July 24, 2012
On June 25, 2012 the Internal Revenue Service (IRS) released Notice 2012-44 (2012-28 IRB 45) (the “Notice”) that provides interpretative guidance on qualified energy conservation bonds (QECBs) under Section 54D of the Internal Revenue Code of 1986, as amended (the “Code”). The Notice uses a question and answer format to clarify, among other things, what types of projects might qualify for two of the multiple eligible financing purposes (also known as “qualified conservation purposes”) under the QECB statute: capital expenditures incurred for purposes of (i) reducing energy consumption in publicly-owned buildings by at least 20 percent and (ii) implementing a “green community program.” Click here to read background material on QECBs and click here to see a list of all qualified conversation purposes under Section 54D(f). Below is a brief summary of certain portions of the Notice.
Reducing Energy Consumption in Publicly-Owned Buildings by at Least 20 Percent
With respect to this qualified conservation purpose, the guidance seeks to clarify what constitutes a publicly-owned building, how an issuer measures the reduction in energy consumption and the period of time over which one must measure the reduction.
Green Community Program
As described in the Notice, a green community program is a program that meets the following two requirements: (a) the program’s purpose is to promote one or more of the purposes of energy conservation, energy efficiency or environmental conservation initiatives relating to energy consumption, including, but not limited to, energy savings through retrofitting initiatives for heating, cooling, lighting, water-saving, storm-water reducing or other efficiency measures, distributed generation initiatives or transportation initiatives that conserve energy and/or support alternative fuel infrastructure, and (b) the program must (i) involve property that is available for general public use or (ii) involve a loan (or other repayment mechanism) or grant program that is broadly available to the member of the general public, including individuals and businesses. It is not necessary for a green community program to affect the entire geographical area or all residents and businesses within the geographic jurisdiction of the governmental unit that implements the program so long as the program broadly benefits the general public, residents or businesses in the affected area. The Notice provides examples of “general public use,” “broadly available” and of a “green community program.”
The foregoing information is intended to be a brief summary of certain portions the Notice, and additional substantive rules under the Notice may apply in certain cases. If you have any questions or would like additional information with respect to the Notice or with respect to whether a proposed project may qualify for QECB financing, please contact one of the authors of this alert.