n-15-70.pdf

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Part III - Administrative, Procedural, and Miscellaneous

Request for Comments on Definitions of Section 48 Property

Notice 2015-70

SECTION 1. PURPOSE

The Department of the Treasury (“Treasury Department”) and the Internal
Revenue Service (“IRS”) anticipate issuing regulations under § 48 of the Internal
Revenue Code to define certain types of property qualifying for the energy credit under
§ 48. This notice requests comments on how to define these types of property;
specifically, this notice requests comments on the definition of certain equipment using
solar energy, certain equipment used to produce, distribute, or use energy derived from
a geothermal deposit, qualified fuel cell property, qualified microturbine property,
combined heat and power system property, qualified small wind energy property, and
equipment using the ground or ground water as a thermal energy source.
SECTION 2. BACKGROUND
For purposes of computing the investment credit under § 46, § 48(a)(1) provides, in
part, that the energy credit for any taxable year is the energy percentage of the basis of each
energy property placed in service during such taxable year.

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Section 48(a)(3)(A) sets forth the types of property qualifying as energy property for
the energy credit. The types of property listed in § 48(a)(3)(A) include certain solar energy
property,
certain equipment used to produce, distribute, or use energy derived from a
geothermal deposit, qualified fuel cell property, qualified microturbine property,
combined heat and power system property, qualified small wind energy property, and
equipment using the ground or ground water as a thermal energy source.
Section 48(c)
further defines some of these terms for purposes of the energy credit.
Section 48(a)(3)(B) provides that, in order to be eligible for the energy credit, the
construction, reconstruction, or erection of the property must be completed by the taxpayer,
or, if the taxpayer acquires the property,
the original use of the property must commence
with the taxpayer. Section 48(a)(3)(C) provides that depreciation or amortization of the
property must be allowable. Section 48(a)(3)(D) provides that the property must meet the
performance and quality standards which have been prescribed by the Secretary of the
Treasury (after consultation with the Secretary of Energy) and are in effect at the time the
property is acquired by the taxpayer.
Section 1.48-9 of the Income Tax Regulations provides additional clarifications to the
definitions of qualified energy property under § 48. Those regulations have not been
updated since 1987, before the types of property listed in this notice were added to
§ 48(a)(3)(A). The Treasury Department and the IRS anticipate issuing regulations to define
these types of property for purposes of the energy credit under § 48.

SECTION 3. TYPES OF PROPERTY ELIGIBLE FOR THE ENERGY CREDIT
.01 Equipment which uses solar energy to generate electricity. Section
48(a)(3)(A)(i) provides that energy property includes equipment which uses solar

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energy to generate electricity to heat or cool (or provide hot water for use in) a structure
or to provide solar process heat, excepting property used to generate energy for the
purpose of heating a swimming pool. Section 48(a)(2)(A)(i)(II) provides that the energy
percentage for such property is 30 percent for periods before January 1, 2017. After
that the energy percentage is 10 percent.
.02 Equipment which uses solar energy to illuminate. Section 48(a)(3)(A)(ii)
provides that energy property includes equipment which uses solar energy to illuminate
the inside of a structure using fiber-optic distributed sunlight but only with respect to
periods ending before January 1, 2017. Section 48(a)(2)(A)(i)(III) provides that the
energy percentage for such property is 30 percent.
.03 Equipment using energy from geothermal sources. Section 48(a)(3)(A)(iii)
provides that energy property includes equipment used to produce, distribute, or use
energy derived from a geothermal deposit (within the meaning of
§ 613(e)(2)) but only,
in the case of electricity generated by geothermal power, up to (but not including) the
electrical transmission stage. Section 48(a)(2)(A)(ii) provides that the energy
percentage for such property is 10 percent.
.04 Qualified fuel cell property. Section 48(a)(3)(A)(iv) provides that energy
property includes qualified fuel cell property. Section 48(a)(2)(A)(i)(I) provides that the
energy percentage for qualified fuel cell property is 30 percent. Section 48(c)(1)(A)
defines qualified fuel cell property, in general, as a fuel cell power plant which has a
nameplate capacity of at least 0.5 kilowatt of electricity using an electrochemical
process and has an electricity-only generation efficiency greater than 30 percent. The

