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; or (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 US 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. The nationwide volume limitation (i.e., “volume cap”) will be dispersed among the states in proportion to the population of the states. In states in which there is located one or more large local governments, which is defined as any municipality or county having a population of 100,000 or more, each large local government was allocated a portion of the stateʼs volume cap based on the ratio the large local government population bore to the state population.