Internal Revenue Bulletin 2020-11 (PDF rendition): IRS Revenue Rulings

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Bulletin No. 2020–11
March 9, 2020
HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
ADMINISTRATIVE & INCOME TAX
Rev. Proc. 2020-12, page 511.
This revenue procedure provides a safe harbor relating to
the allocation of section 45Q credits for the sequestration
of carbon oxide to partners in a partnership for purposes of
section 704(b) of the Code. If taxpayers satisfy the require-
ments of the safe harbor, the revenue procedure provides
that the Internal Revenue Service will treat partnerships as
properly allocating the section 45Q credit in accordance with
section 704(b) and the regulations thereunder.
Rev. Proc. 2020-13, page 515.
This revenue procedure provides procedures applicable to
a taxpayer in a farming business regarding the application
of § 263A of the Internal Revenue Code (Code). Prior to the
enactment of Public Law 115-97, 131 Stat. 2054 (Dec. 22,
2017), commonly referred to as the Tax Cuts and Jobs Act
(TCJA), a taxpayer in a farming business could elect under
§ 263A(d)(3) to have § 263A not apply to certain plants pro-
duced by the taxpayer’s farming business. Section 13102 of
the TCJA added new § 263A(i) to the Code, which provides
that § 263A does not apply to a taxpayer, other than a tax
shelter (as defined in § 448(d)(3) of the Code), for a taxable
year in which the taxpayer qualifies as a small business tax-
payer by satisfying the gross receipts test in § 448(c) of the
Code. This revenue procedure provides the exclusive pro-
cedures for a taxpayer that qualifies for the § 263A(i) small
business taxpayer exemption to revoke its prior election un-
der § 263A(d)(3) and apply the exemption under § 263A(i) in
the same taxable year. In addition, this revenue procedure
provides the exclusive procedures for a taxpayer that quali-
fies for and wishes to make an election under § 263A(d)(3)
in the same taxable year that it no longer qualifies for the
exemption under § 263A(i).
EMPLOYEE PLANS
Notice 2020-11, page 492.
This notice sets forth updates on the corporate bond month-
ly yield curve, the corresponding spot segment rates for
February 2020 used under § 417(e)(3)(D), the 24-month av-
erage segment rates applicable for February 2020, and the
30-year Treasury rates, as reflected by the application of §
430(h)(2)(C)(iv).
INCOME TAX
Notice 2020-12, page 495.
Beginning of Construction for the Credit for Carbon Oxide
Sequestration under Section 45Q. Notice 2020-12 provides
guidance on the determination of when construction has be-
gun on a qualified facility or on carbon capture equipment
that may be eligible for the Section 45Q Credit. This notice
provides two methods for taxpayers to establish the begin-
ning of construction requirement (Physical Work Test and
Five Percent Safe Harbor), a Continuity Requirement for both
methods, guidance on transfers of ownership of a qualified
facility or carbon capture equipment, and additional guidance
applicable to the beginning of construction requirement.
Notice 2020-13, page 502.
Notice 2020-13 provides for adjustments to the limitation on
housing expenses for purposes of section 911 of the Inter-
nal Revenue Code for the 2020 tax year. These adjustments
are made on the basis of geographic differences in housing
costs relative to housing costs in the United States. If the
limitation on housing expenses is higher for the 2020 tax
year than the adjusted limitations on housing expenses pro-
vided in Notice 2019-24, qualified taxpayers may apply the
adjusted limitations in this notice for the 2020 tax year to
their 2019 tax year.
Finding Lists begin on page ii.

Rev. Rul. 2020-6, page 490.
Federal rates; adjusted federal rates; adjusted federal long-
term rate, the long-term exempt rate, and the blended annual
rate. For purposes of sections 382, 1274, 1288, 7872 and
other sections of the Code, tables set forth the rates for
March 2020.

The IRS Mission
Provide America’s taxpayers top-quality service by helping
them understand and meet their tax responsibilities and en-
force the law with integrity and fairness to all.
Introduction
The Internal Revenue Bulletin is the authoritative instrument
of the Commissioner of Internal Revenue for announcing of-
ficial rulings and procedures of the Internal Revenue Service
and for publishing Treasury Decisions, Executive Orders, Tax
Conventions, legislation, court decisions, and other items of
general interest. It is published weekly.
It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application
of the tax laws, including all rulings that supersede, revoke,
modify, or amend any of those previously published in the
Bulletin. All published rulings apply retroactively unless other-
wise indicated. Procedures relating solely to matters of inter-
nal management are not published; however, statements of
internal practices and procedures that affect the rights and
duties of taxpayers are published.
Revenue rulings represent the conclusions of the Service
on the application of the law to the pivotal facts stated in
the revenue ruling. In those based on positions taken in rul-
ings to taxpayers or technical advice to Service field offices,
identifying details and information of a confidential nature are
deleted to prevent unwarranted invasions of privacy and to
comply with statutory requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned
against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—1986 Code.
This part includes rulings and decisions based on provisions
of the Internal Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B,
Legislation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative
Rulings. Bank Secrecy Act Administrative Rulings are issued
by the Department of the Treasury’s Office of the Assistant
Secretary (Enforcement).
Part IV.—Items of General Interest.
This part includes notices of proposed rulemakings, disbar-
ment and suspension lists, and announcements.
The last Bulletin for each month includes a cumulative index
for the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.
The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
March 9, 2020 Bulletin No. 2020–11

Part I
Section 1274.—
Determination of Issue
Price in the Case of Certain
Debt Instruments Issued for
Property
(Also Sections 42, 280G, 382, 467, 468, 482, 483,
1288, 7520, 7872.)
Rev. Rul. 2020-6
This revenue ruling provides various
prescribed rates for federal income tax
purposes for March 2020 (the current
month). Table 1 contains the short-
term, mid-term, and long-term applica-
ble federal rates (AFR) for the current
month for purposes of section 1274(d)
of the Internal Revenue Code. Table 2
contains the short-term, mid-term, and
long-term adjusted applicable federal
rates (adjusted AFR) for the current
month for purposes of section 1288(b).
Table 3 sets forth the adjusted feder-
al long-term rate and the long-term
tax-exempt rate described in section
382(f). Table 4 contains the appropri-
ate percentages for determining the
low-income housing credit described in
section 42(b)(1) for buildings placed in
service during the current month. How-
ever, under section 42(b)(2), the appli-
cable percentage for non-federally sub-
sidized new buildings placed in service
after July 30, 2008, shall not be less
than 9%. Finally, Table 5 contains the
federal rate for determining the present
value of an annuity, an interest for life
or for a term of years, or a remainder or
a reversionary interest for purposes of
section 7520.
REV. RUL. 2020-6 TABLE 1
Applicable Federal Rates (AFR) for March 2020
Period for Compounding
AnnualSemiannualQuarterlyMonthly
Short-term
AFR1.50%1.49%1.49%1.49%
110% AFR1.65%1.64%1.64%1.63%
120% AFR1.80%1.79%1.79%1.78%
130% AFR1.95%1.94%1.94%1.93%
Mid-term
AFR1.53%1.52%1.52%1.52%
110% AFR1.68%1.67%1.67%1.66%
120% AFR1.83%1.82%1.82%1.81%
130% AFR1.99%1.98%1.98%1.97%
150% AFR2.29%2.28%2.27%2.27%
175% AFR2.68%2.66%2.65%2.65%
Long-term
AFR1.93%1.92%1.92%1.91%
110% AFR2.12%2.11%2.10%2.10%
120% AFR2.31%2.30%2.29%2.29%
130% AFR2.52%2.50%2.49%2.49%
REV. RUL. 2020-6 TABLE 2
Adjusted AFR for March 2020
Period for Compounding
AnnualSemiannualQuarterlyMonthly
Short-term adjusted AFR1.13%1.13%1.13%1.13%
Mid-term adjusted AFR1.15%1.15%1.15%1.15%
Long-term adjusted AFR1.47%1.46%1.46%1.46%
March 9, 2020 490 Bulletin No. 2020–11

REV. RUL. 2020-6 TABLE 3
Rates Under Section 382 for March 2020
Adjusted federal long-term rate for the current month1.47%
Long-term tax-exempt rate for ownership changes during the current month (the highest of
the adjusted federal long-term rates for the current month and the prior two months.)
1.63%
REV. RUL. 2020-6 TABLE 4
Appropriate Percentages Under Section 42(b)(1) for March 2020
Note: Under section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service after July
30, 2008, shall not be less than 9%.
Appropriate percentage for the 70% present value low-income housing credit7.40%
Appropriate percentage for the 30% present value low-income housing credit 3.17%
REV. RUL. 2020-6 TABLE 5
Rate Under Section 7520 for March 2020
Applicable federal rate for determining the present value of an annuity, an interest for life or
a term of years, or a remainder or reversionary interest
1.8%
Section 42.—Low-Income
Housing Credit
The applicable federal short-term, mid-term,
and long-term rates are set forth for the month of
March 2020. See Rev. Rul. 2020-6, page 490.
Section 280G.—Golden
Parachute Payments
The applicable federal short-term, mid-term,
and long-term rates are set forth for the month of
March 2020. See Rev. Rul. 2020-6, page 490.
Section 382.—Limitation
on Net Operating Loss
Carryforwards and
Certain Built-In Losses
Following Ownership
Change
The adjusted applicable federal long-term rate
is set forth for the month of March 2020. See Rev.
Rul. 2020-6, page 490.
Section 467.—Certain
Payments for the Use of
Property or Services
The applicable federal short-term, mid-term,
and long-term rates are set forth for the month of
March 2020. See Rev. Rul. 2020-6, page 490.
Section 468.—Special
Rules for Mining and Solid
Waste Reclamation and
Closing Costs
The applicable federal short-term rates are set
forth for the month of March 2020. See Rev. Rul.
2020-6, page 490.
Section 482.—Allocation
of Income and Deductions
Among Taxpayers
The applicable federal short-term, mid-term,
and long-term rates are set forth for the month of
March 2020. See Rev. Rul. 2020-6, page 490.

Section 483.—Interest on
Certain Deferred Payments
The applicable federal short-term, mid-term,
and long-term rates are set forth for the month of
March 2020. See Rev. Rul. 2020-6, page 490.
Section 1288.—Treatment
of Original Issue Discount
on Tax-Exempt Obligations
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month of
March 2020. See Rev. Rul. 2020-6, page 490.
Section 7520.—Valuation
Tables
The applicable federal mid-term rates are set
forth for the month of March 2020. See Rev. Rul.
2020-6, page 490.
Section 7872.—Treatment
of Loans With Below-
Market Interest Rates
The applicable federal short-term, mid-term,
and long-term rates are set forth for the month of
March 2020. See Rev. Rul. 2020-6, page 490.

Bulletin No. 2020–11 491 March 9, 2020

March 9, 2020 492 Bulletin No. 2020–11
Part III
Update for Weighted
Average Interest Rates,
Yield Curves, and Segment
Rates
Notice 2020-11
This notice provides guidance on the
corporate bond monthly yield curve, the
corresponding spot segment rates used
under § 417(e)(3), and the 24-month aver-
age segment rates under § 430(h)(2) of the
Internal Revenue Code. In addition, this
notice provides guidance as to the interest
rate on 30-year Treasury securities under
§ 417(e)(3)(A)(ii)(II) as in effect for plan
years beginning before 2008 and the 30-
year Treasury weighted average rate under
§ 431(c)(6)(E)(ii)(I).
YIELD CURVE AND SEGMENT
RATES
Section 430 specifies the minimum
funding requirements that apply to sin-
gle-employer plans (except for CSEC plans
under § 414(y)) pursuant to § 412. Section
430(h)(2) specifies the interest rates that
must be used to determine a plan’s target
normal cost and funding target. Under
this provision, present value is generally
determined using three 24-month average
interest rates (“segment rates”), each of
which applies to cash flows during speci-
fied periods. To the extent provided under
§ 430(h)(2)(C)(iv), these segment rates are
adjusted by the applicable percentage of
the 25-year average segment rates for the
period ending September 30 of the year
preceding the calendar year in which the
plan year begins.
1
However, an election
may be made under § 430(h)(2)(D)(ii) to
use the monthly yield curve in place of the
segment rates.
Notice 2007-81, 2007-44 I.R.B. 899,
provides guidelines for determining the
monthly corporate bond yield curve, and
the 24-month average corporate bond
segment rates used to compute the target
normal cost and the funding target. Con-
sistent with the methodology specified in
Notice 2007-81, the monthly corporate
bond yield curve derived from January
2020 data is in Table 2020-1 at the end
of this notice. The spot first, second, and
third segment rates for the month of Janu-
ary 2020 are, respectively, 1.91, 2.93, and
3.54.
The 24-month average segment rates
determined under § 430(h)(2)(C)(i)
through (iii) must be adjusted pursuant to
§ 430(h)(2)(C)(iv) to be within the appli-
cable minimum and maximum percentag-
es of the corresponding 25-year average
segment rates. For plan years beginning
before 2021, the applicable minimum per-
centage is 90% and the applicable max-
imum percentage is 110%. The 25-year
average segment rates for plan years be-
ginning in 2019 and 2020 were published
in Notice 2018-73, 2018-40 I.R.B. 526,
and Notice 2019-51, 2019-41 I.R.B. 866,
respectively.
24-MONTH AVERAGE CORPORATE
BOND SEGMENT RATES
The three 24-month average corporate
bond segment rates applicable for Febru-
ary 2020 without adjustment for the 25-
year average segment rate limits are as
follows:
24-Month Average Segment Rates Without 25-Year Average Adjustment
Applicable Month First Segment Second SegmentThird Segment

February 2020 2.753.804.26
Based on § 430(h)(2)(C)(iv), the
24-month averages applicable for Febru-
ary 2020, adjusted to be within the appli-
cable minimum and maximum percentag-
es of the corresponding 25-year average
segment rates, are as follows:
Adjusted 24-Month Average Segment Rates
For Plan Years
Beginning InApplicable Month
First
Segment
Second
Segment
Third
Segment
2019February 20203.745.356.11
2020February 20203.645.215.94
30-YEAR TREASURY SECURITIES
INTEREST RATES
Section 431 specifies the minimum
funding requirements that apply to multi-
employer plans pursuant to § 412. Section
431(c)(6)(B) specifies a minimum amount
for the full-funding limitation described in
§ 431(c)(6)(A), based on the plan’s current
liability. Section 431(c)(6)(E)(ii)(I) pro-
vides that the interest rate used to calculate
current liability for this purpose must be
no more than 5 percent above and no more
than 10 percent below the weighted aver-
age of the rates of interest on 30-year Trea-
sury securities during the four-year period
ending on the last day before the beginning
of the plan year. Notice 88-73, 1988-2 C.B.
<?>
Pursuant to § 433(h)(3)(A), the 3
rd
segment rate determined under § 430(h)(2)(C) is used to determine the current liability of a CSEC plan (which is used to calculate the minimum amount
of the full funding limitation under § 433(c)(7)(C)).

Bulletin No. 2020–11 493 March 9, 2020
Treasury Weighted Average Rates
For Plan Years
Beginning In
30-Year Treasury
Weighted Average
Permissible Range
90% to 105%
February 2020
2.782.50 to 2.92
383, provides guidelines for determining
the weighted average interest rate. The rate
of interest on 30-year Treasury securities
for January 2020 is 2.22 percent. The Ser-
vice determined this rate as the average of
the daily determinations of yield on the 30-
year Treasury bond maturing in November
2049. For plan years beginning in February
2020, the weighted average of the rates of
interest on 30-year Treasury securities and
the permissible range of rates used to cal-
culate current liability are as follows:
MINIMUM PRESENT VALUE
SEGMENT RATES
In general, the applicable interest rates
under § 417(e)(3)(D) are segment rates
computed without regard to a 24-month
average. Notice 2007-81 provides guide-
lines for determining the minimum pres-
ent value segment rates. Pursuant to that
notice, the minimum present value seg-
ment rates determined for January 2020
are as follows:
Minimum Present Value Segment Rates
Month First Segment Second Segment Third Segment
January 2020 1.91 2.93 3.54
DRAFTING INFORMATION
The principal author of this notice is
Tom Morgan of the Office of the Asso-
ciate Chief Counsel (Employee Benefits,
Exempt Organizations, and Employment
Taxes). However, other personnel from
the IRS participated in the development
of this guidance. For further information
regarding this notice, contact Mr. Morgan
at 202-317-6700 or Paul Stern at 202-317-
8702 (not toll-free numbers).

