This notice sets forth interim guidance, pending the issuance of regulations, relating to the credit under section 45J of the Code for production of electricity at advanced nuclear power facilities. Specifically, this notice explains the method that will be used to allocate the national megawatt capacity limitation that limits the allowable credit and prescribes the application process by which taxpayers may request an allocation of the national megawatt capacity limitation. This notice also provides guidance on the requirement that the electricity be sold to an unrelated person and on the effect of grants, tax-exempt bonds, subsidized energy financing, and other credits.

This notice provides guidance with respect to the information reporting requirements applicable to Gulf Opportunity Zone Bonds, Gulf Opportunity Zone Advance Refunding Bonds, and Gulf Tax Credit Bonds. In addition, the notice provides other guidance with respect to Gulf Tax Credit Bonds including guidance to issuers of Gulf Tax Credit Bonds with respect to the credit rate and arbitrage requirements and guidance to holders of Gulf Tax Credit Bonds with respect to the treatment of the credit for income tax purposes.

A list is provided of organizations now classified as private foundations.

Ameratrust, Inc., of Delray Beach, FL, no longer qualifies as an organization to which contributions are deductible under section 170 of the Code.

Credit for sales of fuel produced from a nonconventional source, inflation adjustment factor, and reference price. This notice publishes the nonconventional source fuel credit, the inflation adjustment factor, and the reference price under section 29 of the Code for calendar year 2005. This data is used to determine the credit allowable on sales of fuel produced from a nonconventional source.

This announcement advises individual taxpayers of the release of new Form 8898 (March 2006), Statement for Individuals Who Begin or End Bona Fide Residence in a U.S. Possession. The form is used to notify the IRS that an individual taxpayer became or ceased to be a bona fide resident of a U.S. possession in accordance with Code section 937, which was added by the American Jobs Creation Act of 2004. For this purpose, the following are considered U.S. possessions: American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, the Commonwealth of Puerto Rico, and the U.S. Virgin Islands.

This document contains corrections to final regulations under section 163(d) of the Code (T.D. 9191, 2005-15 I.R.B. 854) regarding rules relating to how and when taxpayers may elect to take qualified dividend income into account as investment income for purposes of calculating the deduction for investment income expense.

This notice publishes the nonconventional source fuel credit, inflation adjustment factor, and reference price under § 29 of the Internal Revenue Code for calendar year 2005. These are used to determine the credit allowable on fuel produced from a nonconventional source under § 29. The calendar year 2005 inflation-adjusted credit applies to the sales of barrel-of-oil equivalent of qualified fuels sold by a taxpayer to an unrelated person during the 2005 calendar year, the domestic production of which is attributable to the taxpayer.

Section 29(a) provides for a credit for producing fuel from a nonconventional source, measured in barrel-of-oil equivalent of qualified fuels, the production of which is attributable to the taxpayer and sold by the taxpayer to an unrelated person during the tax year. The credit is equal to the product of $3.00 and the appropriate inflation adjustment factor.

Section 29(b)(1) and (2) provides for a phaseout of the credit. The credit allowable under § 29(a) must be reduced by an amount which bears the same ratio to the amount of the credit (determined without regard to § 29(b)(1)) as the amount by which the reference price for the calendar year in which the sale occurs exceeds $23.50 bears to $6.00. The $3.00 in § 29(a) and the $23.50 and $6.00 must each be adjusted by multiplying these amounts by the 2005 inflation adjustment factor.

Section 29(c)(1), in part, defines the term “qualified fuels” to include gas produced from biomass and liquid, gaseous, or solid synthetic fuels produced from coal (including lignite), including such fuels when used as feedstocks.

Section 29(d)(1) provides that the credit is to be applied only for sale of qualified fuels the production of which is within the United States (within the meaning of § 638(1)) or a possession of the United States (within the meaning of § 638(2)).

Section 29(d)(2)(A) requires that the Secretary, not later than April 1 of each calendar year, determine and publish in the Federal Register the inflation adjustment factor and the reference price for the preceding calendar year.

