)In General. The IRS and the Trea-
sury Department plan to implement the ini-
tial refundable credit payment procedures
for 2009 for Build America Bonds (Direct
Payment) and Recovery Zone Economic
Development Bonds (Direct Payment) as
promptly as possible to enable state and
local governments to begin issuing these
bonds for authorized purposes to promote
economic recovery and job creation. The
IRS and the Treasury Department expect
that an IRS form for requesting the Federal
share of interest on these bonds, new IRS
“Form 8038–CP,Return for Credit Pay-
ments to Issuers of Qualified Bonds,” will
be available on the IRS website on or about
the date of release of this notice. The IRS
will be prepared to accept such forms for
processing by May 1, 2009, and the IRS
and Treasury Department will be prepared
to make timely payments with respect to
interest payment dates beginning on or af-
ter July 1, 2009, as further described be-
low.
In particular, the initial refundable
credit procedures will require an issuer to
submit a Form 8038–CP to request pay-
ment of the amount of the credit within a
prescribed time before or after each appli-
cable interest payment date, depending on
whether the bonds are fixed rate bonds or
variable rate bonds, as described below.
Issuers should expect to receive requested
payments within 45 days of the date that
a processible Form 8038–CP is filed with
the IRS. See § 6611(g).
When credit payments are made, the
IRS will send the payments to the re-
quested recipient’s “last known address,”
as that phrase is defined and determined
under Treas. Reg. § 301.6212–2 and Rev.
Proc. 2001–18, 2001–1 C.B. 722, or any
successor guidance. In the case of credit
payments sent to a person other than the
issuer, the last known address may not
be the address the issuer provided on the
Form 8038–CP. The instructions to the
Form 8038–CP will provide instructions
on how an issuer or trustee can verify and
update the address of record.
(b)Fixed Rate Bonds. In general, for
fixed rate bonds, upon receipt of a timely
filed Form 8038–CP requesting payment
of the credit, such amount will be paid on
a contemporaneous basis by the applica-
ble interest payment date. For fixed rate
bonds, the due date for an issuer to file
a Form 8038–CP,Return for Credit Pay-
ments to Issuers of Qualified Bonds,isthe
45
th
day before the applicable interest pay-
ment date with respect to the bonds. This
return, however, may not be filed earlier
than the 90
th
day before the relevant inter-
est payment date.
(c)Variable Rate Bonds. In general,
for variable rate bonds, upon receipt of
a timely filed Form8038–CP requesting
payment of the credit, such amount will
be paid quarterly on a reimbursement ba-
sis for interest paid by the issuer during
the quarter, including the interest payment
date with respect to which the return re-
questing payment relates. For variable rate
bonds, the due date for an issuer to file
a Form 8038–CP,Return for Credit Pay-
ments to Issuers of Qualified Bonds,isthe
45
th
day after the last interest payment date
within the quarterly period for which reim-
bursement is requested.
3.2Future Development and Refinement
of Refundable Credit Payment Procedures.
The IRS and the Treasury Department
plan to actively pursue refining the re-
fundable credit payment procedures for
Build America Bonds (Direct Payment)
and Recovery Zone Economic Develop-
ment Bonds (Direct Payment) for 2010
and thereafter to achieve as workable and
efficient a system as possible that is con-
sistent with all necessary and appropriate
compliance safeguards. In this regard, the
IRS and the Treasury Department plan to
study the feasibility of moving these direct
payment procedures to an electronic plat-
formsimilartothatusedbytheBureauof
Public Debt to make recurring electronic
payments on U.S. Treasury securities, such
as U.S. Treasury Securities of the State
and Local Government Series (“SLGs”)
with which state and local governments
are familiar. The IRS and the Treasury
Department expect that any development
or usage of an electronic platform for
these direct payment procedures will in-
clude ongoing compliance safeguards that
involve periodic information returns on
these bonds at least annually.
3.3Tax Character and Procedural
Framework for the Refundable Credit.
In general, the refundable credits for
Build America Bonds under § 6431 are
payments that are treated as overpayments
of tax. In this regard, § 1531(c)(5) of
ARRA adds a reference to Build America
Bond provisions under § 6431 as a con-
forming amendment to § 6401(b)(1) re-
garding amounts treated as overpayments.
Similarly, § 1531(c)(4) of ARRA adds a
reference to the provisions under § 6431
to § 6211(b)(4)(A) regarding treatment of
erroneous payments of credits as negative
amounts of tax or deficiencies. Accord-
ingly, rules relating to overpayments of
tax, such as credits against liabilities in re-
spect of an internal revenue tax and offsets
under § 6402, interest on overpayments of
tax under § 6611, and limitations on cred-
its or refunds of overpayments of tax under
§ 6511alsoapplytocreditpaymentswith
respect to Build America Bonds under
§ 6431. Pursuant to the broad legislative
regulatory authority under § 54AA(h) to
prescribe such regulations and other guid-
ance as may be necessary or appropriate
April 20, 20098362009–16 I.R.B.

to carry out the Build America Bond pro-
visions under § 54AA and the refundable
credit provisions under § 6431, the IRS
and the Treasury Department will con-
sider the potential need to develop any
special rules to adapt or tailor the pro-
cedural framework implementing these
provisions.
SECTION 4. ELECTIONS TO ISSUE
BUILD AMERICA BONDS
Subject to updated IRS reporting forms
or procedures, an issuer of Build Amer-
ica Bonds (Tax Credit), Build America
Bonds (Direct Payment), and Recovery
Zone Economic Development Bonds (Di-
rect Payment) should make the elections
required by §§ 54AA(d) or (g) to issue the
applicable bonds on its books and records
on or before the issue date of such bonds.
SECTION 5. INFORMATION
REPORTING FOR BUILD AMERICA
BONDS
5.1Build America Bonds (Tax Credit).
Subject to updated IRS information
reporting forms or procedures, an issuer
of Build America Bonds (Tax Credit)
must report the issuance of the bonds on
IRS Form 8038–G,Information Return
for Tax-Exempt Governmental Obliga-
tions. Issuers of these bonds with an issue
price of less than $100,000 should file
a Form 8038–G in accordance with the
instructions contained in this notice in-
stead of filing an IRS Form 8038–GC,
Information Return for Small Tax-Exempt
Governmental Bond Issues, Leases, and
Installment Sales. Issuers should check
Line 18, “Other”, on the form and insert
“Build America Bond (tax credit)” on the
line provided. Issuers must attach a sep-
arate schedule that indicates the type of
bond issue that would normally be entered
on Lines 11 to 18,i.e., education, health
and hospital, transportation, public safety,
environment (including sewage bonds),
housing, utilities or other (with description
for “other” category).
5.2Build America Bonds (Direct
Payment) and Recovery Zone Economic
Development Bonds (Direct Payment).
Subject to updated IRS information re-
porting forms or procedures, an issuer of
Build America Bonds (Direct Payment)
or Recovery Zone Economic Development
Bonds (Direct Payment) must report the is-
suance of the bonds on IRS Form 8038–G,
Information Return for Tax-Exempt Gov-
ernmental Obligations. The Form 8038–G
with respect to an issue must be filed with
the IRS at least 30 days before the first
Form 8038–CP is filed to request payment
with respect to an interest payment date for
that issue, except that, for bonds issued be-
fore July 1, 2009 only, such Form 8038–G
may be filed less than 30 days before the
filing of the first Form 8038–CP provided
the form 8038–G is filed separately from
and prior to the filing of Form 8038–CP. Is-
suers should not attach a Form 8038–G to a
Form 8038–CP. Issuers of these bonds with
an issue price of less than $100,000 should
file a Form 8038–G in accordance with
the instructions contained in this notice in-
stead of filing a Form 8038–GC,Informa-
tion Return for Small Tax-Exempt Govern-
mental Bond Issues, Leases, and Install-
ment Sales.
An issuer of Build America Bonds
(Direct Payment) must check Line 18,
“Other”, on the form and insert “Build
America Bond (payment option)” on the
line provided. An issuer of Recovery Zone
Economic Development Bonds (Direct
Payment) must check Line 18, “Other”,
on the form and insert “Recovery Zone
Economic Development Bond (payment
option)” on the line provided. Issuers must
attach a separate schedule that indicates
the type of bond issue that would nor-
mallybeenteredonLines11to18,i.e.,
education, health and hospital, transporta-
tion, public safety, environment (including
sewage bonds), housing, utilities or other
(with description for “other” category).
In addition, issuers of these bonds must
attach a schedule to the Form 8038–G
which contains the information described
below for the bond issue.
(1) For fixed-rate bonds, attach a
complete debt service schedule, titled
“Fixed Rate Bond — Debt Service
Schedule,” that provides a list of each
interest payment date, the total interest
payable on such date, the total prin-
cipal amount of bonds expected to be
outstanding on such date, the credit
payment expected to be requested from
the IRS on such date, and the earliest
date that bonds can be called.
(2) For variable rate bonds, attach a
debt service schedule, titled “Variable
Rate Bond — Debt Service Schedule,”
that provides a list of each interest pay-
ment date, the total principal amount
of bonds expected to be outstanding on
such date, and a description of how in-
terest on the bonds is computed.
SECTION 6. REQUEST FOR
COMMENTS
The IRS and the Treasury Department
solicit public comment on all aspects of
the direct payment procedures for Build
America Bonds, including, without lim-
itation, comments regarding efficient
methods to make such direct payments,
workability and ease of usage for state and
local governments, ongoing compliance
safeguards, and the tax procedural frame-
work for these payments. The IRS and
the Treasury Department solicit specific
public comment on the following aspects
of these direct payment procedures: (1)
whether consideration should be given
to employing an electronic platform to
make these payments similar to that used
for SLGs and what particular features
would be important to making such a plat-
form workable; (2) whether consideration
should be given to a different frequency
or approach to the payment of variable
rate bonds; (3) whether consideration
should be given to making these direct
payments solely to issuers, rather than in-
cluding third parties designated by issuers,
to simplify the process; and (4) whether
consideration should be given to impos-
ing uniform interest payment dates (e.g.,
quarterly on January 1, April 1, July 1,
and October 1) to improve the efficiency
of the program.
Comments should be submitted
in writing and can be emailed to
notice.comments@irscounsel.treas.gov
(include “Notice 2009–26” in the
subject line) or mailed to Office of
Associate Chief Counsel (Financial
Institutions and Products), Re: Notice
2009–26, CC:FIP:B5, Room 3547, 1111
Constitution Avenue, NW, Washington
DC 20224. Comments that are submitted
will be made available to the public.
SECTION 7. EFFECTIVE DATE
TheeffectivedateofthisnoticeisApril
3, 2009. This notice provides interim guid-
2009–16 I.R.B.837April 20, 2009

ance. This notice applies to Build Amer-
ica Bonds, including Recovery Zone Eco-
nomic Development Bonds, issued after
February 17, 2009.
SECTION 8. PAPERWORK
REDUCTION ACT
The information collection contained in
this notice has been approved by the Of-
fice of Management and Budget (OMB) in
accordance with the Paperwork Reduction
Act (44 U.S.C. chapter 35) under control
number 1545–2143. Under the Paperwork
Reduction Act, an agency may not conduct
or sponsor and a person is not required to
respondtoacollectionofinformationun-
less it displays a valid OMB control num-
ber.
The collections of information in this
notice are in Section 5. The information
is required in order to inform the Trea-
sury Department and the IRS of expected
future direct payments on Build America
Bonds. This information will be used to
determine the expected amount of future
direct payments on Build America Bonds.
The collections of information are manda-
tory. The likely respondents are state or lo-
cal governmental issuers of Build America
Bonds.
We estimate the total number of respon-
dents to be 1,000 and the total annual re-
sponses to be 5,000. We estimate it will
take 3 hours to comply. Estimates of the
annualized cost to respondents for the hour
burdens shown are notavailable at this
time.
Books or records relating to a collection
of information must be retained as long
as their contents may become material in
the administration of any internal revenue
law. Generally, tax returns and return in-
formation are confidential, as required by
26 U.S.C. 6103.
SECTION 9. DRAFTING
INFORMATION
The principal authors of this notice are
Carla Young and Timothy Jones of the Of-
fice of Associate Chief Counsel (Finan-
cial Institutions and Products). For fur-
ther information regarding this notice, con-
tact Ms. Young or Mr. Jones at (202)
622–3980.
Premium Assistance for
COBRA Benefits
Notice 2009–27
This notice provides guidance relating
to section 3001 of the American Recovery
and Reinvestment Act of 2009 (ARRA),
Public Law 111–5, enacted February 17,
2009, relating to premium assistance for
COBRA continuation coverage.
BACKGROUND
Section 3001 of ARRA provides for
a 65 percent reduction in the premium
otherwise payable by certain involuntarily
terminated individuals and their families
who elect COBRA continuation health
coverage under the provisions of the Inter-
nal Revenue Code (Code), the Employee
Retirement Income Security Act of 1974
(ERISA), and the Public Health Service
Act (PHS Act). (COBRA continuation
coverage under the Code, ERISA, and
the PHS Act is also referred to in this
notice as “Federal COBRA.”) The pre-
mium reduction also applies to temporary
continuation coverage elected under the
Federal Employees Health Benefits Pro-
gram (FEHBP) and to continuation health
coverage under State programs that pro-
vide for coverage comparable to COBRA
continuation coverage. For purposes of
ARRA, continuation health coverage un-
der all of these provisions is referred to as
“COBRA continuation coverage.”
Under the new provision, an assistance
eligible individual is generally an individ-
ual (1) who is a qualified beneficiary as the
result of an involuntary termination dur-
ing the period from September 1, 2008,
through December 31, 2009, (2) who is el-
igible for COBRA continuation coverage
at any time during that period, and (3) who
elects the coverage. Group health plans
must generally treat assistance eligible in-
dividuals who pay 35 percent of the pre-
mium otherwise payable for COBRA con-
tinuation coverage as having paid the full
amount of the premium. The employer
(or, in certain circumstances, the multiem-
ployer health plan or the insurer) is reim-
bursed for the other 65 percent of the pre-
mium that is not paid by the assistance eli-
gible individual through a credit against its
payroll taxes.
The premium reduction applies as of the
first period of coverage beginning on or
after February 17, 2009 (the date of en-
actment of ARRA). An assistance eligi-
ble individual is eligible for the premium
reduction for up to nine months from the
first month the premium reduction provi-
sions of section 3001 of ARRA apply to
the individual. The premium reduction pe-
riod ends if the individual becomes eligible
for coverage under any other group health
plan
1
or for Medicare benefits.
The premium reduction does not ex-
tend beyond the period of COBRA contin-
uation coverage. An individual receiving
the premium reduction who becomes eli-
gible for coverage under any other group
health plan or Medicare is required to no-
tify the group health plan of eligibility for
that other coverage. Ifthe individual fails
to notify the group health plan, the individ-
ual is subject to a tax penalty of 110 per-
cent of the premium reduction improperly
received after eligibility for the other cov-
erage.
Under ARRA, an employer may allow
an assistance eligible individual to elect
coverage different from the coverage un-
der the plan in which such individual was
enrolled prior to the involuntary termina-
tion, and the premium reduction will ap-
ply with respect to such different cover-
age. (This does not change the basic re-
quirement under Federal COBRA that a
group health plan must allow a qualified
beneficiary to elect to continue the cover-
age in which the individual is enrolled as
of the qualifying event.) If offered, the as-
sistance eligible individual has 90 days af-
ter receiving notice of the option to elect
the other coverage. The premium for cov-
erage offered under this option cannot ex-
ceed the premium for the coverage the in-
dividual had prior to the involuntary ter-
mination. In addition, the coverage of-
fered under this option must be coverage
offered to active employees and cannot be
1
Eligibility for coverage under any other group health plan does not terminate eligibility for the premium reduction if the other group health plan provides only dental, vision, counseling, or
referral services (or a combination of these), isa health flexible spending arrangement or health reimbursement arrangement, or is coverage for treatment that is furnished in an on-site medical
facility maintained by the employer and that consists primarily of first-aid services, prevention and wellness care, or similar care (or a combination of such care). This exception is implicit
throughout this notice whenever reference is made to the end of eligibility for the premium reduction due to eligibility for coverage under any other group health plan.
April 20, 20098382009–16 I.R.B.

coverage that provides only dental, vision,
counseling (or some combination), a flex-
ible spending arrangement under section
106(c) of the Code, or coverage that pro-
vides coverage through an on-site medical
facility maintained by the employer that
consists primarily of first-aid, prevention
and wellness care, or similar care, or a
combination of such care.
ARRA provides an extended election
period for certain individuals who did not
have an election of COBRA continuation
coverage in effect on February 17, 2009
(the date of enactment). The election is
available for individuals who would be as-
sistance eligible individuals if they had a
COBRA continuation coverage election in
effect (that is, as the result of an involun-
tary termination on or after September 1,
2008). This extendedelection period is
for 60 days after the qualified beneficia-
ries are provided notice of the extended
election period. The resulting COBRA
continuation coverage extends no longer
than the original maximum period required
(as measured with respect to the qualify-
ing event) and begins with the first period
of coverage beginning on or after Febru-
ary 17, 2009. The extended election pe-
riod applies to a group health plan subject
to the Federal COBRA requirements and
to temporary continuation coverage under
the FEHBP, but not to State continuation
coverage requirements.
For purposes of section 3001 of ARRA,
comparable continuation coverage under
State law does not include every State law
right to continue health coverage, such as
a right to continue coverage with no rules
that limit the maximum premium that can
be charged with respect to such coverage.
To be comparable, the right generally must
be to continue substantially similar cover-
age as was provided under the group health
plan (or substantially similar coverage as
is provided to similarly situated beneficia-
ries) at a monthly cost that is based on a
specified percentage of the group health
plan’s cost of providing such coverage.
H.R. Rep. No. 111–16, at 716 (2009)
(Conf. Rep.).
For individuals electing Federal CO-
BRA or temporary continuation coverage
under the FEHBP during the extended
election period, the period between the
loss of coverage and beginning of cover-
age under the election is disregarded for
purposes of the rules that would otherwise
permit a group health plan to impose a pre-
existing condition limitation with respect
to the individual’s coverage. The Health
Insurance Portability and Accountability
Act of 1996 (HIPAA) generally limits to
12 months the period that a group health
plan can exclude health benefits relating
to a preexisting condition of a new en-
rollee. The period is generally reduced by
an individual’s creditable coverage (health
coverage under a group health plan or
certain other types of health coverage, in-
cluding individual health insurance) prior
to enrollment. Generally, a plan is not
required to take into account creditable
coverage prior to a significant break in
coverage (i.e., 63 days without creditable
coverage). For an individual who becomes
covered pursuant to an election under
the ARRA extended election period, the
individual is treated as not having a sig-
nificant break in coverage because ARRA
provides that the period between the loss
of coverage and the beginning of cover-
age is disregarded. Thus, the individual’s
creditable coverage accumulated prior
to the involuntary termination remains
available to reduce any future preexisting
condition exclusion. The period between
the loss of coverage and the beginning of
coverage, however, would not be treated
as creditable coverage. For example, an
individual with seven months of creditable
coverage before being involuntarily ter-
minated as of November 1, 2008, who,
pursuant to the extended election period,
elects COBRA continuation coverage that
begins on March 1, 2009, is treated as
having seven months of creditable cover-
age on March 1, 2009, notwithstanding
the period of more than 63 days between
November 1, 2008, and March 1, 2009,
without creditable coverage.
The amount of any premium reduction
is excluded from an individual’s gross in-
come under new section 139C. For pur-
poses of determining the gross income of
the employer and any welfare benefit plan
of which the group health plan is a part,
the amount of the premium reduction is in-
tended to be treated as an employee contri-
bution to the group health plan. H.R. Rep.
No. 111–16, at 716 (2009) (Conf. Rep.).
If the premium reduction is provided
with respect to COBRA continuation cov-
erage for an individual, the individual’s
spouse, or the individual’s dependent,
and the individual’s modified adjusted
gross income (adjusted gross income plus
amounts excluded under section 911, 931,
or 933) exceeds $145,000 ($290,000 for
married filing jointly), the amount of the
premium reduction is recaptured as an in-
crease in the individual’s Federal income
tax liability. The recapture is phased in for
individuals with modified adjusted gross
income in excess of $125,000 ($250,000
for married filing jointly). An individual
may elect to permanently waive the right
to the premium reduction (for example, to
avoid receiving and then repaying the pre-
mium reduction). In addition, an individ-
ual who receives the premium reduction
under ARRA for a month is disqualified
from receiving the Health Coverage Tax
Credit under section 35 for that month.
ARRA amends the Code to add new
section 6432, which provides that the “per-
son to whom premiums are payable” is
entitled to reimbursement for the amount
of premiums not paid by assistance eli-
gible individuals by reason of ARRA
2
in
the form of a credit against payroll tax li-
abilities. For this purpose, payroll taxes
are defined as Federal income tax with-
holding under section 3402, the employee
share of Federal Insurance Contributions
Act (FICA) tax under section 3102, and the
employer share of FICA tax under section
3111. The credit is claimed on the person’s
payroll tax return, in most cases Form 941,
filed quarterly.
3
If the amount of the credit
to which the person is entitled exceeds the
person’s payroll tax liabilities on the re-
turn, the person is entitled to a refund of
such excess as if it were a payment of pay-
roll taxes.
Under ARRA, the “person to whom
premiums are payable” is based on the na-
ture of the plan and which COBRA con-
tinuation coverage provisions apply. In
the case of a group health plan that is
a multiemployer plan, the multiemployer
plan is allowed the credit. In the case of
2
As enacted, the statute refers to section 3002(a) of the Health Insurance Assistance for the Unemployed Act of 2009, whereas the provision permittingan assistance eligible individual to
pay reduced premiums is section 3001(a) of ARRA. A technical correction is expected to correct this cross reference.
3
More information about the payroll tax credit is available on the IRS website atwww.irs.gov/newsroom/article/0,,id=204505,00.html.
2009–16 I.R.B.839April 20, 2009

