Coal Credit Transactions

Southern Illinois has long had its share of coal mining and production, maybe you have some stock or an interested stake in a coal company? There may be a deduction for that. The IRS recently issued a memo that shows general guidelines for dictating refined coal credit transactions.

The IRS advised that investors must have a true entrepreneurial interest in a refined coal operation to qualify for potential tax credits. The investor cannot be heavily insulated from the risks and rewards of the business, if the investor is heavily insulated, they likely cannot benefit from the credits. The initial piece of information the IRS will use to determine the ability to obtain credits is the governing agreement between the investor and developer.

The IRS has determined a list of factors which support the conclusion that an investor faces meaningful entrepreneurial risk and reward that include: (1) making a significant upfront investment that is fixed, nonrefundable, non-contingent and fully at risk; (2) the fortunes of the venture and whether the investor would be impacted by changes in circumstances; and (3) whether the venture takes steps that are reasonably available to minimize the economic losses of the activity.

People make investments all the time, looking out for the future or trying grow their own personal wealth; maybe you have some money invested in a coal company and qualify for tax credits. If you think you might be eligible, or have questions regarding eligibility, reach us at the Center for Financial, Legal & Tax Planning, Inc.