March 9, 2020 494 Bulletin No. 2020–11
Table 2020-1
Monthly Yield Curve for January 2020
Derived from January 2020 Data
MaturityYieldMaturityYieldMaturityYieldMaturityYieldMaturityYield
0.51.7620.53.3640.53.5660.53.6380.53.66
1.01.8021.03.3741.03.5661.03.6381.03.66
1.51.8421.53.3841.53.5661.53.6381.53.66
2.01.8622.03.3942.03.5662.03.6382.03.66
2.51.8922.53.3942.53.5762.53.6382.53.66
3.01.9123.03.4043.03.5763.03.6383.03.66
3.51.9423.53.4143.53.5763.53.6383.53.66
4.01.9724.03.4244.03.5764.03.6384.03.66
4.52.0124.53.4244.53.5764.53.6384.53.67
5.02.0725.03.4345.03.5865.03.6485.03.67
5.52.1325.53.4345.53.5865.53.6485.53.67
6.02.2026.03.4446.03.5866.03.6486.03.67
6.52.2726.53.4546.53.5866.53.6486.53.67
7.02.3527.03.4547.03.5867.03.6487.03.67
7.52.4327.53.4647.53.5967.53.6487.53.67
8.02.5128.03.4648.03.5968.03.6488.03.67
8.52.5828.53.4748.53.5968.53.6488.53.67
9.02.6529.03.4749.03.5969.03.6489.03.67
9.52.7229.53.4849.53.5969.53.6489.53.67
10.02.7930.03.4850.03.6070.03.6490.03.67
10.52.8530.53.4950.53.6070.53.6590.53.67
11.02.9031.03.4951.03.6071.03.6591.03.67
11.52.9531.53.5051.53.6071.53.6591.53.67
12.03.0032.03.5052.03.6072.03.6592.03.67
12.53.0432.53.5052.53.6072.53.6592.53.67
13.03.0833.03.5153.03.6173.03.6593.03.67
13.53.1133.53.5153.53.6173.53.6593.53.67
14.03.1534.03.5254.03.6174.03.6594.03.68
14.53.1734.53.5254.53.6174.53.6594.53.68
15.03.2035.03.5255.03.6175.03.6595.03.68
15.53.2235.53.5355.53.6175.53.6595.53.68
16.03.2436.03.5356.03.6176.03.6596.03.68
16.53.2636.53.5356.53.6276.53.6596.53.68
17.03.2837.03.5457.03.6277.03.6697.03.68
17.53.2937.53.5457.53.6277.53.6697.53.68
18.03.3138.03.5458.03.6278.03.6698.03.68
18.53.3238.53.5558.53.6278.53.6698.53.68
19.03.3339.03.5559.03.6279.03.6699.03.68
19.53.3439.53.5559.53.6279.53.6699.53.68
20.03.3540.03.5560.03.6280.03.66100.03.68

Bulletin No. 2020–11 495 March 9, 2020
Beginning of Construction
for the Credit for Carbon
Oxide Sequestration under
Section 45Q
Notice 2020-12
SECTION 1. PURPOSE
On October 3, 2008, section 115 of the
Energy Improvement and Extension Act
of 2008, Pub. L. 110-343, Div. B, Title I,
122 Stat. 3765, 3829, enacted the credit
for the sequestration of carbon dioxide
under § 45Q of the Internal Revenue Code
(Code). Section 45Q was amended by sec-
tion 1131 of the American Recovery and
Reinvestment Tax Act of 2009, Pub. L.
111-5, Div. B, Title I, 123 Stat 115, 325
(February 17, 2009) and, more recently,
by section 41119 of the Bipartisan Budget
Act of 2018 (BBA), Pub. L. 115-123, Div.
D, Title II, 132 Stat. 64, 162 (February 9,
2018).
As a result of the modifications made
by the BBA amendment, the credit under
§ 45Q now applies to the sequestration of
“qualified carbon oxide,” a broader term
than the qualified carbon dioxide that was
previously the subject of the credit. Fur-
ther, § 45Q now provides that construction
of a qualified facility that includes carbon
capture equipment must begin before Jan-
uary 1, 2024. This amendment became
effective for taxable years beginning after
December 31, 2017.
On May 20, 2019, the Department
of Treasury (Treasury) and the Internal
Revenue Service (IRS) published No-
tice 2019-32, 2019-21 I.R.B. 1187, re-
questing comments on issues concerning
the credit for carbon oxide sequestration
under § 45Q (Section 45Q Credit). In re-
sponse to that notice, many commenters
requested guidance regarding the begin-
ning of construction requirement for the
Section 45Q Credit. This notice provides
guidance on the determination of when
construction has begun on a qualified fa-
cility or on carbon capture equipment that
may be eligible for the Section 45Q Cred-
it. This notice provides two methods for
taxpayers to establish the beginning of
construction requirement (Physical Work
Test and Five Percent Safe Harbor), a
Continuity Requirement for both meth-
ods, guidance on transfers of ownership
of a qualified facility, and additional guid-
ance applicable to the beginning of con-
struction requirement.
The IRS will not issue private letter
rulings or determination letters to taxpay-
ers regarding the application of this notice
or the beginning of construction require-
ment of § 45Q.
SECTION 2. BACKGROUND
Section 45Q(a)(1) allows a credit of
$20 per metric ton of qualified carbon
oxide (i) captured by the taxpayer using
carbon capture equipment which is orig-
inally placed in service at a qualified fa-
cility before the date of the enactment of
BBA, (ii) disposed of by the taxpayer in
secure geological storage, and (iii) neither
used by the taxpayer as a tertiary injectant
in a qualified enhanced oil or natural gas
recovery project nor utilized in a manner
described in § 45Q(f)(5).
Section 45Q(a)(2) allows a credit of
$10 per metric ton of qualified carbon ox-
ide (i) captured by the taxpayer using car-
bon capture equipment which is original-
ly placed in service at a qualified facility
before the date of the enactment of BBA
and (ii) either (I) used by the taxpayer as
a tertiary injectant in a qualified enhanced
oil or natural gas recovery project and dis-
posed of by the taxpayer in secure geolog-
ical storage, or (II) utilized by the taxpay-
er in a manner described in § 45Q(f)(5).
Section 45Q(a)(3) allows a credit of the
applicable dollar amount (as determined
under § 45Q(b)(1)) per metric ton of
qualified carbon oxide (i) captured by the
taxpayer using carbon capture equipment
which is originally placed in service at a
qualified facility on or after the date of the
enactment of BBA during the 12-year pe-
riod beginning on the date the equipment
was originally placed in service, (ii) dis-
posed of by the taxpayer in secure geolog-
ical storage, and (iii) neither used as a ter-
tiary injectant in a qualified enhanced oil
or natural gas recovery project nor utilized
in a manner described in § 45Q(f)(5).
Section 45Q(a)(4) allows a credit of the
applicable dollar amount (as determined
under § 45Q(b)(1)) per metric ton of
qualified carbon oxide (i) captured by the
taxpayer using carbon capture equipment
which is originally placed in service at a
qualified facility on or after the date of the
enactment of BBA, during the 12-year pe-
riod beginning on the date the equipment
was originally placed in service, and (ii)
either (I) used by the taxpayer as a tertiary
injectant in a qualified enhanced oil or nat-
ural gas recovery project and disposed of
by the taxpayer in secure geological stor-
age, or (II) utilized by the taxpayer in a
manner described in § 45Q(f)(5).
Section 45Q(d) sets forth the definition
of a qualified facility as well as beginning
of construction deadlines and the volume
of qualified carbon oxide that must be cap-
tured.
Pursuant to § 45Q(h), the Secretary of
the Treasury or his delegate may prescribe
such regulations and other guidance as
may be necessary or appropriate to carry
out § 45Q, including regulations or other
guidance to determine whether a facility
satisfies the beginning of construction re-
quirements under § 45Q(d)(1) during such
taxable year.
SECTION 3. DEFINITIONS
.01 Qualified Carbon Oxide.
(1) Section 45Q(c)(1) defines “quali-
fied carbon oxide” as—
(a) any carbon dioxide that is captured
from an industrial source by carbon cap-
ture equipment that is originally placed in
service before the date of the enactment
of the BBA, would otherwise be released
into the atmosphere as an industrial emis-
sion of greenhouse gas or lead to such
release, and is measured at the source of
capture and verified at the point of dispos-
al, injection, or utilization,
(b) any carbon dioxide or other carbon
oxide that is captured from an industrial
source by carbon capture equipment that
is originally placed in service on or after
the date of the enactment of the BBA,
would otherwise be released into the at-
mosphere as an industrial emission of
greenhouse gas or lead to such release,
and is measured at the source of capture
and verified at the point of disposal, injec-
tion, or utilization, or
(c) in the case of a direct air capture fa-
cility, any carbon dioxide that is captured
directly from the ambient air, and is mea-
sured at the source of capture and verified

March 9, 2020 496 Bulletin No. 2020–11
at the point of disposal, injection, or uti-
lization.
(2) Section 45Q(c)(2) provides that the
term “qualified carbon oxide” includes the
initial deposit of captured carbon oxide
used as a tertiary injectant but does not
include carbon oxide that is recaptured,
recycled, and re-injected as part of the en-
hanced oil and natural gas recovery pro-
cess.
.02 Qualified Facility. Section 45Q(d)
provides that the term “qualified facility”
means any industrial facility or direct air
capture facility—
(1) the construction of which begins
before January 1, 2024, and
(a) construction of carbon capture
equipment begins before such date, or
(b) the original planning and design for
such facility includes installation of car-
bon capture equipment, and
(2) which captures—
(a) in the case of a facility which emits
not more than 500,000 metric tons of car-
bon oxide into the atmosphere during the
taxable year (Section 45Q(d)(2)(A) Facil-
ity), not less than 25,000 metric tons of
qualified carbon oxide during the taxable
year which is utilized in a manner de-
scribed in § 45Q(f)(5),
(b) in the case of an electricity generating
facility which is not a Section 45Q(d)(2)(a)
Facility (Section 45Q(d)(2)(B) Facility),
not less than 500,000 metric tons of qual-
ified carbon oxide during the taxable year,
or
(c) in the case of a direct air capture
facility or any facility which is not a
Section 45Q(d)(2)(A) Facility or a Sec-
tion 45Q(d)(2)(B) Facility, not less than
100,000 metric tons of qualified carbon
oxide during the taxable year.
.03 Industrial Facility. An industrial
facility is a facility that produces a car-
bon oxide stream from a fuel combus-
tion source, a manufacturing process, or
a fugitive carbon oxide-emission source
that, absent capture and disposal or utili-
zation, would otherwise be released into
the atmosphere as industrial emission of
greenhouse gas or lead to such release.
An industrial facility does not include
a facility that produces carbon dioxide
through carbon dioxide production wells
from natural carbon dioxide-bearing for-
mations.
.04 Direct Air Capture Facility. Section
45Q(e)(1) provides that the term “direct
air capture facility” means any facility that
uses carbon capture equipment to capture
carbon dioxide directly from the ambient
air. A direct air capture facility does not
include any facility that captures carbon
dioxide that is deliberately released from
naturally occurring subsurface springs or
using natural photosynthesis.
.05 Carbon Capture Equipment. Car-
bon capture equipment includes all com-
ponents of property that are used to cap-
ture or process (for example, separation,
purification, drying, and/or compression)
carbon oxide until it is transported away
from the qualified facility for disposal,
utilization, or use as a tertiary injectant.
For these purposes, carbon capture equip-
ment includes a system of gathering lines
that collect carbon oxide captured from a
qualified facility or multiple qualified fa-
cilities that constitute a single project (as
described in section 8.01 of this notice)
for the purpose of transporting that carbon
oxide away from the qualified facility or
single project to a pipeline used to trans-
port carbon oxide from multiple taxpayers
and projects.
SECTION 4. METHODS FOR
ESTABLISHING BEGINNING OF
CONSTRUCTION
.01 In general. This notice provides
two methods for a taxpayer to establish
that construction of a qualified facility or
carbon capture equipment has begun for
purposes of the Section 45Q Credit. A
taxpayer may establish the beginning of
construction by starting physical work of
a significant nature as set forth in section
5 of this notice (Physical Work Test). A
taxpayer may also establish the beginning
of construction by meeting a safe harbor
based on having paid or incurred five per-
cent or more of the total cost of the qual-
ified facility or carbon capture equipment
as set forth in section 6 of this notice (Five
Percent Safe Harbor).
Both methods require that a taxpayer
make continuous progress towards com-
pletion once construction has begun (Con-
tinuity Requirement). Section 7 of this no-
tice discusses the Continuity Requirement
and provides a safe harbor for satisfying
this requirement (Continuity Safe Har-
bor).
.02 Combination of methods. Al-
though a taxpayer may satisfy both meth-
ods of establishing the beginning of con-
struction, construction will be deemed
to have begun on the date the taxpayer
first satisfies one of the two methods. For
example, if a taxpayer performs physical
work of a significant nature on a qualified
facility or carbon capture equipment in
2020, and then pays or incurs five percent
or more of the total cost of the qualified
facility or carbon capture equipment in
2021, construction will be deemed to be-
gin in 2020 under the Physical Work Test,
not in 2021 under the Five Percent Safe
Harbor. Thus, the Continuity Safe Harbor
will be applied beginning in 2020, not in
2021.
For this purpose, a taxpayer that fails
to satisfy the Five Percent Safe Harbor in
one year due to cost overruns (see section
6.03 of this notice) will not be prevented
from using the Physical Work test in a lat-
er year to establish beginning of construc-
tion, provided that occurs before January
1, 2024.
SECTION 5. PHYSICAL WORK
TEST
.01 In general. Construction of a qual-
ified facility or carbon capture equipment
will be considered as having begun when
physical work of a significant nature (as
determined under section 5.02 of this no-
tice) begins, provided that the taxpayer
maintains a continuous program of con-
struction (as determined under section
7.01 of this notice). Work performed by
the taxpayer and work performed for the
taxpayer by other persons under a bind-
ing written contract that is entered into
prior to the manufacture, construction, or
production of components of a qualified
facility or components of carbon capture
equipment is taken into account to de-
termine whether construction has begun.
Whether and when a taxpayer has begun
construction of a qualified facility or car-
bon capture equipment will depend on the
relevant facts and circumstances.
.02 Physical Work of a Significant
Nature. The Physical Work Test requires
that a taxpayer begin physical work of a

Bulletin No. 2020–11 497 March 9, 2020
significant nature. This test focuses on
the nature of the work performed, not the
amount or the cost. Assuming that physi-
cal work performed is of a significant na-
ture, there is no fixed minimum amount of
work or monetary or percentage threshold
required to satisfy the Physical Work Test.
Both off-site and on-site work may be
taken into account for purposes of demon-
strating that physical work of a significant
nature has begun.
(1) Off-Site Physical Work of a Signif-
icant Nature. Generally, off-site physical
work of a significant nature includes the
manufacture of components. Examples
illustrating off-site physical work of a sig-
nificant nature with respect to a qualified
facility or carbon capture equipment in-
clude, but are not limited to:
(a) the manufacture of mounting equip-
ment and support structures such as racks,
skids, and rails;
(b) the manufacture of components
necessary for carbon capture processes
such as membranes, sorbent vessels, ad-
sorbers, compressors, engines, motors,
power generators and regenerators, reboil-
ers, turbines, pressure vessels and other
vessels, piping and pipelines, pumps, heat
exchangers, solvent pumps, filters, recy-
cling units, electrostatic filtration, water
wash equipment, lube oil systems, dehy-
dration systems, glycol contractors, spe-
cially designed flue gas ducts, condition-
ers, cooling towers, absorber units, and
other types of gas separation, liquification,
or processing equipment;
(c) the manufacture of components
necessary for disposal of qualified carbon
oxide in secure geological storage (as de-
scribed in § 45Q(a)(1)(B) and (a)(3)(B))
such as valves, specialized casing, or oth-
er components of a wellhead or well; and
(d) the manufacture of equipment nec-
essary for disposal of qualified carbon
oxide in secure geological storage (as de-
scribed in § 45Q(a)(1)(B) and (a)(3)(B))
such as wellhead equipment, booster com-
pressors, and monitoring equipment for a
storage site.
(2) On-Site Physical Work of a Signifi-
cant Nature. Examples illustrating on-site
physical work of a significant nature with
respect to a qualified facility or carbon
capture equipment include, but are not
limited to:
(a) the excavation for and installation of
foundations (for the project as well as for
buildings to house equipment necessary to
the project) including the setting of anchor
bolts into the ground and the pouring of the
concrete pads of the foundation;
(b) the installation of a system of
gathering lines necessary to connect the
industrial facility to the carbon capture
equipment or other equipment necessary
to the qualified facility before transporta-
tion away from the qualified facility for
disposal, utilization, or use as a tertiary
injectant;
(c) the installation of components nec-
essary for carbon capture processes such
as membranes, sorbent vessels, adsorb-
ers, compressors, engines, motors, pow-
er generators and regenerators, reboilers,
turbines, pressure vessels and other ves-
sels, piping and pipelines, pumps, heat ex-
changers, solvent pumps, filters, recycling
units, electrostatic filtration, water wash
equipment, lube oil systems, dehydration
systems, glycol contractors, specially de-
signed flue gas ducts, conditioners, cool-
ing towers, absorber units, and other types
of gas separation, liquification, or process-
ing equipment; and
(d) the installation of equipment and
other work necessary for the disposal of
qualified carbon oxide in secure geolog-
ical storage (as described in § 45Q(a)(1)
(B) and (a)(3)(B)) at the geological storage
site, which may be at a different location
than the qualified facility or carbon cap-
ture equipment.
.03 Preliminary Activities. Physical
work of a significant nature does not in-
clude preliminary activities, even if the
cost of those preliminary activities is
properly included in the depreciable basis
of the qualified facility or carbon capture
equipment. Generally, preliminary activi-
ties include, but are not limited to:
(1) securing financing;
(2) exploring;
(3) researching;
(4) obtaining permits and licenses;
(5) conducting test drilling to deter-
mine soil condition (including to test the
strength of a foundation);
(6) clearing a site;
(7) excavating to change the contour of
the land (as distinguished from excavation
for a foundation); and
(8) removing existing foundations or
any components that are not part of the
qualified facility or carbon capture equip-
ment (including those on or attached to
building structures).
.04 Inventory. Physical work of a sig-
nificant nature does not include work (per-
formed either by the taxpayer or by anoth-
er person under a binding written contract)
to produce components of a qualified fa-
cility or carbon capture equipment that are
either in existing inventory or are normal-
ly held in inventory by a vendor.
SECTION 6. FIVE PERCENT SAFE
HARBOR
.01 In general. Construction of a qual-
ified facility or carbon capture equipment
will be considered as having begun if:
(1) a taxpayer pays or incurs (within
the meaning of § 1.461-1(a)(1) and (2) of
the Income Tax Regulations) five percent
or more of the total cost of the qualified
facility or carbon capture equipment, and
(2) the taxpayer makes continuous ef-
forts to advance towards completion of
the qualified facility or carbon capture
equipment (as determined under section
7.02 of this notice).
.02 Total Cost of Qualified Facility
or Carbon Capture Equipment. All costs
properly included in the depreciable ba-
sis of a qualified facility or carbon cap-
ture equipment are taken into account to
determine whether the Five Percent Safe
Harbor has been met. Costs associated
with Front-End Engineering and Design
(FEED) activities or other approaches for
front-end planning (e.g., the Front-End
Loading (FEL) approach) common to
projects of similar scope and complexity
may also be considered when determining
whether the Five Percent Safe Harbor has
been met.
.03 Cost Overruns.
(1) Single Project. If the total cost of a
qualified facility or carbon capture equip-
ment that is a single project (as described
in section 8.01 of this notice) comprised
of multiple qualified facilities or multi-
ple units of carbon capture equipment
exceeds its anticipated total cost, so that
the amount a taxpayer actually paid or in-
curred with respect to the single project
turns out to be less than five percent of the