Section 29(d)(2)(B) defines “inflation adjustment factor” for a calendar year as the fraction the numerator of which is the GNP implicit price deflator for the calendar year and the denominator of which is the GNP implicit price deflator for calendar year 1979. The term “GNP implicit price deflator” means the first revision of the implicit price deflator for the gross national product as computed and published by the Department of Commerce.

Section 29(d)(2)(C) defines “reference price” to mean with respect to a calendar year the Secretary’s estimate of the annual average wellhead price per barrel for all domestic crude oil the price of which is not subject to regulation by the United States.

Section 29(d)(5) provides that the term “barrel-of-oil equivalent” with respect to any fuel generally means that amount of the fuel which has a Btu content of 5.8 million.

The inflation adjustment factor for calendar year 2005 is 2.2640. The reference price for calendar year 2005 is $50.26. These amounts were published in the Federal Register on April 10, 2006.

Because the calendar year 2005 reference price does not exceed $23.50 multiplied by the inflation adjustment factor, the phaseout of the credit provided for in § 29(b)(1) does not occur for any qualified fuel sold in calendar year 2005.

The nonconventional source fuel credit under § 29(a) is $6.79 per barrel-of-oil equivalent of qualified fuels ($3.00 x 2.2640). This amount was published in the Federal Register on April 10, 2006.

The principal author of this notice is Jaime C. Park of the Office of Associate Chief Counsel (Passthroughs and Special Industries). For further information regarding this notice, contact Ms. Park at (202) 622-3120 (not a toll-free call).

This notice sets forth interim guidance, pending the issuance of regulations, relating to the credit under § 45J of the Internal Revenue Code for production of electricity at advanced nuclear power facilities. Specifically, this notice specifies the method that will be used to allocate the national megawatt capacity limitation that limits the allowable credit and prescribes the application process by which taxpayers may request an allocation of the national megawatt capacity limitation. This notice also provides guidance on the requirement that the electricity be sold to an unrelated person and on the effect of grants, tax-exempt bonds, subsidized energy financing, and other credits. The Internal Revenue Service and the Treasury Department expect that the regulations will incorporate the rules set forth in this notice.

.01 Section 45J was enacted by section 1306 of the Energy Policy Act of 2005, Public Law 109-58 (119 Stat. 594). Section 45J permits a taxpayer to claim a credit for electricity that the taxpayer (1) produces at an advanced nuclear power facility during the eight-year period beginning when the facility is placed in service and (2) sells to an unrelated person (qualifying electricity).

.02 Under § 45J(d), an advanced nuclear power facility is a nuclear facility that meets all of the following requirements:

(1) The facility consists of a nuclear power reactor that uses nuclear energy to produce electricity. For purposes of this notice, each nuclear power reactor located on a multi-reactor site is a separate facility.

(2) The facility is owned by the taxpayer.

(3) The reactor design for the facility is approved by the Nuclear Regulatory Commission after December 31, 1993 (and such design or a substantially similar design of comparable capacity was not approved on or before that date).

(4) The facility is placed in service before January 1, 2021.

.03 Under § 45J(b)(1), a taxpayer may claim a credit for qualifying electricity produced at an advanced nuclear power facility only if part of the national megawatt capacity limitation has been allocated to the facility.

.04 Under § 45J(b)(1) and (c), the credit allowed for a taxable year with respect to the qualified electricity produced at an advanced nuclear power facility is computed under the following rules:

(1) A tentative credit for the taxable year is computed for the facility. The facility’s tentative credit for the taxable year is equal to 1.8 cents multiplied by the kilowatt hours of qualified electricity produced at the facility and sold during the taxable year to an unrelated person.

(2) The credit percentage is computed for the facility. If the nameplate capacity of the facility exceeds the national megawatt capacity limitation allocated to the facility, the credit percentage for the facility is determined by dividing the national capacity limitation allocated to the facility by its nameplate capacity. If the nameplate capacity of the facility does not exceed the national megawatt capacity limitation allocated to the facility, the credit percentage for the facility is 100 percent.

