Clean Renewable Energy Bonds (CREBs)

Note: Following the Tax Cuts and Jobs Act of 2017, section 54C of the Internal Revenue Code, which authorized New Clean Renewable Energy Bonds (CREBs), was repealed. As per IRS Notice 2018-15, the IRS ceased processing applications or issuing allocations for New CREBs. The summary below describes CREBs prior to their repeal and is for historical reference only.

Clean Renewable Energy Bonds (CREBs) were primarily utilized by public sector entities to fund renewable energy projects, aligning with technologies eligible for the federal renewable energy production tax credit (PTC). CREBs were available to electric cooperatives, various government entities, and some lenders. The issuer repaid the principal, while bondholders earned federal tax credits instead of traditional bond interest, effectively reducing the borrower’s interest rate.

The Energy Improvement and Extension Act of 2008 allocated $800 million for new CREBs. This allocation was increased by $1.6 billion through the American Recovery and Reinvestment Act of 2009, bringing the total New CREB allocation to $2.4 billion. This Act also extended the deadline for existing allocations (“Old CREBs”) until December 31, 2009, and made modifications to enhance the program’s utility for certain projects. Another provision expanded CREBs eligibility to marine and hydrokinetic energy projects.

Participation in CREBs was constrained by the bond volume set by Congress. Applicants had to seek a CREBs allocation from the IRS and issue bonds within a designated timeframe. The $2.4 billion New CREBs allocation didn’t have a specific expiry under the law, but IRS guidelines required bond issuance within three years of allocation notification. The allocation was equally divided (33.3% each) among public power providers, governmental bodies, and electric cooperatives, with IRS Notice 2015-12 assigning different volume caps.

The U.S. Treasury Department sets the tax credit rate daily. Under new allocations, this credit was reduced to 70% of the original rate. Other significant changes were detailed in IRS Notice 2009-33.

CREBs differed from traditional tax-exempt bonds; the tax credits were considered taxable income for the bondholder. These credits could be claimed annually, subject to the Energy Policy Act of 2005 limits. Rates for prior and new CREB allocations are available through specific Treasury links.

IRS Notice 2009-33, issued in April 2009, called for New CREB applications and provided interim program rules. The deadline for applications was August 4, 2009. Additional guidance can be found in IRS Notices 2006-7 and 2007-26, unless superseded by 2008 and 2009 legislation. In October 2009, the Treasury allocated $2.2 billion in new CREBs for 805 projects. A subsequent IRS announcement in September 2010 offered around $191 million in unallocated New CREB volume to electric cooperatives. The allocation was announced in March 2011. It’s unclear if further announcements will be made for Old CREBs or New CREBs that miss the issuance deadline.

Historically, CREBs originated from the Energy Policy Act of 2005, initially allocating $800 million for public sector renewable energy projects. Following the Tax Relief and Health Care Act of 2006, an additional $400 million was available in 2008. The IRS allocated the original $800 million to 610 projects in 2006, and the additional $400 million, plus surrendered volume, to 312 projects in 2008.

For more details on CREBs, contact Zoran Stojanovic or Timothy Jones at the IRS (202) 622-3980, or Janae Lemley for IRS Notice 2009-33 (636) 255-1202.

*As of March 2010 (H.R. 2847, Sec. 301), New CREB issuers could opt for a direct Treasury payment, a refundable tax credit equal to the non-refundable tax credit for bondholders. This applied to New CREBs issued post-March 18, 2010, enactment. IRS Notice 2010-35, issued in April 2010, provides guidance on this option.