March 9, 2020 498 Bulletin No. 2020–11
total cost of the single project at the time
it is placed in service, the Five Percent
Safe Harbor is not satisfied. However, the
Five Percent Safe Harbor will be satis-
fied and the Section 45Q Credit may be
claimed with respect to some, but not all,
of the qualified facilities or units of carbon
capture equipment comprising the single
project as long as the total aggregate cost
of those qualified facilities or units of car-
bon capture equipment that are eligible for
the Section 45Q Credit is not more than
twenty times greater than the amount the
taxpayer paid or incurred.
(a) Example. In 2023, a taxpayer incurs
$250,000 in costs to construct Project C,
comprised of 5 separate direct air capture
facilities that will be operated as a single
project (as described in section 8.01 of
this notice). The taxpayer anticipates that
each direct air capture facility will cost
$1,000,000 for a total cost for Project C
of $5,000,000. Thereafter, the taxpay-
er makes continuous efforts to complete
Project C. The taxpayer timely places all
five of the direct air capture facilities that
comprise Project C in service in 2026. At
that time, the actual total cost of Project C
amounts to $6,000,000, with each direct
air capture facility costing $1,200,000. Al-
though the taxpayer did not pay or incur
five percent of the actual total cost of Proj-
ect C in 2023, the taxpayer will be treated
as satisfying the Five Percent Safe Harbor
in 2023 with respect to 4 of the direct air
capture facilities, as their actual total cost
of $4,800,000 is not more than twenty
times greater than the $250,000 in costs
incurred by the taxpayer. Thus, the tax-
payer may claim the Section 45Q Cred-
it based on the amount of carbon oxide
captured from 4 of the direct air capture
facilities. However, if the taxpayer is able
to demonstrate that the Physical Work Test
was satisfied with respect to Project C pri-
or to January 1, 2024, the taxpayer may
claim the Section 45Q Credit based on the
entire Project C.
(2) Single Qualified Facility or Unit of
Carbon Capture Equipment. If the total
cost of a single qualified facility or unit
of carbon capture equipment, which is
not part of a single project (as described
in section 8.01 of this notice) comprised
of multiple qualified facilities or units
of carbon capture equipment and which
cannot be separated into multiple qual-
ified facilities or units of carbon capture
equipment, exceeds its anticipated total
cost so that the amount a taxpayer actually
paid or incurred with respect to the single
qualified facility or unit of carbon capture
equipment as of an earlier year is less than
five percent of the total cost of the single
qualified facility or unit of carbon capture
equipment at the time it is placed in ser-
vice, then the taxpayer will not satisfy the
Five Percent Safe Harbor with respect to
any portion of the single qualified facili-
ty or unit of carbon capture equipment in
such earlier year.
(a) Example. In 2023, a taxpayer incurs
$250,000 in costs to construct Project D,
a qualified facility. The taxpayer antici-
pates that the total cost of Project D will
be $5,000,000. Thereafter, the taxpay-
er makes continuous efforts to complete
Project D. The taxpayer places Project D
in service in a later year. At that time, its
actual total cost amounts to $6,000,000.
Because Project D is a single qualified fa-
cility that is not a single project comprised
of multiple qualified facilities, the taxpay-
er will not satisfy the Five Percent Safe
Harbor as of 2023. However, the taxpayer
may demonstrate that construction began
in 2023 if the requirements of the Physical
Work Test are satisfied.
SECTION 7. CONTINUITY
REQUIREMENT
.01 Physical Work Test: Continuous
Construction Test. A continuous pro-
gram of construction involves continuing
physical work of a significant nature (as
described in section 5.02 of this notice).
Whether a taxpayer maintains a contin-
uous program of construction to satisfy
the Continuity Requirement will be deter-
mined by the relevant facts and circum-
stances.
.02 Five Percent Safe Harbor: Con-
tinuous Efforts Test. Whether a taxpayer
makes continuous efforts to advance to-
wards completion of a qualified facility
or carbon capture equipment to satisfy
the Continuity Requirement will be deter-
mined by the relevant facts and circum-
stances. Facts and circumstances indicat-
ing continuous efforts to advance towards
completion of a qualified facility or car-
bon capture equipment include, but are
not limited to:
(1) paying or incurring additional
amounts included in the total cost of the
qualified facility or carbon capture equip-
ment;
(2) entering into binding written con-
tracts for the manufacture, construction,
or production of components of the qual-
ified facility or components of the carbon
capture equipment or for future work to
construct the qualified facility or carbon
capture equipment;
(3) obtaining necessary permits; and
(4) performing physical work of a sig-
nificant nature (as described in section
5.02 of this notice).
.03 Excusable Disruptions to Continu-
ous Construction and Continuous Efforts
Tests. Certain disruptions in a taxpayer’s
continuous construction or continuous
efforts to complete a qualified facility or
carbon capture equipment that are beyond
the taxpayer’s control will not be con-
sidered as indicating that a taxpayer has
failed to satisfy the Continuity Require-
ment. However, these disruptions will
not extend the Continuity Safe Harbor
Deadline as provided in section 7.05 of
this notice. Following is a non-exclusive
list of construction disruptions that will
not be considered as indicating that a tax-
payer has failed to satisfy the Continuity
Requirement:
(1) delays due to severe weather con-
ditions;
(2) delays due to natural disasters;
(3) delays in obtaining permits or li-
censes from any federal, state, local, or
Indian tribal government;
(4) delays at the written request of a
federal, state, local, or Indian tribal gov-
ernment regarding matters of public safe-
ty, security, or similar concerns;
(5) interconnection-related delays, such
as those relating to the completion of con-
struction on a new carbon dioxide pipeline
or necessary upgrades to resolve capacity
or congestion issues that may be associ-
ated with a project’s planned interconnec-
tion;
(6) delays in the manufacture of cus-
tom components;
(7) delays due to labor stoppages;
(8) delays due to the inability to obtain
specialized equipment of limited avail-
ability;
(9) delays due to the presence of en-
dangered species;

Bulletin No. 2020–11 499 March 9, 2020
(10) financing delays; and
(11) delays due to supply shortages.
.04 Timing of Excusable Disruption
Determination. In the case of a single proj-
ect comprised of a single qualified facili-
ty or carbon capture equipment, whether
an excusable disruption has occurred for
purposes of the satisfying the Continuity
Requirement must be determined in the
calendar year during which the qualified
facility or carbon capture equipment is
placed in service. In the case of a single
project comprised of multiple qualified
facilities or units of carbon capture equip-
ment, whether an excusable disruption has
occurred for purposes of the beginning of
construction requirement of § 45Q must
be determined in the calendar year during
which the last of multiple qualified facili-
ties or units of carbon capture equipment
is placed in service.
.05 Continuity Safe Harbor: Deemed
Satisfaction of Continuity Requirement.
Except as provided in this section, if a tax-
payer places a qualified facility or carbon
capture equipment in service by the end
of a calendar year that is no more than
six calendar years after the calendar year
during which construction of the qualified
facility or carbon capture equipment be-
gan (Continuity Safe Harbor Deadline),
the qualified facility or carbon capture
equipment will be considered to satisfy
the Continuity Safe Harbor. The excus-
able disruption rules in section 7.03 of this
notice do not extend the Continuity Safe
Harbor Deadline. If a qualified facility or
carbon capture equipment is not placed
in service before the end of the sixth cal-
endar year after the calendar year during
which construction of the qualified facil-
ity or carbon capture equipment began,
whether the qualified facility or carbon
capture equipment satisfies the Continui-
ty Requirement under either the Physical
Work Test or the Five Percent Safe Harbor
will be determined based on the relevant
facts and circumstances.
For example, if construction begins
on a qualified facility or carbon capture
equipment on January 15, 2021, and the
qualified facility or carbon capture equip-
ment is placed in service by December
31, 2027, the qualified facility or carbon
capture equipment will be considered
to satisfy the Continuity Safe Harbor. If
the qualified facility or carbon capture
equipment is not placed in service before
January 1, 2028, whether the Continuity
Requirement was satisfied will be deter-
mined based on the relevant facts and cir-
cumstances.
SECTION 8. OTHER GUIDANCE
APPLICABLE TO PHYSICAL
WORK TEST AND FIVE PERCENT
SAFE HARBOR
.01 Single project. Solely for purposes
of determining whether construction of a
qualified facility or carbon capture equip-
ment has begun for purposes of the Sec-
tion 45Q Credit, multiple qualified facili-
ties or units of carbon capture equipment
that are operated as part of a single project
(along with any components of property
that serve some or all such qualified facil-
ities or units of carbon capture equipment)
may be treated as a single qualified facil-
ity or unit of carbon capture equipment.
Whether multiple qualified facilities or
units of carbon capture equipment are
operated as part of a single project will
depend on the relevant facts and circum-
stances.
(1) Factors for Single Project Deter-
mination. Factors indicating that multiple
qualified facilities or units of carbon cap-
ture equipment are operated as part of a
single project include, but are not limited
to:
(a) the qualified facilities or units of
carbon capture equipment are owned by a
single legal entity;
(b) the qualified facilities or units of
carbon capture equipment are constructed
in the same general geographic location or
on adjacent or contiguous pieces of land;
(c) a single system of gathering lines or
a single off-take operation is used to col-
lect and deliver carbon oxide to a transpor-
tation pipeline;
(d) carbon oxide captured from the
qualified facilities is disposed of, utilized,
or used as a tertiary injectant pursuant to a
shared contract;
(e) the qualified facilities or units of
carbon capture equipment are described
in one or more common environmental or
other regulatory permits or are required to
collectively report their activities;
(f) the qualified facilities or units of
carbon capture equipment were construct-
ed pursuant to a single contract providing
FEED or similar services covering the
full scope of the single project;
(g) the qualified facilities or units of
carbon capture equipment were construct-
ed pursuant to a single master construc-
tion contract; and
(h) the construction of the qualified fa-
cilities or units of carbon capture equip-
ment was financed pursuant to the same
loan agreement.
(2) Example. A taxpayer is developing
5 separate units of carbon capture equip-
ment that will be constructed adjacent to
and connected to multiple industrial fa-
cilities. These industrial facilities are lo-
cated within the same general geograph-
ic location. All 5 units of carbon capture
equipment are described in common en-
vironmental and other regulatory permits.
Pursuant to a single contract, carbon oxide
captured from all 5 units of carbon capture
equipment will be transported to a single
off-taker that will use that carbon oxide as
a tertiary injectant. In 2022, the taxpayer
manufactures 1 of the 5 units of carbon
capture equipment. Thereafter, the taxpay-
er completes the construction of all 5 units
of carbon capture equipment pursuant to
a continuous program of construction and
connects them to industrial facilities. The
taxpayer may treat the 5 units of carbon
capture equipment as a single project
(Project E). For purposes of the Section
45Q Credit, the taxpayer has performed
physical work of a significant nature that
constitutes the beginning of construction
of Project E in 2022.
(3) Timing of Single Project Determi-
nation. The determination of whether mul-
tiple qualified facilities or units of carbon
capture equipment are operated as part of
a single project and are therefore treated
as a single qualified facility or unit of car-
bon capture equipment for purposes of the
beginning of construction requirement of
§ 45Q must be determined in the calendar
year during which the last of the multiple
qualified facilities or units of carbon cap-
ture equipment is placed in service.
(4) Disaggregation for Continuity Safe
Harbor. Multiple qualified facilities or
units of carbon capture equipment that
are operated as part of a single project
and treated as a single qualified facility or
carbon capture equipment under section
8.01 of this notice for purposes of deter-
mining whether construction of a qualified

March 9, 2020 500 Bulletin No. 2020–11
facility or carbon capture equipment has
begun may be disaggregated and treated
as multiple separate qualified facilities
or units of carbon capture equipment for
purposes of determining whether a sep-
arate qualified facility or unit of carbon
capture equipment satisfies the Continuity
Safe Harbor. Those disaggregated sepa-
rate qualified facilities or units of carbon
capture equipment that are placed in ser-
vice prior to the Continuity Safe Harbor
Deadline will be eligible for the Continu-
ity Safe Harbor. The remaining disaggre-
gated separate qualified facilities or units
of carbon capture equipment may satisfy
the Continuity Requirement under a facts
and circumstances determination.
(5) Example. A taxpayer is developing
Project F that will consist of 5 qualified fa-
cilities. Carbon oxide captured from Proj-
ect F will be collected and delivered to a
transportation pipeline through a single
system of gathering lines and disposed of
through a single contract for secure geo-
logical storage. Project F will be treated
as a single project under section 8.01 of
this notice.
In 2022, the taxpayer performs physi-
cal work of a significant nature on Proj-
ect F that satisfies the Physical Work Test.
Thereafter, the taxpayer places in service
only 4 of the 5 separate qualified facilities
comprising Project F in 2028. The taxpay-
er disaggregates Project F under section
8.01(4) of this notice; 4 of the 5 separate
qualified facilities satisfy the Continuity
Safe Harbor. For the remaining qualified
facility, the taxpayer may demonstrate that
it satisfies the Continuous Construction
Test described in section 7.01 of this no-
tice based on the facts and circumstances.
.02 Construction by Contract. For
components of qualified facility or carbon
capture equipment that are manufactured,
constructed, or produced for the taxpayer
by another person under a binding written
contract (as described in section 8.02(1)
of this notice), the work performed and
amounts paid or incurred under the con-
tract are taken into account in determining
whether the Physical Work Test or Five
Percent Safe Harbor Test is met, provid-
ed the contract is entered into prior to the
work taking place or the amounts paid or
incurred.
(1) Binding Written Contract. A written
contract is binding only if it is enforceable
under local law against the taxpayer or a
predecessor and does not limit damages to
a specified amount (for example, by use
of a liquidated damages provision). For
this purpose, a contractual provision that
limits damages to an amount equal to at
least five percent of the total contract price
will not be treated as limiting damages to
a specified amount. For additional guid-
ance regarding the definition of a binding
written contract, see § 1.168(k)-1(b)(4)(ii)
(A)-(D) of the Income Tax Regulations.
(2) Master Contract. If a taxpayer en-
ters into a binding written contract for a
specific number of components of prop-
erty to be manufactured, constructed, or
produced for the taxpayer by another per-
son under a binding written contract (mas-
ter contract), and then through a new bind-
ing written contract (project contract) the
taxpayer assigns its rights to certain com-
ponents of property to an affiliated special
purpose vehicle that will own the qualified
facility or carbon capture equipment for
which such components of property are to
be used, work performed or amounts paid
or incurred with respect to the master con-
tract may be taken into account in deter-
mining whether the Physical Work Test or
Five Percent Safe Harbor Test is met with
respect to the qualified facility or carbon
capture equipment.
.03 Look-through Rule.
(1) Physical Work Test. Both on-site
and off-site work (performed either by
the taxpayer or by another person under
a binding written contract) may be taken
into account for purposes of demonstrat-
ing that physical work of a significant na-
ture has begun with respect to a qualified
facility or carbon capture equipment. For
example, in the case of a qualified facil-
ity or carbon capture equipment, on-site
physical work of a significant nature may
begin with the installation of piping and
pipelines, including to connect an indus-
trial facility to carbon capture equipment.
If the qualified facility or carbon capture
equipment’s piping and pipelines are to
be assembled on-site from components of
property manufactured off-site by a per-
son other than the taxpayer and delivered
to the site, physical work of a significant
nature begins when the manufacture of the
components of the piping and pipelines
begin at the off-site location, but only if
(i) the manufacturer’s work is performed
pursuant to a binding written contract and
(ii) these components of property are not
held in the manufacturer’s inventory. If
a manufacturer produces components of
property for multiple qualified facilities or
units of carbon capture equipment, a rea-
sonable method must be used to associate
individual components of property with a
particular purchaser.
(2) Five Percent Safe Harbor. For a
qualified facility or carbon capture equip-
ment or components of a qualified facil-
ity or carbon capture equipment that are
manufactured, constructed, or produced
for the taxpayer by another person under a
binding written contract with the taxpay-
er, amounts paid or incurred with respect
to the qualified facility or carbon capture
equipment by the other person before
the qualified facility or carbon capture
equipment is provided to the taxpayer are
deemed paid or incurred by the taxpayer
when the amounts are paid or incurred
by the other person under the principles
of § 461 for purposes of the Five Percent
Safe Harbor Test.
(a) Example. In 2023, an accrual-meth-
od taxpayer, G, enters into a binding writ-
ten contract with H. Under the contract,
G will provide components of carbon
capture equipment to H in June 2025. In
2023, G pays J pursuant to a contract for J
to provide parts to G (in March 2024) for
use in the components of carbon capture
equipment. G’s employees provide G with
services necessary to design and plan for
the production of the components of car-
bon capture equipment in 2023 and with
services to manufacture (assemble) the
components of carbon capture equipment
in 2025.
G incurs the cost to design and plan for
the production of the components of car-
bon capture equipment in 2023, incurs the
costs for the components of carbon capture
equipment in March 2024 when J delivers
the components of carbon capture equip-
ment to G (even though the components
of carbon capture equipment were paid for
in 2023), and incurs the costs for G’s em-
ployees to manufacture the components
of carbon capture equipment in 2025. For
purposes of determining whether H has
satisfied the Five Percent Safe Harbor
in 2023, H may only include the costs G
incurred for its employees’ performance
of design and planning activities for the

