PART IV—CREDITS AGAINST TAX
Editorial Notes
Amendments
2017—
2009—
2008—
2005—
1996—
1990—
1984—
1977—
1971—
Subpart A—Nonrefundable Personal Credits
Editorial Notes
Amendments
2022—
2018—
2010—
2005—
2001—
1998—
1997—
1996—
1990—
1986—
1984—
1983—
1982—
1981—
1980—
1978—
1977—
1976—
1975—
1971—
1970—
1965—
1964—
1962—
§21. Expenses for household and dependent care services necessary for gainful employment
(a) Allowance of credit
(1) In general
In the case of an individual for which there are 1 or more qualifying individuals (as defined in subsection (b)(1)) with respect to such individual, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the applicable percentage of the employment-related expenses (as defined in subsection (b)(2)) paid by such individual during the taxable year.
(2) Applicable percentage defined
For purposes of paragraph (1), the term "applicable percentage" means 35 percent reduced (but not below 20 percent) by 1 percentage point for each $2,000 (or fraction thereof) by which the taxpayer's adjusted gross income for the taxable year exceeds $15,000.
(b) Definitions of qualifying individual and employment-related expenses
For purposes of this section—
(1) Qualifying individual
The term "qualifying individual" means—
(A) a dependent of the taxpayer (as defined in section 152(a)(1)) who has not attained age 13,
(B) a dependent of the taxpayer (as defined in section 152, determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B)) who is physically or mentally incapable of caring for himself or herself and who has the same principal place of abode as the taxpayer for more than one-half of such taxable year, or
(C) the spouse of the taxpayer, if the spouse is physically or mentally incapable of caring for himself or herself and who has the same principal place of abode as the taxpayer for more than one-half of such taxable year.
(2) Employment-related expenses
(A) In general
The term "employment-related expenses" means amounts paid for the following expenses, but only if such expenses are incurred to enable the taxpayer to be gainfully employed for any period for which there are 1 or more qualifying individuals with respect to the taxpayer:
(i) expenses for household services, and
(ii) expenses for the care of a qualifying individual.
Such term shall not include any amount paid for services outside the taxpayer's household at a camp where the qualifying individual stays overnight.
(B) Exception
Employment-related expenses described in subparagraph (A) which are incurred for services outside the taxpayer's household shall be taken into account only if incurred for the care of—
(i) a qualifying individual described in paragraph (1)(A), or
(ii) a qualifying individual (not described in paragraph (1)(A)) who regularly spends at least 8 hours each day in the taxpayer's household.
(C) Dependent care centers
Employment-related expenses described in subparagraph (A) which are incurred for services provided outside the taxpayer's household by a dependent care center (as defined in subparagraph (D)) shall be taken into account only if—
(i) such center complies with all applicable laws and regulations of a State or unit of local government, and
(ii) the requirements of subparagraph (B) are met.
(D) Dependent care center defined
For purposes of this paragraph, the term "dependent care center" means any facility which—
(i) provides care for more than six individuals (other than individuals who reside at the facility), and
(ii) receives a fee, payment, or grant for providing services for any of the individuals (regardless of whether such facility is operated for profit).
(c) Dollar limit on amount creditable
The amount of the employment-related expenses incurred during any taxable year which may be taken into account under subsection (a) shall not exceed—
(1) $3,000 if there is 1 qualifying individual with respect to the taxpayer for such taxable year, or
(2) $6,000 if there are 2 or more qualifying individuals with respect to the taxpayer for such taxable year.
The amount determined under paragraph (1) or (2) (whichever is applicable) shall be reduced by the aggregate amount excludable from gross income under section 129 for the taxable year.
(d) Earned income limitation
(1) In general
Except as otherwise provided in this subsection, the amount of the employment-related expenses incurred during any taxable year which may be taken into account under subsection (a) shall not exceed—
(A) in the case of an individual who is not married at the close of such year, such individual's earned income for such year, or
(B) in the case of an individual who is married at the close of such year, the lesser of such individual's earned income or the earned income of his spouse for such year.
(2) Special rule for spouse who is a student or incapable of caring for himself
In the case of a spouse who is a student or a qualifying individual described in subsection (b)(1)(C), for purposes of paragraph (1), such spouse shall be deemed for each month during which such spouse is a full-time student at an educational institution, or is such a qualifying individual, to be gainfully employed and to have earned income of not less than—
(A) $250 if subsection (c)(1) applies for the taxable year, or
(B) $500 if subsection (c)(2) applies for the taxable year.
In the case of any husband and wife, this paragraph shall apply with respect to only one spouse for any one month.
(e) Special rules
For purposes of this section—
(1) Place of abode
An individual shall not be treated as having the same principal place of abode of the taxpayer if at any time during the taxable year of the taxpayer the relationship between the individual and the taxpayer is in violation of local law.
(2) Married couples must file joint return
If the taxpayer is married at the close of the taxable year, the credit shall be allowed under subsection (a) only if the taxpayer and his spouse file a joint return for the taxable year.
(3) Marital status
An individual legally separated from his spouse under a decree of divorce or of separate maintenance shall not be considered as married.
(4) Certain married individuals living apart
If—
(A) an individual who is married and who files a separate return—
(i) maintains as his home a household which constitutes for more than one-half of the taxable year the principal place of abode of a qualifying individual, and
(ii) furnishes over half of the cost of maintaining such household during the taxable year, and
(B) during the last 6 months of such taxable year such individual's spouse is not a member of such household,
such individual shall not be considered as married.
(5) Special dependency test in case of divorced parents, etc.
If—
(A) section 152(e) applies to any child with respect to any calendar year, and
(B) such child is under the age of 13 or is physically or mentally incapable of caring for himself,
in the case of any taxable year beginning in such calendar year, such child shall be treated as a qualifying individual described in subparagraph (A) or (B) of subsection (b)(1) (whichever is appropriate) with respect to the custodial parent (as defined in section 152(e)(4)(A)), and shall not be treated as a qualifying individual with respect to the noncustodial parent.
(6) Payments to related individuals
No credit shall be allowed under subsection (a) for any amount paid by the taxpayer to an individual—
(A) with respect to whom, for the taxable year, a deduction under section 151(c) (relating to deduction for personal exemptions for dependents) is allowable either to the taxpayer or his spouse, or
(B) who is a child of the taxpayer (within the meaning of section 152(f)(1)) who has not attained the age of 19 at the close of the taxable year.
For purposes of this paragraph, the term "taxable year" means the taxable year of the taxpayer in which the service is performed.
(7) Student
The term "student" means an individual who during each of 5 calendar months during the taxable year is a full-time student at an educational organization.
(8) Educational organization
The term "educational organization" means an educational organization described in section 170(b)(1)(A)(ii).
(9) Identifying information required with respect to service provider
No credit shall be allowed under subsection (a) for any amount paid to any person unless—
(A) the name, address, and taxpayer identification number of such person are included on the return claiming the credit, or
(B) if such person is an organization described in section 501(c)(3) and exempt from tax under section 501(a), the name and address of such person are included on the return claiming the credit.
In the case of a failure to provide the information required under the preceding sentence, the preceding sentence shall not apply if it is shown that the taxpayer exercised due diligence in attempting to provide the information so required.
(10) Identifying information required with respect to qualifying individuals
No credit shall be allowed under this section with respect to any qualifying individual unless the TIN of such individual is included on the return claiming the credit.
(f) Regulations
The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this section.
(g) Special rules for 2021
In the case of any taxable year beginning after December 31, 2020, and before January 1, 2022—
(1) Credit made refundable
If the taxpayer (in the case of a joint return, either spouse) has a principal place of abode in the United States (determined as provided in section 32) for more than one-half of the taxable year, the credit allowed under subsection (a) shall be treated as a credit allowed under subpart C (and not allowed under this subpart).
(2) Increase in dollar limit on amount creditable
Subsection (c) shall be applied—
(A) by substituting "$8,000" for "$3,000" in paragraph (1) thereof, and
(B) by substituting "$16,000" for "$6,000" in paragraph (2) thereof.
(3) Increase in applicable percentage
Subsection (a)(2) shall be applied—
(A) by substituting "50 percent" for "35 percent", and
(B) by substituting "$125,000" for "$15,000".
(4) Application of phaseout to high income individuals
(A) In general
Subsection (a)(2) shall be applied by substituting "the phaseout percentage" for "20 percent".
(B) Phaseout percentage
The term "phaseout percentage" means 20 percent reduced (but not below zero) by 1 percentage point for each $2,000 (or fraction thereof) by which the taxpayer's adjusted gross income for the taxable year exceeds $400,000.
(h) Application of credit in possessions
(1) Payment to possessions with mirror code tax systems
The Secretary shall pay to each possession of the United States with a mirror code tax system amounts equal to the loss (if any) to that possession by reason of the application of this section (determined without regard to this subsection) with respect to taxable years beginning in or with 2021. Such amounts shall be determined by the Secretary based on information provided by the government of the respective possession.
(2) Payments to other possessions
The Secretary shall pay to each possession of the United States which does not have a mirror code tax system amounts estimated by the Secretary as being equal to the aggregate benefits that would have been provided to residents of such possession by reason of this section with respect to taxable years beginning in or with 2021 if a mirror code tax system had been in effect in such possession. The preceding sentence shall not apply unless the respective possession has a plan, which has been approved by the Secretary, under which such possession will promptly distribute such payments to its residents.
(3) Coordination with credit allowed against United States income taxes
In the case of any taxable year beginning in or with 2021, no credit shall be allowed under this section to any individual—
(A) to whom a credit is allowable against taxes imposed by a possession with a mirror code tax system by reason of this section, or
(B) who is eligible for a payment under a plan described in paragraph (2).
(4) Mirror code tax system
For purposes of this subsection, the term "mirror code tax system" means, with respect to any possession of the United States, the income tax system of such possession if the income tax liability of the residents of such possession under such system is determined by reference to the income tax laws of the United States as if such possession were the United States.
(5) Treatment of payments
For purposes of
(Added
Editorial Notes
Prior Provisions
A prior section 21 was renumbered
Amendments
2021—Subsec. (g).
Subsec. (h).
2007—Subsec. (e)(5).
2005—Subsec. (b)(1)(B).
2004—Subsec. (a)(1).
Subsec. (b)(1).
"(A) a dependent of the taxpayer who is under the age of 13 and with respect to whom the taxpayer is entitled to a deduction under section 151(c),
"(B) a dependent of the taxpayer who is physically or mentally incapable of caring for himself, or
"(C) the spouse of the taxpayer, if he is physically or mentally incapable of caring for himself."
Subsec. (e)(1).
Subsec. (e)(5).
Subsec. (e)(6)(B).
2002—Subsec. (d)(2)(A).
Subsec. (d)(2)(B).
2001—Subsec. (a)(2).
Subsec. (c)(1).
Subsec. (c)(2).
1996—Subsec. (e)(10).
1988—Subsec. (b)(1)(A).
Subsec. (c).
Subsec. (e)(5)(B).
Subsec. (e)(9).
1987—Subsec. (b)(2)(A).
1986—Subsecs. (b)(1)(A), (e)(6)(A).
Subsec. (e)(6)(B).
1984—
Subsec. (a)(1).
Subsec. (b).
Subsec. (c).
Subsec. (d).
Subsec. (d)(2).
Subsec. (d)(2)(A).
Subsec. (d)(2)(B).
Subsec. (e).
Subsec. (e)(5).
"(A) paragraph (2) or (4) of section 152(e) applies to any child with respect to any calendar year, and
"(B) such child is under the age of 15 or is physically or mentally incapable of caring for himself,"
for former provisions:
"(A) a child (as defined in section 151(e)(3)) who is under the age of 15 or who is physically or mentally incapable of caring for himself receives over half of his support during the calendar year from his parents who are divorced or legally separated under a decree of divorce or separate maintenance or who are separated under a written separation agreement, and
"(B) such child is in the custody of one or both of his parents for more than one-half of the calendar year."
and substituted in concluding text "(whichever is appropriate) with respect to the custodial parent (within the meaning of section 152(e)(1)), and shall not be treated as a qualifying individual with respect to the noncustodial parent" for ", as the case may be, with respect to that parent who has custody for a longer period during such calendar year than the other parent, and shall not be treated as being a qualifying individual with respect to such other parent."
Subsecs. (f), (g).
1983—Subsec. (b)(2).
1981—Subsec. (a).
Subsec. (c)(2)(B).
Subsec. (c)(2)(C), (D).
Subsec. (d)(1).
Subsec. (d)(2).
Subsec. (e)(2)(A).
Subsec. (e)(2)(B).
1978—Subsec. (f)(6).
Statutory Notes and Related Subsidiaries
Effective Date of 2021 Amendment
Effective Date of 2005 Amendment
Effective Date of 2004 Amendment
Amendment by
Effective Date of 2002 Amendment
Effective Date of 2001 Amendment
Effective Date of 1996 Amendment
"(1)
"(2)
Effective Date of 1988 Amendment
Effective Date of 1987 Amendment
"(1)
"(2)
Effective Date of 1986 Amendment
Amendment by
Effective Date of 1984 Amendment
Amendment by section 423(c)(4) of
Effective Date of 1983 Amendment
Amendment by
Effective Date of 1981 Amendment
"(1) Except as provided in paragraph (2), the amendments made by this section [amending this section and enacting
"(2) The amendments made by subsection (e)(2) [amending
Effective Date of 1978 Amendment
Effective Date
Section applicable to taxable years beginning after Dec. 31, 1975, see section 508 of
Program To Increase Public Awareness
§22. Credit for the elderly and the permanently and totally disabled
(a) General rule
In the case of a qualified individual, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to 15 percent of such individual's section 22 amount for such taxable year.
(b) Qualified individual
For purposes of this section, the term "qualified individual" means any individual—
(1) who has attained age 65 before the close of the taxable year, or
(2) who retired on disability before the close of the taxable year and who, when he retired, was permanently and totally disabled.
(c) Section 22 amount
For purposes of subsection (a)—
(1) In general
An individual's section 22 amount for the taxable year shall be the applicable initial amount determined under paragraph (2), reduced as provided in paragraph (3) and in subsection (d).
(2) Initial amount
(A) In general
Except as provided in subparagraph (B), the initial amount shall be—
(i) $5,000 in the case of a single individual, or a joint return where only one spouse is a qualified individual,
(ii) $7,500 in the case of a joint return where both spouses are qualified individuals, or
(iii) $3,750 in the case of a married individual filing a separate return.
(B) Limitation in case of individuals who have not attained age 65
(i) In general
In the case of a qualified individual who has not attained age 65 before the close of the taxable year, except as provided in clause (ii), the initial amount shall not exceed the disability income for the taxable year.
(ii) Special rules in case of joint return
In the case of a joint return where both spouses are qualified individuals and at least one spouse has not attained age 65 before the close of the taxable year—
(I) if both spouses have not attained age 65 before the close of the taxable year, the initial amount shall not exceed the sum of such spouses' disability income, or
(II) if one spouse has attained age 65 before the close of the taxable year, the initial amount shall not exceed the sum of $5,000 plus the disability income for the taxable year of the spouse who has not attained age 65 before the close of the taxable year.
(iii) Disability income
For purposes of this subparagraph, the term "disability income" means the aggregate amount includable in the gross income of the individual for the taxable year under section 72 or 105(a) to the extent such amount constitutes wages (or payments in lieu of wages) for the period during which the individual is absent from work on account of permanent and total disability.
(3) Reduction
(A) In general
The reduction under this paragraph is an amount equal to the sum of the amounts received by the individual (or, in the case of a joint return, by either spouse) as a pension or annuity or as a disability benefit—
(i) which is excluded from gross income and payable under—
(I) title II of the Social Security Act,
(II) the Railroad Retirement Act of 1974, or
(III) a law administered by the Department of Veterans Affairs, or
(ii) which is excluded from gross income under any provision of law not contained in this title.
No reduction shall be made under clause (i)(III) for any amount described in section 104(a)(4).
(B) Treatment of certain workmen's compensation benefits
For purposes of subparagraph (A), any amount treated as a social security benefit under section 86(d)(3) shall be treated as a disability benefit received under title II of the Social Security Act.
(d) Adjusted gross income limitation
If the adjusted gross income of the taxpayer exceeds—
(1) $7,500 in the case of a single individual,
(2) $10,000 in the case of a joint return, or
(3) $5,000 in the case of a married individual filing a separate return,
the section 22 amount shall be reduced by one-half of the excess of the adjusted gross income over $7,500, $10,000, or $5,000, as the case may be.
(e) Definitions and special rules
For purposes of this section—
(1) Married couple must file joint return
Except in the case of a husband and wife who live apart at all times during the taxable year, if the taxpayer is married at the close of the taxable year, the credit provided by this section shall be allowed only if the taxpayer and his spouse file a joint return for the taxable year.
(2) Marital status
Marital status shall be determined under section 7703.
(3) Permanent and total disability defined
An individual is permanently and totally disabled if he is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months. An individual shall not be considered to be permanently and totally disabled unless he furnishes proof of the existence thereof in such form and manner, and at such times, as the Secretary may require.
(f) Nonresident alien ineligible for credit
No credit shall be allowed under this section to any nonresident alien.
(Aug. 16, 1954, ch. 736,
Editorial Notes
References in Text
The Social Security Act, referred to in subsec. (c)(3)(A)(i)(I), (B), is act Aug. 14, 1935, ch. 531,
The Railroad Retirement Act of 1974, referred to in subsec. (c)(3)(A)(i)(II), is act Aug. 29, 1935, ch. 812, as amended generally by
Amendments
2018—Subsec. (c)(3)(A)(i)(III).
1986—Subsec. (e)(2).
1984—
Subsec. (a).
Subsec. (c).
Subsec. (c)(1).
Subsec. (d).
1983—
Subsec. (a).
Subsec. (b).
Subsec. (c).
Subsec. (d).
Subsec. (e).
Subsec. (f).
1981—Subsec. (e)(9)(B).
1978—Subsec. (e)(2).
Subsec. (e)(4)(B).
Subsec. (e)(5)(B).
Subsec. (e)(8), (9).
1976—
1974—Subsec. (c)(1)(E), (F).
1964—Subsec. (a).
Subsecs. (i), (j).
1962—Subsec. (c)(1).
Subsec. (d).
1956—Subsec. (d)(2). Act Jan. 28, 1956, reduced from 75 to 72 the age at which there will be no limitation on earned income and increased from $900 to $1,200 the amount that an individual over 65 can earn without reducing the $1,200 on which the retirement credit is computed.
1955—Subsec. (f). Act Aug. 9, 1955, extended the retirement income tax credit to members of the Armed Forces.
Statutory Notes and Related Subsidiaries
Effective Date of 1986 Amendment
Amendment by
Effective Date of 1984 Amendment
Amendment by section 474(d) of
Effective Date of 1983 Amendment
"(1)
"(2)
Effective Date of 1981 Amendment
Amendment by
Effective Date of 1978 Amendment
"(A) The amendments made by paragraphs (1) and (2) [amending this section] shall apply to taxable years beginning after December 31, 1975.
"(B) The amendments made by paragraph (3) [amending this section] shall apply to taxable years beginning after December 31, 1977."
Effective Date of 1976 Amendment
Amendment by
Effective Date of 1974 Amendment
Amendment by
Effective Date of 1964 Amendment
Amendment by section 113(a) of
Effective Date of 1962 Amendment
Effective Date of 1956 Amendment
Act Jan. 28, 1956, ch. 18, §2,
Effective Date of 1955 Amendment
Act Aug. 9, 1955, ch. 659, §2,
Determination of Retirement Income Credit Under Provisions as They Existed Prior to Amendment by Pub. L. 94–455 Election
§23. Adoption expenses
(a) Allowance of credit
(1) In general
In the case of an individual, there shall be allowed as a credit against the tax imposed by this chapter the amount of the qualified adoption expenses paid or incurred by the taxpayer.
(2) Year credit allowed
The credit under paragraph (1) with respect to any expense shall be allowed—
(A) in the case of any expense paid or incurred before the taxable year in which such adoption becomes final, for the taxable year following the taxable year during which such expense is paid or incurred, and
(B) in the case of an expense paid or incurred during or after the taxable year in which such adoption becomes final, for the taxable year in which such expense is paid or incurred.
(3) $10,000 credit for adoption of child with special needs regardless of expenses
In the case of an adoption of a child with special needs which becomes final during a taxable year, the taxpayer shall be treated as having paid during such year qualified adoption expenses with respect to such adoption in an amount equal to the excess (if any) of $10,000 over the aggregate qualified adoption expenses actually paid or incurred by the taxpayer with respect to such adoption during such taxable year and all prior taxable years.
(b) Limitations
(1) Dollar limitation
The aggregate amount of qualified adoption expenses which may be taken into account under subsection (a) for all taxable years with respect to the adoption of a child by the taxpayer shall not exceed $10,000.
(2) Income limitation
(A) In general
The amount allowable as a credit under subsection (a) for any taxable year (determined without regard to subsection (c)) shall be reduced (but not below zero) by an amount which bears the same ratio to the amount so allowable (determined without regard to this paragraph but with regard to paragraph (1)) as—
(i) the amount (if any) by which the taxpayer's adjusted gross income exceeds $150,000, bears to
(ii) $40,000.
(B) Determination of adjusted gross income
For purposes of subparagraph (A), adjusted gross income shall be determined without regard to sections 911, 931, and 933.
(3) Denial of double benefit
(A) In general
No credit shall be allowed under subsection (a) for any expense for which a deduction or credit is allowed under any other provision of this chapter.
(B) Grants
No credit shall be allowed under subsection (a) for any expense to the extent that funds for such expense are received under any Federal, State, or local program.
(c) Carryforwards of unused credit
(1) In general
If the credit allowable under subsection (a) for any taxable year exceeds the limitation imposed by section 26(a) for such taxable year reduced by the sum of the credits allowable under this subpart (other than this section and section 25D), such excess shall be carried to the succeeding taxable year and added to the credit allowable under subsection (a) for such taxable year.
(2) Limitation
No credit may be carried forward under this subsection to any taxable year following the fifth taxable year after the taxable year in which the credit arose. For purposes of the preceding sentence, credits shall be treated as used on a first-in first-out basis.
(d) Definitions
For purposes of this section—
(1) Qualified adoption expenses
The term "qualified adoption expenses" means reasonable and necessary adoption fees, court costs, attorney fees, and other expenses—
(A) which are directly related to, and the principal purpose of which is for, the legal adoption of an eligible child by the taxpayer,
(B) which are not incurred in violation of State or Federal law or in carrying out any surrogate parenting arrangement,
(C) which are not expenses in connection with the adoption by an individual of a child who is the child of such individual's spouse, and
(D) which are not reimbursed under an employer program or otherwise.
(2) Eligible child
The term "eligible child" means any individual who—
(A) has not attained age 18, or
(B) is physically or mentally incapable of caring for himself.
(3) Child with special needs
The term "child with special needs" means any child if—
(A) a State has determined that the child cannot or should not be returned to the home of his parents,
(B) such State has determined that there exists with respect to the child a specific factor or condition (such as his ethnic background, age, or membership in a minority or sibling group, or the presence of factors such as medical conditions or physical, mental, or emotional handicaps) because of which it is reasonable to conclude that such child cannot be placed with adoptive parents without providing adoption assistance, and
(C) such child is a citizen or resident of the United States (as defined in section 217(h)(3)).
(e) Special rules for foreign adoptions
In the case of an adoption of a child who is not a citizen or resident of the United States (as defined in section 217(h)(3))—
(1) subsection (a) shall not apply to any qualified adoption expense with respect to such adoption unless such adoption becomes final, and
(2) any such expense which is paid or incurred before the taxable year in which such adoption becomes final shall be taken into account under this section as if such expense were paid or incurred during such year.
(f) Filing requirements
(1) Married couples must file joint returns
Rules similar to the rules of paragraphs (2), (3), and (4) of section 21(e) shall apply for purposes of this section.
(2) Taxpayer must include TIN
(A) In general
No credit shall be allowed under this section with respect to any eligible child unless the taxpayer includes (if known) the name, age, and TIN of such child on the return of tax for the taxable year.
(B) Other methods
The Secretary may, in lieu of the information referred to in subparagraph (A), require other information meeting the purposes of subparagraph (A), including identification of an agent assisting with the adoption.
(g) Basis adjustments
For purposes of this subtitle, if a credit is allowed under this section for any expenditure with respect to any property, the increase in the basis of such property which would (but for this subsection) result from such expenditure shall be reduced by the amount of the credit so allowed.
(h) Adjustments for inflation
In the case of a taxable year beginning after December 31, 2002, each of the dollar amounts in subsection (a)(3) and paragraphs (1) and (2)(A)(i) of subsection (b) shall be increased by an amount equal to—
(1) such dollar amount, multiplied by
(2) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting "calendar year 2001" for "calendar year 2016" in subparagraph (A)(ii) thereof.
If any amount as increased under the preceding sentence is not a multiple of $10, such amount shall be rounded to the nearest multiple of $10.
(i) Regulations
The Secretary shall prescribe such regulations as may be appropriate to carry out this section and section 137, including regulations which treat unmarried individuals who pay or incur qualified adoption expenses with respect to the same child as 1 taxpayer for purposes of applying the dollar amounts in subsections (a)(3) and (b)(1) of this section and in section 137(b)(1).
(Added
Inflation Adjusted Items for Certain Years
For inflation adjustment of certain items in this section, see Revenue Procedures listed in a table under
Editorial Notes
Prior Provisions
A prior section 23, added
Amendments
2018—Subsec. (c)(1).
2017—Subsec. (h)(2).
2013—Subsec. (b)(4).
"(A) the sum of the regular tax liability (as defined in section 26(b)) plus the tax imposed by section 55, over
"(B) the sum of the credits allowable under this subpart (other than this section and section 25D) and section 27 for the taxable year."
Subsec. (c).
2010—Subsec. (a)(3).
Subsec. (b)(1).
Subsec. (b)(4).
"(A) the sum of the regular tax liability (as defined in section 26(b)) plus the tax imposed by section 55, over
"(B) the sum of the credits allowable under this subpart (other than this section and section 25D) and section 27 for the taxable year."
See Effective and Termination Dates of 2010 Amendment note below.
Subsec. (c).
Subsec. (h).
2008—Subsec. (b)(4)(B).
2005—Subsec. (b)(4).
Subsec. (c).
2002—Subsec. (a)(1).
"(A) in the case of an adoption of a child other than a child with special needs, the amount of the qualified adoption expenses paid or incurred by the taxpayer, and
"(B) in the case of an adoption of a child with special needs, $10,000."
Subsec. (a)(2).
Subsec. (a)(3).
Subsec. (b)(1).
Subsec. (h).
Subsec. (i).
2001—Subsec. (a)(1).
Subsec. (a)(2).
Subsec. (b)(1).
Subsec. (b)(2)(A)(i).
Subsec. (b)(4).
Subsec. (c).
Subsec. (d)(2).
"(A) who—
"(i) has not attained age 18, or
"(ii) is physically or mentally incapable of caring for himself, and
"(B) in the case of qualified adoption expenses paid or incurred after December 31, 2001, who is a child with special needs."
Subsecs. (h), (i).
1998—Subsec. (b)(2)(A).
Subsec. (c).
1997—Subsec. (a)(2).
"(A) for the taxable year following the taxable year during which such expense is paid or incurred, or
"(B) in the case of an expense which is paid or incurred during the taxable year in which the adoption becomes final, for such taxable year."
Subsec. (b)(2)(B).
"(i) without regard to sections 911, 931, and 933, and
"(ii) after the application of sections 86, 135, 137, 219, and 469."
Statutory Notes and Related Subsidiaries
Effective Date of 2017 Amendment
Amendment by
Effective Date of 2013 Amendment
Effective and Termination Dates of 2010 Amendment
Amendment by
Amendment by
Effective and Termination Dates of 2008 Amendment
"(1)
"(2)
"(3)
Effective and Termination Dates of 2005 Amendment
"(1)
"(2)
"(3)
Effective Date of 2002 Amendment
Amendment by section 418(a)(1) of
Effective Date of 2001 Amendment
Amendment by section 201(b)(2)(E) of
"(1)
"(2)
Effective Date of 1998 Amendment
Amendment by section 6008(d)(6) of
Effective Date of 1997 Amendment
"(1)
"(2)
Effective Date
Savings Provision
Amendment by
"(1) any provision amended or repealed by the amendments made by subsection (b) or (d) [see Tables for classification] applied to—
"(A) any transaction occurring before the date of the enactment of this Act [Mar. 23, 2018],
"(B) any property acquired before such date of enactment, or
"(C) any item of income, loss, deduction, or credit taken into account before such date of enactment, and
"(2) the treatment of such transaction, property, or item under such provision would (without regard to the amendments or repeals made by such subsection) affect the liability for tax for periods ending after such date of enactment,
nothing in the amendments or repeals made by this section [see Tables for classification] shall be construed to affect the treatment of such transaction, property, or item for purposes of determining liability for tax for periods ending after such date of enactment."
Expenses Paid or Incurred Before 2002
Tax Credit and Gross Income Exclusion Study and Report
§24. Child tax credit
(a) Allowance of credit
There shall be allowed as a credit against the tax imposed by this chapter for the taxable year with respect to each qualifying child of the taxpayer for which the taxpayer is allowed a deduction under section 151 an amount equal to $1,000.
(b) Limitations
(1) Limitation based on adjusted gross income
The amount of the credit allowable under subsection (a) shall be reduced (but not below zero) by $50 for each $1,000 (or fraction thereof) by which the taxpayer's modified adjusted gross income exceeds the threshold amount. For purposes of the preceding sentence, the term "modified adjusted gross income" means adjusted gross income increased by any amount excluded from gross income under section 911, 931, or 933.
(2) Threshold amount
For purposes of paragraph (1), the term "threshold amount" means—
(A) $110,000 in the case of a joint return,
(B) $75,000 in the case of an individual who is not married, and
(C) $55,000 in the case of a married individual filing a separate return.
For purposes of this paragraph, marital status shall be determined under section 7703.
(c) Qualifying child
For purposes of this section—
(1) In general
The term "qualifying child" means a qualifying child of the taxpayer (as defined in section 152(c)) who has not attained age 17.
(2) Exception for certain noncitizens
The term "qualifying child" shall not include any individual who would not be a dependent if subparagraph (A) of section 152(b)(3) were applied without regard to all that follows "resident of the United States".
(d) Portion of credit refundable
(1) In general
The aggregate credits allowed to a taxpayer under subpart C shall be increased by the lesser of—
(A) the credit which would be allowed under this section without regard to this subsection and the limitation under section 26(a) or
(B) the amount by which the aggregate amount of credits allowed by this subpart (determined without regard to this subsection) would increase if the limitation imposed by section 26(a) were increased by the greater of—
(i) 15 percent of so much of the taxpayer's earned income (within the meaning of section 32) which is taken into account in computing taxable income for the taxable year as exceeds $3,000, or
(ii) in the case of a taxpayer with 3 or more qualifying children, the excess (if any) of—
(I) the taxpayer's social security taxes for the taxable year, over
(II) the credit allowed under section 32 for the taxable year.
The amount of the credit allowed under this subsection shall not be treated as a credit allowed under this subpart and shall reduce the amount of credit otherwise allowable under subsection (a) without regard to section 26(a). For purposes of subparagraph (B), any amount excluded from gross income by reason of section 112 shall be treated as earned income which is taken into account in computing taxable income for the taxable year.
(2) Social security taxes
For purposes of paragraph (1)—
(A) In general
The term "social security taxes" means, with respect to any taxpayer for any taxable year—
(i) the amount of the taxes imposed by sections 3101 and 3201(a) on amounts received by the taxpayer during the calendar year in which the taxable year begins,
(ii) 50 percent of the taxes imposed by section 1401 on the self-employment income of the taxpayer for the taxable year, and
(iii) 50 percent of the taxes imposed by section 3211(a) on amounts received by the taxpayer during the calendar year in which the taxable year begins.
(B) Coordination with special refund of social security taxes
The term "social security taxes" shall not include any taxes to the extent the taxpayer is entitled to a special refund of such taxes under section 6413(c).
(C) Special rule
Any amounts paid pursuant to an agreement under section 3121(l) (relating to agreements entered into by American employers with respect to foreign affiliates) which are equivalent to the taxes referred to in subparagraph (A)(i) shall be treated as taxes referred to in such subparagraph.
(3) Exception for taxpayers excluding foreign earned income
Paragraph (1) shall not apply to any taxpayer for any taxable year if such taxpayer elects to exclude any amount from gross income under section 911 for such taxable year.
(e) Identification requirements
(1) Qualifying child identification requirement
No credit shall be allowed under this section to a taxpayer with respect to any qualifying child unless the taxpayer includes the name and taxpayer identification number of such qualifying child on the return of tax for the taxable year and such taxpayer identification number was issued on or before the due date for filing such return.
(2) Taxpayer identification requirement
No credit shall be allowed under this section if the taxpayer identification number of the taxpayer was issued after the due date for filing the return for the taxable year.
(f) Taxable year must be full taxable year
Except in the case of a taxable year closed by reason of the death of the taxpayer, no credit shall be allowable under this section in the case of a taxable year covering a period of less than 12 months.
(g) Restrictions on taxpayers who improperly claimed credit in prior year
(1) Taxpayers making prior fraudulent or reckless claims
(A) In general
No credit shall be allowed under this section for any taxable year in the disallowance period.
(B) Disallowance period
For purposes of subparagraph (A), the disallowance period is—
(i) the period of 10 taxable years after the most recent taxable year for which there was a final determination that the taxpayer's claim of credit under this section was due to fraud, and
(ii) the period of 2 taxable years after the most recent taxable year for which there was a final determination that the taxpayer's claim of credit under this section was due to reckless or intentional disregard of rules and regulations (but not due to fraud).
(2) Taxpayers making improper prior claims
In the case of a taxpayer who is denied credit under this section for any taxable year as a result of the deficiency procedures under subchapter B of
(h) Special rules for taxable years 2018 through 2025
(1) In general
In the case of a taxable year beginning after December 31, 2017, and before January 1, 2026, this section shall be applied as provided in paragraphs (2) through (7).
(2) Credit amount
Subsection (a) shall be applied by substituting "$2,000" for "$1,000".
(3) Limitation
In lieu of the amount determined under subsection (b)(2), the threshold amount shall be $400,000 in the case of a joint return ($200,000 in any other case).
(4) Partial credit allowed for certain other dependents
(A) In general
The credit determined under subsection (a) (after the application of paragraph (2)) shall be increased by $500 for each dependent of the taxpayer (as defined in section 152) other than a qualifying child described in subsection (c).
(B) Exception for certain noncitizens
Subparagraph (A) shall not apply with respect to any individual who would not be a dependent if subparagraph (A) of section 152(b)(3) were applied without regard to all that follows "resident of the United States".
(C) Certain qualifying children
In the case of any qualifying child with respect to whom a credit is not allowed under this section by reason of paragraph (7), such child shall be treated as a dependent to whom subparagraph (A) applies.
(5) Maximum amount of refundable credit
(A) In general
The amount determined under subsection (d)(1)(A) with respect to any qualifying child shall not exceed $1,400, and such subsection shall be applied without regard to paragraph (4) of this subsection.
(B) Adjustment for inflation
In the case of a taxable year beginning after 2018, the $1,400 amount in subparagraph (A) shall be increased by an amount equal to—
(i) such dollar amount, multiplied by
(ii) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting "2017" for "2016" in subparagraph (A)(ii) thereof.
If any increase under this clause is not a multiple of $100, such increase shall be rounded to the next lowest multiple of $100.
(6) Earned income threshold for refundable credit
Subsection (d)(1)(B)(i) shall be applied by substituting "$2,500" for "$3,000".
(7) Social security number required
No credit shall be allowed under this section to a taxpayer with respect to any qualifying child unless the taxpayer includes the social security number of such child on the return of tax for the taxable year. For purposes of the preceding sentence, the term "social security number" means a social security number issued to an individual by the Social Security Administration, but only if the social security number is issued—
(A) to a citizen of the United States or pursuant to subclause (I) (or that portion of subclause (III) that relates to subclause (I)) of section 205(c)(2)(B)(i) of the Social Security Act, and
(B) before the due date for such return.
(i) Special rules for 2021
In the case of any taxable year beginning after December 31, 2020, and before January 1, 2022—
(1) Refundable credit
If the taxpayer (in the case of a joint return, either spouse) has a principal place of abode in the United States (determined as provided in section 32) for more than one-half of the taxable year or is a bona fide resident of Puerto Rico (within the meaning of section 937(a)) for such taxable year—
(A) subsection (d) shall not apply, and
(B) so much of the credit determined under subsection (a) (after application of subparagraph (A)) as does not exceed the amount of such credit which would be so determined without regard to subsection (h)(4) shall be allowed under subpart C (and not allowed under this subpart).
(2) 17-year-olds eligible for treatment as qualifying children
This section shall be applied—
(A) by substituting "age 18" for "age 17" in subsection (c)(1), and
(B) by substituting "described in subsection (c) (determined after the application of subsection (i)(2)(A))" for "described in subsection (c)" in subsection (h)(4)(A).
(3) Credit amount
Subsection (h)(2) shall not apply and subsection (a) shall be applied by substituting "$3,000 ($3,600 in the case of a qualifying child who has not attained age 6 as of the close of the calendar year in which the taxable year of the taxpayer begins)" for "$1,000".
(4) Reduction of increased credit amount based on modified adjusted gross income
(A) In general
The amount of the credit allowable under subsection (a) (determined without regard to subsection (b)) shall be reduced by $50 for each $1,000 (or fraction thereof) by which the taxpayer's modified adjusted gross income (as defined in subsection (b)) exceeds the applicable threshold amount.
(B) Applicable threshold amount
For purposes of this paragraph, the term "applicable threshold amount" means—
(i) $150,000, in the case of a joint return or surviving spouse (as defined in section 2(a)) ,1
(ii) $112,500, in the case of a head of household (as defined in section 2(b)), and
(iii) $75,000, in any other case.
(C) Limitation on reduction
(i) In general
The amount of the reduction under subparagraph (A) shall not exceed the lesser of—
(I) the applicable credit increase amount, or
(II) 5 percent of the applicable phaseout threshold range.
(ii) Applicable credit increase amount
For purposes of this subparagraph, the term "applicable credit increase amount" means the excess (if any) of—
(I) the amount of the credit allowable under this section for the taxable year determined without regard to this paragraph and subsection (b), over
(II) the amount of such credit as so determined and without regard to paragraph (3).
