[author: John A. Eliason]

On December 7, 2012, the IRS made public its revocation of Private Letter Ruling 201214007 on the basis that the ruling was "not in accord with the current views of the Service."

The Original Ruling

PLR 201214007 concerned the allocation of purchase price where a taxpayer acquired wind energy facilities together with facility-specific power purchase agreements (PPAs). In that ruling, the taxpayer represented the following:

  • Each PPA required the producer of the electricity generated by the related wind energy facility to sell, and the buyer to purchase all, or a specified cap amount, of the output of that specific facility for a specified price for a specified term of years
  • Under the terms of each PPA, there were no circumstances under which the producer can produce or obtain capacity, energy, or environmental attributes required to fulfill its obligations under the PPA from sources other than the specific wind energy facility designated in the PPA
  • If a facility-specific PPA was transferred to another party without a transfer of the related wind energy facility to that same party, the transferee would have no means of satisfying its obligations under the PPA

Based on the taxpayer's representations, the IRS concluded that the specific-facility PPA should not be treated as an asset separate from its related wind energy facility.