Great Plains Gasification Associates, A Partnership, Transco Coal Gas Company, A Partner Other Than The Tax Matters Partner - Page 16

                                        - 16 -                                        
          consideration in structuring the financial terms of the project             
          and in deciding to pursue the project.                                      
               In 1982, the partnership requested an IRS ruling that the              
          partnership’s DOE-guaranteed loan from FFB would not be                     
          considered “subsidized energy financing” under section                      
          48(l)(11)(C).  In a private letter ruling dated May 8, 1984, the            
          IRS ruled that, because the partnership was required to obtain              
          financing through FFB as a condition to obtaining a loan                    
          guarantee from the DOE, the funds that the partnership borrowed             
          from FFB did not constitute subsidized energy financing under               
          section 48(l)(11)(C).10                                                     
          Financial Difficulties With the Project                                     
               In the mid-1980s, as construction of the Great Plains                  
          project neared completion, energy prices declined unexpectedly              
          and precipitously.  As a result, projected initial short-term               
          losses from the project spiked; there was no longer reasonable              
          assurance that the project would generate sufficient cash for the           
          partnership to repay its debt to FFB on time.  Nevertheless, the            

               10 In response to a subsequent ruling request by the                   
          partnership, the IRS ruled in a private letter ruling dated July            
          25, 1984 (supplemented by letter rulings dated Feb. 12 and Mar.             
          11, 1985), that the partnership met the requirements for the                
          credit for fuel production from nonconventional sources under               
          sec. 29 (formerly sec. 44D).  Because energy tax credits offset             
          the sec. 29 credits in full, however, the partnership and its               
          partners realized no tax benefit from the sec. 29 tax credits.              

Page:  Previous  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  22  23  24  25  Next

Last modified: May 25, 2011