Form 8907 Nonconventional Source Fuel Credit

2006 Form 8907, Nonconventional Source Fuel Credit

Purpose: This is the first circulated draft of the 2006 Form 8907 for your review and
comments. See the next page for a discussion of the major changes.
TPCC Meeting: None, but may be arranged if requested.
Prior Version: The 2005 Form 8907 is available at:
http://www.irs.gov/pub/irs-pdf/f8907.pdf
Other Products: Circulations of draft tax forms, instructions, notices, and publications
are posted at:
http://taxforms.web.irs.gov/draft_products.html
Comments: Please email, call, or fax any comments by June 5, 2006.

Major Changes to 2006 Form 8907

Most changes to Form 8907, Nonconventional Source Fuel Credit, have been made to
support the redesign of Form 3800, General Business Credit. This includes revising the
text of lines 13 and 14, and adding lines 15 and 16 on the first page of the form.
For tax years ending after 2005, the nonconventional source fuel credit becomes part of
the general business credit. Therefore, Parts II and III of the form, which pertained
specifically to tax year 2005, have been removed, along with any related instructions.
On page 1, we removed “Part I” because the form is no longer divided into parts. For
lines 1 through 5, we added column (d) so all sales of qualified fuel could be accounted
for.
We updated the code reference in the “Caution” on page 2 to reflect the fact that the
relevant citation has been redesignated as IRC 45K(f).
David Jeffrey Buchanan
Tax Forms and Publications
SE:W:CAR:MP:T:B:P
Email: [email protected]
Phone: 202-622-3085
Fax: 202-622-3262

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Form

I.R.S. SPECIFICATIONS
TO BE REMOVED BEFORE PRINTING
INSTRUCTIONS TO PRINTERS
FORM 8907, PAGE 1 of 4
MARGINS: TOP 13mm (1⁄ 2 "), CENTER SIDES.
PRINTS: HEAD TO HEAD
PAPER: WHITE WRITING, SUB. 20.
INK: BLACK
FLAT SIZE: 216mm (81⁄ 2 ") 3 279mm (11")
PERFORATE: (NONE)
DO NOT PRINT — DO NOT PRINT — DO NOT PRINT — DO NOT PRINT

8907

Name(s) shown on return

A

Type of qualified fuel (enter code)

B

Date the facility was placed in service

1

Barrel-of-oil equivalents

2

Enter the product of $3 multiplied by
the inflation adjustment factor. See
instructions
Multiply line 2 by line 1
Phaseout adjustment. See
instructions
Subtract line 4 from line 3. If zero or
less, enter zero
Add columns (a) through (d) on line 5

5
6

Date

Signature

O.K. to print
Revised proofs
requested

OMB No. 1545-2008

Nonconventional Source Fuel Credit

Department of the Treasury
Internal Revenue Service

3
4

Action

2006

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©
©

Attach to your tax return.
See instructions.

Attachment
Sequence No.

146

Identifying number

(a)
Qualified coke and coke
gas sold after 12/31/2005

(b)
All other qualified fuels
sold after 12/31/2005

7a Reduction due to government monies and subsidized financing. Enter
the total of government grants, proceeds of tax-exempt government
obligations, and subsidized energy financing for the project for this and
all prior tax years
b Enter the total of additions to the capital account for the project for this
and all prior tax years
c Divide line 7a by line 7b. Show as a decimal to at least 4 places
d Multiply line 6 by line 7c
8 Subtract line 7d from line 6

9a Reduction due to energy credit. Enter the total amount allowed under
section 38 for this and all prior tax years by reason of the energy
percentage with respect to the property used in the project

(c)
Qualified coke and
coke gas
sold after 12/31/2006

6

7a
7b
7c
7d
8

9a

b Enter the total amount recaptured with respect to the amount entered
on line 9a under section 49(b) or 50(a) for this and any prior tax year,
9b
and under section 38 for any prior tax year
c Subtract line 9b from line 9a. If zero or less, enter amount from line 8 on line 10 and go to line 11a
10 Subtract line 9c from line 8
11a Reduction due to enhanced oil recovery credit (Form 8830). Enter the
total amount allowed for this and all prior tax years by reason of any
enhanced oil recovery credit with respect to such project

11a

b Enter the total amount of enhanced oil recovery credit recapture with
respect to the amount on line 11a for any prior tax year

11b

c Subtract line 11b from line 11a. If zero or less, enter the amount from line 10 on line 12 and go to
line 13
12 Subtract line 11c from line 10
13 Nonconventional source fuel credit from partnerships, S corporations, estates, and trusts
14 Add lines 12 and 13. Estates and trusts, go to line 15; partnerships and S corporations, report this
amount on Schedule K; all others, report this amount on Form 3800, line 1s
15 Amount allocated to beneficiaries of the estate or trust (see instructions)
16 Estates and trusts: subtract line 15 from line 14. Report this amount on Form 3800, line 1s
For Paperwork Reduction Act Notice, see instructions.