(iii) Applicable phaseout threshold range
For purposes of this subparagraph, the term "applicable phaseout threshold range" means the excess of—
(I) the threshold amount applicable to the taxpayer under subsection (b) (determined after the application of subsection (h)(3)), over
(II) the applicable threshold amount applicable to the taxpayer under this paragraph.
(D) Coordination with limitation on overall credit
Subsection (b) shall be applied by substituting "the credit allowable under subsection (a) (determined after the application of subsection (i)(4)(A)" for "the credit allowable under subsection (a)".
(j) Reconciliation of credit and advance credit
(1) In general
The amount of the credit allowed under this section to any taxpayer for any taxable year shall be reduced (but not below zero) by the aggregate amount of payments made under section 7527A to such taxpayer during such taxable year. Any failure to so reduce the credit shall be treated as arising out of a mathematical or clerical error and assessed according to section 6213(b)(1).
(2) Excess advance payments
(A) In general
If the aggregate amount of payments under section 7527A to the taxpayer during the taxable year exceeds the amount of the credit allowed under this section to such taxpayer for such taxable year (determined without regard to paragraph (1)), the tax imposed by this chapter for such taxable year shall be increased by the amount of such excess. Any failure to so increase the tax shall be treated as arising out of a mathematical or clerical error and assessed according to section 6213(b)(1).
(B) Safe harbor based on modified adjusted gross income
(i) In general
In the case of a taxpayer whose modified adjusted gross income (as defined in subsection (b)) for the taxable year does not exceed 200 percent of the applicable income threshold, the amount of the increase determined under subparagraph (A) with respect to such taxpayer for such taxable year shall be reduced (but not below zero) by the safe harbor amount.
(ii) Phase out of safe harbor amount
In the case of a taxpayer whose modified adjusted gross income (as defined in subsection (b)) for the taxable year exceeds the applicable income threshold, the safe harbor amount otherwise in effect under clause (i) shall be reduced by the amount which bears the same ratio to such amount as such excess bears to the applicable income threshold.
(iii) Applicable income threshold
For purposes of this subparagraph, the term "applicable income threshold" means—
(I) $60,000 in the case of a joint return or surviving spouse (as defined in section 2(a)),
(II) $50,000 in the case of a head of household, and
(III) $40,000 in any other case.
(iv) Safe harbor amount
For purposes of this subparagraph, the term "safe harbor amount" means, with respect to any taxable year, the product of—
(I) $2,000, multiplied by
(II) the excess (if any) of the number of qualified children taken into account in determining the annual advance amount with respect to the taxpayer under section 7527A with respect to months beginning in such taxable year, over the number of qualified children taken into account in determining the credit allowed under this section for such taxable year.
(k) Application of credit in possessions
(1) Mirror code possessions
(A) In general
The Secretary shall pay to each possession of the United States with a mirror code tax system amounts equal to the loss (if any) to that possession by reason of the application of this section (determined without regard to this subsection) with respect to taxable years beginning after 2020. Such amounts shall be determined by the Secretary based on information provided by the government of the respective possession.
(B) Coordination with credit allowed against United States income taxes
No credit shall be allowed under this section for any taxable year to any individual to whom a credit is allowable against taxes imposed by a possession of the United States with a mirror code tax system by reason of the application of this section in such possession for such taxable year.
(C) Mirror code tax system
For purposes of this paragraph, the term "mirror code tax system" means, with respect to any possession of the United States, the income tax system of such possession if the income tax liability of the residents of such possession under such system is determined by reference to the income tax laws of the United States as if such possession were the United States.
(2) Puerto Rico
(A) Application to taxable years in 2021
(i) For application of refundable credit to residents of Puerto Rico, see subsection (i)(1).
(ii) For nonapplication of advance payment to residents of Puerto Rico, see section 7527A(e)(4)(A).
(B) Application to taxable years after 2021
In the case of any bona fide resident of Puerto Rico (within the meaning of section 937(a)) for any taxable year beginning after December 31, 2021—
(i) the credit determined under this section shall be allowable to such resident, and
(ii) subsection (d)(1)(B)(ii) shall be applied without regard to the phrase "in the case of a taxpayer with 3 or more qualifying children".
(3) American Samoa
(A) In general
The Secretary shall pay to American Samoa amounts estimated by the Secretary as being equal to the aggregate benefits that would have been provided to residents of American Samoa by reason of the application of this section for taxable years beginning after 2020 if the provisions of this section had been in effect in American Samoa (applied as if American Samoa were the United States and without regard to the application of this section to bona fide residents of Puerto Rico under subsection (i)(1)).
(B) Distribution requirement
Subparagraph (A) shall not apply unless American Samoa has a plan, which has been approved by the Secretary, under which American Samoa will promptly distribute such payments to its residents.
(C) Coordination with credit allowed against United States income taxes
(i) In general
In the case of a taxable year with respect to which a plan is approved under subparagraph (B), this section (other than this subsection) shall not apply to any individual eligible for a distribution under such plan.
(ii) Application of section in event of absence of approved plan
In the case of a taxable year with respect to which a plan is not approved under subparagraph (B)—
(I) if such taxable year begins in 2021, subsection (i)(1) shall be applied by substituting "bona fide resident of Puerto Rico or American Samoa" for "bona fide resident of Puerto Rico", and
(II) if such taxable year begins after December 31, 2021, rules similar to the rules of paragraph (2)(B) shall apply with respect to bona fide residents of American Samoa (within the meaning of section 937(a)).
(4) Treatment of payments
For purposes of
(Added
Inflation Adjusted Items for Certain Years
For inflation adjustment of certain items in this section, see Revenue Procedures listed in a table under
Editorial Notes
References in Text
Section 205(c)(2)(B)(i) of the Social Security Act, referred to in subsec. (h)(7)(A), is classified to
Prior Provisions
A prior section 24, added
Amendments
2021—Subsec. (i).
Subsec. (j).
Subsec. (k).
2018—Subsec. (d)(3), (5).
Subsec. (e)(2).
2017—Subsec. (h).
2015—Subsec. (d)(1)(B)(i).
Subsec. (d)(3), (4).
Subsec. (d)(5).
Subsec. (e).
Subsec. (g).
2014—Subsec. (d)(4).
2013—Subsec. (b)(3).
"(A) the sum of the regular tax liability (as defined in section 26(b)) plus the tax imposed by section 55, over
"(B) the sum of the credits allowable under this subpart (other than this section and sections 23, 25A(i), 25B, 25D, 30, 30B, and 30D) and section 27 for the taxable year."
Subsec. (d)(1).
Subsec. (d)(1)(A), (B).
Subsec. (d)(4).
2010—Subsec. (b)(3)(B).
Subsec. (d)(4).
2009—Subsec. (b)(3)(B).
Subsec. (d)(4).
2008—Subsec. (a).
Subsec. (b)(3)(B).
Subsec. (d)(4).
2007—Subsec. (d)(1)(B).
Subsec. (d)(1)(B)(ii)(II).
2005—Subsec. (b)(3).
Subsec. (d)(1).
"(A) the credit which would be allowed under this section without regard to this subsection and the limitation under subsection (b)(3), or
"(B) the amount by which the amount of credit allowed by this section (determined without regard to this subsection) would increase if the limitation imposed by subsection (b)(3) were increased by the greater of—
"(i) 15 percent of so much of the taxpayer's earned income (within the meaning of section 32) which is taken into account in computing taxable income for the taxable year as exceeds $10,000, or
"(ii) in the case of a taxpayer with 3 or more qualifying children, the excess (if any) of—
"(I) the taxpayer's social security taxes for the taxable year, over
"(II) the credit allowed under section 32 for the taxable year.
The amount of the credit allowed under this subsection shall not be treated as a credit allowed under this subpart and shall reduce the amount of credit otherwise allowable under subsection (a) without regard to subsection (b)(3). For purposes of subparagraph (B), any amount excluded from gross income by reason of section 112 shall be treated as earned income which is taken into account in computing taxable income for the taxable year."
2004—Subsec. (a).
Subsec. (c)(1).
"(A) the taxpayer is allowed a deduction under section 151 with respect to such individual for the taxable year,
"(B) such individual has not attained the age of 17 as of the close of the calendar year in which the taxable year of the taxpayer begins, and
"(C) such individual bears a relationship to the taxpayer described in section 32(c)(3)(B)."
Subsec. (c)(2).
Subsec. (d)(1).
Subsec. (d)(1)(B)(i).
Subsec. (d)(2)(A)(iii).
2003—Subsec. (a)(2).
2002—Subsec. (b)(3)(B).
Subsec. (d)(1)(B).
2001—Subsec. (a).
Subsec. (b).
Subsec. (b)(1).
Subsec. (b)(3).
Subsec. (b)(3)(B).
Subsec. (d).
"(A) the credit which would be allowed under this section without regard to this subsection and the limitation under section 26(a); or
"(B) the amount by which the aggregate amount of credits allowed by this subpart (without regard to this subsection) would increase if the limitation imposed by section 26(a) were increased by the excess (if any) of—
"(i) the taxpayer's Social Security taxes for the taxable year, over
"(ii) the credit allowed under section 32 (determined without regard to subsection (n)) for the taxable year.
The amount of the credit allowed under this subsection shall not be treated as a credit allowed under this subpart and shall reduce the amount of credit otherwise allowable under subsection (a) without regard to section 26(a)."
Subsec. (d)(1).
Subsec. (d)(1)(B).
Subsec. (d)(2).
"(A) the amount of tax imposed by section 55 (relating to alternative minimum tax) with respect to such taxpayer for such taxable year, over
"(B) the amount of the reduction under section 32(h) with respect to such taxpayer for such taxable year."
Subsec. (d)(2)(A)(iii).
Subsec. (d)(3).
Subsec. (d)(4).
1999—Subsec. (d)(2).
1998—Subsec. (d)(1).
"(A) the amount of the credit allowed under this section (without regard to this subsection and after application of the limitation under section 26), or
"(B) the alternative credit amount determined under paragraph (2)."
Subsec. (d)(2).
Subsec. (d)(3).
"(A) increased by the taxpayer's social security taxes for such taxable year, and
"(B) reduced by the sum of—
"(i) the credits allowed under this part other than under subpart C or this section, and
"(ii) the credit allowed under section 32 without regard to subsection (m) thereof."
Subsec. (d)(4).
Subsec. (d)(5).
Statutory Notes and Related Subsidiaries
Effective Date of 2021 Amendment
Effective Date of 2018 Amendment
Effective Date of 2017 Amendment
Effective Date of 2015 Amendment
Effective Date of 2014 Amendment
Effective Date of 2013 Amendment
"(1)
"(2)
Amendment by section 104(c)(2)(B) of
Effective and Termination Dates of 2010 Amendment
Amendment by
Amendment by
Effective and Termination Dates of 2009 Amendment
Effective and Termination Dates of 2008 Amendment
Amendment by section 106(e)(2)(B) of title I of div. B of
"(e)
"(f)
Effective Date of 2007 Amendment
Effective and Termination Dates of 2005 Amendment
Amendment by
Amendment by
Effective and Termination Dates of 2004 Amendment
Amendment by section 101(a) of
Amendment by title I of
Amendment by section 204 of
Effective and Termination Dates of 2003 Amendment
"(1)
"(2)
Amendments by title I of
Effective Date of 2002 Amendment
Amendment by section 411(b) of
Effective Date of 2001 Amendment
Amendment by sections 201(b), 202(f), and 618(b) of
Amendment by sections 201(b), 202(f), and 618(b) of
"(1)
"(2)
Amendment by section 202(f)(2)(B) of
Effective Date of 1999 Amendment
Effective Date of 1998 Amendment
Amendment by
Effective Date
Refunds Disregarded in Administration of Federal and Federally Assisted Programs
§25. Interest on certain home mortgages
(a) Allowance of credit
(1) In general
There shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the product of—
(A) the certificate credit rate, and
(B) the interest paid or accrued by the taxpayer during the taxable year on the remaining principal of the certified indebtedness amount.
(2) Limitation where credit rate exceeds 20 percent
(A) In general
If the certificate credit rate exceeds 20 percent, the amount of the credit allowed to the taxpayer under paragraph (1) for any taxable year shall not exceed $2,000.
(B) Special rule where 2 or more persons hold interests in residence
If 2 or more persons hold interests in any residence, the limitation of subparagraph (A) shall be allocated among such persons in proportion to their respective interests in the residence.
(b) Certificate credit rate; certified indebtedness amount
For purposes of this section—
(1) Certificate credit rate
The term "certificate credit rate" means the rate of the credit allowable by this section which is specified in the mortgage credit certificate.
(2) Certified indebtedness amount
The term "certified indebtedness amount" means the amount of indebtedness which is—
(A) incurred by the taxpayer—
(i) to acquire the principal residence of the taxpayer,
(ii) as a qualified home improvement loan (as defined in section 143(k)(4)) with respect to such residence, or
(iii) as a qualified rehabilitation loan (as defined in section 143(k)(5)) with respect to such residence, and
(B) specified in the mortgage credit certificate.
(c) Mortgage credit certificate; qualified mortgage credit certificate program
For purposes of this section—
(1) Mortgage credit certificate
The term "mortgage credit certificate" means any certificate which—
(A) is issued under a qualified mortgage credit certificate program by the State or political subdivision having the authority to issue a qualified mortgage bond to provide financing on the principal residence of the taxpayer,
(B) is issued to the taxpayer in connection with the acquisition, qualified rehabilitation, or qualified home improvement of the taxpayer's principal residence,
(C) specifies—
(i) the certificate credit rate, and
(ii) the certified indebtedness amount, and
(D) is in such form as the Secretary may prescribe.
(2) Qualified mortgage credit certificate program
(A) In general
The term "qualified mortgage credit certificate program" means any program—
(i) which is established by a State or political subdivision thereof for any calendar year for which it is authorized to issue qualified mortgage bonds,
(ii) under which the issuing authority elects (in such manner and form as the Secretary may prescribe) not to issue an amount of private activity bonds which it may otherwise issue during such calendar year under section 146,
(iii) under which the indebtedness certified by mortgage credit certificates meets the requirements of the following subsections of section 143 (as modified by subparagraph (B) of this paragraph):
(I) subsection (c) (relating to residence requirements),
(II) subsection (d) (relating to 3-year requirement),
(III) subsection (e) (relating to purchase price requirement),
(IV) subsection (f) (relating to income requirements),
(V) subsection (h) (relating to portion of loans required to be placed in targeted areas), and
(VI) paragraph (1) of subsection (i) (relating to other requirements),
(iv) under which no mortgage credit certificate may be issued with respect to any residence any of the financing of which is provided from the proceeds of a qualified mortgage bond or a qualified veterans' mortgage bond,
(v) except to the extent provided in regulations, which is not limited to indebtedness incurred from particular lenders,
(vi) except to the extent provided in regulations, which provides that a mortgage credit certificate is not transferrable, and
(vii) if the issuing authority allocates a block of mortgage credit certificates for use in connection with a particular development, which requires the developer to furnish to the issuing authority and the homebuyer a certificate that the price for the residence is no higher than it would be without the use of a mortgage credit certificate.
Under regulations, rules similar to the rules of subparagraphs (B) and (C) of section 143(a)(2) shall apply to the requirements of this subparagraph.
(B) Modifications of section 143
Under regulations prescribed by the Secretary, in applying section 143 for purposes of subclauses (II), (IV), and (V) of subparagraph (A)(iii)—
(i) each qualified mortgage certificate credit program shall be treated as a separate issue,
(ii) the product determined by multiplying—
(I) the certified indebtedness amount of each mortgage credit certificate issued under such program, by
(II) the certificate credit rate specified in such certificate,
shall be treated as proceeds of such issue and the sum of such products shall be treated as the total proceeds of such issue, and
(iii) paragraph (1) of section 143(d) shall be applied by substituting "100 percent" for "95 percent or more".
Clause (iii) shall not apply if the issuing authority submits a plan to the Secretary for administering the 95-percent requirement of section 143(d)(1) and the Secretary is satisfied that such requirement will be met under such plan.
(d) Determination of certificate credit rate
For purposes of this section—
(1) In general
The certificate credit rate specified in any mortgage credit certificate shall not be less than 10 percent or more than 50 percent.
(2) Aggregate limit on certificate credit rates
(A) In general
In the case of each qualified mortgage credit certificate program, the sum of the products determined by multiplying—
(i) the certified indebtedness amount of each mortgage credit certificate issued under such program, by
(ii) the certificate credit rate with respect to such certificate,
shall not exceed 25 percent of the nonissued bond amount.
(B) Nonissued bond amount
For purposes of subparagraph (A), the term "nonissued bond amount" means, with respect to any qualified mortgage credit certificate program, the amount of qualified mortgage bonds which the issuing authority is otherwise authorized to issue and elects not to issue under subsection (c)(2)(A)(ii).
(e) Special rules and definitions
For purposes of this section—
(1) Carryforward of unused credit
(A) In general
If the credit allowable under subsection (a) for any taxable year exceeds the applicable tax limit for such taxable year, such excess shall be a carryover to each of the 3 succeeding taxable years and, subject to the limitations of subparagraph (B), shall be added to the credit allowable by subsection (a) for such succeeding taxable year.
(B) Limitation
The amount of the unused credit which may be taken into account under subparagraph (A) for any taxable year shall not exceed the amount (if any) by which the applicable tax limit for such taxable year exceeds the sum of—
(i) the credit allowable under subsection (a) for such taxable year determined without regard to this paragraph, and
(ii) the amounts which, by reason of this paragraph, are carried to such taxable year and are attributable to taxable years before the unused credit year.
(C) Applicable tax limit
For purposes of this paragraph, the term "applicable tax limit" means the limitation imposed by section 26(a) for the taxable year reduced by the sum of the credits allowable under this subpart (other than this section and sections 23 and 25D).
(2) Indebtedness not treated as certified where certain requirements not in fact met
Subsection (a) shall not apply to any indebtedness if all the requirements of subsection (c)(1), (d), (e), (f), and (i) of section 143 and clauses (iv), (v), and (vii) of subsection (c)(2)(A), were not in fact met with respect to such indebtedness. Except to the extent provided in regulations, the requirements described in the preceding sentence shall be treated as met if there is a certification, under penalty of perjury, that such requirements are met.
(3) Period for which certificate in effect
(A) In general
Except as provided in subparagraph (B), a mortgage credit certificate shall be treated as in effect with respect to interest attributable to the period—
(i) beginning on the date such certificate is issued, and
(ii) ending on the earlier of the date on which—
(I) the certificate is revoked by the issuing authority, or
(II) the residence to which such certificate relates ceases to be the principal residence of the individual to whom the certificate relates.
(B) Certificate invalid unless indebtedness incurred within certain period
A certificate shall not apply to any indebtedness which is incurred after the close of the second calendar year following the calendar year for which the issuing authority made the applicable election under subsection (c)(2)(A)(ii).
(C) Notice to Secretary when certificate revoked
Any issuing authority which revokes any mortgage credit certificate shall notify the Secretary of such revocation at such time and in such manner as the Secretary shall prescribe by regulations.
(4) Reissuance of mortgage credit certificates
The Secretary may prescribe regulations which allow the administrator of a mortgage credit certificate program to reissue a mortgage credit certificate specifying a certified mortgage indebtedness that replaces the outstanding balance of the certified mortgage indebtedness specified on the original certificate to any taxpayer to whom the original certificate was issued, under such terms and conditions as the Secretary determines are necessary to ensure that the amount of the credit allowable under subsection (a) with respect to such reissued certificate is equal to or less than the amount of credit which would be allowable under subsection (a) with respect to the original certificate for any taxable year ending after such reissuance.
(5) Public notice that certificates will be issued
At least 90 days before any mortgage credit certificate is to be issued after a qualified mortgage credit certificate program, the issuing authority shall provide reasonable public notice of—
(A) the eligibility requirements for such certificate,
(B) the methods by which such certificates are to be issued, and
(C) such other information as the Secretary may require.
(6) Interest paid or accrued to related persons
No credit shall be allowed under subsection (a) for any interest paid or accrued to a person who is a related person to the taxpayer (within the meaning of section 144(a)(3)(A)).
(7) Principal residence
The term "principal residence" has the same meaning as when used in section 121.
(8) Qualified rehabilitation and home improvement
(A) Qualified rehabilitation
The term "qualified rehabilitation" has the meaning given such term by section 143(k)(5)(B).
(B) Qualified home improvement
The term "qualified home improvement" means an alteration, repair, or improvement described in section 143(k)(4).
(9) Qualified mortgage bond
The term "qualified mortgage bond" has the meaning given such term by section 143(a)(1).
(10) Manufactured housing
For purposes of this section, the term "single family residence" includes any manufactured home which has a minimum of 400 square feet of living space and a minimum width in excess of 102 inches and which is of a kind customarily used at a fixed location. Nothing in the preceding sentence shall be construed as providing that such a home will be taken into account in making determinations under section 143.
(f) Reduction in aggregate amount of qualified mortgage bonds which may be issued where certain requirements not met
(1) In general
If for any calendar year any mortgage credit certificate program which satisfies procedural requirements with respect to volume limitations prescribed by the Secretary fails to meet the requirements of paragraph (2) of subsection (d), such requirements shall be treated as satisfied with respect to any certified indebtedness of such program, but the applicable State ceiling under subsection (d) of section 146 for the State in which such program operates shall be reduced by 1.25 times the correction amount with respect to such failure. Such reduction shall be applied to such State ceiling for the calendar year following the calendar year in which the Secretary determines the correction amount with respect to such failure.
(2) Correction amount
(A) In general
For purposes of paragraph (1), the term "correction amount" means an amount equal to the excess credit amount divided by 0.25.
(B) Excess credit amount
(i) In general
For purposes of subparagraph (A)(ii), the term "excess credit amount" means the excess of—
(I) the credit amount for any mortgage credit certificate program, over
(II) the amount which would have been the credit amount for such program had such program met the requirements of paragraph (2) of subsection (d).
(ii) Credit amount
For purposes of clause (i), the term "credit amount" means the sum of the products determined under clauses (i) and (ii) of subsection (d)(2)(A).
(3) Special rule for States having constitutional home rule cities
In the case of a State having one or more constitutional home rule cities (within the meaning of section 146(d)(3)(C)), the reduction in the State ceiling by reason of paragraph (1) shall be allocated to the constitutional home rule city, or to the portion of the State not within such city, whichever caused the reduction.
(4) Exception where certification program
The provisions of this subsection shall not apply in any case in which there is a certification program which is designed to ensure that the requirements of this section are met and which meets such requirements as the Secretary may by regulations prescribe.
(5) Waiver
The Secretary may waive the application of paragraph (1) in any case in which he determines that the failure is due to reasonable cause.
(g) Reporting requirements
Each person who makes a loan which is a certified indebtedness amount under any mortgage credit certificate shall file a report with the Secretary containing—
(1) the name, address, and social security account number of the individual to which the certificate was issued,
(2) the certificate's issuer, date of issue, certified indebtedness amount, and certificate credit rate, and
(3) such other information as the Secretary may require by regulations.
Each person who issues a mortgage credit certificate shall file a report showing such information as the Secretary shall by regulations prescribe. Any such report shall be filed at such time and in such manner as the Secretary may require by regulations.
(h) Regulations; contracts
(1) Regulations
The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this section, including regulations which may require recipients of mortgage credit certificates to pay a reasonable processing fee to defray the expenses incurred in administering the program.
(2) Contracts
The Secretary is authorized to enter into contracts with any person to provide services in connection with the administration of this section.
(i) Recapture of portion of Federal subsidy from use of mortgage credit certificates
For provisions increasing the tax imposed by this chapter to recapture a portion of the Federal subsidy from the use of mortgage credit certificates, see section 143(m).
(Added
Editorial Notes
Prior Provisions
A prior section 25 was renumbered
Amendments
2018—Subsec. (e)(1)(C).
2013—Subsec. (e)(1)(C).
"(i) in the case of a taxable year to which section 26(a)(2) applies, the limitation imposed by section 26(a)(2) for the taxable year reduced by the sum of the credits allowable under this subpart (other than this section and sections 23, 25D, and 1400C), and
"(ii) in the case of a taxable year to which section 26(a)(2) does not apply, the limitation imposed by section 26(a)(1) for the taxable year reduced by the sum of the credits allowable under this subpart (other than this section and sections 23, 24, 25A(i), 25B, 25D, 30, 30B, 30D, and 1400C)."
2010—Subsec. (e)(1)(C).
2009—Subsec. (e)(1)(C)(ii).
2008—Subsec. (e)(1)(C)(ii).
2005—Subsec. (e)(1)(C).
2001—Subsec. (e)(1)(C).
1998—Subsec. (e)(1)(C).
1997—Subsec. (e)(7).
1996—Subsec. (e)(1)(C).
1993—Subsecs. (h) to (j).
1991—Subsec. (h).
1990—Subsec. (h).
1989—Subsec. (h).
1988—Subsec. (c)(2)(A)(ii).
Subsec. (h).
Subsec. (j).
1986—Subsec. (a)(1)(B).
Subsec. (b)(2)(A)(ii).
Subsec. (b)(2)(A)(iii).
Subsec. (c)(2)(A).
Subsec. (c)(2)(A)(ii).
Subsec. (c)(2)(A)(iii).
"(I) subsection (d) (relating to residence requirements),
"(II) subsection (e) (relating to 3-year requirement),
"(III) subsection (f) (relating to purchase price requirement),
"(IV) subsection (h) (relating to portion of loans required to be placed in targeted areas), and
"(V) subsection (j), other than paragraph (2) thereof (relating to other requirements),".
Subsec. (c)(2)(A)(iii)(V).
Subsec. (c)(2)(B).
"(iii) paragraph (1) of section 103A(e) shall be applied by substituting '100 percent' for '90 percent or more'.
Clause (iii) shall not apply if the issuing authority submits a plan to the Secretary for administering the 90-percent requirement of section 103A(e)(1) and the Secretary is satisfied that such requirement will be met under such plan."
Subsec. (d)(2)(A).
Subsec. (d)(3).
"(A) has a State ceiling (as defined in section 103A(g)(4)) for the year an election is made that exceeds 20 percent of the average annual aggregate principal amount of mortgages executed during the immediately preceding 3 calendar years for single family owner-occupied residences located within the jurisdiction of such State, or
"(B) issued qualified mortgage bonds in an aggregate amount less than $150,000,000 for calendar year 1983,
the certificate credit rate for any mortgage credit certificate shall not exceed 20 percent unless the issuing authority submits a plan to the Secretary to ensure that the weighted average of the certificate credit rates in such mortgage credit certificate program does not exceed 20 percent and the Secretary approves such plan."
Subsec. (e)(1)(B).
Subsec. (e)(2).
Subsec. (e)(6).
Subsec. (e)(8)(A).
Subsec. (e)(8)(B).
Subsec. (e)(9).
Subsec. (e)(10).
Subsec. (f)(1).
Subsec. (f)(2)(A).
Subsec. (f)(3).
Subsec. (f)(4).
Statutory Notes and Related Subsidiaries
Effective Date of 2013 Amendment
Amendment by
Effective and Termination Dates of 2010 Amendment
Amendment by
Amendment by
Effective Date of 2009 Amendment
Amendment by section 1004(b)(2) of
Amendment by section 1142(b)(1)(B) of
Amendment by section 1144(b)(1)(B) of
Effective Date of 2008 Amendment
Amendment by
Effective and Termination Dates of 2005 Amendment
Amendment by section 402(i)(3)(C) of
The Internal Revenue Code of 1986 to be applied and administered as if the amendments made by section 1335(b)(1)–(3) of
Amendments by
Amendment by
Effective Date of 2001 Amendment
Amendment by
Amendment by
Amendment by section 201(b)(2)(F) of
Amendment by section 618(b)(2)(B) of
Effective Date of 1998 Amendment
Amendment by
Effective Date of 1997 Amendment
Amendment by
Effective Date of 1996 Amendment
Amendment by
Effective Date of 1993 Amendment
Effective Date of 1991 Amendment
Effective Date of 1990 Amendment
Amendment by
Effective Date of 1988 Amendment
Amendment by section 1013(a)(25), (26) of
Amendment by section 4005(a)(2) of
Amendment by section 4005(g)(7) of
Effective Date of 1986 Amendment
Amendment by section 1301(f)(1) of
Amendment by section 1862(a)–(d)(1) of
Effective Date
"(1)
"(2)
Savings Provision
Amendment by
For provisions that nothing in amendment by
Plan Amendments Not Required Until January 1, 1989
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101–1147 and 1171–1177] or title XVIII [§§1800–1899A] of
§25A. American Opportunity and Lifetime Learning credits
(a) Allowance of credit
In the case of an individual, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year the amount equal to the sum of—
(1) the American Opportunity Tax Credit, plus
(2) the Lifetime Learning Credit.
(b) American Opportunity Tax Credit
(1) Per student credit
In the case of any eligible student for whom an election is in effect under this section for any taxable year, the American Opportunity Tax Credit is an amount equal to the sum of—
(A) 100 percent of so much of the qualified tuition and related expenses paid by the taxpayer during the taxable year (for education furnished to the eligible student during any academic period beginning in such taxable year) as does not exceed $2,000, plus
(B) 25 percent of such expenses so paid as exceeds $2,000 but does not exceed $4,000.
(2) Limitations applicable to American Opportunity Tax Credit
(A) Credit allowed only for 4 taxable years
An election to have this section apply with respect to any eligible student for purposes of the American Opportunity Tax Credit under subsection (a)(1) may not be made for any taxable year if such an election (by the taxpayer or any other individual) is in effect with respect to such student for any 4 prior taxable years.
(B) Credit allowed for year only if individual is at least ½ time student for portion of year
The American Opportunity Tax Credit under subsection (a)(1) shall not be allowed for a taxable year with respect to the qualified tuition and related expenses of an individual unless such individual is an eligible student for at least one academic period which begins during such year.
(C) Credit allowed only for first 4 years of postsecondary education
The American Opportunity Tax Credit under subsection (a)(1) shall not be allowed for a taxable year with respect to the qualified tuition and related expenses of an eligible student if the student has completed (before the beginning of such taxable year) the first 4 years of postsecondary education at an eligible educational institution.
(D) Denial of credit if student convicted of a felony drug offense
The American Opportunity Tax Credit under subsection (a)(1) shall not be allowed for qualified tuition and related expenses for the enrollment or attendance of a student for any academic period if such student has been convicted of a Federal or State felony offense consisting of the possession or distribution of a controlled substance before the end of the taxable year with or within which such period ends.
(3) Eligible student
For purposes of this subsection, the term "eligible student" means, with respect to any academic period, a student who—
(A) meets the requirements of section 484(a)(1) of the Higher Education Act of 1965 (
(B) is carrying at least ½ the normal full-time work load for the course of study the student is pursuing.
(4) Restrictions on taxpayers who improperly claimed American Opportunity Tax Credit in prior years
(A) Taxpayers making prior fraudulent or reckless claims
(i) In general
No American Opportunity Tax Credit shall be allowed under this section for any taxable year in the disallowance period.
(ii) Disallowance period
For purposes of subparagraph (A), the disallowance period is—
(I) the period of 10 taxable years after the most recent taxable year for which there was a final determination that the taxpayer's claim of the American Opportunity Tax Credit under this section was due to fraud, and
(II) the period of 2 taxable years after the most recent taxable year for which there was a final determination that the taxpayer's claim of the American Opportunity Tax Credit under this section was due to reckless or intentional disregard of rules and regulations (but not due to fraud).
(B) Taxpayers making improper prior claims
In the case of a taxpayer who is denied the American Opportunity Tax Credit under this section for any taxable year as a result of the deficiency procedures under subchapter B of
(c) Lifetime Learning Credit
(1) Per taxpayer credit
The Lifetime Learning Credit for any taxpayer for any taxable year is an amount equal to 20 percent of so much of the qualified tuition and related expenses paid by the taxpayer during the taxable year (for education furnished during any academic period beginning in such taxable year) as does not exceed $10,000.
(2) Special rules for determining expenses
(A) Coordination with American Opportunity Tax Credit
The qualified tuition and related expenses with respect to an individual who is an eligible student for whom a 1 American Opportunity Tax Credit under subsection (a)(1) is allowed for the taxable year shall not be taken into account under this subsection.
(B) Expenses eligible for Lifetime Learning Credit
For purposes of paragraph (1), qualified tuition and related expenses shall include expenses described in subsection (f)(1) with respect to any course of instruction at an eligible educational institution to acquire or improve job skills of the individual.
(d) Limitations based on modified adjusted gross income
(1) In general
The American Opportunity Tax Credit and the Lifetime Learning Credit shall each (determined without regard to this paragraph) be reduced (but not below zero) by the amount which bears the same ratio to each such credit (as so determined) as—
(A) the excess of—
(i) the taxpayer's modified adjusted gross income for such taxable year, over
(ii) $80,000 ($160,000 in the case of a joint return), bears to
(B) $10,000 ($20,000 in the case of a joint return).
(2) Modified adjusted gross income
For purposes of this subsection, the term "modified adjusted gross income" means the adjusted gross income of the taxpayer for the taxable year increased by any amount excluded from gross income under section 911, 931, or 933.
(e) Election not to have section apply
A taxpayer may elect not to have this section apply with respect to the qualified tuition and related expenses of an individual for any taxable year.
(f) Definitions
For purposes of this section—
(1) Qualified tuition and related expenses
(A) In general
The term "qualified tuition and related expenses" means tuition and fees required for the enrollment or attendance of—
(i) the taxpayer,
(ii) the taxpayer's spouse, or
(iii) any dependent of the taxpayer with respect to whom the taxpayer is allowed a deduction under section 151,
at an eligible educational institution for courses of instruction of such individual at such institution.
(B) Exception for education involving sports, etc.
Such term does not include expenses with respect to any course or other education involving sports, games, or hobbies, unless such course or other education is part of the individual's degree program.
(C) Exception for nonacademic fees
Such term does not include student activity fees, athletic fees, insurance expenses, or other expenses unrelated to an individual's academic course of instruction.
(D) Required course materials taken into account for American Opportunity Tax Credit
For purposes of determining the American Opportunity Tax Credit, subparagraph (A) shall be applied by substituting "tuition, fees, and course materials" for "tuition and fees".
(2) Eligible educational institution
The term "eligible educational institution" means an institution—
(A) which is described in section 481 of the Higher Education Act of 1965 (
(B) which is eligible to participate in a program under title IV of such Act.
(g) Special rules
(1) Identification requirement
(A) In general
No credit shall be allowed under subsection (a) to a taxpayer with respect to the qualified tuition and related expenses of an individual unless the taxpayer includes the name and taxpayer identification number of such individual on the return of tax for the taxable year.
(B) Additional identification requirements with respect to American Opportunity Tax Credit
(i) Student
The requirements of subparagraph (A) shall not be treated as met with respect to the American Opportunity Tax Credit unless the individual's taxpayer identification number was issued on or before the due date for filing the return of tax for the taxable year.
(ii) Taxpayer
No American Opportunity Tax Credit shall be allowed under this section if the taxpayer identification number of the taxpayer was issued after the due date for filing the return for the taxable year.
(iii) Institution
No American Opportunity Tax Credit shall be allowed under this section unless the taxpayer includes the employer identification number of any institution to which qualified tuition and related expenses were paid with respect to the individual.
(2) Adjustment for certain scholarships, etc.
The amount of qualified tuition and related expenses otherwise taken into account under subsection (a) with respect to an individual for an academic period shall be reduced (before the application of subsections (b), (c), and (d)) by the sum of any amounts paid for the benefit of such individual which are allocable to such period as—
(A) a qualified scholarship which is excludable from gross income under section 117,
(B) an educational assistance allowance under
(C) a payment (other than a gift, bequest, devise, or inheritance within the meaning of section 102(a)) for such individual's educational expenses, or attributable to such individual's enrollment at an eligible educational institution, which is excludable from gross income under any law of the United States.
(3) Treatment of expenses paid by dependent
If a deduction under section 151 with respect to an individual is allowed to another taxpayer for a taxable year beginning in the calendar year in which such individual's taxable year begins—
(A) no credit shall be allowed under subsection (a) to such individual for such individual's taxable year,
(B) qualified tuition and related expenses paid by such individual during such individual's taxable year shall be treated for purposes of this section as paid by such other taxpayer, and
(C) a statement described in paragraph (8) and received by such individual shall be treated as received by the taxpayer.
(4) Treatment of certain prepayments
If qualified tuition and related expenses are paid by the taxpayer during a taxable year for an academic period which begins during the first 3 months following such taxable year, such academic period shall be treated for purposes of this section as beginning during such taxable year.
(5) Denial of double benefit
No credit shall be allowed under this section for any expense for which a deduction is allowed under any other provision of this chapter.
(6) No credit for married individuals filing separate returns
If the taxpayer is a married individual (within the meaning of section 7703), this section shall apply only if the taxpayer and the taxpayer's spouse file a joint return for the taxable year.
(7) Nonresident aliens
If the taxpayer is a nonresident alien individual for any portion of the taxable year, this section shall apply only if such individual is treated as a resident alien of the United States for purposes of this chapter by reason of an election under subsection (g) or (h) of section 6013.
(8) Payee statement requirement
Except as otherwise provided by the Secretary, no credit shall be allowed under this section unless the taxpayer receives a statement furnished under section 6050S(d) which contains all of the information required by paragraph (2) thereof.
[(h) Repealed. Pub. L. 116–260, div. EE, title I, §104(a)(2), Dec. 27, 2020, 134 Stat. 3041 ]
(i) Portion of American Opportunity Tax Credit made refundable
Forty percent of so much of the credit allowed under subsection (a) as is attributable to the American Opportunity Tax Credit (determined after application of subsection (d) and without regard to this paragraph 2 and section 26(a)) shall be treated as a credit allowable under subpart C (and not allowed under subsection (a)). The preceding sentence shall not apply to any taxpayer for any taxable year if such taxpayer is a child to whom subsection (g) of section 1 applies for such taxable year.
(j) Regulations
The Secretary may prescribe such regulations as may be necessary or appropriate to carry out this section, including regulations providing for a recapture of the credit allowed under this section in cases where there is a refund in a subsequent taxable year of any amount which was taken into account in determining the amount of such credit.