Bulletin No. 2020–11 501 March 9, 2020
components of carbon capture equipment
in 2023. The other costs in this example
are treated as incurred by H in 2024 and
2025, and are included in the total cost of
the carbon capture equipment.
.04 Retrofitted Qualified Facility or
Carbon Capture Equipment.
(1) In general. A qualified facility or
carbon capture equipment may qualify as
originally placed in service even though it
contains some used components of prop-
erty, provided the fair market value of the
used components of property is not more
than 20 percent of the qualified facility or
carbon capture equipment’s total value
(the cost of the new components of prop-
erty plus the value of the used components
of property) (80/20 Rule). See Rev. Rul.
94-31, 1994-1 C.B. 16; Notice 2008-60,
2008-2 C.B. 178. In the case of a single
project comprised of multiple qualified
facilities or units of carbon capture equip-
ment, the 80/20 Rule is applied to each
qualified facility or unit of carbon capture
equipment comprising the single project.
For purposes of the 80/20 Rule, the cost of
a new qualified facility or carbon capture
equipment includes all properly capital-
ized costs of the new qualified facility or
carbon capture equipment.
(2) Beginning of Construction. To
satisfy the beginning of construction re-
quirement of § 45Q, the Physical Work
Test or the Five Percent Safe Harbor is
applied only with respect to the work per-
formed on, or amounts paid or incurred
for, new components of property used to
retrofit used components of property or
an existing qualified facility or carbon
capture equipment. For the Five Percent
Safe Harbor, all costs properly capital-
ized in the basis of the qualified facility
or carbon capture equipment are taken
into account.
SECTION 9. TRANSFER OF
QUALIFIED FACILITY OR
CARBON CAPTURE EQUIPMENT
.01 In general. The definition of a qual-
ified facility provided in § 45Q(d) requires
that the construction of the facility begin
before January 1, 2024, and either con-
struction of carbon capture equipment be-
gins before such date or the original plan-
ning and design for such facility includes
installation of carbon capture equipment.
There is no statutory requirement that
the taxpayer that places the facility in
service also be the taxpayer that begins
construction of the facility. Thus, except
as provided in section 9.03 of this notice,
a fully or partially developed facility may
be transferred without losing its qualifica-
tion under the Physical Work Test or the
Five Percent Safe Harbor for purposes of
§ 45Q.
For example, a taxpayer may acquire a
qualified facility or carbon capture equip-
ment (that consists of more than just tan-
gible personal property) from an unrelated
developer that had begun construction of
the qualified facility or carbon capture
equipment prior to January 1, 2024, and
thereafter the taxpayer may complete the
qualified facility or carbon capture equip-
ment and place it in service. The work per-
formed or amount paid or incurred prior
to January 1, 2024, by the unrelated trans-
feror developer may be taken into account
for purposes of determining whether the
qualified facility or carbon capture equip-
ment satisfies the Physical Work Test or
Five Percent Safe Harbor.
(1) Example. In August 2023, a devel-
oper acquires a parcel of land on which
it intends to build and operate Project K,
a qualified facility that will include car-
bon capture equipment. The developer
contributes the land to its wholly-owned
limited liability company (LLC), which
is disregarded as an entity separate from
its owner for federal tax purposes, to hold
and develop Project K. In November 2023,
the developer incurs 5 percent of the total
cost of Project K and thereafter maintains
continuous efforts to advance towards the
completion of Project K. In April 2024, to
finance the development of Project K, the
developer sells 95 percent of the interests
in LLC to a group of investors who are not
related to the developer, and the developer
does not contribute the sales proceeds to
LLC.
Under Rev. Rul. 99-5, 1999-1 C.B.
434, the developer is treated as selling
95 percent of each of the assets of LLC
to the investors, and immediately thereaf-
ter the developer and investors are treated
as contributing their respective 5 percent
and 95 percent interests in those assets
to LLC, which is now a partnership and
the owner of Project K for federal tax
purposes. In October 2026, LLC places
Project K in service. Because Project K
satisfies the Five Percent Safe Harbor in
November 2023 and assuming Project K
otherwise satisfies the requirements of the
Section 45Q Credit, the LLC is eligible to
claim the Section 45Q Credit with respect
to Project K.
(2) Example. In 2025, a taxpayer ac-
quires an unfinished qualified facility (that
consists of land and components of an in-
dustrial facility and components of carbon
capture equipment) from an unrelated de-
veloper that had begun construction of the
qualified facility in 2022, and thereafter
the taxpayer completes the development
of that qualified facility and places it in
service in 2028. The work performed or
the amounts paid or incurred by the un-
related developer prior to the taxpayer’s
acquisition of the qualified facility may be
taken into account by the taxpayer for pur-
poses of determining when the qualified
facility satisfies the Physical Work Test or
the Five Percent Safe Harbor.
.02 Relocation of components of a
Qualified Facility or Carbon Capture
Equipment by taxpayer. A taxpayer may
begin construction of a qualified facili-
ty or carbon capture equipment with the
intent to develop the qualified facility or
carbon capture equipment at a certain site,
and thereafter transfer components of the
qualified facility or carbon capture equip-
ment to a different site, complete its devel-
opment, and place it in service. The work
performed or amount paid or incurred pri-
or to the site transfer by such a taxpayer
may be taken into account for purposes of
determining whether the qualified facility
or carbon capture equipment satisfies the
Physical Work Test or the Five Percent
Safe Harbor.
.03 Transfers of components of a Qual-
ified Facility or Carbon Capture Equip-
ment between unrelated parties.
(1) In general. In the case of a trans-
fer consisting solely of tangible personal
property (including contractual rights to
such property under a binding written con-
tract) to a transferee not related (within the
meaning of § 197(f)(9)(C) and § 1.197-
2(h)(6) of the Income Tax Regulations)
to the transferor, any work performed or
amount paid or incurred by the transferor
with respect to such transferred property
will not be taken into account with respect
to the transferee for purposes of the Phys-

March 9, 2020 502 Bulletin No. 2020–11
ical Work Test or the Five Percent Safe
Harbor.
(2) Example. Developer D intends
to develop and operate carbon capture
equipment at Facility L, an industrial fa-
cility owned and operated by a different
taxpayer. Prior to January 1, 2024, De-
veloper D pays or incurs $60,000 to have
CO
2
compressors that will be used in the
capture of carbon oxide manufactured
off-site pursuant to a binding written con-
tract. Thereafter Developer D incurs no
further development costs and engages
in no further development activity with
respect to the carbon capture equipment.
In January 2024, Developer D sells the
CO
2
compressors to Developer E, a party
unrelated to Developer D. Developer E
is developing and intends to operate car-
bon capture equipment at Facility M, an
industrial facility located on a parcel of
land owned by Developer E. Developer
E incorporates the CO
2
compressors ac-
quired from Developer D into the carbon
capture equipment to be used at Facility
M. In October 2028, Developer E places
the carbon capture equipment in service
at Facility M. The total cost of the car-
bon capture equipment at Facility M is
$1,000,000.
Amounts paid or incurred by Devel-
oper D prior to January 1, 2024, for the
CO
2
compressors will not be taken into
account for purposes of satisfying the
Five Percent Safe Harbor with respect to
the carbon capture equipment at Facili-
ty M. However, if without regard to the
CO
2
compressors, Developer E has oth-
erwise satisfied the Physical Work Test
or the Five Percent Safe Harbor with
respect to the carbon capture equipment
at Facility M, Developer E will be con-
sidered to have begun construction on
Facility M for purposes of the Section
45Q Credit.
SECTION 10. RELIANCE ON
NOTICE 2009-83
Notice 2009-83, 2009-44 I.R.B. 588,
which Notice 2011-25, I.R.B. 2011-14
604, modified by removing section 4.07
of Notice 2009-83, provides guidance
on determining eligibility for the former
credit under § 45Q for carbon dioxide
sequestration, the amount of the credit
for tax years prior to the BBA amend-
ments to § 45Q, and the rules regarding
adequate security measures for secure
geological storage of carbon dioxide.
Taxpayers may rely on Notice 2009-83,
as modified by Notice 2011-25, until ad-
ditional guidance on those specific issues
is provided by the Treasury Department
and the IRS.
SECTION 11. EFFECTIVE DATE
The provisions of this notice are ef-
fective on March 9, 2020. Taxpayers that
began construction on a qualified facility
or carbon capture equipment by satisfy-
ing either the Physical Work Test or the
Five Percent Safe Harbor Test, or both,
before the effective date of this notice,
may use the effective date of this notice as
the date that construction began on such
qualified facility or carbon capture equip-
ment. A taxpayer that began construction
on a qualified facility or carbon capture
equipment before the effective date of this
notice under both the Physical Work Test
and the Five Percent Safe Harbor may
choose either method (but not both) for
the purpose of applying the beginning of
construction rules of this notice.
SECTION 12. DRAFTING
INFORMATION
The principal author of this notice is Jen-
nifer Bernardini of the Office of Associate
Chief Counsel (Passthroughs & Special In-
dustries). For further information regarding
this notice contact Ms. Bernardini on (202)
317-6853 (not a toll-free number).
Determination of Housing
Cost Amounts Eligible for
Exclusion or Deduction for
2020
Notice 2020-13
I. PURPOSE
This notice provides adjustments to the
limitation on housing expenses for pur-
poses of section 911 of the Internal Rev-
enue Code for specific locations for 2020.
These adjustments are made on the basis
of geographic differences in housing costs
relative to housing costs in the United
States.
II. BACKGROUND
Section 911(a) allows a qualified in-
dividual to elect to exclude from gross
income the foreign earned income and
housing cost amount of such individual.
The term “housing cost amount” is gen-
erally the total of the housing expenses
for the taxable year minus a base housing
amount. See § 911(c)(1). For this purpose,
the base housing amount for the taxable
year is limited to an amount that is tied
to the maximum foreign earned income
exclusion amount, which is $107,600 for
2020. See § 911(c)(1)(B) and (d)(1). Spe-
cifically, the base housing amount is 16
percent of the maximum foreign earned
income exclusion amount (computed on
a daily basis), multiplied by the number
of days in the applicable period that fall
within the taxable year. Assuming that
the entire taxable year of a qualified indi-
vidual is within the applicable period, the
base housing amount for 2020 is $17,216
($107,600 x .16).
Similarly, the housing expense amount
is also limited, based on a percentage of
the maximum foreign earned income ex-
clusion amount. Specifically, the limit on
such housing expenses generally equals
30 percent of the maximum foreign earned
income exclusion amount (computed on a
daily basis), multiplied by the number of
days in the applicable period for which
the taxpayer is a qualified individual. See
§ 911(c)(2)(A) and (d)(1). Thus, under
this general limitation, a qualified individ-
ual whose entire taxable year is within the
applicable period is limited to maximum
housing expenses of $32,280 ($107,600
x .30) for 2020. However, section 911(c)
(2)(B) authorizes the Secretary to issue
regulations or other guidance to adjust
the percentage under section 911(c)(2)(A)
(i) (which determines the limit on hous-
ing expenses) based on geographic differ-
ences in housing costs relative to housing
costs in the United States. Pursuant to this
authority, the Department of the Treasury

Bulletin No. 2020–11 503 March 9, 2020
(Treasury Department) and the Internal
Revenue Service (IRS) have published
annual notices concerning the limitation
on the section 911 housing cost amounts
since the 2006 taxable year.
For more background on the foreign
housing exclusion, see https://www.irs.
gov/individuals/international-taxpayers/
foreign-housing-exclusion-or-deduc-
tion.
III. TABLE OF ADJUSTED
HOUSING LIMITATIONS FOR 2020
The following table provides adjusted
limitations on housing expenses (in lieu
of the otherwise applicable limitation of
$32,280) for 2020.
CountryLocation
Limitation on
Housing Expenses
(full year)
Limitation on
Housing Expenses
(daily)
AngolaLuanda84,000229.51
ArgentinaBuenos Aires56,500154.37
AustraliaCanberra35,30096.45
AustraliaSydney67,900185.52
AustriaVienna35,40096.72
Bahamas, TheNassau49,700135.79
BahrainBahrain48,300131.97
BarbadosBarbados37,700103.01
BarbadosBridgetown37,700103.01
BelgiumBrussels40,500110.66
BelgiumGosselies36,10098.63
BelgiumMons36,10098.63
BelgiumSHAPE/Chièvres36,10098.63
BermudaBermuda90,000245.90
BrazilRio de Janeiro35,10095.90
BrazilSao Paulo56,600154.64
CanadaCalgary38,200104.37
CanadaMontreal52,100142.35
CanadaOttawa44,000120.22
CanadaQuebec34,60094.54
CanadaToronto50,000136.61
CanadaVancouver45,300123.77
CanadaVictoria39,500107.92
Cayman IslandsGrand Cayman48,000131.15
ChileSantiago34,40093.99
ChinaBeijing69,000188.52
ChinaHong Kong114,300312.30
ChinaShanghai57,001155.74
ColombiaBogota58,700160.38
ColombiaAll cities other than Bogota49,400134.97
Costa RicaSan Jose37,800103.28
Democratic Republic of the CongoKinshasa42,000114.75
DenmarkCopenhagen43,704119.41
Dominican RepublicSanto Domingo45,500124.32
EcuadorQuito38,200104.37

March 9, 2020 504 Bulletin No. 2020–11
CountryLocation
Limitation on
Housing Expenses
(full year)
Limitation on
Housing Expenses
(daily)
EstoniaTallinn46,600127.32
FranceGarches69,400189.62
FranceLyon38,400104.92
FranceMarseille37,400102.19
FranceParis69,400189.62
FranceSevres69,400189.62
FranceSuresnes69,400189.62
FranceVersailles69,400189.62
GermanyBabenhausen34,00092.90
GermanyBaumholder33,80092.35
GermanyBerlin41,600113.66
GermanyBirkenfeld33,80092.35
GermanyBoeblingen40,300110.11
GermanyBonn42,000114.75
GermanyCologne56,200153.55
GermanyDarmstadt34,00092.90
GermanyFrankfurt am Main35,50096.99
GermanyGelnhausen42,900117.21
GermanyGiessen36,00098.36
GermanyGrafenwoehr34,40093.99
GermanyHanau42,900117.21
GermanyIdar-Oberstein33,80092.35
GermanyIngolstadt48,600132.79
GermanyKaiserslautern, Landkreis42,200115.30
GermanyKarlsruhe32,80089.62
GermanyKoblenz33,40091.26
GermanyLudwigsburg40,300110.11
GermanyMainz46,500127.05
GermanyMunich48,600132.79
GermanyNellingen40,300110.11
GermanyNeubruecke33,80092.35
GermanyOber Ramstadt34,00092.90
GermanyPfullendorf33,40091.26
GermanyPirmasens42,200115.30
GermanySembach42,200115.30
GermanyStuttgart40,300110.11
GermanyVilseck34,40093.99
GermanyWahn42,000114.75
GermanyWiesbaden46,500127.05
GermanyZweibrueken42,200115.30

Bulletin No. 2020–11 505 March 9, 2020
CountryLocation
Limitation on
Housing Expenses
(full year)
Limitation on
Housing Expenses
(daily)
GermanyAll cities other than
Augsburg, Babenhausen, Bad
Aibling, Bad Kreuznach,
Bad Nauheim, Baumholder,
Berchtesgaden, Berlin,
Birkenfeld, Boeblingen,
Bonn, Bremen, Bremerhaven,
Butzbach, Cologne,
Darmstadt, Delmenhorst,
Duesseldorf, Erlangen,
Flensburg, Frankfurt am
Main, Friedberg, Fuerth,
Garlstedt, Garmisch-
Partenkirchen, Geilenkirchen,
Gelnhausen, Germersheim,
Giebelstadt, Giessen,
Grafenwoehr, Grefrath,
Greven, Gruenstadt,
Hamburg, Hanau, Handorf,
Hannover, Heidelberg,
Heilbronn, Herongen,
Idar-Oberstein, Ingolstadt,
Kaiserslautern, Landkreis,
Kalkar, Karlsruhe, Kerpen,
Kitzingen, Koblenz, Leimen,
Leipzig, Ludwigsburg,
Mainz, Mannheim, Mayen,
Moenchen-Gladbach,
Muenster, Munich, Nellingen,
Neubruecke, Noervenich,
Nuernberg, Ober Ramstadt,
Oberammergau, Osterholz-
Scharmbeck, Pfullendorf,
Pirmasens, Rheinau,
Rheinberg, Schwabach,
Schwetzingen, Seckenheim,
Sembach, Stuttgart,
Twisteden, Vilseck, Wahn,
Wertheim, Wiesbaden,
Worms, Wuerzburg, Zirndorf,
and Zweibrueken
33,40091.26
GhanaAccra36,00098.36
GreeceAthens34,00092.90
GreeceElefsis34,00092.90
GreeceEllinikon34,00092.90
GreeceMt. Parnis34,00092.90
GreeceMt. Pateras34,00092.90
GreeceNea Makri34,00092.90
GreecePiraeus34,00092.90
GreeceTanagra34,00092.90
GuatemalaGuatemala City42,000114.75