(3) The credit allowed is the lesser of (a) the tentative credit for the facility multiplied by the credit percentage for the facility, or (b) $125,000,000 per 1000 megawatts of national megawatt capacity limitation allocated to the facility.

.05 Section 45J(b)(2) provides that the national megawatt capacity limitation is 6,000 megawatts. Section 45J(b)(3) requires the Secretary to allocate this national megawatt capacity limitation. Section 45J(b)(4) requires the Secretary to provide a certification process under which the Secretary, after consultation with the Secretary of Energy, shall approve and allocate the national megawatt capacity limitation.

.01 Allocation Limited to Qualifying Facilities. The Service will allocate the national megawatt capacity limitation only to advanced nuclear facilities (within the meaning of § 45J(d)(2)) that satisfy the requirements of this section 3.01 (qualifying facilities). An advanced nuclear facility is a qualifying facility only if each of the following requirements is satisfied:

(1) An application for a construction/operating license for the facility is filed with the Nuclear Regulatory Commission on or before the later of (i) December 31, 2008, or (ii) the date on which the aggregate nameplate capacity of advanced nuclear facilities for which applications for a construction/operating license have been filed with the Nuclear Regulatory Commission first equals or exceeds 6,000 megawatts.

(2) Construction on the facility begins before January 1, 2014. For this purpose, construction begins when a person who has applied for or been granted a combined license for an advanced nuclear facility initiates the pouring of safety-related concrete for the reactor building.

(3) The U.S. Department of Energy (DOE) provides a certification that the facility qualifies as an advanced nuclear facility, that the requirements of section 3.01(1) and (2) are satisfied, and that it is feasible for the facility to placed in service prior to January 1, 2021 (“DOE certification”).

.02 Application Required.

The Service will allocate the national megawatt capacity limitation only to qualifying facilities for which the applications are submitted in accordance with section 4 of this notice.

.03 Allocation Method.

The national megawatt capacity limitation will be allocated as follows:

(1) If the total nameplate capacity of all qualifying facilities for which applications are submitted does not exceed the national megawatt capacity limitation, each of those facilities will be allocated an amount of national megawatt capacity limitation equal to its nameplate capacity.

(2) If the total nameplate capacity of all qualifying facilities for which applications are submitted exceeds the national megawatt capacity limitation, the national megawatt capacity limitation will be allocated among the facilities in proportion to their nameplate capacities.

.04 Service Action.

On or before December 31, 2014, the Service will accept or reject the taxpayer’s application and will notify the taxpayer, by letter, of its decision. If the taxpayer’s application is accepted, the acceptance letter will state the amount of the national megawatt capacity limitation allocated to the facility.

.01 A taxpayer must submit, for each facility for which an allocation of the national megawatt capacity limitation is requested (1) an application to the Service for an allocation under § 45J(b) (“application for § 45J allocation”) and (2) an application to DOE for a DOE certification (“application for DOE certification”).

.02 Applications for § 45J allocation and applications for DOE certification must be submitted before January 31, 2014. For purposes of this notice, an application that is submitted by U.S. mail will be treated as received by the Service on the date of the postmark and an application submitted by a private delivery service will be treated as received by the Service on the date recorded or the date marked in accordance with § 7502(f)(2)(C).

.03 The application for § 45J allocation must include all of the following:

(1) The name and taxpayer identification number of the taxpayer who will place the facility in service;

(2) The name and location of the facility;

(3) The nameplate capacity of the facility;

(4) The date on which the application for a construction/operating license for the facility was filed with the Nuclear Regulatory Commission;

(5) The date on which construction on the facility began;

(6) Documentation establishing that the facility is expected to be placed in service prior to January 1, 2021; and

(7) A copy of the application for DOE certification for the facility.

.04 Applications for § 45J allocation should be marked: SECTION 45J APPLICATION FOR ALLOCATION. There is not any user fee for these applications.

