rp-10-45.pdf

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Rev. Proc. 2010-45

SECTION 1. PURPOSE
This revenue procedure provides a safe harbor under section 118(a) of the
Internal Revenue Code for the treatment of certain grants to corporations from the
National Energy Technology Laboratory of the Department of Energy (DOE) under the
Electric Drive Vehicle Battery and Component Manufacturing Initiative (the Initiative) as
authorized by Division A, Title IV of the American Recovery and Reinvestment Act of
2009 (Pub. L. 111-5) (ARRA).
SECTION 2. BACKGROUND
Section 118(a) of the Code provides that in the case of a corporation, gross
income does not include a contribution to the capital of the taxpayer.
Section 1.118-1 of the Income Tax Regulations provides that section 118 applies
to contributions to capital made by a person other than a shareholder, for example,
property contributed to a corporation by a governmental unit for the purpose of enabling
the corporation to expand its operating facilities.
Section 362(c)(2) of the Code requires a basis reduction in a corporation's
property when the corporation receives money from a nonshareholder as a contribution
to its capital.
Division A, Title IV of ARRA requires the Secretary of Energy to provide facility
funding awards to manufacturers of advanced battery systems and vehicle batteries that
are produced in the United States, including advanced lithium ion batteries, hybrid

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electrical systems, component manufacturers, and software designers. $2 billion was
made available for grants for the manufacturing of advanced batteries and components.
The Initiative provides grants for seven Areas of Interest: (1) Cell and Battery
Manufacturing Facilities; (2) Advanced Battery Supplier Manufacturing Facilities;
(3) Combined Applications for Areas of Interest 1 and 2; (4) Advanced Lithium ion
Battery Recycling Facilities; (5) Electric Drive Component Manufacturing Facilities;
(6) Electric Drive Subcomponent Manufacturing Facilities; and (7) Combined
Applications for Areas of Interest 5 and 6. See Funding Opportunity Number DE-FOA-
0000026 (March 19, 2009). This guidance may be accessed electronically at:
http://www.netl.doe.gov/business/solicitation
s/archive/main-FY09.html#00026
SECTION 3. SCOPE
This revenue procedure applies to corporate taxpayers that receive a grant from
DOE under the Initiative for Areas of Interest 1 through 7. This revenue procedure does
not apply to the portion of any grant paid or incurred for travel or training expenses or
paid to reimburse pre-application expenses. For this purpose, pre-application expenses
only include those costs incurred in preparing and submitting an application to receive a
grant. This revenue procedure does not apply to noncorporate taxpayers.
SECTION 4. PROCEDURE
The Internal Revenue Service will not challenge a corporation’s treatment of a
grant to the corporation from DOE under the Initiative for Areas of Interest 1 through 7
within the scope of section 3 of this revenue procedure as a nonshareholder
contribution to the capital of the corporation under section 118(a) of the Code if the

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corporation properly reduces the basis of its property under section 362(c)(2) and the
regulations thereunder.
SECTION 5. EFFECTIVE DATE
This revenue procedure is effective November 12, 2010.

SECTION 6. DRAFTING INFORMATION
The principal author of this revenue procedure is David McDonnell of the Office
of Associate Chief Counsel (Passthroughs & Special Industries). For further information
regarding this revenue procedure contact Mr. McDonnell at (202) 622-3040 (not a toll
free call).