March 9, 2020 506 Bulletin No. 2020–11
CountryLocation
Limitation on
Housing Expenses
(full year)
Limitation on
Housing Expenses
(daily)
GuineaConakry51,300140.16
GuyanaGeorgetown35,00095.63
Holy See, TheHoly See, The46,200126.23
HungaryBudapest32,50088.80
IndiaMumbai67,920185.57
IndiaNew Delhi56,124153.34
IndonesiaJakarta37,776103.21
IrelandDublin40,200109.84
IsraelBeer Sheva57,400156.83
IsraelTel Aviv50,800138.80
ItalyGenoa41,800114.21
ItalyLa Spezia40,400110.38
ItalyMilan69,000188.52
ItalyNaples47,400129.51
ItalyParma35,10095.90
ItalyPordenone-Aviano36,800100.55
ItalyRome46,200126.23
ItalyTurin34,60094.54
ItalyVicenza38,600105.46
JamaicaKingston41,200112.57
JapanAtsugi41,600113.66
JapanCamp Zama41,600113.66
JapanChiba-Ken41,600113.66
JapanFussa41,600113.66
JapanGifu74,300203.01
JapanHaneda41,600113.66
JapanIwakuni32,80089.62
JapanKanagawa-Ken41,600113.66
JapanKomaki74,300203.01
JapanMachidi-Shi41,600113.66
JapanMisawa33,20090.71
JapanNagoya74,300203.01
JapanOkinawa Prefecture57,500157.10
JapanOsaka-Kobe90,664247.72
JapanSagamihara41,600113.66
JapanSaitama-Ken41,600113.66
JapanSasebo34,10093.17
JapanTachikawa41,600113.66
JapanTokyo93,200254.64
JapanTokyo-to41,600113.66
JapanYokohama49,600135.52
JapanYokosuka51,200139.89
JapanYokota39,200107.10

Bulletin No. 2020–11 507 March 9, 2020
CountryLocation
Limitation on
Housing Expenses
(full year)
Limitation on
Housing Expenses
(daily)
JerusalemJerusalem49,000133.88
JerusalemWest Bank49,000133.88
KazakhstanAlmaty48,000131.15
KoreaCamp Colbern54,200148.09
KoreaCamp Market53,800146.99
KoreaCamp Mercer54,200148.09
KoreaK-1653,800146.99
KoreaKimpo Airfield53,800146.99
KoreaOsan AB35,30096.45
KoreaPyongtaek38,600105.46
KoreaSeoul53,800146.99
KoreaSuwon53,800146.99
KoreaTaegu32,90089.89
KoreaTongduchon35,20096.17
KuwaitKuwait City64,400175.96
KuwaitAll cities other than Kuwait
City
57,700157.65
LuxembourgLuxembourg37,900103.55
MacedoniaSkopje35,40096.72
MalaysiaKuala Lumpur46,200126.23
MalaysiaAll cities other than Kuala
Lumpur
33,70092.08
MaltaMalta55,100150.55
MexicoMerida37,900103.55
MexicoMexico City47,900130.87
MexicoMonterrey33,20090.71
MexicoAll cities other than Ciudad
Juarez, Cuernavaca,
Guadalajara, Hermosillo,
Matamoros, Mazatlan,
Merida, Metapa, Mexico City,
Monterrey, Nogales, Nuevo
Laredo, Reynosa, Tapachula,
Tijuana, Tuxtla Gutierrez, and
Veracruz
39,400107.65
MozambiqueMaputo39,500107.92
NetherlandsAmsterdam52,900144.54
NetherlandsAruba39,100106.83
NetherlandsBrunssum34,60094.54
NetherlandsEygelshoven34,60094.54
NetherlandsHague, The55,100150.55
NetherlandsHeerlen34,60094.54
NetherlandsHoensbroek34,60094.54
NetherlandsHulsberg34,60094.54
NetherlandsKerkrade34,60094.54

March 9, 2020 508 Bulletin No. 2020–11
CountryLocation
Limitation on
Housing Expenses
(full year)
Limitation on
Housing Expenses
(daily)
NetherlandsLandgraaf34,60094.54
NetherlandsMaastricht34,60094.54
NetherlandsPapendrecht33,20090.71
NetherlandsRotterdam33,20090.71
NetherlandsSchaesburg34,60094.54
NetherlandsSchinnen34,60094.54
NetherlandsSchiphol52,900144.54
NetherlandsYpenburg55,100150.55
NetherlandsAll cities other than
Amsterdam, Aruba,
Brunssum, Coevorden,
Eygelshoven, The Hague,
Heerlen, Hoensbroek,
Hulsberg, Kerkrade,
Landgraaf, Maastricht,
Margraten, Papendrecht,
Rotterdam, Schaesburg,
Schinnen, Schiphol, and
Ypenburg.
32,80089.62
Netherlands AntillesCuracao45,800125.14
New ZealandAuckland35,70097.54
New ZealandWellington33,80092.35
NigeriaAbuja36,00098.36
NorwayOslo32,80089.62
OmanMuscat41,300112.84
PanamaPanama City39,500107.92
PeruLima39,100106.83
PhilippinesCavite39,300107.38
PhilippinesManila39,300107.38
PolandWarsaw40,900111.75
PortugalAlverca42,300115.57
PortugalLisbon42,300115.57
QatarDoha45,888125.38
QatarAll cities other than Doha32,40088.52
RomaniaBucharest41,200112.57
RussiaMoscow108,000295.08
RussiaSaint Petersburg60,000163.93
RussiaSakhalin Island77,500211.75
RussiaVladivostok77,500211.75
RussiaYekaterinburg47,400129.51
Saudi ArabiaJeddah30,66783.79
Saudi ArabiaRiyadh40,000109.29
SingaporeSingapore82,900226.50
SloveniaLjubljana48,500132.51
South AfricaPretoria39,300107.38

Bulletin No. 2020–11 509 March 9, 2020
CountryLocation
Limitation on
Housing Expenses
(full year)
Limitation on
Housing Expenses
(daily)
SpainBarcelona40,600110.93
SpainMadrid56,300153.83
SpainRota34,40093.99
SpainValencia32,40088.52
SurinameParamaribo33,00090.16
SwitzerlandBern65,600179.23
SwitzerlandGeneva93,300254.92
SwitzerlandZurich39,219107.16
SwitzerlandAll cities other than Bern,
Geneva and Zurich
32,90089.89
TaiwanTaipei46,188126.20
TanzaniaDar Es Salaam44,000120.22
ThailandBangkok59,000161.20
Trinidad and TobagoPort of Spain54,500148.91
UkraineKiev72,000196.72
United Arab EmiratesAbu Dhabi49,687135.76
United Arab EmiratesDubai57,174156.21
United KingdomBasingstoke41,099112.29
United KingdomBath41,000112.02
United KingdomBracknell62,100169.67
United KingdomBristol32,60089.07
United KingdomBrookwood32,60089.07
United KingdomCambridge35,50096.99
United KingdomCaversham73,800201.64
United KingdomCheltenham43,300118.31
United KingdomCroughton37,400102.19
United KingdomFairford35,30096.45
United KingdomFarnborough54,700149.45
United KingdomFelixstowe34,30093.72
United KingdomGibraltar44,616121.90
United KingdomHarrogate38,600105.46
United KingdomHigh Wycombe62,100169.67
United KingdomHuntingdon36,700100.27
United KingdomKemble35,30096.45
United KingdomLakenheath47,800130.60
United KingdomLondon71,500195.36
United KingdomLoudwater56,400154.10
United KingdomMenwith Hill38,600105.46
United KingdomMildenhall47,800130.60
United KingdomOxfordshire35,90098.09
United KingdomPlymouth35,90098.09
United KingdomPortsmouth35,90098.09
United KingdomReading62,100169.67

March 9, 2020 510 Bulletin No. 2020–11
CountryLocation
Limitation on
Housing Expenses
(full year)
Limitation on
Housing Expenses
(daily)
United KingdomRochester36,900100.82
United KingdomSamlesbury36,700100.27
United KingdomSouthampton44,200120.77
United KingdomSurrey48,402132.25
United KingdomWaterbeach36,700100.27
United KingdomWiltshire34,70094.81
United KingdomAll cities other than
Basingstoke, Bath, Belfast,
Birmingham, Bracknell,
Bristol, Brookwood, Brough,
Cambridge, Caversham,
Chelmsford, Cheltenham,
Chicksands, Croughton,
Dunstable, Edinburgh, Edzell,
Fairford, Farnborough,
Felixstowe, Ft. Halstead,
Gibraltar, Glenrothes,
Greenham Common,
Harrogate, High Wycombe,
Huntingdon, Hythe, Kemble,
Lakenheath, Liverpool,
London, Loudwater, Menwith
Hill, Mildenhall, Nottingham,
Oxfordshire, Plymouth,
Portsmouth, Reading,
Rochester, Samlesbury,
Southampton, Surrey,
Waterbeach, Welford, West
Byfleet, and Wiltshire.
36,700100.27
VenezuelaCaracas57,000155.74
VietnamHanoi46,800127.87
VietnamHo Chi Minh City42,000114.75
IV. OPTION TO APPLY
2020 ADJUSTED HOUSING
LIMITATIONS TO 2019 TAXABLE
YEAR
For some locations, the limitation on
housing expenses provided in Section 3 of
this notice may be higher than the limitation
on housing expenses provided in the “Table
of Adjusted Limitations for 2019” in Notice
2019-24. A qualified individual incurring
housing expenses in such a location during
2019 may apply the adjusted limitation on
housing expenses provided in Section 3 of
this notice for 2020 in lieu of the amounts
provided in the “Table of Adjusted Limita-
tions for 2019” in Notice 2019-24 (and as
set forth in the Instructions to Form 2555,
Foreign Earned Income, for 2019).
The Treasury Department and the IRS
anticipate that future annual notices pro-
viding adjustments to housing expense
limitations will make a similar option
available to qualified individuals that in-
cur housing expenses in the immediately
preceding year. For example, when adjust-
ed housing expense limitations for 2021
are issued, it is expected that taxpayers
will be permitted to apply those adjusted
limitations to the 2020 taxable year.
V. Filing Prior Year or Amended Tax
Returns
Notice 2011–8, 2011-8 I.R.B. 503;
Notice 2012–19, 2012-10 I.R.B. 440;
Notice 2013–31, 2013-21 I.R.B. 1099;
Notice 2014-29, 2014-18 I.R.B. 991;
Notice 2015-33, 2015-18 I.R.B. 934;
Notice 2016-21, 2016-12 I.R.B. 465;
Notice 2017-21, 2017-13 I.R.B. 1026;
Notice 2018-44, 2018-21 I.R.B. 611; and
Notice 2019-24, 2019-14, I.R.B.932 are
relisted to assist those individuals who
are filing prior year or amended tax re-
turns.

Bulletin No. 2020–11 511 March 9, 2020
VI. EFFECT ON OTHER
DOCUMENTS
This notice supersedes Notice 2006-
87, 2006-43 I.R.B. 766; Notice 2007-25,
2007-12 I.R.B. 760; Notice 2007-77, 2007-
40 I.R.B. 735; Notice 2008-107, 2008-50
I.R.B. 1265; Notice 2010-27, 2010-15
I.R.B. 531; Notice 2011–8, 2011-8 I.R.B.
503; Notice 2012–19, 2012-10 I.R.B. 440;
Notice 2013–31, 2013-21 I.R.B. 1099;
Notice 2014-29, 2014-18 I.R.B. 991; No-
tice 2015-33, 2015-18 I.R.B. 934; No-
tice 2016-21, 2016-12 I.R.B. 465; Notice
2017-21, 2017-13 I.R.B. 1026; Notice
2018-44, 2018-21 I.R.B. 611; and Notice
2019-24, 2019-14, I.R.B.932.
VII. EFFECTIVE DATE
This notice is effective for taxable
years beginning on or after January 1,
2020. However, as provided in Section 4,
a taxpayer may apply the 2020 adjusted
housing limitations contained in Section
3 of this notice to his or her taxable year
beginning in 2019.
VIII. DRAFTING INFORMATION
The principal author of this notice
is Kate Y. Hwa of the Office of Associate
Chief Counsel (International). For further
information regarding this notice, con-
tact Kate Y. Hwa at (202) 317-5001 (not a
toll-free number).
26 CFR 601.105: Examination of returns and claims
for refund, credit or abatement; determination of
correct tax liability.
(Also: §§ 45Q, 704, 1.704-1)
Rev. Proc. 2020-12
SECTION 1. PURPOSE
This revenue procedure establishes a
safe harbor (Safe Harbor) under which the
Internal Revenue Service (IRS) will treat
partnerships as properly allocating, in ac-
cordance with section 704(b) of the Inter-
nal Revenue Code (Code), the credit for
carbon oxide sequestration under section
45Q of the Code (Section 45Q Credit).
The Department of the Treasury (Treasury
Department) and the IRS intend for the
Safe Harbor to simplify the application of
section 45Q to partnerships that are eligi-
ble to claim the Section 45Q Credit.
SECTION 2. BACKGROUND
.01 Section 45Q generally allows a
credit of an amount per metric ton of qual-
ified carbon oxide captured by the taxpay-
er that is either: (i) disposed of in secure
geological storage; (ii) used as a tertiary
injectant in a qualified enhanced oil or
natural gas recovery project and disposed
of in secure geological storage; or (iii)
utilized in certain ways described in sec-
tion 45Q(f)(5). The amount of the credit
depends on the date the carbon capture
equipment is placed in service and wheth-
er the qualified carbon oxide is disposed
of in secure storage, used, or utilized.
.02 In the case of carbon oxide cap-
tured using carbon capture equipment
that is originally placed in service at a
qualified facility on or after February 9,
2018, the Section 45Q Credit is available
during the 12-year period beginning on
the date the equipment was originally
placed in service. Although section 45Q
does not define “placed in service,” the
term has been defined for purposes of
the investment tax credit and the deduc-
tion for depreciation. For these purpos-
es, property is considered to be placed in
service in the taxable year that the prop-
erty is placed in a condition or state of
readiness and availability for a specifi-
cally assigned function. See §§ 1.46-3(d)
(1)(ii) and 1.167(a)-11(e)(1)(i) of the In-
come Tax Regulations.
.03 Section 704(a) provides that a part-
ner’s distributive share of income, gain,
loss, deduction, or credit is, except as oth-
erwise provided in chapter 1 of subtitle A
of the Code, determined by the partner-
ship agreement. Section 704(b) provides
that a partner’s distributive share of in-
come, gain, loss, deduction, or credit (or
item thereof) is determined in accordance
with the partner’s interest in the partner-
ship (determined by taking into account
all facts and circumstances), if: (i) the
partnership agreement does not provide
as to the partner’s distributive share of
income, gain, loss, deduction, or credit
(or item thereof); or (ii) the allocation to
a partner under the partnership agreement
of income, gain, loss, deduction, or credit
(or item thereof) does not have substantial
economic effect.
.04 Section 1.704-1(b)(4)(ii) pro-
vides that allocations of tax credits and
tax credit recapture are not reflected by
adjustments to the partners’ capital ac-
counts (except with respect to certain
investment tax credit property under
section 38 of the Code). Thus, these allo-
cations cannot have economic effect un-
der § 1.704-1(b)(2)(ii)(b)(1), and the tax
credits and tax credit recapture must be
allocated in accordance with the partners’
interests in the partnership as of the time
the tax credit or credit recapture arises.
With respect to tax credits other than the
investment tax credit provided by section
38, if a partnership expenditure (whether
or not deductible) that gives rise to a tax
credit in a partnership taxable year also
gives rise to valid allocations of partner-
ship loss or deduction (or other down-
ward capital account adjustments) for the
year, then the partners’ interests in the
partnership with respect to the credit (or
the cost giving rise to it) are in the same
proportion as the partners’ respective dis-
tributive shares of the loss or deduction
(and adjustments). See § 1.704-1(b)(5),
Example 11. Section 1.704-1(b)(4)(ii)
further provides that identical principles
apply in determining the partners’ inter-
ests in the partnership regarding tax cred-
its that arise from receipts of the partner-
ship (whether or not taxable).
.05 A partnership exists when two or
more “parties in good faith and acting
with a business purpose intended to join
together in the present conduct of the en-
terprise.” Commissioner v. Culbertson,
337 U.S. 733, 742 (1949). In making this
determination, courts “look not so much
at the labels used by the partnership but
at true facts and circumstances” to deter-
mine whether a partner has a “meaningful
stake in the success or failure” of the en-
terprise. TIFD III-E, Inc. v. United States,
459 F.3d 220, 231 and 241 (2d Cir. 2006).
A purported partner in a partnership may
in substance be more properly viewed as
a lender to the partnership or purchaser of
partnership assets if the purported partner
lacks “any meaningful downside risk or
any meaningful upside potential in” the
partnership. Historic Boardwalk Hall,
LLC v. Commissioner, 694 F.3d 425, 455
(3d Cir. 2012).