(Added
Inflation Adjusted Items for Certain Years
For inflation adjustment of certain items in this section, see Revenue Procedures listed in a table under
Editorial Notes
References in Text
The date of the enactment of this section, referred to in subsecs. (b)(3)(A) and (f)(2)(A), is the date of enactment of
The Higher Education Act of 1965, referred to in subsec. (f)(2)(B), is
Amendments
2020—Subsec. (d).
Subsec. (h).
2018—
Subsec. (b).
Subsec. (b)(1)(A).
Subsec. (b)(1)(B).
Subsec. (b)(2).
Subsec. (b)(2)(A), (C).
Subsec. (b)(4).
Subsec. (c)(1).
Subsec. (c)(2)(A).
Subsec. (d).
Subsec. (f)(1)(D).
Subsec. (g)(1).
Subsec. (h).
Subsec. (i).
2017—Subsec. (h)(1)(A)(ii), (2)(A)(ii).
2015—Subsec. (g)(3)(C).
Subsec. (g)(8).
Subsec. (i).
Subsec. (i)(6).
Subsec. (i)(6)(C).
Subsec. (i)(7).
2014—Subsec. (i)(3).
2013—Subsec. (i).
Subsec. (i)(5) to (7).
2010—Subsec. (i).
Subsec. (i)(5)(B).
2009—Subsecs. (i), (j).
2001—Subsec. (e).
"(1)
"(2)
Statutory Notes and Related Subsidiaries
Effective Date of 2020 Amendment
Effective Date of 2018 Amendment
Amendment by section 101(l)(1) to (9), (11) to (14) of
Effective Date of 2017 Amendment
Amendment by
Effective Date of 2015 Amendment
"(1)
"(2)
Amendment by section 208(a)(2) of
Effective Date of 2014 Amendment
Amendment by
Effective Date of 2013 Amendment
Amendment by section 103(a)(1) of
Amendment by section 104(c)(2)(D) of
Effective and Termination Dates of 2010 Amendment
Amendment by section 103(a)(1) of
Amendment by
Amendment by
Effective Date of 2009 Amendment
Amendment by
Effective Date of 2001 Amendment
Effective Date
"(1)
"(2)
Savings Provision
For provisions that nothing in amendment by section 401(b)(1) of
Treatment of Possessions
"(1)
"(A)
"(B)
"(2)
"(3)
"(A)
"(B)
"(C)
[Amendments by
1 So in original. Probably should be "an".
2 So in original. Probably should be "this subsection".
§25B. Elective deferrals and IRA contributions by certain individuals
(a) Allowance of credit
In the case of an eligible individual, there shall be allowed as a credit against the tax imposed by this subtitle for the taxable year an amount equal to the applicable percentage of so much of the qualified retirement savings contributions of the eligible individual for the taxable year as do not exceed $2,000.
(b) Applicable percentage
For purposes of this section—
(1) Joint returns
In the case of a joint return, the applicable percentage is—
(A) if the adjusted gross income of the taxpayer is not over $30,000, 50 percent,
(B) if the adjusted gross income of the taxpayer is over $30,000 but not over $32,500, 20 percent,
(C) if the adjusted gross income of the taxpayer is over $32,500 but not over $50,000, 10 percent, and
(D) if the adjusted gross income of the taxpayer is over $50,000, zero percent.
(2) Other returns
In the case of—
(A) a head of household, the applicable percentage shall be determined under paragraph (1) except that such paragraph shall be applied by substituting for each dollar amount therein (as adjusted under paragraph (3)) a dollar amount equal to 75 percent of such dollar amount, and
(B) any taxpayer not described in paragraph (1) or subparagraph (A), the applicable percentage shall be determined under paragraph (1) except that such paragraph shall be applied by substituting for each dollar amount therein (as adjusted under paragraph (3)) a dollar amount equal to 50 percent of such dollar amount.
(3) Inflation adjustment
In the case of any taxable year beginning in a calendar year after 2006, each of the dollar amounts in paragraph (1) shall be increased by an amount equal to—
(A) such dollar amount, multiplied by
(B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting "calendar year 2005" for "calendar year 2016" in subparagraph (A)(ii) thereof.
Any increase determined under the preceding sentence shall be rounded to the nearest multiple of $500.
(c) Eligible individual
For purposes of this section—
(1) In general
The term "eligible individual" means any individual if such individual has attained the age of 18 as of the close of the taxable year.
(2) Dependents and full-time students not eligible
The term "eligible individual" shall not include—
(A) any individual with respect to whom a deduction under section 151 is allowed to another taxpayer for a taxable year beginning in the calendar year in which such individual's taxable year begins, and
(B) any individual who is a student (as defined in section 152(f)(2)).
(d) Qualified retirement savings contributions
For purposes of this section—
(1) In general
The term "qualified retirement savings contributions" means, with respect to any taxable year, the sum of—
(A) the amount of the qualified retirement contributions (as defined in section 219(e)) made by the eligible individual,
(B) the amount of—
(i) any elective deferrals (as defined in section 402(g)(3)) of such individual, and
(ii) any elective deferral of compensation by such individual under an eligible deferred compensation plan (as defined in section 457(b)) of an eligible employer described in section 457(e)(1)(A),
(C) the amount of voluntary employee contributions by such individual to any qualified retirement plan (as defined in section 4974(c)), and
(D) the amount of contributions made before January 1, 2026, by such individual to the ABLE account (within the meaning of section 529A) of which such individual is the designated beneficiary.
(2) Reduction for certain distributions
(A) In general
The qualified retirement savings contributions determined under paragraph (1) shall be reduced (but not below zero) by the aggregate distributions received by the individual during the testing period from any entity of a type to which contributions under paragraph (1) may be made. The preceding sentence shall not apply to the portion of any distribution which is not includible in gross income by reason of a trustee-to-trustee transfer or a rollover distribution.
(B) Testing period
For purposes of subparagraph (A), the testing period, with respect to a taxable year, is the period which includes—
(i) such taxable year,
(ii) the 2 preceding taxable years, and
(iii) the period after such taxable year and before the due date (including extensions) for filing the return of tax for such taxable year.
(C) Excepted distributions
There shall not be taken into account under subparagraph (A)—
(i) any distribution referred to in section 72(p), 401(k)(8), 401(m)(6), 402(g)(2), 404(k), or 408(d)(4), and
(ii) any distribution to which section 408A(d)(3) applies.
(D) Treatment of distributions received by spouse of individual
For purposes of determining distributions received by an individual under subparagraph (A) for any taxable year, any distribution received by the spouse of such individual shall be treated as received by such individual if such individual and spouse file a joint return for such taxable year and for the taxable year during which the spouse receives the distribution.
(e) Adjusted gross income
For purposes of this section, adjusted gross income shall be determined without regard to sections 911, 931, and 933.
(f) Investment in the contract
Notwithstanding any other provision of law, a qualified retirement savings contribution shall not fail to be included in determining the investment in the contract for purposes of section 72 by reason of the credit under this section.
(Added and amended
Amendment of Subsection (d)(1)
Inflation Adjusted Items for Certain Years
For inflation adjustment of certain items in this section, see Revenue Procedures listed in a table under
Editorial Notes
Amendments
2022—Subsec. (d)(1).
"(A) the amount of the qualified retirement contributions (as defined in section 219(e)) made by the eligible individual,
"(B) the amount of—
"(i) any elective deferrals (as defined in section 402(g)(3)) of such individual, and
"(ii) any elective deferral of compensation by such individual under an eligible deferred compensation plan (as defined in section 457(b)) of an eligible employer described in section 457(e)(1)(A),
"(C) the amount of voluntary employee contributions by such individual to any qualified retirement plan (as defined in section 4974(c)), and
"(D) the amount of contributions made before January 1, 2026".
2017—Subsec. (b)(3)(B).
Subsec. (d)(1)(D).
2013—Subsec. (g).
"(1) the sum of the regular tax liability (as defined in section 26(b)) plus the tax imposed by section 55, over
"(2) the sum of the credits allowable under this subpart (other than this section and sections 23, 25A(i), 25D, 30, 30B, and 30D) and section 27 for the taxable year."
2010—Subsec. (g)(2).
2009—Subsec. (g)(2).
2008—Subsec. (g)(2).
2006—Subsec. (b).
Subsec. (h).
2005—Subsec. (g).
2004—Subsec. (c)(2)(B).
2002—Subsec. (d)(2)(A).
"(i) any distribution from a qualified retirement plan (as defined in section 4974(c)), or from an eligible deferred compensation plan (as defined in section 457(b)), received by the individual during the testing period which is includible in gross income, and
"(ii) any distribution from a Roth IRA or a Roth account received by the individual during the testing period which is not a qualified rollover contribution (as defined in section 408A(e)) to a Roth IRA or a rollover under section 402(c)(8)(B) to a Roth account."
Subsecs. (g), (h).
2001—Subsec. (g).
Statutory Notes and Related Subsidiaries
Effective Date of 2022 Amendment
Amendment by
Effective Date of 2013 Amendment
Amendment by
Effective and Termination Dates of 2010 Amendment
Amendment by
Amendment by
Effective Date of 2017 Amendment
Amendment by section 11002(d)(1)(C) of
Effective Date of 2009 Amendment
Amendment by section 1004(b)(4) of
Amendment by section 1142(b)(1)(C) of
Amendment by section 1144(b)(1)(C) of
Effective Date of 2008 Amendment
Amendment by section 106(e)(2)(C) of
Amendment by section 205(d)(1)(C) of
Effective Date of 2006 Amendment
Effective and Termination Dates of 2005 Amendment
Amendment by
Amendment by
Effective Date of 2004 Amendment
Amendment by
Effective Date of 2002 Amendment
Effective Date
Amendment by section 618(b)(1) of
Amendment by section 618(b)(1) of
Amendment by section 618(b)(1) of
§25C. Energy efficient home improvement credit
(a) Allowance of credit
In the case of an individual, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to 30 percent of the sum of—
(1) the amount paid or incurred by the taxpayer for qualified energy efficiency improvements installed during such taxable year,
(2) the amount of the residential energy property expenditures paid or incurred by the taxpayer during such taxable year, and
(3) the amount paid or incurred by the taxpayer during the taxable year for home energy audits.
(b) Limitations
(1) In general
The credit allowed under this section with respect to any taxpayer for any taxable year shall not exceed $1,200.
(2) Energy property
The credit allowed under this section by reason of subsection (a)(2) with respect to any taxpayer for any taxable year shall not exceed, with respect to any item of qualified energy property, $600.
(3) Windows
The credit allowed under this section by reason of subsection (a)(1) with respect to any taxpayer for any taxable year shall not exceed, in the aggregate with respect to all exterior windows and skylights, $600.
(4) Doors
The credit allowed under this section by reason of subsection (a)(1) with respect to any taxpayer for any taxable year shall not exceed—
(A) $250 in the case of any exterior door, and
(B) $500 in the aggregate with respect to all exterior doors.
(5) Heat pump and heat pump water heaters; biomass stoves and boilers
Notwithstanding paragraphs (1) and (2), the credit allowed under this section by reason of subsection (a)(2) with respect to any taxpayer for any taxable year shall not, in the aggregate, exceed $2,000 with respect to amounts paid or incurred for property described in clauses (i) and (ii) of subsection (d)(2)(A) and in subsection (d)(2)(B).
(6) Home energy audits
(A) Dollar limitation
The amount of the credit allowed under this section by reason of subsection (a)(3) shall not exceed $150.
(B) Substantiation requirement
No credit shall be allowed under this section by reason of subsection (a)(3) unless the taxpayer includes with the taxpayer's return of tax such information or documentation as the Secretary may require.
(c) Qualified energy efficiency improvements
For purposes of this section—
(1) In general
The term "qualified energy efficiency improvements" means any energy efficient building envelope component, if—
(A) such component is installed in or on a dwelling unit located in the United States and owned and used by the taxpayer as the taxpayer's principal residence (within the meaning of section 121),
(B) the original use of such component commences with the taxpayer, and
(C) such component reasonably can be expected to remain in use for at least 5 years.
(2) Energy efficient building envelope component
The term "energy efficient building envelope component" means a building envelope component which meets—
(A) in the case of an exterior window or skylight, Energy Star most efficient certification requirements,
(B) in the case of an exterior door, applicable Energy Star requirements, and
(C) in the case of any other component, the prescriptive criteria for such component established by the most recent International Energy Conservation Code standard in effect as of the beginning of the calendar year which is 2 years prior to the calendar year in which such component is placed in service.
(3) Building envelope component
The term "building envelope component" means—
(A) any insulation material or system, including air sealing material or system, which is specifically and primarily designed to reduce the heat loss or gain of a dwelling unit when installed in or on such dwelling unit,
(B) exterior windows (including skylights), and
(C) exterior doors.
(4) Manufactured homes included
The term "dwelling unit" includes a manufactured home which conforms to Federal Manufactured Home Construction and Safety Standards (part 3280 of title 24, Code of Federal Regulations).
(d) Residential energy property expenditures
For purposes of this section—
(1) In general
The term "residential energy property expenditures" means expenditures made by the taxpayer for qualified energy property which is—
(A) installed on or in connection with a dwelling unit located in the United States and used as a residence by the taxpayer, and
(B) originally placed in service by the taxpayer.
Such term includes expenditures for labor costs properly allocable to the onsite preparation, assembly, or original installation of the property.
(2) Qualified energy property
The term "qualified energy property" means any of the following:
(A) Any of the following which meet or exceed the highest efficiency tier (not including any advanced tier) established by the Consortium for Energy Efficiency which is in effect as of the beginning of the calendar year in which the property is placed in service:
(i) An electric or natural gas heat pump water heater.
(ii) An electric or natural gas heat pump.
(iii) A central air conditioner.
(iv) A natural gas, propane, or oil water heater.
(v) A natural gas, propane, or oil furnace or hot water boiler.
(B) A biomass stove or boiler which—
(i) uses the burning of biomass fuel to heat a dwelling unit located in the United States and used as a residence by the taxpayer, or to heat water for use in such a dwelling unit, and
(ii) has a thermal efficiency rating of at least 75 percent (measured by the higher heating value of the fuel).
(C) Any oil furnace or hot water boiler which—
(i) is placed in service after December 31, 2022, and before January 1, 2027, and—
(I) meets or exceeds 2021 Energy Star efficiency criteria, and
(II) is rated by the manufacturer for use with fuel blends at least 20 percent of the volume of which consists of an eligible fuel, or
(ii) is placed in service after December 31, 2026, and—
(I) achieves an annual fuel utilization efficiency rate of not less than 90, and
(II) is rated by the manufacturer for use with fuel blends at least 50 percent of the volume of which consists of an eligible fuel.
(D) Any improvement to, or replacement of, a panelboard, sub-panelboard, branch circuits, or feeders which—
(i) is installed in a manner consistent with the National Electric Code,
(ii) has a load capacity of not less than 200 amps,
(iii) is installed in conjunction with—
(I) any qualified energy efficiency improvements, or
(II) any qualified energy property described in subparagraphs (A) through (C) for which a credit is allowed under this section for expenditures with respect to such property, and
(iv) enables the installation and use of any property described in subclause (I) or (II) of clause (iii).
(3) Eligible fuel
For purposes of paragraph (2), the term "eligible fuel" means—
(A) biodiesel and renewable diesel (within the meaning of section 40A), and
(B) second generation biofuel (within the meaning of section 40).
(e) Home energy audits
For purposes of this section, the term "home energy audit" means an inspection and written report with respect to a dwelling unit located in the United States and owned or used by the taxpayer as the taxpayer's principal residence (within the meaning of section 121) which—
(1) identifies the most significant and cost-effective energy efficiency improvements with respect to such dwelling unit, including an estimate of the energy and cost savings with respect to each such improvement, and
(2) is conducted and prepared by a home energy auditor that meets the certification or other requirements specified by the Secretary in regulations or other guidance (as prescribed by the Secretary not later than 365 days after the date of the enactment of this subsection).
(f) Special rules
For purposes of this section—
(1) Application of rules
Rules similar to the rules under paragraphs (4), (5), (6), (7), and (8) of section 25D(e) shall apply.
(2) Joint ownership of energy items
(A) In general
Any expenditure otherwise qualifying as an expenditure under this section shall not be treated as failing to so qualify merely because such expenditure was made with respect to two or more dwelling units.
(B) Limits applied separately
In the case of any expenditure described in subparagraph (A), the amount of the credit allowable under subsection (a) shall (subject to paragraph (1)) be computed separately with respect to the amount of the expenditure made for each dwelling unit.
(3) Property financed by subsidized energy financing
For purposes of determining the amount of expenditures made by any individual with respect to any property, there shall not be taken into account expenditures which are made from subsidized energy financing (as defined in section 48(a)(4)(C)).
(g) Basis adjustments
For purposes of this subtitle, if a credit is allowed under this section for any expenditure with respect to any property, the increase in the basis of such property which would (but for this subsection) result from such expenditure shall be reduced by the amount of the credit so allowed.
(h) Termination
This section shall not apply with respect to any property placed in service—
(1) after December 31, 2007, and before January 1, 2009, or
(2) after December 31, 2032.
(Added
Amendment of Section
(C) transportation fuel (as defined in section 45Z(d)(5)).
See 2022 Amendment note below.
(h) Product identification number requirement
(1) In general
No credit shall be allowed under subsection (a) with respect to any item of specified property placed in service after December 31, 2024, unless—
(A) such item is produced by a qualified manufacturer, and
(B) the taxpayer includes the qualified product identification number of such item on the return of tax for the taxable year.
(2) Qualified product identification number
For purposes of this section, the term "qualified product identification number" means, with respect to any item of specified property, the product identification number assigned to such item by the qualified manufacturer pursuant to the methodology referred to in paragraph (3).
(3) Qualified manufacturer
For purposes of this section, the term "qualified manufacturer" means any manufacturer of specified property which enters into an agreement with the Secretary which provides that such manufacturer will—
(A) assign a product identification number to each item of specified property produced by such manufacturer utilizing a methodology that will ensure that such number (including any alphanumeric) is unique to each such item (by utilizing numbers or letters which are unique to such manufacturer or by such other method as the Secretary may provide),
(B) label such item with such number in such manner as the Secretary may provide, and
(C) make periodic written reports to the Secretary (at such times and in such manner as the Secretary may provide) of the product identification numbers so assigned and including such information as the Secretary may require with respect to the item of specified property to which such number was so assigned.
(4) Specified property
For purposes of this subsection, the term "specified property" means any qualified energy property and any property described in subparagraph (B) or (C) of subsection (c)(3).
See 2022 Amendment notes below.
Editorial Notes
References in Text
The date of the enactment of this subsection, referred to in subsec. (e)(2), is the date of enactment of
Amendments
2022—
Subsec. (a).
"(1) 10 percent of the amount paid or incurred by the taxpayer for qualified energy efficiency improvements installed during such taxable year, and
"(2) the amount of the residential energy property expenditures paid or incurred by the taxpayer during such taxable year."
Subsec. (a)(3).
Subsec. (b).
"(1)
"(2)
"(3)
"(A) $50 for any advanced main air circulating fan,
"(B) $150 for any qualified natural gas, propane, or oil furnace or hot water boiler, and
"(C) $300 for any item of energy-efficient building property."
Subsec. (b)(6).
Subsec. (c)(2).
"(A) applicable Energy Star program requirements, in the case of a roof or roof products,
"(B) version 6.0 Energy Star program requirements, in the case of an exterior window, a skylight, or an exterior door, and
"(C) the prescriptive criteria for such component established by the 2009 International Energy Conservation Code, as such Code (including supplements) is in effect on the date of the enactment of the American Recovery and Reinvestment Tax Act of 2009, in the case of any other component."
Subsec. (c)(3)(A).
Subsec. (c)(3)(D).
Subsec. (d).
Subsec. (d)(3)(C).
Subsecs. (e) to (g).
Subsec. (g)(2).
Subsec. (h).
Subsec. (i).
2020—Subsec. (d)(3)(E).
Subsec. (d)(6).
Subsec. (g)(2).
2019—Subsec. (d)(3)(A).
Subsec. (d)(3)(D).
Subsec. (g)(2).
2018—Subsec. (b)(2).
Subsec. (d)(3)(B).
Subsec. (d)(3)(D).
Subsec. (g)(2).
2015—Subsec. (c)(1).
Subsec. (c)(2) to (4).
Subsec. (g)(2).
2014—Subsec. (g)(2).
2013—Subsec. (g)(2).
2010—Subsecs. (a), (b).
"(a)
"(1) the amount paid or incurred by the taxpayer during such taxable year for qualified energy efficiency improvements, and
"(2) the amount of the residential energy property expenditures paid or incurred by the taxpayer during such taxable year.
"(b)
Subsec. (c)(1).
Subsec. (c)(2)(A).
Subsec. (c)(4).
Subsec. (d)(2)(A)(ii).
Subsec. (d)(3)(E).
Subsec. (d)(4).
Subsec. (e)(3).
Subsec. (g)(2).
2009—Subsecs. (a), (b).
Subsec. (c)(2)(A).
Subsec. (c)(4).
Subsec. (d)(2)(A)(ii).
Subsec. (d)(3)(B).
Subsec. (d)(3)(C).
Subsec. (d)(3)(D).
Subsec. (d)(3)(E).
Subsec. (d)(4).
Subsec. (e)(1).
Subsec. (g)(2).
2008—Subsec. (c)(1).
Subsec. (c)(2)(D).
Subsec. (d)(2)(C).
Subsec. (d)(3)(C), (D).
"(i) in the case of a closed loop product, has an energy efficiency ratio (EER) of at least 14.1 and a heating coefficient of performance (COP) of at least 3.3,
"(ii) in the case of an open loop product, has an energy efficiency ratio (EER) of at least 16.2 and a heating coefficient of performance (COP) of at least 3.6, and
"(iii) in the case of a direct expansion (DX) product, has an energy efficiency ratio (EER) of at least 15 and a heating coefficient of performance (COP) of at least 3.5,".
Subsec. (d)(3)(E).
Subsec. (d)(3)(F).
Subsec. (d)(6).
Subsec. (g).
2007—Subsec. (c)(3).
2005—Subsec. (b)(2).
Statutory Notes and Related Subsidiaries
Effective Date of 2022 Amendment
"(1)
"(2)
"(3)
Amendment by section 13704(b)(1) of
Effective Date of 2020 Amendment
Effective Date of 2019 Amendment
Effective Date of 2018 Amendment
Effective Date of 2015 Amendment
"(1)
"(2)
Effective Date of 2014 Amendment
Effective Date of 2013 Amendment
Effective Date of 2010 Amendment
Effective Date of 2009 Amendment
"(1)
"(2)
"(1)
"(2)
Effective Date of 2008 Amendment
"(1)
"(2)
Effective Date
§25D. Residential clean energy credit
(a) Allowance of credit
In the case of an individual, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the sum of the applicable percentages of—
(1) the qualified solar electric property expenditures,
(2) the qualified solar water heating property expenditures,
(3) the qualified fuel cell property expenditures,
(4) the qualified small wind energy property expenditures,
(5) the qualified geothermal heat pump property expenditures, and
(6) the qualified battery storage technology expenditures,
made by the taxpayer during such year.
(b) Limitations
(1) Maximum credit for fuel cells
In the case of any qualified fuel cell property expenditure, the credit allowed under subsection (a) (determined without regard to subsection (c)) for any taxable year shall not exceed $500 with respect to each half kilowatt of capacity of the qualified fuel cell property (as defined in section 48(c)(1)) to which such expenditure relates.
(2) Certification of solar water heating property
No credit shall be allowed under this section for an item of property described in subsection (d)(1) unless such property is certified for performance by the non-profit Solar Rating Certification Corporation or a comparable entity endorsed by the government of the State in which such property is installed.
(c) Carryforward of unused credit
If the credit allowable under subsection (a) exceeds the limitation imposed by section 26(a) for such taxable year reduced by the sum of the credits allowable under this subpart (other than this section), such excess shall be carried to the succeeding taxable year and added to the credit allowable under subsection (a) for such succeeding taxable year.
(d) Definitions
For purposes of this section—
(1) Qualified solar water heating property expenditure
The term "qualified solar water heating property expenditure" means an expenditure for property to heat water for use in a dwelling unit located in the United States and used as a residence by the taxpayer if at least half of the energy used by such property for such purpose is derived from the sun.
(2) Qualified solar electric property expenditure
The term "qualified solar electric property expenditure" means an expenditure for property which uses solar energy to generate electricity for use in a dwelling unit located in the United States and used as a residence by the taxpayer.
(3) Qualified fuel cell property expenditure
The term "qualified fuel cell property expenditure" means an expenditure for qualified fuel cell property (as defined in section 48(c)(1), without regard to subparagraph (D) thereof) installed on or in connection with a dwelling unit located in the United States and used as a principal residence (within the meaning of section 121) by the taxpayer.
(4) Qualified small wind energy property expenditure
The term "qualified small wind energy property expenditure" means an expenditure for property which uses a wind turbine to generate electricity for use in connection with a dwelling unit located in the United States and used as a residence by the taxpayer.
(5) Qualified geothermal heat pump property expenditure
(A) In general
The term "qualified geothermal heat pump property expenditure" means an expenditure for qualified geothermal heat pump property installed on or in connection with a dwelling unit located in the United States and used as a residence by the taxpayer.
(B) Qualified geothermal heat pump property
The term "qualified geothermal heat pump property" means any equipment which—
(i) uses the ground or ground water as a thermal energy source to heat the dwelling unit referred to in subparagraph (A) or as a thermal energy sink to cool such dwelling unit, and
(ii) meets the requirements of the Energy Star program which are in effect at the time that the expenditure for such equipment is made.
(6) Qualified battery storage technology expenditure
The term "qualified battery storage technology expenditure" means an expenditure for battery storage technology which—
(A) is installed in connection with a dwelling unit located in the United States and used as a residence by the taxpayer, and
(B) has a capacity of not less than 3 kilowatt hours.
(e) Special rules
For purposes of this section—
(1) Labor costs
Expenditures for labor costs properly allocable to the onsite preparation, assembly, or original installation of the property described in subsection (d) and for piping or wiring to interconnect such property to the dwelling unit shall be taken into account for purposes of this section.
(2) Solar panels
No expenditure relating to a solar panel or other property installed as a roof (or portion thereof) shall fail to be treated as property described in paragraph (1) or (2) of subsection (d) solely because it constitutes a structural component of the structure on which it is installed.
(3) Swimming pools, etc., used as storage medium
Expenditures which are properly allocable to a swimming pool, hot tub, or any other energy storage medium which has a function other than the function of such storage shall not be taken into account for purposes of this section.
(4) Fuel cell expenditure limitations in case of joint occupancy
In the case of any dwelling unit with respect to which qualified fuel cell property expenditures are made and which is jointly occupied and used during any calendar year as a residence by two or more individuals, the following rules shall apply:
(A) Maximum expenditures for fuel cells
The maximum amount of such expenditures which may be taken into account under subsection (a) by all such individuals with respect to such dwelling unit during such calendar year shall be $1,667 in the case of each half kilowatt of capacity of qualified fuel cell property (as defined in section 48(c)(1)) with respect to which such expenditures relate.
(B) Allocation of expenditures
The expenditures allocated to any individual for the taxable year in which such calendar year ends shall be an amount equal to the lesser of—
(i) the amount of expenditures made by such individual with respect to such dwelling during such calendar year, or
(ii) the maximum amount of such expenditures set forth in subparagraph (A) multiplied by a fraction—
(I) the numerator of which is the amount of such expenditures with respect to such dwelling made by such individual during such calendar year, and
(II) the denominator of which is the total expenditures made by all such individuals with respect to such dwelling during such calendar year.
(5) Tenant-stockholder in cooperative housing corporation
In the case of an individual who is a tenant-stockholder (as defined in section 216) in a cooperative housing corporation (as defined in such section), such individual shall be treated as having made his tenant-stockholder's proportionate share (as defined in section 216(b)(3)) of any expenditures of such corporation.
(6) Condominiums
(A) In general
In the case of an individual who is a member of a condominium management association with respect to a condominium which the individual owns, such individual shall be treated as having made the individual's proportionate share of any expenditures of such association.
(B) Condominium management association
For purposes of this paragraph, the term "condominium management association" means an organization which meets the requirements of paragraph (1) of section 528(c) (other than subparagraph (E) thereof) with respect to a condominium project substantially all of the units of which are used as residences.
(7) Allocation in certain cases
If less than 80 percent of the use of an item is for nonbusiness purposes, only that portion of the expenditures for such item which is properly allocable to use for nonbusiness purposes shall be taken into account.
(8) When expenditure made; amount of expenditure
(A) In general
Except as provided in subparagraph (B), an expenditure with respect to an item shall be treated as made when the original installation of the item is completed.
(B) Expenditures part of building construction
In the case of an expenditure in connection with the construction or reconstruction of a structure, such expenditure shall be treated as made when the original use of the constructed or reconstructed structure by the taxpayer begins.
(f) Basis adjustments
For purposes of this subtitle, if a credit is allowed under this section for any expenditure with respect to any property, the increase in the basis of such property which would (but for this subsection) result from such expenditure shall be reduced by the amount of the credit so allowed.
(g) Applicable percentage
For purposes of subsection (a), the applicable percentage shall be—
(1) in the case of property placed in service after December 31, 2016, and before January 1, 2020, 30 percent,
(2) in the case of property placed in service after December 31, 2019, and before January 1, 2022, 26 percent,
(3) in the case of property placed in service after December 31, 2021, and before January 1, 2033, 30 percent,
(4) in the case of property placed in service after December 31, 2032, and before January 1, 2034, 26 percent, and
(5) in the case of property placed in service after December 31, 2033, and before January 1, 2035, 22 percent.
(h) Termination
The credit allowed under this section shall not apply to property placed in service after December 31, 2034.
(Added
Editorial Notes
Amendments
2022—
Subsec. (a)(6).
Subsec. (d)(3).
Subsec. (d)(6).
"(A)
"(i) which uses the burning of biomass fuel to heat a dwelling unit located in the United States and used as a residence by the taxpayer, or to heat water for use in such a dwelling unit, and
"(ii) which has a thermal efficiency rating of at least 75 percent (measured by the higher heating value of the fuel).
"(B)
Subsec. (g)(2).
Subsec. (g)(3) to (5).
Subsec. (h).
2020—Subsec. (a)(6).
Subsec. (d)(6).
Subsec. (g)(2).
Subsec. (g)(3).
Subsec. (h).
2018—Subsec. (a).
"(1) the applicable percentage of the qualified solar electric property expenditures made by the taxpayer during such year,
"(2) the applicable percentage of the qualified solar water heating property expenditures made by the taxpayer during such year,
"(3) 30 percent of the qualified fuel cell property expenditures made by the taxpayer during such year,
"(4) 30 percent of the qualified small wind energy property expenditures made by the taxpayer during such year, and
"(5) 30 percent of the qualified geothermal heat pump property expenditures made by the taxpayer during such year."
Subsec. (g).
Subsec. (h).
2015—Subsec. (a)(1), (2).
Subsec. (g).
Subsec. (h).
2013—Subsec. (c).
2009—Subsec. (b)(1).
Subsec. (e)(4).
Subsec. (e)(4)(A).
Subsec. (e)(4)(C).
Subsec. (e)(9).
2008—Subsec. (a)(4).
Subsec. (a)(5).
Subsec. (b)(1).
Subsec. (b)(1)(D).
Subsec. (b)(1)(E).
Subsec. (c).
Subsec. (d)(4).
Subsec. (d)(5).
Subsec. (e)(4)(A).
Subsec. (e)(4)(A)(iv).
Subsec. (e)(4)(A)(v).
Subsec. (g).
2006—Subsecs. (a)(1), (b)(1)(A).
Subsec. (d)(2).
Subsec. (e)(4)(A)(i).
Subsec. (g).
2005—Subsec. (b)(1).
Subsec. (c).
Subsec. (e)(4)(A), (B).
"(A) The amount of the credit allowable, under subsection (a) by reason of expenditures (as the case may be) made during such calendar year by any of such individuals with respect to such dwelling unit shall be determined by treating all of such individuals as 1 taxpayer whose taxable year is such calendar year.
"(B) There shall be allowable, with respect to such expenditures to each of such individuals, a credit under subsection (a) for the taxable year in which such calendar year ends in an amount which bears the same ratio to the amount determined under subparagraph (A) as the amount of such expenditures made by such individual during such calendar year bears to the aggregate of such expenditures made by all of such individuals during such calendar year."
Statutory Notes and Related Subsidiaries
Effective Date of 2022 Amendment
"(1)
"(2)
Effective Date of 2020 Amendment
Amendment by section 148(b) of
Effective Date of 2018 Amendment
Effective Date of 2015 Amendment
Effective Date of 2013 Amendment
Amendment by
Effective Date of 2009 Amendment
Amendment by section 1103(b)(2)(B) of
Effective Date of 2008 Amendment
Amendment by
Effective and Termination Dates of 2005 Amendment
Amendment by section 402(i)(3)(E) of
Amendments by
Effective Date
Section applicable to property placed in service after Dec. 31, 2005, in taxable years ending after such date, see section 1335(c) of
§25E. Previously-owned clean vehicles
(a) Allowance of credit
In the case of a qualified buyer who during a taxable year places in service a previously-owned clean vehicle, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the lesser of—
(1) $4,000, or
(2) the amount equal to 30 percent of the sale price with respect to such vehicle.
(b) Limitation based on modified adjusted gross income
(1) In general
No credit shall be allowed under subsection (a) for any taxable year if—
(A) the lesser of—
(i) the modified adjusted gross income of the taxpayer for such taxable year, or
(ii) the modified adjusted gross income of the taxpayer for the preceding taxable year, exceeds
(B) the threshold amount.
(2) Threshold amount
For purposes of paragraph (1)(B), the threshold amount shall be—
(A) in the case of a joint return or a surviving spouse (as defined in section 2(a)), $150,000,
(B) in the case of a head of household (as defined in section 2(b)), $112,500, and
(C) in the case of a taxpayer not described in subparagraph (A) or (B), $75,000.
(3) Modified adjusted gross income
For purposes of this subsection, the term "modified adjusted gross income" means adjusted gross income increased by any amount excluded from gross income under section 911, 931, or 933.
(c) Definitions
For purposes of this section—
(1) Previously-owned clean vehicle
The term "previously-owned clean vehicle" means, with respect to a taxpayer, a motor vehicle—
(A) the model year of which is at least 2 years earlier than the calendar year in which the taxpayer acquires such vehicle,
(B) the original use of which commences with a person other than the taxpayer,
(C) which is acquired by the taxpayer in a qualified sale, and
(D) which—
(i) meets the requirements of subparagraphs (C), (D), (E), (F), and (H) (except for clause (iv) thereof) of section 30D(d)(1), or
(ii) is a motor vehicle which—
(I) satisfies the requirements under subparagraphs (A) and (B) of section 30B(b)(3), and
(II) has a gross vehicle weight rating of less than 14,000 pounds.
(2) Qualified sale
The term "qualified sale" means a sale of a motor vehicle—
(A) by a dealer (as defined in section 30D(g)(8)),
(B) for a sale price which does not exceed $25,000, and
(C) which is the first transfer since the date of the enactment of this section to a qualified buyer other than the person with whom the original use of such vehicle commenced.
(3) Qualified buyer
The term "qualified buyer" means, with respect to a sale of a motor vehicle, a taxpayer—
(A) who is an individual,
(B) who purchases such vehicle for use and not for resale,
(C) with respect to whom no deduction is allowable with respect to another taxpayer under section 151, and
(D) who has not been allowed a credit under this section for any sale during the 3-year period ending on the date of the sale of such vehicle.
(4) Motor vehicle; capacity
The terms "motor vehicle" and "capacity" have the meaning given such terms in paragraphs (2) and (4) of section 30D(d), respectively.
(d) VIN number requirement
No credit shall be allowed under subsection (a) with respect to any vehicle unless the taxpayer includes the vehicle identification number of such vehicle on the return of tax for the taxable year.
(e) Application of certain rules
For purposes of this section, rules similar to the rules of section 30D(f) (without regard to paragraph (10) or (11) thereof) shall apply for purposes of this section.
(f) Transfer of credit
Rules similar to the rules of section 30D(g) shall apply.
(g) Termination
No credit shall be allowed under this section with respect to any vehicle acquired after December 31, 2032.
(Added and amended
Editorial Notes
References in Text
The date of the enactment of this section, referred to in subsec. (c)(2)(C), is the date of enactment of
Amendments
2022—Subsecs. (f), (g).
Statutory Notes and Related Subsidiaries
Effective Date
"(1)
"(2)
§26. Limitation based on tax liability; definition of tax liability
(a) Limitation based on amount of tax
The aggregate amount of credits allowed by this subpart for the taxable year shall not exceed the sum of—
(1) the taxpayer's regular tax liability for the taxable year reduced by the foreign tax credit allowable under section 27, and
(2) the tax imposed by section 55(a) for the taxable year.
(b) Regular tax liability
For purposes of this part—
(1) In general
The term "regular tax liability" means the tax imposed by this chapter for the taxable year.
(2) Exception for certain taxes
For purposes of paragraph (1), any tax imposed by any of the following provisions shall not be treated as tax imposed by this chapter:
(A) section 55 (relating to minimum tax),
(B) section 59A (relating to base erosion and anti-abuse tax),
(C) subsection (m)(5)(B), (q), (t), or (v) of section 72 (relating to additional taxes on certain distributions),
(D) section 143(m) (relating to recapture of proration of Federal subsidy from use of mortgage bonds and mortgage credit certificates),
(E) section 530(d)(4) (relating to additional tax on certain distributions from Coverdell education savings accounts),
(F) section 531 (relating to accumulated earnings tax),
(G) section 541 (relating to personal holding company tax),
(H) section 1351(d)(1) (relating to recoveries of foreign expropriation losses),
(I) section 1374 (relating to tax on certain built-in gains of S corporations),
(J) section 1375 (relating to tax imposed when passive investment income of corporation having subchapter C earnings and profits exceeds 25 percent of gross receipts),
(K) subparagraph (A) of section 7518(g)(6) (relating to nonqualified withdrawals from capital construction funds taxed at highest marginal rate),
(L) sections 871(a) and 881 (relating to certain income of nonresident aliens and foreign corporations),
(M) section 860E(e) (relating to taxes with respect to certain residual interests),
(N) section 884 (relating to branch profits tax),
(O) sections 453(l)(3) and 453A(c) (relating to interest on certain deferred tax liabilities),
[(P) Repealed.
