A DEPRECIATION BONUS was allowed on a new hydrogen pipeline, even though the hydrogen company effectively committed to build the
pipeline before the depreciation bonus became available in 2008.

The hydrogen company wanted to claim a 50% depreciation bonus, meaning deduct half the pipeline cost immediately and depreciate the
remaining cost over 15 years. A depreciation bonus cannot be claimed if the company signed a binding contact to “acquire” the pipeline before
2008. The IRS said the fact that the company had a contract in 2007 to supply hydrogen to a customer and the contract required it to construct
and own a pipeline to deliver the hydrogen to the customer did not mean the hydrogen company committed to “acquire” the pipeline in 2007.

For one thing, the company did not “acquire” the pipeline; it built a new pipeline. The IRS also said the contract provision that made the hydrogen supplier responsible for the pipeline merely addressed how costs would be allocated between the hydrogen company and the customer.

The ruling is Private Letter Ruling 201140002. The IRS made it public in
mid-October.