Internal Revenue Service Issues Correction to Energy Regulations Definitions

On Friday, February 16, 2024, the Internal Revenue Service issued a correction to a notice of proposed rulemaking published last year. The subject of the correction to Proposed REG-132569-17 addresses the energy credit determined under Internal Revenue Code § 48 to further apply § 38 General Business Credit and § 46 Amount of Credit of the Code. The Proposed Regulation serves to outline an updated application of energy property requirements toward certain gas upgrading equipment.

Originally published in § 1.48-9(e)(11)(i), the Proposed Regulations excluded from the definition of “qualified biogas property” any “gas upgrading equipment necessary to concentrate the gas into the appropriate mixture for injection into a pipeline through the removal of other gases such as carbon dioxide, nitrogen or oxygen.”

However, § 1.48-9(f)(1) dictates that property owned by the taxpayer that is an integral part of an energy property, as defined in proposed subsection § 1.48-9(f)(3), would be treated as energy property. The correction is needed to clarify that gas upgrading equipment, which is necessary to concentrate the gas from qualified biogas property into the appropriate mixture for injection into a pipeline, would be an energy property if it is an integral part of an energy property as defined in § 1.48-9(f)(3).

Correction of Publication:

The correction of the publication of the Proposed Regulations, is updated from stating, “However, gas upgrading equipment necessary to concentrate the gas into the appropriate mixture for injection into a pipeline through removal of other gases such as carbon dioxide, nitrogen, or oxygen is not included in qualified biogas property.” The sentence is edited to read as follows: “However, gas upgrading equipment necessary to concentrate the gas into the appropriate mixture for injection into a pipeline through removal of other gases such as carbon dioxide, nitrogen, or oxygen is not a functionally interdependent component (as defined in paragraph (f)(2)(ii) of this section) of qualified biogas property.”

When gas upgrading equipment necessary to concentrate the gas into the appropriate mixture for injection into a pipeline though removal of other gases such as carbon dioxide, nitrogen, or oxygen is not a functionally interdependent component, it is includable as part of an energy property.

This correction, which provides clarity on the issue, reopens the comment period on the proposed rulemaking to include comments made within 30 days of the publication of this correction.

Please contact the Ryan tax professionals listed below for more information.

TECHNICAL INFORMATION CONTACTS:

Ian Boccaccio
Principal
Ryan
469.399.4545
ian.boccaccio@ryan.com

Nicholaus List
Director
Ryan
917.472.9472
nicholaus.list@ryan.com

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