March 9, 2020 512 Bulletin No. 2020–11
SECTION 3. SCOPE
.01 The Safe Harbor provided in sec-
tion 4 of this revenue procedure applies
to any partnership (Project Company)
that validly claims the Section 45Q Cred-
it. Partners in a Project Company may
include a project developer (Developer)
and one or more investors, as defined in
section 4.01 of this revenue procedure
(Investors). The Project Company typi-
cally owns the carbon capture equipment
(Equipment). In addition to the Project
Company, the Developer, and the Inves-
tors, carbon oxide capture and sequestra-
tion transactions may involve lenders, one
or more carbon oxide emitters (Emitters),
one or more construction contractors, one
or more qualified carbon oxide purchasers
(Offtakers), and one or more project op-
erators.
.02 If a Project Company, Developer,
and Investor(s) satisfy all of the require-
ments of the Safe Harbor provided in sec-
tion 4 of this revenue procedure, the IRS
will treat the Investor as a partner in the
Project Company and will treat the Project
Company as properly allocating the Sec-
tion 45Q Credit in accordance with sec-
tion 704(b).
.03 The federal income tax treatment
described in section 3.02 of this revenue
procedure applies solely with respect to
carbon oxide capture and sequestration
transactions described in sections 3.01
and 3.02 of this revenue procedure and
should not be viewed as precedent for any
other federal tax credit transaction. Tax-
payers should not infer that compliance
with the Safe Harbor ensures that they
are otherwise entitled to validly claim the
Section 45Q Credit. A Project Company
and its partners that do not satisfy each of
the requirements in section 4 of this reve-
nue procedure do not qualify for the Safe
Harbor.
.04 This revenue procedure applies
only to partnerships with a Section 45Q
Credit and partners in such partnerships.
This revenue procedure does not apply to
any other tax credits and may not be cit-
ed as precedent for any other federal tax
credit allocation.
.05 The Safe Harbor in this revenue
procedure provides guidance on partner-
ship allocations of the Section 45Q Credit
to taxpayers establishing or participating
in carbon capture partnerships in lieu of
such taxpayers requesting letter rulings.
Therefore, the IRS will not issue letter
rulings on any issues under subchapter K
of chapter 1 of subtitle A of the Code for
partnerships claiming or seeking to claim
the Section 45Q Credit.
SECTION 4. SAFE HARBOR
This section 4 sets forth the Safe Har-
bor under which the IRS will treat part-
nerships as properly allocating the Section
45Q Credit in accordance with section
704(b). If a Project Company and its part-
ners do not satisfy each of the require-
ments in this section 4, the Project Com-
pany and its partners do not qualify for the
Safe Harbor.
.01 Investors Defined. Investors hold
an interest in the Project Company (Part-
nership Interest) as described in section
4.02(2) of this revenue procedure. An
Investor may be an initial partner in the
Project Company or may later become an
Investor by acquiring an interest in the
Project Company either directly from the
Project Company by contribution or from
another partner by purchase.
.02 Partners’ Partnership Interests.
(1) Developer’s Minimum Partnership
Interest. The Developer must have a min-
imum one percent Partnership Interest in
each material item of partnership income,
gain, loss, deduction, and credit at all
times during the existence of the Project
Company.
(2) Investor’s Partnership Interest.
(a) Investor’s Minimum Partnership
Interest. Each Investor must have, at all
times during the period it owns a Partner-
ship Interest, a minimum interest in each
material item of partnership income, gain,
loss, deduction, and credit equal to at least
five percent of the Investor’s percentage
interest in each such item for the taxable
year for which the Investor’s percentage
share of that item is the largest (as adjust-
ed for sales, redemptions, or dilutions of
its interest).
(b) Requirements Regarding the Inves-
tor’s Partnership Interest. The Investor’s
Partnership Interest must constitute a bona
fide equity investment with a reasonably
anticipated value commensurate with the
Investor’s overall percentage interest in
the Project Company, separate from any
federal, state, and local tax deductions, al-
lowances, credits, and other tax attributes
to be allocated by the Project Company to
the Investor. An Investor’s Partnership In-
terest is a bona fide equity investment only
if that reasonably anticipated value is con-
tingent upon the Project Company’s net
income, gain, and loss, and is not substan-
tially fixed in amount. Likewise, the In-
vestor must not be substantially protected
from losses from the Project Company’s
activities. The Investor’s return from its
investment in the Project Company must
not be limited in a manner comparable to
a preferred return representing a payment
for capital.
(c) Arrangements to Reduce the Val-
ue of the Investor’s Partnership Interest
or the Investor’s Economic Return. The
value of the Investor’s Partnership In-
terest may not be reduced through fees
(including developer, management, and
incentive fees), or other arrangements,
that are unreasonable compared with fees
or other arrangements for a carbon oxide
capture and utilization or sequestration
project that does not qualify for the Sec-
tion 45Q Credit, and may not be reduced
by disproportionate rights to distributions
or by issuances of interests in the Project
Company (or rights to acquire interests in
the Project Company) for less than fair
market value consideration.
.03 Investor’s Minimum Unconditional
Investment. On the date the Investor ac-
quires a Partnership Interest, the Investor
must make a minimum unconditional in-
vestment with respect to the Project Com-
pany (Investor Minimum Investment).
The Investor must maintain the Investor
Minimum Investment throughout the du-
ration of its ownership of its Partnership
Interest, except that the Investor Mini-
mum Investment may be reduced as a
result of distributions of cash flow from
the Project Company’s operation of the
Equipment. Investments required to be
made by the Investor in the future will not
be included in the Investor Minimum In-
vestment until the investment is actually
made with respect to the partnership. The
Investor Minimum Investment must be
equal to at least 20 percent of the sum of
the fixed capital investment plus any rea-
sonably anticipated contingent investment
required to be made by the Investor under
the partnership agreement. The Investor

Bulletin No. 2020–11 513 March 9, 2020
must not be protected against loss of any
portion of the Investor Minimum Invest-
ment through any arrangement, directly or
indirectly, with: the Developer; any other
Investor; an Emitter; an Offtaker; or any
person related to the Developer, other In-
vestors, an Emitter, or an Offtaker.
.04 Contingent Consideration. More
than 50 percent of the sum of the fixed
investment plus reasonably anticipated
contingent investment to be made by an
Investor with respect to a Partnership In-
terest must be fixed and determinable ob-
ligations that are not contingent in amount
or certainty of payment. Contributions to
the Project Company to pay ongoing op-
erating expenses will not be treated as part
of the Investor’s contingent investment
for purposes of this requirement.
.05 Purchase Rights. Neither the De-
veloper, the Investors, nor any related per-
son may have a call option or other con-
tractual right or agreement to purchase,
at any time, the Equipment, any property
included in the Equipment, or a Partner-
ship Interest at a future date (other than a
contractual right or agreement for a pres-
ent sale).
.06 Sale Rights. An Investor may not
have a contractual right or other agree-
ment to require any person involved in
any part of the carbon capture transaction
to purchase or liquidate the Investor’s
Partnership Interest at a future date at a
price that is more than its fair market val-
ue determined at the time of exercise of
the contractual right to sell.
.07 Determination of Fair Market Val-
ue. Solely for the purposes of this reve-
nue procedure, any determination of the
fair market value of the Equipment or a
Partnership Interest may take into account
contracts or other arrangements creating
rights or obligations only if such contracts
or other arrangements creating rights or
obligations are entered into in the ordinary
course of the Project Company’s business
and are negotiated at arm’s length.
.08 Guarantees and Loans.
(1) No person involved in any part of
the Project Company may directly or in-
directly guarantee or otherwise insure the
Investor’s ability to claim the Section 45Q
Credit, the cash equivalent of the credits,
or the repayment of any portion of the In-
vestor’s contribution due to inability to
claim the Section 45Q Credit, in the event
that the IRS challenges all or a portion of
the transactional structure of the partner-
ship. Further, no person involved in any
part of the Project Company (or any relat-
ed person) may guarantee that the Investor
will receive distributions from the Project
Company or consideration in exchange for
its interest in the Project Company (except
for a fair market value sale right described
in section 4.06 of this revenue procedure).
This requirement does not prohibit the In-
vestor from procuring insurance, includ-
ing recapture insurance, from persons not
related to the Developer, any other Inves-
tor, an Emitter, or an Offtaker.
(2) The following guarantees may be
provided to the Investor or the Project
Company: (i) guarantees for the perfor-
mance of any acts necessary to claim the
Section 45Q Credit (including ensuring
proper secure geological storage of the
qualified carbon oxide through disposal,
or use as a tertiary injectant, or utiliza-
tion); and (ii) guarantees for the avoidance
of any act (or omissions) that would cause
the Project Company to fail to qualify
for the Section 45Q Credit or that would
result in a recapture of the Section 45Q
Credit. Examples of guarantees permit-
ted under this section include completion
guarantees, operating deficit guarantees,
environmental indemnities, and financial
covenants.
(3) A long-term carbon oxide purchase
agreement entered into on arm’s-length
terms between the Project Company and
an Emitter, between the Project Company
and an Offtaker, or between an Emitter and
an Offtaker, does not constitute a guaran-
tee even if the Emitter or the Offtaker is
related to the Project Company, and even
if such contracts contain “supply all,”
“supply-or-pay,” “take all,” “take-or-pay,”
or “securely-store-or-pay” provisions. A
long-term contract between the Project
Company and the Emitter or the Offtaker
pursuant to which the Project Company
leases the equipment to the Emitter or the
Offtaker or agrees to use the Equipment
to perform services for the Emitter or the
Offtaker also does not constitute a guaran-
tee even if the Emitter or the Offtaker is
related to the Project Company.
(4) The Developer (or a person related
to the Developer) may not lend any In-
vestor the funds to acquire any part of the
Investor’s interest in the Project Company
or guarantee any indebtedness incurred or
created in connection with the acquisition
of such Investor’s interest in the Project
Company.
.09 Allocation of the Section 45Q Cred-
it. Allocations under the Project Compa-
ny’s partnership agreement must satisfy
the requirements of section 704(b) and the
regulations thereunder. The Section 45Q
Credit and any recapture of the Section
45Q Credit must be allocated in accor-
dance with § 1.704-1(b)(4)(ii). If the Proj-
ect Company generates receipts from its
activities relating to carbon oxide seques-
tration (such as payments for capturing
qualified carbon oxide or for the sale of
qualified carbon oxide), and those receipts
give rise to valid allocations of partner-
ship income, an allocation of the Section
45Q Credit in the same proportion as the
partners’ respective distributive shares of
such income will be treated as in accor-
dance with the partners’ interests in the
partnership for this purpose. If the Proj-
ect Company does not receive payments
for its activities relating to carbon oxide
sequestration, an allocation of the Section
45Q Credit in the same proportion as the
partners’ respective distributive shares of
the loss or deduction (or other downward
capital account adjustments) associated
with the cost of the capture and disposal,
use as a tertiary injectant, or utilization of
the qualified carbon oxide will be treated
as in accordance with the partners’ inter-
ests in the partnership for this purpose.
SECTION 5. EXAMPLE
This section 5 provides an example of a
valid allocation of the Section 45Q Credit
by a limited liability company (LLC) that
is classified as a partnership for federal in-
come tax purposes.
.01 Facts.
(1) The Developer is a C corporation
for federal income tax purposes that owns
and operates carbon capture projects. The
Developer may also use carbon oxide for
enhanced oil recovery. The Project Com-
pany is an LLC classified as a partnership
for federal income tax purposes that has
been formed by the Developer to own and
manage a carbon capture project that: (i)
owns Equipment; (ii) has rights to cap-
ture carbon oxide from an Emitter; and
(iii) sells the carbon oxide to an Offtaker

March 9, 2020 514 Bulletin No. 2020–11
(which may be the Developer and may be
a partner). The Investor is a C corporation
for federal income tax purposes that in-
vests in carbon capture projects primarily
to benefit from the Section 45Q Credit.
The Developer will assign to the Project
Company a number of contracts or agree-
ments relating to the development of the
carbon capture project.
(2) The Developer will cause the
Equipment to be constructed and placed
in service. Construction of the Equipment
will be financed with $100x of construc-
tion financing. At some point before the
Equipment is placed in service, the De-
veloper will contribute the Equipment to
the Project Company. The Investor will
contribute $10x to the Project Company
in exchange for an interest in the Project
Company. The Investor’s contribution of
$10x is 20 percent of the Investor’s total
agreed investment of $50x.
(3) The Project Company will be a
party to a long-term contract with the
Emitter, pursuant to which the Project
Company will install the carbon capture
equipment on or adjacent to the Emitter’s
facility and will have rights to capture
carbon oxide emissions. The contract
with the Emitter may provide for either
a fixed or variable payment for the right
to capture or purchase the carbon oxide
emissions. The contract may also per-
mit the Project Company to capture the
Emitter’s entire emission stream or may
specify a minimum amount of carbon
oxide that the Emitter must supply to the
Project Company. The Project Company
will also be party to a long-term contract
with the Offtaker, pursuant to which the
Offtaker will undertake to purchase car-
bon oxide from the Project Company.
That contract may be at a fixed or vari-
able price and may provide a commit-
ment from the Offtaker to purchase all of
the Project Company’s carbon oxide. The
Offtaker will also agree to use the carbon
oxide as a tertiary injectant in enhanced
oil recovery and store it in secure geolog-
ical storage, and avoid any release of the
stored carbon oxide. These agreements
will provide for remedies for breach of
contract. Neither the Developer nor any
person involved in the Project Compa-
ny will provide a guarantee or otherwise
insure the Investor’s ability to claim the
Section 45Q Credit, the cash equivalent
of the credit, or the repayment of any por-
tion of the Investor’s contribution due to
inability to claim the Section 45Q Credit,
or guarantee that the Investor will receive
distributions from the Project Company
or consideration in exchange for its in-
terest in the Project Company (except
for a sale right, described in section 4.06
of this revenue procedure, at fair market
value, as described in section 4.07 of this
revenue procedure).
(4) Pursuant to the Project Company
operating agreement (Operating Agree-
ment), the Developer will have the right to
manage the Project Company, subject to
the right of the Investor to consent to cer-
tain activities. The Operating Agreement
also provides that all allocations must
satisfy the requirements of section 704(b)
and the regulations thereunder.
(5) Below are a chart and an explana-
tion that describe the distribution and allo-
cation provisions applicable to Developer
and Investor over various time periods.
DeveloperInvestor
CashGross Income/Loss and Section
45Q Credits
CashGross Income/Loss and Section
45Q Credits
Period 1100%1%0%99%
Period 20%1%100%99%
Period 395%95%5%5%
(a) During Period 1, 99 percent of the
Project Company’s gross income or loss
and the Section 45Q Credit will be allo-
cated to the Investor, and the remainder
will be allocated to the Developer, and
100 percent of the Project Company’s
cash flows will be distributed to the De-
veloper. Period 1 will continue until the
earlier of: (i) the date that the Developer
receives an agreed cash return, which may
be an amount equal to the aggregate con-
tributions made by the Developer; or (ii)
a fixed outside date. When Period 1 ends,
Period 2 begins.
(b) During Period 2, 99 percent of the
Project Company’s gross income or loss
and the Section 45Q Credit will be allo-
cated to the Investor, the remainder will be
allocated to the Developer, and 100 per-
cent of the Project Company’s cash flows
will be distributed to the Investor. Period
2 will continue until the Investor achieves
an agreed after-tax internal rate of return
(Flip Point). When Period 2 ends, Period
3 begins. If the Flip Point occurs before
Period 1 ends, Period 1 ends at that time,
and Period 3 begins.
(c) During Period 3, five percent of the
Project Company’s gross income or loss
and the Section 45Q Credit will be allo-
cated to, and five percent of the Project
Company’s cash flows will be distributed
to, the Investor, and 95 percent of the Proj-
ect Company’s gross income or loss and
the Section 45Q Credit will be allocated
to, and 95 percent of the Project Compa-
ny’s cash flows will be distributed to, the
Developer. Period 3 will continue for the
remaining life of the project.
.02 Conclusion. Under the facts set
forth in section 5.01 of this revenue pro-
cedure, the IRS will treat the Investor as
a partner in the Project Company and will
treat the Project Company as properly al-
locating the Section 45Q Credit in accor-
dance with section 704(b) and the regula-
tions thereunder.
SECTION 6. REQUEST FOR
COMMENTS
The Treasury Department and the IRS
request comments on the requirements of
the Safe Harbor.