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term “fuel cell power plant” is defined in § 48(c)(1)(C) as an integrated system
comprised of a fuel cell stack assembly and associated balance of plant components
which converts a fuel into electricity using electrochemical means. Section 48(c)(1)(B)
limits the energy credit amount for qualified fuel cell property each year to $1,500 per
0.5 kilowatt of capacity of such property. Section 48(c)(1)(D) provides that the qualified
fuel cell property must be placed in service before January 1, 2017.
.05 Qualified microturbine property. Section 48(a)(3)(A)(iv) provides that energy
property includes qualified microturbine property. Section 48(a)(2)(A)(ii) provides that
the energy percentage for qualified microturbine property is 10 percent. Section
48(c)(2)(D) provides that the qualified microturbine property must be placed in service
before January 1, 2017. Section 48(c)(2)(A) defines qualified microturbine property as
a stationary microturbine power plant which has a nameplate capacity of less than
2,000 kilowatts and has an electricity-only generation efficiency of not less than 26
percent at International Standard Organization conditions. Section 48(c)(2)(C) clarifies
that the term “stationary microturbine power plant” means an integrated system
comprised of a gas turbine engine, a combustor, a recuperator or regenerator, a
generator or alternator, and associated balance of plant components which converts a
fuel into electricity and thermal energy. That term also includes all secondary
components located between the existing infrastructure for fuel delivery and the existing
infrastructure for power distribution, including equipment and controls for meeting
relevant power standards, such as voltage, frequency, and power factors. Section
48(c)(2)(B) limits the amount of the § 48 credit for qualified microturbine property to an

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amount equal to $200 per each kilowatt of capacity of such property.
.06 Combined heat and power system property. Section 48(a)(3)(A)(v) provides
that energy property includes combined heat and power system property. Section
48(a)(2)(A)(ii) provides that the energy percentage for combined heat and power
system property is 10 percent. Section 48(c)(3)(A)(iv) provides that the combined heat
and power system property must be placed in service before January 1, 2017. Section
48(c)(3)(A) defines combined heat and power system property as property comprising a
system which uses the same energy source for the simultaneous or sequential
generation of electrical power, mechanical shaft power, or both, in combination with the
generation of steam or other forms of useful thermal energy (including heating and
cooling applications). The system must produce at least 20 percent of its total useful
energy in the form of thermal energy which is not used to produce electrical or
mechanical power (or combination thereof) and at least 20 percent of its total useful
energy in the form of electrical or mechanical power (or combination thereof), and the
energy efficiency percentage of the system must exceed 60 percent. Section
48(c)(3)(B) contains limitations on the combined heat and power system property for
which the energy credit may be claimed.
.07 Qualified small wind energy property. Section 48(a)(3)(A)(vi) provides that
energy property includes qualified small wind energy property. Section
48(a)(2)(A)(i)(IV) provides that the energy percentage for qualified small wind energy
property is 30 percent. Section 48(c)(4)(C) provides that the qualified small wind
energy property must be placed in service before January 1, 2017. Section 48(c)(4)(A)

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defines qualified small wind energy property as property using a wind turbine which has
a nameplate capacity of not more than 100 kilowatts to generate electricity.
.08 Equipment using the ground or ground water as a thermal energy source.
Section 48(a)(3)(A)(vii) provides that energy property includes equipment which uses
the ground or ground water as a thermal energy source to heat a structure or as a
thermal energy sink to cool a structure, but only with respect to periods ending before
January 1, 2017. Section 48(a)(2)(A)(ii) provides that the energy percentage for such
property using the ground or ground water as a thermal energy source is 10 percent.
SECTION 4. REQUEST FOR COMMENTS
.01 The Treasury Department and the IRS request comments on issues that
should be addressed in proposed regulations on the definition of certain types of
property under § 48. Specifically, the Treasury Department and the IRS request
comments that address the following:
(1) Whether only property that actually produces electricity may be considered
energy property or whether property such as storage devices and power conditioning
equipment may also be considered energy property.
(2) Whether dual-use property should qualify for the credit and, if so, under what
circumstances it should qualify. If it should qualify, what portion of the basis of dual use
property should be taken into account in computing the energy percentage.
(3) Comprehensive definitions of the property described in Section 3 of this
notice.
(4) Definitions of terms such as storage devices, power conditioning equipment,

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transfer equipment, and other property commonly used in conjunction with property
described in Section 3 of this notice, as well as definitions of parts related to the
functioning of these items.
(5) The need for other energy-related definitions.
.02 Any comments must be received by February 16, 2016.
SECTION 5. ADDRESS TO SEND COMMENTS
.01 Comments on the definition of qualified property for purposes of the energy
credit under § 48 should be sent to:
Internal Revenue Service
CC:PA:LPD:PR (Notice 2015-70)
Room 5203
P.O. Box 7604
Ben Franklin Station
Washington, DC 20044

Please include “Notice 2015-70” on the cover page.
.02 Submissions may be hand delivered Monday through Friday between the
hours of 8 a.m. and 4 p.m. to:
Internal Revenue Service
Courier’s Desk
1111 Constitution Ave., N.W.
Washington, DC 20224
Attn: CC:PA:LPD:PR
(Notice 2015-70)

.03 Submissions may also be sent electronically
to the following e-mail address:

Notice.Comments@irscounsel.treas.gov

Please include “Notice 2015-70” in the subject line.
All comments will be available for public inspection and copying.

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SECTION 6. DRAFTING INFORMATION
The principal author of this notice is Patrick S. Kirwan of the Office of Associate
Chief Counsel (Passthroughs & Special Industries). For further information regarding
this notice contact Mr. Kirwan at (202) 317-6853 (not a toll-free call).