a group health plan subject to the Fed-
eral COBRA requirements or the tempo-
rary continuation coverage requirements
under the FEHBP, or a group health plan
under which some or all of the coverage
is not provided by insurance, the employer
maintaining the plan is allowed the credit.
For any other group health plan subject to
ARRA (generally, fully insured coverage
subject to State continuation coverage re-
quirements), the insurer providing cover-
age under the group health plan is allowed
the credit. These are the exclusive rules for
who may take the credit unless the Secre-
tary provides otherwise pursuant to the au-
thority in section 6432(b).
ARRA provides an individual who re-
quests and is denied treatment as an assis-
tance eligible individual with the right to
a review of the denial, within 15 business
days after the receipt of the application
for review, by the Department of Labor
(or the Department of Health and Human
Services in connection with COBRA con-
tinuation coverage that is provided other
than pursuant to ERISA). ARRA also
includes new notification requirements,
administered by the Department of La-
bor, regarding the premium assistance and
new elections provided under ARRA. For
further information on the notice require-
ments, seehttp://www.dol.gov/COBRA.
An assistance eligible individual who
pays the reduced premium pursuant to
ARRA must be treated by the plan as hav-
ing paid the full premium. If the plan does
not treat the assistance eligible individual
as having paid the full premium, it is a
failure to meet the requirements of the un-
derlying statute. Thus, in the case of a plan
subject to the COBRA continuation cov-
erage requirements under section 4980B,
the failure to treat the assistance eligible
individual making the reduced payment
as having made the full payment would
be a failure to satisfy the requirements
of section 4980B and may result in the
imposition of the excise tax under section
4980B(b).
QUESTIONS AND ANSWERS
The following questions and an-
swers address a number of issues that
have arisen with respect to the pre-
mium reduction for COBRA continu-
ation coverage under ARRA. In gen-
eral, the questions and answers apply
for purposes of all COBRA continuation
coverage requirements under ARRA,
i.e., Federal COBRA, the temporary
continuation coverage requirements
of the FEHBP, and comparable State
health care continuation coverage
requirements. However, certain questions
and answers or certain portions of certain
questions and answers may apply only for
purposes of Federal COBRA and not for
purposes of the temporary continuation
coverage requirements of the FEHBP and
comparable State health care continuation
coverage requirements; those provisions
are introduced with the phrase “for
purposes of Federal COBRA.”
INVOLUNTARY TERMINATION
Q&A–1 through Q&A–9 apply solely
for purposes of determining whether there
is an involuntary termination under section
3001 of ARRA (including new Code sec-
tions added by section 3001 of ARRA), but
not for any other purposes under the Code
or any other law.
Q–1. What circumstances constitute an
involuntary termination for purposes of the
definition of an assistance eligible individ-
ual?
A–1. An involuntary termination
means a severance from employment due
to the independent exercise of the unilat-
eral authority of the employer to terminate
the employment, other than due to the em-
ployee’s implicit or explicit request, where
the employee was willing and able to con-
tinue performing services. An involuntary
termination may include the employer’s
failure to renew a contract at the time
the contract expires, if the employee was
willing and able to execute a new contract
providing terms and conditions similar
to those in the expiring contract and to
continue providing the services. In ad-
dition, an employee-initiated termination
from employment constitutes an invol-
untary termination from employment for
purposes of the premium reduction if
the termination from employment consti-
tutes a termination for good reason due
to employer action that causes a material
negative change in the employment rela-
tionship for the employee.
Involuntary termination is the involun-
tary termination of employment, not the in-
voluntary termination of health coverage.
Thus, qualifying events other than an in-
voluntary termination, such as divorce or
a dependent child ceasing to be a depen-
dent child under the generally applicable
requirements of the plan (such as loss of
dependent status due to aging out of eli-
gibility), are not involuntary terminations
qualifying an individual for the premium
reduction. In addition, involuntary termi-
nation does not include the death of an em-
ployee or absence from work due to illness
or disability.
The determination of whether a termi-
nation is involuntary is based on all the
facts and circumstances. For example, if
a termination is designated as voluntary or
as a resignation, but the facts and circum-
stances indicate that, absent such voluntary
termination, the employer would have ter-
minated the employee’s services, and that
the employee had knowledge that the em-
ployee would be terminated, the termina-
tion is involuntary.
Q–2. Does an involuntary termination
include a lay-off period with a right of re-
call or a temporary furlough period?
A–2. Yes. An involuntary reduction to
zero hours, such as a lay-off, furlough, or
other suspension of employment, resulting
in a loss of health coverage is an involun-
tary termination for purposes of the pre-
mium reduction.
Q–3. Does an involuntary termination
include a reduction in hours?
A–3. Generally no. If the reduction in
hours is not a reduction to zero, the mere
reduction in hours is not an involuntary ter-
mination. However, an employee’s vol-
untaryterminationinresponsetoanem-
ployer-imposed reduction in hours may be
an involuntary termination if the reduction
in hours is a material negative change in
the employment relationship for the em-
ployee.
Q–4. Does involuntary termination in-
clude an employer’s action to end an indi-
vidual’s employment while the individual
is absent from work due to illness or dis-
ability?
A–4. Yes. Involuntary termination oc-
curs when the employer takes action to end
the individual’s employment status (but
mere absence from work due to illness or
disability before the employer has taken
action to end the individual’s employment
status is not an involuntary termination).
Q–5. Does an involuntary termination
include retirement?
April 20, 20098402009–16 I.R.B.

A–5. If the facts and circumstances
indicate that, absent retirement, the em-
ployer would have terminated the em-
ployee’s services, and the employee had
knowledge that the employee would be
terminated, the retirement is an involun-
tary termination.
Q–6. Does involuntary termination in-
clude involuntary termination for cause?
A–6. Yes. However, for purposes of
Federal COBRA, if the termination of em-
ployment is due to gross misconduct of the
employee, the termination is not a qualify-
ing event and the employee and other fam-
ily members losing health coverage by rea-
son of the employee’s termination of em-
ployment are not eligible for COBRA con-
tinuation coverage.
Q–7. Does an involuntary termination
include a resignation as the result of a ma-
terial change in the geographic location of
employment for the employee?
A–7. Yes.
Q–8. Does an involuntary termination
include a work stoppage as the result of a
strike initiated by employees or their rep-
resentatives?
A–8. No. However, a lockout initiated
by the employer is an involuntary termina-
tion.
Q–9. Does an involuntary termination
include a termination elected by the em-
ployee in return for a severance package (a
“buy-out”) where the employer indicates
that after the offer period for the severance
package, a certain number of remaining
employees in the employee’s group will be
terminated?
A–9. Yes.
ASSISTANCE ELIGIBLE
INDIVIDUAL
Q–10. Who qualifies as an assistance
eligible individual?
A–10. An individual must be an assis-
tance eligible individual to be eligible for
the premium reduction. Under ARRA, an
assistance eligible individual is a qualified
beneficiary as the result of an involuntary
termination that occurred during the pe-
riod from September 1, 2008, through De-
cember 31, 2009, is eligible for COBRA
continuation coverage at any time during
that period, and elects the COBRA con-
tinuation coverage. In order to be a qual-
ified beneficiary, the individual must be
covered under the group health plan on
the day before the involuntary termination
(except in the case of a child born to or
adopted by a covered employee during a
period of COBRA continuation coverage
or in certain circumstances where cover-
age was wrongfully denied the individual
(see section 54.4980B–3, Q&A–1)). For
purposes of Federal COBRA, an individ-
ual who loses group health coverage in
connection with the termination of a cov-
ered employee’s employment by reason of
the employee’s gross misconduct is not a
qualified beneficiary and thus cannot be an
assistance eligible individual.
Q–11. If the involuntary termination
and loss of coverage resulting in eligibility
for COBRA continuation coverage occur
before September 1, 2008, can the individ-
ual become an assistance eligible individ-
ual?
A–11. No. The involuntary termina-
tion resulting in COBRA continuation
coverage must occur during the period
from September 1, 2008, through Decem-
ber 31, 2009, even if the individual is still
on COBRA continuation coverage after
February 17, 2009.
Q–12. If the involuntary termination
occurs before September 1, 2008, but the
loss of coverage resulting in eligibility for
COBRA continuation coverage occurs af-
ter September 1, 2008 (but no later than
December 31, 2009), can the individual
become an assistance eligible individual?
A–12. No. The involuntary termination
resulting in COBRA continuation cover-
age must occur during the period from
September 1, 2008, through December 31,
2009. Although section 4980B(f)(8) al-
lows a plan to provide that the COBRA
continuation coverage does not begin until
the loss of coverage, that does not change
the date of the involuntary termination.
Q–13. If an individual’s involuntary
termination occurs no later than December
31, 2009, but the loss of coverage result-
ing in eligibility for COBRA continuation
coverage occurs after December 31, 2009,
is the individual an assistance eligible in-
dividual?
A–13. No. Both the involuntary termi-
nation and eligibility for COBRA contin-
uation coverage must occur during the pe-
riod from September 1, 2008, through De-
cember 31, 2009. If the loss of coverage
is after December 31, 2009, the individual
cannot become an assistance eligible indi-
vidual.
Q–14.For purposes of Federal
COBRA, if an employer provides health
coverage for an involuntarily terminated
employee after the involuntary termination
on the same terms as for similarly situated
active employees, when is a loss of
coverage under the group health plan
considered to occur (and, consequently,
when does COBRA continuation coverage
begin)?
A–14. For purposes of Federal COBRA,
the effect on when a loss of coverage under
a group health plan is considered to occur
if an employer provides health coverage
for an involuntarily terminated employee
after the involuntary termination on the
same terms as for similarly situated active
employees depends on how the employer
treats the provision of health coverage for
the involuntarily terminated employee.
If the employer treats the provision of
health coverage as deferring the loss of
coverage, then for purposes of the ARRA
premium reduction the loss of coverage
(and eligibility for Federal COBRA)
will be considered to occur when the
employer’s provision of health coverage
on the same terms as for similarly situated
active employees ends. However, if the
employer treats the provision of health
coverage after the involuntary termination
as part of its obligation to provide COBRA
continuation coverage for the involuntarily
terminated employee, then the loss of
coverage will be considered to have
occurred as of the date for which the
employer begins making the provision of
such COBRA continuation coverage.
Example. An individual is involuntarily termi-
nated from employment on November 15, 2009.
Health coverage in connection with the November
15, 2009, termination of employment would nor-
mally end on November 30, 2009. However, the
individual is provided with severance benefits that
include six months of health coverage for which
no premium is required, running from December 1,
2009, through May 31, 2010. The employer con-
siders no loss of coverage to have occurred until
the six months of severance benefits have been ex-
hausted. Under these facts, for purposes of Federal
COBRA, the loss of coverage does not occur until
May 31, 2010, which is after December 31, 2009.
Although the individual’s involuntary termination
occurs during the required time period, the beginning
of eligibility for COBRA continuation coverage does
not. Consequently, the individual cannot become
an assistance eligible individual. However, if the
employer considered the payment of health coverage
during the severance benefits period to be the provi-
sion of COBRA continuation coverage on behalf of
the involuntarily terminated individual, for purposes
of Federal COBRA the loss of coverage would be
2009–16 I.R.B.841April 20, 2009

considered to have occurred on November 30, 2009,
and thus the individual could become an assistance
eligible individual.
For purposes of Federal COBRA, if the plan does
not provide for the optional extension of required pe-
riods under section 4980B(f)(8) to apply, the end of
the 18-month maximum required period of COBRA
continuation coverage is measured from the date of
the individual’s involuntary termination, November
15, 2009. If the plan does provide for the optional ex-
tension of required periods under section 4980B(f)(8)
to apply, the end of the 18-month maximum required
period of COBRA continuation coverage is measured
from the date of the loss of coverage, May 31, 2009.
Q–15. Does an involuntary termination
of an employee following another quali-
fying event, such as a divorce, satisfy the
requirements for the qualified beneficiary
from the first qualifying event to be an as-
sistance eligible individual?
A–15. No. Generally, if COBRA con-
tinuation coverage is based on a qualifying
event before the involuntary termination,
the later involuntary termination does not
cause the qualified beneficiary to become
an assistance eligible individual. How-
ever, if, in anticipation of an involuntary
termination that would otherwise qualify
an individual as an assistance eligible in-
dividual, the employer takes action other
than the involuntary termination of the in-
dividual that results in a loss of cover-
age for the individual (for example, a re-
duction in hours for the employee in an-
ticipation of involuntarily terminating the
employee), the action causing the loss of
coverage prior to the involuntary termina-
tion is disregarded in determining whether
involuntary termination is the qualifying
event that results in the COBRA continua-
tion coverage for the individual.
Example 1. An employee is divorced after
September 1, 2008, and before December 31, 2009.
The divorce results in a loss of health coverage for
the spouse of the employee. The spouse is eligible
for and timely elects COBRA continuation cover-
age. After the divorce, and before December 31,
2009, the employee is involuntarily terminated and
loses health coverage. The employee elects COBRA
continuation coverage that begins before December
31, 2009. The spouse is not an assistance eligible
individual because the qualifying event with respect
to the spouse’s COBRA continuation coverage is
not an involuntary termination. The employee is an
assistance eligible individual.
Example 2. An employee experiences a reduc-
tion in hours in March 2009 that does not constitute
(and is not in anticipation of) an involuntary termina-
tion. The reduction in hours results in a loss of cov-
erage for the employee. The employee is eligible for
and timely elects COBRA continuation coverage that
begins as of April 1, 2009. In November 2009, the
employee is involuntarily terminated from employ-
ment. The employee cannot become an assistance
eligible individual in connection with the November
2009 involuntary termination because the qualifying
event with respect to the COBRA continuation cov-
erage is not involuntary termination.
Q–16. If, as the result of an involuntary
termination that occurred during the period
from September 1, 2008, through Decem-
ber 31, 2009, an individual loses cover-
age under a health plan that is not subject
to the COBRA continuation coverage re-
quirements (as defined under ARRA) and
the individual is offered and elects con-
tinuation coverage provided voluntarily by
an employer, is the premium reduction ap-
plicable and the related payroll tax credit
for the employer (or other entity) available
with respect to the continuation health cov-
erage?
A–16. No. In order for the COBRA
continuation coverage premium reduction
and the related payroll tax credit to apply,
the plan must be subject to the COBRA
continuation coverage requirements as de-
finedinARRA.
Example. A group health plan maintained by an
employer that is not subject to COBRA continuation
coverage requirements under Federal COBRA, under
the FEHBP, or under State law nevertheless provides
continuation health coverage to involuntarily termi-
nated employees. Because the terminated employees
are not eligible for COBRA continuation coverage (as
defined under ARRA), they are not assistance eligi-
ble individuals and the premium reduction does not
apply.
Q–17. Can an individual become an
assistance eligible individual more than
once?
A–17. Yes. An individual who be-
comes a qualified beneficiary as the result
of an involuntary termination and who oth-
erwise meets the requirements to be an as-
sistance eligible individual is treated as an
assistance eligible individual even if previ-
ously treated as an assistance eligible indi-
vidual. See Q&A–43 regarding the period
of premium reduction in such situations.
Q–18. If an individual has a loss of cov-
erage and becomes a qualified beneficiary
eligible for COBRA continuation cover-
age as the result of an involuntary termina-
tion no later than December 31, 2009, and
timely elects COBRA continuation cov-
erage after December 31, 2009 (with the
COBRA continuation coverage beginning
retroactively back to the loss of coverage),
is the individual an assistance eligible indi-
vidual eligible for the premium reduction?
A–18. Yes. The election of COBRA
continuation coverage is not required to
occur during the period from September
1, 2008, through December 31, 2009, as
long as the resulting COBRA continuation
coverage begins during that period.
Q–19. Is the death of an employee an
involuntary termination of employment
that would make qualified beneficiaries
such as the spouse and dependent children
of the employee assistance eligible indi-
viduals?
A–19. No. The death of an employee is
not an involuntary termination of employ-
ment.
CALCULATION OF PREMIUM
REDUCTION
Q–20. What premium amount is used
to determine the 35 percent share that must
be paid by (or on behalf of) an assistance
eligible individual?
A–20. The premium used to deter-
mine the 35 percent share that must be
paid by (or on behalf of) an assistance
eligible individual is the cost that would
be charged to the assistance eligible indi-
vidual for COBRA continuation coverage
if the individual were not an assistance
eligible individual. If, without regard
to the subsidy, the assistance eligible
individual is required to pay 102 percent of
the “applicable premium” for continuation
coverage,i.e., generally the maximum
permitted under the Federal COBRA
rules, the assistance eligible individual
is required to pay only 35 percent of the
102 percent of the applicable premium.
However, if the premium that would be
charged the assistance eligible individual
is less than the maximum COBRA
premium, for example if the employer
subsidizes the coverage by paying all
or part of the cost, the amount actually
charged the assistance eligible individual
is used to determine the assistance eligible
individual’s 35 percent share.
In determining whether an assistance
eligible individual has paid 35 percent of
the premium, payments on behalf of the in-
dividual by another person (other than the
employer with respect to which the invol-
untary termination occurred) are taken into
account. For example, some or all of the
35 percent share of the premium could be
paid on behalf of the individual by a par-
ent, guardian, State agency, or charity.
The following examples illustrate this
Q&A–20. For all examples, 102 per-
cent of the applicable premium for the
April 20, 20098422009–16 I.R.B.