(Q) section 220(f)(4) (relating to additional tax on Archer MSA distributions not used for qualified medical expenses),
(R) section 138(c)(2) (relating to penalty for distributions from Medicare Advantage MSA not used for qualified medical expenses if minimum balance not maintained),
(S) sections 106(e)(3)(A)(ii), 223(b)(8)(B)(i)(II), and 408(d)(9)(D)(i)(II) (relating to certain failures to maintain high deductible health plan coverage),
(T) section 170(o)(3)(B) (relating to recapture of certain deductions for fractional gifts),
(U) section 223(f)(4) (relating to additional tax on health savings account distributions not used for qualified medical expenses),
(V) subsections (a)(1)(B)(i) and (b)(4)(A) of section 409A (relating to interest and additional tax with respect to certain deferred compensation),
(W) section 36(f) (relating to recapture of homebuyer credit),
(X) section 457A(c)(1)(B) (relating to determinability of amounts of compensation),
(Y) section 529A(c)(3)(A) (relating to additional tax on ABLE account distributions not used for qualified disability expenses), and
(Z) section 24(j)(2) (relating to excess advance payments).
(c) Tentative minimum tax
For purposes of this part, the term "tentative minimum tax" means the amount determined under section 55(b)(1).
(Added §25, renumbered §26,
Editorial Notes
Amendments
2021—Subsec. (b)(2)(Z).
2018—Subsec. (a)(1).
Subsec. (b)(2)(P).
2017—Subsec. (b)(2)(B).
2014—Subsec. (b)(2)(B).
Subsec. (b)(2)(Y).
2013—Subsec. (a).
2010—Subsec. (a)(1).
Subsec. (a)(2).
2009—Subsec. (a)(1).
Subsec. (a)(2).
2008—Subsec. (a)(1).
Subsec. (a)(2).
Subsec. (b)(2)(W).
Subsec. (b)(2)(X).
2007—Subsec. (a)(2).
Subsec. (b)(2)(S) to (V).
2006—Subsec. (a)(2).
2005—Subsec. (b)(2)(E).
Subsec. (b)(2)(T).
2004—Subsec. (a)(2).
Subsec. (b)(2)(R).
Subsec. (b)(2)(S).
2002—Subsec. (a)(1).
Subsec. (a)(2).
Subsec. (b)(2)(P), (Q).
Subsec. (b)(2)(R).
2001—Subsec. (a)(1).
Subsec. (b)(2)(E).
2000—Subsec. (b)(2)(Q).
1999—Subsec. (a).
"(1) the taxpayer's regular tax liability for the taxable year, over
"(2) the tentative minimum tax for the taxable year (determined without regard to the alternative minimum tax foreign tax credit).
For purposes of paragraph (2), the taxpayer's tentative minimum tax for any taxable year beginning during 1998 shall be treated as being zero."
1998—Subsec. (a).
1997—Subsec. (b)(2)(E) to (O).
Subsec. (b)(2)(P).
Subsec. (b)(2)(Q).
1996—Subsec. (b)(2)(O).
1989—Subsec. (b)(2)(C), (D).
"(C) subsection (m)(5)(B) (q), or (v) of section 72 (relating to additional tax on certain distributions),
"(D) section 72(t) (relating to 10-percent additional tax on early distributions from qualified retirement plans),".
Subsec. (b)(2)(K).
Subsec. (b)(2)(L), (M).
"(L) section 860E(e) (relating to taxes with respect to certain residual interests), and
"(L) section 884 (relating to branch profits tax), and
"(M) section 143(m) (relating to recapture of portion of federal subsidy from use of mortgage bonds and mortgage credit certificates)."
Subsec. (b)(2)(N).
1988—Subsec. (b)(2)(C).
Subsec. (b)(2)(D).
Subsec. (b)(2)(K).
Subsec. (b)(2)(L).
Subsec. (b)(2)(M).
1986—Subsec. (a).
Subsec. (b).
Subsec. (b)(1).
Subsec. (b)(2).
Subsec. (c).
Statutory Notes and Related Subsidiaries
Effective Date of 2021 Amendment
Amendment by
Effective Date of 2017 Amendment
Effective Date of 2014 Amendment
Amendment by section 221(a)(12)(B) of
Amendment by section 102(e)(1) of
Effective Date of 2013 Amendment
Amendment by
Effective and Termination Dates of 2010 Amendment
Amendment by
Amendment by
Effective Date of 2009 Amendment
Amendment by section 1004(b)(3) of
Amendment by section 1142(b)(1)(D) of
Amendment by section 1144(b)(1)(D) of
Effective Date of 2008 Amendment
Amendment by section 106(e)(2)(D) of
Amendment by section 205(d)(1)(D) of
Amendment by section 801(b) of
Effective Date of 2007 Amendment
Effective Date of 2006 Amendment
Effective Date of 2005 Amendment
Effective Date of 2004 Amendment
Effective Date of 2002 Amendment
Effective Date of 2001 Amendment
Amendment by
Amendment by
Amendment by section 201(b)(2)(D) of
Amendment by section 202(f)(2)(C) of
Amendment by section 618(b)(2)(C) of
Effective Date of 1999 Amendment
Amendment by
Effective Date of 1998 Amendment
Amendment by
Effective Date of 1997 Amendment
Effective Date of 1996 Amendment
Effective Date of 1989 Amendment
Amendment by section 7811(c)(1), (2) of
Effective Date of 1988 Amendment
Amendment by section 1006(t)(16)(C) of
Amendment by sections 1007(g)(1), 1011A(c)(10), and 1012(q)(8) of
Amendment by section 4005(g)(4) of
Amendment by section 5012(b)(2) of
Effective Date of 1986 Amendment
Amendment by section 261(c) of
Amendment by section 632(c)(1) of
Amendment by section 632(c)(1) of
Amendment by section 701(c)(1) of
Effective Date
Section applicable to taxable years beginning after Dec. 31, 1983, and to carrybacks from such years, see section 475(a) of
Savings Provision
For provisions that nothing in amendment by
Applicability of Certain Amendments by Public Law 99–514 in Relation to Treaty Obligations of United States
For applicability of amendment by section 701(c)(1) of
Treatment of Tax Imposed Under Former Section 409(c)
Subpart B—Other Credits
Editorial Notes
Amendments
2022—
2018—
2014—
2009—
2008—
2005—
1997—
1996—
1992—
1986—
1984—
§27. Taxes of foreign countries and possessions of the United States
The amount of taxes imposed by foreign countries and possessions of the United States shall be allowed as a credit against the tax imposed by this chapter to the extent provided in section 901 1
(Aug. 16, 1954, ch. 736,
Editorial Notes
Amendments
2018—
1984—
1976—
Statutory Notes and Related Subsidiaries
Effective Date of 1976 Amendment
"(1) Except as provided by paragraph (2), the amendments made by this section [enacting
"(2) The amendment made by subsection (d)(2) [amending
Savings Provision
For provisions that nothing in amendment by
1 So in original. Probably should be followed by a period.
[§28. Renumbered §45C]
[§29. Renumbered §45K]
[§30. Repealed. Pub. L. 113–295, div. A, title II, §221(a)(2)(A), Dec. 19, 2014, 128 Stat. 4037 ]
Section, added
A prior section 30 was renumbered
Statutory Notes and Related Subsidiaries
Effective Date of Repeal
Repeal effective Dec. 19, 2014, subject to a savings provision, see section 221(b) of
[§30A. Repealed. Pub. L. 115–141, div. U, title IV, §401(d)(1)(B), Mar. 23, 2018, 132 Stat. 1206 ]
Section, added
Statutory Notes and Related Subsidiaries
Savings Provision
For provisions that nothing in repeal by
American Samoa Economic Development Credit
"(a)
"(1) in the case of a taxable year beginning before January 1, 2012, such corporation—
"(A) is an existing credit claimant with respect to American Samoa, and
"(B) elected the application of [former] section 936 of the Internal Revenue Code of 1986 for its last taxable year beginning before January 1, 2006, and
"(2) in the case of a taxable year beginning after December 31, 2011, such corporation meets the requirements of subsection (e).
"(b)
"(1)
"(2)
"(3)
"(c)
"(d)
"(1) in the case of a corporation that meets the requirements of subparagraphs (A) and (B) of subsection (a)(1), to the first 16 taxable years of such corporation which begin after December 31, 2006, and before January 1, 2022, and
"(2) in the case of a corporation that does not meet the requirements of subparagraphs (A) and (B) of subsection (a)(1), to the first 10 taxable years of such corporation which begin after December 31, 2011, and before January 1, 2022.
In the case of a corporation described in subsection (a)(2), the Internal Revenue Code of 1986 shall be applied and administered without regard to the amendments made by section 401(d)(1) of the Tax Technical Corrections Act of 2018 [div. U of
"(e)
[
[
[
[
[
[
[
[
§30B. Alternative motor vehicle credit
(a) Allowance of credit
There shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the sum of—
(1) the new qualified fuel cell motor vehicle credit determined under subsection (b),
(2) the new advanced lean burn technology motor vehicle credit determined under subsection (c),
(3) the new qualified hybrid motor vehicle credit determined under subsection (d),
(4) the new qualified alternative fuel motor vehicle credit determined under subsection (e), and
(5) the plug-in conversion credit determined under subsection (i).
(b) New qualified fuel cell motor vehicle credit
(1) In general
For purposes of subsection (a), the new qualified fuel cell motor vehicle credit determined under this subsection with respect to a new qualified fuel cell motor vehicle placed in service by the taxpayer during the taxable year is—
(A) $8,000 ($4,000 in the case of a vehicle placed in service after December 31, 2009), if such vehicle has a gross vehicle weight rating of not more than 8,500 pounds,
(B) $10,000, if such vehicle has a gross vehicle weight rating of more than 8,500 pounds but not more than 14,000 pounds,
(C) $20,000, if such vehicle has a gross vehicle weight rating of more than 14,000 pounds but not more than 26,000 pounds, and
(D) $40,000, if such vehicle has a gross vehicle weight rating of more than 26,000 pounds.
(2) Increase for fuel efficiency
(A) In general
The amount determined under paragraph (1)(A) with respect to a new qualified fuel cell motor vehicle which is a passenger automobile or light truck shall be increased by—
(i) $1,000, if such vehicle achieves at least 150 percent but less than 175 percent of the 2002 model year city fuel economy,
(ii) $1,500, if such vehicle achieves at least 175 percent but less than 200 percent of the 2002 model year city fuel economy,
(iii) $2,000, if such vehicle achieves at least 200 percent but less than 225 percent of the 2002 model year city fuel economy,
(iv) $2,500, if such vehicle achieves at least 225 percent but less than 250 percent of the 2002 model year city fuel economy,
(v) $3,000, if such vehicle achieves at least 250 percent but less than 275 percent of the 2002 model year city fuel economy,
(vi) $3,500, if such vehicle achieves at least 275 percent but less than 300 percent of the 2002 model year city fuel economy, and
(vii) $4,000, if such vehicle achieves at least 300 percent of the 2002 model year city fuel economy.
(B) 2002 model year city fuel economy
For purposes of subparagraph (A), the 2002 model year city fuel economy with respect to a vehicle shall be determined in accordance with the following tables:
(i) In the case of a passenger automobile:
| If vehicle inertia weight class is: | The 2002 model year city fuel economy is: |
|---|---|
| 1,500 or 1,750 lbs | 45.2 mpg |
| 2,000 lbs | 39.6 mpg |
| 2,250 lbs | 35.2 mpg |
| 2,500 lbs | 31.7 mpg |
| 2,750 lbs | 28.8 mpg |
| 3,000 lbs | 26.4 mpg |
| 3,500 lbs | 22.6 mpg |
| 4,000 lbs | 19.8 mpg |
| 4,500 lbs | 17.6 mpg |
| 5,000 lbs | 15.9 mpg |
| 5,500 lbs | 14.4 mpg |
| 6,000 lbs | 13.2 mpg |
| 6,500 lbs | 12.2 mpg |
| 7,000 to 8,500 lbs | 11.3 mpg. |
(ii) In the case of a light truck:
| If vehicle inertia weight class is: | The 2002 model year city fuel economy is: |
|---|---|
| 1,500 or 1,750 lbs | 39.4 mpg |
| 2,000 lbs | 35.2 mpg |
| 2,250 lbs | 31.8 mpg |
| 2,500 lbs | 29.0 mpg |
| 2,750 lbs | 26.8 mpg |
| 3,000 lbs | 24.9 mpg |
| 3,500 lbs | 21.8 mpg |
| 4,000 lbs | 19.4 mpg |
| 4,500 lbs | 17.6 mpg |
| 5,000 lbs | 16.1 mpg |
| 5,500 lbs | 14.8 mpg |
| 6,000 lbs | 13.7 mpg |
| 6,500 lbs | 12.8 mpg |
| 7,000 to 8,500 lbs | 12.1 mpg. |
(C) Vehicle inertia weight class
For purposes of subparagraph (B), the term "vehicle inertia weight class" has the same meaning as when defined in regulations prescribed by the Administrator of the Environmental Protection Agency for purposes of the administration of title II of the Clean Air Act (
(3) New qualified fuel cell motor vehicle
For purposes of this subsection, the term "new qualified fuel cell motor vehicle" means a motor vehicle—
(A) which is propelled by power derived from 1 or more cells which convert chemical energy directly into electricity by combining oxygen with hydrogen fuel which is stored on board the vehicle in any form and may or may not require reformation prior to use,
(B) which, in the case of a passenger automobile or light truck, has received on or after the date of the enactment of this section a certificate that such vehicle meets or exceeds the Bin 5 Tier II emission level established in regulations prescribed by the Administrator of the Environmental Protection Agency under section 202(i) of the Clean Air Act for that make and model year vehicle,
(C) the original use of which commences with the taxpayer,
(D) which is acquired for use or lease by the taxpayer and not for resale, and
(E) which is made by a manufacturer.
(c) New advanced lean burn technology motor vehicle credit
(1) In general
For purposes of subsection (a), the new advanced lean burn technology motor vehicle credit determined under this subsection for the taxable year is the credit amount determined under paragraph (2) with respect to a new advanced lean burn technology motor vehicle placed in service by the taxpayer during the taxable year.
(2) Credit amount
(A) Fuel economy
(i) In general
The credit amount determined under this paragraph shall be determined in accordance with the following table:
| In the case of a vehicle which achieves a fuel economy (expressed as a percentage of the 2002 model year city fuel economy) of— | The credit amount is— |
|---|---|
| At least 125 percent but less than 150 percent | $400 |
| At least 150 percent but less than 175 percent | $800 |
| At least 175 percent but less than 200 percent | $1,200 |
| At least 200 percent but less than 225 percent | $1,600 |
| At least 225 percent but less than 250 percent | $2,000 |
| At least 250 percent | $2,400. |
(ii) 2002 model year city fuel economy
For purposes of clause (i), the 2002 model year city fuel economy with respect to a vehicle shall be determined on a gasoline gallon equivalent basis as determined by the Administrator of the Environmental Protection Agency using the tables provided in subsection (b)(2)(B) with respect to such vehicle.
(B) Conservation credit
The amount determined under subparagraph (A) with respect to a new advanced lean burn technology motor vehicle shall be increased by the conservation credit amount determined in accordance with the following table:
| In the case of a vehicle which achieves a lifetime fuel savings (expressed in gallons of gasoline) of— | The conservation credit amount is— |
|---|---|
| At least 1,200 but less than 1,800 | $250 |
| At least 1,800 but less than 2,400 | $500 |
| At least 2,400 but less than 3,000 | $750 |
| At least 3,000 | $1,000. |
(3) New advanced lean burn technology motor vehicle
For purposes of this subsection, the term "new advanced lean burn technology motor vehicle" means a passenger automobile or a light truck—
(A) with an internal combustion engine which—
(i) is designed to operate primarily using more air than is necessary for complete combustion of the fuel,
(ii) incorporates direct injection,
(iii) achieves at least 125 percent of the 2002 model year city fuel economy,
(iv) for 2004 and later model vehicles, has received a certificate that such vehicle meets or exceeds—
(I) in the case of a vehicle having a gross vehicle weight rating of 6,000 pounds or less, the Bin 5 Tier II emission standard established in regulations prescribed by the Administrator of the Environmental Protection Agency under section 202(i) of the Clean Air Act for that make and model year vehicle, and
(II) in the case of a vehicle having a gross vehicle weight rating of more than 6,000 pounds but not more than 8,500 pounds, the Bin 8 Tier II emission standard which is so established,
(B) the original use of which commences with the taxpayer,
(C) which is acquired for use or lease by the taxpayer and not for resale, and
(D) which is made by a manufacturer.
(4) Lifetime fuel savings
For purposes of this subsection, the term "lifetime fuel savings" means, in the case of any new advanced lean burn technology motor vehicle, an amount equal to the excess (if any) of—
(A) 120,000 divided by the 2002 model year city fuel economy for the vehicle inertia weight class, over
(B) 120,000 divided by the city fuel economy for such vehicle.
(d) New qualified hybrid motor vehicle credit
(1) In general
For purposes of subsection (a), the new qualified hybrid motor vehicle credit determined under this subsection for the taxable year is the credit amount determined under paragraph (2) with respect to a new qualified hybrid motor vehicle placed in service by the taxpayer during the taxable year.
(2) Credit amount
(A) Credit amount for passenger automobiles and light trucks
In the case of a new qualified hybrid motor vehicle which is a passenger automobile or light truck and which has a gross vehicle weight rating of not more than 8,500 pounds, the amount determined under this paragraph is the sum of the amounts determined under clauses (i) and (ii).
(i) Fuel economy
The amount determined under this clause is the amount which would be determined under subsection (c)(2)(A) if such vehicle were a vehicle referred to in such subsection.
(ii) Conservation credit
The amount determined under this clause is the amount which would be determined under subsection (c)(2)(B) if such vehicle were a vehicle referred to in such subsection.
(B) Credit amount for other motor vehicles
(i) In general
In the case of any new qualified hybrid motor vehicle to which subparagraph (A) does not apply, the amount determined under this paragraph is the amount equal to the applicable percentage of the qualified incremental hybrid cost of the vehicle as certified under clause (v).
(ii) Applicable percentage
For purposes of clause (i), the applicable percentage is—
(I) 20 percent if the vehicle achieves an increase in city fuel economy relative to a comparable vehicle of at least 30 percent but less than 40 percent,
(II) 30 percent if the vehicle achieves such an increase of at least 40 percent but less than 50 percent, and
(III) 40 percent if the vehicle achieves such an increase of at least 50 percent.
(iii) Qualified incremental hybrid cost
For purposes of this subparagraph, the qualified incremental hybrid cost of any vehicle is equal to the amount of the excess of the manufacturer's suggested retail price for such vehicle over such price for a comparable vehicle, to the extent such amount does not exceed—
(I) $7,500, if such vehicle has a gross vehicle weight rating of not more than 14,000 pounds,
(II) $15,000, if such vehicle has a gross vehicle weight rating of more than 14,000 pounds but not more than 26,000 pounds, and
(III) $30,000, if such vehicle has a gross vehicle weight rating of more than 26,000 pounds.
(iv) Comparable vehicle
For purposes of this subparagraph, the term "comparable vehicle" means, with respect to any new qualified hybrid motor vehicle, any vehicle which is powered solely by a gasoline or diesel internal combustion engine and which is comparable in weight, size, and use to such vehicle.
(v) Certification
A certification described in clause (i) shall be made by the manufacturer and shall be determined in accordance with guidance prescribed by the Secretary. Such guidance shall specify procedures and methods for calculating fuel economy savings and incremental hybrid costs.
(3) New qualified hybrid motor vehicle
For purposes of this subsection—
(A) In general
The term "new qualified hybrid motor vehicle" means a motor vehicle—
(i) which draws propulsion energy from onboard sources of stored energy which are both—
(I) an internal combustion or heat engine using consumable fuel, and
(II) a rechargeable energy storage system,
(ii) which, in the case of a vehicle to which paragraph (2)(A) applies, has received a certificate of conformity under the Clean Air Act and meets or exceeds the equivalent qualifying California low emission vehicle standard under section 243(e)(2) of the Clean Air Act for that make and model year, and
(I) in the case of a vehicle having a gross vehicle weight rating of 6,000 pounds or less, the Bin 5 Tier II emission standard established in regulations prescribed by the Administrator of the Environmental Protection Agency under section 202(i) of the Clean Air Act for that make and model year vehicle, and
(II) in the case of a vehicle having a gross vehicle weight rating of more than 6,000 pounds but not more than 8,500 pounds, the Bin 8 Tier II emission standard which is so established,
(iii) which has a maximum available power of at least—
(I) 4 percent in the case of a vehicle to which paragraph (2)(A) applies,
(II) 10 percent in the case of a vehicle which has a gross vehicle weight rating of more than 8,500 pounds and not more than 14,000 pounds, and
(III) 15 percent in the case of a vehicle in excess of 14,000 pounds,
(iv) which, in the case of a vehicle to which paragraph (2)(B) applies, has an internal combustion or heat engine which has received a certificate of conformity under the Clean Air Act as meeting the emission standards set in the regulations prescribed by the Administrator of the Environmental Protection Agency for 2004 through 2007 model year diesel heavy duty engines or ottocycle heavy duty engines, as applicable,
(v) the original use of which commences with the taxpayer,
(vi) which is acquired for use or lease by the taxpayer and not for resale, and
(vii) which is made by a manufacturer.
Such term shall not include any vehicle which is not a passenger automobile or light truck if such vehicle has a gross vehicle weight rating of less than 8,500 pounds.
(B) Consumable fuel
For purposes of subparagraph (A)(i)(I), the term "consumable fuel" means any solid, liquid, or gaseous matter which releases energy when consumed by an auxiliary power unit.
(C) Maximum available power
(i) Certain passenger automobiles and light trucks
In the case of a vehicle to which paragraph (2)(A) applies, the term "maximum available power" means the maximum power available from the rechargeable energy storage system, during a standard 10 second pulse power or equivalent test, divided by such maximum power and the SAE net power of the heat engine.
(ii) Other motor vehicles
In the case of a vehicle to which paragraph (2)(B) applies, the term "maximum available power" means the maximum power available from the rechargeable energy storage system, during a standard 10 second pulse power or equivalent test, divided by the vehicle's total traction power. For purposes of the preceding sentence, the term "total traction power" means the sum of the peak power from the rechargeable energy storage system and the heat engine peak power of the vehicle, except that if such storage system is the sole means by which the vehicle can be driven, the total traction power is the peak power of such storage system.
(D) Exclusion of plug-in vehicles
Any vehicle with respect to which a credit is allowable under section 30D (determined without regard to subsection (c) thereof) shall not be taken into account under this section.
(e) New qualified alternative fuel motor vehicle credit
(1) Allowance of credit
Except as provided in paragraph (5), the new qualified alternative fuel motor vehicle credit determined under this subsection is an amount equal to the applicable percentage of the incremental cost of any new qualified alternative fuel motor vehicle placed in service by the taxpayer during the taxable year.
(2) Applicable percentage
For purposes of paragraph (1), the applicable percentage with respect to any new qualified alternative fuel motor vehicle is—
(A) 50 percent, plus
(B) 30 percent, if such vehicle—
(i) has received a certificate of conformity under the Clean Air Act and meets or exceeds the most stringent standard available for certification under the Clean Air Act for that make and model year vehicle (other than a zero emission standard), or
(ii) has received an order certifying the vehicle as meeting the same requirements as vehicles which may be sold or leased in California and meets or exceeds the most stringent standard available for certification under the State laws of California (enacted in accordance with a waiver granted under section 209(b) of the Clean Air Act) for that make and model year vehicle (other than a zero emission standard).
For purposes of the preceding sentence, in the case of any new qualified alternative fuel motor vehicle which weighs more than 14,000 pounds gross vehicle weight rating, the most stringent standard available shall be such standard available for certification on the date of the enactment of the Energy Tax Incentives Act of 2005.
(3) Incremental cost
For purposes of this subsection, the incremental cost of any new qualified alternative fuel motor vehicle is equal to the amount of the excess of the manufacturer's suggested retail price for such vehicle over such price for a gasoline or diesel fuel motor vehicle of the same model, to the extent such amount does not exceed—
(A) $5,000, if such vehicle has a gross vehicle weight rating of not more than 8,500 pounds,
(B) $10,000, if such vehicle has a gross vehicle weight rating of more than 8,500 pounds but not more than 14,000 pounds,
(C) $25,000, if such vehicle has a gross vehicle weight rating of more than 14,000 pounds but not more than 26,000 pounds, and
(D) $40,000, if such vehicle has a gross vehicle weight rating of more than 26,000 pounds.
(4) New qualified alternative fuel motor vehicle
For purposes of this subsection—
(A) In general
The term "new qualified alternative fuel motor vehicle" means any motor vehicle—
(i) which is only capable of operating on an alternative fuel,
(ii) the original use of which commences with the taxpayer,
(iii) which is acquired by the taxpayer for use or lease, but not for resale, and
(iv) which is made by a manufacturer.
(B) Alternative fuel
The term "alternative fuel" means compressed natural gas, liquefied natural gas, liquefied petroleum gas, hydrogen, and any liquid at least 85 percent of the volume of which consists of methanol.
(5) Credit for mixed-fuel vehicles
(A) In general
In the case of a mixed-fuel vehicle placed in service by the taxpayer during the taxable year, the credit determined under this subsection is an amount equal to—
(i) in the case of a 75/25 mixed-fuel vehicle, 70 percent of the credit which would have been allowed under this subsection if such vehicle was a qualified alternative fuel motor vehicle, and
(ii) in the case of a 90/10 mixed-fuel vehicle, 90 percent of the credit which would have been allowed under this subsection if such vehicle was a qualified alternative fuel motor vehicle.
(B) Mixed-fuel vehicle
For purposes of this subsection, the term "mixed-fuel vehicle" means any motor vehicle described in subparagraph (C) or (D) of paragraph (3), which—
(i) is certified by the manufacturer as being able to perform efficiently in normal operation on a combination of an alternative fuel and a petroleum-based fuel,
(ii) either—
(I) has received a certificate of conformity under the Clean Air Act, or
(II) has received an order certifying the vehicle as meeting the same requirements as vehicles which may be sold or leased in California and meets or exceeds the low emission vehicle standard under section 88.105–94 of title 40, Code of Federal Regulations, for that make and model year vehicle,
(iii) the original use of which commences with the taxpayer,
(iv) which is acquired by the taxpayer for use or lease, but not for resale, and
(v) which is made by a manufacturer.
(C) 75/25 mixed-fuel vehicle
For purposes of this subsection, the term "75/25 mixed-fuel vehicle" means a mixed-fuel vehicle which operates using at least 75 percent alternative fuel and not more than 25 percent petroleum-based fuel.
(D) 90/10 mixed-fuel vehicle
For purposes of this subsection, the term "90/10 mixed-fuel vehicle" means a mixed-fuel vehicle which operates using at least 90 percent alternative fuel and not more than 10 percent petroleum-based fuel.
(f) Limitation on number of new qualified hybrid and advanced lean-burn technology vehicles eligible for credit
(1) In general
In the case of a qualified vehicle sold during the phaseout period, only the applicable percentage of the credit otherwise allowable under subsection (c) or (d) shall be allowed.
(2) Phaseout period
For purposes of this subsection, the phaseout period is the period beginning with the second calendar quarter following the calendar quarter which includes the first date on which the number of qualified vehicles manufactured by the manufacturer of the vehicle referred to in paragraph (1) sold for use in the United States after December 31, 2005, is at least 60,000.
(3) Applicable percentage
For purposes of paragraph (1), the applicable percentage is—
(A) 50 percent for the first 2 calendar quarters of the phaseout period,
(B) 25 percent for the 3d and 4th calendar quarters of the phaseout period, and
(C) 0 percent for each calendar quarter thereafter.
(4) Controlled groups
(A) In general
For purposes of this subsection, all persons treated as a single employer under subsection (a) or (b) of section 52 or subsection (m) or (o) of section 414 shall be treated as a single manufacturer.
(B) Inclusion of foreign corporations
For purposes of subparagraph (A), in applying subsections (a) and (b) of section 52 to this section, section 1563 shall be applied without regard to subsection (b)(2)(C) thereof.
(5) Qualified vehicle
For purposes of this subsection, the term "qualified vehicle" means any new qualified hybrid motor vehicle (described in subsection (d)(2)(A)) and any new advanced lean burn technology motor vehicle.
(g) Application with other credits
(1) Business credit treated as part of general business credit
So much of the credit which would be allowed under subsection (a) for any taxable year (determined without regard to this subsection) that is attributable to property of a character subject to an allowance for depreciation shall be treated as a credit listed in section 38(b) for such taxable year (and not allowed under subsection (a)).
(2) Personal credit
For purposes of this title, the credit allowed under subsection (a) for any taxable year (determined after application of paragraph (1)) shall be treated as a credit allowable under subpart A for such taxable year.
(h) Other definitions and special rules
For purposes of this section—
(1) Motor vehicle
The term "motor vehicle" means any vehicle which is manufactured primarily for use on public streets, roads, and highways (not including a vehicle operated exclusively on a rail or rails) and which has at least 4 wheels.
(2) City fuel economy
The city fuel economy with respect to any vehicle shall be measured in a manner which is substantially similar to the manner city fuel economy is measured in accordance with procedures under part 600 of subchapter Q of chapter I of title 40, Code of Federal Regulations, as in effect on the date of the enactment of this section.
(3) Other terms
The terms "automobile", "passenger automobile", "medium duty passenger vehicle", "light truck", and "manufacturer" have the meanings given such terms in regulations prescribed by the Administrator of the Environmental Protection Agency for purposes of the administration of title II of the Clean Air Act (
(4) Reduction in basis
For purposes of this subtitle, the basis of any property for which a credit is allowable under subsection (a) shall be reduced by the amount of such credit so allowed (determined without regard to subsection (g)).
(5) No double benefit
The amount of any deduction or other credit allowable under this chapter—
(A) for any incremental cost taken into account in computing the amount of the credit determined under subsection (e) shall be reduced by the amount of such credit attributable to such cost, and
(B) with respect to a vehicle described under subsection (b) or (c), shall be reduced by the amount of credit allowed under subsection (a) for such vehicle for the taxable year (determined without regard to subsection (g)).
(6) Property used by tax-exempt entity
In the case of a vehicle whose use is described in paragraph (3) or (4) of section 50(b) and which is not subject to a lease, the person who sold such vehicle to the person or entity using such vehicle shall be treated as the taxpayer that placed such vehicle in service, but only if such person clearly discloses to such person or entity in a document the amount of any credit allowable under subsection (a) with respect to such vehicle (determined without regard to subsection (g)). For purposes of subsection (g), property to which this paragraph applies shall be treated as of a character subject to an allowance for depreciation.
(7) Property used outside United States, etc., not qualified
No credit shall be allowable under subsection (a) with respect to any property referred to in section 50(b)(1) or with respect to the portion of the cost of any property taken into account under section 179.
(8) Recapture
The Secretary shall, by regulations, provide for recapturing the benefit of any credit allowable under subsection (a) with respect to any property which ceases to be property eligible for such credit (including recapture in the case of a lease period of less than the economic life of a vehicle).
(9) Election to not take credit
No credit shall be allowed under subsection (a) for any vehicle if the taxpayer elects to not have this section apply to such vehicle.
(10) Interaction with air quality and motor vehicle safety standards
Unless otherwise provided in this section, a motor vehicle shall not be considered eligible for a credit under this section unless such vehicle is in compliance with—
(A) the applicable provisions of the Clean Air Act for the applicable make and model year of the vehicle (or applicable air quality provisions of State law in the case of a State which has adopted such provision under a waiver under section 209(b) of the Clean Air Act), and
(B) the motor vehicle safety provisions of
[(i) Repealed. Pub. L. 117–169, title I, §13401(i)(2)(B), Aug. 16, 2022, 136 Stat. 1961 ]
(j) Regulations
(1) In general
Except as provided in paragraph (2), the Secretary shall promulgate such regulations as necessary to carry out the provisions of this section.
(2) Coordination in prescription of certain regulations
The Secretary of the Treasury, in coordination with the Secretary of Transportation and the Administrator of the Environmental Protection Agency, shall prescribe such regulations as necessary to determine whether a motor vehicle meets the requirements to be eligible for a credit under this section.
(k) Termination
This section shall not apply to any property purchased after—
(1) in the case of a new qualified fuel cell motor vehicle (as described in subsection (b)), December 31, 2021,
(2) in the case of a new advanced lean burn technology motor vehicle (as described in subsection (c)) or a new qualified hybrid motor vehicle (as described in subsection (d)(2)(A)), December 31, 2010,
(3) in the case of a new qualified hybrid motor vehicle (as described in subsection (d)(2)(B)), December 31, 2009, and
(4) in the case of a new qualified alternative fuel vehicle (as described in subsection (e)), December 31, 2010.
(Added
Editorial Notes
References in Text
The Clean Air Act, referred to in text, is act July 14, 1955, ch. 360,
The date of the enactment of this section, referred to in subsecs. (b)(3)(B) and (h)(2), is the date of enactment of
The date of the enactment of the Energy Tax Incentives Act of 2005, referred to in subsec. (e)(2), is the date of enactment of title XIII of
Amendments
2022—Subsec. (h)(8).
Subsec. (i).
2020—Subsec. (k)(1).
2019—Subsec. (k)(1).
2018—Subsec. (k)(1).
2015—Subsec. (k)(1).
2014—Subsec. (h)(5)(B).
Subsec. (h)(8).
2013—Subsec. (g)(2).
2010—Subsec. (g)(2)(B)(ii).
2009—Subsec. (a)(5).
Subsec. (d)(3)(D).
Subsec. (g)(2).
"(A) the regular tax liability (as defined in section 26(b)) reduced by the sum of the credits allowable under subpart A and sections 27 and 30, over
"(B) the tentative minimum tax for the taxable year."
Subsec. (h)(1).
Subsec. (h)(8).
Subsecs. (i) to (k).
2008—Subsec. (d)(3)(D).
2005—Subsec. (g)(2)(A).
Subsec. (h)(6).
Statutory Notes and Related Subsidiaries
Effective Date of 2022 Amendment
Amendment by
Effective Date of 2020 Amendment
Effective Date of 2019 Amendment
Effective Date of 2018 Amendment
Effective Date of 2015 Amendment
Effective Date of 2014 Amendment
Effective Date of 2013 Amendment
Amendment by
Effective and Termination Dates of 2010 Amendment
Amendment by
Amendment by
Effective Date of 2009 Amendment
Amendment by section 1142(b)(2) of
Amendment by section 1144(a) of
Effective Date of 2008 Amendment
Amendment by
Effective Date of 2005 Amendment
Amendment by section 402(j) of
Effective Date
§30C. Alternative fuel vehicle refueling property credit
(a) Credit allowed
There shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to 30 percent (6 percent in the case of property of a character subject to depreciation) of the cost of any qualified alternative fuel vehicle refueling property placed in service by the taxpayer during the taxable year.
(b) Limitation
The credit allowed under subsection (a) with respect to any single item of qualified alternative fuel vehicle refueling property placed in service by the taxpayer during the taxable year shall not exceed—
(1) $100,000 in the case of any such item of property of a character subject to an allowance for depreciation, and
(2) $1,000 in any other case.
(c) Qualified alternative fuel vehicle refueling property
For purposes of this section—
(1) In general
The term "qualified alternative fuel vehicle refueling property" has the same meaning as the term "qualified clean-fuel vehicle refueling property" would have under section 179A if—
(A) paragraph (1) of section 179A(d) did not apply to property installed on property which is used as the principal residence (within the meaning of section 121) of the taxpayer, and
(B) only the following were treated as clean-burning fuels for purposes of section 179A(d):
(i) Any fuel at least 85 percent of the volume of which consists of one or more of the following: ethanol, natural gas, compressed natural gas, liquified natural gas, liquefied petroleum gas, or hydrogen.
(ii) Any mixture—
(I) which consists of two or more of the following: biodiesel (as defined in section 40A(d)(1)), diesel fuel (as defined in section 4083(a)(3)), or kerosene, and
(II) at least 20 percent of the volume of which consists of biodiesel (as so defined) determined without regard to any kerosene in such mixture.
(iii) Electricity.
(2) Bidirectional charging equipment
Property shall not fail to be treated as qualified alternative fuel vehicle refueling property solely because such property—
(A) is capable of charging the battery of a motor vehicle propelled by electricity, and
(B) allows discharging electricity from such battery to an electric load external to such motor vehicle.
(3) Property required to be located in eligible census tracts
(A) In general
Property shall not be treated as qualified alternative fuel vehicle refueling property unless such property is placed in service in an eligible census tract.
(B) Eligible census tract
(i) In general
For purposes of this paragraph, the term "eligible census tract" means any population census tract which—
(I) is described in section 45D(e), or
(II) is not an urban area.
(ii) Urban area
For purposes of clause (i)(II), the term "urban area" means a census tract (as defined by the Bureau of the Census) which, according to the most recent decennial census, has been designated as an urban area by the Secretary of Commerce.
(d) Application with other credits
(1) Business credit treated as part of general business credit
So much of the credit which would be allowed under subsection (a) for any taxable year (determined without regard to this subsection) that is attributable to property of a character subject to an allowance for depreciation shall be treated as a credit listed in section 38(b) for such taxable year (and not allowed under subsection (a)).
(2) Personal credit
The credit allowed under subsection (a) (after the application of paragraph (1)) for any taxable year shall not exceed the excess (if any) of—
(A) the regular tax liability (as defined in section 26(b)) reduced by the sum of the credits allowable under subpart A and section 27, over
(B) the tentative minimum tax for the taxable year.
(e) Special rules
For purposes of this section—
(1) Reduction in basis
For purposes of this subtitle, the basis of any property for which a credit is allowable under subsection (a) shall be reduced by the amount of such credit so allowed (determined without regard to subsection (d)).
(2) Property used by tax-exempt entity
In the case of any qualified alternative fuel vehicle refueling property the use of which is described in paragraph (3) or (4) of section 50(b) and which is not subject to a lease, the person who sold such property to the person or entity using such property shall be treated as the taxpayer that placed such property in service, but only if such person clearly discloses to such person or entity in a document the amount of any credit allowable under subsection (a) with respect to such property (determined without regard to subsection (d)). For purposes of subsection (d), property to which this paragraph applies shall be treated as of a character subject to an allowance for depreciation.
