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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.
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