Synfuel projects are once again in limbo at the IRS | Norton Rose Fulbright
The agency stopped issuing rulings in early May confirming that coal agglomeration facilities that mix chemical reagents with coal make “synthetic fuel from coal.” Such a ruling is key to claiming tax credits of $1.095 an mmBtu on the output from the projects. IRS officials in Washington describe the situation as a “pause” in further rulings.
The problem is that a chemistry lab that is helping the IRS with tax audits of synfuel plants could not match the results that one taxpayer reported when the IRS issued the taxpayer a ruling. The IRS considers output from the plants “synthetic fuel” if the output is significantly different in chemical composition from the raw coal used to produce it. The IRS arranged meetings between its lab and the two main labs — Combustion Resources and Paspek — that owners of the synfuel plants use for their own testing. The meetings took place in May. In the meantime, the IRS national office is continuing to work on private letter rulings that it has in process, but there was no word as the NewsWire went to press June 1 when the “pause” might be lifted.