(3) Property used outside United States not qualified
No credit shall be allowable under subsection (a) with respect to any property referred to in section 50(b)(1) or with respect to the portion of the cost of any property taken into account under section 179.
(4) Election not to take credit
No credit shall be allowed under subsection (a) for any property if the taxpayer elects not to have this section apply to such property.
(5) Recapture rules
Rules similar to the rules of section 179A(e)(4) shall apply.
(6) Reference
For purposes of this section, any reference to section 179A shall be treated as a reference to such section as in effect immediately before its repeal.
(f) Special rule for electric charging stations for certain vehicles with 2 or 3 wheels
For purposes of this section—
(1) In general
The term "qualified alternative fuel vehicle refueling property" includes any property described in subsection (c) for the recharging of a motor vehicle described in paragraph (2), but only if such property—
(A) meets the requirements of subsection (a)(2),1 and
(B) is of a character subject to depreciation.
(2) Motor vehicle
A motor vehicle is described in this paragraph if the motor vehicle—
(A) is manufactured primarily for use on public streets, roads, or highways (not including a vehicle operated exclusively on a rail or rails),
(B) has 2 or 3 wheels, and
(C) is propelled by electricity.
(g) Wage and apprenticeship requirements
(1) Increased credit amount
(A) In general
In the case of any qualified alternative fuel vehicle refueling project which satisfies the requirements of subparagraph (C), the amount of the credit determined under subsection (a) for any qualified alternative fuel vehicle refueling property of a character subject to an allowance for depreciation which is part of such project shall be equal to such amount (determined without regard to this sentence) multiplied by 5.
(B) Qualified alternative fuel vehicle refueling project
For purposes of this subsection, the term "qualified alternative fuel vehicle refueling project" means a project consisting of one or more properties that are part of a single project.
(C) Project requirements
A project meets the requirements of this subparagraph if it is one of the following:
(i) A project the construction of which begins prior to the date that is 60 days after the Secretary publishes guidance with respect to the requirements of paragraphs (2)(A) and (3).
(ii) A project which satisfies the requirements of paragraphs (2)(A) and (3).
(2) Prevailing wage requirements
(A) In general
The requirements described in this subparagraph with respect to any qualified alternative fuel vehicle refueling project are that the taxpayer shall ensure that any laborers and mechanics employed by the taxpayer or any contractor or subcontractor in the construction of any qualified alternative fuel vehicle refueling property which is part of such project shall be paid wages at rates not less than the prevailing rates for construction, alteration, or repair of a similar character in the locality in which such project is located as most recently determined by the Secretary of Labor, in accordance with subchapter IV of
(B) Correction and penalty related to failure to satisfy wage requirements
Rules similar to the rules of section 45(b)(7)(B) shall apply.
(3) Apprenticeship requirements
Rules similar to the rules of section 45(b)(8) shall apply.
(4) Regulations and guidance
The Secretary shall issue such regulations or other guidance as the Secretary determines necessary to carry out the purposes of this subsection, including regulations or other guidance which provides for requirements for recordkeeping or information reporting for purposes of administering the requirements of this subsection.
(h) Regulations
The Secretary shall prescribe such regulations as necessary to carry out the provisions of this section.
(i) Termination
This section shall not apply to any property placed in service after December 31, 2032.
(Added
Amendment of Subsection (c)(1)(B)
(iv) Any transportation fuel (as defined in section 45Z(d)(5)).
See 2022 Amendment note below.
Editorial Notes
References in Text
Section 179A as in effect immediately before its repeal, referred to in subsec. (e)(6), means
Amendments
2022—Subsec. (a).
Subsec. (b).
Subsec. (b)(1).
Subsec. (c).
Subsec. (c)(1)(B)(iv).
Subsec. (c)(3).
Subsec. (f).
Subsec. (g).
Subsecs. (h), (i).
2020—Subsec. (g).
2019—Subsec. (g).
2018—Subsec. (e)(6), (7).
Subsec. (g).
2015—Subsec. (g).
2014—Subsec. (e)(1).
Subsec. (e)(7).
Subsec. (g).
"(1) in the case of property relating to hydrogen, after December 31, 2014, and
"(2) in the case of any other property, after December 31, 2013."
2013—Subsec. (g)(2).
2010—Subsec. (g)(2).
2009—Subsec. (d)(2)(A).
Subsec. (e)(6).
2008—Subsec. (c)(2)(C).
Subsec. (g)(2).
2007—Subsec. (b).
Subsec. (c).
"(1)
"(A) at least 85 percent of the volume of which consists of one or more of the following: ethanol, natural gas, compressed natural gas, liquefied natural gas, liquefied petroleum gas, or hydrogen, or
"(B) any mixture of biodiesel (as defined in section 40A(d)(1)) and diesel fuel (as defined in section 4083(a)(3)), determined without regard to any use of kerosene and containing at least 20 percent biodiesel.
"(2)
2005—Subsec. (d)(2)(A).
Subsec. (e)(2).
Statutory Notes and Related Subsidiaries
Effective Date of 2022 Amendment
"(1)
"(2)
Amendment by section 13704(b)(2) of
Effective Date of 2020 Amendment
Effective Date of 2019 Amendment
Effective Date of 2018 Amendment
Effective Date of 2015 Amendment
Effective Date of 2014 Amendment
Amendment by section 218(b) of
Amendment by section 221(a)(34)(B) of
Effective Date of 2013 Amendment
Effective Date of 2010 Amendment
Effective Date of 2009 Amendment
Amendment by section 1142(b)(3) of
Amendment by section 1144(b)(2) of
Effective Date of 2008 Amendment
Effective Date of 2007 Amendment
"(1)
"(2)
"(3)
Effective Date of 2005 Amendment
Amendment by section 402(k) of
Effective Date
Savings Provision
For provisions that nothing in amendment by
1 So in original. There is no subsec. (a)(2) in this section.
§30D. Clean vehicle credit
(a) Allowance of credit
There shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the sum of the credit amounts determined under subsection (b) with respect to each new clean vehicle placed in service by the taxpayer during the taxable year.
(b) Per vehicle dollar limitation
(1) In general
The amount determined under this subsection with respect to any new clean vehicle is the sum of the amounts determined under paragraphs (2) and (3) with respect to such vehicle.
(2) Critical minerals
In the case of a vehicle with respect to which the requirement described in subsection (e)(1)(A) is satisfied, the amount determined under this paragraph is $3,750.
(3) Battery components
In the case of a vehicle with respect to which the requirement described in subsection (e)(2)(A) is satisfied, the amount determined under this paragraph is $3,750.
(c) Application with other credits
(1) Business credit treated as part of general business credit
So much of the credit which would be allowed under subsection (a) for any taxable year (determined without regard to this subsection) that is attributable to property of a character subject to an allowance for depreciation shall be treated as a credit listed in section 38(b) for such taxable year (and not allowed under subsection (a)).
(2) Personal credit
For purposes of this title, the credit allowed under subsection (a) for any taxable year (determined after application of paragraph (1)) shall be treated as a credit allowable under subpart A for such taxable year.
(d) New clean vehicle
For purposes of this section—
(1) In general
The term "new clean vehicle" means a motor vehicle—
(A) the original use of which commences with the taxpayer,
(B) which is acquired for use or lease by the taxpayer and not for resale,
(C) which is made by a qualified manufacturer,
(D) which is treated as a motor vehicle for purposes of title II of the Clean Air Act,
(E) which has a gross vehicle weight rating of less than 14,000 pounds,
(F) which is propelled to a significant extent by an electric motor which draws electricity from a battery which—
(i) has a capacity of not less than 7 kilowatt hours, and
(ii) is capable of being recharged from an external source of electricity,
(G) the final assembly of which occurs within North America, and
(H) for which the person who sells any vehicle to the taxpayer furnishes a report to the taxpayer and to the Secretary, at such time and in such manner as the Secretary shall provide, containing—
(i) the name and taxpayer identification number of the taxpayer,
(ii) the vehicle identification number of the vehicle, unless, in accordance with any applicable rules promulgated by the Secretary of Transportation, the vehicle is not assigned such a number,
(iii) the battery capacity of the vehicle,
(iv) verification that original use of the vehicle commences with the taxpayer,
(v) the maximum credit under this section allowable to the taxpayer with respect to the vehicle, and
(vi) in the case of a taxpayer who makes an election under subsection (g)(1), any amount described in subsection (g)(2)(C) which has been provided to such taxpayer.
(2) Motor vehicle
The term "motor vehicle" means any vehicle which is manufactured primarily for use on public streets, roads, and highways (not including a vehicle operated exclusively on a rail or rails) and which has at least 4 wheels.
(3) Qualified manufacturer
The term "qualified manufacturer" means any manufacturer (within the meaning of the regulations prescribed by the Administrator of the Environmental Protection Agency for purposes of the administration of title II of the Clean Air Act (
(4) Battery capacity
The term "capacity" means, with respect to any battery, the quantity of electricity which the battery is capable of storing, expressed in kilowatt hours, as measured from a 100 percent state of charge to a 0 percent state of charge.
(5) Final assembly
For purposes of paragraph (1)(G), the term "final assembly" means the process by which a manufacturer produces a new clean vehicle at, or through the use of, a plant, factory, or other place from which the vehicle is delivered to a dealer or importer with all component parts necessary for the mechanical operation of the vehicle included with the vehicle, whether or not the component parts are permanently installed in or on the vehicle.
(6) New qualified fuel cell motor vehicle
For purposes of this section, the term "new clean vehicle" shall include any new qualified fuel cell motor vehicle (as defined in section 30B(b)(3)) which meets the requirements under subparagraphs (G) and (H) of paragraph (1).
(7) Excluded entities
For purposes of this section, the term "new clean vehicle" shall not include—
(A) any vehicle placed in service after December 31, 2024, with respect to which any of the applicable critical minerals contained in the battery of such vehicle (as described in subsection (e)(1)(A)) were extracted, processed, or recycled by a foreign entity of concern (as defined in section 40207(a)(5) of the Infrastructure Investment and Jobs Act (
(B) any vehicle placed in service after December 31, 2023, with respect to which any of the components contained in the battery of such vehicle (as described in subsection (e)(2)(A)) were manufactured or assembled by a foreign entity of concern (as so defined).
(e) Critical mineral and battery component requirements
(1) Critical minerals requirement
(A) In general
The requirement described in this subparagraph with respect to a vehicle is that, with respect to the battery from which the electric motor of such vehicle draws electricity, the percentage of the value of the applicable critical minerals (as defined in section 45X(c)(6)) contained in such battery that were—
(i) extracted or processed—
(I) in the United States, or
(II) in any country with which the United States has a free trade agreement in effect, or
(ii) recycled in North America,
is equal to or greater than the applicable percentage (as certified by the qualified manufacturer, in such form or manner as prescribed by the Secretary).
(B) Applicable percentage
For purposes of subparagraph (A), the applicable percentage shall be—
(i) in the case of a vehicle placed in service after the date on which the proposed guidance described in paragraph (3)(B) is issued by the Secretary and before January 1, 2024, 40 percent,
(ii) in the case of a vehicle placed in service during calendar year 2024, 50 percent,
(iii) in the case of a vehicle placed in service during calendar year 2025, 60 percent,
(iv) in the case of a vehicle placed in service during calendar year 2026, 70 percent, and
(v) in the case of a vehicle placed in service after December 31, 2026, 80 percent.
(2) Battery components
(A) In general
The requirement described in this subparagraph with respect to a vehicle is that, with respect to the battery from which the electric motor of such vehicle draws electricity, the percentage of the value of the components contained in such battery that were manufactured or assembled in North America is equal to or greater than the applicable percentage (as certified by the qualified manufacturer, in such form or manner as prescribed by the Secretary).
(B) Applicable percentage
For purposes of subparagraph (A), the applicable percentage shall be—
(i) in the case of a vehicle placed in service after the date on which the proposed guidance described in paragraph (3)(B) is issued by the Secretary and before January 1, 2024, 50 percent,
(ii) in the case of a vehicle placed in service during calendar year 2024 or 2025, 60 percent,
(iii) in the case of a vehicle placed in service during calendar year 2026, 70 percent,
(iv) in the case of a vehicle placed in service during calendar year 2027, 80 percent,
(v) in the case of a vehicle placed in service during calendar year 2028, 90 percent,
(vi) in the case of a vehicle placed in service after December 31, 2028, 100 percent.
(3) Regulations and guidance
(A) In general
The Secretary shall issue such regulations or other guidance as the Secretary determines necessary to carry out the purposes of this subsection, including regulations or other guidance which provides for requirements for recordkeeping or information reporting for purposes of administering the requirements of this subsection.
(B) Deadline for proposed guidance
Not later than December 31, 2022, the Secretary shall issue proposed guidance with respect to the requirements under this subsection.
(f) Special rules
(1) Basis reduction
For purposes of this subtitle, the basis of any property for which a credit is allowable under subsection (a) shall be reduced by the amount of such credit so allowed (determined without regard to subsection (c)).
(2) No double benefit
The amount of any deduction or other credit allowable under this chapter for a vehicle for which a credit is allowable under subsection (a) shall be reduced by the amount of credit allowed under such subsection for such vehicle (determined without regard to subsection (c)).
[(3) Repealed. Pub. L. 117–169, title I, §13401(g)(2)(B)(i), Aug. 16, 2022, 136 Stat. 1960 ]
(4) Property used outside United States not qualified
No credit shall be allowable under subsection (a) with respect to any property referred to in section 50(b)(1).
(5) Recapture
The Secretary shall, by regulations, provide for recapturing the benefit of any credit allowable under subsection (a) with respect to any property which ceases to be property eligible for such credit.
(6) Election not to take credit
No credit shall be allowed under subsection (a) for any vehicle if the taxpayer elects to not have this section apply to such vehicle.
(7) Interaction with air quality and motor vehicle safety standards
A vehicle shall not be considered eligible for a credit under this section unless such vehicle is in compliance with—
(A) the applicable provisions of the Clean Air Act for the applicable make and model year of the vehicle (or applicable air quality provisions of State law in the case of a State which has adopted such provision under a waiver under section 209(b) of the Clean Air Act), and
(B) the motor vehicle safety provisions of
(8) One credit per vehicle
In the case of any vehicle, the credit described in subsection (a) shall only be allowed once with respect to such vehicle, as determined based upon the vehicle identification number of such vehicle, including any vehicle with respect to which the taxpayer elects the application of subsection (g).
(9) VIN requirement
No credit shall be allowed under this section with respect to any vehicle unless the taxpayer includes the vehicle identification number of such vehicle on the return of tax for the taxable year.
(10) Limitation based on modified adjusted gross income
(A) In general
No credit shall be allowed under subsection (a) for any taxable year if—
(i) the lesser of—
(I) the modified adjusted gross income of the taxpayer for such taxable year, or
(II) the modified adjusted gross income of the taxpayer for the preceding taxable year, exceeds
(ii) the threshold amount.
(B) Threshold amount
For purposes of subparagraph (A)(ii), the threshold amount shall be—
(i) in the case of a joint return or a surviving spouse (as defined in section 2(a)), $300,000,
(ii) in the case of a head of household (as defined in section 2(b)), $225,000, and
(iii) in the case of a taxpayer not described in clause (i) or (ii), $150,000.
(C) Modified adjusted gross income
For purposes of this paragraph, the term "modified adjusted gross income" means adjusted gross income increased by any amount excluded from gross income under section 911, 931, or 933.
(11) Manufacturer's suggested retail price limitation
(A) In general
No credit shall be allowed under subsection (a) for a vehicle with a manufacturer's suggested retail price in excess of the applicable limitation.
(B) Applicable limitation
For purposes of subparagraph (A), the applicable limitation for each vehicle classification is as follows:
(i) Vans
In the case of a van, $80,000.
(ii) Sport utility vehicles
In the case of a sport utility vehicle, $80,000.
(iii) Pickup trucks
In the case of a pickup truck, $80,000.
(iv) Other
In the case of any other vehicle, $55,000.
(C) Regulations and guidance
For purposes of this paragraph, the Secretary shall prescribe such regulations or other guidance as the Secretary determines necessary for determining vehicle classifications using criteria similar to that employed by the Environmental Protection Agency and the Department of the Energy to determine size and class of vehicles.
(g) Transfer of credit
(1) In general
Subject to such regulations or other guidance as the Secretary determines necessary, if the taxpayer who acquires a new clean vehicle elects the application of this subsection with respect to such vehicle, the credit which would (but for this subsection) be allowed to such taxpayer with respect to such vehicle shall be allowed to the eligible entity specified in such election (and not to such taxpayer).
(2) Eligible entity
For purposes of this subsection, the term "eligible entity" means, with respect to the vehicle for which the credit is allowed under subsection (a), the dealer which sold such vehicle to the taxpayer and has—
(A) subject to paragraph (4), registered with the Secretary for purposes of this paragraph, at such time, and in such form and manner, as the Secretary may prescribe,
(B) prior to the election described in paragraph (1) and not later than at the time of such sale, disclosed to the taxpayer purchasing such vehicle—
(i) the manufacturer's suggested retail price,
(ii) the value of the credit allowed and any other incentive available for the purchase of such vehicle, and
(iii) the amount provided by the dealer to such taxpayer as a condition of the election described in paragraph (1),
(C) not later than at the time of such sale, made payment to such taxpayer (whether in cash or in the form of a partial payment or down payment for the purchase of such vehicle) in an amount equal to the credit otherwise allowable to such taxpayer, and
(D) with respect to any incentive otherwise available for the purchase of a vehicle for which a credit is allowed under this section, including any incentive in the form of a rebate or discount provided by the dealer or manufacturer, ensured that—
(i) the availability or use of such incentive shall not limit the ability of a taxpayer to make an election described in paragraph (1), and
(ii) such election shall not limit the value or use of such incentive.
(3) Timing
An election described in paragraph (1) shall be made by the taxpayer not later than the date on which the vehicle for which the credit is allowed under subsection (a) is purchased.
(4) Revocation of registration
Upon determination by the Secretary that a dealer has failed to comply with the requirements described in paragraph (2), the Secretary may revoke the registration (as described in subparagraph (A) of such paragraph) of such dealer.
(5) Tax treatment of payments
With respect to any payment described in paragraph (2)(C), such payment—
(A) shall not be includible in the gross income of the taxpayer, and
(B) with respect to the dealer, shall not be deductible under this title.
(6) Application of certain other requirements
In the case of any election under paragraph (1) with respect to any vehicle—
(A) the requirements of paragraphs (1) and (2) of subsection (f) shall apply to the taxpayer who acquired the vehicle in the same manner as if the credit determined under this section with respect to such vehicle were allowed to such taxpayer,
(B) paragraph (6) of such subsection shall not apply, and
(C) the requirement of paragraph (9) of such subsection (f) shall be treated as satisfied if the eligible entity provides the vehicle identification number of such vehicle to the Secretary in such manner as the Secretary may provide.
(7) Advance payment to registered dealers
(A) In general
The Secretary shall establish a program to make advance payments to any eligible entity in an amount equal to the cumulative amount of the credits allowed under subsection (a) with respect to any vehicles sold by such entity for which an election described in paragraph (1) has been made.
(B) Excessive payments
Rules similar to the rules of section 6417(d)(6) shall apply for purposes of this paragraph.
(C) Treatment of advance payments
For purposes of
(8) Dealer
For purposes of this subsection, the term "dealer" means a person licensed by a State, the District of Columbia, the Commonwealth of Puerto Rico, any other territory or possession of the United States, an Indian tribal government, or any Alaska Native Corporation (as defined in section 3 of the Alaska Native Claims Settlement Act (
(9) Indian tribal government
For purposes of this subsection, the term "Indian tribal government" means the recognized governing body of any Indian or Alaska Native tribe, band, nation, pueblo, village, community, component band, or component reservation, individually identified (including parenthetically) in the list published most recently as of the date of enactment of this subsection pursuant to section 104 of the Federally Recognized Indian Tribe List Act of 1994 (
(10) Recapture
In the case of any taxpayer who has made an election described in paragraph (1) with respect to a new clean vehicle and received a payment described in paragraph (2)(C) from an eligible entity, if the credit under subsection (a) would otherwise (but for this subsection) not be allowable to such taxpayer pursuant to the application of subsection (f)(10), the tax imposed on such taxpayer under this chapter for the taxable year in which such vehicle was placed in service shall be increased by the amount of the payment received by such taxpayer.
(h) Termination
No credit shall be allowed under this section with respect to any vehicle placed in service after December 31, 2032.
(Added
Editorial Notes
References in Text
The Clean Air Act, referred to in subsecs. (d)(1)(D), (3), (f)(7)(A), is act July 14, 1955, ch. 360,
Amendments
2022—
Subsec. (a).
Subsec. (b)(1).
Subsec. (b)(2), (3).
Subsec. (d).
Subsec. (d)(1).
Subsec. (d)(1)(C).
Subsec. (d)(1)(F)(i).
Subsec. (d)(1)(G).
Subsec. (d)(1)(H).
Subsec. (d)(1)(H)(vi).
Subsec. (d)(3).
Subsec. (d)(5).
Subsec. (d)(6).
Subsec. (d)(7).
Subsec. (e).
Subsec. (f)(3).
Subsec. (f)(8).
Subsec. (f)(9) to (11).
Subsec. (g).
Subsec. (h).
2020—Subsec. (g)(3)(E)(ii).
2019—Subsec. (g)(3)(E)(ii).
2018—Subsec. (g)(3)(E)(ii).
2015—Subsec. (g)(3)(E).
2014—Subsec. (f)(1), (2).
Subsec. (f)(3).
2013—Subsec. (c)(2).
Subsec. (f)(2).
Subsec. (f)(7).
Subsec. (g).
2010—Subsec. (c)(2)(B)(ii).
2009—
Statutory Notes and Related Subsidiaries
Effective Date of 2022 Amendment; Transition Rule
"(1)
"(2)
"(3)
"(4)
"(5)
"(1) after December 31, 2021, and before the date of enactment of this Act [Aug. 16, 2022], purchased, or entered into a written binding contract to purchase, a new qualified plug-in electric drive motor vehicle (as defined in section 30D(d)(1) of the Internal Revenue Code of 1986, as in effect on the day before the date of enactment of this Act), and
"(2) placed such vehicle in service on or after the date of enactment of this Act,
such taxpayer may elect (at such time, and in such form and manner, as the Secretary of the Treasury, or the Secretary's delegate, may prescribe) to treat such vehicle as having been placed in service on the day before the date of enactment of this Act."
Effective Date of 2020 Amendment
Effective Date of 2019 Amendment
Effective Date of 2018 Amendment
Effective Date of 2015 Amendment
Effective Date of 2014 Amendment
Amendment by
Effective Date of 2013 Amendment
Amendment by section 104(c)(2)(I) of
Effective and Termination Dates of 2010 Amendment
Amendment by
Amendment by
Effective Date of 2009 Amendment
Amendment by
Effective Date
Section applicable to taxable years beginning after Dec. 31, 2008, see section 205(e) of
Gross-Up of Direct Spending
1 So in original. Another closing parenthesis probably should appear.
Subpart C—Refundable Credits
Editorial Notes
Amendments
2014—
2010—
2009—
2008—
2002—
1984—
§31. Tax withheld on wages
(a) Wage withholding for income tax purposes
(1) In general
The amount withheld as tax under
(2) Year of credit
The amount so withheld during any calendar year shall be allowed as a credit for the taxable year beginning in such calendar year. If more than one taxable year begins in a calendar year, such amount shall be allowed as a credit for the last taxable year so beginning.
(b) Credit for special refunds of social security tax
(1) In general
The Secretary may prescribe regulations providing for the crediting against the tax imposed by this subtitle of the amount determined by the taxpayer or the Secretary to be allowable under section 6413(c) as a special refund of tax imposed on wages. The amount allowed as a credit under such regulations shall, for purposes of this subtitle, be considered an amount withheld at source as tax under section 3402.
(2) Year of credit
Any amount to which paragraph (1) applies shall be allowed as a credit for the taxable year beginning in the calendar year during which the wages were received. If more than one taxable year begins in the calendar year, such amount shall be allowed as a credit for the last taxable year so beginning.
(c) Special rule for backup withholding
Any credit allowed by subsection (a) for any amount withheld under section 3406 shall be allowed for the taxable year of the recipient of the income in which the income is received.
(Aug. 16, 1954, ch. 736,
Editorial Notes
Amendments
1984—Subsec. (a)(1).
1983—
1982—
1976—Subsec. (b)(1).
Statutory Notes and Related Subsidiaries
Effective Date of 1984 Amendment
Effective Date of 1983 Amendment
"(a)
"(b)
"(c)
Construction of Amendment by Title VII of Division A of Pub. L. 98–369
§32. Earned income
(a) Allowance of credit
(1) In general
In the case of an eligible individual, there shall be allowed as a credit against the tax imposed by this subtitle for the taxable year an amount equal to the credit percentage of so much of the taxpayer's earned income for the taxable year as does not exceed the earned income amount.
(2) Limitation
The amount of the credit allowable to a taxpayer under paragraph (1) for any taxable year shall not exceed the excess (if any) of—
(A) the credit percentage of the earned income amount, over
(B) the phaseout percentage of so much of the adjusted gross income (or, if greater, the earned income) of the taxpayer for the taxable year as exceeds the phaseout amount.
(b) Percentages and amounts
For purposes of subsection (a)—
(1) Percentages
The credit percentage and the phaseout percentage shall be determined as follows:
| In the case of an eligible individual with: | The credit percentage is: | The phaseout percentage is: |
|---|---|---|
| 1 qualifying child | 34 | 15.98 |
| 2 qualifying children | 40 | 21.06 |
| 3 or more qualifying children | 45 | 21.06 |
| No qualifying children | 7.65 | 7.65 |
(2) Amounts
(A) In general
Subject to subparagraph (B), the earned income amount and the phaseout amount shall be determined as follows:
| In the case of an eligible individual with: | The earned income amount is: | The phaseout amount is: |
|---|---|---|
| 1 qualifying child | $6,330 | $11,610 |
| 2 or more qualifying children | $8,890 | $11,610 |
| No qualifying children | $4,220 | $5,280 |
(B) Joint returns
In the case of a joint return filed by an eligible individual and such individual's spouse, the phaseout amount determined under subparagraph (A) shall be increased by $5,000.
(c) Definitions and special rules
For purposes of this section—
(1) Eligible individual
(A) In general
The term "eligible individual" means—
(i) any individual who has a qualifying child for the taxable year, or
(ii) any other individual who does not have a qualifying child for the taxable year, if—
(I) such individual's principal place of abode is in the United States for more than one-half of such taxable year,
(II) such individual (or, if the individual is married, either the individual or the individual's spouse) has attained age 25 but not attained age 65 before the close of the taxable year, and
(III) such individual is not a dependent for whom a deduction is allowable under section 151 to another taxpayer for any taxable year beginning in the same calendar year as such taxable year.
(B) Qualifying child ineligible
If an individual is the qualifying child of a taxpayer for any taxable year of such taxpayer beginning in a calendar year, such individual shall not be treated as an eligible individual for any taxable year of such individual beginning in such calendar year.
(C) Exception for individual claiming benefits under section 911
The term "eligible individual" does not include any individual who claims the benefits of section 911 (relating to citizens or residents living abroad) for the taxable year.
(D) Limitation on eligibility of nonresident aliens
The term "eligible individual" shall not include any individual who is a nonresident alien individual for any portion of the taxable year unless such individual is treated for such taxable year as a resident of the United States for purposes of this chapter by reason of an election under subsection (g) or (h) of section 6013.
(E) Identification number requirement
No credit shall be allowed under this section to an eligible individual who does not include on the return of tax for the taxable year—
(i) such individual's taxpayer identification number, and
(ii) if the individual is married, the taxpayer identification number of such individual's spouse.
(2) Earned income
(A) The term "earned income" means—
(i) wages, salaries, tips, and other employee compensation, but only if such amounts are includible in gross income for the taxable year, plus
(ii) the amount of the taxpayer's net earnings from self-employment for the taxable year (within the meaning of section 1402(a)), but such net earnings shall be determined with regard to the deduction allowed to the taxpayer by section 164(f).
(B) For purposes of subparagraph (A)—
(i) the earned income of an individual shall be computed without regard to any community property laws,
(ii) no amount received as a pension or annuity shall be taken into account,
(iii) no amount to which section 871(a) applies (relating to income of nonresident alien individuals not connected with United States business) shall be taken into account,
(iv) no amount received for services provided by an individual while the individual is an inmate at a penal institution shall be taken into account,
(v) no amount described in subparagraph (A) received for service performed in work activities as defined in paragraph (4) or (7) of section 407(d) of the Social Security Act to which the taxpayer is assigned under any State program under part A of title IV of such Act shall be taken into account, but only to the extent such amount is subsidized under such State program, and
(vi) a taxpayer may elect to treat amounts excluded from gross income by reason of section 112 as earned income.
(3) Qualifying child
(A) In general
The term "qualifying child" means a qualifying child of the taxpayer (as defined in section 152(c), determined without regard to paragraph (1)(D) thereof and section 152(e)).
(B) Married individual
The term "qualifying child" shall not include an individual who is married as of the close of the taxpayer's taxable year unless the taxpayer is entitled to a deduction under section 151 for such taxable year with respect to such individual (or would be so entitled but for section 152(e)).
(C) Place of abode
For purposes of subparagraph (A), the requirements of section 152(c)(1)(B) shall be met only if the principal place of abode is in the United States.
(D) Identification requirements
(i) In general
A qualifying child shall not be taken into account under subsection (b) unless the taxpayer includes the name, age, and TIN of the qualifying child on the return of tax for the taxable year.
(ii) Other methods
The Secretary may prescribe other methods for providing the information described in clause (i).
(4) Treatment of military personnel stationed outside the United States
For purposes of paragraphs (1)(A)(ii)(I) and (3)(C), the principal place of abode of a member of the Armed Forces of the United States shall be treated as in the United States during any period during which such member is stationed outside the United States while serving on extended active duty with the Armed Forces of the United States. For purposes of the preceding sentence, the term "extended active duty" means any period of active duty pursuant to a call or order to such duty for a period in excess of 90 days or for an indefinite period.
(d) Married individuals
(1) In general
In the case of an individual who is married, this section shall apply only if a joint return is filed for the taxable year under section 6013.
(2) Determination of marital status
For purposes of this section—
(A) In general
Except as provided in subparagraph (B), marital status shall be determined under section 7703(a).
(B) Special rule for separated spouse
An individual shall not be treated as married if such individual—
(i) is married (as determined under section 7703(a)) and does not file a joint return for the taxable year,
(ii) resides with a qualifying child of the individual for more than one-half of such taxable year, and
(iii)(I) during the last 6 months of such taxable year, does not have the same principal place of abode as the individual's spouse, or
(II) has a decree, instrument, or agreement (other than a decree of divorce) described in section 121(d)(3)(C) with respect to the individual's spouse and is not a member of the same household with the individual's spouse by the end of the taxable year.
(e) Taxable year must be full taxable year
Except in the case of a taxable year closed by reason of the death of the taxpayer, no credit shall be allowable under this section in the case of a taxable year covering a period of less than 12 months.
(f) Amount of credit to be determined under tables
(1) In general
The amount of the credit allowed by this section shall be determined under tables prescribed by the Secretary.
(2) Requirements for tables
The tables prescribed under paragraph (1) shall reflect the provisions of subsections (a) and (b) and shall have income brackets of not greater than $50 each—
(A) for earned income between $0 and the amount of earned income at which the credit is phased out under subsection (b), and
(B) for adjusted gross income between the dollar amount at which the phaseout begins under subsection (b) and the amount of adjusted gross income at which the credit is phased out under subsection (b).
[(g) Repealed. Pub. L. 111–226, title II, §219(a)(2), Aug. 10, 2010, 124 Stat. 2403 ]
[(h) Repealed. Pub. L. 107–16, title III, §303(c), June 7, 2001, 115 Stat. 55 ]
(i) Denial of credit for individuals having excessive investment income
(1) In general
No credit shall be allowed under subsection (a) for the taxable year if the aggregate amount of disqualified income of the taxpayer for the taxable year exceeds $10,000.
(2) Disqualified income
For purposes of paragraph (1), the term "disqualified income" means—
(A) interest or dividends to the extent includible in gross income for the taxable year,
(B) interest received or accrued during the taxable year which is exempt from tax imposed by this chapter,
(C) the excess (if any) of—
(i) gross income from rents or royalties not derived in the ordinary course of a trade or business, over
(ii) the sum of—
(I) the deductions (other than interest) which are clearly and directly allocable to such gross income, plus
(II) interest deductions properly allocable to such gross income,
(D) the capital gain net income (as defined in section 1222) of the taxpayer for such taxable year, and
(E) the excess (if any) of—
(i) the aggregate income from all passive activities for the taxable year (determined without regard to any amount included in earned income under subsection (c)(2) or described in a preceding subparagraph), over
(ii) the aggregate losses from all passive activities for the taxable year (as so determined).
For purposes of subparagraph (E), the term "passive activity" has the meaning given such term by section 469.
(j) Inflation adjustments
(1) In general
In the case of any taxable year beginning after 2015 (2021 in the case of the dollar amount in subsection (i)(1)), each of the dollar amounts in subsections (b)(2) and (i)(1) shall be increased by an amount equal to—
(A) such dollar amount, multiplied by
(B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting in subparagraph (A)(ii) thereof—
(i) in the case of amounts in subsection (b)(2)(A), "calendar year 1995" for "calendar year 2016",
(ii) in the case of the $5,000 amount in subsection (b)(2)(B), "calendar year 2008" for "calendar year 2016", and
(iii) in the case of the $10,000 amount in subsection (i)(1), "calendar year 2020" for "calendar year 2016".
(2) Rounding
(A) In general
If any dollar amount in subsection (b)(2)(A) (after being increased under subparagraph (B) thereof), after being increased under paragraph (1), is not a multiple of $10, such dollar amount shall be rounded to the nearest multiple of $10.
(B) Disqualified income threshold amount
If the dollar amount in subsection (i)(1), after being increased under paragraph (1), is not a multiple of $50, such amount shall be rounded to the next lowest multiple of $50.
(k) Restrictions on taxpayers who improperly claimed credit in prior year
(1) Taxpayers making prior fraudulent or reckless claims
(A) In general
No credit shall be allowed under this section for any taxable year in the disallowance period.
(B) Disallowance period
For purposes of paragraph (1), the disallowance period is—
(i) the period of 10 taxable years after the most recent taxable year for which there was a final determination that the taxpayer's claim of credit under this section was due to fraud, and
(ii) the period of 2 taxable years after the most recent taxable year for which there was a final determination that the taxpayer's claim of credit under this section was due to reckless or intentional disregard of rules and regulations (but not due to fraud).
(2) Taxpayers making improper prior claims
In the case of a taxpayer who is denied credit under this section for any taxable year as a result of the deficiency procedures under subchapter B of
(l) Coordination with certain means-tested programs
For purposes of—
(1) the United States Housing Act of 1937,
(2) title V of the Housing Act of 1949,
(3) section 101 of the Housing and Urban Development Act of 1965,
(4) sections 221(d)(3), 235, and 236 of the National Housing Act, and
(5) the Food and Nutrition Act of 2008,
any refund made to an individual (or the spouse of an individual) by reason of this section shall not be treated as income (and shall not be taken into account in determining resources for the month of its receipt and the following month).
(m) Identification numbers
Solely for purposes of subsections (c)(1)(E) and (c)(3)(D), a taxpayer identification number means a social security number issued to an individual by the Social Security Administration (other than a social security number issued pursuant to clause (II) (or that portion of clause (III) that relates to clause (II)) of section 205(c)(2)(B)(i) of the Social Security Act) on or before the due date for filing the return for the taxable year.
(n) Special rules for individuals without qualifying children
In the case of any taxable year beginning after December 31, 2020, and before January 1, 2022—
(1) Decrease in minimum age for credit
(A) In general
Subsection (c)(1)(A)(ii)(II) shall be applied by substituting "the applicable minimum age" for "age 25".
(B) Applicable minimum age
For purposes of this paragraph, the term "applicable minimum age" means—
(i) except as otherwise provided in this subparagraph, age 19,
(ii) in the case of a specified student (other than a qualified former foster youth or a qualified homeless youth), age 24, and
(iii) in the case of a qualified former foster youth or a qualified homeless youth, age 18.
(C) Specified student
For purposes of this paragraph, the term "specified student" means, with respect to any taxable year, an individual who is an eligible student (as defined in section 25A(b)(3)) during at least 5 calendar months during the taxable year.
(D) Qualified former foster youth
For purposes of this paragraph, the term "qualified former foster youth" means an individual who—
(i) on or after the date that such individual attained age 14, was in foster care provided under the supervision or administration of an entity administering (or eligible to administer) a plan under part B or part E of title IV of the Social Security Act (without regard to whether Federal assistance was provided with respect to such child under such part E), and
(ii) provides (in such manner as the Secretary may provide) consent for entities which administer a plan under part B or part E of title IV of the Social Security Act to disclose to the Secretary information related to the status of such individual as a qualified former foster youth.
(E) Qualified homeless youth
For purposes of this paragraph, the term "qualified homeless youth" means, with respect to any taxable year, an individual who certifies, in a manner as provided by the Secretary, that such individual is either an unaccompanied youth who is a homeless child or youth, or is unaccompanied, at risk of homelessness, and self-supporting.
(2) Elimination of maximum age for credit
Subsection (c)(1)(A)(ii)(II) shall be applied without regard to the phrase "but not attained age 65".
(3) Increase in credit and phaseout percentages
The table contained in subsection (b)(1) shall be applied by substituting "15.3" for "7.65" each place it appears therein.
(4) Increase in earned income and phaseout amounts
(A) In general
The table contained in subsection (b)(2)(A) shall be applied—
(i) by substituting "$9,820" for "$4,220", and
(ii) by substituting "$11,610" for "$5,280".
(B) Coordination with inflation adjustment
Subsection (j) shall not apply to any dollar amount specified in this paragraph.
(Added
Inflation Adjusted Items for Certain Years
For inflation adjustment of certain items in this section, see Revenue Procedures listed in a table under
Editorial Notes
References in Text
The Social Security Act, referred to in subsecs. (c)(2)(B)(v), (m), and (n)(1)(D), is act Aug. 14, 1935, ch. 531,
The United States Housing Act of 1937, referred to in subsec. (l)(1), is act Sept. 1, 1937, ch. 896, as revised generally by
The Housing Act of 1949, referred to in subsec. (l)(2), is act July 15, 1949, ch. 338,
Section 101 of the Housing and Urban Development Act of 1965, referred to in subsec. (l)(3), is section 101 of
Sections 221(d)(3), 235, and 236 of the National Housing Act, referred to in subsec. (l)(4), are classified to sections 1715l(d)(3), 1715z, and 1715z–1, respectively, of Title 12.