COBRA continuation coverage is $1,000
per month, and the person to whom
premiums are payable is the employer
maintaining the plan.
Example 1. The employer requires individuals
electing COBRA continuation coverage to pay $500
per month. An assistance eligible individual is en-
titled to COBRA continuation coverage upon the
timely payment of $175 (35 percent of $500). The
employer’s resulting payroll tax credit is $325 (65
percent of $500).
Example 2. The employer requires active em-
ployees to pay $200 per month for health coverage.
For involuntarily terminated employees, the sever-
ance benefits include continued health coverage at
the cost of $200 per month for six months after ter-
mination. After the six-month severance period, the
terminated employee must pay $1,000 per month for
the remainder of the COBRA continuation coverage.
The employer considers the loss of coverage to occur
on the last day coverage is in effect before the sev-
erance benefits begin to take effect; that is, the em-
ployer considers the six-month severance period to be
part of the terminated employee’s COBRA continua-
tion coverage period, during which the employer pays
$800 toward the cost of the terminated employee’s
COBRA continuation coverage.
For the first six months, an assistance eligible in-
dividual is entitled to COBRA continuation coverage
upon the timely payment of $70 (35 percent of $200);
for the next three months, the individual is entitled
to COBRA continuation coverage upon the timely
payment of $350 (35 percent of $1,000). The em-
ployer’s resulting payroll tax credit is $130 (65 per-
cent of $200) for the first six months and $650 (65
percent of $1,000) for the next three months.
Example 3. Same facts as Example 2, except
that the employer considers the loss of health cover-
age and the beginning of the terminated employee’s
COBRA continuation coverage period to occur at the
end of the six-month severance period. For the first
six months after termination of employment, the ter-
minated employee is not eligible for COBRA con-
tinuation coverage and is not an assistance eligible
individual. The employee therefore pays $200 for
coverage, and no subsidy applies. The employee
elects COBRA continuation coverage at the end of
the six-month period and is an assistance eligible in-
dividual. For the next nine months, the individual is
entitled to COBRA continuation coverage upon the
timely payment of $350 (35 percent of $1,000). The
employer’s resulting payroll tax credit is $650 (65
percent of $1,000).
For purposes of Federal COBRA, if the plan does
not provide for the optional extension of required pe-
riods under section 4980B(f)(8) to apply, the end of
the 18-month maximum required period of COBRA
continuation coverage is measured from the date of
the individual’s involuntary termination (that is, 12
months after the end of the six-month severance pe-
riod). If the plan does provide for the optional ex-
tension of required periods under section 4980B(f)(8)
to apply, the end of the 18-month maximum required
period of COBRA continuation coverage is measured
from the date of the loss of coverage (i.e., 24 months
after the involuntary termination).
Example 4. The employer requires active em-
ployees to pay $200 per month for health coverage.
For involuntarily terminated employees, the sever-
ance benefits include continued health coverage for
six months after termination at no cost. The employer
considers that COBRA continuation coverage begins
on the date of the involuntary termination. After the
six-month severance period, the terminated employee
would be required to pay $1,000 per month (but for
the ARRA premium reduction) for the remainder of
the COBRA continuation coverage. Because the pre-
mium during the first six months is zero, the premium
reduction is not available and no payroll tax credit is
available to the employer. For the next three months
after the severance period, the terminated employee is
entitled to COBRA continuation coverage upon the
timely payment of $350 (35 percent of $1,000) for
coverage. The employer’s resulting payroll tax credit
is $650 (65 percent of $1,000). After the first nine
months, no subsidy applies, so the terminated em-
ployee can be required to pay $1,000 per month for
any later month of COBRA continuation coverage.
Example 5. Same facts as Example 4, except the
employer considers no loss of coverage to have oc-
curred until the end of the severance period,i.e.,six
months after termination of employment. For the first
six months, the terminated employee is not eligible
for COBRA continuation coverage and is not an as-
sistance eligible individual. The employee pays noth-
ing for the coverage, and no payroll tax credit is avail-
able to the employer. The employee elects COBRA
continuation coverage at the end of the six-month
period and is an assistance eligible individual. For
the next nine months, the individual is entitled to
COBRA continuation coverage upon the timely pay-
ment of $350 (35 percent of $1,000). The employer’s
resulting payroll tax credit is $650 (65 percent of
$1,000).
For purposes of Federal COBRA, if the plan does
not provide for the optional extension of required pe-
riods under section 4980B(f)(8) to apply, the end of
the 18-month maximum required period of COBRA
continuation coverage is measured from the date of
the individual’s involuntary termination (that is, 12
months after the end of the six-month severance pe-
riod). If the plan does provide for the optional ex-
tension of required periods under section 4980B(f)(8)
to apply, the end of the 18-month maximum required
period of COBRA continuation coverage is measured
from the date of the loss of coverage (i.e.,24months
after the involuntary termination).
Q–21. If a plan that previously charged
less than the maximum premium allowed
under the COBRA continuation provisions
increases the premium pursuant to sec-
tion 54.4980B–8, Q&A–2(b)(1) (or simi-
lar authority under comparable State law
or other Federal law), does the ARRA pre-
mium reduction apply to the increased pre-
mium amount?
A–21. Yes.
Example. Under the plan, 102 percent of the ap-
plicable premium for COBRA continuation coverage
is $1,000 per month. Prior to February 17, 2009,
the plan charged $500 per month for COBRA con-
tinuation coverage. Pursuant to section 54.4980B–8,
Q&A–2(b)(1) and the applicable notice requirements,
beginning March 1, 2009, the plan charges $1,000 per
month for COBRA continuation coverage. The pre-
mium reduction and the payroll tax credit are based
on $1,000 for the coverage beginning March 1, 2009.
Q–22. If a plan that previously charged
less than the maximum premium allowed
under the COBRA continuation provisions
increases the premiumpursuant to section
54.4980B–8, Q&A–2(b)(1), and the em-
ployer provides a separate taxable pay-
ment to the assistance eligible individual,
does the premium reduction apply to the
increased premium amount?
A–22. Yes.
Example 1. Under a group health plan, 102 per-
cent of the applicable premium for COBRA contin-
uation coverage is $1,000 per month. Prior to Feb-
ruary 17, 2009, the plan charged $400 per month for
COBRA continuation coverage. Pursuant to section
54.4980B–8, Q&A–2(b)(1) and the applicable notice
requirements, the plan charges $1,000 per month for
COBRA continuation coverage for periods of cover-
age beginning March 1, 2009. In addition, beginning
March 1, 2009, the employer provides a taxable sev-
erance benefit of $600 per month to employees who
are assistance eligible individuals. The premium re-
duction is based on $1,000 for the coverage beginning
March 1, 2009, and thus the individual is entitled to
COBRA continuation coverage upon the timely pay-
ment of $350 (35 percent of $1,000).
Example 2. Same facts as Example 1, except that,
beginning March 1, 2009, instead of providing a tax-
able severance benefit, the employer reimburses em-
ployees who are assistance eligible individuals for the
$350 the employees pay for the coverage, and the
employer excludes that amount from the employees’
gross income under section 106. Consequently, the
$350 is treated as paid by the employer, and, because
there is no non-employer payment, the premium re-
duction is not available, and no payroll tax credit is
available to the employer.
Q–23. Does the premium reduction ap-
ply to portions of the premium attributable
to COBRA continuation coverage for in-
dividuals who are not qualified beneficia-
ries?
A–23. No. The premium reduc-
tion is limited to premiums attributable
to COBRA continuation coverage for
assistance eligible individuals, defined
as qualified beneficiaries who elect
COBRA continuation coverage and whose
qualifying event with respect to the
coverage is the involuntary termination
of employment of a covered employee
during the period from September 1, 2008,
through December 31, 2009. A qualified
beneficiary with respect to a covered
employee under a group health plan is
the spouse of the employee under Federal
law or a dependent child of the employee
under Federal law if, generally, the spouse
or dependent child was a beneficiary under
the plan on the day before the qualifying
2009–16 I.R.B.843April 20, 2009

event. Qualified beneficiary also includes
a child who is born to or adopted by the
covered employee during the period of
COBRA continuation coverage. Subject
to the preceding sentence, qualified
beneficiary does not include a spouse
or dependent child not covered before
the qualifying event and added to the
coverage during a later enrollment period.
In addition, if an individual does not meet
the definition of a qualified beneficiary
under Federal COBRA, the individual’s
coverage is not eligible for the premium
reduction under ARRA, even though such
an individual may be covered under a plan
byitsterms,orasrequiredbyStatelaw.
Q–24. If COBRA continuation cover-
age is provided under a State program that
provides comparable continuation cov-
erage does the premium reduction apply
to portions of the premium attributable
to COBRA continuation coverage for
individuals who would not be qualified
beneficiaries under Federal COBRA if
the coverage were provided under Federal
COBRA?
A–24.No.While section
3001(a)(10)(B) of ARRA defines COBRA
continuation coverage eligible for the
premium reduction to include comparable
State continuation coverage, qualified
beneficiary is defined under section
3001(a)(10)(E) by cross-reference to
ERISA. Thus, the premium reduction is
limited to the premium attributable to the
coverage of the involuntarily terminated
employee and the employee’s spouse or
dependent children who are qualified
beneficiaries under Federal COBRA, even
if the State law requires a group health
plan to provide continuation coverage to
a broader group.
Q–25. If the COBRA continuation cov-
erage of one or more assistance eligible in-
dividuals also covers one or more individ-
uals who are not assistance eligible indi-
viduals, how is the premium paid by the
assistance eligible individual for COBRA
continuation coverage allocated between
the assistance eligible individuals and the
other individuals?
A–25. Amounts paid by an assistance
eligible individual for COBRA continua-
tion coverage covering one or more indi-
viduals who are assistance eligible individ-
uals and one or more individuals who are
not assistance eligibleindividuals are allo-
cated first to the cost of covering assistance
eligible individuals and then to the cost of
covering non-assistance eligible individu-
als. Thus, if the cost of covering a non-as-
sistance eligible individual does not add to
the cost of covering the assistance eligible
individuals, then the cost of covering the
non-assistance eligible individual is zero,
and the premium reduction applies to the
full amount paid for the COBRA contin-
uation coverage. If the cost of covering a
non-assistance eligible individual adds to
the cost of covering the assistance eligible
individuals, it is the incremental cost that
is ineligible for the premium reduction.
Example 1. An individual and the individual’s
two dependent children are assistance eligible indi-
viduals and have COBRA continuation coverage.
The COBRA continuation coverage also covers an in-
dividual who is not an assistance eligible individual.
The amount the plan requires to be paid for COBRA
continuation coverage for self-plus-two-or-more-de-
pendents for non-assistance eligible individuals is
$1,000 per month.
The amount the individual would pay (but for the
ARRA premium reduction) for covering the individ-
ual and the two children (the assistance eligible in-
dividuals) under the COBRA continuation coverage
is $1,000 per month. The additional premium amount
for coverage of the individual who is not an assistance
eligible individual is $0 per month. The individ-
ual is entitled to apply the premium reduction to the
$1,000, and is entitled to COBRA continuation cov-
erage upon the timely payment of $350 (35 percent
of $1,000) for the coverage. The employer’s result-
ing payroll tax credit is $650 (65 percent of $1,000).
Example 2. Same facts as Example 1, except
the individual has only one dependent child, and the
plan charges $800 per month for self-plus-one-de-
pendent COBRA continuation coverage. Although
the individual’s premium (but for the ARRA pre-
mium reduction) would be $1,000 per month for
self-plus-two-or-more-dependents COBRA con-
tinuation coverage, the portion of the premium
attributable to coverage for the individual and the
individual’s dependent child (both assistance eligible
individuals) is $800.
The individual is entitled to apply the premium
reduction to the $800 and is entitled to COBRA con-
tinuation coverage upon the timely payment of $280
(35 percent of $800) for that portion of the coverage.
The amount the individual pays for the non-assistance
eligible individual is $200. The individual’s total pre-
mium payment is $480 ($280 plus $200). The em-
ployer’s resulting payroll tax credit is $520 (65 per-
cent of $800).
Example 3. An individual is an assistance el-
igible individual and has COBRA continuation
coverage. The individual has self-only coverage
and pays $157.50 (35 percent of the $450 per
month charged non-assistance eligible individu-
als for self-only COBRA continuation coverage).
During the premium reduction period, the plan has
an open enrollment period during which it allows
active employees and qualified beneficiaries to add
spouses and dependents to the health coverage.
The individual adds the individual’s spouse and
dependent child, who were not covered prior to the
involuntary termination, to the COBRA continuation
coverage. Without regard to the ARRA premium
reduction, COBRA continuation coverage for
self-plus-two-or-more-dependents is $1,000 per
month.
The spouse and the dependent child are not as-
sistance eligible individuals because they were not
covered by the plan on the day before the involun-
tary termination. The amount the individual pays for
the spouse and the dependent child is $550 per month
($1,000 less $450). The individual is entitled to the
premium reduction with respect to $450 per month.
Thus, the individual is entitled to COBRA continu-
ation coverage upon the timely payment of $707.50
($550 + $157.50 [35 percent of $450 = $157.50]).
The employer’s resulting payroll tax credit is $292.50
(65 percent of $450).
Q–26. Does the premium reduction ap-
ply to the increased premium if the plan,
in compliance with section 54.4980B–8,
Q&A–2(c), allows the assistance eligible
individual to change coverage from the
benefit package that covered the individ-
ual prior to termination to a different ben-
efit package with a higher applicable pre-
mium that allows an increase in the amount
charged the assistance eligible individual?
A–26. Yes.
COVERAGE ELIGIBLE FOR
PREMIUM REDUCTION
Q–27. Is the premium reduction avail-
able for COBRA continuation coverage
under a vision-only or dental-only plan?
A–27. Yes. The premium reduction
is available for COBRA continuation cov-
erage of any group health plan, except a
flexible spending arrangement (FSA) un-
der section 106(c) offered under a section
125 cafeteria plan. This includes vision-
only or dental-only plans and “mini-med
plans,” whether or not the employer pays
for a portion of the costs for active employ-
ees. The premium reduction is not avail-
able for continuation coverage offered by
employers for non-health benefits that are
not subject to COBRA continuation cover-
age, such as group life insurance.
Q–28. Can retiree health coverage be
treated as COBRA continuation coverage
for which the premium reduction is avail-
able?
A–28. Yes, but only if the retiree cov-
erage does not differ from the coverage
made available to similarly situated active
employees (though the amount charged
for the coverage may be higher than that
charged to active employees and the re-
tiree coverage may still be eligible for
April 20, 20098442009–16 I.R.B.

the ARRA premium reduction as long as
the charge to retirees does not exceed the
maximum amount allowed under Federal
COBRA).
Q–29. Is the premium reduction avail-
able for COBRA continuation coverage
under a health reimbursement arrangement
(HRA)?
A–29. Yes. While an HRA may qualify
as an FSA under section 106(c), the exclu-
sion of FSAs from the premium reduction
is limited to FSAs provided through a sec-
tion 125 cafeteria plan, which would not
include an HRA.
BEGINNING OF PREMIUM
REDUCTION PERIOD
Q–30. When does the premium reduc-
tion first apply to an assistance eligible in-
dividual?
A–30. The premium reduction applies
as of the first period of coverage begin-
ning on or after February 17, 2009 (the
date of enactment of ARRA), for which
the assistance eligible individual is eligi-
ble to pay only 35 percent of the premium
(as determined without regard to the pre-
mium reduction) and be treated as having
made full payment. For this purpose, a pe-
riod of coverage is a monthly or shorter pe-
riod with respect to which premiums are
charged by the plan with respect to such
coverage. Therefore, the exact date when
the first period of coverage beginning on
or after February 17, 2009, begins depends
on the period with respect to which premi-
ums are charged by the plan.
Q–31. If a plan requires that COBRA
continuation coverage be paid for based on
a calendar month and an assistance eligible
individual has COBRA continuation cov-
erage for the entire month of February, can
the plan pro-rate the premium for February
in order to apply the ARRA premium re-
duction to the portion of February that be-
gins on February 17, 2009?
A–31. No. If a plan requires that
COBRA continuation coverage be paid
for based on a calendar month and an
assistance eligible individual has COBRA
continuation coverage for the entire month
of February, the first period of coverage
beginning on or after February 17, 2009,
is the month beginning March 1, and
the premium reduction only applies to
the premiums for COBRA continuation
coverage for March and the following
months.
Q–32. If a plan requires that COBRA
continuation coverage be paid for based on
a calendar month and requires an individ-
ual who loses coverage other than on the
lastdayofthemonthandwhowishesto
enroll in COBRA continuation coverage to
pay apro-rataportion of the monthly pre-
mium for the first partial month of cover-
age, what is the first period of coverage to
which the premium reduction applies for
an assistance eligible individual who loses
coverage after February 17, 2009?
A–32. If a plan requires an individual
who loses coverage other than on the last
dayofthemonthandwhowishestoen-
roll in COBRA continuation coverage to
pay apro-rataportion of the monthly pre-
mium, the first period of coverage to which
the premium reduction applies for an assis-
tance eligible individual who loses cover-
age after February 17, 2009, is the individ-
ual’s first partial month of coverage. But
see Q&A–48 for a different rule in the case
of an individual electing COBRA continu-
ation coverage under the ARRA extended
election period.
END OF PREMIUM REDUCTION
PERIOD
Q–33. For how long does the premium
reduction apply to an assistance eligible
individual?
A–33. The premium reduction applies
until the earliest of (1) the first date the
assistance eligible individual becomes el-
igible for other group health plan coverage
(with certain exceptions) or Medicare cov-
erage, (2) the date that is nine months after
the first day of the first month for which the
ARRA premium reduction provisions ap-
ply to the individual, or (3) the date the in-
dividual ceases to be eligible for COBRA
continuation coverage.
Q–34. If an assistance eligible individ-
ual is eligible for other group health plan
coverage but does not enroll in the other
group health plan coverage, is the pre-
mium reduction available for the individ-
ual’s COBRA continuation coverage after
the date the individual is first eligible for
the other coverage?
A–34. No.
Example 1. An assistance eligible individual be-
gins employment with a new employer and is eligible
to enroll in the employer’s group health plan, with
coverage effective the first day of the next month.
The assistance eligible individual declines the cov-
erage and continues COBRAcontinuation coverage.
Although eligibility for other group health coverage
does not end the individual’s eligibility for Federal
COBRA, the premium reduction is no longer avail-
able as of the first day of the next month.
Example 2. Same facts as Example 1, except
that the new employer’s group health plan imposes
a 2-month waiting period. The premium reduction
stops being available as of the first day after the end
of the waiting period, even though the employee de-
clined coverage under the plan. It is the same result if
the employee had enrolled for coverage; the premium
reduction would apply until the first day after the end
of the waiting period.
Example 3. The spouse of an assistance eligible
individual (who is also an assistance eligible individ-
ual) begins employment with a new employer and is
eligible to enroll in the employer’s group health plan
with self-only or family coverage, with coverage ef-
fective the first day of the next month. The spouse
enrolls in self-only coverage, and the assistance eli-
gible individual continues COBRA continuation cov-
erage. Although the individual is allowed to continue
Federal COBRA, the premium reduction is no longer
available for the COBRA continuation coverage as of
the first day of the next month because the assistance
eligible individual is eligible for coverage under the
group health plan of the spouse’s employer.
Q–35. Is an assistance eligible indi-
vidual who otherwise meets the eligibility
requirements for coverage under a group
health plan, but who cannot enroll and
have coverage take effect immediately,
considered eligible for coverage under the
group health plan for purposes of ending
the period of premium reduction?
A–35. No. An individual who is eli-
gible to enroll for coverage under a group
health plan is considered to be eligible
for coverage under the group health plan
for purposes of ending the period of pre-
mium reduction only from the first date
that coverage can take effect. For exam-
ple, if, as of February 17, 2009, an assis-
tance eligible individual meets the eligi-
bility requirements for coverage under a
group health plan maintained by the indi-
vidual’s spouse, but cannot enroll and have
coverage take effect immediately, the indi-
vidual may receive the premium reduction
for periods of coverage until the first date
that coverage can take effect under the plan
maintained by the spouse’s employer.
Q–36. What is the effect on eligibility
for the premium reduction if retiree health
coverage that is not COBRA continuation
coverage is offered at the same time that
COBRA continuation coverage is offered?
A–36. The effect on eligibility for the
premium reduction of an offer of retiree
coverage that is not COBRA continuation
2009–16 I.R.B.845April 20, 2009