Bulletin No. 2020–11 515 March 9, 2020
SECTION 7. EFFECTIVE DATE
This revenue procedure is effective for
transactions entered into on or after March
9, 2020. If a Project Company, Developer,
and Investor satisfy all the requirements
of the Safe Harbor provided in section
4 of this revenue procedure for transac-
tions entered into before March 9, 2020,
the IRS will treat the Investor as a part-
ner in the Project Company and treat the
Project Company as properly allocating
the Section 45Q Credit in accordance with
the Safe Harbor, and therefore section
704(b) and the regulations thereunder, for
such taxable year(s). However, taxpayers
should not infer that compliance with the
Safe Harbor ensures that they are other-
wise entitled to validly claim the Section
45Q Credit.
SECTION 8. DRAFTING
INFORMATION
The principal author of this revenue
procedure is Sonia K. Kothari of the Office
of Associate Chief Counsel (Passthroughs
and Special Industries). For further infor-
mation regarding this revenue procedure,
contact Sonia K. Kothari at (202) 317-
6850.
26 CFR 601.601: Rules and regulations.
(Also Part 1, §§ 168, 263A, 446, 448; 1.168(i)-4,
1.168(k)-1, 1.168(k)-2, 1.263A-1, 1.263A-4, 1.446-1,
1.448-1T.)
Rev. Proc. 2020-13
SECTION 1. PURPOSE
.01 This revenue procedure provides
procedures applicable to a taxpayer in a
farming business regarding the applica-
tion of § 263A of the Internal Revenue
Code (Code). Prior to the enactment of
Public Law 115-97, 131 Stat. 2054 (Dec.
22, 2017), commonly referred to as the
Tax Cuts and Jobs Act (TCJA), a taxpay-
er in a farming business could elect under
§ 263A(d)(3) to have § 263A not apply to
certain plants produced by the taxpayer’s
farming business. Section 13102 of the
TCJA added new § 263A(i) to the Code,
which provides that § 263A does not apply
to a taxpayer, other than a tax shelter (as
defined in § 448(d)(3) of the Code), for a
taxable year in which the taxpayer quali-
fies as a small business taxpayer by satis-
fying the gross receipts test in § 448(c) of
the Code.
.02 Section 5 of this revenue procedure
provides the exclusive procedures for a
taxpayer that elected under § 263A(d)(3)
to have § 263A not apply to certain plants
produced by the taxpayer in a farming
business if the taxpayer: (1) wants to re-
voke its election under § 263A(d)(3);
(2) qualifies as a small business taxpay-
er within the meaning of § 263A(i); and
(3) wants to apply the exemption from
§ 263A that is provided in § 263A(i) be-
ginning with such revocation taxable year.
.03 Section 6 of this revenue proce-
dure provides the exclusive procedures
for a taxpayer in a farming business that
uses the exemption from the application
of § 263A provided under § 263A(i) if the
taxpayer: (1) no longer qualifies as a small
business taxpayer eligible to use the ex-
emption under § 263A(i); and (2) wants to
make an election under § 263A(d)(3) and
the accompanying regulations for certain
plants produced by the taxpayer in a farm-
ing business for the first taxable year in
which the taxpayer is ineligible to use the
exemption in § 263A(i).
SECTION 2. BACKGROUND
.01 Section 263A generally requires
direct costs and an allocable portion of in-
direct costs of certain property produced
or acquired for resale by a taxpayer to be
included in inventory costs, in the case of
property that is inventory in the hands of
the taxpayer, or to be capitalized, in the
case of other property.
.02 Section 263A(d)(3) and its accom-
panying regulations allow certain taxpay-
ers that are not required to use an accrual
method of accounting under § 447 (relating
to certain corporations engaged in farming)
or § 448(a)(3) (relating to tax shelters) to
make an election to have § 263A not apply
to certain costs related to certain plants pro-
duced in any farming business carried on
by such taxpayer. Section 263A(e)(4) and
§ 1.263A-4(a)(4) of the Income Tax Regu-
lations generally define the term “farming
business” as a trade or business involving
the cultivation of land or the raising or har-
vesting of any agricultural or horticultural
commodity, including: the trade or busi-
ness of operating a nursery or sod farm; the
raising or harvesting of trees bearing fruit,
nuts, or other crops; the raising of ornamen-
tal trees (other than evergreen trees that are
more than 6 years old at the time they are
severed from their roots); and the raising,
shearing, feeding, caring for, training, and
management of animals. See § 1.263A-4
for specific guidance on the application of
§ 263A and the accompanying regulations
to farming businesses.
.03 If the election under § 263A(d)(3)
is made, the taxpayer and any related per-
son in a farming business are subject to
special rules provided in § 263A(e)(1) and
(2). Under these special rules, the plants
produced by the taxpayer are treated as
§ 1245 property, if not otherwise § 1245
property, and any gain resulting from any
disposition of a plant is recaptured to the
extent of the total amount of the deductions
that, but for the election, would have been
required to be capitalized with respect to
the plant. In addition, the special rules re-
quire that the alternative depreciation sys-
tem (ADS), as described in § 168(g)(2), be
applied to all property used predominantly
in any farming business of the taxpayer or
related person and placed in service in any
taxable year during which the election is
in effect.
.04 Section 263A(d)(3)(D) and
§ 1.263A-4(d)(1) provide that an election
under § 263A(d)(3) not to capitalize costs
under § 263A for certain plants produced
in the taxpayer’s farming business is a
method of accounting under § 446 and,
once made, may be revoked only with the
consent of the Secretary of the Treasury or
his delegate. A taxpayer must file a change
in method of accounting request using the
non-automatic change procedures of Rev.
Proc. 2015-13, 2015-5 I.R.B. 419, (or its
successor) to revoke its election under
§ 263A(d)(3) before applying § 263A to
such capitalizable costs.
.05 Section 13102 of the TCJA added
§ 263A(i), which provides that § 263A
does not apply to a taxpayer, other than a
tax shelter prohibited from using the cash
receipts and disbursements method under
§ 448(a)(3), for a taxable year in which the
taxpayer meets the gross receipts test of
§ 448(c). Section 263A(i) applies to tax-
able years beginning after December 31,
2017.

March 9, 2020 516 Bulletin No. 2020–11
.06 The exemption provided in
§ 263A(i) does not require a taxpay-
er to apply the special rules provided in
§ 263A(e)(1) and (2) relating to the treat-
ment of plants produced by the taxpayer
as § 1245 property or, in the case of the
taxpayer or related person, to use ADS for
all property predominantly used in any
farming business of the taxpayer or related
person. However, any plant as defined in
section 4.06 of this revenue procedure that
is or has been treated as § 1245 property
with respect to taxable years before the
year in which the revocation is effective
continues to be treated as § 1245 property.
See §§ 263A(e)(1)(A)(ii), 1245(a)(3) and
1.1245-3(c).
.07 Some taxpayers have inquired
whether they must file a Form 3115, Appli-
cation for Change in Accounting Method,
to revoke the election under § 263A(d)(3)
and to apply the exemption under
§ 263A(i) for the same taxable year. A
taxpayer that revokes its election under
§ 263A(d)(3) and applies the exemption
under § 263A(i) for the same taxable year
is not changing its treatment of plants
produced in the taxpayer’s farming busi-
ness under § 263A. Consequently, there
is not a change in method of accounting
under § 446(e). However, the consent of
the Commissioner of Internal Revenue
(Commissioner) is needed to revoke the
election under § 263A(d)(3) pursuant to
§§ 263A(d)(3)(D) and 1.263A-4(d)(1).
Section 5 of this revenue procedure pro-
vides the exclusive procedures for obtain-
ing the consent of the Commissioner to
revoke the election under § 263A(d)(3)
by a taxpayer in a farming business if the
taxpayer: (1) meets the requirements of
§ 263A(i); (2) previously elected under
§ 263A(d)(3) to have § 263A not apply to
certain plants produced by the taxpayer in
a farming business; and (3) wants to apply
the exemption from § 263A provided in
§ 263A(i) for the same taxable year as the
taxable year it revokes its election under
§ 263A(d)(3).
.08 The Department of the Treasury
and the Internal Revenue Service (IRS)
also are aware that a taxpayer in a farm-
ing business may become ineligible for
the exemption to capitalization under
§ 263A(i) because, for example, the tax-
payer no longer satisfies the gross receipts
test in § 448(c). Such a taxpayer might
want to make an election under § 263A(d)
(3) for the first taxable year the taxpayer is
no longer eligible to apply § 263A(i). Sec-
tion 6 of this revenue procedure provides
the exclusive procedures for a taxpayer
in a farming business if the taxpayer: (1)
uses the exemption to capitalization under
§ 263A(i) with respect to a farming busi-
ness; (2) is no longer eligible to use the
exemption under § 263A(i) because the
taxpayer no longer meets the requirements
of § 263A(i); and (3) wants to make the
election under § 263A(d)(3) and the ac-
companying regulations for the first tax-
able year the taxpayer is no longer eligible
to apply § 263A(i).
SECTION 3. SCOPE
This revenue procedure applies to a
taxpayer that:
.01 Is an eligible small business tax-
payer, as defined in section 4.01 of this
revenue procedure, that wants to revoke
its election made under § 263A(d)(3), and
in the same taxable year, apply the exemp-
tion under § 263A(i); or
.02 Is a former eligible small business
taxpayer, as defined in section 4.02 of this
revenue procedure, that wants to make an
election under § 263A(d)(3) in the first
taxable year that the taxpayer no lon-
ger qualifies to use the exemption under
§ 263A(i); or
.03 Is a related person, as defined in
section 4.03 of this revenue procedure, of
either:
(1) An eligible small business taxpayer,
as defined in section 4.01 of this revenue
procedure, or
(2) A former eligible small business
taxpayer, as defined in section 4.02 of this
revenue procedure.
SECTION 4. DEFINITIONS
.01 Eligible small business taxpay-
er. An eligible small business taxpay-
er is a taxpayer, other than a tax shelter
as defined in § 448(d)(3), that meets the
§ 448(c) gross receipts test, as defined in
section 4.05 of this revenue procedure,
and that:
(1) made a valid election under
§ 263A(d)(3) for plants produced in the
taxpayer’s farming business for a taxable
year prior to the taxable year for which the
taxpayer wants to revoke such election;
and
(2) properly implemented the election
under § 263A(d)(3).
.02 Former eligible small business tax-
payer. A former eligible small business
taxpayer is a taxpayer whose method of
accounting is not to capitalize costs under
§ 263A based on the exemption provided
in § 263A(i), and for the taxable year:
(1) becomes ineligible to use the ex-
emption under § 263A(i); and
(2) is eligible to and wants to elect un-
der § 263A(d)(3) not to capitalize costs
under § 263A for certain plants produced
in the taxpayer’s farming business.
.03 Related person. A related person is
as defined in § 1.263A-4(d)(4)(iii).
.04 Farming business. A farming busi-
ness is as defined in § 263A(e)(4) and
§ 1.263A-4(a)(4).
.05 Gross receipts test. The gross re-
ceipts test is as defined § 448(c).
.06 Plant. A plant is as defined in
§ 1.263A-4(a)(4)(A).
SECTION 5. PROCEDURES FOR
ELIGIBLE SMALL BUSINESS
TAXPAYERS TO REVOKE THE
ELECTION MADE UNDER
§ 263A(d)(3) AND TO APPLY § 263A(i)
.01 In general. An eligible small busi-
ness taxpayer has the consent of the Com-
missioner to revoke its election made un-
der § 263A(d)(3) and § 1.263A-4(d)(3)
(§ 263A(d)(3) election) and apply the
exemption under § 263A(i) for the same
taxable year if the taxpayer complies with
the procedures provided in this section 5.
See section 5.03 of this revenue proce-
dure for the effect of the revocation of the
§ 263A(d)(3) election on the depreciation
of property used in a farming business of
the eligible small business taxpayer or re-
lated person. A valid § 263A election re-
voked pursuant to this revenue procedure
remains in effect with respect to taxable
years before the year in which the revoca-
tion is effective. An eligible small business
taxpayer that revokes its own § 263A(d)(3)
election but also is a related person to a
taxpayer that made a § 263A(d)(3) elec-
tion that has not also been revoked must
continue to apply § 1.263A-4(d)(4)(ii)
for taxable years that the unrevoked
§ 263A(d)(3) election is in effect.

Bulletin No. 2020–11 517 March 9, 2020
.02 Time and manner of revocation.
(1) In general. Except as provided in
section 5.02(2) of this revenue procedure,
an eligible small business taxpayer re-
vokes its § 263A(d)(3) election under this
section 5 on its original federal income tax
return, including extensions, for the tax-
able year for which the taxpayer wants to
revoke its § 263A(d)(3) election (revoca-
tion year), by:
(a) Continuing not to capitalize costs
of plants produced in its farming business
under § 263A;
(b) Applying section 5.03 of this rev-
enue procedure for determining depreci-
ation of property predominantly used in
a farming business of the eligible small
business taxpayer or related person; and
(c) Continuing to treat plants that are
or have been treated as § 1245 property
for prior taxable years as § 1245 property.
See §§ 263A(e)(1)(A)(ii), 1245(a)(3) and
1.1245-3(c).
(2) Making a revocation of § 263A(d)(3)
election for a taxable year beginning in
2018. If an eligible small business tax-
payer timely filed its federal income tax
return for its taxable year beginning in
2018 (2018 taxable year), wants to re-
voke its § 263A(d)(3) election for the
2018 taxable year, and did not revoke the
§ 263A(d)(3) election within the time and
in the manner provided in section 5.02(1)
of this revenue procedure, the taxpayer
may revoke its § 263A(d)(3) election by
using one of the options described in this
section 5.02(2):
(a) Amended return or AAR. The tax-
payer may file an amended federal income
tax return, or in the case of a partnership
subject to the centralized partnership audit
regime enacted as part of the Bipartisan
Budget Act of 2015, an administrative ad-
justment request (AAR), for the 2018 tax-
able year before the taxpayer files its fed-
eral income tax return for the first taxable
year beginning after the 2018 taxable year.
This amended return or AAR must include
the adjustment to taxable income for the
revocation of the § 263A(d)(3) election in
the manner provided in section 5.02(1) of
this revenue procedure and any collateral
adjustments to taxable income or to tax
liability. Such collateral adjustments also
must be made on federal income tax re-
turns or AARs for any affected succeeding
taxable years, if applicable. If an eligible
small business taxpayer uses the option
under this section 5.02(2)(a), then all re-
lated persons affected by the taxpayer’s
revocation of the § 263A(d)(3) election
must also use this option to reflect the tax-
payer’s revocation; or
(b) Form 3115. The taxpayer may
file a Form 3115 with the eligible small
business taxpayer’s timely filed federal
income tax return for the first, second,
or third taxable year beginning after the
2018 taxable year. Only during this limit-
ed period of time will the late revocation
of the § 263A(d)(3) election under this
section 5.02(2)(b) be treated as a change
in method of accounting with a § 481(a)
adjustment. No part of the § 481(a) ad-
justment shall be based on amounts that
were, or which should have been, taken
into account in computing taxable income
for taxable years prior to the 2018 taxable
year. The § 481(a) adjustment takes into
account only the adjustments resulting
from the change in the applicable depre-
ciation method, the applicable recovery
period, and/or the applicable convention
under the ADS to the applicable depre-
ciation method, the applicable recovery
period, and/or the applicable convention
under the general depreciation system of
§ 168(a) (GDS) for all property used pre-
dominantly in any farming business of the
eligible small business taxpayer. The time
and manner of making this late revocation
are described in the procedures for auto-
matic method changes described in Rev.
Proc. 2015-13 and section 7 of this rev-
enue procedure. If an eligible small busi-
ness taxpayer uses the option under this
section 5.02(2)(b), then all related persons
affected by the taxpayer’s revocation of
the § 263A(d)(3) election must also use
this option to reflect the taxpayer’s revo-
cation.
.03 Changing depreciation of property
to the GDS.
(1) In general. Beginning with the re-
vocation year, an eligible small business
taxpayer that revokes its § 263A(d)(3)
election under this section 5, or a related
person, is not required under § 263A(e)(2)
and § 1.263A-4(d)(4)(ii) to depreciate all
property used predominantly in any farm-
ing business of the taxpayer, or related
person, in accordance with the ADS, un-
less such property is otherwise required
to be depreciated in accordance with the
ADS (for example, § 168(g)(1)(G) applies
to such property). The preceding sentence
applies to such property placed in service
by the eligible small business taxpayer or
related person in taxable years beginning
before the revocation year (existing prop-
erty) and to such property placed in service
by the eligible small business taxpayer or
related person in the revocation year and
subsequent taxable years (newly-acquired
property). If an eligible small business
taxpayer revokes its own § 263A(d)(3)
election but also is a related person to a
taxpayer that made a § 263A(d)(3) election
that has not been revoked, the eligible small
business taxpayer must continue to apply
§ 263A(e)(2) and § 1.263A-4(d)(4)(ii)
for taxable years that such § 263A(d)(3)
election is in effect.
(2) Existing property. For all property
used predominantly in any farming busi-
ness of the eligible small business tax-
payer or related person that was placed
in service in a taxable year prior to the
revocation year and that is not otherwise
required to be depreciated in accordance
with the ADS, a change in use occurs
for such property under § 168(i)(5) and
§ 1.168(i)-4(d) for the revocation year as a
result of its revocation of the § 263A(d)(3)
election. Accordingly, depreciation for
such property beginning for the revoca-
tion year is determined in accordance with
§ 1.168(i)-4(d). However, pursuant to
§ 1.168(i)-4(d)(3)(C)(ii), the eligible small
business taxpayer or related person may
elect to determine the depreciation for such
property as though the change in use had
not occurred. See § 1.168(i)-4(d)(3)(C)(ii)
for the time and manner of making this
election for the revocation year. Pursuant
to § 1.168(i)-4(f), a change in computing
depreciation for the revocation year for
such property is not a change in method of
accounting under § 446(e). The addition-
al first year depreciation deduction under
§ 168(k) is not allowable for any such exist-
ing property. See §§ 1.168(k)-1(f)(6)(iv)(B)
and 1.168(k)-2(g)(6)(iv)(B).
(3) Newly-acquired property. For all
property used predominantly in any farm-
ing business of the eligible small business
taxpayer or related person that was placed
in service in the revocation year and sub-
sequent taxable years and that is not oth-
erwise required to be depreciated in ac-
cordance with the ADS, the eligible small

