Syncoal projects may get some relief in April | Norton Rose Fulbright
The US government allows a tax credit of $1.035 an mmBtu for making “synthetic fuel from coal.” The IRS announced last October that it would no longer rule on whether facilities that produce such fuels qualify for tax credits while it studies what it means to make a “synthetic” fuel. Coal companies had complained that some 52 facilities that add a chemical binder to coal fines or crushed whole coal to make pellets were improperly claiming tax credits.
IRS and Treasury officials say additional guidance will be issued soon and that the IRS will resume issuing rulings by late April. A senior Treasury official said projects that already have IRS rulings will not be affected. Also, the government does not plan any change in what qualifies as a synthetic fuel. Rather, the guidance is expected to attack transactions the government considers abusive. Examples are “spawned” projects. These are conventional coal wash plants or asphalt plants that were converted into syncoal facilities after a June 1998 deadline for placing syncoal facilities in service to qualify for tax credits.