Tax Court Rules Investors in Refined Coal Tax Credit Investment were Bona Fide Partners, Get Credits

Wednesday, September 4, 2019 - 4:15pm

In a bench opinion, a United States Tax Court judge ruled that investors were bona fide partners in a refined coal production facility and were entitled to tax credits. The decision in Cross Refined Coal, LLC, USA Refined Coal, LLC, Tax Matters Partner v. Commissioner of Internal Revenue concerned whether Cross Refined Coal, LLC was a bona fide partnership and whether the tax credit investors were bona fide partners. The IRS disallowed millions of dollars in tax credits for the years 2011 and 2012 after determining that Cross was not in substance a partnership as it was not formed to carry on a business or for the sharing of profits and losses by its partners, but rather was created to facilitate the monetizing of refined coal tax credits. The court sided with the plaintiffs, specifically mentioning differences between this case and the Historic Boardwalk Hall case and highlighting that the credits in question were production, not investment tax credits. Under a Tax Court rule, a bench opinion cannot be relied on in any other case.