The Food and Nutrition Act of 2008, referred to in subsec. (l)(5), is
Codification
Prior Provisions
A prior section 32 was renumbered
Amendments
2021—Subsec. (c)(1)(A).
Subsec. (c)(1)(E)(ii).
Subsec. (c)(1)(F).
Subsec. (d).
Subsec. (d)(1).
Subsec. (i)(1).
Subsec. (j)(1).
Subsec. (j)(1)(B)(i).
Subsec. (j)(1)(B)(iii).
Subsec. (n).
2018—Subsec. (b)(2)(B).
Subsec. (j)(1).
Subsec. (j)(1)(B).
Subsec. (j)(1)(B)(i).
Subsec. (j)(1)(B)(ii).
Subsec. (l).
2017—Subsecs. (b)(2)(B)(ii)(II), (j)(1)(B)(i), (ii).
2015—Subsec. (b)(1).
Subsec. (b)(2)(B).
Subsec. (b)(3).
Subsec. (m).
2014—Subsec. (b)(1).
Subsec. (b)(2)(B).
"(i) $1,000 in the case of taxable years beginning in 2002, 2003, and 2004,
"(ii) $2,000 in the case of taxable years beginning in 2005, 2006, and 2007, and
"(iii) $3,000 in the case of taxable years beginning after 2007."
Subsec. (b)(3)(B)(ii).
2013—Subsec. (b)(3).
2010—Subsec. (b)(3).
Subsec. (g).
"(1)
"(2)
2009—Subsec. (b)(3).
2008—Subsec. (c)(2)(B)(vi).
"(I) after the date of the enactment of this clause, and
"(II) before January 1, 2008,
a taxpayer may elect to treat amounts excluded from gross income by reason of section 112 as earned income."
Subsec. (l)(5).
2006—Subsec. (c)(2)(B)(vi)(II).
2005—Subsec. (c)(2)(B)(vi)(II).
2004—Subsec. (c)(1)(C) to (G).
Subsec. (c)(2)(B)(vi).
Subsec. (c)(3).
Subsec. (c)(4).
Subsec. (m).
2002—Subsec. (g)(2).
2001—Subsec. (a)(2)(B).
Subsec. (b)(2).
Subsec. (c)(1)(C).
Subsec. (c)(2)(A)(i).
Subsec. (c)(3)(A)(ii).
Subsec. (c)(3)(B)(i).
"(I) a son or daughter of the taxpayer, or a descendant of either,
"(II) a stepson or stepdaughter of the taxpayer, or."
Subsec. (c)(3)(B)(iii).
"(I) is a brother, sister, stepbrother, or stepsister of the taxpayer (or a descendant of any such relative) or is placed with the taxpayer by an authorized placement agency,
"(II) the taxpayer cares for as the taxpayer's own child, and
"(III) has the same principal place of abode as the taxpayer for the taxpayer's entire taxable year."
Subsec. (c)(3)(E).
Subsec. (c)(5).
Subsec. (f)(2)(B).
Subsec. (h).
Subsec. (j)(1)(B).
Subsec. (j)(2)(A).
Subsec. (n).
1999—Subsec. (c)(3)(B)(iii).
1998—Subsec. (c)(1)(F).
Subsec. (c)(1)(G).
Subsec. (c)(2)(B)(v).
Subsec. (c)(3)(A)(ii) to (iv).
Subsec. (c)(3)(D)(i).
Subsec. (c)(5)(A).
Subsec. (c)(5)(B).
"(III) other trades or businesses
"(v) interest received or accrued during the taxable year which is exempt from tax imposed by this chapter, and
"(vi) amounts received as a pension or annuity, and any distributions or payments received from an individual retirement plan, by the taxpayer during the taxable year to the extent not included in gross income.
For purposes of clause (iv), there shall not be taken into account items which are attributable to a trade or business which consists of the performance of services by the taxpayer as an employee. Clause (vi) shall not include any amount which is not includible in gross income by reason of section 402(c), 403(a)(4), 403(b), 408(d)(3), (4), or (5), or 457(e)(10)."
Subsec. (c)(5)(C).
Subsecs. (m), (n).
"(1)
"(2)
"(A) the amount determined under section 24(d)(1)(A), over
"(B) the amount determined under section 24(d)(1)(B).
The amounts referred to in subparagraphs (A) and (B) shall be determined as if section 24(d) applied to all taxpayers.
"(3)
1997—Subsec. (c)(2)(B)(v).
Subsec. (c)(4).
Subsec. (c)(5)(B).
Subsec. (c)(5)(B)(iv).
Subsec. (c)(5)(B)(v), (vi).
Subsec. (k).
Subsec. (l).
Subsec. (m).
1996—Subsec. (a)(2)(B).
Subsec. (b)(2).
Subsec. (c)(1)(C).
Subsec. (c)(1)(F).
Subsec. (c)(5).
Subsec. (f)(2)(B).
Subsec. (i)(1).
Subsec. (i)(2).
Subsec. (j).
"(1)
"(A) such dollar amount, multiplied by
"(B) the cost-of-living adjustment determined under section 1(f)(3), for the calendar year in which the taxable year begins, by substituting 'calendar year 1993' for 'calendar year 1992'.
"(2)
Subsec. (l).
1995—Subsecs. (i) to (k).
1994—Subsec. (c)(1)(E).
Subsec. (c)(2)(B)(iv).
Subsec. (c)(3)(D)(i).
"(I) the taxpayer includes the name and age of each qualifying child (without regard to this subparagraph) on the return of tax for the taxable year, and
"(II) in the case of an individual who has attained the age of 1 year before the close of the taxpayer's taxable year, the taxpayer includes the taxpayer identification number of such individual on such return of tax for such taxable year."
Subsec. (c)(4).
1993—Subsec. (a).
"(1) the basic earned income credit, and
"(2) the health insurance credit."
Subsec. (b).
Subsec. (c)(1)(A).
Subsec. (c)(3)(D)(ii).
Subsec. (i)(1).
"(A) such dollar amount, multiplied by
"(B) the cost-of-living adjustment determined under section 1(f)(3), for the calendar year in which the taxable year begins, by substituting 'calendar year 1984' for 'calendar year 1989' in subparagraph (B) thereof."
Subsec. (i)(2), (3).
1990—Subsec. (a).
Subsec. (b).
"(1) the maximum credit allowable under subsection (a) to any taxpayer, over
"(2) 10 percent of so much of the adjusted gross income (or, if greater, the earned income) of the taxpayer for the taxable year as exceeds $9,000.
In the case of any taxable year beginning in 1987, paragraph (2) shall be applied by substituting '$6,500' for '$9,000'."
Subsec. (c).
Subsec. (i)(1)(B).
Subsec. (i)(2)(A).
Subsec. (i)(2)(B).
"(i) the $5,714 amount contained in subsection (a),
"(ii) the $6,500 amount contained in the last sentence of subsection (b), and
"(iii) the $9,000 amount contained in subsection (b)(2)."
Subsec. (j).
1988—Subsec. (h).
Subsec. (i)(3).
1986—Subsec. (a).
Subsec. (b).
"(1) $550, over
"(2) 122/9 percent of so much of the adjusted gross income (or, if greater, the earned income) of the taxpayer for the taxable year as exceeds $6,500."
Subsec. (c)(1)(A)(i).
Subsec. (c)(1)(C).
"(i) section 911 (relating to citizens or residents of the United States living abroad),
"(ii) section 931 (relating to income from sources within possessions of the United States)."
Subsec. (d).
Subsec. (f)(2)(A), (B).
"(A) for earned income between $0 and $11,000, and
"(B) for adjusted gross income between $6,500 and $11,000."
Subsec. (i).
1984—
Subsec. (a).
Subsec. (b)(1).
Subsec. (b)(2).
Subsec. (c)(1)(A)(i).
Subsec. (c)(1)(B).
Subsec. (f)(2)(A).
Subsec. (f)(2)(B).
Subsec. (h).
1983—Subsec. (c)(2)(A)(ii).
1981—Subsec. (c)(1)(C).
1980—Subsec. (c)(1)(C).
Subsecs. (g), (h).
1978—Subsec. (a).
Subsec. (b).
Subsec. (c)(1).
Subsec. (c)(1)(C).
Subsec. (c)(2)(B).
Subsec. (f).
Subsec. (h).
1976—Subsec. (a).
Subsec. (b).
Subsec. (c)(1)(A).
1975—Subsec. (a).
Subsec. (b).
Statutory Notes and Related Subsidiaries
Effective Date of 2021 Amendment
Effective Date of 2018 Amendment
Amendment by section 101(a) of
Effective Date of 2017 Amendment
Amendment by
Effective Date of 2015 Amendment
Effective Date of 2014 Amendment
Amendment by section 221(a)(3) of
Effective Date of 2013 Amendment
Amendment by
Effective Date of 2010 Amendment
Amendment by
Effective Date of 2009 Amendment
Effective Date of 2008 Amendment
Amendment of this section and repeal of
Amendment by section 4002(b)(1)(B), (2)(O) of
Effective Date of 2006 Amendment
Effective Date of 2005 Amendment
Effective Date of 2004 Amendment
Amendment by section 205 of
Effective Date of 2002 Amendment
Effective Date of 2001 Amendment
Amendment by section 201(c)(3) of
"(1)
"(2)
Effective Date of 1999 Amendment
Effective Date of 1998 Amendment
"(1)
"(2)
Amendment by sections 6003(b) and 6010(p)(1), (2) of
Effective Date of 1997 Amendment
Amendment by section 101(b) of
Amendment by section 312(d)(2) of
"(1) The amendments made by subsection (a) [amending this section and
"(2) The amendments made by subsections (b), (c), and (d) [amending this section] shall apply to taxable years beginning after December 31, 1997."
Effective Date of 1996 Amendment
"(1)
"(2)
"(1)
"(2)
Effective Date of 1995 Amendment
Effective Date of 1994 Amendment
"(1)
"(2)
"(A) returns for taxable years beginning in 1995 with respect to individuals who are born after October 31, 1995, and
"(B) returns for taxable years beginning in 1996 with respect to individuals who are born after November 30, 1996."
Effective Date of 1993 Amendment
Effective Date of 1990 Amendment
Amendment by section 11101(d)(1)(B) of
Effective Date of 1988 Amendment
Amendment by
Effective Date of 1986 Amendment
Amendment by sections 104(b)(1)(B) and 111(a)–(d)(1) of
Amendment by section 1272(d)(4) of
Amendment by section 1301(j)(8) of
Effective Date of 1984 Amendment
Amendment by section 423(c)(3) of
Effective Date of 1983 Amendment
Amendment by
Effective Date of 1981 Amendment
Amendment by
Effective Date of 1980 Amendment
Effective Date of 1978 Amendment
Effective Date of 1978 Amendment; Election of Prior Law
Amendment by
Effective and Termination Dates of 1976 Amendment
Effective and Termination Dates of 1975 Amendment
Savings Provision
For provisions that nothing in amendment by section 401(b)(4) of
Information Return Matching
Temporary Special Rule for Determining Earned Income for Purposes of Earned Income Tax Credit
"(a)
"(1) such earned income for the taxpayer's first taxable year beginning in 2019, for
"(2) such earned income for the taxpayer's first taxable year beginning in 2021.
"(b)
"(1)
"(2)
"(c)
"(1)
"(2)
"(d)
"(1)
"(2)
"(3)
"(4)
Temporary Special Rule for Determination of Earned Income
"(a)
"(1) such earned income for the preceding taxable year, for
"(2) such earned income for the taxpayer's first taxable year beginning in 2020.
"(b)
"(1)
"(2)
"(c)
"(1)
"(2)
Study on Earned Income Tax Credit Certification Program
"(a)
"(1) The costs (in time and money) incurred by the participants in the program.
"(2) The administrative costs incurred by the Internal Revenue Service in operating the program.
"(3) The percentage of individuals included in the program who were not certified for the credit, including the percentage of individuals who were not certified due to—
"(A) ineligibility for the credit; and
"(B) failure to complete the requirements for certification.
"(4) The percentage of individuals to whom paragraph (3)(B) applies who were—
"(A) otherwise eligible for the credit; and
"(B) otherwise ineligible for the credit.
"(5) The percentage of individuals to whom paragraph (3)(B) applies who—
"(A) did not respond to the request for certification; and
"(B) responded to such request but otherwise failed to complete the requirements for certification.
"(6) The reasons—
"(A) for which individuals described in paragraph (5)(A) did not respond to requests for certification; and
"(B) for which individuals described in paragraph (5)(B) had difficulty in completing the requirements for certification.
"(7) The characteristics of those individuals who were denied the credit due to—
"(A) failure to complete the requirements for certification; and
"(B) ineligibility for the credit.
"(8) The impact of the program on non-English speaking participants.
"(9) The impact of the program on homeless and other highly transient individuals.
"(b)
"(1)
"(2)
Program To Increase Public Awareness
Secretary of the Treasury, or Secretary's delegate, to establish taxpayer awareness program to inform taxpaying public of availability of earned income credit and child health insurance under this section, see section 11114 of
Employee Notification
Disregard of Refund for Determination of Eligibility for Federal Benefits or Assistance
[
§33. Tax withheld at source on nonresident aliens and foreign corporations
There shall be allowed as a credit against the tax imposed by this subtitle the amount of tax withheld at source under subchapter A of
(Aug. 16, 1954, ch. 736,
Editorial Notes
Prior Provisions
A prior section 33 was renumbered
Amendments
1984—
Statutory Notes and Related Subsidiaries
Effective Date of 1984 Amendment
§34. Certain uses of gasoline and special fuels
(a) General rule
There shall be allowed as a credit against the tax imposed by this subtitle for the taxable year an amount equal to the sum of the amounts payable to the taxpayer—
(1) under section 6420 (determined without regard to section 6420(g)),
(2) under section 6421 (determined without regard to section 6421(i)), and
(3) under section 6427 (determined without regard to section 6427(k)).
(b) Exception
Credit shall not be allowed under subsection (a) for any amount payable under section 6421 or 6427, if a claim for such amount is timely filed and, under section 6421(i) or 6427(k), is payable under such section.
(Added
Editorial Notes
Prior Provisions
A prior section 34, acts Aug. 16, 1954, ch. 736,
Amendments
2007—Subsec. (a)(1).
Subsec. (a)(2).
Subsec. (a)(3).
1998—Subsec. (b).
1996—Subsec. (a)(3).
"(A) with respect to fuels used for nontaxable purposes or resold, or
"(B) with respect to any qualified diesel-powered highway vehicle purchased (or deemed purchased under section 6427(g)(6)),
during the taxable year (determined without regard to section 6427(k))."
1988—Subsec. (b).
1986—Subsec. (a)(3).
1984—
Subsec. (a)(3).
Subsec. (b).
1983—
Subsec. (a)(2) to (4).
Subsec. (b).
1980—Subsec. (a)(4).
Subsec. (b).
1978—Subsec. (a)(3).
Subsec. (a)(4).
Subsec. (b).
1976—Subsec. (a)(1).
Subsec. (a)(3).
Subsec. (a)(4).
Subsec. (b).
Subsec. (c).
1970—
Subsec. (a)(4).
Subsec. (c).
Statutory Notes and Related Subsidiaries
Effective Date of 1998 Amendment
Effective Date of 1996 Amendment
Effective Date of 1988 Amendment
Amendment by
Effective Date of 1986 Amendment
Amendment by section 1703(e)(2)(F) of
Amendment by section 1877(a) of
Effective Date of 1984 Amendment
Amendment by section 911(d)(2)(A) of
Effective Date of 1983 Amendment
Effective Date of 1980 Amendment
Amendment by
Effective Date of 1978 Amendment
Amendment by
Effective Date of 1976 Amendments
Amendment by
Amendment by section 1901(a)(3) of
Amendment by section 1906(b)(8), (9) of
Effective Date of 1970 Amendment
Amendment by
Effective Date
Section applicable to taxable years beginning on or after July 1, 1965, see section 809(f) of
§35. Health insurance costs of eligible individuals
(a) In general
In the case of an individual, there shall be allowed as a credit against the tax imposed by subtitle A an amount equal to 72.5 percent of the amount paid by the taxpayer for coverage of the taxpayer and qualifying family members under qualified health insurance for eligible coverage months beginning in the taxable year.
(b) Eligible coverage month
For purposes of this section—
(1) In general
The term "eligible coverage month" means any month if—
(A) as of the first day of such month, the taxpayer—
(i) is an eligible individual,
(ii) is covered by qualified health insurance, the premium for which is paid by the taxpayer,
(iii) does not have other specified coverage, and
(iv) is not imprisoned under Federal, State, or local authority, and
(B) such month begins more than 90 days after the date of the enactment of the Trade Act of 2002, and before January 1, 2022.
(2) Joint returns
In the case of a joint return, the requirements of paragraph (1)(A) shall be treated as met with respect to any month if at least 1 spouse satisfies such requirements.
(c) Eligible individual
For purposes of this section—
(1) In general
The term "eligible individual" means—
(A) an eligible TAA recipient,
(B) an eligible alternative TAA recipient, and
(C) an eligible PBGC pension recipient.
(2) Eligible TAA recipient
(A) In general
Except as provided in subparagraph (B), the term "eligible TAA recipient" means, with respect to any month, any individual who is receiving for any day of such month a trade readjustment allowance under
(B) Special rule
In the case of any eligible coverage month beginning after the date of the enactment of this paragraph, the term "eligible TAA recipient" means, with respect to any month, any individual who—
(i) is receiving for any day of such month a trade readjustment allowance under
(ii) would be eligible to receive such allowance except that such individual is in a break in training provided under a training program approved under section 236 of such Act that exceeds the period specified in section 233(e) of such Act, but is within the period for receiving such allowances provided under section 233(a) of such Act, or
(iii) is receiving unemployment compensation (as defined in section 85(b)) for any day of such month and who would be eligible to receive such allowance for such month if section 231 of such Act were applied without regard to subsections (a)(3)(B) and (a)(5) thereof.
An individual shall continue to be treated as an eligible TAA recipient during the first month that such individual would otherwise cease to be an eligible TAA recipient by reason of the preceding sentence.
(3) Eligible alternative TAA recipient
The term "eligible alternative TAA recipient" means, with respect to any month, any individual who—
(A) is a worker described in section 246(a)(3)(B) of the Trade Act of 1974 who is participating in the program established under section 246(a)(1) of such Act, and
(B) is receiving a benefit for such month under section 246(a)(2) of such Act.
An individual shall continue to be treated as an eligible alternative TAA recipient during the first month that such individual would otherwise cease to be an eligible alternative TAA recipient by reason of the preceding sentence.
(4) Eligible PBGC pension recipient
The term "eligible PBGC pension recipient" means, with respect to any month, any individual who—
(A) has attained age 55 as of the first day of such month, and
(B) is receiving a benefit for such month any portion of which is paid by the Pension Benefit Guaranty Corporation under title IV of the Employee Retirement Income Security Act of 1974.
(d) Qualifying family member
For purposes of this section—
(1) In general
The term "qualifying family member" means—
(A) the taxpayer's spouse, and
(B) any dependent of the taxpayer with respect to whom the taxpayer is entitled to a deduction under section 151(c).
Such term does not include any individual who has other specified coverage.
(2) Special dependency test in case of divorced parents, etc.
If section 152(e) applies to any child with respect to any calendar year, in the case of any taxable year beginning in such calendar year, such child shall be treated as described in paragraph (1)(B) with respect to the custodial parent (as defined in section 152(e)(4)(A)) and not with respect to the noncustodial parent.
(e) Qualified health insurance
For purposes of this section—
(1) In general
The term "qualified health insurance" means any of the following:
(A) Coverage under a COBRA continuation provision (as defined in section 9832(d)(1)).
(B) State-based continuation coverage provided by the State under a State law that requires such coverage.
(C) Coverage offered through a qualified State high risk pool (as defined in section 2744(c)(2) of the Public Health Service Act).
(D) Coverage under a health insurance program offered for State employees.
(E) Coverage under a State-based health insurance program that is comparable to the health insurance program offered for State employees.
(F) Coverage through an arrangement entered into by a State and—
(i) a group health plan (including such a plan which is a multiemployer plan as defined in section 3(37) of the Employee Retirement Income Security Act of 1974),
(ii) an issuer of health insurance coverage,
(iii) an administrator, or
(iv) an employer.
(G) Coverage offered through a State arrangement with a private sector health care coverage purchasing pool.
(H) Coverage under a State-operated health plan that does not receive any Federal financial participation.
(I) Coverage under a group health plan that is available through the employment of the eligible individual's spouse.
(J) In the case of any eligible individual and such individual's qualifying family members, coverage under individual health insurance (other than coverage enrolled in through an Exchange established under the Patient Protection and Affordable Care Act). For purposes of this subparagraph, the term "individual health insurance" means any insurance which constitutes medical care offered to individuals other than in connection with a group health plan and does not include Federal- or State-based health insurance coverage.
(K) Coverage under an employee benefit plan funded by a voluntary employees' beneficiary association (as defined in section 501(c)(9)) established pursuant to an order of a bankruptcy court, or by agreement with an authorized representative, as provided in
(2) Requirements for state-based coverage
(A) In general
The term "qualified health insurance" does not include any coverage described in subparagraphs (B) through (H) of paragraph (1) unless the State involved has elected to have such coverage treated as qualified health insurance under this section and such coverage meets the following requirements:
(i) Guaranteed issue
Each qualifying individual is guaranteed enrollment if the individual pays the premium for enrollment or provides a qualified health insurance costs credit eligibility certificate described in section 7527 and pays the remainder of such premium.
(ii) No imposition of preexisting condition exclusion
No pre-existing condition limitations are imposed with respect to any qualifying individual.
(iii) Nondiscriminatory premium
The total premium (as determined without regard to any subsidies) with respect to a qualifying individual may not be greater than the total premium (as so determined) for a similarly situated individual who is not a qualifying individual.
(iv) Same benefits
Benefits under the coverage are the same as (or substantially similar to) the benefits provided to similarly situated individuals who are not qualifying individuals.
(B) Qualifying individual
For purposes of this paragraph, the term "qualifying individual" means—
(i) an eligible individual for whom, as of the date on which the individual seeks to enroll in the coverage described in subparagraphs (B) through (H) of paragraph (1), the aggregate of the periods of creditable coverage (as defined in section 9801(c)) is 3 months or longer and who, with respect to any month, meets the requirements of clauses (iii) and (iv) of subsection (b)(1)(A); and
(ii) the qualifying family members of such eligible individual.
(3) Exception
The term "qualified health insurance" shall not include—
(A) a flexible spending or similar arrangement, and
(B) any insurance if substantially all of its coverage is of excepted benefits described in section 9832(c).
(f) Other specified coverage
For purposes of this section, an individual has other specified coverage for any month if, as of the first day of such month—
(1) Subsidized coverage
(A) In general
Such individual is covered under any insurance which constitutes medical care (except insurance substantially all of the coverage of which is of excepted benefits described in section 9832(c)) under any health plan maintained by any employer (or former employer) of the taxpayer or the taxpayer's spouse and at least 50 percent of the cost of such coverage (determined under section 4980B) is paid or incurred by the employer.
(B) Eligible alternative TAA recipients
In the case of an eligible alternative TAA recipient, such individual is either—
(i) eligible for coverage under any qualified health insurance (other than insurance described in subparagraph (A), (B), or (F) of subsection (e)(1)) under which at least 50 percent of the cost of coverage (determined under section 4980B(f)(4)) is paid or incurred by an employer (or former employer) of the taxpayer or the taxpayer's spouse, or
(ii) covered under any such qualified health insurance under which any portion of the cost of coverage (as so determined) is paid or incurred by an employer (or former employer) of the taxpayer or the taxpayer's spouse.
(C) Treatment of cafeteria plans
For purposes of subparagraphs (A) and (B), the cost of coverage shall be treated as paid or incurred by an employer to the extent the coverage is in lieu of a right to receive cash or other qualified benefits under a cafeteria plan (as defined in section 125(d)).
(2) Coverage under Medicare, Medicaid, or SCHIP
Such individual—
(A) is entitled to benefits under part A of title XVIII of the Social Security Act or is enrolled under part B of such title, or
(B) is enrolled in the program under title XIX or XXI of such Act (other than under section 1928 of such Act).
(3) Certain other coverage
Such individual—
(A) is enrolled in a health benefits plan under
(B) is entitled to receive benefits under
(g) Special rules
(1) Coordination with advance payments of credit
With respect to any taxable year, the amount which would (but for this subsection) be allowed as a credit to the taxpayer under subsection (a) shall be reduced (but not below zero) by the aggregate amount paid on behalf of such taxpayer under section 7527 for months beginning in such taxable year.
(2) Coordination with other deductions
Amounts taken into account under subsection (a) shall not be taken into account in determining any deduction allowed under section 162(l) or 213.
(3) Medical and health savings accounts
Amounts distributed from an Archer MSA (as defined in section 220(d)) or from a health savings account (as defined in section 223(d)) shall not be taken into account under subsection (a).
(4) Denial of credit to dependents
No credit shall be allowed under this section to any individual with respect to whom a deduction under section 151 is allowable to another taxpayer for a taxable year beginning in the calendar year in which such individual's taxable year begins.
(5) Both spouses eligible individuals
The spouse of the taxpayer shall not be treated as a qualifying family member for purposes of subsection (a), if—
(A) the taxpayer is married at the close of the taxable year,
(B) the taxpayer and the taxpayer's spouse are both eligible individuals during the taxable year, and
(C) the taxpayer files a separate return for the taxable year.
(6) Marital status; certain married individuals living apart
Rules similar to the rules of paragraphs (3) and (4) of section 21(e) shall apply for purposes of this section.
(7) Insurance which covers other individuals
For purposes of this section, rules similar to the rules of section 213(d)(6) shall apply with respect to any contract for qualified health insurance under which amounts are payable for coverage of an individual other than the taxpayer and qualifying family members.
(8) Treatment of payments
For purposes of this section—
(A) Payments by Secretary
Payments made by the Secretary on behalf of any individual under section 7527 (relating to advance payment of credit for health insurance costs of eligible individuals) shall be treated as having been made by the taxpayer on the first day of the month for which such payment was made.
(B) Payments by taxpayer
Payments made by the taxpayer for eligible coverage months shall be treated as having been made by the taxpayer on the first day of the month for which such payment was made.
(9) Continuation coverage premium assistance
In the case of an assistance eligible individual who receives premium assistance for continuation coverage under section 9501(a)(1) of the American Rescue Plan Act of 2021 for any month during the taxable year, such individual shall not be treated as an eligible individual, a certified individual, or a qualifying family member for purposes of this section or section 7527 with respect to such month.
(10) Continued qualification of family members after certain events
(A) Medicare eligibility
In the case of any month which would be an eligible coverage month with respect to an eligible individual but for subsection (f)(2)(A), such month shall be treated as an eligible coverage month with respect to such eligible individual solely for purposes of determining the amount of the credit under this section with respect to any qualifying family members of such individual (and any advance payment of such credit under section 7527). This subparagraph shall only apply with respect to the first 24 months after such eligible individual is first entitled to the benefits described in subsection (f)(2)(A).
(B) Divorce
In the case of the finalization of a divorce between an eligible individual and such individual's spouse, such spouse shall be treated as an eligible individual for purposes of this section and section 7527 for a period of 24 months beginning with the date of such finalization, except that the only qualifying family members who may be taken into account with respect to such spouse are those individuals who were qualifying family members immediately before such finalization.
(C) Death
In the case of the death of an eligible individual—
(i) any spouse of such individual (determined at the time of such death) shall be treated as an eligible individual for purposes of this section and section 7527 for a period of 24 months beginning with the date of such death, except that the only qualifying family members who may be taken into account with respect to such spouse are those individuals who were qualifying family members immediately before such death, and
(ii) any individual who was a qualifying family member of the decedent immediately before such death (or, in the case of an individual to whom paragraph (4) applies, the taxpayer to whom the deduction under section 151 is allowable) shall be treated as an eligible individual for purposes of this section and section 7527 for a period of 24 months beginning with the date of such death, except that in determining the amount of such credit only such qualifying family member may be taken into account.
(11) Election
(A) In general
This section shall not apply to any taxpayer for any eligible coverage month unless such taxpayer elects the application of this section for such month.
(B) Timing and applicability of election
Except as the Secretary may provide—
(i) an election to have this section apply for any eligible coverage month in a taxable year shall be made not later than the due date (including extensions) for the return of tax for the taxable year; and
(ii) any election for this section to apply for an eligible coverage month shall apply for all subsequent eligible coverage months in the taxable year and, once made, shall be irrevocable with respect to such months.
(12) Coordination with premium tax credit
(A) In general
An eligible coverage month to which the election under paragraph (11) applies shall not be treated as a coverage month (as defined in section 36B(c)(2)) for purposes of section 36B with respect to the taxpayer.
(B) Coordination with advance payments of premium tax credit
In the case of a taxpayer who makes the election under paragraph (11) with respect to any eligible coverage month in a taxable year or on behalf of whom any advance payment is made under section 7527 with respect to any month in such taxable year—
(i) the tax imposed by this chapter for the taxable year shall be increased by the excess, if any, of—
(I) the sum of any advance payments made on behalf of the taxpayer under section 1412 of the Patient Protection and Affordable Care Act and section 7527 for months during such taxable year, over
(II) the sum of the credits allowed under this section (determined without regard to paragraph (1)) and section 36B (determined without regard to subsection (f)(1) thereof) for such taxable year; and
(ii) section 36B(f)(2) shall not apply with respect to such taxpayer for such taxable year, except that if such taxpayer received any advance payments under section 7527 for any month in such taxable year and is later allowed a credit under section 36B for such taxable year, then section 36B(f)(2)(B) shall be applied by substituting the amount determined under clause (i) for the amount determined under section 36B(f)(2)(A).
(13) Regulations
The Secretary may prescribe such regulations and other guidance as may be necessary or appropriate to carry out this section, section 6050T, and section 7527.
(Added
Editorial Notes
References in Text
The date of the enactment of the Trade Act of 2002, referred to in subsec. (b)(1)(B), is the date of enactment of
The Trade Act of 1974, referred to in subsec. (c)(2), (3), is
The date of the enactment of this paragraph, referred to in subsec. (c)(2)(B), probably means the date of enactment of
The Employee Retirement Income Security Act of 1974, referred to in subsecs. (c)(4)(B) and (e)(1)(F)(i), is
Section 2744(c)(2) of the Public Health Service Act, referred to in subsec. (e)(1)(C), is classified to
The Patient Protection and Affordable Care Act, referred to in subsecs. (e)(1)(J) and (g)(12)(B)(i)(I), is
The Social Security Act, referred to in subsec. (f)(2), is act Aug. 14, 1935, ch. 531,
Section 9501(a)(1) of the American Rescue Plan Act of 2021, referred to in subsec. (g)(9), is section 9501(a)(1) of
Prior Provisions
A prior section 35 was renumbered
Another prior section 35, acts Aug. 16, 1954, ch. 736,
Amendments
2021—Subsec. (g)(9).
2020—Subsec. (b)(1)(B).
2019—Subsec. (b)(1)(B).
2015—Subsec. (b)(1)(B).
Subsec. (e)(1)(J).
"(i) in the case of an eligible TAA recipient, the allowance described in subsection (c)(2),
"(ii) in the case of an eligible alternative TAA recipient, the benefit described in subsection (c)(3)(B), or
"(iii) in the case of any eligible PBGC pension recipient, the benefit described in subsection (c)(4)(B).
For purposes of".
Subsec. (g)(11) to (13).
2014—Subsec. (g)(9) to (11).
2011—Subsec. (a).
Subsec. (b)(1)(B).
Subsec. (c)(2)(B).
Subsec. (e)(1)(K).
Subsec. (g)(10).
2010—Subsec. (a).
Subsec. (c)(2)(B).
Subsec. (e)(1)(K).
Subsec. (g)(9).
Subsec. (g)(10).
2009—Subsec. (a).
Subsec. (c)(2).
Subsec. (e)(1)(K).
Subsec. (g)(9), (10).
Subsec. (g)(11).
2007—Subsec. (d)(2).
2004—Subsec. (g)(3).
Statutory Notes and Related Subsidiaries
Effective Date of 2021 Amendment
Effective Date of 2020 Amendment
Effective Date of 2019 Amendment
Effective Date of 2015 Amendment
"(1)
"(2)
"(3)
"(A) may be made at any time on or after such date of enactment and before the expiration of the 3-year period of limitation prescribed in section 6511(a) with respect to such taxable year; and
"(B) may be made on an amended return."
Effective Date of 2014 Amendment
Amendment by
Effective Date of 2011 Amendment
"(1)
"(2)
"(A) The amendment made by subsection (b)(2)(B) [amending
"(B) The amendment made by subsection (b)(2)(D) [amending
Effective Date of 2010 Amendment
"(1) the amendments made by subsection (b)(1) [amending provisions set out as a note under
"(2) the amendments made by subsection (b)(2) [amending provisions set out as a note under
"(3) the amendments made by subsections (b)(3) and (b)(4) [amending provisions set out as a note under
Effective Date of 2009 Amendment
Except as otherwise provided and subject to certain applicability provisions, amendment by sections 1899A(a)(1), 1899C(a), 1899E(a), and 1899G(a) of
Effective Date of 2004 Amendment
Amendment by
Effective Date
"(1)
"(2)
Construction
Agency Outreach
Survey and Report on Enhanced Health Coverage Tax Credit Program
"(a)
"(1)
"(2)
"(A) HCTC
"(i) demographic information of such individuals, including income and education levels,
"(ii) satisfaction of such individuals with the enrollment process in the HCTC program,
"(iii) satisfaction of such individuals with available health coverage options under the credit, including level of premiums, benefits, deductibles, cost-sharing requirements, and the adequacy of provider networks, and
"(iv) any other information that the Secretary determines is appropriate.
"(B)
"(i) demographic information of each individual, including income and education levels,
"(ii) whether the individual was aware of the health coverage tax credit or the HCTC program,
"(iii) the reasons the individual has not enrolled in the HCTC program, including whether such reasons include the burden of the process of enrollment and the affordability of coverage,
"(iv) whether the individual has health insurance coverage, and, if so, the source of such coverage, and
"(v) any other information that the Secretary determines is appropriate.
"(3)
"(b)
"(1) In each State and nationally—
"(A) the total number of eligible individuals (as defined in section 35(c) of the Internal Revenue Code of 1986) and the number of eligible individuals receiving the health coverage tax credit,
"(B) the total number of such eligible individuals who receive an advance payment of the health coverage tax credit through the HCTC program,
"(C) the average length of the time period of the participation of eligible individuals in the HCTC program, and
"(D) the total number of participating eligible individuals in the HCTC program who are enrolled in each category of coverage as described in section 35(e)(1) of such Code,
with respect to each category of eligible individuals described in section 35(c)(1) of such Code.
"(2) In each State and nationally, an analysis of—
"(A) the range of monthly health insurance premiums, for self-only coverage and for family coverage, for individuals receiving the health coverage tax credit, and
"(B) the average and median monthly health insurance premiums, for self-only coverage and for family coverage, for individuals receiving the health coverage tax credit,
with respect to each category of coverage as described in section 35(e)(1) of such Code.
"(3) In each State and nationally, an analysis of the following information with respect to the health insurance coverage of individuals receiving the health coverage tax credit who are enrolled in coverage described in subparagraphs (B) through (H) of section 35(e)(1) of such Code:
"(A) Deductible amounts.
"(B) Other out-of-pocket cost-sharing amounts.
"(C) A description of any annual or lifetime limits on coverage or any other significant limits on coverage services, or benefits.
The information required under this paragraph shall be reported with respect to each category of coverage described in such subparagraphs.
"(4) In each State and nationally, the gender and average age of eligible individuals (as defined in section 35(c) of such Code) who receive the health coverage tax credit, in each category of coverage described in section 35(e)(1) of such Code, with respect to each category of eligible individuals described in such section.
"(5) The steps taken by the Secretary of the Treasury to increase the participation rates in the HCTC program among eligible individuals, including outreach and enrollment activities.
"(6) The cost of administering the HCTC program by function, including the cost of subcontractors, and recommendations on ways to reduce administrative costs, including recommended statutory changes.
"(7) The number of States applying for and receiving national emergency grants under [former] section 173(f) of the Workforce Investment Act of 1998 ([former] 29 U.S.C. 2918(f)), the activities funded by such grants on a State-by-State basis, and the time necessary for application approval of such grants."
§36. First-time homebuyer credit
(a) Allowance of credit
In the case of an individual who is a first-time homebuyer of a principal residence in the United States during a taxable year, there shall be allowed as a credit against the tax imposed by this subtitle for such taxable year an amount equal to 10 percent of the purchase price of the residence.
(b) Limitations
(1) Dollar limitation
(A) In general
Except as otherwise provided in this paragraph, the credit allowed under subsection (a) shall not exceed $8,000.
(B) Married individuals filing separately
In the case of a married individual filing a separate return, subparagraph (A) shall be applied by substituting "$4,000" for "$8,000".
(C) Other individuals
If two or more individuals who are not married purchase a principal residence, the amount of the credit allowed under subsection (a) shall be allocated among such individuals in such manner as the Secretary may prescribe, except that the total amount of the credits allowed to all such individuals shall not exceed $8,000.
(D) Special rule for long-time residents of same principal residence
In the case of a taxpayer to whom a credit under subsection (a) is allowed by reason of subsection (c)(6), subparagraphs (A), (B), and (C) shall be applied by substituting "$6,500" for "$8,000" and "$3,250" for "$4,000".
(2) Limitation based on modified adjusted gross income
(A) In general
The amount allowable as a credit under subsection (a) (determined without regard to this paragraph) for the taxable year shall be reduced (but not below zero) by the amount which bears the same ratio to the amount which is so allowable as—
(i) the excess (if any) of—
(I) the taxpayer's modified adjusted gross income for such taxable year, over
(II) $125,000 ($225,000 in the case of a joint return), bears to
(ii) $20,000.