(1) These applications should be sent to the following address:

If a private delivery service is used, the address is:

(2) Applications for certification may also be hand delivered Monday through Friday between the hours of 8 a.m. and 4 p.m. to:

.05 The application for DOE certification must be submitted to DOE in such manner and contain such information as DOE may require. If DOE determines that the conditions for certification are satisfied (see section 3.01 of this notice), it will provide the DOE certification to the Service. The DOE certification will be subject to such requirements and conditions as the Secretary of Energy may prescribe.

If an amount of national megawatt capacity limitation is allocated to a facility and the facility is not placed in service before January 1, 2021, or the DOE informs the Service that the DOE certification for the facility has been withdrawn, the amount of the national megawatt capacity limitation allocated to that facility will be withdrawn and the national megawatt capacity limitation will be reallocated under the rules of section 3.03 of this notice among the remaining qualifying facilities.

.01 Sale to Unrelated Person. The credit under § 45J is allowed only for electricity that the taxpayer produces and sells to an unrelated person. Electricity will be treated as sold to an unrelated person for this purpose if the ultimate purchaser of the electricity is not related to the person that produces the electricity. The requirement of a sale to an unrelated person will be treated as satisfied in these circumstances even if the producer sells the electricity to a related person for resale by the related person to a person that is not related to the producer. For rules for determining whether a person is related to the producer of the electricity, see § 45(e)(4).

.02 Effect of Grants, Tax-Exempt Bonds, Subsidized Energy Financing, and Other Credits. The amount of the credit under § 45J is not reduced on account of any grants, tax-exempt bonds, subsidized energy financing, or other credits described in § 45(b)(3).

The collection of information contained in this notice has been reviewed and approved by the Office of Management and Budget in accordance with the Paperwork Reduction Act (44 U.S.C. 3507) under control number 1545-2000.

An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number.

The collections of information in this notice are in section 3. This information is required to be collected and retained in order for taxpayers to claim the new credit for the production of electricity from advanced nuclear power facilities under § 45J. The information will be used to determine the portion of the national megawatt capacity limitation to which a taxpayer’s facility is entitled. The collection of information is required to obtain a benefit. The likely respondents are corporations and partnerships.

The estimated total annual reporting burden is 600 hours.

The estimated annual burden per respondent varies from 10 to 60 hours, depending on individual circumstances, with an estimated average of 40 hours. The estimated number of respondents is 15.

The estimated annual frequency of responses is on occasion.

Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. 6103.

The principal author of this notice is Patrick S. Kirwan of the Office of Associate Chief Counsel (Passthroughs & Special Industries). For further information regarding this notice, contact Mr. Kirwan at (202) 622-3110 (not a toll-free call).

This notice provides guidance with respect to the information reporting requirements applicable to Gulf Opportunity Zone Bonds, Gulf Opportunity Zone Advance Refunding Bonds, and Gulf Tax Credit Bonds issued pursuant to § 1400N of the Internal Revenue Code. This notice also provides additional guidance with respect to the credit rate and arbitrage requirements applicable to Gulf Tax Credit Bonds and with respect to the treatment of the credit by holders of Gulf Tax Credit Bonds.

Section 101 of the Gulf Opportunity Zone Act of 2005, Pub. L. No. 109-135 (the Act), added §§ 1400M and 1400N to the Internal Revenue Code. Section 1400M(1) defines the term Gulf Opportunity Zone (“GO Zone”) as that portion of the Hurricane Katrina disaster area determined by the President to warrant individual or individual and public assistance from the Federal Government under the Robert T. Stafford Disaster Relief and Emergency Assistance Act by reason of Hurricane Katrina.

In general, § 1400N authorizes the states of Alabama, Louisiana and Mississippi to issue: (1) certain exempt facility bonds and qualified mortgage bonds pursuant to § 1400N(a) (“Gulf Opportunity Zone Bonds”), (2) advance refunding bonds pursuant to § 1400N(b) (“Gulf Opportunity Zone Advance Refunding Bonds”) and (3) tax credit bonds pursuant to § 1400(N)(l) (“Gulf Tax Credit Bonds”). Gulf Opportunity Zone Bonds and Gulf Opportunity Zone Advance Refunding Bonds must be issued before January 1, 2011. Gulf Tax Credit Bonds must be issued before January 1, 2007.