coverage at the same time that COBRA
continuation coverage is offered depends
on whether the retiree coverage is offered
under the same group health plan as the
COBRA continuation coverage or under
a different group health plan. If offered
under the same group health plan, the offer
of the retiree coverage has no effect on
an individual’s eligibility for the ARRA
premium reduction.
If offered under a different group health
plan, the offer can affect the individual’s
eligibility for the premium reduction. If
offered to an individual whose eligibility
for COBRA continuation coverage arises
in connection with an involuntary ter-
mination on or after February 17, 2009,
the offer of retiree coverage that is not
COBRA continuation coverage under
a different group health plan than the
one under which COBRA continuation
coverage is being offered will render
the individual ineligible for the ARRA
premium reduction. If offered to someone
whose eligibility for COBRA continuation
coverage arose on or after September 1,
2008, but before February 17, 2009, the
offer will render the individual ineligible
for the premium reduction only if the
period the individual is given for enrolling
in the retiree coverage extends to at least
February 17, 2009.
Q&A–6 of section 54.4980B–2 pro-
vides rules for determining whether health
benefits provided by an employer or em-
ployee organization constitute one or more
group health plans for purposes of Federal
COBRA. Under those rules, all health
benefits provided by an organization con-
stitute a single group health plan unless
it is clear from the instruments governing
the arrangement or arrangements that the
benefits are being provided under separate
plans and the arrangement or arrangements
are operated pursuant to such instruments
as separate plans.
Q–37. Does eligibility for coverage un-
der an HRA end the period of premium re-
duction under ARRA as eligibility for cov-
erage under any other group health plan?
A–37. Not if the HRA qualifies as
an FSA under section 106(c), but other-
wise yes. Under section 106(c), an FSA
is health coverage under which the max-
imum amount of reimbursement which is
reasonably available to a participant of the
coverage is less than 500 percent of the
value of the coverage. For this purpose,
the maximum amount of reimbursement
which is reasonably available is generally
the balance of the HRA and the value of
the HRA coverage would generally be the
applicable premium for COBRA continu-
ation of the HRA coverage.
Q–38. Is the premium reduction avail-
able after December 31, 2009?
A–38. Yes, the premium reduction may
be available after December 31, 2009, for
individuals who qualify as assistance eli-
gible individuals on or before December
31, 2009. For example, an assistance eligi-
ble individual with respect to whom the pe-
riod of COBRA continuation coverage for
which the premium reduction first applies
begins on December 1, 2009, could re-
ceive the premium reduction until August
31, 2010, assuming the individual does not
become eligible for other group health plan
coverage or Medicare or lose eligibility for
COBRA continuation coverage before that
date.
Q–39. Does the death of an involuntar-
ily terminated employee end the eligibil-
ity of the qualified beneficiary spouse and
dependent children for the premium reduc-
tion?
A–39. No.
Q–40. Does a failure to timely pay the
required premium for COBRA continua-
tion coverage end the premium reduction?
A–40. Yes. Failure to timely pay the re-
quired premium for COBRA continuation
coverage ends the period of COBRA con-
tinuation coverage, atwhich time the indi-
vidual no longer qualifies for the premium
reduction. For this purpose, payment is
considered timely if it is made by the end
of any applicable grace period for making
the payment.
Q–41. Is an individual currently en-
rolled in Medicare who is a qualified
beneficiary as the result of an involuntary
termination of employment that occurred
during the period from September 1, 2008,
through December 31, 2009, able to elect
COBRA continuation coverage and re-
ceive the premium reduction?
A–41. No. An individual currently en-
rolled in Medicare who becomes a quali-
fied beneficiary as the result of an invol-
untary termination that occurred during the
period from September 1, 2008, through
December 31, 2009, may be eligible to
elect COBRA continuation coverage but is
not eligible for the premium reduction.
Q–42. If an assistance eligible individ-
ual receiving a premium reduction from
an employer fails to provide notice of the
individual’s eligibility for coverage under
any other group health plan or Medicare
and continues receiving the premium re-
duction, is the employer required to refund
to the IRS the payroll tax credit relating to
the premium reduction provided with re-
spect to the period after the individual’s el-
igibility for the premium reduction ended
due to eligibility for coverage under the
other group health plan or Medicare?
A–42. No. If the employer has claimed
a payroll tax credit for the premium reduc-
tion, the employer is not required to refund
to the IRS the excess premium reduction
received as a credit merely because the as-
sistance eligible individual failed to pro-
vide notice that the individual is no longer
eligible for the premium reduction due to
eligibility for coverage under any other
group health plan or Medicare unless the
employer otherwise knew of the eligibil-
ity for such coverage. The assistance eli-
gible individual who failed to provide no-
tice may be subject to a Federal tax penalty
of 110 percent of the premium reduction
improperly received.The penalty will not
apply if it is shown that individual’s fail-
ure to provide notice was due to reasonable
cause and not to willful neglect. The em-
ployer who received the credit against pay-
roll taxes in the amount of the excess pre-
mium reduction has no rights to the penalty
payment.
Q–43. How long is the period of pre-
mium reduction for an individual who be-
comes an assistance eligible individual a
second time?
A–43. An assistance eligible individ-
ual is eligible for up to nine months of pre-
mium reduction for each involuntary ter-
mination.
Example. An individual is involuntarily termi-
nated and loses coverage as of April 1, 2009. The
individual otherwise meets the requirements for an
assistance eligible individual and is allowed the pre-
mium reduction for COBRA continuation coverage
beginning April 1, 2009. On July 1, 2009, the individ-
ual ceases to be an assistance eligible individual be-
cause of coverage under a group health plan provided
by the employer of the individual’s spouse. Subse-
quently, the individual’s spouse is involuntarily ter-
minated, the individual loses coverage as of Novem-
ber 1, 2009, and, at that time, otherwise meets the re-
quirements for being an assistance eligible individual.
The individual is allowed up to nine months of pre-
mium reduction with respect to the involuntary ter-
mination of the individual’s spouse.
April 20, 20098462009–16 I.R.B.

Q–44. Is the period for which pre-
mium assistance is available extended by
a second qualifying event, such as a di-
vorce, following an involuntary termina-
tion based on which a qualified beneficiary
is an assistance eligible individual?
A–44. No.
RECAPTURE OF PREMIUM
ASSISTANCE
Q–45. Can a plan refuse to provide
the premium reduction to an individual be-
cause of the individual’s income?
A–45. No. Even if an assistance eli-
gible individual’s income is high enough
that the recapture ofthe premium reduc-
tion would apply, COBRA continuation
coverage must be provided upon payment
of 35 percent of the premium unless the in-
dividual has notified the plan that the in-
dividual has elected the permanent waiver
of the premium reduction (or the period for
the premium reduction has ended).
Q–46. How does an assistance eligible
individual make a permanent election to
waive the right to the premium reduction?
A–46. An assistance eligible individ-
ual who wants to make a permanent elec-
tion to waive the right to the premium re-
duction makes the election by providing
a signed and dated notification (including
a reference to “permanent waiver”) to the
person who is reimbursed for the premium
reduction under section 6432. There is
no separate additional notification to any
government agency. If an assistance eligi-
ble individual makes the permanent elec-
tion to waive the right to the premium re-
duction, the individual may not later re-
verse the election and may not receive the
premium reduction for any future period
of COBRA continuation coverage in 2009
or 2010, regardless of modified adjusted
gross income in those years.
EXTENDED ELECTION PERIOD
Q&A–47 through Q&A–50 and
Q&A–52 through Q&A–55 apply only for
purposes of Federal COBRA and tempo-
rary continuation coverage under FEHBP.
Q–47. If an employee was involuntarily
terminated during the period from Septem-
ber 1, 2008, through February 17, 2009,
and elected self-only COBRA continua-
tion coverage, are a spouse and dependent
children who are qualified beneficiaries in
connection with the involuntary termina-
tion allowed to elect COBRA continuation
coverage and receive the premium reduc-
tion under the extended election period?
A–47. Yes. An individual who does not
have an election of COBRA continuation
coverage in effect on February 17, 2009,
but who would have been an assistance
eligible individual if the election were in
effect is allowed a second opportunity to
elect COBRA continuation coverage un-
der the extension of election period under
section 3001(a)(4)(A) of ARRA. The re-
sulting coverage begins with the first pe-
riod of COBRA continuation coverage be-
ginning on or after February 17, 2009. A
spouse or dependent child who is a benefi-
ciary under a group health plan that covers
an employee on the day before the invol-
untary termination of the employee (whose
termination was on or after September 1,
2008) would have been an assistance eli-
gible individual if the spouse or dependent
child timely elected COBRA continuation
coverage and thus qualifies for the second
election, notwithstanding the prior election
of self-only COBRA continuation cover-
age by the employee.
Q–48. If a plan requires that COBRA
continuation coverage be paid for based on
a calendar month, what is the first period
of coverage for an assistance eligible indi-
vidual who becomes eligible for COBRA
continuation coverage as a result of the
extended election period provided under
ARRA?
A–48. If, as a result of the extended
election period provided under ARRA, an
assistance eligible individual becomes el-
igible for COBRA continuation coverage
under a plan that requires that COBRA
continuation coverage be paid for based
on a calendar month, the individual’s first
period of coverage beginning on or after
February 17, 2009, is the month begin-
ning March 1, and the premium reduction
only applies to the premiums for COBRA
continuation coverage for March and the
following months. This does not change
even if the plan otherwise requires indi-
viduals who lose coverage before the last
dayofthemonthandwhowishtoenroll
in COBRA continuation coverage to pay
a pro-rata portion of the monthly premium
for the first partial month of coverage.
Q–49. If a plan requires that COBRA
continuation coverage be paid for based on
a monthly period computed from the date
of the loss of coverage, what is the first
period of coverage beginning on or after
February 17, 2009, for an assistance eli-
gible individual who becomes eligible for
COBRA continuation coverage as a result
of the extended election period provided
under ARRA?
A–49. The first period of coverage is
the monthly period corresponding to the
day after the loss of coverage to the day of
the following month corresponding to the
day of the loss of coverage. For example,
if the last day of coverage was October
3, 2008, the period of coverage runs from
the fourth of the month to the third of the
following month, and thus the first period
of coverage on or after February 17, 2009,
is the period March 4, 2009, through April
3, 2009.
Q–50. May an individual involuntarily
terminated during the period from Septem-
ber 1, 2008, through February 17, 2009,
who still has an open COBRA continua-
tion coverage election period independent
of ARRA elect coverage under the ex-
tended election period and receive and
only pay for coverage that starts on the
first period of coverage beginning on or
after February 17, 2009?
A–50. Yes. The extended election
period for electing COBRA continuation
coverage is available for all individuals
who are qualified beneficiaries as the
result of an involuntary termination dur-
ing the period from September 1, 2008,
through February 17, 2009, even if they
still have an open COBRA election period
as of February 17, 2009. If these indi-
viduals elect COBRA under their original
COBRA election period, under Federal
COBRA the coverage is retroactive to
their loss of coverage and the premium
reduction does not apply to the periods
of coverage prior to the first period of
coverage beginning on or after February
17, 2009 (generally, periods of coverage
before March 2009 for plans with monthly
coverage periods).
Example. An individual is involuntarily termi-
nated in December 2008 and received the COBRA
election notice in January 2009. As of February 17,
2009, the individual has not elected COBRA con-
tinuation coverage. The individual should receive a
notice about the extendedelection period for COBRA
continuation coverage and the individual may decline
to elect COBRA continuation coverage under the
original COBRA election period and instead elect
and pay for COBRA continuation coverage only
for coverage periods on or after February 17, 2009,
under the extended election period.
2009–16 I.R.B.847April 20, 2009

Q–51. Is the extended election period
available to involuntarily terminated em-
ployees whose continuation coverage is
provided pursuant to State law only?
A–51. Generally, no. The ex-
tended election period under section
3001(a)(4)(A) of ARRA applies to a
group health plan that is subject to Federal
COBRA or the temporary continuation
coverage requirements of the FEHBP. It
does not apply to plans subject to COBRA
continuation coverage requirements under
a State program that provides comparable
continuation coverage. However, if a State
program provides for a similar special
election and an individual otherwise sat-
isfies the requirements to be an assistance
eligible individual, the premium reduction
is available for any resulting continuation
coverage.
Q–52. When does COBRA continua-
tion coverage begin for individuals making
the election during the extended election
period provided under section 3001(a)(4)
of ARRA?
A–52.As provided in section
3001(a)(4)(B) of ARRA, COBRA con-
tinuation coverage elected during the
extended election period begins with the
first period of coverage beginning on or
after February 17, 2009. Thus, expenses
incurred after the loss of coverage and
before the first day of the first period of
coverage beginning on or after February
17, 2009, are not covered under the result-
ing COBRA continuation coverage.
Q–53. How does the COBRA con-
tinuation coverage election under the ex-
tendedelectionperiodapplyinthecaseof
an HRA?
A–53. Generally, qualified beneficia-
ries electing COBRA continuation cover-
age with respect to HRA coverage have ac-
cess to the same level of reimbursements
during COBRA continuation coverage as
was available immediately before the qual-
ifying event. Thus, a qualified benefi-
ciary electing COBRA continuation cov-
erage with respect to an HRA under the
extended election period would have ac-
cess to the same level of reimbursements
as they had immediately before the quali-
fying event. The amount available would
be reduced for any reimbursements made
after the qualifying event; for example, re-
imbursements for expenses incurred be-
fore the event submitted and reimbursed
after the event. Upon election of COBRA
continuation coverage with respect to the
HRA under the extended election period,
the HRA would not be required to reim-
burse expenses incurred after the loss of
coverage and before the first day of the
first period of coverage beginning on or af-
ter February 17, 2009.
Q–54. If an assistance eligible individ-
ual was eligible for other group health plan
coverage prior to February 17, 2009, but
has been unable to enroll in the other group
health plan coverage on and after February
17, 2009, is the premium reduction avail-
able to the individual’s COBRA continua-
tion coverage?
A–54. Yes, the assistance eligible in-
dividual is allowed the premium reduc-
tion until the individual is eligible to enroll
in coverage under any other group health
plan.
Example 1. An assistance eligible individual was
involuntarily terminated and lost health coverage on
or after September 1, 2008, and before February 17,
2009. At the time of, and because of, the loss of
coverage, the assistance eligible individual was el-
igible for a special enrollment period in the group
health plan provided by the employer of the individ-
ual’s spouse. The specialenrollment period ended
before February 17, 2009. The assistance eligible in-
dividual elected COBRA continuation coverage and
has not been eligible to enroll in coverage under the
spouse’s group health plan at any time on or after Feb-
ruary 17, 2009. Under these facts, the assistance eli-
gible individual is not considered eligible for cover-
age under the plan of the spouse’s employer until the
effective date of coverage for the first enrollment op-
portunity that occurs on or after February 17, 2009.
Therefore, the assistance eligible individual may re-
ceive the premium reduction beginning with the first
period of coverage beginning on or after February 17,
2009, and until becoming eligible for coverage under
the plan of the spouse’s employer.
Example 2. Same facts as Example 1, except that
the spouse’s group health plan has an open enroll-
ment period from June 1, 2009, to June 21, 2009,
with coverage elected during the open enrollment pe-
riod beginning July 1, 2009. The individual’s spouse
may elect coverage for the individual under the group
health plan at that time. The spouse does not elect
coverage for the individual, who continues COBRA
continuation coverage. The premium reduction is no
longer available for the individual’s COBRA contin-
uation coverage for periods beginning on or after July
1, 2009.
Q–55. Under Federal COBRA, what
is timely payment of the initial premium
for COBRA continuation coverage for
an individual electing the coverage under
the extended election period of section
3001(a)(4) of ARRA?
A–55. Pursuant to section 54.4980B–8,
Q&A–5(b), a plan cannot require payment
for any period of Federal COBRA for a
qualified beneficiary earlier than 45 days
after the date on which the election of
COBRA continuation coverage is made
for that qualified beneficiary. Thus, for
purposes of Federal COBRA in the case
of COBRA continuation coverage elected
under the extended election period of sec-
tion 3001(a)(4) of ARRA, the plan cannot
require payment of the first premium ear-
lier than 45 days after the date on which
the election of Federal COBRA under the
extended election period is made for that
qualified beneficiary.
PAYMENTS TO INSURERS UNDER
FEDERAL COBRA
Q–56. In the case of an insured plan
that is not a multiemployer plan and that
is subject to the COBRA continuation pro-
visions contained in the Code, if the in-
surer and the employer have agreed that
the insurer will collect the premiums di-
rectly from the qualified beneficiaries, is
the insurer required to treat an assistance
eligible individual paying 35 percent of the
premium as having paid the full premium,
even before the employer pays the insurer
the remaining 65 percent?
A–56. Yes. If the insurer fails to treat
a 35 percent payment by an assistance el-
igible individual as a payment of the full
premium, the insurer may be liable for the
excise tax under section 4980B(e)(1)(B),
which applies to each person responsible
(other than in a capacity as an employee)
for administering or providing benefits un-
der the plan and whose act or failure to act
caused (in whole or in part) the failure, if
the person assumed responsibility for the
performance of the act to which the failure
relates.
COMPARABLE STATE
CONTINUATION COVERAGE
Q–57. Does a State continuation cover-
age program provide comparable coverage
qualifying for the premium reduction un-
der ARRA if the maximum period of con-
tinuation coverage under the program dif-
fers from the maximum period under Fed-
eral COBRA?
A–57. Yes. A different period of con-
tinuation coverage under State continua-
tion coverage programs does not disqual-
ify the State program from being compara-
ble. Thus, for example, the mere fact that a
State continuation coverage program only
April 20, 20098482009–16 I.R.B.