March 9, 2020 518 Bulletin No. 2020–11
business taxpayer or related person deter-
mines the depreciation in accordance with
the GDS. Because such newly-acquired
property is not required to be depreciat-
ed under the ADS, the property may be
qualified property for purposes of the ad-
ditional first year depreciation deduction
under § 168(k), if all requirements under
§ 168(k) and § 1.168(k)-1 or § 1.168(k)-2,
as applicable, are satisfied.
(4) Failure to change to GDS.
(a) Existing property. If an eligible
small business taxpayer or related person
does not depreciate any existing proper-
ty that is described in section 5.03(1) of
this revenue procedure and that is not
otherwise required to be depreciated
in accordance with the ADS, under the
GDS for the revocation year and the sub-
sequent taxable year, then that taxpayer
or related person has adopted an imper-
missible method of accounting for that
item of MACRS property, as defined in
§ 1.168(b)-1(a)(2). A change from that
impermissible method of accounting to
the applicable depreciation method, the
applicable recovery period, and/or the
applicable convention under the GDS is
a change in method of accounting under
§ 446(e). See § 1.446-1(e)(2)(ii)(d)(2)(i).
The taxpayer requests to make such a
method change by filing Form 3115 in
accordance with the automatic change
procedures or non-automatic change
procedures, as applicable, in Rev. Proc.
2015-13 (or any successor). If the tax-
payer is eligible to make this method
change under the automatic change pro-
cedures, the method change is described
in section 6.05 of Rev. Proc. 2019-43,
2019-48 I.R.B. 1107 (or any successor).
The § 481(a) adjustment as of the first
day of the year of change is calculated
as though the change in use occurred for
the item of MACRS property in the re-
vocation year.
(b) Newly-acquired property. If an el-
igible small business taxpayer or related
person does not depreciate any new-
ly-acquired property that is described in
section 5.03(1) of this revenue procedure
and that is not otherwise required to be
depreciated under the ADS (including
property described in § 168(g)(1)(E)),
under the GDS for the property placed-
in-service year and the subsequent tax-
able year, then that taxpayer or related
person has adopted an impermissible
method of accounting for that item of
MACRS property. A change from that
impermissible method of accounting to
the applicable depreciation method, the
applicable recovery period, and/or the
applicable convention under the GDS
for the item of MACRS property is a
change in method of accounting under
§ 446(e). See § 1.446-1(e)(2)(ii)(d)(2)(i).
The taxpayer requests to make such a
method change by filing Form 3115 in
accordance with the automatic change
procedures or non-automatic change
procedures, as applicable, in Rev. Proc.
2015-13 (or any successor). If the tax-
payer is eligible to make this method
change under the automatic change pro-
cedures, the method change is described
in section 6.01 of Rev. Proc. 2019-43 (or
any successor).
SECTION 6. PROCEDURES FOR
FORMER ELIGIBLE SMALL
BUSINESS TAXPAYERS TO
CHANGE FROM APPLYING
§ 263A(i) TO MAKING A § 263A(d)(3)
ELECTION
.01 In general. A former eligible small
business taxpayer may make a § 263A(d)(3)
election for plants produced in its farm-
ing business in the first taxable year the
former small business taxpayer no lon-
ger qualifies to use the exemption under
§ 263A(i), if the taxpayer complies with
the procedures provided in this section 6.
A § 263A(d)(3) election made under this
section 6 is in effect for the taxable year
the § 263A(d)(3) election is made (election
year), and for any subsequent taxable year
that the taxpayer has a valid § 263A(d)(3)
election in effect. A former eligible small
business taxpayer that follows the pro-
cedures under this section 6 to make the
§ 263A(d)(3) election for the first taxable
year the taxpayer no longer qualifies as a
small business taxpayer under § 263A(i)
is not treated as making a change in meth-
od of accounting under § 446(e).
.02 Time and manner of making the
§ 263A(d)(3) election. A former eligi-
ble small business taxpayer makes its
§ 263A(d)(3) election under this section 6
on its original federal tax return, including
extensions, for the first taxable year for
which the taxpayer no longer qualifies to
use the exemption under § 263A(i), by:
(1) Following the manner of making
the § 263A(d)(3) election provided in
§ 1.263A-4(d)(3); and
(2) Continuing not to capitalize costs
of plants produced in its farming business
under § 263A.
.03 Depreciation of property.
(1) Newly-acquired property. A former
eligible small business taxpayer that makes
a § 263A(d)(3) election under this section
6 is required under § 1.263A-4(d)(4)(ii)
to apply the ADS to depreciate all property
used predominantly in any farming busi-
ness of the taxpayer and placed in service
by the taxpayer in the election year and in
any subsequent taxable year during which
the § 263A(d)(3) election is in effect. A re-
lated person of such former eligible small
business taxpayer also is required under
§ 1.263A-4(d)(4)(ii) to apply the ADS to
depreciate all property used predominant-
ly in any farming business of the related
person and placed in service by the relat-
ed person in the election year and in any
subsequent taxable year during which the
§ 263A(d)(3) election is in effect for the
former eligible small business taxpay-
er, even if the related person qualifies for
the exemption under § 263A(i). The ad-
ditional first year depreciation deduction
under § 168(k) is not allowable for any
property described in this section 6.03(1).
See §§ 1.168(k)-1(b)(2)(ii)(A)(2) ,
1.168(k)-1(b)(2)(ii)(B)(1), and
1.168(k)-2(b)(2)(ii)(B).
(2) Existing property. A former eligi-
ble small business taxpayer that makes a
§ 263A(d)(3) election under this section
6, or related person, is not required under
§ 1.263A-4(d)(4)(ii) to apply the ADS to
depreciate all property used predominant-
ly in any farming business of the taxpayer
or related person and placed in service by
the taxpayer or related person in a taxable
year prior to the election year.
(3) Failure to use the ADS for new-
ly-acquired property.
(a) Former eligible small business
taxpayer. If a former eligible small busi-
ness taxpayer that makes a § 263A(d)(3)
election under this section 6 does not de-
termine its depreciation under the ADS for
any property described in section 6.03(1)
of this revenue procedure for its placed-
in-service year and the subsequent tax-

Bulletin No. 2020–11 519 March 9, 2020
able year, then that taxpayer has not
made a valid § 263A(d)(3) election under
§ 1.263A-4(d)(3)(i) and this section 6. To
make such election valid, the taxpayer
must obtain the consent of the Commis-
sioner by filing a Form 3115 in accordance
with the non-automatic change procedures
in Rev. Proc. 2015-13 (or any successor).
See § 1.263A-4(d)(3)(ii).
(b) Related person. If a related person
of a former eligible small business tax-
payer that makes the § 263A(d)(3) elec-
tion under this section 6 does not deter-
mine its depreciation under the ADS for
any property described in section 6.03(1)
of this revenue procedure, then the relat-
ed person has adopted an impermissible
method of accounting for that item of
MACRS property. A change from that im-
permissible method of accounting to the
applicable depreciation method, recovery
period, applicable convention under the
ADS for the item of MACRS property is
a change in method of accounting under
§ 446(e). See § 1.446-1(e)(2)(ii)(d)(2)(i).
A related person that wants to change
its method of accounting from that im-
permissible method of accounting must
make the method change by filing Form
3115 in accordance with the automat-
ic change procedures or non-automat-
ic change procedures, as applicable, in
Rev. Proc. 2015-13 (or any successor).
If the related person is eligible to make
this method change under the automatic
change procedures, the method change
is described in section 6.01 of Rev.
Proc. 2019-43 (or any successor). Sec-
tion 6.03(3)(a) of this revenue procedure,
and not this section 6.03(3)(b), applies
to a related person if the related person
itself is a former eligible small business
taxpayer and makes the § 263A(d)(3)
election under this section 6.
SECTION 7. CHANGE IN METHOD
OF ACCOUNTING
.01 In general. The making of a late
revocation of the eligible small busi-
ness taxpayer’s § 263A(d)(3) election
for the 2018 taxable year, under section
5.02(2)(b) of this revenue procedure, is
treated for a limited period of time as a
change in method of accounting to which
§§ 446(e) and 481, and the correspond-
ing regulations, apply. An eligible small
business taxpayer that wants to revoke its
§ 263A(d)(3) election for the 2018 taxable
year, as described in section 5.02(2)(b) of
this revenue procedure, must use the au-
tomatic change procedures in Rev. Proc.
2015-13 or its successor.
.02 Automatic change. Rev. Proc.
2019-43 is modified to add new section
12.19 to read as follows:
.19 Late revocation of elections under
§ 263A(d)(3).
(1) Description of change.
(a) Applicability. This change applies
to an eligible small business taxpayer
within the scope of Rev. Proc. 2020-13,
2020-11 I.R.B. 515, that wants to make
a late revocation of the election under
§ 263A(d)(3) provided in section 5.02(2)
(b) of Rev. Proc. 2020-13.
(b) Inapplicability. The IRS will treat
the late revocation of an election under
§ 263A(d)(3) that is provided in section
5.02(2)(b) of Rev. Proc. 2020-13 as a
change in method of accounting with a
§ 481(a) adjustment only for the taxable
years specified in section 12.19(2) of this
revenue procedure. This treatment does
not apply to a taxpayer that makes a late
revocation under § 263A(d)(3) provided
in section 5.02(2)(b) of Rev. Proc. 2020-
13 before or after the time specified in
section 12.19(2) of this revenue proce-
dure, and any such late revocation is not a
change in method of accounting.
(2) Time for making the change. The
change under this section 12.19 must
be made for the taxpayer’s first, second,
or third taxable year beginning after the
taxpayer’s first taxable year beginning in
2018 (2018 taxable year).
(3) Certain eligibility rules inapplicable.
The eligibility rules in section 5.01(1)(d)
and (f) of Rev. Proc. 2015-13, 2015-5
I.R.B 419, do not apply to this change
for the taxpayer’s first, second, or third
taxable year succeeding the 2018 taxable
year.
(4) Concurrent automatic change. A
taxpayer making this change for more
than one property used predominantly in
any farming business of the taxpayer un-
der section 5.02(2)(b) of Rev. Proc. 2020-
13 for the same year of change should file
a single Form 3115 for all such farming
property. The single Form 3115 must pro-
vide a single net § 481(a) adjustment for
all such changes.
(5) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change to the method of
accounting under this section 12.19 is
“243.”
(6) Contact information. For further
information regarding a change under this
section, contact Anna Gleysteen at (202)
317-7007 (not a toll-free call).
SECTION 8. EFFECTIVE DATE
.01 In general. This revenue procedure
is effective on February 21, 2020.
.02 Transition rule. If on or before
February 21, 2020, a taxpayer properly
filed a Form 3115 under the non-auto-
matic change procedures in Rev. Proc.
2015-13 requesting the Commission-
er’s consent to revoke its § 263A(d)(3)
election, and the Form 3115 is pending
with the national office on February 21,
2020, the taxpayer may choose to revoke
its § 263A(d)(3) election using the pro-
cedures provided in this revenue proce-
dure, if the taxpayer is otherwise eligi-
ble to use this revenue procedure. The
taxpayer must notify the national office
contact person for the Form 3115 (if un-
known, see section 9.08(6) of Rev. Proc.
2020-1, 2020-1 I.R.B. 1, 51 (or any suc-
cessor)) of the taxpayer’s intent to make
the § 263A(d)(3) revocation under this
revenue procedure before the later of (a)
March 22, 2020, or (b) the issuance of a
letter ruling granting or denying consent
for the revocation. The notification should
indicate that the taxpayer chooses to ap-
ply the revocation procedures contained
in this revenue procedure. If the taxpay-
er timely notifies the national office that
it chooses to convert the Form 3115 to
the procedures contained in this revenue
procedure, the national office will send a
letter to the taxpayer acknowledging its
request and will return the user fee sub-
mitted with the Form 3115.
SECTION 9. EFFECT ON OTHER
DOCUMENTS
Rev. Proc. 2019-43 is modified to in-
clude the accounting method change
provided in section 7.02 of this revenue
procedure in section 12 of Rev. Proc.
2019-43.

March 9, 2020 520 Bulletin No. 2020–11
SECTION 10. PAPERWORK
REDUCTION ACT
This revenue procedure does not
impose any additional information col-
lection requirements in the form of re-
porting, recordkeeping requirements
or third-party disclosure requirements.
However, because this revenue proce-
dure provides a method change option for
taxpayers to revoke their § 263A(d)(3)
election for the 2018 taxable year in
section 5.02(2)(b) of this revenue pro-
cedure, the consent of the Commission-
er under § 446(e) is required before the
taxpayer or related person can use the
exemption in § 263A(i). The IRS ex-
pects that these taxpayers will request
this consent by filing Form 3115, Appli-
cation for Change in Accounting Meth-
od. This revenue procedure alternatively
provides an option for taxpayers to re-
voke their § 263A(d)(3) election for the
2018 taxable year in section 5.02(2)(a)
of this revenue procedure by filing an
amended return. For purposes of the
Paperwork Reduction Act, the reporting
burden associated with any collection
of information using the method of ac-
counting option in sections 5.02(2)(a)
and (b) of this revenue procedure will
be reflected in OMB control number
1545-0074 for individual income tax re-
turns; OMB control number 1545-0123
for business taxpayers; or OMB control
number 1545-2070 for other taxpayers
in the case of a Form 3115.
SECTION 11. DRAFTING
INFORMATION
The principal author of this revenue
procedure is Anna Gleysteen of the Office
of Associate Chief Counsel (Income Tax
and Accounting). For further information
regarding this revenue procedure, contact
Ms. Gleysteen or Evan Hewitt at (202)
317-7007 (not a toll-free number).

Bulletin No. 2020–11 i March 9, 2020
Definition of Terms
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the
effect:
Amplified describes a situation where
no change is being made in a prior pub-
lished position, but the prior position is
being extended to apply to a variation of
the fact situation set forth therein. Thus, if
an earlier ruling held that a principle ap-
plied to A, and the new ruling holds that
the same principle also applies to B, the
earlier ruling is amplified. (Compare with
modified, below).
Clarified is used in those instances
where the language in a prior ruling is be-
ing made clear because the language has
caused, or may cause, some confusion. It
is not used where a position in a prior rul-
ing is being changed.
Distinguished describes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.
Modified is used where the substance
of a previously published position is being
changed. Thus, if a prior ruling held that a
principle applied to A but not to B, and the
new ruling holds that it applies to both A
and B, the prior ruling is modified because
it corrects a published position. (Compare
with amplified and clarified, above).
Obsoleted describes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transactions.
This term is most commonly used in a ruling
that lists previously published rulings that
are obsoleted because of changes in laws or
regulations. A ruling may also be obsoleted
because the substance has been included in
regulations subsequently adopted.
Revoked describes situations where the
position in the previously published ruling
is not correct and the correct position is
being stated in a new ruling.
Superseded describes a situation where
the new ruling does nothing more than
restate the substance and situation of a
previously published ruling (or rulings).
Thus, the term is used to republish under
the 1986 Code and regulations the same
position published under the 1939 Code
and regulations. The term is also used
when it is desired to republish in a single
ruling a series of situations, names, etc.,
that were previously published over a
period of time in separate rulings. If the
new ruling does more than restate the sub-
stance of a prior ruling, a combination of
terms is used. For example, modified and
superseded describes a situation where the
substance of a previously published ruling
is being changed in part and is continued
without change in part and it is desired to
restate the valid portion of the previous-
ly published ruling in a new ruling that is
self contained. In this case, the previously
published ruling is first modified and then,
as modified, is superseded.
Supplemented is used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names
in subsequent rulings. After the original
ruling has been supplemented several
times, a new ruling may be published that
includes the list in the original ruling and
the additions, and supersedes all prior rul-
ings in the series.
Suspended is used in rare situations to
show that the previous published rulings
will not be applied pending some future
action such as the issuance of new or
amended regulations, the outcome of cas-
es in litigation, or the outcome of a Ser-
vice study.
Abbreviations
The following abbreviations in current use
and formerly used will appear in material
published in the Bulletin.
A—Individual.
Acq.—Acquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cumulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Cooperative.
Ct.D.—Court Decision.
CY—County.
D—Decedent.
DC—Dummy Corporation.
DE—Donee.
Del. Order—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Employer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduciary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Foreign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Federal Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grantee.
GP—General Partner.
GR—Grantor.
IC—Insurance Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited Partner.
LR—Lessor.
M—Minor.
Nonacq.—Nonacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Personal Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Partnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Real Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsidiary.
S.P.R.—Statement of Procedural Rules.
Stat.—Statutes at Large.
T—Target Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Transferee.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpayer.
TR—Trust.
TT—Trustee.
U.S.C.—United States Code.
X—Corporation.
Y—Corporation.
Z—Corporation.

March 9, 2020 ii Bulletin No. 2020–11
Numerical Finding List
1
Bulletin 2020–11
Announcements:
2020-1, 2020-5 I.R.B. 552
Notices:
2020-1, 2020-2 I.R.B. 290
2020-2, 2020-3 I.R.B. 327
2020-3, 2020-3 I.R.B. 330
2020-4, 2020-4 I.R.B. 380
2020-5, 2020-4 I.R.B. 380
2020-6, 2020-7 I.R.B. 411
2020-7, 2020-7 I.R.B. 411
2020-8, 2020-7 I.R.B. 415
2020-9, 2020-7 I.R.B. 417
2020-10, 2020-10 I.R.B. 456
2020-11, 2020-11 I.R.B. 492
2020-12, 2020-11 I.R.B. 495
2020-13, 2020-11 I.R.B. 502
Proposed Regulations:
REG-107431-19, 2020-3 I.R.B. 332
REG-122180-18, 2020-3 I.R.B. 342
REG-100956-19, 2020-4 I.R.B. 383
REG-125710-18, 2020-5 I.R.B. 554
REG-132741-17, 2020-10 I.R.B. 458
Revenue Procedures:
2020-1, 2020-01 I.R.B. 1
2020-2, 2020-01 I.R.B. 107
2020-3, 2020-01 I.R.B. 131
2020-4, 2020-01 I.R.B. 148
2020-5, 2020-01 I.R.B. 241
2020-7, 2020-01 I.R.B. 281
2020-9, 2020-02 I.R.B. 294
2020-10, 2020-02 I.R.B. 295
2020-11, 2020-06 I.R.B. 406
2020-8, 2020-08 I.R.B. 447
2020-12, 2020-11 I.R.B. 511
2020-13, 2020-11 I.R.B. 515
Revenue Rulings:
2020-1, 2020-3 I.R.B. 296
2020-2, 2020-3 I.R.B. 298
2020-3, 2020-3 I.R.B. 409
2020-4, 2020-4 I.R.B. 444
2020-5, 2020-5 I.R.B. 454
2020-6, 2020-11 I.R.B. 490
Treasury Decisions:
9886, 2020-2 I.R.B. 285
9887, 2020-3 I.R.B. 302
9888, 2020-3 I.R.B. 306
9891, 2020-8 I.R.B. 419
Treasury Decisions:—Continued
9892, 2020-8 I.R.B. 439
9893, 2020-9 I.R.B. 449
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2018–27 through 2018–52 is in Internal Revenue Bulletin
2018–52, dated December 27, 2018.

Bulletin No. 2020–11 iii March 9, 2020
Finding List of Current Actions on
Previously Published Items
1
Bulletin 2020–11
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2018–27 through 2018–52 is in Internal Revenue Bulletin
2018–52, dated December 27, 2018.

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