The Internal Revenue Service recently released Notice 2012-44, which provides guidance concerning qualified energy conservation bonds. QECBs are taxable bonds that can be issued by State or local governments to finance certain energy conservation projects, including: (i) reducing energy consumption in publicly-owned buildings by at least 20 percent; and (ii) implementing green community programs. QECBs may also be issued to finance certain electricity-producing facilities, such as wind facilities and solar facilities.
QECBs may be issued to (i) provide the holders of QECBs with a federal tax credit instead of a portion of the interest payable on the bonds or (ii) provide the issuer with a direct federal cash subsidy from the U.S. Treasury representing a portion of the interest paid by the issuer to holders of QECBs. Congress authorized $3.2 billion in nationwide volume cap for QECBs in 2009 and approximately $2 billion of such nationwide volume cap is still unused. Volume cap was first allocated to a State and then allocated to large local governments within the State. Large local governments are any municipality or county having a population of 100,000 or more. Accordingly, municipalities and counties with a population of 100,000 or more were allocated volume cap that authorizes the issuance of QECBs in certain amounts.