(B) Modified adjusted gross income
For purposes of subparagraph (A), the term "modified adjusted gross income" means the adjusted gross income of the taxpayer for the taxable year increased by any amount excluded from gross income under section 911, 931, or 933.
(3) Limitation based on purchase price
No credit shall be allowed under subsection (a) for the purchase of any residence if the purchase price of such residence exceeds $800,000.
(4) Age limitation
No credit shall be allowed under subsection (a) with respect to the purchase of any residence unless the taxpayer has attained age 18 as of the date of such purchase. In the case of any taxpayer who is married (within the meaning of section 7703), the taxpayer shall be treated as meeting the age requirement of the preceding sentence if the taxpayer or the taxpayer's spouse meets such age requirement.
(c) Definitions
For purposes of this section—
(1) First-time homebuyer
The term "first-time homebuyer" means any individual if such individual (and if married, such individual's spouse) had no present ownership interest in a principal residence during the 3-year period ending on the date of the purchase of the principal residence to which this section applies.
(2) Principal residence
The term "principal residence" has the same meaning as when used in section 121.
(3) Purchase
(A) In general
The term "purchase" means any acquisition, but only if—
(i) the property is not acquired from a person related to the person acquiring such property (or, if married, such individual's spouse), and
(ii) the basis of the property in the hands of the person acquiring such property is not determined—
(I) in whole or in part by reference to the adjusted basis of such property in the hands of the person from whom acquired, or
(II) under section 1014(a) (relating to property acquired from a decedent).
(B) Construction
A residence which is constructed by the taxpayer shall be treated as purchased by the taxpayer on the date the taxpayer first occupies such residence.
(4) Purchase price
The term "purchase price" means the adjusted basis of the principal residence on the date such residence is purchased.
(5) Related persons
A person shall be treated as related to another person if the relationship between such persons would result in the disallowance of losses under section 267 or 707(b) (but, in applying section 267(b) and (c) for purposes of this section, paragraph (4) of section 267(c) shall be treated as providing that the family of an individual shall include only his spouse, ancestors, and lineal descendants).
(6) Exception for long-time residents of same principal residence
In the case of an individual (and, if married, such individual's spouse) who has owned and used the same residence as such individual's principal residence for any 5-consecutive-year period during the 8-year period ending on the date of the purchase of a subsequent principal residence, such individual shall be treated as a first-time homebuyer for purposes of this section with respect to the purchase of such subsequent residence.
(d) Exceptions
No credit under subsection (a) shall be allowed to any taxpayer for any taxable year with respect to the purchase of a residence if—
(1) the taxpayer is a nonresident alien,
(2) the taxpayer disposes of such residence (or such residence ceases to be the principal residence of the taxpayer (and, if married, the taxpayer's spouse)) before the close of such taxable year,
(3) a deduction under section 151 with respect to such taxpayer is allowable to another taxpayer for such taxable year, or
(4) the taxpayer fails to attach to the return of tax for such taxable year a properly executed copy of the settlement statement used to complete such purchase.
(e) Reporting
If the Secretary requires information reporting under section 6045 by a person described in subsection (e)(2) thereof to verify the eligibility of taxpayers for the credit allowable by this section, the exception provided by section 6045(e) shall not apply.
(f) Recapture of credit
(1) In general
Except as otherwise provided in this subsection, if a credit under subsection (a) is allowed to a taxpayer, the tax imposed by this chapter shall be increased by 62/3 percent of the amount of such credit for each taxable year in the recapture period.
(2) Acceleration of recapture
If a taxpayer disposes of the principal residence with respect to which a credit was allowed under subsection (a) (or such residence ceases to be the principal residence of the taxpayer (and, if married, the taxpayer's spouse)) before the end of the recapture period—
(A) the tax imposed by this chapter for the taxable year of such disposition or cessation shall be increased by the excess of the amount of the credit allowed over the amounts of tax imposed by paragraph (1) for preceding taxable years, and
(B) paragraph (1) shall not apply with respect to such credit for such taxable year or any subsequent taxable year.
(3) Limitation based on gain
In the case of the sale of the principal residence to a person who is not related to the taxpayer, the increase in tax determined under paragraph (2) shall not exceed the amount of gain (if any) on such sale. Solely for purposes of the preceding sentence, the adjusted basis of such residence shall be reduced by the amount of the credit allowed under subsection (a) to the extent not previously recaptured under paragraph (1).
(4) Exceptions
(A) Death of taxpayer
Paragraphs (1) and (2) shall not apply to any taxable year ending after the date of the taxpayer's death.
(B) Involuntary conversion
Paragraph (2) shall not apply in the case of a residence which is compulsorily or involuntarily converted (within the meaning of section 1033(a)) if the taxpayer acquires a new principal residence during the 2-year period beginning on the date of the disposition or cessation referred to in paragraph (2). Paragraph (2) shall apply to such new principal residence during the recapture period in the same manner as if such new principal residence were the converted residence.
(C) Transfers between spouses or incident to divorce
In the case of a transfer of a residence to which section 1041(a) applies—
(i) paragraph (2) shall not apply to such transfer, and
(ii) in the case of taxable years ending after such transfer, paragraphs (1) and (2) shall apply to the transferee in the same manner as if such transferee were the transferor (and shall not apply to the transferor).
(D) Waiver of recapture for purchases in 2009 and 2010
In the case of any credit allowed with respect to the purchase of a principal residence after December 31, 2008—
(i) paragraph (1) shall not apply, and
(ii) paragraph (2) shall apply only if the disposition or cessation described in paragraph (2) with respect to such residence occurs during the 36-month period beginning on the date of the purchase of such residence by the taxpayer.
(E) Special rule for members of the armed forces, etc.
(i) In general
In the case of the disposition of a principal residence by an individual (or a cessation referred to in paragraph (2)) after December 31, 2008, in connection with Government orders received by such individual, or such individual's spouse, for qualified official extended duty service—
(I) paragraph (2) and subsection (d)(2) shall not apply to such disposition (or cessation), and
(II) if such residence was acquired before January 1, 2009, paragraph (1) shall not apply to the taxable year in which such disposition (or cessation) occurs or any subsequent taxable year.
(ii) Qualified official extended duty service
For purposes of this section, the term "qualified official extended duty service" means service on qualified official extended duty as—
(I) a member of the uniformed services,
(II) a member of the Foreign Service of the United States, or
(III) an employee of the intelligence community.
(iii) Definitions
Any term used in this subparagraph which is also used in paragraph (9) of section 121(d) shall have the same meaning as when used in such paragraph.
(5) Joint returns
In the case of a credit allowed under subsection (a) with respect to a joint return, half of such credit shall be treated as having been allowed to each individual filing such return for purposes of this subsection.
(6) Return requirement
If the tax imposed by this chapter for the taxable year is increased under this subsection, the taxpayer shall, notwithstanding section 6012, be required to file a return with respect to the taxes imposed under this subtitle.
(7) Recapture period
For purposes of this subsection, the term "recapture period" means the 15 taxable years beginning with the second taxable year following the taxable year in which the purchase of the principal residence for which a credit is allowed under subsection (a) was made.
(g) Election to treat purchase in prior year
In the case of a purchase of a principal residence after December 31, 2008, a taxpayer may elect to treat such purchase as made on December 31 of the calendar year preceding such purchase for purposes of this section (other than subsections (b)(4), (c), (f)(4)(D), and (h)).
(h) Application of section
(1) In general
This section shall only apply to a principal residence purchased by the taxpayer on or after April 9, 2008, and before May 1, 2010.
(2) Exception in case of binding contract
In the case of any taxpayer who enters into a written binding contract before May 1, 2010, to close on the purchase of a principal residence before July 1, 2010, and who purchases such residence before October 1, 2010, paragraph (1) shall be applied by substituting "October 1, 2010" for "May 1, 2010".
(3) Special rule for individuals on qualified official extended duty outside the United States
In the case of any individual who serves on qualified official extended duty service (as defined in section 121(d)(9)(C)(i)) outside the United States for at least 90 days during the period beginning after December 31, 2008, and ending before May 1, 2010, and, if married, such individual's spouse—
(A) paragraphs (1) and (2) shall each be applied by substituting "May 1, 2011" for "May 1, 2010", and
(B) paragraph (2) shall be applied by substituting "July 1, 2011" for "July 1, 2010", and for "October 1, 2010".
(Added
Editorial Notes
Prior Provisions
A prior section 36 was renumbered
Another prior section 36, acts Aug. 16, 1954, ch. 736,
Amendments
2010—Subsec. (h)(2).
Subsec. (h)(3)(B).
2009—Subsec. (b)(1)(A).
Subsec. (b)(1)(B).
Subsec. (b)(1)(C).
Subsec. (b)(1)(D).
Subsec. (b)(2)(A)(i)(II).
Subsec. (b)(3).
Subsec. (b)(4).
Subsec. (c)(3)(A)(i).
Subsec. (c)(6).
Subsec. (d).
"(1) a credit under section 1400C (relating to first-time homebuyer in the District of Columbia) is allowable to the taxpayer (or the taxpayer's spouse) for such taxable year or any prior taxable year,
"(2) the residence is financed by the proceeds of a qualified mortgage issue the interest on which is exempt from tax under section 103,".
Subsec. (d)(3).
Subsec. (d)(4).
Subsec. (f)(4)(D).
Subsec. (f)(4)(E).
Subsec. (g).
Subsec. (h).
Subsec. (h)(3).
Statutory Notes and Related Subsidiaries
Effective Date of 2010 Amendment
Effective Date of 2009 Amendment
"(1)
"(2)
"(3)
"(1)
"(2)
"(3)
Effective Date
Section applicable to residences purchased on or after Apr. 9, 2008, in taxable years ending on or after such date, see section 3011(c) of
[§36A. Repealed. Pub. L. 113–295, div. A, title II, §221(a)(5)(A), Dec. 19, 2014, 128 Stat. 4037 ]
Section, added
Statutory Notes and Related Subsidiaries
Effective Date of Repeal
Repeal effective Dec. 19, 2014, subject to a savings provision, see section 221(b) of
Treatment of Possessions
§36B. Refundable credit for coverage under a qualified health plan
(a) In general
In the case of an applicable taxpayer, there shall be allowed as a credit against the tax imposed by this subtitle for any taxable year an amount equal to the premium assistance credit amount of the taxpayer for the taxable year.
(b) Premium assistance credit amount
For purposes of this section—
(1) In general
The term "premium assistance credit amount" means, with respect to any taxable year, the sum of the premium assistance amounts determined under paragraph (2) with respect to all coverage months of the taxpayer occurring during the taxable year.
(2) Premium assistance amount
The premium assistance amount determined under this subsection with respect to any coverage month is the amount equal to the lesser of—
(A) the monthly premiums for such month for 1 or more qualified health plans offered in the individual market within a State which cover the taxpayer, the taxpayer's spouse, or any dependent (as defined in section 152) of the taxpayer and which were enrolled in through an Exchange established by the State under 1311 1 of the Patient Protection and Affordable Care Act, or
(B) the excess (if any) of—
(i) the adjusted monthly premium for such month for the applicable second lowest cost silver plan with respect to the taxpayer, over
(ii) an amount equal to 1/12 of the product of the applicable percentage and the taxpayer's household income for the taxable year.
(3) Other terms and rules relating to premium assistance amounts
For purposes of paragraph (2)—
(A) Applicable percentage
(i) In general
Except as provided in clause (ii), the applicable percentage for any taxable year shall be the percentage such that the applicable percentage for any taxpayer whose household income is within an income tier specified in the following table shall increase, on a sliding scale in a linear manner, from the initial premium percentage to the final premium percentage specified in such table for such income tier:
| In the case of household income (expressed as a percent of poverty line) within the following income tier: | The initial premium percentage is— | The final premium percentage is— |
|---|---|---|
| Up to 133% | 2.0% | 2.0% |
| 133% up to 150% | 3.0% | 4.0% |
| 150% up to 200% | 4.0% | 6.3% |
| 200% up to 250% | 6.3% | 8.05% |
| 250% up to 300% | 8.05% | 9.5% |
| 300% up to 400% | 9.5% | 9.5%. |
(ii) Indexing
(I) In general
Subject to subclause (II), in the case of taxable years beginning in any calendar year after 2014, the initial and final applicable percentages under clause (i) (as in effect for the preceding calendar year after application of this clause) shall be adjusted to reflect the excess of the rate of premium growth for the preceding calendar year over the rate of income growth for the preceding calendar year.
(II) Additional adjustment
Except as provided in subclause (III), in the case of any calendar year after 2018, the percentages described in subclause (I) shall, in addition to the adjustment under subclause (I), be adjusted to reflect the excess (if any) of the rate of premium growth estimated under subclause (I) for the preceding calendar year over the rate of growth in the consumer price index for the preceding calendar year.
(III) Failsafe
Subclause (II) shall apply for any calendar year only if the aggregate amount of premium tax credits under this section and cost-sharing reductions under section 1402 of the Patient Protection and Affordable Care Act for the preceding calendar year exceeds an amount equal to 0.504 percent of the gross domestic product for the preceding calendar year.
(iii) Temporary percentages for 2021 through 2025
In the case of a taxable year beginning after December 31, 2020, and before January 1, 2026—
(I) clause (ii) shall not apply for purposes of adjusting premium percentages under this subparagraph, and
(II) the following table shall be applied in lieu of the table contained in clause (i):
| In the case of household income (expressed as a percent of poverty line) within the following income tier: | The initial premium percentage is— | The final premium percentage is— |
|---|---|---|
| Up to 150.0 percent | 0.0 | 0.0 |
| 150.0 percent up to 200.0 percent | 0.0 | 2.0 |
| 200.0 percent up to 250.0 percent | 2.0 | 4.0 |
| 250.0 percent up to 300.0 percent | 4.0 | 6.0 |
| 300.0 percent up to 400.0 percent | 6.0 | 8.5 |
| 400.0 percent and higher | 8.5 | 8.5 |
(B) Applicable second lowest cost silver plan
The applicable second lowest cost silver plan with respect to any applicable taxpayer is the second lowest cost silver plan of the individual market in the rating area in which the taxpayer resides which—
(i) is offered through the same Exchange through which the qualified health plans taken into account under paragraph (2)(A) were offered, and
(ii) provides—
(I) self-only coverage in the case of an applicable taxpayer—
(aa) whose tax for the taxable year is determined under section 1(c) 2 (relating to unmarried individuals other than surviving spouses and heads of households) and who is not allowed a deduction under section 151 for the taxable year with respect to a dependent, or
(bb) who is not described in item (aa) but who purchases only self-only coverage, and
(II) family coverage in the case of any other applicable taxpayer.
If a taxpayer files a joint return and no credit is allowed under this section with respect to 1 of the spouses by reason of subsection (e), the taxpayer shall be treated as described in clause (ii)(I) unless a deduction is allowed under section 151 for the taxable year with respect to a dependent other than either spouse and subsection (e) does not apply to the dependent.
(C) Adjusted monthly premium
The adjusted monthly premium for an applicable second lowest cost silver plan is the monthly premium which would have been charged (for the rating area with respect to which the premiums under paragraph (2)(A) were determined) for the plan if each individual covered under a qualified health plan taken into account under paragraph (2)(A) were covered by such silver plan and the premium was adjusted only for the age of each such individual in the manner allowed under section 2701 of the Public Health Service Act. In the case of a State participating in the wellness discount demonstration project under section 2705(d) of the Public Health Service Act, the adjusted monthly premium shall be determined without regard to any premium discount or rebate under such project.
(D) Additional benefits
If—
(i) a qualified health plan under section 1302(b)(5) of the Patient Protection and Affordable Care Act offers benefits in addition to the essential health benefits required to be provided by the plan, or
(ii) a State requires a qualified health plan under section 1311(d)(3)(B) of such Act to cover benefits in addition to the essential health benefits required to be provided by the plan,
the portion of the premium for the plan properly allocable (under rules prescribed by the Secretary of Health and Human Services) to such additional benefits shall not be taken into account in determining either the monthly premium or the adjusted monthly premium under paragraph (2).
(E) Special rule for pediatric dental coverage
For purposes of determining the amount of any monthly premium, if an individual enrolls in both a qualified health plan and a plan described in section 1311(d)(2)(B)(ii)(I) 2 of the Patient Protection and Affordable Care Act for any plan year, the portion of the premium for the plan described in such section that (under regulations prescribed by the Secretary) is properly allocable to pediatric dental benefits which are included in the essential health benefits required to be provided by a qualified health plan under section 1302(b)(1)(J) of such Act shall be treated as a premium payable for a qualified health plan.
(c) Definition and rules relating to applicable taxpayers, coverage months, and qualified health plan
For purposes of this section—
(1) Applicable taxpayer
(A) In general
The term "applicable taxpayer" means, with respect to any taxable year, a taxpayer whose household income for the taxable year equals or exceeds 100 percent but does not exceed 400 percent of an amount equal to the poverty line for a family of the size involved.
(B) Special rule for certain individuals lawfully present in the United States
If—
(i) a taxpayer has a household income which is not greater than 100 percent of an amount equal to the poverty line for a family of the size involved, and
(ii) the taxpayer is an alien lawfully present in the United States, but is not eligible for the medicaid program under title XIX of the Social Security Act by reason of such alien status,
the taxpayer shall, for purposes of the credit under this section, be treated as an applicable taxpayer with a household income which is equal to 100 percent of the poverty line for a family of the size involved.
(C) Married couples must file joint return
If the taxpayer is married (within the meaning of section 7703) at the close of the taxable year, the taxpayer shall be treated as an applicable taxpayer only if the taxpayer and the taxpayer's spouse file a joint return for the taxable year.
(D) Denial of credit to dependents
No credit shall be allowed under this section to any individual with respect to whom a deduction under section 151 is allowable to another taxpayer for a taxable year beginning in the calendar year in which such individual's taxable year begins.
(E) Temporary rule for 2021 through 2025
In the case of a taxable year beginning after December 31, 2020, and before January 1, 2026, subparagraph (A) shall be applied without regard to "but does not exceed 400 percent".
(2) Coverage month
For purposes of this subsection—
(A) In general
The term "coverage month" means, with respect to an applicable taxpayer, any month if—
(i) as of the first day of such month the taxpayer, the taxpayer's spouse, or any dependent of the taxpayer is covered by a qualified health plan described in subsection (b)(2)(A) that was enrolled in through an Exchange established by the State under section 1311 of the Patient Protection and Affordable Care Act, and
(ii) the premium for coverage under such plan for such month is paid by the taxpayer (or through advance payment of the credit under subsection (a) under section 1412 of the Patient Protection and Affordable Care Act).
(B) Exception for minimum essential coverage
(i) In general
The term "coverage month" shall not include any month with respect to an individual if for such month the individual is eligible for minimum essential coverage other than eligibility for coverage described in section 5000A(f)(1)(C) (relating to coverage in the individual market).
(ii) Minimum essential coverage
The term "minimum essential coverage" has the meaning given such term by section 5000A(f).
(C) Special rule for employer-sponsored minimum essential coverage
For purposes of subparagraph (B)—
(i) Coverage must be affordable
Except as provided in clause (iii), an employee shall not be treated as eligible for minimum essential coverage if such coverage—
(I) consists of an eligible employer-sponsored plan (as defined in section 5000A(f)(2)), and
(II) the employee's required contribution (within the meaning of section 5000A(e)(1)(B)) with respect to the plan exceeds 9.5 percent of the applicable taxpayer's household income.
This clause shall also apply to an individual who is eligible to enroll in the plan by reason of a relationship the individual bears to the employee.
(ii) Coverage must provide minimum value
Except as provided in clause (iii), an employee shall not be treated as eligible for minimum essential coverage if such coverage consists of an eligible employer-sponsored plan (as defined in section 5000A(f)(2)) and the plan's share of the total allowed costs of benefits provided under the plan is less than 60 percent of such costs.
(iii) Employee or family must not be covered under employer plan
Clauses (i) and (ii) shall not apply if the employee (or any individual described in the last sentence of clause (i)) is covered under the eligible employer-sponsored plan or the grandfathered health plan.
(iv) Indexing
In the case of plan years beginning in any calendar year after 2014, the Secretary shall adjust the 9.5 percent under clause (i)(II) in the same manner as the percentages are adjusted under subsection (b)(3)(A)(ii).
(3) Definitions and other rules
(A) Qualified health plan
The term "qualified health plan" has the meaning given such term by section 1301(a) of the Patient Protection and Affordable Care Act, except that such term shall not include a qualified health plan which is a catastrophic plan described in section 1302(e) of such Act.
(B) Grandfathered health plan
The term "grandfathered health plan" has the meaning given such term by section 1251 of the Patient Protection and Affordable Care Act.
(4) Special rules for qualified small employer health reimbursement arrangements
(A) In general
The term "coverage month" shall not include any month with respect to an employee (or any spouse or dependent of such employee) if for such month the employee is provided a qualified small employer health reimbursement arrangement which constitutes affordable coverage.
(B) Denial of double benefit
In the case of any employee who is provided a qualified small employer health reimbursement arrangement for any coverage month (determined without regard to subparagraph (A)), the credit otherwise allowable under subsection (a) to the taxpayer for such month shall be reduced (but not below zero) by the amount described in subparagraph (C)(i)(II) for such month.
(C) Affordable coverage
For purposes of subparagraph (A), a qualified small employer health reimbursement arrangement shall be treated as constituting affordable coverage for a month if—
(i) the excess of—
(I) the amount that would be paid by the employee as the premium for such month for self-only coverage under the second lowest cost silver plan offered in the relevant individual health insurance market, over
(II) 1/12 of the employee's permitted benefit (as defined in section 9831(d)(3)(C)) under such arrangement, does not exceed—
(ii) 1/12 of 9.5 percent of the employee's household income.
(D) Qualified small employer health reimbursement arrangement
For purposes of this paragraph, the term "qualified small employer health reimbursement arrangement" has the meaning given such term by section 9831(d)(2).
(E) Coverage for less than entire year
In the case of an employee who is provided a qualified small employer health reimbursement arrangement for less than an entire year, subparagraph (C)(i)(II) shall be applied by substituting "the number of months during the year for which such arrangement was provided" for "12".
(F) Indexing
In the case of plan years beginning in any calendar year after 2014, the Secretary shall adjust the 9.5 percent amount under subparagraph (C)(ii) in the same manner as the percentages are adjusted under subsection (b)(3)(A)(ii).
(d) Terms relating to income and families
For purposes of this section—
(1) Family size
The family size involved with respect to any taxpayer shall be equal to the number of individuals for whom the taxpayer is allowed a deduction under section 151 (relating to allowance of deduction for personal exemptions) for the taxable year.
(2) Household income
(A) Household income
The term "household income" means, with respect to any taxpayer, an amount equal to the sum of—
(i) the modified adjusted gross income of the taxpayer, plus
(ii) the aggregate modified adjusted gross incomes of all other individuals who—
(I) were taken into account in determining the taxpayer's family size under paragraph (1), and
(II) were required to file a return of tax imposed by section 1 for the taxable year.
(B) Modified adjusted gross income
The term "modified adjusted gross income" means adjusted gross income increased by—
(i) any amount excluded from gross income under section 911,
(ii) any amount of interest received or accrued by the taxpayer during the taxable year which is exempt from tax, and
(iii) an amount equal to the portion of the taxpayer's social security benefits (as defined in section 86(d)) which is not included in gross income under section 86 for the taxable year.
(3) Poverty line
(A) In general
The term "poverty line" has the meaning given that term in section 2110(c)(5) of the Social Security Act (
(B) Poverty line used
In the case of any qualified health plan offered through an Exchange for coverage during a taxable year beginning in a calendar year, the poverty line used shall be the most recently published poverty line as of the 1st day of the regular enrollment period for coverage during such calendar year.
(e) Rules for individuals not lawfully present
(1) In general
If 1 or more individuals for whom a taxpayer is allowed a deduction under section 151 (relating to allowance of deduction for personal exemptions) for the taxable year (including the taxpayer or his spouse) are individuals who are not lawfully present—
(A) the aggregate amount of premiums otherwise taken into account under clauses (i) and (ii) of subsection (b)(2)(A) shall be reduced by the portion (if any) of such premiums which is attributable to such individuals, and
(B) for purposes of applying this section, the determination as to what percentage a taxpayer's household income bears to the poverty level for a family of the size involved shall be made under one of the following methods:
(i) A method under which—
(I) the taxpayer's family size is determined by not taking such individuals into account, and
(II) the taxpayer's household income is equal to the product of the taxpayer's household income (determined without regard to this subsection) and a fraction—
(aa) the numerator of which is the poverty line for the taxpayer's family size determined after application of subclause (I), and
(bb) the denominator of which is the poverty line for the taxpayer's family size determined without regard to subclause (I).
(ii) A comparable method reaching the same result as the method under clause (i).
(2) Lawfully present
For purposes of this section, an individual shall be treated as lawfully present only if the individual is, and is reasonably expected to be for the entire period of enrollment for which the credit under this section is being claimed, a citizen or national of the United States or an alien lawfully present in the United States.
(3) Secretarial authority
The Secretary of Health and Human Services, in consultation with the Secretary, shall prescribe rules setting forth the methods by which calculations of family size and household income are made for purposes of this subsection. Such rules shall be designed to ensure that the least burden is placed on individuals enrolling in qualified health plans through an Exchange and taxpayers eligible for the credit allowable under this section.
(f) Reconciliation of credit and advance credit
(1) In general
The amount of the credit allowed under this section for any taxable year shall be reduced (but not below zero) by the amount of any advance payment of such credit under section 1412 of the Patient Protection and Affordable Care Act.
(2) Excess advance payments
(A) In general
If the advance payments to a taxpayer under section 1412 of the Patient Protection and Affordable Care Act for a taxable year exceed the credit allowed by this section (determined without regard to paragraph (1)), the tax imposed by this chapter for the taxable year shall be increased by the amount of such excess.
(B) Limitation on increase
(i) In general
In the case of a taxpayer whose household income is less than 400 percent of the poverty line for the size of the family involved for the taxable year, the amount of the increase under subparagraph (A) shall in no event exceed the applicable dollar amount determined in accordance with the following table (one-half of such amount in the case of a taxpayer whose tax is determined under section 1(c) 2 for the taxable year):
| If the household income (expressed as a percent of poverty line) is: | The applicable dollar amount is: |
|---|---|
| Less than 200% | $600 |
| At least 200% but less than 300% | $1,500 |
| At least 300% but less than 400% | $2,500. |
(ii) Indexing of amount
In the case of any calendar year beginning after 2014, each of the dollar amounts in the table contained under clause (i) shall be increased by an amount equal to—
(I) such dollar amount, multiplied by
(II) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year, determined by substituting "calendar year 2013" for "calendar year 2016" in subparagraph (A)(ii) thereof.
If the amount of any increase under clause (i) is not a multiple of $50, such increase shall be rounded to the next lowest multiple of $50.
(iii) Temporary modification of limitation on increase
In the case of any taxable year beginning in 2020, for any taxpayer who files for such taxable year an income tax return reconciling any advance payment of the credit under this section, the Secretary shall treat subparagraph (A) as not applying.
(3) Information requirement
Each Exchange (or any person carrying out 1 or more responsibilities of an Exchange under section 1311(f)(3) or 1321(c) of the Patient Protection and Affordable Care Act) shall provide the following information to the Secretary and to the taxpayer with respect to any health plan provided through the Exchange:
(A) The level of coverage described in section 1302(d) of the Patient Protection and Affordable Care Act and the period such coverage was in effect.
(B) The total premium for the coverage without regard to the credit under this section or cost-sharing reductions under section 1402 of such Act.
(C) The aggregate amount of any advance payment of such credit or reductions under section 1412 of such Act.
(D) The name, address, and TIN of the primary insured and the name and TIN of each other individual obtaining coverage under the policy.
(E) Any information provided to the Exchange, including any change of circumstances, necessary to determine eligibility for, and the amount of, such credit.
(F) Information necessary to determine whether a taxpayer has received excess advance payments.
(g) Special rule for individuals who receive unemployment compensation during 2021
(1) In general
For purposes of this section, in the case of a taxpayer who has received, or has been approved to receive, unemployment compensation for any week beginning during 2021, for the taxable year in which such week begins—
(A) such taxpayer shall be treated as an applicable taxpayer, and
(B) there shall not be taken into account any household income of the taxpayer in excess of 133 percent of the poverty line for a family of the size involved.
(2) Unemployment compensation
For purposes of this subsection, the term "unemployment compensation" has the meaning given such term in section 85(b).
(3) Evidence of unemployment compensation
For purposes of this subsection, a taxpayer shall not be treated as having received (or been approved to receive) unemployment compensation for any week unless such taxpayer provides self-attestation of, and such documentation as the Secretary shall prescribe which demonstrates, such receipt or approval.
(4) Clarification of rules remaining applicable
(A) Joint return requirement
Paragraph (1)(A) shall not affect the application of subsection (c)(1)(C).
(B) Household income and affordabillity 3
Paragraph (1)(B) shall not apply to any determination of household income for purposes of paragraph (2)(C)(i)(II) or (4)(C)(ii) of subsection (c) 4
(h) Regulations
The Secretary shall prescribe such regulations as may be necessary to carry out the provisions of this section, including regulations which provide for—
(1) the coordination of the credit allowed under this section with the program for advance payment of the credit under section 1412 of the Patient Protection and Affordable Care Act, and
(2) the application of subsection (f) where the filing status of the taxpayer for a taxable year is different from such status used for determining the advance payment of the credit.
(Added and amended
Inflation Adjusted Items for Certain Years
For inflation adjustment of certain items in this section, see Revenue Procedures listed in a table under
Editorial Notes
References in Text
Sections 1251, 1301, 1302, 1311, 1321, 1402, and 1412 of the Patient Protection and Affordable Care Act, referred to in text, are classified to sections 18011, 18021, 18022, 18031, 18041, 18071, and 18082, respectively, of Title 42, The Public Health and Welfare.
Section 1(c), referred to in subsecs. (b)(3)(B)(ii)(I)(aa) and (f)(2)(B)(i), to be treated, for purposes of the rate of tax, as a reference to the corresponding rate bracket under
Sections 2701 and 2705(d) of the Public Health Service Act, referred to in subsec. (b)(3)(C), are classified to sections 300gg and 300gg–4(d), respectively, of Title 42, The Public Health and Welfare. The reference to section 2705(d) probably should be a reference to section 2705(l), which relates to wellness program demonstration project and is classified to
Section 1311(d)(2)(B)(ii)(I) of the Patient Protection and Affordable Care Act, referred to in subsec. (b)(3)(E), probably means section 1311(d)(2)(B)(ii) of
The Social Security Act, referred to in subsec. (c)(1)(B)(ii), is act Aug. 14, 1935, ch. 531,
Amendments
2022—Subsec. (b)(3)(A)(iii).
Subsec. (c)(1)(E).
2021—Subsec. (b)(3)(A)(iii).
Subsec. (c)(1)(E).
Subsec. (f)(2)(B)(iii).
Subsecs. (g), (h).
2017—Subsec. (f)(2)(B)(ii)(II).
2016—Subsec. (c)(4).
2011—Subsec. (c)(2)(D).
Subsec. (d)(2)(B)(iii).
Subsec. (f)(2)(B)(i).
2010—Subsec. (b)(3)(A)(i).
"(I) the taxpayer's household income for the taxable year in excess of 100 percent of the poverty line for a family of the size involved, bears to
"(II) an amount equal to 200 percent of the poverty line for a family of the size involved."
Subsec. (b)(3)(A)(ii).
Subsec. (b)(3)(A)(iii).
Subsec. (c)(1)(A).
Subsec. (c)(2)(C)(i)(II).
Subsec. (c)(2)(C)(iv).
Subsec. (c)(2)(D).
Subsec. (d)(2)(A)(i), (ii).
Subsec. (d)(2)(B).
"(i) decreased by the amount of any deduction allowable under paragraph (1), (3), (4), or (10) of section 62(a),
"(ii) increased by the amount of interest received or accrued during the taxable year which is exempt from tax imposed by this chapter, and
"(iii) determined without regard to sections 911, 931, and 933."
Subsec. (f)(2)(B).
Subsec. (f)(2)(B)(ii).
Subsec. (f)(3).
Statutory Notes and Related Subsidiaries
Effective Date of 2022 Amendment
Effective Date of 2021 Amendment
Effective Date of 2017 Amendment
Amendment by
Effective Date of 2016 Amendment
"(A)
"(B)
"(C)
"(D)
"(i)
"(ii)
"(E)
"(F)
"(i)
"(ii)
"(iii)
Effective Date of 2011 Amendment
Effective Date of 2010 Amendment
Effective Date
Substantiation Requirements
No Impact on Social Security Trust Funds
"(1)
"(2)
1 So in original. Probably should be preceded by "section".
2 See References in Text note below.
3 So in original. Probably should be "affordability".
4 So in original. Probably should be followed by a period.
[§36C. Renumbered §23]
§37. Overpayments of tax
For credit against the tax imposed by this subtitle for overpayments of tax, see section 6401.
(Aug. 16, 1954, ch. 736,
Editorial Notes
Prior Provisions
A prior section 37 was renumbered
Subpart D—Business Related Credits
Editorial Notes
Amendments
2022—
2019—
2018—
2017—
2010—
2008—
2006—
2005—
2004—
2001—
2000—
1996—
1993—
1992—
1990—
1986—
1984—
1 So in original. Does not conform to section catchline.
§38. General business credit
(a) Allowance of credit
There shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the sum of—
(1) the business credit carryforwards carried to such taxable year,
(2) the amount of the current year business credit, plus
(3) the business credit carrybacks carried to such taxable year.
(b) Current year business credit
For purposes of this subpart, the amount of the current year business credit is the sum of the following credits determined for the taxable year:
(1) the investment credit determined under section 46,
(2) the work opportunity credit determined under section 51(a),
(3) the alcohol fuels credit determined under section 40(a),
(4) the research credit determined under section 41(a),
(5) the low-income housing credit determined under section 42(a),
(6) the enhanced oil recovery credit under section 43(a),
(7) in the case of an eligible small business (as defined in section 44(b)), the disabled access credit determined under section 44(a),
(8) the renewable electricity production credit under section 45(a),
(9) the empowerment zone employment credit determined under section 1396(a),
(10) the Indian employment credit as determined under section 45A(a),
(11) the employer social security credit determined under section 45B(a),
(12) the orphan drug credit determined under section 45C(a),
(13) the new markets tax credit determined under section 45D(a),
(14) in the case of an eligible employer (as defined in section 45E(c)), the small employer pension plan startup cost credit determined under section 45E(a),
(15) the employer-provided child care credit determined under section 45F(a),
(16) the railroad track maintenance credit determined under section 45G(a),
(17) the biodiesel fuels credit determined under section 40A(a),
(18) the low sulfur diesel fuel production credit determined under section 45H(a),
(19) the marginal oil and gas well production credit determined under section 45I(a),
(20) the distilled spirits credit determined under section 5011(a),
(21) the advanced nuclear power facility production credit determined under section 45J(a),
(22) the nonconventional source production credit determined under section 45K(a),
(23) the new energy efficient home credit determined under section 45L(a),
(24) the portion of the alternative motor vehicle credit to which section 30B(g)(1) applies,
(25) the portion of the alternative fuel vehicle refueling property credit to which section 30C(d)(1) applies,
(26) the mine rescue team training credit determined under section 45N(a),
(27) in the case of an eligible agricultural business (as defined in section 45O(e)), the agricultural chemicals security credit determined under section 45O(a),
(28) the differential wage payment credit determined under section 45P(a),
(29) the carbon dioxide sequestration credit determined under section 45Q(a),
(30) the portion of the new clean vehicle credit to which section 30D(c)(1) applies,
(31) the small employer health insurance credit determined under section 45R,
(32) in the case of an eligible employer (as defined in section 45S(c)), the paid family and medical leave credit determined under section 45S(a),
(33) in the case of an eligible employer (as defined in section 45T(c)), the retirement auto-enrollment credit determined under section 45T(a), plus
(34) the zero-emission nuclear power production credit determined under section 45U(a).
(35) the sustainable aviation fuel credit determined under section 40B,
(36) the clean hydrogen production credit determined under section 45V(a),
(37) the qualified commercial clean vehicle credit determined under section 45W, plus
(38) the advanced manufacturing production credit determined under section 45X(a).
(41) 1 in the case of an eligible small employer (as defined in section 45AA(c)), the military spouse retirement plan eligibility credit determined under section 45AA(a).
(c) Limitation based on amount of tax
(1) In general
The credit allowed under subsection (a) for any taxable year shall not exceed the excess (if any) of the taxpayer's net income tax over the greater of—
(A) the tentative minimum tax for the taxable year, or
(B) 25 percent of so much of the taxpayer's net regular tax liability as exceeds $25,000.
For purposes of the preceding sentence, the term "net income tax" means the sum of the regular tax liability and the tax imposed by section 55, reduced by the credits allowable under subparts A and B of this part, and the term "net regular tax liability" means the regular tax liability reduced by the sum of the credits allowable under subparts A and B of this part.
(2) Empowerment zone employment credit may offset 25 percent of minimum tax
(A) In general
In the case of the empowerment zone employment credit—
(i) this section and section 39 shall be applied separately with respect to such credit, and
(ii) for purposes of applying paragraph (1) to such credit—
(I) 75 percent of the tentative minimum tax shall be substituted for the tentative minimum tax under subparagraph (A) thereof, and
(II) the limitation under paragraph (1) (as modified by subclause (I)) shall be reduced by the credit allowed under subsection (a) for the taxable year (other than the empowerment zone employment credit and the specified credits).
(B) Empowerment zone employment credit
For purposes of this paragraph, the term "empowerment zone employment credit" means the portion of the credit under subsection (a) which is attributable to the credit determined under section 1396 (relating to empowerment zone employment credit).
[(3) Repealed. Pub. L. 115–141, div. U, title IV, §401(d)(6)(B)(iii), Mar. 23, 2018, 132 Stat. 1211 ]
(4) Special rules for specified credits
(A) In general
In the case of specified credits—
(i) this section and section 39 shall be applied separately with respect to such credits, and
(ii) in applying paragraph (1) to such credits—
(I) the tentative minimum tax shall be treated as being zero, and
(II) the limitation under paragraph (1) (as modified by subclause (I)) shall be reduced by the credit allowed under subsection (a) for the taxable year (other than the specified credits).