(d)
All other qualified fuels
sold after 12/31/2006

Cat. No. 37716X

9c
10

11c
12
13
14
15
16
Form

8907

(2006)

1
I.R.S. SPECIFICATIONS
TO BE REMOVED BEFORE PRINTING
INSTRUCTIONS TO PRINTERS
FORM 8907, PAGE 2 of 4
MARGINS: TOP 13mm (1⁄ 2 "), CENTER SIDES.
PRINTS: HEAD TO HEAD
PAPER: WHITE WRITING, SUB. 20.
INK: BLACK
FLAT SIZE: 216mm (81⁄ 2 ") 3 279mm (11")
PERFORATE: (NONE)
DO NOT PRINT — DO NOT PRINT — DO NOT PRINT — DO NOT PRINT

Page

Form 8907 (2006)

General Instructions

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Section references are to the Internal Revenue Code unless
otherwise noted.

What’s New

The passive activity limitation and the tax liability limitation are
no longer figured on Form 8907. Parts II and III of the 2005
form have been eliminated and these limitations must be
figured on Form 3800.
Taxpayers that are not partnerships, S corporations,
estates, or trusts, and whose only source of this credit is from
those pass-through entities, are not required to complete or
file this form. Instead, they can report this credit directly on
line 1s of Form 3800.

Purpose of Form

2

Use Form 8907 to figure the nonconventional source fuel
credit. The credit is part of the general business credit. This
credit is allowed for a qualified fuel that you produced and that
was sold by you to an unrelated person during the tax year.
Qualified fuels for this credit are:
● Gas produced from biomass,
● Liquid, gaseous, or solid synthetic fuels produced from
coal, and
● Coke or coke gas (if sold after December 31, 2005).
See Qualified Fuels below for more information.

Changes to the Nonconventional Source
Fuel Credit
For tax years ending after December 31, 2005, the
nonconventional source fuel credit becomes a general
business credit. Section 29 was redesignated as section 45K.
Coke and coke gas. The credit has been extended to certain
facilities that produce coke and coke gas fuel. In order to
qualify for the credit, the fuel must be produced and sold after
December 31, 2005.

Qualified Fuels
Gas produced from biomass. This fuel qualifies for the
credit if:
● It is produced by the taxpayer in a facility located in the
United States or a U.S. possession that was originally placed
in service after December 31, 1992, and before July 1, 1998,
(pursuant to a binding written contract in effect before
January 1, 1997), and
● The fuel is sold before January 1, 2008.
Biomass means any organic material other than oil, natural
gas, and coal (including lignite), or any product thereof.
Liquid, gaseous, or solid fuels produced from coal. This
includes lignite and any of these fuels when used as
feedstocks. The fuel qualifies for the credit if:
● It is produced by the taxpayer in a facility located in the
United States or a U.S. possession that was placed in service
after December 31, 1992, and before July 1, 1998, (pursuant
to a binding written contract in effect before January 1, 1997),
and
● The fuel is sold before January 1, 2008.
Coke and coke gas. The fuel qualifies for the credit if:
● It is produced by the taxpayer in a facility located in the
United States or a U.S. possession that was placed in service
before January 1, 1993, or after January 1, 1998, and before
January 1, 2010, and

● The fuel is sold during the period beginning on the later of
January 1, 2006, or the date the facility is placed in service
and ending 4 years after the date the period began.
You cannot claim the credit for coke or coke gas if
the facility used to produce coke or coke gas was
used to produce other qualified fuels and a credit
CAUTION for those fuels was allowed by reason of section
45K(f) for this tax year or any preceding tax year.

Specific Instructions

Line A

Enter a code identifying the type of qualified fuel sold as
follows:
● For gas produced from biomass, enter “A”.
● For liquid, gaseous, or solid synthetic fuels produced from
coal, enter “B”.
● For coke or coke gas, enter “C”.

Line B

Enter the date the facility was placed in service. If there is
more than one facility, attach a statement showing separately
for each facility the type of fuel it produced and the date it was
placed in service.