provides for six months of continuation
coverage (instead of 18 months) would
not result in the State program failing to
be comparable. Similarly, State programs
providing for different qualifying events,
different qualified beneficiaries, or differ-
ent maximum premiums generally do not
fail to be comparable solely for those rea-
sons.
Q–58. In the case of an insured plan
subject solely to State law requiring the
insurer to provide continuation coverage,
if the employer collects the reduced pre-
miums from assistance eligible individuals
and pays the full premium to the insurer,
is the employer eligible to take the payroll
credit directly?
A–58. No. Under section 6432(b)(3),
in the case of an insured plan subject solely
to State law with respect to the require-
ment to provide continuation coverage, the
only person entitled to be reimbursed for
the premium reduction through the payroll
credit (unless and until provided otherwise
in future guidance) is the insurer providing
the coverage under the group health plan.
ADDITIONAL ISSUES
The IRS and Treasury are aware of var-
ious issues relating to the premium reduc-
tion provision that are not addressed in this
notice, including issues affecting partic-
ular arrangements. Although this notice
does not address these issues, the IRS and
Treasury continue to consider these and
other issues and possible guidance with re-
spect to them.
DRAFTING INFORMATION
The principal author of this notice is
Leslie R. Paul of the Office of Division
Counsel/Associate Chief Counsel (Tax Ex-
empt and Government Entities). For fur-
ther information regarding this notice, con-
tact Ms. Paul at (202) 622–6080 (not a
toll-free call).
Qualified Energy Conservation
Bond Allocations for 2009
Notice 2009–29
SECTION 1. PURPOSE
This notice sets forth the maximum face
amount of qualified energy conservation
bonds (“QECBs”) that may be issued by
each State and large local government un-
der § 54D(e)(1) of the Internal Revenue
Code. For this purpose, § 54A(e)(3) pro-
vides that the term “State” includes the
District of Columbia and any possession
of the United States. This notice also pro-
vides certain interim guidance for QECBs.
SECTION 2. BACKGROUND
.01 INTRODUCTION
Section 301(a) of Tax Extenders and
Alternative Minimum Tax Relief Act of
2008, Division C of Pub. L. 110–343.
122 Stat. 1365 (2008) (“Act”) added new
§ 54D to provide program provisions for
QECBs. The Act amended § 54A(d)(1)
to provide that the term “qualified tax
credit bond” means, in part, a qualified
energy conservation bond that is part of
an issue that meets the requirements of
§ 54A(d)(2), (3), (4), (5), and (6) re-
garding expenditures of bond proceeds,
information reporting, arbitrage, matu-
rity limitations, and prohibitions against
financial conflicts of interest. The Act
also amended § 54A(d)(2) to provide that,
for purposes of § 54A(d)(2)(C), the term
“qualified purpose” for a QECB means a
purpose specified in § 54D(a)(1) described
below.
The Act added § 54D(d) to provide a
national bond limitation (“national bond
volume cap”) authorization for QECBs of
$800 million. Section 1112 of Title 1 of
Division B of the American Recovery and
Reinvestment Act of 2009, Pub. L. No.
111–5, 123 Stat. 115 (2009) (“2009 Act”)
amended §54D(d) to increase the national
bond volume cap authorization for QECBs
from $800 million to $3.2 billion.
.02 QUALIFIED ENERGY
CONSERVATION BONDS UNDER
§54D
Section 54D(a) defines a “qualified en-
ergy conservation bond” to mean any bond
issued as part of an issue if —
(1) 100 percent of the available project
proceeds of such issue are to be used for
one or more qualified conservation pur-
poses,
(2) the bond is issued by a State or local
government, and
(3) the issuer designates such bond for
purposes of this section.
Section 54D(b) provides that the annual
credit determined under § 54A(b) with re-
spect to any qualified energy conservation
bond shall be 70 percent of the amount so
determined without regard to § 54D(b).
Section 54D(c) provides that the max-
imum face amount of bonds which may
be designated under § 54D(a) by any is-
suer shall not exceed the portion of the
volume cap allocated to such issuer under
§54D(e).
Section 54D(e)(1) provides that the
$3.2 billion in total national bond volume
cap shall be allocated by the Department of
the Treasury among the States in propor-
tion to the population of the States. Section
54D(e)(2)(A) provides that in the case
of any State where there is a “large local
government,” as defined § 54D(e)(2)(C),
each large local government shall be al-
located a portion of the State’s allocation
that bears the same ratio to the State’s
allocation (determined without regard to
this subparagraph) as the population of the
large local government bears to the popu-
lation of the State. Section 54D(e)(2)(B)
provides that the amount allocated under
this subsection to a large local govern-
ment may be reallocated by the large
local government to the State where the
large local government is located. Section
54D(e)(2)(C) provides that for purposes of
§ 54D, the term “large local government”
means any municipality or county that has
a population of 100,000 or more.
Under § 54D(e)(3), any allocation to a
State or large local government shall be
allocated in turn by the State or large lo-
cal government to issuers within the State
in a manner that results in the use of not
less than 70 percent of the allocation to
such State or large local government to
designate bonds that are not private activ-
ity bonds.
Section 54D(f) defines the term “quali-
fied conservation purpose” to mean any of
the following:
(A) Capital expenditures incurred for
purposes of (i) reducing energy consump-
tion in publicly-owned buildings by at
least 20 percent, (ii) implementing green
community programs (including the use
of loans, grants, or other repayment mech-
anisms to implement such programs), (iii)
rural development involving the produc-
tion of electricity from renewable energy
resources, or (iv) any qualified facility (as
determined under section 45(d) without
2009–16 I.R.B.849April 20, 2009

regard to paragraphs (8) and (10) thereof
and without regard to any placed in service
date).
(B) Expenditures with respect to re-
search facilities, and research grants, to
support research in (i) development of cel-
lulosic ethanol or other nonfossil fuels, (ii)
technologies for the capture and sequestra-
tion of carbon dioxide produced through
the use of fossil fuels, (iii) increasing the
efficiency of existing technologies for
producing nonfossil fuels, (iv) automobile
battery technologies and other technolo-
gies to reduce fossil fuel consumption in
transportation, or (v) technologies to re-
duce energy use in buildings.
(C) Mass commuting facilities and re-
lated facilities that reduce consumption of
energy, including expenditures to reduce
pollution from vehicles used for mass
commuting.
(D) Demonstration projects designed
to promote the commercialization of (i)
green building technology, (ii) conversion
of agricultural wastefor use in the produc-
tion of fuel or otherwise, (iii) advanced
battery manufacturing technologies, (iv)
technologies to reduce peak use of elec-
tricity, or (v) technologies for the capture
and sequestration of carbon dioxide emit-
ted from combusting fossil fuels in order
to produce electricity.
(E) Public education campaigns to pro-
mote energy efficiency.
Section 54D(f)(2) provides that, in the
case of any private activity bond, the term
“qualified conservation purposes” shall
not include any expenditure that is not
a capital expenditure. New § 54D(e)(4)
added by the 2009 Act provides a special
rule for bonds to finance green community
programs, stating that bonds issued for
the purpose of providing loans, grants, or
other repayment mechanisms for capital
expenditures to implement green commu-
nity programs are not treated as private
activity bonds for purposes of § 54D(e)(3).
Section 54D(g)(1) provides that the
population of any State or local govern-
ment shall be determined for purposes of
this section as provided in § 146(j) for
2008. Section 54D(g)(2) provides, in de-
termining the population of any county for
purposes of § 54D, for the exclusion of
that portion of the county population taken
into account in determining the population
of any municipality that is a large local
government.
Under § 54D(h), an Indian tribal gov-
ernment shall be treated as a large local
government, except that (1) an Indian
tribal government shall be treated as lo-
cated within a State to the extent of so
much of the population of such govern-
ment as resides within the State, and (2)
any bond issued by an Indian tribal gov-
ernment shall be treated as a qualified
energy conservation bond only if issued
as part of an issue the available project
proceeds of which are used for purposes
for which such Indian tribal government
could issue bonds to which § 103(a) ap-
plies.
SECTION 3. INTERIM GUIDANCE
AND RELIANCE
.01 GENERALLY
Pending the promulgation and effective
date of future administrative or regulatory
guidance, taxpayers may rely on the in-
terim guidance provided in this notice.
.02 CREDIT RATE
For QECBs issued under §§ 54A and
54D, the maximum maturity and the credit
rate are determined as of the date that there
is a binding, written contract for the sale
or exchange of the bond. The applicable
maximum maturity, the discount rate for
determining the maturity, and QCEB credit
rate are published for that date by the Bu-
reau of Public Debt on its Internet site for
State and Local Government Series secu-
rities at:https://www.treasurydirect.gov.
For further information regarding the
methodology and procedures that the
Treasury Department uses to determine
these credit rates, see Notice 2009–15,
2009–6 I.R.B. 449 (February 9, 2009).
.03 SINKING FUND YIELD
Section 54A(d)(4)(C) provides that an
issue shall not be treated as failing to meet
the requirements of § 148 by reason of any
fund which is expected to be used to re-
pay the issue if: (i) the fund is funded at
a rate not more rapid than equal annual
installments; (ii) the fund is funded in a
manner reasonably expected to result in an
amount not greater than an amount neces-
sary to repay the issue; and (iii) the yield on
such fund is not greater than the discount
rate determined under § 54A(d)(5)(B)(the
“permitted sinking fund yield”).
The permitted sinking fund yield is
determined under § 54A(d)(5)(B) by us-
ing a rate equal to 110 percent of the
long-term adjusted, applicable federal
rate (“AFR”), compounded semiannually,
for the month in which the bond is sold.
The IRS publishes the long-term adjusted
AFR, compounded semiannually, each
month in a revenue ruling that is pub-
lished in the Internal Revenue Bulletin.
The Bureau of Public Debt publishes the
permitted sinking fund yield for each
month on its Internet site for State and
Local Government Series securities at:
https://www.treasurydirect.gov.
.04 INFORMATION REPORTING
Section 54A(d)(3) requires issuers of
QECBs to submit information reporting
returns to the IRS similar to those required
to be submitted under § 149(e) for tax-ex-
empt State or local governmental bonds.
These information reporting returns are re-
quired to be submitted at the same time and
in the same manner as those under § 149(e)
on such forms as shall be prescribed by
the IRS for such purpose. Pending further
guidance from the IRS regarding the appli-
cable forms to be used for such informa-
tion reporting for QECBs, in the case of
an issue of QECBs, the issuer must sub-
mit to the IRS an information return on
Form 8038, at the same time and in the
same manner as required under § 149(e),
with modifications as described below. Is-
suers of QECBs should complete Part II of
Form 8038 by checking Line 20c (Other),
writing “QECBs” in the space provided for
the bond description, and entering the is-
suepriceoftheQECBsintheIssuePrice
column on Line 20c. For purposes of
this notice, the term “issue” has the mean-
ing used for tax-exempt bond purposes in
§ 1.150–1(c) of the Income Tax Regula-
tions.
.05 ELIGIBLE ISSUERS
Eligible issuers of QECBs include
States, political subdivisions as defined
for purposes of § 103, and entities empow-
ered to issue bonds on behalf of any such
entity under rules similar to those for de-
termining whether a bond issued on behalf
of a State or political subdivision consti-
tutes an obligation of that State or political
April 20, 20098502009–16 I.R.B.

subdivision for purposes of § 103 and
§ 1.103–1(b) of the regulations. Further,
eligible issuers include otherwise-eligible
issuers in conduit financing issues (as de-
fined in § 1.150–1(b) of the regulations).
An eligible issuer may issue QECBs based
on a volume cap allocation received by
the eligible issuer itself or by a conduit
borrower or other ultimate beneficiary of
theissueofQECBs. Inallevents,the
eligible costs for qualified conservation
purposes financed with the proceeds of
an issue of QECBs under § 54D(f) must
relate to qualified conservation purposes
that are located within or attributable to
both the jurisdiction of the issuer of the
QECBs and the jurisdiction of the entity
authorized to allocate volume cap to an
issue of QECBs for the financing of those
qualified conservation purposes. Entities
authorized to allocate volume cap con-
sist of States and large local governments
that receive volume cap allocations under
§ 54D(e). Thus, for example, a large local
government that has received a volume
cap allocation under § 54D(e)(2) either
may issue bonds and designate them as
QECBs with respect to that volume cap it-
self or it may be a beneficiary of proceeds
of an issue of bonds issued and designated
as QECBs by another eligible issuer with
respect to that volume cap, provided that,
in either event, the proceeds of the issue
are used to finance qualified conservation
purposes located within or attributable to
both the jurisdiction of the issuer of the
QECBs and the jurisdiction of the large
local government authorized to allocate
volume cap to the issue of QECBs for the
financing of those qualified conservation
purposes.
SECTION 4. NATIONAL BOND
VOLUME CAP FOR QECBs
The national bond volume cap for
QECBs is $3.2 billion. Each State must
allocate a portion of its allocation of the
national bond volume cap to each large
local government in the State in an amount
that bears the same ratio to the State’s
allocation as the population of such large
local government bears to the population
of such State. For this purpose, § 54D(h),
described above, is applicable.
The allocations set forth below were
based on the most recent available state
population information released by the
by the United States Census Bureau
before the beginning of 2009 (which
consists of state population informa-
tion as of July 1, 2008), which can
be found at the following web site:
http://www.census.gov/popest/states/ta-
bles/NST-EST2008–01.xls.
In making the required reallocations of
applicable portions of State allocations to
large local governments, States must use
population figures for large local govern-
ments within the States based on available
data from the United States Census Bureau
for the period that is closest in time to that
used for the State and released by the Cen-
sus before 2009 which consists of informa-
tion as of July 1, 2007. City and county
population figures are located generally at
http://www.census.gov/popest/.
In making the required allocations to
large local governments, a State shall
make the required adjustments under
§ 54D(g)(2), described above. Further, in
making the required allocations to large
local governments, in the case of a State
that has local political subdivisions that are
not referred to as counties or cities (e.g.,
townships, boroughs,or parishes), the de-
termination of whether such political sub-
divisions are eligible to be treated as large
local governments is based on whether,
in substance, such political subdivisions
are most closely analogous to counties
or cities and whether they constitute un-
controlled general purpose governmental
entities under §1.150–1(e)(3)(providing
that an entity is not a controlled entity
if the entity possesses substantial taxing,
eminent domain, and police powers).
Allocations to States of the National Bond Volume Cap for
Qualified Energy Conservation Bonds
StateorTerritoryQECBAllocation(indollars)
Alabama48,364,000
Alaska7,120,000
Arizona67,436,000
Arkansas29,623,000
California381,329,000
Colorado
51,244,000
Connecticut36,323,000
Delaware
9,058,000
District of Columbia6,140,000
Florida190,146,000
Georgia100,484,000
Hawaii13,364,000
Idaho
15,809,000
Illinois133,846,000
Indiana
66,155,000
Iowa
31,150,000
Kansas29,070,000
Kentucky44,291,000
Louisiana
45,759,000
Maine
13,657,000
2009–16 I.R.B.851April 20, 2009

Allocations to States of the National Bond Volume Cap for
Qualified Energy Conservation Bonds
S
tateorTerritoryQECBAllocation(indollars)
Maryland
58,445,000
Massachusetts67,413,000
Michigan103,780,000
Minnesota
54,159,000
Mississippi30,486,000
Missouri61,329,000
Montana10,037,000
Nebraska
18,502,000
Nevada
26,975,000
New Hampshire
13,651,000
New Jersey90,078,000
New Mexico
20,587,000
New York202,200,000
North Carolina
95,677,000
North Dakota
6,655,000
Ohio119,160,000
Oklahoma37,787,000
Oregon39,320,000
Pennsylvania129,144,000
Rhode Island10,901,000
South Carolina
46,475,000
South Dakota8,343,000
Tennessee64,476,000
Texas
252,378,000
Utah28,389,000
Vermont
6,445,000
Virginia80,600,000
Washington67,944,000
West Virginia18,824,000
Wisconsin
58,387,000
Wyoming
5,526,000
American Samoa673,000
Guam1,826,000
Northern Marianas899,000
Puerto Rico41,021,000
US Virgin Islands1,140,000
Total Allocation3,200,000,000
SECTION 5. EFFECTIVE DATE OF
VOLUME CAP LIMITATIONS
The limitations for QECBs in Section
4 are effective for QECBs issued pursuant
to the national bond volume cap after Oc-
tober 3, 2008.
SECTION 6. DRAFTING
INFORMATION
The principal authors of this notice are
Timothy L. Jones and David E. White of
the Office of Associate Chief Counsel (Fi-
nancial Institutions & Products). For fur-
ther information regarding this notice, con-
tact Timothy L. Jones or David E. White at
(202) 622–3980 (not a toll-free call).
Qualified Zone Academy Bond
Allocations for 2008 and 2009
Notice 2009–30
SECTION 1. PURPOSE
This notice sets forth the maximum
face amount of Qualified Zone Academy
Bonds (“QZABs”) that may be issued for
each State for each of the calendar years
2008 and 2009 under § 54E(c)(2) of the In-
ternal Revenue Code. Under § 54A(e)(3),
the term State includes the District of Co-
lumbia and any possession of the United
States. This notice also provides certain
interim guidance for QZABs issued after
October 3, 2008.
SECTION 2. BACKGROUND
.01 INTRODUCTION
Section 313 of the Tax Extenders and
Alternative Minimum Tax Relief Act of
2008, Div. C of Pub. L. No. 110–343,
122 Stat. 3765 (2008) (“Act”) added new
§ 54E, which provides revised program
provisions for QZABs in lieu of the ex-
isting provisions under § 1397E, effec-
April 20, 20098522009–16 I.R.B.

tive for obligations issued after October 3,
2008. The Act amended § 54A(d)(1) to
provide that the term qualified tax credit
bond (“QTCB”) means, in part, a quali-
fied zone academy bond which is part of
an issue that meets the requirements of
§§ 54A(d)(2), (3), (4), (5), and (6) regard-
ing expenditures of bond proceeds, infor-
mation reporting, arbitrage, maturity lim-
itations, and prohibitions against financial
conflicts of interest. The Act also amended
§ 54A(d)(2)(C) to provide that, for pur-
poses of § 54A(d)(2), the term “qualified
purpose” for a QZAB means a purpose
specified in § 54E(a)(1), described below.
The Act added § 54E(c)(1) to provide a
national zone academy bond limitation au-
thorization for QZABs of $400 million for
each of calendar years 2008 and 2009. In
addition, section 1522 of Title I of Division
B of the American Recovery and Reinvest-
ment Act of 2009, Pub. L. No. 111–5,
123 Stat. 115 (2009) (“2009 Act”) fur-
ther amended § 54E(c)(1) to provide an in-
creased national zone academy bond limi-
tation authorization for QZABs of $1.4 bil-
lion for each of calendar years 2009 and
2010.
.02 QUALIFIED ZONE ACADEMY
BOND UNDER § 54E
Section 54E(d) defines “qualified zone
academy” as any public school (or aca-
demic program within a public school)
which is established by and operated un-
der the supervision of an eligible local
education agency to provide education
or training below the postsecondary level
provided: (A) the public school or pro-
gram is designed in cooperation with
business to enhance the academic curricu-
lum, increase graduation and employment
rates and prepare students for college and
the workforce; (B) students will be sub-
ject to the same academic standards and
assessments as other students educated
by the eligible local education agency;
(C) the comprehensive education plan is
approved by the eligible local education
agency; and (D)(i)such public school
is located in an empowerment zone or
enterprise community including such des-
ignated after October 3, 2008; or (ii) there
is a reasonable expectation (as of the date
of bond issuance) that at least 35 percent
of the students will be eligible for free
or reduced cost lunches under the school
lunch program established under the Na-
tional School Lunch Act.
Section 54E(a) provides that a “quali-
fied zone academy bond” or QZAB means
anybondissuedaspartofanissueif:(1)
100 percent of the available project pro-
ceeds of such issue are to be used for a
qualified purpose with respect to a quali-
fied zone academy established by an eli-
gible local education agency; (2) the bond
is issued by a State or local government
within the jurisdiction of which such acad-
emy is located, and (3) the issuer: (A) des-
ignates such bond for purposes of this sec-
tion; (B) certifies that it has written assur-
ances that the private business contribution
requirement of § 54E(b) will be met; and,
(C) certifies that it has the written approval
of the eligible local education agency for
such bond issuance.
Section 54E(d)(3) provides that a qual-
ified purpose with respect to each acad-
emy means: (A) rehabilitating or repair-
ing the public school facility; (B) provid-
ing equipment; (C) developing course ma-
terials; and, (D) training teachers and other
school personnel. The private business
contribution requirement of § 54E(b) is
met if the eligible local education agency
that established the qualified zone acad-
emy has written commitments from pri-
vate entities to make qualified contribu-
tions having a present value (as of the date
of issuance of the issue) of not of less than
10 percent of the proceeds of the issue.
Section 54E(d)(4) defines “qualified con-
tributions” as any contribution (of a type
and quality acceptable to the eligible lo-
cal education agency) of: (A) equipment
for use in the qualified zone academy (in-
cluding state-of-the-art technology and vo-
cational equipment); (B) technical assis-
tance in developing curriculum or in train-
ing teachers to promote appropriate market
driven technology in the classroom; (C)
employees’ services as volunteer mentors;
(D) internships, field trips, or other educa-
tional opportunities outside the academy;
or (E) any other property or service speci-
fied by the eligible education agency. Sec-
tion 54E(d)(2) defines “eligible local ed-
ucation agency” as any local educational
agency as defined in § 9101 of the Elemen-
tary and Secondary Education Act of 1965.
Section 54E(c)(2) provides that the
Department of the Treasury shall allocate
the national zone academy bond limitation
among the States on the basis of their re-
spective populations of individuals below
the poverty line (as defined by the Office
of Management and Budget). The limi-
tation amount allocated to a State under
the preceding sentence shall be allocated
by the State education agency to qualified
zone academies within such State.
Under § 54E(c)(3), the maximum ag-
gregate face amount of bonds issued
during any calendar year which may be
designated as QZABs with respect to any
qualified zone academy shall not exceed
the limitation amount allocated to such
academy for such calendar year. However,
under § 54E(c)(4)(A), if for any calendar
year the limitation amount for any State
exceeds the amount ofbonds issued during
such year which are designated QZABs
with respect to qualified zone academies
within such State, the limitation amount
for such State for the following calendar
year shall be increased by the amount
of such excess. Under § 54E(c)(4)(B),
however, any carryforward of a limitation
amount may be carried only to the first
2 years following the unused limitation
year. For these purposes, the limitation
amount shall be treated as used on a first-in
first-out basis.
Section 54E(c)(4)(C) applies the rules
under §§ 54E(c)(4)(A) and (B) to QZABs
issued after October 3, 2008, under a car-
ryforward of an unused limitation to calen-
dar years 2008 or 2009 that initially arose
in a prior year under § 1397E(e)(4). Any
such carryforward is treated as though it
were a carryforward that initially arose un-
der § 54E in that prior year.
Sections 1.1397E–1 (the “Final Regu-
lations”) and 1.1397E–1T (the “Tempo-
rary Regulations”) set forth regulations
that were issued under § 1397E. Except
as provided in this notice, or to the ex-
tent inconsistent with §§ 54A and 54E,
the Final Regulations and the Temporary
Regulations apply to QZABs issued under
§§ 54A and 54E.
SECTION 3. INTERIM GUIDANCE
AND RELIANCE
.01 GENERALLY
Pending the promulgation and effec-
tive date of future administrative or regu-
latory guidance, taxpayers may rely on the
interim guidance provided in this notice
and, to the extent not inconsistent with this
2009–16 I.R.B.853April 20, 2009

