IRS issues regs to encourage refinery expansions

The US IRS has issued temporary regulations and a notice of proposed rulemaking to encourage expansion of existing US refineries and construction of new plants as mandated by the 2005 Energy Policy Act.

Nick Snow
Washington Editor

WASHINGTON, DC, July 8 -- The US Internal Revenue Service has issued temporary regulations and a notice of proposed rulemaking (NOPR) to encourage expansion of existing US refineries and construction of new plants as mandated by the 2005 Energy Policy Act (EPACT).

The temporary regulations amend Section 179C of the federal income tax code, which was added when EPACT became law. They define "qualified refinery property" and are designed to assist refiners in determining costs that may be expensed under the provision, the US Department of Treasury division said on July 8.

An installation located within the US that processes liquid fuel from oil or other qualified fuel is considered a qualified refinery under the temporary regulations, which the IRS has proposed adopting as a rulemaking. Not eligible are refinery properties that are primarily topping plants, asphalt plants, lubricant facilities, crude or product terminals, or blending facilities. Nor is refinery property built solely to comply with consent decrees or projects mandated by federal, state, or local governments.

Section 179C allows refiners to deduct 50% of the cost of any qualified refinery property that goes into service between Aug. 8, 2005, and Jan. 1, 2012, according to the notice. Remaining qualified expenditures are generally recovered under Section 179B and Section 168 where applicable, it indicated. All properly capitalized costs can be included, it said.

The IRS will take comments on its proposed rulemaking through Oct. 7. It also plans to hold a public hearing Nov. 20 and will accept outlines of topics to be discussed there through Oct. 14.

The National Petrochemical and Refiners Association applauded the IRS's July 8 action and expressed gratitude to US Sen. Kay Bailey Hutchison (R-Tex.) for encouraging the Treasury Department and IRS to move promptly. "Domestic refiners will finally have the certainty that they will receive the credits for expansion projects provided 3 years ago by the Energy Policy Act," NPRA Pres. Charles T. Drevna said.

Contact Nick Snow at nicks@pennwell.com.

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