Line 1
Enter the barrel-of-oil equivalent of the qualified fuel in the
appropriate column. If you sold more than one type of fuel for
any column, compute the barrel-of-oil equivalent separately
for each type of fuel and enter the total in the appropriate
column. Compute the barrel-of-oil equivalent separately for
each type of qualified fuel by:
1. Determining the British Thermal Unit (BTU) value of the
amount of qualified fuel sold during the year using prevailing
industry standards, then
2. Dividing the BTU value of the fuel by 5.8 million.
Note. For liquid, gaseous, or solid synthetic fuels produced
from coal, do not include the BTU value of any additives used
to produce the fuel.
The average barrel-of-oil equivalent for coke and
coke gas cannot exceed 4,000 barrels a day.
When determining the average, do not take into
CAUTION account days before the date the facility was
placed in service.

Line 2
The $3 amount used to compute the credit must be adjusted
by multiplying it by the inflation adjustment factor for the type
of qualified fuel and the calendar year in which the sale
occurs. The inflation adjustment factor for coke and coke gas
will be different from the inflation adjustment factor for all
other qualified fuels.
Inflation adjustment factor. The inflation adjustment factor
for each calendar year and type of qualified fuel is provided in
the Internal Revenue Bulletin in April of the following year. The
Internal Revenue Bulletin is available at www.irs.gov.

Line 4
The amount of the credit is reduced if the reference price for
domestic crude oil reaches a certain amount. Compute the
phaseout adjustment separately for each column of line 4 as
follows:
(a) Determine the reference price for the
calendar year in which the fuel was sold.
The reference price for each calendar
year is provided in the Internal Revenue
Bulletin in April of the following year (a)

1
I.R.S. SPECIFICATIONS
TO BE REMOVED BEFORE PRINTING
INSTRUCTIONS TO PRINTERS
FORM 8907, PAGE 3 of 4 (Page 4 is blank)
MARGINS: TOP 13mm (1⁄ 2 "), CENTER SIDES.
PRINTS: HEAD TO HEAD
PAPER: WHITE WRITING, SUB. 20.
INK: BLACK
1
FLAT SIZE: 216mm (8 ⁄ 2 ") 3 279mm (11")
PERFORATE: (NONE)
DO NOT PRINT — DO NOT PRINT — DO NOT PRINT — DO NOT PRINT

Page 3

Form 8907 (2006)

(b) Multiply $23.50 by the inflation
adjustment factor for the type of qualified
fuel and calendar year in which the fuel
was sold
(b)
(c) Subtract line (b) from line (a). If zero
or less, stop here; enter zero on line 4
and go to line 5
(c)
(d) Multiply $6.00 by the inflation
adjustment factor for the type of qualified
fuel and calendar year in which the fuel
was sold
(d)
(e) Divide line (c) by line (d)
(e)
(f) Phaseout Adjustment. Multiply line (e)
by the amount from line 3 of the form.
Enter this figure on line 4 and go to
line 5
(f)

Line 7a

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Enter the sum, for this and all prior tax years, of:
● Grants provided by the United States, a state, or a political
subdivision of the state for the project;
● Proceeds of a tax-exempt issue of state or local
government obligations used to provide financing for the
project; and
● The total amount of subsidized energy financing provided
directly or indirectly under a federal, state, or local program
provided for the project.

Line 15
Estates and trusts. Allocate the amount on line 14 between
the estate and trust and the beneficiaries in proportion to the
income allocable to each. On line 15, enter the beneficiaries’
allocated amount.

Paperwork Reduction Act Notice. We ask for the information
on this form to carry out the Internal Revenue laws of the
United States. You are required to give us the information. We
need it to ensure that you are complying with these laws and
to allow us to figure and collect the right amount of tax.
You are not required to provide the information requested
on a form that is subject to the Paperwork Reduction Act
unless the form displays a valid OMB control number. Books
or records relating to a form or its instructions must be
retained as long as their contents may become material in
the administration of any Internal Revenue law. Generally, tax
returns and return information are confidential, as required by
section 6103.
The time needed to complete and file this form will vary
depending on individual circumstances. The estimated
burden for individual taxpayers filing this form is approved
under OMB control number 1545-0074 and is included in the
estimates shown in the instructions for their individual
income tax return. The estimated burden for all other
taxpayers who file this form is shown below.
Recordkeeping

11 hr., 28 min.

Learning about the law or the form

30 min.

Preparing and sending the form to the IRS

42 min.

If you have comments concerning the accuracy of these
time estimates or suggestions for making this form simpler,
we would be happy to hear from you. See the instructions for
the tax return with which this form is filed.