notice and the provisions of §§ 54A and
54E, the existing regulations issued under
§ 1397E.
.02. CREDIT RATE
For QZABs issued under §§ 54A and
54E, the maximum maturity and the credit
rate are determined as of the date that there
is a binding, written contract for the sale
or exchange of the bond. The applicable
maximum maturity and the QZAB credit
rate are published for that date by the Bu-
reau of Public Debt on its Internet site for
State and Local Government Series securi-
ties at:http://www.treasurydirect.gov.For
further information regarding the method-
ology and procedures that the Treasury De-
partment uses to determine these credit
rates, see Notice 2009–15, 2009–6 I.R.B.
449 (February 9, 2009).
.03 SINKING FUND YIELD
Section 54A(d)(4)(C) provides that an
issue shall not be treated as failing to meet
the requirements of § 148 by reason of any
fund which is expected to be used to re-
pay the issue if: (i) the fund is funded at
a rate not more rapid than equal annual
installments; (ii) the fund is funded in a
manner reasonably expected to result in an
amount not greater than an amount neces-
sary to repay the issue; and (iii) the yield on
such fund is not greater than the discount
rate determined under § 54A(d)(5)(B) (the
“permitted sinking fund yield”).
The permitted sinking fund yield is
determined under § 54A(d)(5)(B) by us-
ing a rate equal to 110 percent of the
long-term adjusted, applicable federal
rate (“AFR”), compounded semiannually,
for the month in which the bond is sold.
The IRS publishes the long-term adjusted
AFR, compounded semiannually, each
month in a revenue ruling that is pub-
lished in the Internal Revenue Bulletin.
The Bureau of Public Debt publishes the
permitted sinking fund yield for each
month on its Internet site for State and
Local Government Series securities at
https://www.treasurydirect.gov.
SECTION 4. NATIONAL ZONE
ACADEMY BOND LIMITATION
FOR 2008
The national limitation for QZABs is-
sued under § 54E for calendar year 2008
is $400 million. This amount is allocated
among the States as follows:
Qualified Zone Academy Bond Alloca-
tions by State or Territory, 2008.
S
tateorTerritoryQZABAllocations(indollars)
Alabama7,606,000
Alaska600,000
Arizona8,817,000
Arkansas4,924,000
California44,364,000
Colorado
5,694,000
Connecticut2,692,000
Delaware881,000
District of Columbia921,000
Florida21,607,000
Georgia
13,250,000
Hawaii1,001,000
Idaho1,781,000
Illinois14,972,000
Indiana
7,586,000
Iowa3,182,000
Kansas3,002,000
Kentucky
7,145,000
Louisiana
7,756,000
Maine
1,541,000
Maryland
4,543,000
Massachusetts
6,215,000
Michigan13,781,000
Minnesota4,824,000
Mississippi
5,824,000
Missouri7,426,000
Montana1,321,000
Nebraska1,931,000
Nevada2,702,000
New Hampshire901,000
New Jersey7,296,000
New Mexico3,493,000
New York
25,720,000
North Carolina12,600,000
North Dakota741,000
Ohio
14,651,000
April 20, 20098542009–16 I.R.B.

StateorTerritoryQZABAllocations(indollars)
Oklahoma
5,574,000
Oregon4,744,000
Pennsylvania13,941,000
Rhode Island1,221,000
South Carolina
6,425,000
South Dakota1,011,000
Tennessee
9,547,000
Texas37,939,000
Utah
2,512,000
Vermont610,000
Virginia7,436,000
Washington
7,256,000
West Virginia2,982,000
Wisconsin
5,885,000
Wyoming440,000
American Samoa391,000
Guam399,000
Northern Mariana Islands389,000
Puerto Rico17,644,000
U.S. Virgin Islands363,000
Total Allocation400,000,000
SECTION 5. NATIONAL ZONE
ACADEMY BOND LIMITATION
FOR 2009
The national limitation for QZABs is-
sued under § 54E for calendar year 2009
is $1.4 billion. This amount is allocated
among the States as follows:
Qualified Zone Academy Bond Alloca-
tions by State or Territory, 2009.
S
tateorTerritoryQZABAllocations(indollars)
Alabama26,621,000
Alaska2,102,000
Arizona
30,859,000
Arkansas17,233,000
California
155,275,000
Colorado19,930,000
Connecticut9,422,000
Delaware3,082,000
DC3,222,000
Florida
75,623,000
Georgia46,376,000
Hawaii
3,503,000
Idaho
6,235,000
Illinois
52,401,000
Indiana
26,551,000
Iowa11,139,000
Kansas
10,508,000
Kentucky
25,009,000
Louisiana27,146,000
Maine
5,394,000
Maryland
15,902,000
Massachusetts
21,752,000
Michigan48,232,000
Minnesota16,883,000
Mississippi20,386,000
Missouri
25,990,000
Montana4,624,000
2009–16 I.R.B.855April 20, 2009

StateorTerritoryQZABAllocations(indollars)
Nebraska6,760,000
Nevada
9,457,000
New Hampshire
3,152,000
New Jersey
25,535,000
New Mexico12,224,000
New York90,020,000
North Carolina44,099,000
North Dakota
2,592,000
Ohio
51,280,000
Oklahoma
19,510,000
Oregon16,603,000
Pennsylvania48,793,000
Rhode Island4,273,000
South Carolina22,487,000
South Dakota
3,538,000
Tennessee33,416,000
Texas132,788,000
Utah8,792,000
Vermont2,137,000
Virginia
26,025,000
Washington
25,395,000
West Virginia10,438,000
Wisconsin
20,596,000
Wyoming
1,541,000
American Samoa1,368,000
Guam1,397,000
Northern Mariana Islands1,362,000
Puerto Rico
61,753,000
Virgin Islands1,269,000
Total Allocation1,400,000,000
SECTION 6. EFFECTIVE DATE OF
NATIONAL ZONE ACADEMY BOND
LIMITATIONS
The national limitation allocated in sec-
tion 4 is effective for QZABs issued after
October 3, 2008, and the national limita-
tion allocated in section 5 is effective for
QZABs issued on or after January 1, 2009.
SECTION 7. DRAFTING
INFORMATION
The principal authors of this notice are
Timothy Jones and Sandra H. Westin of the
Office of Associate Chief Counsel (Finan-
cial Institutions and Products). For further
information regarding this notice, contact
Sandra H. Westin or Timothy L. Jones at
(202) 622–3980 (not a toll-free call).
Election and Notice
Procedures for Multiemployer
Plans Under Sections 204 and
205 of WRERA
No
tice 2009–31
I. PURPOSE
This notice provides guidance for spon-
sors of multiemployer defined benefit
plans relating to the elections described
in sections 204 and 205 of the Worker,
Retiree, and Employer Recovery Act of
2008, P.L. 110–458 (WRERA), and on the
notice required to be provided if a plan
sponsor makes an election under section
204.
II. BACKGROUND
1. PPA provisions
Section 432 of the Internal Rev-
enue Code (Code), which was added
by the Pension Protection Act of 2006,
P.L. 109–280 (PPA), provides rules for
multiemployer defined benefit plans
that are significantly underfunded. In
particular, section 432(b)(3) provides
that the plan actuary for any such
multiemployer plan must, by the 90
th
day
of each plan year, certify to the Secretary
of the Treasury and to the plan sponsor
as to the plan’s “section 432 status” (i.e.,
whether the plan is in endangered status,
critical status, or neither status) for the
plan year. If a plan is certified to be in
endangered status (including seriously
endangered status), the plan sponsor
must adopt a funding improvement plan
that is reasonably expected to enable the
multiemployer plan to achieve certain
funding improvements by the end of its
10-year funding improvement period (with
a possible substitution of a 15-year funding
improvement period for a plan in seriously
endangered status). Similarly, the sponsor
of a plan that has been certified to be in
critical status must adopt a rehabilitation
April 20, 20098562009–16 I.R.B.

plan that generally is reasonably expected
to enable the multiemployer plan to
emerge from critical status by the end
of its 10-year rehabilitation period (with
alternative approaches available if the
plan sponsor determines, as described
in section 432(e)(3)(A)(ii), that the plan
cannot reasonably be expected to emerge
from critical status by the end of the
rehabilitation period using all reasonable
measures). A funding improvement plan
or rehabilitation plan must be updated
each year after the initial endangered year
(referred to in section 432(c)(2) as the
initial determination year) or initial critical
year.
Section 432(b)(3)(D) provides that the
sponsor of a multiemployer plan in endan-
gered or critical status must provide notice
of the plan’s certified status to participants
and beneficiaries, the bargaining parties,
the Pension Benefit Guaranty Corporation,
and the Secretary of Labor, not later than
30 days after the date of the certification. If
the plan is in critical status, the notice must
explain that adjustable benefits, as defined
in section 432(e)(8), may be reduced.
Section 4971(a) and (b) imposes an
excise tax on an employer responsible for
contributing to or under a plan if the plan
has an accumulated funding deficiency.
PPA added section 4971(g) to the Code,
providing new excise tax rules for plans in
endangered or criticalstatus. In particular,
section 4971(g) imposes new excise taxes
with respect to plans in critical or endan-
gered status, and section 4971(g)(1)(A)
provides that no excise tax is imposed
under section 4971(a) or (b) for a taxable
year with respect to a plan in critical status
for the plan year that ends with or within
the taxable year.
Section 432 applies to plan years begin-
ning on or after January 1, 2008. Section
4971(g) applies to tax years that include
the last day of any plan year beginning on
or after January 1, 2008.
2. Section 204 of WRERA
Section 204(a) of WRERA provides
that a multiemployer plan sponsor may
elect, notwithstanding the actuarial cer-
tification of the plan’s section 432 status
under section 432(b)(3) of the Code for the
plan year for which the election is made
(“election year”), to temporarily freeze
the plan’s section 432 status so that it is
the same as the plan’s section 432 status
for the plan year immediately prior to the
election year (“prior year”). Specifically,
section 204(a)(1) of WRERA provides
that a multiemployer plan sponsor may
elect that the plan’s section 432 status
forthefirstplanyearbeginningonor
after October 1, 2008 and not later than
September 30, 2009 be the same as the
plan’s section 432 status for the prior year.
If section 432 of the Code did not apply
to the plan for the prior year (because the
prior year began before January 1, 2008),
the actuary must, in order to apply the
election, make a certification of the plan’s
section 432 status for the prior year in the
same manner as if section 432 had applied
for the prior year.
Section 204(a)(2) of WRERA provides
that the sponsor of a multiemployer plan
that was in endangered or critical status
for the prior year, and for which an elec-
tion is made under section 204, is not re-
quired to update its funding improvement
plan, rehabilitation plan, or schedules as
otherwise required under section 432(c)(6)
or 432(e)(3)(B) of the Code until the plan
year following the election year.
Section 204(b) of WRERA provides a
special rule for multiemployer plans that
would, but for the election to freeze the
plan’s section 432 status, be in critical sta-
tus for the election year. In particular, if
the plan has, without regard to the elec-
tion, been certified by the plan actuary to
be in critical status for the election year,
then the plan is treated as being in critical
status for that year for purposes of apply-
ing the excise tax exception under section
4971(g)(1)(A) of the Code.
Section 204(c)(1) of WRERA provides
that an election under section 204 must be
made at the time and in the manner that the
Secretary of the Treasury or the Secretary’s
delegate may prescribe and, once made,
may be revoked only with the consent of
the Secretary. If the election is made be-
fore the date the annual certification of the
plan’s section 432 status is submitted to
the Secretary, then the election must be in-
cluded with the certification that is submit-
ted to the Secretary. If the election is made
after the date the certification is submitted,
then the election must be submitted to the
Secretary not later than 30 days after the
date of the election.
Section 204(c)(2) of WRERA provides
special notice rules that apply when an
election under section 204 is made to
freeze a plan’s section 432 status and that
modify the otherwise applicable notice
requirements under section 432(b)(3)(D)
of the Code. If a plan is in neither endan-
gered nor critical status as a result of the
election, the plan sponsor must provide the
notice described in section 204(c)(2)(A)
of WRERA. This notice applies in lieu of
the notice that is otherwise required under
section 432(b)(3)(D) of the Code in the
case of a plan that has been certified to be
in endangered or critical status. The notice
described in section 204(c)(2)(A)(ii) of
WRERA must be provided to the partic-
ipants and beneficiaries, the bargaining
parties, the Pension Benefit Guaranty Cor-
poration, and the Secretary of Labor and
must contain such information about the
election as the Secretary of the Treasury
(in consultation with the Secretary of La-
bor) may require. Pursuant to section
204(c)(2)(A)(ii)(I) of WRERA, if the elec-
tion is made before the date the annual cer-
tification of the plan’s section 432 status is
submitted to the Secretary of the Treasury,
then notice must be provided not later than
30 days after the date of the certification.
Under section 204(c)(2)(A)(ii)(II), if the
election is made after the date the annual
certification is submitted to the Secretary,
then notice must be provided not later than
30 days after the date of the election.
Under section 204(c)(2)(B) of
WRERA, if the plan is certified to be in
critical status for the election year but
is in endangered status by reason of an
election made under section 204, the notice
that must be provided is the notice that
would have been provided under section
432(b)(3)(D) of the Code if the plan had
been certified to be in endangered status
for the election year.
3. Section 205 of WRERA
Section 205 of WRERA provides for
an elective extension of the funding im-
provement period or rehabilitation period
for multiemployer plans in endangered or
critical status for a plan year beginning in
2008 or 2009.
If the sponsor of a multiemployer plan
that is in endangered or critical status for a
plan year beginning in 2008 or 2009 (de-
termined after application of section 204
of WRERA) makes an election under sec-
tion 205 of WRERA, then, for purposes of
2009–16 I.R.B.857April 20, 2009

section 432 of the Code, the plan’s 10-year
funding improvement period or rehabilita-
tion period, whichever is applicable, is ex-
tendedto13years.Similarly,ifthespon-
sor of a multiemployer plan that is in se-
riously endangered status for a plan year
beginning in 2008 or 2009 (determined af-
ter application of section 204 of WRERA)
and that is eligible for a 15-year funding
improvement period makes an election un-
der section 205 of WRERA, then, for pur-
poses of section 432 of the Code, the plan’s
funding improvement period is extended
to 18 years. An election under section
205 of WRERA must be made at the time,
and in the manner and form, as the Secre-
tary of the Treasury or the Secretary’s del-
egate may prescribe (in consultation with
the Secretary of Labor).
III. EFFECT OF ELECTION
A multiemployer plan for which an
election under section 204 of WRERA has
been made must be operated in accordance
with its section 432 status, as determined
pursuant to the election, rather than the
section 432 status to which the actuary
certified for the election year. Thus, for
example, the sponsorofamultiemployer
plan that would have been in critical status
for the election year, but for an election
under section 204 to freeze the plan’s sec-
tion 432 status as endangered, could not
assess employer surcharges under section
432(e)(7) of the Code, reduce adjustable
benefits under section 432(e)(8), or re-
strict lump sum distributions under section
432(f)(2). Such a multiemployer plan
would continue to beoperated in accor-
dance with its funding improvement plan
(rather than a rehabilitation plan), but the
funding improvement plan would not be
required to be updated for the election
year. If the plan’s sponsor had not adopted
a funding improvement plan based on
its endangered status for the prior year
(because section 432 did not apply to the
plan for the prior year), then the sponsor
would need to adopt a funding improve-
ment plan in the election year (the first
year for which section 432 applies to the
multiemployer plan). However, pursuant
to section 204(b) of WRERA, the excise
tax exception under section 4971(g)(1)(A)
of the Code for a plan in critical status
would be available with respect to any ac-
cumulated funding deficiency of the plan
for the election year, even though the plan,
by reason of the election under section
204 of WRERA, is not treated as being in
critical status.
A plan sponsor that wishes to take ad-
vantage of the rule under section 204(a)(2),
under which no updates to a funding im-
provement plan or rehabilitation plan are
required until the year following the elec-
tion year, must make the election under
section 204 even if the plan’s section 432
status for the election year would be the
same regardless of whether the election is
made.
A plan sponsor should take into account
the interaction between sections 204 and
205 of WRERA in choosing whether to
elect the relief provided under either sec-
tion. For example, a plan sponsor may
elect under section 204 for the plan year
beginning in 2009 to freeze the plan’s sec-
tion 432 status as neither endangered nor
critical (rather than operate in accordance
with an actuarial certification of endan-
gered status or critical status for that year).
If, however, the plan is subsequently certi-
fied as being in endangered or critical sta-
tus for the plan year beginning in 2010,
then the section 205 election to extend the
funding improvement period or rehabilita-
tion period to 13 years (or 18 years, if ap-
plicable) would no longer be available be-
cause the initial endangered year or initial
critical year for the plan (the year when
the plan first enters endangered or critical
status) would not be until 2010 (a year as
ofwhichnoelectionundersection205is
available). On the other hand, if the plan
sponsor does not make an election under
section 204 for a year so that it operates in
accordance with the plan’s endangered or
critical status as certified for the year, and
elects for that year to extend the funding
improvement period or rehabilitation pe-
riod under section 205, then the funding
improvement period or rehabilitation pe-
riod for the plan as determined in accor-
dance with the 2009 election would con-
tinue to be 13 years (or 18 years, if ap-
plicable) for as long as the funding im-
provement plan or rehabilitation plan re-
mains in effect. The same result would ap-
ply if the plan sponsor makes an election
under section 204 where the plan’s sec-
tion 432 status is unchanged for the elec-
tion year, in which case no update to the
funding improvement plan or rehabilita-
tion plan would be required for the election
year.
As another example, a plan sponsor
may elect for the plan year beginning in
2009 both to freeze the plan’s section 432
status as endangered, as permitted under
section 204 (rather than operate in accor-
dance with an actuarial certification of
critical status for that year), and to extend
the funding improvement period to 13
years as permitted under section 205. If,
however, the plan is subsequently certified
as being in critical status for the plan year
beginning in 2010, then the section 205
election to extend the funding improve-
ment period to 13 years (or 18 years, if
applicable) would nolonger be applicable
because the funding improvement plan
would have to be replaced by a rehabili-
tation plan. Moreover, the sponsor could
not then elect to extend the rehabilitation
period to 13 years because the initial crit-
ical year for the plan would not be until
2010 (a year as of which no election under
section 205 is available).
IV. ELECTION PROCEDURES
1. Timing of elections
Pursuant to the authority granted to the
Secretary and his delegate under section
204(c)(1)(A) of WRERA to prescribe the
time and manner for making an election, an
election under section 204 must be made
by the later of April 30, 2009 and the date
that is 30 days after the due date of the an-
nual certification of section 432 status for
the election year. For example, the sponsor
of a plan with a plan year beginning July 1
whose actuary certifies on September 23,
2009 as to the plan’s status for the plan year
beginning July 1, 2009, and who wishes to
make an election under section 204, must
do so by October 28, 2009 (the 30th day
after September 28, 2009, the due date of
the certification of section 432 status for
the election year). As another example, the
sponsor of a plan with a plan year begin-
ning October 1, 2008 who wishes to make
an election under section 204 must do so
by April 30, 2009 (which is the later of the
two dates for that plan).
Pursuant to the authority granted to the
Secretary and his delegate under section
205(b)(1) to prescribe the time and man-
ner for making an election under section
205, such an election must be made by the
April 20, 20098582009–16 I.R.B.

