IRS Issues Guidance on New ASTM Requirements for Biodiesel and on Cellulosic Biofuel Producer Credit (Notice 2008-110)

The IRS has issued guidance in response to a revision of the biodiesel requirements of the American Society of Testing and Materials (ASTM). The guidance also affects the cellulosic biofuel producer credit under Code Sec. 40, which was added by the Food, Conservation, and Energy Act of 2008 (P.L. 110-234).

The ASTM, on October 13, 2008, revised the biodiesel requirements of ASTM D6751 by adding a cold soak filtration test for biodiesel --a test that evaluates the performance of biodiesel in cold weather. Under the definition of biodiesel in Code Sec. 40A(d)(1), biodiesel must meet the requirements for ASTM D6751. Failure to meet the requirements of ASTM D6751 disqualifies a fuel from the tax incentives for the production, sale and use of biodiesel and biodiesel mixtures under Code Secs. 40A, 6426 and 6427(e).

Specifically, for a taxpayer to claim a biodiesel mixture credit under Code Sec. 6426 or a biodiesel mixture credit or biodiesel credit under Code Sec. 40A, the taxpayer must provide a certificate from the producer of the biodiesel. The model certificate in Notice 2005-62, I.R.B. 2005-35, 443, has the biodiesel producer certifying that the biodiesel it has produced and sold meets the requirements of ASTM D6751. Also, the forms on which taxpayers claim biodiesel incentives require the claimant to certify that the biodiesel meets the requirements of ASTM D6751.

The guidance provides a transitional rule with respect to the addition of the cold soak filtration test for biodiesel. If a claim relates to the production, sale, or use of biodiesel or a biodiesel mixture that occurs before April 1, 2009, certification that the biodiesel meets the requirements of ASTM D6751 as in effect before the October 13, 2008, revision is sufficient. However, for claims relating to biodiesel produced, sold or used after April 1, 2009, certification that biodiesel meets the requirements of ASTM D6751 is valid only if the biodiesel satisfies ASTM D6751 as in effect after the October 13, 2008, revision adding the cold soak filtration test for biodiesel.

Regarding the cellulosic biofuel producer credit, the guidance specifies that the definition of cellulosic biofuel in Code Sec. 40(b)(6)(E), which excludes "low-proof alcohol," refers to an alcohol with a proof of less than 150. For this purpose, the proof of alcohol is determined without regard to any added denaturants.

In addition, taxpayers claiming a cellulosic biofuel credit and applying for the requisite registration letter from the IRS should make their application on Form 637, Application for Registration (For Certain Excise Tax Activities). The guidance provides that the IRS will register an applicant as a producer of biofuel only if the IRS: (1) determines that the applicant is a producer of cellulosic biofuel or is likely to become one within a reasonable time after being registered under Code Sec. 4101; and (2) is satisfied with the filing, deposit, payment, reporting, and claim history for all federal taxes of the applicant and any related person.

Notice 2008-110, 2008FED ¶46,669

Notice 2008-110, ETR ¶66,866

Other References:

Code Sec. 40

CCH Reference - 2008FED ¶4304.25

CCH Reference - ETR ¶2215.08

CCH Reference - ETR ¶2215.16

Code Sec. 40A

CCH Reference - 2008FED ¶4320.25

CCH Reference - ETR ¶2325.01

CCH Reference - ETR ¶2325.07

Code Sec. 4101

CCH Reference - ETR ¶10,945.02

CCH Reference - ETR ¶10,945.17

Code Sec. 6426

CCH Reference - ETR ¶49,250.03

CCH Reference - ETR ¶49,250.25

CCH Reference - ETR ¶49,250.27

Code Sec. 6427

CCH Reference - ETR ¶49,685.095

Tax Research Consultant

CCH Reference - TRC BUSEXP: 54,122

CCH Reference - TRC BUSEXP: 55,104

CCH Reference - TRC BUSEXP: 55,106

CCH Reference - TRC EXCISE: 24,374

Final Regulations Classify Bulgarian Public Limited Liability Company (T.D. 9433)

Final regulations have been issued classifying the Bulgarian public limited liability company (aktsionerno druzhestvo) so that it is consistent with the classification of public limited liability companies organized in other countries of the European Economic Area. The regulations are effective on November 28, 2008, and effect persons owning an interest in a Bulgarian aktsionerno druzhestvo on or after January 1, 2007. Temporary regulations issued on March 21, 2008 (T.D. 9388, TAXDAY, 2008/03/21, I.3) have been removed.

Under Code Sec. 7701, certain foreign business entities are always classified as corporations for federal tax purposes. These foreign business entities are known as per se corporations. The final regulations modify the list of per se corporations to include the aktsionerno druzhestvo, which is a Bulgarian public limited liability company.

CCH Comment. The European public limited liability company, or SE, is included on the per se corporation list. In the preamble to T.D. 9388, the aktsionerno druzhestvo was incorrectly characterized as Bulgaria's SE. In fact, the aktsionerno druzhestvo is a public limited liability company organized in Bulgaria

The final regulations apply to any aktsionerno druzhestvo formed on or after January 1, 2007, and to those formed before that date in which, in the aggregate, a 50 percent or more interest is owned by a person or persons who were not owners of the entity as of January 1, 2007. In the case of a partnership, an interest means a capital or profits interest. In the case of a corporation, an interest means an equity interest in the entity measured by vote or value.

T.D. 9433, 2008FED ¶47,065

Other References:

Code Sec. 7701

CCH Reference - 2008FED ¶43,082

Tax Research Consultant

CCH Reference - TRC STAGES: 24,054

CCH Reference - TRC STAGES: 24,104