The credit rate for an issue of Gulf Tax Credit Bonds is the applicable Gulf Tax Credit Bond credit rate published each business day by the Bureau of Public Debt on its Internet site for State and Local Government Series securities at: http://www.publicdebt.treas.gov. The applicable Gulf Tax Credit Bond credit rate shall be applied to an issue of Gulf Tax Credit Bonds on the day the issue is sold. For this purpose, the issue is sold on the first day there is a binding, written contract for the sale or exchange of the bonds. The credit rates will be determined by the Treasury Department based on its estimate of the yield on outstanding AA rate corporate bonds of a similar maturity for the business day immediately prior to the date on which the issue is sold.

Section 1400N(l)(4)(D) generally provides that the arbitrage requirements of § 148 applicable to tax-exempt State or local bonds apply to Gulf Tax Credit Bonds and any loans made with the proceeds of such bonds. In applying § 148 to Gulf Tax Credit Bonds the following special rules apply—

(1) The credit allowed under § 1400N(l)(1) shall be disregarded for purposes of computing the yield on the issue under § 1.148-4;

(2) Section 148(b)(3) (relating to exception to the definition of “investment property” for certain tax-exempt bonds) shall not apply.

The following rules are applicable to holders of Gulf Tax Credit Bonds:

(1) The holder of a Gulf Tax Credit Bond must treat the bond as if it pays qualified stated interest (within the meaning of § 1.1273-1(c)) on each credit allowance date. Thus, for example, if the holder uses an accrual method of accounting, the holder must accrue as interest income the amount of the credit over each period that ends on a credit allowance date.

(2) If a holder holds a Gulf Tax Credit Bond on a credit allowance date but cannot use all or a portion of the credit to reduce its income tax liability (for example, because the limitation in § 1400N(l)(3) applies), the holder is allowed a deduction for the taxable year that includes the credit allowance date (or, at the option of the holder, the next succeeding taxable year). The amount of the deduction is equal to the amount of the unused credit deemed paid on each credit allowance date during the taxable year.

(3) If a person is a partner in a partnership, a beneficiary of an estate or trust, a shareholder in an S corporation, or the owner of an interest in another pass-through entity except for a regulated investment company (collectively, pass-through entity), and the pass-through entity owns a Gulf Tax Credit Bond, then the amount of the credit under § 1400(l)(1) allowed to such person for any taxable year shall not exceed an amount (separately computed with respect to such person’s interest in such entity) equal to the amount of tax attributable to that portion of the person’s taxable income in such year that is allocable or apportionable to the person’s interest in such entity.

The principal authors of this notice are Timothy L. Jones and Aviva M. Roth of the Office of Associate Chief Counsel (Tax Exempt & Government Entities). However, other personnel from the IRS and the Treasury Department participated in its development. For further information regarding this notice, contact Timothy L. Jones or Aviva M. Roth at (202) 622-3980 (not a toll-free call).

Under Title 31, Code of Federal Regulations, Part 10, an attorney, certified public accountant, enrolled agent, or enrolled actuary, in order to avoid the institution or conclusion of a proceeding for his or her disbarment or suspension from practice before the Internal Revenue Service, may offer his or her consent to suspension from such practice. The Director, Office of Professional Responsibility, in his discretion, may suspend an attorney, certified public accountant, enrolled agent, or enrolled actuary in accordance with the consent offered.

The following individuals have been placed under consent suspension from practice before the Internal Revenue Service:

Under Title 31, Code of Federal Regulations, Part 10, the Director, Office of Professional Responsibility, is authorized to immediately suspend from practice before the Internal Revenue Service any practitioner who, within five years from the date the expedited proceeding is instituted (1) has had a license to practice as an attorney, certified public accountant, or actuary suspended or revoked for cause or (2) has been convicted of certain crimes.