last day of the plan year as of which the
election is being made, or, if earlier, by the
date a funding improvement plan, rehabil-
itation plan, or update is adopted that takes
into account the election. However, in no
event is the election required to be made
earlier than April 30, 2009.
2. Submission of election to the Service
The sponsor must submit any election
under section 204 or 205 to the Internal
Revenue Service. If the election is made
on or before the date the annual certifica-
tion of section 432 status for the election
year is submitted to the Secretary, the elec-
tion must be included with the certifica-
tion. If the election is made after the date
the annual certification of section 432 sta-
tus for the election year is submitted to the
Secretary, the election must be submitted
by the date that is 30 days following the
date of the election.
Elections should be sent to the Em-
ployee Plans Compliance Unit (EPCU),
which is the same office as to which
annual certificationsare submitted. In-
structions for filing WRERA elections
electronically with the EPCU may be
found athttp://www.irs.gov/retirement/ar-
ticle/0,,id=171015,00.html.Alternatively,
WRERA elections may be mailed to the
following address:
Internal Revenue Service
EPCU
Group 7602
SE:TEGE:EP
Room 1700 — 17th Floor
230 Dearborn Street
Chicago, IL 60604
3. Content of election
An election under section 204 or 205
of WRERA must be signed by an autho-
rized trustee who is a current member of
the board of trustees that is the plan spon-
sor and contain each of the following items
of information, as applicable:
a. Name, address, telephone number,
and EIN of the plan sponsor.
b. Name, plan EIN (if different from
sponsor EIN), and plan number of the
plan for which the election is being
made.
c. A statement that the election is in-
tended to be an election under section
204, section 205, or both sections 204
and 205.
d. If the election is under section 204 (or
under both sections 204 and 205):
i. A statement of the plan year for
which the election (or elections)
is being made.
ii. The section 432 status of the plan
for the election year taking the
section 204 election into account
(thisisthesameasthesection
432 status of the plan for the prior
year).
iii. If section 432 of the Code did
not apply to the plan for the prior
year (because the prior year be-
gan before January 1, 2008), an
attachment of an actuarial certifi-
cation of what would have been
the plan’s section 432 status for
the prior year had section 432 ap-
plied to the plan for the prior year.
e. If the election is under section 205 of
WRERA, and no election under sec-
tion 204 of WRERA applies for the
year, a statement of the plan year as of
which the section 205 election is be-
ing made.
V. SPECIAL NOTICE
REQUIREMENT FOR PLANS
IN NEITHER ENDANGERED NOR
CRITICAL STATUS AS A RESULT
OF FREEZE ELECTION
1. General notice requirements
As described above, if the plan spon-
sor elects to freeze the plan’s section 432
status for the election year as neither en-
dangered nor critical, despite an actuarial
certification of endangered or critical sta-
tus for the election year, then the sponsor
must provide a special notice. The notice
must be provided to participants and ben-
eficiaries, the bargaining parties, the Pen-
sion Benefit Guaranty Corporation, and
the Secretary of Labor.
As described in section 204(c)(2)(A)(ii)
ofWRERA,thenoticemustbeprovided
no later than 30 days after the later of,
1) the actuarial certification for the elec-
tion year, or 2) the date of the election.
Thenoticemustbeprovidedeitherinthe
form of a paper document or in an elec-
tronic form that satisfies the requirements
of § 1.401(a)–21 of the Treasury regula-
tions.
2. Content of notice
The notice provided pursuant to section
204(c)(2)(A)(ii) of WRERA must be writ-
ten in a manner calculated to be understood
by the average employee to whom the no-
tice applies, and must contain each of the
following items of information, as applica-
ble:
a. The name of the plan, the EIN of the
plan sponsor, the EIN of the plan, and
the plan number.
b. That an election has been made un-
der section 204 of WRERA to treat the
plan as being neither in endangered
nor critical status for the plan year be-
ginning on[fill in the date that is the
first day of the election year].
c. The plan’s endangered or critical sta-
tus for the election year as certified by
the plan’s actuary (that is, the plan’s
status if no section 204 election were
made).
d. An explanation that: (i) the election
applies only for the current plan year;
and (ii) if the plan is certified to be
in endangered or critical status for the
year following the election year, the
plan sponsor will provide notice of the
plan’s status (i.e., endangered or crit-
ical) for that following year and steps
will have to be taken to improve the
plan’s funded situation, which steps
may include increases in contributions
and reductions in future benefit accru-
als.
e. Solely in the case of a plan certified
to be in critical status for the election
year, an explanation that, if the plan is
certified to be in critical status for the
year following the election year, the
steps that will have to be taken to im-
prove the plan’s funded situation will
include a surcharge on employer con-
tributions and the suspension of the
payment of lump sums and similar ac-
celerated distributions for individuals
who commence receiving benefits af-
ter notice is provided of the plan’s crit-
ical status, and may include amend-
ments to reduce early retirement ben-
efits or other adjustable benefits for
such individuals.
f. Information on how to obtain addi-
tional information about the election
from the plan administrator, includ-
2009–16 I.R.B.859April 20, 2009

ing a telephone number, address, and
email address (if appropriate).
3. Submission of notice to PBGC and
DOL
A notice provided pursuant to section
204(c)(2)(A)(ii) of WRERA must be sub-
mitted to the Pension Benefit Guaranty
Corporation and the Department of Labor.
The notice should be sent to the following
addresses:
Pension Benefit Guaranty Corporation
Multiemployer Program Division
1200 K Street, N.W., Suite 930
Washington, D.C. 20005
U. S. Department of Labor
Employee Benefits Security
Administration
Public Disclosure Room, N–1513
200 Constitution Ave., N.W.
Washington, DC 20210
Alternatively, the notice may
be submitted electronically to
multiemployerprogram@pbgc.govand to
wreranotice@dol.gov.
WRERA notices received by the De-
partment of Labor will be available for
public inspection at the Public Disclosure
Room, and accessible electronically at
http://www.dol.gov/ebsa.
VI. EFFECT OF WRERA ELECTION
ON FORM 5500, SCHEDULE MB
AND SCHEDULE R FILINGS
A Form 5500,Annual Report/Return of
Employee Benefit Plan,thatisfiledfor
a multiemployer plan must be accompa-
nied by Schedule MB, Multiemployer De-
fined Benefit Plan and Certain Money Pur-
chase Plan ActuarialInformation, and by
Schedule R, Retirement Plan Information.
Schedule MB requires the actuary for a
multiemployer plan to report the plan’s
section 432 status. The instructions in-
dicate that Schedule MB should be com-
pleted based on the actuary’s certification
of the status, and that the actuary should
include supporting documentation for the
certification. If a multiemployer plan is
in endangered or critical status, the in-
structions indicate that the plan sponsor
must submit with Schedule R a summary
of the multiemployer plan’s funding im-
provement or rehabilitation plan, or an up-
date of the plan, as applicable.
As described above, an election under
section 204 of WRERA affects whether
a funding improvement or rehabilitation
plan must be adopted or updated. Sched-
ules MB and R and the related instruc-
tions for plan years beginning in 2008 have
already been issued and do not address
the effect of an election under section 204
of WRERA. However, such an election
can be made with respect to a plan year
beginning between October 1, 2008, and
December 31, 2008. Therefore, the in-
structions for the 2008 Schedule MB and
Schedule R must be revised to address the
reporting for a multiemployer plan with a
plan year beginning between October 1,
2008, and December 31, 2008, for which
an election is made under section 204 of
WRERA.
Under the revised instructions:
•The section 432 status of the plan that
is reported on Schedule MB is the sta-
tus of the multiemployer plan as certi-
fied by the plan actuary without taking
into account an election under section
204 of WRERA.
•The plan sponsor must include an at-
tachment to the Schedule R which pro-
vides information about the election
under section 204 of WRERA, and its
effect on the plan’s section 432 status
and on the requirement to adopt a fund-
ing improvement plan or rehabilitation
plan.
VII. PAPERWORK REDUCTION
ACT
The collections of information con-
tained in this notice have been approved
by the Office of Management and Budget
in accordance with the Paperwork Reduc-
tion Act of 1995 (44 U.S.C. 3507(c)).
An agency may not conduct or sponsor,
and a person is not required to respond
to, a collection of information unless the
collection of information displays a valid
OMB control number. The OMB approval
number for this notice is 1545–2141.
The collections of information in this
notice are in sections IV, V, and VI. The
informationisrequiredinordertoim-
plement an election under sections 204
and 205 or WRERA and to provide the
required notice of the election. The col-
lections of information are mandatory for
those plan sponsors making an election.
The likely respondents are sponsors of
multiemployer defined benefit retirement
plans.
We estimate the total number of respon-
dents to be 1,600 for 2009.
We estimate it will take 1 hour to com-
ply.
Estimates of the annualized cost to re-
spondents for the hour burdens shown are
not available at this time.
Books or records relating to a collection
of information must be retained as long
as their contents may become material in
the administration of any internal revenue
law. Generally, tax returns and tax return
information are confidential, as required
by 26 U.S.C. 6103.
Drafting Information
The principal author of this notice is
Diane S. Bloom of the Employee Plans,
Tax Exempt and Government Entities
Division. For further information re-
garding this notice,please contact the
Employee Plans taxpayer assistance an-
swering service at 1–877–829–5500 (a
toll-free number) or e-mail Ms. Bloom at
RetirementPlanQuestions@irs.gov.
26 CFR 601.602: Tax forms and instructions.
(Also: Part I, §§ 24, 25A, 32, 132, and 179.)
Rev. Proc. 2009–21
SECTION 1. PURPOSE
This revenue procedure modifies and
supersedes section 3.04 of Rev. Proc.
2007–66, 2007–45 I.R.B. 970, to reflect a
statutory amendment by the Tax Extenders
and Alternative Minimum Tax Relief Act
of 2008, Div. C of Pub. L. No. 110–343,
122 Stat. 3765 (2008) (TEAMTRA).
This revenue procedure also modifies and
supersedes sections 3.04, 3.05, 3.06(1),
3.12, and 3.20 of Rev. Proc. 2008–66,
2008–45 I.R.B. 1107, to reflect statutory
amendments by the American Recovery
and Reinvestment Tax Act of 2009, Tit. I
of Div. B of Pub. L. No. 111–5, 123 Stat.
115 (2009) (ARRTA).
SECTION 2. BACKGROUND
.01 Section 501(a) of TEAMTRA
added § 24(d)(4) of the Code to provide
April 20, 20098602009–16 I.R.B.

a temporary increase in the refundable
portion of the child tax credit for tax-
able years beginning in 2008. Under
§ 24(d)(1)(B)(i), the amount that may be
refundable is determined using a value that
is adjusted annually for inflation. For tax-
able years beginning in 2008, § 24(d)(4)
provided that $8,500 is the value used in
§ 24(d)(1)(B)(i) instead of the inflation
adjusted value.
.02 Section 1003 of ARRTA amended
§ 24(d)(4) of the Code to provide a tem-
porary increase in the refundable por-
tion of the child tax credit for taxable
years beginning in 2009 or 2010. Under
§ 24(d)(1)(B)(i), the amount that may be
refundable is determined using a value
that is adjusted annually for inflation. For
taxable years beginning in 2009 or 2010,
§ 24(d)(4) provides that $3,000 is the
value used in § 24(d)(1)(B)(i) instead of
the inflation adjusted value.
.03 Section 1004 of ARRTA added
new § 25A(i) to the Code (the Ameri-
can Opportunity Tax Credit) to provide
temporary increases in the amount of the
Hope Scholarship Credit and the threshold
phaseout amounts for the credit. Sec-
tion 25A(i)(1) provides that, for taxable
years beginning in 2009 or 2010, the Hope
Scholarship Credit is equal to 100 percent
of the amount of qualified tuition and re-
lated expenses not in excess of $2,000 plus
25 percent of those expenses in excess
of $2,000, but not in excess of $4,000.
Section 25A(i)(4) provides that, for tax-
able years beginning in 2009 or 2010, the
amount of the Hope Scholarship Credit
begins to phase out for taxpayers whose
modified adjusted gross income exceeds
$80,000 ($160,000 for married taxpayers
filing a joint return). The credit is com-
pletely phased out at $90,000 ($180,000
for married taxpayers filing a joint return).
.04 Section 1002 of ARRTA added
§ 32(b)(3) to the Code to provide a
temporary increase in the earned in-
come credit for certain taxpayers. Under
§ 32(b)(3)(A), for taxable years beginning
in 2009 or 2010, the maximum amount
of the earned income credit for taxpayers
with three or more qualifying children is
45 percent of the earned income amount
for the taxable year. For taxable years
beginning in 2009, under § 32(b)(3)(B)(i)
the amount added to the threshold phase-
out amounts and the completed phaseout
amounts for married taxpayers filing a
joint return is $5,000. For taxable years
beginning in 2010, the $5,000 amount
under § 32(b)(3)(B)(i) is adjusted for in-
flation.
.05 Section 1151 of ARRTA amended
§ 132(f)(2) of the Code to provide a tem-
porary increase in the amount excludable
from gross income for certain employer
provided transportation fringe benefits.
For months beginning after February 17,
2009, and before January 1, 2011, the
monthly limitation under § 132(f)(2)(A)
for transportation in a commuter highway
vehicle and any transit pass is the same as
the amount in effect under § 132(f)(2)(B)
for qualified parking, which is $230 per
month for 2009.
.06 Section 1202 of ARRTA amended
§ 179(b)(7) of the Code to extend the
2008 dollar limitations under §§ 179(b)(1)
and (2) to 2009 taxable years. For tax-
able years beginning in 2009, § 179(b)(1)
provides that a taxpayer may elect to ex-
pense up to $250,000 of § 179 property
placed in service during that year. Un-
der § 179(b)(2), the $250,000 amount in
§ 179(b)(1) is reduced by the amount by
which the cost of § 179 property placed in
service during that year exceeds $800,000.
SECTION 3. MODIFICATION OF REV.
PROC. 2007–66
To reflect the statutory amendment
made by TEAMTRA to § 24, section 3.04
of Rev. Proc. 2007–66 is modified to read
as follows:
.04Child Tax Credit. For taxable
years beginning in 2008, the value used in
§ 24(d)(1)(B)(i) to determine the amount
of credit under § 24 that may be refundable
is $8,500.
SECTION 4. MODIFICATION OF REV.
PROC. 2008–66
To reflect the statutory amendments
made by ARRTA to §§ 24, 25A, 32, 132,
and 179, sections 3.04, 3.05, 3.06(1), 3.12,
and 3.20 of Rev. Proc. 2008–66 are modi-
fied to read as follows:
.04Child Tax Credit.For taxable years
beginning in 2009, the value used in
§ 24(d)(1)(B)(i) to determine the amount
of credit under § 24 that may be refundable
is $3,000.
.05Hope and Lifetime Learning Cred-
its.
(1) For taxable years beginning in
2009, the Hope Scholarship Credit under
§ 25A(b)(1) is an amount equal to 100
percent of qualified tuition and related
expenses not in excess of $2,000 plus
25 percent of those expenses in excess
of $2,000, but not in excess of $4,000.
Accordingly, the maximum Hope Schol-
arship Credit allowable under § 25A(b)(1)
for taxable years beginning in 2009 is
$2,500.
(2) For taxable years beginning in 2009,
a taxpayer’s modified adjusted gross in-
come in excess of $80,000 ($160,000 for
a joint return) is used to determine the
reduction under § 25A(d)(2)(A)(ii) in the
amount of the Hope Scholarship Credit
otherwise allowable under § 25A(a)(1).
For taxable years beginning in 2009, a tax-
payer’s modified adjusted gross income
in excess of $50,000 ($100,000 for a joint
return) is used to determine the reduction
under § 25A(d)(2)(A)(ii) in the amount
of the Lifetime Learning Credit otherwise
allowable under § 25A(a)(2).
.06Earned Income Credit.
(1)In general. For taxable years be-
ginning in 2009, the following amounts
are used to determine the earned income
credit under § 32(b). The “earned in-
come amount” is the amount of earned
income at or above which the maximum
amount of the earned income credit is al-
lowed. The “threshold phaseout amount”
is the amount of adjusted gross income
(or, if greater, earned income) above which
the maximum amount of the credit begins
to phase out. The “completed phaseout
amount” is the amount of adjusted gross
income (or, if greater, earned income) at
or above which no credit is allowed. The
threshold phaseout amounts and the com-
pleted phaseout amounts shown in the ta-
ble below for married taxpayers filing a
joint return include the $5,000 increase
provided in § 32(b)(3)(B)(i) for taxable
years beginning in 2009.
2009–16 I.R.B.861April 20, 2009

