Announcement 2009-69 — Announcement 2009-69

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Part IV - Items of General Interest

Wind Energy Partnerships

Announcement 2009-69

This announcement revises Revenue Procedure 2007-65 by replacing the
following language in Section 3: "The Service generally will closely scrutinize a Project
Company as a partnership or Investors as partners if a Project Company's partnership
agreement does not satisfy each requirement of this revenue procedure. The
requirements set forth in this revenue procedure that must be satisfied in order to qualify
for the Safe Harbor, however, are not intended to provide substantive rules and are not
to be used as audit guidelines. The Safe Harbor in this revenue procedure is to provide
guidance to taxpayers establishing or participating in wind energy partnerships in lieu of
taxpayers requesting a letter ruling. Therefore, the Service will not rule on any issues
under Subchapter K for partnerships claiming the credit under § 45." with "The
requirements set forth in this revenue procedure that must be satisfied in order to qualify
for the Safe Harbor are not intended to provide substantive rules and are not to be used
as audit guidelines. Returns claiming wind energy production tax credits under § 45 are
subject to examination by the Service. The Safe Harbor in this revenue procedure is to

provide guidance to taxpayers establishing or participating in wind energy partnerships
in lieu of taxpayers requesting a letter ruling. Therefore, the Service will not rule on any
issues under Subchapter K for partnerships claiming the credit under § 45."
This announcement also replaces the following language from Section 4.05:
"Neither the Developer, the Investors nor any related parties may have a contractual
right to purchase, at any time, the Wind Farm, any property included in the Wind Farm
or an interest in the Project Company at a price less than its fair market value
determined at the time of exercise of the contractual right to purchase, and provided
further that the Developer (or any party related to the Developer) may not have a
contractual right to purchase the Wind Farm or an interest in the Project Company
earlier than 5 years after the qualified facility is first placed into service," with "The
Developer, the Investor, or any related party may only have a contractual right to
purchase the Wind Farm, any property included in the Wind Farm, or an interest in the
Project Company (the Property) that satisfies the requirements of this section 4.05. The
contractual right must be negotiated for valid non-tax business reasons at arm's length
by parties with material adverse interests. The purchase price for the Property must
either be a price that is not less than the fair market value of the Property determined at
the time of exercise or, if the purchase price is determined prior to exercise, a price that
the parties reasonably believe, based on all facts and circumstances at the time the
price is determined, will not be less than the fair market value of the Property at the time
the right may be exercised. Finally, the Developer (or any party related to the
Developer) may not have a contractual right to purchase the Property earlier than 5
years after the qualified facility is first placed in service."

This announcement also replaces the following language in Section 4.09: "Thus,
generally only entities not subject to § 469, and not individuals, will be able to offset
non-project income with credits received as a passive investor in the partnership," with
"Generally, a taxpayer subject to § 469 may utilize passive activity credits from qualified
wind facilities only to the extent of their tax liability allocable to passive activities,
whether from qualified wind facilities or other sources."
Finally, this announcement replaces the following language in Section 5.02:
"Example 2. The facts are the same as in Example 1, except Investor is initially
allocated 99.5% of LLC's gross income or loss and § 45 credits. Under these facts, the
wind energy limited liability company's classification as a valid partnership would be
closely scrutinized by the Service. Likewise, if any other provision of this safe harbor is
not followed for any wind energy partnerships, the Service will closely scrutinize the
validity of such purported partnerships," with, "Example 2. The facts are the same as in
Example 1, except Investor is initially allocated 99.5% of LLC's gross income or loss
and § 45 credits. Under these facts, the wind energy LLC's classification as a valid
partnership would not be governed by the safe harbor in this revenue procedure.
Likewise, if any other provision of this safe harbor is not followed for any wind energy
partnerships, such partnerships would not be governed by the safe harbor in this
revenue procedure."
The principal authors of this announcement are Vishal R. Amin and Richard T.
Probst of the Office of Associate Chief Counsel (Passthroughs and Special Industries).
For further information regarding this announcement contact Vishal R. Amin or Richard
T. Probst at (202) 622-3060 (not a toll-free call).