The following individuals have been placed under suspension from practice before the Internal Revenue Service by virtue of the expedited proceeding provisions:

Under Title 31, Code of Federal Regulations, Part 10, after notice and an opportunity for a proceeding before an administrative law judge, the following individuals have been placed under suspension from practice before the Internal Revenue Service:

Under Title 31, Code of Federal Regulations, Part 10, after notice and an opportunity for a proceeding before an administrative law judge, the following individuals have been disbarred from practice before the Internal Revenue Service:

Under Title 31, Code of Federal Regulations, Part 10, in lieu of a proceeding being instituted or continued, an attorney, certified public accountant, enrolled agent, or enrolled actuary, may offer his or her consent to the issuance of a censure. Censure is a public reprimand.

The following individuals have consented to the issuance of a Censure:

Under Title 31, Code of Federal Regulations, Part 10, an enrolled agent, in order to avoid the institution or conclusion of a proceeding for his or her disbarment or suspension from practice before the Internal Revenue Service, may offer his or her resignation as an enrolled agent. The Director, Office of Professional Responsibility, in his discretion, may accept the offered resignation.

The Director, Office of Professional Responsibility, has accepted offers of resignation as an enrolled agent from the following individuals:

Beginning with tax year 2001, an individual with worldwide gross income of more than $75,000 must file Form 8898 for the tax year in which the individual becomes or ceases to be a bona fide resident of one of the following U.S. possessions: American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, the Commonwealth of Puerto Rico, or the U.S. Virgin Islands. The form is required to be filed by Internal Revenue Code section 937, which was added by the American Jobs Creation Act of 2004 (Public Law 108-357), and Treasury Regulation section 1.937-1(h).

For married individuals, the $75,000 filing threshold applies to each spouse separately.

Individuals who are required to file Form 8898 generally must do so by the due date (including extensions) for filing Form 1040 or Form 1040NR. However, for tax years 2001 through 2005, Form 8898 must be filed by July 17, 2006. Individuals who have an extension to file their 2005 return must file Form 8898 for 2005 by the extended due date. Form 8898 must be filed by itself and not with Form 1040 or Form 1040NR.

Form 8898 and its instructions can be ordered by calling 1-800-829-3676 or can be downloaded at www.irs.gov.

Internal Revenue Service (IRS), Treasury.

Final regulations and removal of temporary regulations.

This document contains a correction to temporary regulations (T.D. 9191, 2005-15 I.R.B. 854) that was published in the Federal Register on Friday, March 18, 2005 (70 FR 13100) relating to the time and manner of making section 163(d)(4)(B) election to treat qualified dividend income as investment income.

This correction is effective March 18, 2005.

Amy Pfalzgraf, (202) 622-4950 (not a toll-free number).

Paragraph 1. The authority citation for part 1 continues to read as follows:

Authority: 26 USC 7805 * * *

The name of an organization that no longer qualifies as an organization described in section 170(c)(2) of the Internal Revenue Code of 1986 is listed below.

Generally, the Service will not disallow deductions for contributions made to a listed organization on or before the date of announcement in the Internal Revenue Bulletin that an organization no longer qualifies. However, the Service is not precluded from disallowing a deduction for any contributions made after an organization ceases to qualify under section 170(c)(2) if the organization has not timely filed a suit for declaratory judgment under section 7428 and if the contributor (1) had knowledge of the revocation of the ruling or determination letter, (2) was aware that such revocation was imminent, or (3) was in part responsible for or was aware of the activities or omissions of the organization that brought about this revocation.

If on the other hand a suit for declaratory judgment has been timely filed, contributions from individuals and organizations described in section 170(c)(2) that are otherwise allowable will continue to be deductible. Protection under section 7428(c) would begin on May 1, 2006, and would end on the date the court first determines that the organization is not described in section 170(c)(2) as more particularly set forth in section 7428(c)(1). For individual contributors, the maximum deduction protected is $1,000, with a husband and wife treated as one contributor. This benefit is not extended to any individual, in whole or in part, for the acts or omissions of the organization that were the basis for revocation.