Number of Qualifying Children
ItemOneTwoThree or MoreNone
Earned Income Amount
$ 8,950$12,570$12,570$ 5,970
Maximum Amount of
Credit
$ 3,043$ 5,028$ 5,657$ 457
Threshold Phaseout
Amount (Single,
Surviving Spouse,
or Head of Household)
$16,420$16,420$16,420$ 7,470
Completed Phaseout
Amount (Single,
Surviving Spouse,
or Head of Household)
$35,463$40,295$43,279$13,440
Threshold Phaseout
Amount (Married Filing
Jointly)
$21,420$21,420$21,420$21,420
Completed Phaseout
Amount (Married Filing
Jointly)
$40,463$45,295$48,279$18,440
The instructions for the Form 1040 se-
ries provide tables showing the amount of
the earned income credit for each type of
taxpayer.
.12Qualified Transportation Fringe.
For taxable years beginning in 2009, the
monthly limitation under § 132(f)(2)(A)
for months beginning after February 17,
2009, regarding the aggregate fringe bene-
fit exclusion amount for transportation in a
commuter highway vehicle and any transit
pass, and under § 132(f)(2)(B), regarding
the fringe benefit exclusion amount for
qualified parking, is $230. For January
and February 2009, the monthly limita-
tion under § 132(f)(2)(A) is $120 and the
monthly limitation under § 132(f)(2)(B) is
$230.
.20Election to Expense Certain Depre-
ciable Assets. For taxable years beginning
in 2009, under § 179(b)(1) the aggregate
cost of any § 179 property a taxpayer may
elect to treat as an expense cannot exceed
$250,000. Under § 179(b)(2) the $250,000
limitation is reduced (but not below zero)
by the amount by which the cost of § 179
property placed in service during the 2009
taxable year exceeds $800,000.
SECTION 5. EFFECT ON OTHER
DOCUMENTS
Section 3.04 of Rev. Proc. 2007–66
and sections 3.04, 3.05, 3.06(1), 3.12 and
3.20 of Rev. Proc. 2008–66 are modified
and superseded.
SECTION 6. E
FFECTIVE DATE
Section 3.04 of Rev. Proc. 2007–66
is modified and superseded effective for
taxable years beginning in 2008. Sections
3.04, 3.05., 3.06(1), 3.12, and 3.20 of Rev.
Proc. 2008–66 are modified and super-
seded effective for taxable years beginning
in 2009.
SECTION 7. DRAFTING
INFORMATION
The principal author of this revenue
procedure is Christina M. Glendening of
the Office of Associate Chief Counsel
(Income Tax & Accounting). For further
information regarding this revenue pro-
cedure, contact Ms. Glendening at (202)
622–4920 (not a toll-free call).
26 CFR 601.105: Examination of returns and claims
for refund, credit, or abatement; determination of
correct tax liability.
(Also: Part I, § 911, 1.911–1.)
Rev. Proc. 2009–22
SECTION 1. PURPOSE
.01 This revenue procedure provides
information to any individual who failed
to meet the eligibility requirements of
§ 911(d)(1) of the Internal Revenue Code
because adverse conditions in a foreign
country precluded the individual from
meeting those requirements for taxable
year 2008.
.02 This revenue procedure lists the
countries for which the eligibility re-
quirements of § 911(d)(1) are waived for
taxable year 2008.
SECTION 2. BACKGROUND
.01 Section 911(a) of the Code allows
a “qualified individual,” as defined in
§ 911(d)(1), to exclude foreign earned
income and housing cost amounts from
gross income. Section 911(c)(4) of the
Code allows a qualified individual to
deduct housing cost amounts from gross
income.
.02 Section 911(d)(1) of the Code de-
fines the term “qualified individual” as an
individual whose tax home is in a foreign
country and who is (A) a citizen of the
United States and establishes to the satis-
faction of the Secretary of the Treasury that
April 20, 20098622009–16 I.R.B.

the individual has been abona fideresident
of a foreign country or countries for an un-
interrupted period that includes an entire
taxable year, or (B) a citizen or resident of
the United States who, during any period
of 12 consecutive months, is present in a
foreign country or countries during at least
330 full days.
.03 Section 911(d)(4) of the Code pro-
vides an exception to the eligibility re-
quirements of § 911(d)(1). An individ-
ual will be treated as a qualified individ-
ual with respect to a period in which the
individual was abona fideresident of, or
was present in, a foreign country, if the in-
dividual left the country during a period
for which the Secretary of the Treasury, af-
ter consultation with the Secretary of State,
determines that individuals were required
to leave because of war, civil unrest, or
similar adverse conditions that precluded
the normal conduct of business. An in-
dividual must establish that but for those
conditions the individual could reasonably
have been expected to meet the eligibility
requirements.
.04 For 2008, the Secretary of the Trea-
sury, in consultation with the Secretary of
State, has determined that war, civil unrest,
or similar adverse conditions precluded the
normal conduct of business in the follow-
ing countries beginning on the specified
date:
Date of Departure
CountryOn or after
ChadFebruary 3, 2008
SerbiaFebruary 22, 2008
YemenApril 7, 2008
.05 Accordingly, for purposes of § 911
of the Code, an individual who left one
of the foregoing countries on or after the
specified departure date during 2008 shall
be treated as a qualified individual with re-
spect to the period during which that in-
dividual was present in, or was abona
fideresident of, such foreign country, if
the individual establishes a reasonable ex-
pectation of meeting the requirements of
§ 911(d) but for those conditions.
.06 To qualify for relief under
§ 911(d)(4) of the Code, an individual
must have established residency, or have
been physically present, in the foreign
country on or prior to the date that the
Secretary of the Treasury determines that
individuals were required to leave the for-
eign country. Individuals who establish
residency, or are first physically present, in
the foreign country after the date that the
Secretary prescribes shall not be treated as
qualified individuals under § 911(d)(4) of
the Code. For example, individuals who
are first physically present or establish
residency in Chad after February 3, 2008,
are not eligible to qualify for the exception
provided in § 911(d)(4) of the Code for
taxable year 2008.
SECTION 3. INQUIRIES
A taxpayer who needs assistance on
how to claim this exclusion, or on how to
file an amended return, should contact a lo-
cal IRS Office or, for a taxpayer residing
or traveling outside the United States, the
nearest overseas IRS office.
SECTION 4. DRAFTING
INFORMATION
The principal author of this revenue
procedureisKateY.HwaoftheOfficeof
Associate Chief Counsel (International).
For further information regarding this rev-
enue procedure, contact Ms. Hwa at (202)
622–3840 (not a toll-free call).
2009–16 I.R.B.863April 20, 2009

Definition of Terms
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the ef-
fect:
Amplifieddescribes a situation where
no change is being made in a prior pub-
lished position, but the prior position is be-
ingextendedtoapplytoavariationofthe
fact situation set forth therein. Thus, if
an earlier ruling held that a principle ap-
plied to A, and the new ruling holds that the
same principle also applies to B, the earlier
ruling is amplified. (Compare withmodi-
fied,below).
Clarifiedis used in those instances
where the language in a prior ruling is be-
ing made clear because the language has
caused, or may cause, some confusion.
It is not used where a position in a prior
ruling is being changed.
Distinguisheddescribes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.
Modifiedis used where the substance
of a previously published position is being
changed. Thus, if a prior ruling held that a
principle applied to A but not to B, and the
new ruling holds that it applies to both A
and B, the prior ruling is modified because
it corrects a published position. (Compare
withamplifiedandclarified, above).
Obsoleteddescribes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transac-
tions. This term is most commonly used in
a ruling that lists previously published rul-
ings that are obsoleted because of changes
in laws or regulations. A ruling may also
be obsoleted because the substance has
been included in regulations subsequently
adopted.
Revokeddescribes situations where the
position in the previously published ruling
is not correct and the correct position is
beingstatedinanewruling.
Supersededdescribes a situation where
the new ruling does nothing more than re-
state the substance and situation of a previ-
ously published ruling (or rulings). Thus,
the term is used to republish under the
1986 Code and regulations the same po-
sition published under the 1939 Code and
regulations. The term is also used when
it is desired to republish in a single rul-
ing a series of situations, names, etc., that
were previously published over a period of
time in separate rulings. If the new rul-
ing does more than restate the substance
of a prior ruling, a combination of terms
is used. For example,modifiedandsu-
persededdescribes a situation where the
substance of a previously published ruling
is being changed in part and is continued
without change in part and it is desired to
restate the valid portion of the previously
published ruling in a new ruling that is self
contained. In this case, the previously pub-
lished ruling is first modified and then, as
modified, is superseded.
Supplementedis used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names in
subsequent rulings. After the original rul-
ing has been supplemented several times, a
new ruling may be published that includes
the list in the original ruling and the ad-
ditions, and supersedes all prior rulings in
the series.
Suspendedis used in rare situations to
show that the previous published rulings
will not be applied pending some future
action such as the issuance of new or
amended regulations, the outcome of cases
in litigation, or the outcome of a Service
study.
Abbreviations
The fol
lowing abbreviations in current use
and for
merly used will appear in material
publis
hedintheBulletin.
A—Individual.
Acq.—A
cquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank
.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cu
mulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Coo
perative.
Ct.D.—Court Decision.
CY—County.
D—Decede
nt.
DC—Dummy Corporation.
DE—Donee.
Del. Order
—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Emp
loyer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduc
iary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Fo
reign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Fed
eral Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grante
e.
GP—General Partner.
GR—Grantor.
IC—Insura
nce Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited
Partner.
LR—Lessor.
M—Minor.
Nonacq.—No
nacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Persona
l Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Pa
rtnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Re
al Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsi
diary.
S.P.R.—Statement of Procedural Rules.
Stat.—Statutes at Large.
T—Target
Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Trans
feree.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpay
er.
TR—Trust.
TT—Trustee.
U.S.C.—Uni
ted States Code.
X—Corporation.
Y—Corporation.
Z—Corporat
ion.
April 20, 2009i2009–16 I.R.B.

Numerical Finding List
1
Bulletins 2009–1 through 2009–16
Announcements:
2009-1, 2009-1 I.R.B.242
2009-2, 2009-5 I.R.B.424
2009-3, 2009-6 I.R.B.459
2009-4, 2009-8 I.R.B.597
2009-5, 2009-8 I.R.B.569
2009-6, 2009-9 I.R.B.643
2009-7, 2009-10 I.R.B.663
2009-8, 2009-8 I.R.B.598
2009-9, 2009-9 I.R.B.643
2009-10, 2009-9 I.R.B.644
2009-11, 2009-10 I.R.B.663
2009-12, 2009-11 I.R.B.686
2009-13, 2009-11 I.R.B.686
2009-14, 2009-11 I.R.B.687
2009-15, 2009-11 I.R.B.687
2009-16, 2009-11 I.R.B.691
2009-17, 2009-12 I.R.B.714
2009-18, 2009-12 I.R.B.714
2009-19, 2009-12 I.R.B.715
2009-20, 2009-12 I.R.B.716
2009-21, 2009-13 I.R.B.730
2009-22, 2009-13 I.R.B.731
2009-23, 2009-13 I.R.B.731
2009-24, 2009-13 I.R.B.732
2009-25, 2009-14 I.R.B.755
2009-26, 2009-14 I.R.B.755
2009-27, 2009-14 I.R.B.756
2009-28, 2009-15 I.R.B.760
2009-29, 2009-14 I.R.B.757
2009-30, 2009-15 I.R.B.794
2009-31, 2009-15 I.R.B.798
2009-32, 2009-15 I.R.B.799
2009-33, 2009-15 I.R.B.799
Notices:
2009-1, 2009-2 I.R.B.250
2009-2, 2009-4 I.R.B.344
2009-3, 2009-2 I.R.B.250
2009-4, 2009-2 I.R.B.251
2009-5, 2009-3 I.R.B.309
2009-6, 2009-3 I.R.B.311
2009-7, 2009-3 I.R.B.312
2009-8, 2009-4 I.R.B.347
2009-9, 2009-5 I.R.B.419
2009-10, 2009-5 I.R.B.419
2009-11, 2009-5 I.R.B.420
2009-12, 2009-6 I.R.B.446
2009-13, 2009-6 I.R.B.447
2009-14, 2009-7 I.R.B.516
2009-15, 2009-6 I.R.B.449
2009-16, 2009-8 I.R.B.572
Notices— Continued:
2009-17, 2009-8 I.R.B.575
2009-18, 2009-10 I.R.B.648
2009-19, 2009-10 I.R.B.660
2009-20, 2009-12 I.R.B.711
2009-21, 2009-13 I.R.B.724
2009-22, 2009-14 I.R.B.741
2009-23, 2009-16 I.R.B.802
2009-24, 2009-16 I.R.B.817
2009-25, 2009-15 I.R.B.758
2009-26, 2009-16 I.R.B.833
2009-27, 2009-16 I.R.B.838
2009-29, 2009-16 I.R.B.849
2009-30, 2009-16 I.R.B.852
2009-31, 2009-16 I.R.B.856
Proposed Regulations:
REG-144615-02, 2009-7 I.R.B.561
REG-148568-04, 2009-5 I.R.B.421
REG-160872-04, 2009-4 I.R.B.358
REG-158747-06, 2009-4 I.R.B.362
REG-116699-07, 2009-13 I.R.B.727
REG-138326-07, 2009-9 I.R.B.638
REG-143686-07, 2009-8 I.R.B.579
REG-150670-07, 2009-4 I.R.B.378
REG-113462-08, 2009-4 I.R.B.379
REG-147636-08, 2009-9 I.R.B.641
REG-150066-08, 2009-5 I.R.B.423
Revenue Procedures:
2009-1, 2009-1 I.R.B.1
2009-2, 2009-1 I.R.B.87
2009-3, 2009-1 I.R.B.107
2009-4, 2009-1 I.R.B.118
2009-5, 2009-1 I.R.B.161
2009-6, 2009-1 I.R.B.189
2009-7, 2009-1 I.R.B.226
2009-8, 2009-1 I.R.B.229
2009-9, 2009-2 I.R.B.256
2009-10, 2009-2 I.R.B.267
2009-11, 2009-3 I.R.B.313
2009-12, 2009-3 I.R.B.321
2009-13, 2009-3 I.R.B.323
2009-14, 2009-3 I.R.B.324
2009-15, 2009-4 I.R.B.356
2009-16, 2009-6 I.R.B.449
2009-17, 2009-7 I.R.B.517
2009-18, 2009-11 I.R.B.670
2009-19, 2009-14 I.R.B.747
2009-20, 2009-14 I.R.B.749
2009-21, 2009-16 I.R.B.860
2009-22, 2009-16 I.R.B.862
Revenue Rulings:
2009-1, 2009-2 I.R.B.248
2009-2, 2009-2 I.R.B.245
Revenue Rulings— Continued:
2009-3, 2009-5 I.R.B.382
2009-4, 2009-5 I.R.B.408
2009-5, 2009-6 I.R.B.432
2009-6, 2009-12 I.R.B.694
2009-7, 2009-13 I.R.B.717
2009-8, 2009-10 I.R.B.645
2009-9, 2009-14 I.R.B.735
2009-10, 2009-14 I.R.B.738
Tax Conventions:
2009-5, 2009-8 I.R.B.569
Treasury Decisions:
9434, 2009-4 I.R.B.339
9435, 2009-4 I.R.B.333
9436, 2009-3 I.R.B.268
9437, 2009-4 I.R.B.341
9438, 2009-5 I.R.B.387
9439, 2009-5 I.R.B.416
9440, 2009-5 I.R.B.409
9441, 2009-7 I.R.B.460
9442, 2009-6 I.R.B.434
9443, 2009-8 I.R.B.564
9444, 2009-9 I.R.B.603
9445, 2009-9 I.R.B.635
9446, 2009-9 I.R.B.607
9447, 2009-12 I.R.B.694
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2008–27 through 2008–52 is in Internal Revenue Bulletin
2008–52, dated December 29, 2008.
2009–16 I.R.B.iiApril 20, 2009

Finding List of Current Actions on
Previously Published Items
1
Bulletins 2009–1 through 2009–16
Notices:
99-35
Obsoleted by
Notice 2009-15, 2009-6 I.R.B.449
2001-55
Modified by
Notice 2009-1, 2009-2 I.R.B.250
2002-27
Modified by
Notice 2009-9, 2009-5 I.R.B.419
2005-74
Obsoleted by
T.D. 9446, 2009-9 I.R.B.607
2007-26
Modified by
Notice 2009-15, 2009-6 I.R.B.449
2007-52
Clarified, modified, and amplified by
Notice 2009-24, 2009-16 I.R.B.817
2007-53
Clarified, modified, and ampilfied by
Notice 2009-23, 2009-16 I.R.B.802
2007-54
Obsoleted by
T.D. 9436, 2009-3 I.R.B.268
2008-11
Obsoleted by
T.D. 9436, 2009-3 I.R.B.268
2008-12
Obsoleted by
T.D. 9436, 2009-3 I.R.B.268
Rev. Proc. 2009-11, 2009-3 I.R.B.313
2008-13
Obsoleted by
T.D. 9436, 2009-3 I.R.B.268
List of forms modified and superseded by
Rev. Proc. 2009-11, 2009-3 I.R.B.313
Modified and clarified by
Notice 2009-5, 2009-3 I.R.B.309
2008-46
Obsoleted by
T.D. 9436, 2009-3 I.R.B.268
Rev. Proc. 2009-11, 2009-3 I.R.B.313
2008-100
Amplified and superseded by
Notice 2009-14, 2009-7 I.R.B.516
Proposed Regulations:
REG-144615-02
Corrected by
Ann. 2009-19, 2009-12 I.R.B.715
REG-149519-03
Withdrawn by
Ann. 2009-4, 2009-8 I.R.B.597
REG-148326-05
Corrected by
Ann. 2009-14, 2009-11 I.R.B.687
REG-158747-06
Hearing scheduled by
Ann. 2009-29, 2009-14 I.R.B.757
REG-150066-08
Corrected by
Ann. 2009-31, 2009-15 I.R.B.798
Revenue Procedures:
2007-17
Superseded by
Rev. Proc. 2009-14, 2009-3 I.R.B.324
2007-66
Modified and superseded by
Rev. Proc. 2009-21, 2009-16 I.R.B.860
2007-68
Superseded by
Rev. Proc. 2009-17, 2009-7 I.R.B.517
2007-71
Modified by
Notice 2009-3, 2009-2 I.R.B.250
2008-1
Superseded by
Rev. Proc. 2009-1, 2009-1 I.R.B.1
2008-2
Superseded by
Rev. Proc. 2009-2, 2009-1 I.R.B.87
2008-3
Superseded by
Rev. Proc. 2009-3, 2009-1 I.R.B.107
2008-4
Superseded by
Rev. Proc. 2009-4, 2009-1 I.R.B.118
2008-5
Superseded by
Rev. Proc. 2009-5, 2009-1 I.R.B.161
2008-6
Superseded by
Rev. Proc. 2009-6, 2009-1 I.R.B.189
2008-7
Superseded by
Rev. Proc. 2009-7, 2009-1 I.R.B.226
Revenue Procedures— Continued:
2008-8
Superseded by
Rev. Proc. 2009-8, 2009-1 I.R.B.229
2008-9
Superseded by
Rev. Proc. 2009-9, 2009-2 I.R.B.256
2008-17
Obsoleted in part by
Rev. Proc. 2009-18, 2009-11 I.R.B.670
2008-61
Superseded by
Rev. Proc. 2009-3, 2009-1 I.R.B.107
2008-65
Amplified and supplemented by
Rev. Proc. 2009-16, 2009-6 I.R.B.449
2008-66
Modified and superseded by
Rev. Proc. 2009-21, 2009-16 I.R.B.860
2008-68
Amplified and superseded by
Rev. Proc. 2009-15, 2009-4 I.R.B.356
Revenue Rulings:
65-286
Obsoleted by
T.D. 9435, 2009-4 I.R.B.333
71-381
Obsoleted in part by
Rev. Rul. 2009-9, 2009-14 I.R.B.735
76-54
Obsoleted by
T.D. 9435, 2009-4 I.R.B.333
92-19
Supplemented by
Rev. Rul. 2009-3, 2009-5 I.R.B.382
2008-19
Modified by
Rev. Rul. 2009-3, 2009-5 I.R.B.382
Treasury Decisions:
9436
Corrected by
Ann. 2009-15, 2009-11 I.R.B.687
9438
Corrected by
Ann. 2009-30, 2009-15 I.R.B.794
9439
Corrected by
Ann. 2009-12, 2009-11 I.R.B.686
1
A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2008–27 through 2008–52 is in Internal Revenue Bulletin 2008–52, dated December 29,
2008.
April 20, 2009iii2009–16 I.R.B.

Treasury Decisions— Continued:
9441
Corrected by
Ann. 2009-18, 2009-12 I.R.B.714
9442
Corrected by
Ann. 2009-13, 2009-11 I.R.B.686
Ann. 2009-20, 2009-12 I.R.B.716
9446
Corrected by
Ann. 2009-23, 2009-13 I.R.B.731
2009–16 I.R.B.ivApril 20, 2009

April 20, 20092009–16 I.R.B.

2009–16 I.R.B.April 20, 2009

April 20, 20092009–16 I.R.B.

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