(B) Specified credits
For purposes of this subsection, the term "specified credits" means—
(i) for taxable years beginning after December 31, 2004, the credit determined under section 40,
(ii) the credit determined under section 41 for the taxable year with respect to an eligible small business (as defined in paragraph (5)(A) after application of the rules of paragraph (5)(B)),
(iii) the credit determined under section 42 to the extent attributable to buildings placed in service after December 31, 2007,
(iv) the credit determined under section 45 to the extent that such credit is attributable to electricity or refined coal produced—
(I) at a facility which is originally placed in service after the date of the enactment of this paragraph, and
(II) during the 4-year period beginning on the date that such facility was originally placed in service,
(v) the credit determined under section 45 to the extent that such credit is attributable to section 45(e)(10) (relating to Indian coal production facilities),
(vi) the credit determined under section 45B,
(vii) the credit determined under section 45G,
(viii) the credit determined under section 45R,
(ix) the credit determined under section 45S,
(x) the credit determined under section 46 to the extent that such credit is attributable to the energy credit determined under section 48,
(xi) the credit determined under section 46 to the extent that such credit is attributable to the rehabilitation credit under section 47, but only with respect to qualified rehabilitation expenditures properly taken into account for periods after December 31, 2007, and
(xii) the credit determined under section 51.
(5) Rules related to eligible small businesses
(A) Eligible small business
For purposes of this subsection, the term "eligible small business" means, with respect to any taxable year—
(i) a corporation the stock of which is not publicly traded,
(ii) a partnership, or
(iii) a sole proprietorship,
if the average annual gross receipts of such corporation, partnership, or sole proprietorship for the 3-taxable-year period preceding such taxable year does not exceed $50,000,000. For purposes of applying the test under the preceding sentence, rules similar to the rules of paragraphs (2) and (3) of section 448(c) shall apply.
(B) Treatment of partners and S corporation shareholders
For purposes of paragraph (4)(B)(ii), any credit determined under section 41 with respect to a partnership or S corporation shall not be treated as a specified credit by any partner or shareholder unless such partner or shareholder meets the gross receipts test under subparagraph (A) for the taxable year in which such credit is treated as a current year business credit.
(6) Special rules
(A) Married individuals
In the case of a husband or wife who files a separate return, the amount specified under subparagraph (B) of paragraph (1) shall be $12,500 in lieu of $25,000. This subparagraph shall not apply if the spouse of the taxpayer has no business credit carryforward or carryback to, and has no current year business credit for, the taxable year of such spouse which ends within or with the taxpayer's taxable year.
(B) Controlled groups
In the case of a controlled group, the $25,000 amount specified under subparagraph (B) of paragraph (1) shall be reduced for each component member of such group by apportioning $25,000 among the component members of such group in such manner as the Secretary shall by regulations prescribe. For purposes of the preceding sentence, the term "controlled group" has the meaning given to such term by section 1563(a).
(C) Limitations with respect to certain persons
In the case of a person described in subparagraph (A) or (B) of section 46(e)(1) (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990), the $25,000 amount specified under subparagraph (B) of paragraph (1) shall equal such person's ratable share (as determined under section 46(e)(2) (as so in effect) of such amount.
(D) Estates and trusts
In the case of an estate or trust, the $25,000 amount specified under subparagraph (B) of paragraph (1) shall be reduced to an amount which bears the same ratio to $25,000 as the portion of the income of the estate or trust which is not allocated to beneficiaries bears to the total income of the estate or trust.
(E) Corporations
In the case of a corporation—
(i) the first sentence of paragraph (1) shall be applied by substituting "25 percent of the taxpayer's net income tax as exceeds $25,000" for "the greater of" and all that follows,
(ii) paragraph (2)(A) shall be applied without regard to clause (ii)(I) thereof, and
(iii) paragraph (4)(A) shall be applied without regard to clause (ii)(I) thereof.
(d) Ordering rules
For purposes of any provision of this title where it is necessary to ascertain the extent to which the credits determined under any section referred to in subsection (b) are used in a taxable year or as a carryback or carryforward—
(1) In general
The order in which such credits are used shall be determined on the basis of the order in which they are listed in subsection (b) as of the close of the taxable year in which the credit is used.
(2) Components of investment credit
The order in which the credits listed in section 46 are used shall be determined on the basis of the order in which such credits are listed in section 46 as of the close of the taxable year in which the credit is used.
(Added and amended
Amendment of Subsection (b)
(39) the clean electricity production credit determined under section 45Y(a).
See 2022 Amendment note below.
(40) the clean fuel production credit determined under section 45Z(a).
See 2022 Amendment note below.
Editorial Notes
References in Text
The date of the enactment of this paragraph, referred to in subsec. (c)(4)(B)(iv)(I), is the date of enactment of
The date of the enactment of the Revenue Reconciliation Act of 1990, referred to in subsec. (c)(6)(C), is the date of enactment of
Codification
Prior Provisions
A prior section 38, added
Another prior section 38 was renumbered
Amendments
2022—Subsec. (b)(30).
Subsec. (b)(34).
Subsec. (b)(35).
Subsec. (b)(36).
Subsec. (b)(37).
Subsec. (b)(38).
Subsec. (b)(39).
Subsec. (b)(40).
Subsec. (b)(41).
Subsec. (c)(6)(E).
2019—Subsec. (b)(33).
2018—Subsec. (b)(24), (25).
Subsec. (b)(26) to (29).
Subsec. (b)(30) to (32).
Subsec. (b)(33) to (37).
Subsec. (c)(2)(A)(ii)(II).
Subsec. (c)(3).
Subsec. (c)(4)(A)(ii)(II).
Subsec. (c)(4)(B)(ii).
Subsec. (c)(5).
Subsec. (c)(5)(A).
Subsec. (c)(5)(B).
Subsec. (c)(5)(C), (D).
2017—Subsec. (b)(35) to (37).
Subsec. (c)(4)(B)(ix) to (xii).
Subsec. (c)(6)(E).
2015—Subsec. (c)(4)(B)(ii) to (iv).
Subsec. (c)(4)(B)(v) to (x).
Subsec. (c)(4)(B)(xi).
2014—Subsec. (b)(35) to (37).
Subsec. (c)(2)(A).
Subsec. (d)(3).
2010—Subsec. (b)(36).
Subsec. (c)(2)(A)(ii)(II).
Subsec. (c)(3)(A)(ii)(II).
Subsec. (c)(4)(A)(ii)(II).
Subsec. (c)(4)(B)(vi) to (ix).
Subsec. (c)(5), (6).
2009—Subsec. (b)(35).
2008—Subsec. (b)(32).
Subsec. (b)(33).
Subsec. (b)(34).
Subsec. (b)(35).
Subsec. (c)(4)(B)(ii) to (iv).
Subsec. (c)(4)(B)(v).
Subsec. (c)(4)(B)(vi).
Subsec. (c)(4)(B)(vii).
Subsec. (c)(4)(B)(viii).
2007—Subsec. (b)(8), (24).
Subsec. (b)(30).
Subsec. (c)(4)(B)(iii), (iv).
2006—Subsec. (b)(29) to (31).
2005—Subsec. (b)(20).
Subsec. (b)(21).
Subsec. (b)(22).
Subsec. (b)(23).
Subsec. (b)(24).
Subsec. (b)(25).
Subsec. (b)(26).
Subsec. (b)(27).
Subsec. (b)(28) to (30).
Subsec. (c)(2)(A)(ii)(II).
Subsec. (c)(3)(A)(ii)(II).
Subsec. (c)(4)(B).
2004—Subsec. (b)(16).
Subsec. (b)(17).
Subsec. (b)(18).
Subsec. (b)(19).
Subsec. (c)(2)(A)(ii)(II), (3)(A)(ii)(II).
Subsec. (c)(4), (5).
2002—Subsec. (b)(15).
Subsec. (c)(2)(A)(ii)(II).
Subsec. (c)(3), (4).
2001—Subsec. (b)(12).
Subsec. (b)(13).
Subsec. (b)(14).
Subsec. (b)(15).
2000—Subsec. (b)(13).
1996—Subsec. (b)(2).
Subsec. (b)(12).
Subsec. (c)(2)(C).
1993—Subsec. (b)(7).
Subsec. (b)(8).
Subsec. (b)(9).
Subsec. (b)(10).
Subsec. (b)(11).
Subsec. (c)(2), (3).
1992—Subsec. (b)(6) to (8).
1990—Subsec. (b)(1).
Subsec. (b)(4).
Subsec. (b)(5).
Subsec. (b)(6).
Subsec. (b)(7).
Subsec. (c)(2).
Subsec. (c)(2)(C).
Subsec. (c)(3).
Subsec. (d).
Subsec. (d)(2).
Subsec. (d)(3)(B).
1988—Subsec. (c).
Subsec. (d).
1986—Subsec. (b)(4).
Subsec. (b)(5).
Subsec. (c).
"(A) so much of the taxpayer's net tax liability for the taxable year as does not exceed $25,000, plus
"(B) 75 percent of so much of the taxpayer's net tax liability for the taxable year as exceeds $25,000."
and former par. (2) "Net tax liability", which provided: "For purposes of paragraph (1), the term 'net tax liability' means the tax liability (as defined in section 26(b)), reduced by the sum of the credits allowable under subparts A and B of this part."
Subsec. (c)(1)(B).
Subsec. (d).
1984—Subsec. (c)(2).
Statutory Notes and Related Subsidiaries
Effective Date of 2022 Amendment
Amendment by section 10101(d) of
Amendment by section 13105(b)(1) of
Amendment by section 13203(b) of
Amendment by section 13204(a)(4)(A) of
Amendment by section 13401(i)(3) of
Amendment by section 13403(b)(1) of
Amendment by section 13502(b)(1) of
Amendment by section 13701(b)(1) of
Amendment by section 13704(b)(3) of
Effective Date of 2019 Amendment
Effective Date of 2017 Amendment
Amendment by section 12001(b)(1) of
Effective Date of 2015 Amendment
"(1)
"(2)
"(3)
Effective Date of 2014 Amendment
Amendment by section 209(f)(1) of
Amendment by section 221(a)(2)(B), (6) of
Effective Date of 2010 Amendment
"(1)
"(2)
Effective Date of 2009 Amendment
Amendment by
Effective Date of 2008 Amendment
Amendment by section 103(b) of
Amendment by section 205(c) of
"(2)
"(3)
Amendment of this section and repeal of
[
Effective Date of 2007 Amendment
Effective Date of 2006 Amendment
Effective Date of 2005 Amendment
Amendment by section 1322(a)(2) of
Amendment by section 1341(b)(1) of
Amendment by section 1342(b)(1) of
Effective Date of 2004 Amendment
Effective Date of 2002 Amendment
Amendment by section 411(d)(2) of
Effective Date of 2001 Amendment
Effective Date of 2000 Amendment
Effective Date of 1996 Amendment
Amendment by section 1205(a)(2) of
Effective Date of 1993 Amendment
Effective Date of 1992 Amendment
Effective Date of 1990 Amendment
Amendment by section 11511(b)(1) of
"(1)
"(2)
Amendment by section 11813(b)(2) of
Effective Date of 1988 Amendment
Amendment by section 1007(g)(2), (8) of
Effective Date of 1986 Amendment
Amendment by section 231(d)(1), (3)(B) of
Amendment by section 252(b) of
Amendment by section 701(c)(4) of
"(1)
"(2)
Effective Date of 1984 Amendment
Amendment by
Effective Date
Section applicable to taxable years beginning after Dec. 31, 1983, and to carrybacks from such years, see section 475(a) of
Savings Provision
For provisions that amendment made by section 401(d)(6)(B)(i)–(iii) of
For provisions that nothing in amendment by section 401(b)(5)(A)–(D), (d)(2)(B), (6)(B)(i)–(iii) of
For provisions that nothing in amendment by section 11813(b)(2) of
Business Credit for Retention of Certain Newly Hired Individuals in 2010
"(a)
"(1) $1,000, or
"(2) 6.2 percent of the wages (as defined in section 3401(a) [probably means section 3401(a) of the Internal Revenue Code of 1986]) paid by the taxpayer to such retained worker during the 52 consecutive week period referred to in subsection (b)(2).
"(b)
"(1) who was employed by the taxpayer on any date during the taxable year,
"(2) who was so employed by the taxpayer for a period of not less than 52 consecutive weeks, and
"(3) whose wages (as defined in section 3401(a) [probably means section 3401(a) of the Internal Revenue Code of 1986]) for such employment during the last 26 weeks of such period equaled at least 80 percent of such wages for the first 26 weeks of such period.
"(c)
"(d)
"(1)
"(A)
"(B)
"(2)
"(A) to whom a credit is allowed against taxes imposed by the possession by reason of this section for such taxable year, or
"(B) who is eligible for a payment under a plan described in paragraph (1)(B) with respect to such taxable year.
"(3)
"(A)
"(B)
"(C)
Credit for Contributions to Certain Community Development Corporations
"(a)
"(b)
"(c)
"(d)
"(1)
"(A) which is made to a selected community development corporation during the 5-year period beginning on the date such corporation was selected for purposes of this section,
"(B) the amount of which is available for use by such corporation for at least 10 years,
"(C) which is to be used by such corporation for qualified low-income assistance within its operational area, and
"(D) which is designated by such corporation for purposes of this section.
"(2)
"(e)
"(1)
"(A) which is described in section 501(c)(3) of such Code and exempt from tax under section 501(a) of such Code,
"(B) the principal purposes of which include promoting employment of, and business opportunities for, low-income individuals who are residents of the operational area, and
"(C) which is selected by the Secretary of Housing and Urban Development for purposes of this section.
"(2)
"(3)
"(A) The area meets the size requirements under section 1392(a)(3).
"(B) The unemployment rate (as determined by the appropriate available data) is not less than the national unemployment rate.
"(C) The median family income of residents of such area does not exceed 80 percent of the median gross income of residents of the jurisdiction of the local government which includes such area.
"(f)
"(1) which is designed to provide employment of, and business opportunities for, low-income individuals who are residents of the operational area of the community development corporation, and
"(2) which is approved by the Secretary of Housing and Urban Development."
Applicability of Certain Amendments by Public Law 99–514 in Relation to Treaty Obligations of United States
For applicability of amendment by section 701(c)(4) of
Effective 15-Year Carryback of Existing Carryforwards of Steel Companies
"(a)
"(b)
"(1) 50 percent of the portion of the corporation's existing carryforwards to which the election under subsection (a) applies, or
"(2) the corporation's net tax liability for the carryback period.
"(c)
"(d)
"(1)
"(2)
"(3)
"(A) which begins with the corporation's 15th taxable year preceding the 1st taxable year from which there is an unused credit included in such corporation's existing carryforwards (but in no event shall such period begin before the corporation's 1st taxable year ending after December 31, 1961), and
"(B) which ends with the corporation's last taxable year beginning before January 1, 1986.
"(e)
"(1) the amount of the tax imposed by section 56 of the Internal Revenue Code of 1986, or
"(2) the amount of any credit allowable under such Code,
for any taxable year in the carryback period.
"(f)
"(1)
"(2)
"(A) such corporation shall place such refund in a separate account; and
"(B) amounts in such separate account—
"(i) shall only be used by the corporation—
"(I) to purchase an insurance policy which provides that, in the event the corporation becomes involved in a title 11 or similar case (as defined in section 368(a)(3)(A) of the Internal Revenue Code of 1954 [now 1986]), the insurer will provide life and health insurance coverage during the 1-year period beginning on the date when the corporation receives the refund to any individual with respect to whom the corporation would (but for such involvement) have been obligated to provide such coverage the coverage provided by the insurer will be identical to the coverage which the corporation would (but for such involvement) have been obligated to provide, and provides that the payment of insurance premiums will not be required during such 1-year period to keep such policy in force, or
"(II) directly in connection with the trade or business of the corporation in the manufacturer or production of steel; and
"(ii) shall be used (or obligated) for purposes described in clause (i) not later than 3 months after the corporation receives the refund.
"(3) In the case of a qualified corporation, no offset to any refund under this section may be made by reason of any tax imposed by section 4971 of the Internal Revenue Code of 1986 (or any interest or penalty attributable to any such tax), and the date on which any such refund is to be paid shall be determined without regard to such corporation's status under
"(g)
"(1)
"(A)
"(B)
"(2)
"(A) are unused business credit carryforwards to the taxpayer's 1st taxable year beginning after December 31, 1986 (determined without regard to the limitations of section 38(c) and any reduction under section 49 of the Internal Revenue Code of 1986), and
"(B) are attributable to the amount of the regular investment credit determined for periods before January 1, 1986, under section 46(a)(1) of such Code (relating to regular percentage), or any corresponding provision of prior law, determined on the basis that the regular investment credit was used first.
"(3)
"(h)
Effective 15-Year Carryback of Existing Carryforwards of Qualified Farmers
"(a)
"(b)
"(1) 50 percent of the portion of the taxpayer's existing carryforwards to which the election under subsection (a) applies,
"(2) the taxpayer's net tax liability for the carryback period (within the meaning of section 212(d) of this Act [set out as a note above]), or
"(3) $750.
"(c)
"(d)
"(1) the amount of the tax imposed by section 56 of the Internal Revenue Code of 1954 [now 1986], or
"(2) the amount of any credit allowable under such Code,
for any taxable year in the carryback period (within the meaning of section 212(d)(3) of this Act [set out as a note above]).
"(e)
"(1)
"(2)
"(A) are unused business credit carryforwards to the taxpayer's 1st taxable year beginning after December 31, 1986 (determined without regard to the limitations of section 38(c) of the Internal Revenue Code of 1986), and
"(B) are attributable to the amount of the investment credit determined for periods before January 1, 1986, under section 46(a) of such Code (or any corresponding provision of prior law) with respect to section 38 property which was used by the taxpayer in the trade or business of farming, determined on the basis that such credit was used first.
"(3)
Treatment of Investment Tax Credits With Respect to Certain Public Utilities
For provisions requiring different applications of subsec. (c) of this section to certain public utilities by making substitutions in the percentages of the tentative minimum tax referred to in subsec. (c)(3)(A)(ii), (B), under certain circumstances, see section 701(f)(6) of
Plan Amendments Not Required Until January 1, 1989
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101–1147 and 1171–1177] or title XVIII [§§1800–1899A] of
Transition Rules
"(a)
"(1) such plan was favorably approved on September 23, 1983, by employees, and
"(2) not later than January 11, 1984, the employer of such employees was 100 percent owned by such plan.
"(b)
"(1) which was first published on December 17, 1855, and which began publication under its current name in 1954, and
"(2) which is published in a constitutional home rule city (within the meaning of section 146(d)(3)(C) of the Internal Revenue Code of 1986) which has a population of less than 2,500,000."
Accounting for Investment Credit in Certain Financial Reports and Reports to Federal Agencies
"(1)
"(A) no taxpayer shall be required to use, for purposes of financial reports subject to the jurisdiction of any Federal agency or reports made to any Federal agency, any particular method of accounting for the credit allowed by such section 38 [this section], and
"(B) a taxpayer shall disclose, in any such report, the method of accounting for such credit used by him for purposes of such report.
"(2)
[
Treatment of Investment Credit by Federal Regulatory Agencies
"(1) in the case of public utility property (as defined in section 46(c)(3)(B) of the Internal Revenue Code of 1986, more than a proportionate part (determined with reference to the average useful life of the property with respect to which the credit was allowed) of the credit against tax allowed for any taxable year by section 38 of such Code, or
"(2) in the case of any other property, any credit against tax allowed by section 38 of such Code,
to reduce such taxpayer's Federal income taxes for the purpose of establishing the cost of service of the taxpayer or to accomplish a similar result by any other method."
Section 203(e) of
1 See Amendment of Subsection (b) note below.
§39. Carryback and carryforward of unused credits
(a) In general
(1) 1-year carryback and 20-year carryforward
If the sum of the business credit carryforwards to the taxable year plus the amount of the current year business credit for the taxable year exceeds the amount of the limitation imposed by subsection (c) of section 38 for such taxable year (hereinafter in this section referred to as the "unused credit year"), such excess (to the extent attributable to the amount of the current year business credit) shall be—
(A) a business credit carryback to the taxable year preceding the unused credit year, and
(B) a business credit carryforward to each of the 20 taxable years following the unused credit year,
and, subject to the limitations imposed by subsections (b) and (c), shall be taken into account under the provisions of section 38(a) in the manner provided in section 38(a).
(2) Amount carried to each year
(A) Entire amount carried to first year
The entire amount of the unused credit for an unused credit year shall be carried to the earliest of the 21 taxable years to which (by reason of paragraph (1)) such credit may be carried.
(B) Amount carried to other 20 years
The amount of the unused credit for the unused credit year shall be carried to each of the other 20 taxable years to the extent that such unused credit may not be taken into account under section 38(a) for a prior taxable year because of the limitations of subsections (b) and (c).
(3) 5-year carryback for marginal oil and gas well production credit
Notwithstanding subsection (d), in the case of the marginal oil and gas well production credit—
(A) this section shall be applied separately from the business credit (other than the marginal oil and gas well production credit),
(B) paragraph (1) shall be applied by substituting "each of the 5 taxable years" for "the taxable year" in subparagraph (A) thereof, and
(C) paragraph (2) shall be applied—
(i) by substituting "25 taxable years" for "21 taxable years" in subparagraph (A) thereof, and
(ii) by substituting "24 taxable years" for "20 taxable years" in subparagraph (B) thereof.
(4) 3-year carryback for applicable credits
Notwithstanding subsection (d), in the case of any applicable credit (as defined in section 6417(b))—
(A) this section shall be applied separately from the business credit (other than the applicable credit),
(B) paragraph (1) shall be applied by substituting "each of the 3 taxable years" for "the taxable year" in subparagraph (A) thereof, and
(C) paragraph (2) shall be applied—
(i) by substituting "23 taxable years" for "21 taxable years" in subparagraph (A) thereof, and
(ii) by substituting "22 taxable years" for "20 taxable years" in subparagraph (B) thereof.
(b) Limitation on carrybacks
The amount of the unused credit which may be taken into account under section 38(a)(3) for any preceding taxable year shall not exceed the amount by which the limitation imposed by section 38(c) for such taxable year exceeds the sum of—
(1) the amounts determined under paragraphs (1) and (2) of section 38(a) for such taxable year, plus
(2) the amounts which (by reason of this section) are carried back to such taxable year and are attributable to taxable years preceding the unused credit year.
(c) Limitation on carryforwards
The amount of the unused credit which may be taken into account under section 38(a)(1) for any succeeding taxable year shall not exceed the amount by which the limitation imposed by section 38(c) for such taxable year exceeds the sum of the amounts which, by reason of this section, are carried to such taxable year and are attributable to taxable years preceding the unused credit year.
(d) Transitional rule
No portion of the unused business credit for any taxable year which is attributable to a credit specified in section 38(b) or any portion thereof may be carried back to any taxable year before the first taxable year for which such specified credit or such portion is allowable (without regard to subsection (a)).
(Added
Editorial Notes
Prior Provisions
A prior section 39 was renumbered
Another prior section 39 was renumbered
Amendments
2022—Subsec. (a)(4).
2018—Subsec. (a)(3)(A).
Subsec. (a)(4).
2010—Subsec. (a)(3)(A).
Subsec. (a)(4).
2005—Subsec. (a)(1)(A).
Subsec. (a)(3)(B).
2004—Subsec. (a)(3).
Subsec. (d).
2001—Subsec. (d)(10).
2000—Subsec. (d)(9).
1998—Subsec. (a)(2).
1997—Subsec. (a)(1).
Subsec. (a)(2).
Subsec. (d)(8).
1996—Subsec. (d)(5).
Subsec. (d)(6).
Subsec. (d)(7).
1993—Subsec. (d)(4).
Subsec. (d)(5).
Subsec. (d)(6).
1992—Subsec. (d).
1990—Subsec. (d)(1) to (4).
Subsec. (d)(5).
1988—Subsec. (d)(4).
1986—Subsec. (d)(1)(A).
Subsec. (d)(2)(B).
Subsec. (d)(3).
Statutory Notes and Related Subsidiaries
Effective Date of 2022 Amendment
Amendment by
Effective Date of 2010 Amendment
Effective Date of 2004 Amendment
Amendment by section 245(b) of
Amendment by section 341(c) of
Effective Date of 2001 Amendment
Amendment by
Effective Date of 2000 Amendment
Amendment by
Effective Date of 1998 Amendment
Amendment by
Effective Date of 1997 Amendment
Effective Date of 1996 Amendment
Amendment by section 1205(c) of
Effective Date of 1993 Amendment
Amendment by section 13322(d) of
Amendment by section 13443(b)(2) of
Effective Date of 1992 Amendment
Amendment by
Effective Date of 1990 Amendment
Amendment by section 11511(b)(2) of
Amendment by section 11611(b)(2) of
Effective Date of 1988 Amendment
Amendment by
Effective Date of 1986 Amendment
Amendment by section 231(d)(3)(C)(i) of
Amendment by section 1846 of
Effective Date
Section applicable to taxable years beginning after Dec. 31, 1983, and to carrybacks from such years, see section 475(a) of
Savings Provision
For provisions that nothing in amendment by
For provisions that nothing in amendment by section 11801(a)(2) of
Plan Amendments Not Required Until January 1, 1989
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101–1147 and 1171–1177] or title XVIII [§§1800–1899A] of
§40. Alcohol, etc., used as fuel
(a) General rule
For purposes of section 38, the alcohol fuels credit determined under this section for the taxable year is an amount equal to the sum of—
(1) the alcohol mixture credit,
(2) the alcohol credit,
(3) in the case of an eligible small ethanol producer, the small ethanol producer credit, plus
(4) the second generation biofuel producer credit.
(b) Definition of alcohol mixture credit, alcohol credit, and small ethanol producer credit
For purposes of this section, and except as provided in subsection (h)—
(1) Alcohol mixture credit
(A) In general
The alcohol mixture credit of any taxpayer for any taxable year is 60 cents for each gallon of alcohol used by the taxpayer in the production of a qualified mixture.
(B) Qualified mixture
The term "qualified mixture" means a mixture of alcohol and gasoline or of alcohol and a special fuel which—
(i) is sold by the taxpayer producing such mixture to any person for use as a fuel, or
(ii) is used as a fuel by the taxpayer producing such mixture.
(C) Sale or use must be in trade or business, etc.
Alcohol used in the production of a qualified mixture shall be taken into account—
(i) only if the sale or use described in subparagraph (B) is in a trade or business of the taxpayer, and
(ii) for the taxable year in which such sale or use occurs.
(D) Casual off-farm production not eligible
No credit shall be allowed under this section with respect to any casual off-farm production of a qualified mixture.
(2) Alcohol credit
(A) In general
The alcohol credit of any taxpayer for any taxable year is 60 cents for each gallon of alcohol which is not in a mixture with gasoline or a special fuel (other than any denaturant) and which during the taxable year—
(i) is used by the taxpayer as a fuel in a trade or business, or
(ii) is sold by the taxpayer at retail to a person and placed in the fuel tank of such person's vehicle.
(B) User credit not to apply to alcohol sold at retail
No credit shall be allowed under subparagraph (A)(i) with respect to any alcohol which was sold in a retail sale described in subparagraph (A)(ii).
(3) Smaller credit for lower proof alcohol
In the case of any alcohol with a proof which is at least 150 but less than 190, paragraphs (1)(A) and (2)(A) shall be applied by substituting "45 cents" for "60 cents".
(4) Small ethanol producer credit
(A) In general
The small ethanol producer credit of any eligible small ethanol producer for any taxable year is 10 cents for each gallon of qualified ethanol fuel production of such producer.
(B) Qualified ethanol fuel production
For purposes of this paragraph, the term "qualified ethanol fuel production" means any alcohol which is ethanol which is produced by an eligible small ethanol producer, and which during the taxable year—
(i) is sold by such producer to another person—
(I) for use by such other person in the production of a qualified mixture in such other person's trade or business (other than casual off-farm production),
(II) for use by such other person as a fuel in a trade or business, or
(III) who sells such ethanol at retail to another person and places such ethanol in the fuel tank of such other person, or
(ii) is used or sold by such producer for any purpose described in clause (i).
(C) Limitation
The qualified ethanol fuel production of any producer for any taxable year shall not exceed 15,000,000 gallons (determined without regard to any qualified second generation biofuel production).
(D) Additional distillation excluded
The qualified ethanol fuel production of any producer for any taxable year shall not include any alcohol which is purchased by the producer and with respect to which such producer increases the proof of the alcohol by additional distillation.
(5) Adding of denaturants not treated as mixture
The adding of any denaturant to alcohol shall not be treated as the production of a mixture.
(6) Second generation biofuel producer credit
(A) In general
The second generation biofuel producer credit of any taxpayer is an amount equal to the applicable amount for each gallon of qualified second generation biofuel production.
(B) Applicable amount
For purposes of subparagraph (A), the applicable amount means $1.01, except that such amount shall, in the case of second generation biofuel which is alcohol, be reduced by the sum of—
(i) the amount of the credit in effect for such alcohol under subsection (b)(1) (without regard to subsection (b)(3)) at the time of the qualified second generation biofuel production, plus
(ii) in the case of ethanol, the amount of the credit in effect under subsection (b)(4) at the time of such production.
(C) Qualified second generation biofuel production
For purposes of this section, the term "qualified second generation biofuel production" means any second generation biofuel which is produced by the taxpayer, and which during the taxable year—
(i) is sold by the taxpayer to another person—
(I) for use by such other person in the production of a qualified second generation biofuel mixture in such other person's trade or business (other than casual off-farm production),
(II) for use by such other person as a fuel in a trade or business, or
(III) who sells such second generation biofuel at retail to another person and places such second generation biofuel in the fuel tank of such other person, or
(ii) is used or sold by the taxpayer for any purpose described in clause (i).
The qualified second generation biofuel production of any taxpayer for any taxable year shall not include any alcohol which is purchased by the taxpayer and with respect to which such producer increases the proof of the alcohol by additional distillation.
(D) Qualified second generation biofuel mixture
For purposes of this paragraph, the term "qualified second generation biofuel mixture" means a mixture of second generation biofuel and gasoline or of second generation biofuel and a special fuel which—
(i) is sold by the person producing such mixture to any person for use as a fuel, or
(ii) is used as a fuel by the person producing such mixture.
(E) Second generation biofuel
For purposes of this paragraph—
(i) In general
The term "second generation biofuel" means any liquid fuel which—
(I) is derived by, or from, qualified feedstocks, and
(II) meets the registration requirements for fuels and fuel additives established by the Environmental Protection Agency under section 211 of the Clean Air Act (
(ii) Exclusion of low-proof alcohol
The term "second generation biofuel" shall not include any alcohol with a proof of less than 150. The determination of the proof of any alcohol shall be made without regard to any added denaturants.
(iii) Exclusion of certain fuels
The term "second generation biofuel" shall not include any fuel if—
(I) more than 4 percent of such fuel (determined by weight) is any combination of water and sediment,
(II) the ash content of such fuel is more than 1 percent (determined by weight), or
(III) such fuel has an acid number greater than 25.
(F) Qualified feedstock
For purposes of this paragraph, the term "qualified feedstock" means—
(i) any lignocellulosic or hemicellulosic matter that is available on a renewable or recurring basis, and
(ii) any cultivated algae, cyanobacteria, or lemna.
(G) Special rules for algae
In the case of fuel which is derived by, or from, feedstock described in subparagraph (F)(ii) and which is sold by the taxpayer to another person for refining by such other person into a fuel which meets the requirements of subparagraph (E)(i)(II) and the refined fuel is not excluded under subparagraph (E)(iii)—
(i) such sale shall be treated as described in subparagraph (C)(i),
(ii) such fuel shall be treated as meeting the requirements of subparagraph (E)(i)(II) and as not being excluded under subparagraph (E)(iii) in the hands of such taxpayer, and
(iii) except as provided in this subparagraph, such fuel (and any fuel derived from such fuel) shall not be taken into account under subparagraph (C) with respect to the taxpayer or any other person.
(H) Allocation of second generation biofuel producer credit to patrons of cooperative
Rules similar to the rules under subsection (g)(6) shall apply for purposes of this paragraph.
(I) Registration requirement
No credit shall be determined under this paragraph with respect to any taxpayer unless such taxpayer is registered with the Secretary as a producer of second generation biofuel under section 4101.
(J) Application of paragraph
(i) In general
This paragraph shall apply with respect to qualified second generation biofuel production after December 31, 2008, and before January 1, 2025.
(ii) No carryover to certain years after expiration
If this paragraph ceases to apply for any period by reason of clause (i), rules similar to the rules of subsection (e)(2) shall apply.
(c) Coordination with exemption from excise tax
The amount of the credit determined under this section with respect to any alcohol shall, under regulations prescribed by the Secretary, be properly reduced to take into account any benefit provided with respect to such alcohol solely by reason of the application of section 4041(b)(2), section 6426, or section 6427(e).
(d) Definitions and special rules
For purposes of this section—
(1) Alcohol defined
(A) In general
The term "alcohol" includes methanol and ethanol but does not include—
(i) alcohol produced from petroleum, natural gas, or coal (including peat), or
(ii) alcohol with a proof of less than 150.
(B) Determination of proof
The determination of the proof of any alcohol shall be made without regard to any added denaturants.
(2) Special fuel defined
The term "special fuel" includes any liquid fuel (other than gasoline) which is suitable for use in an internal combustion engine.
(3) Mixture or alcohol not used as a fuel, etc.
(A) Mixtures
If—
(i) any credit was determined under this section with respect to alcohol used in the production of any qualified mixture, and
(ii) any person—
(I) separates the alcohol from the mixture, or
(II) without separation, uses the mixture other than as a fuel,
then there is hereby imposed on such person a tax equal to 60 cents a gallon (45 cents in the case of alcohol with a proof less than 190) for each gallon of alcohol in such mixture.
(B) Alcohol
If—
(i) any credit was determined under this section with respect to the retail sale of any alcohol, and
(ii) any person mixes such alcohol or uses such alcohol other than as a fuel,
then there is hereby imposed on such person a tax equal to 60 cents a gallon (45 cents in the case of alcohol with a proof less than 190) for each gallon of such alcohol.
(C) Small ethanol producer credit
If—
(i) any credit was determined under subsection (a)(3), and
(ii) any person does not use such fuel for a purpose described in subsection (b)(4)(B),
then there is hereby imposed on such person a tax equal to 10 cents a gallon for each gallon of such alcohol.
(D) Second generation biofuel producer credit
If—
(i) any credit is allowed under subsection (a)(4), and
(ii) any person does not use such fuel for a purpose described in subsection (b)(6)(C),
then there is hereby imposed on such person a tax equal to the applicable amount (as defined in subsection (b)(6)(B)) for each gallon of such second generation biofuel.
(E) Applicable laws
All provisions of law, including penalties, shall, insofar as applicable and not inconsistent with this section, apply in respect of any tax imposed under subparagraph (A), (B), (C), or (D) as if such tax were imposed by section 4081 and not by this chapter.
(4) Volume of alcohol
For purposes of determining under subsection (a) the number of gallons of alcohol with respect to which a credit is allowable under subsection (a), the volume of alcohol shall include the volume of any denaturant (including gasoline) which is added under any formulas approved by the Secretary to the extent that such denaturants do not exceed 2 percent of the volume of such alcohol (including denaturants).
(5) Pass-thru in the case of estates and trusts
Under regulations prescribed by the Secretary, rules similar to the rules of subsection (d) of section 52 shall apply.
(6) Special rule for second generation biofuel producer credit
No second generation biofuel producer credit shall be determined under subsection (a) with respect to any second generation biofuel unless such second generation biofuel is produced in the United States and used as a fuel in the United States. For purposes of this subsection, the term "United States" includes any possession of the United States.
(7) Limitation to alcohol with connection to the United States
No credit shall be determined under this section with respect to any alcohol which is produced outside the United States for use as a fuel outside the United States. For purposes of this paragraph, the term "United States" includes any possession of the United States.
(e) Termination
(1) In general
This section shall not apply to any sale or use—
(A) for any period after December 31, 2011, or
(B) for any period before January 1, 2012, during which the rates of tax under section 4081(a)(2)(A) are 4.3 cents per gallon.
(2) No carryovers to certain years after expiration
If this section ceases to apply for any period by reason of paragraph (1), no amount attributable to any sale or use before the first day of such period may be carried under section 39 by reason of this section (treating the amount allowed by reason of this section as the first amount allowed by this subpart) to any taxable year beginning after the 3-taxable-year period beginning with the taxable year in which such first day occurs.
(3) Exception for second generation biofuel producer credit
Paragraph (1) shall not apply to the portion of the credit allowed under this section by reason of subsection (a)(4).
(f) Election to have alcohol fuels credit not apply
(1) In general
A taxpayer may elect to have this section not apply for any taxable year.
(2) Time for making election
An election under paragraph (1) for any taxable year may be made (or revoked) at any time before the expiration of the 3-year period beginning on the last date prescribed by law for filing the return for such taxable year (determined without regard to extensions).
(3) Manner of making election
An election under paragraph (1) (or revocation thereof) shall be made in such manner as the Secretary may by regulations prescribe.
(g) Definitions and special rules for eligible small ethanol producer credit
For purposes of this section—
(1) Eligible small ethanol producer
The term "eligible small ethanol producer" means a person who, at all times during the taxable year, has a productive capacity for alcohol (as defined in subsection (d)(1)(A) without regard to clauses (i) and (ii)) not in excess of 60,000,000 gallons.
(2) Aggregation rule
For purposes of the 15,000,000 gallon limitation under subsection (b)(4)(C) and the 60,000,000 gallon limitation under paragraph (1), all members of the same controlled group of corporations (within the meaning of section 267(f)) and all persons under common control (within the meaning of section 52(b) but determined by treating an interest of more than 50 percent as a controlling interest) shall be treated as 1 person.
(3) Partnership, S corporations, and other pass-thru entities
In the case of a partnership, trust, S corporation, or other pass-thru entity, the limitations contained in subsection (b)(4)(C) and paragraph (1) shall be applied at the entity level and at the partner or similar level.
(4) Allocation
For purposes of this subsection, in the case of a facility in which more than 1 person has an interest, productive capacity shall be allocated among such persons in such manner as the Secretary may prescribe.
(5) Regulations
The Secretary may prescribe such regulations as may be necessary—
(A) to prevent the credit provided for in subsection (a)(3) from directly or indirectly benefiting any person with a direct or indirect productive capacity of more than 60,000,000 gallons of alcohol during the taxable year, or
(B) to prevent any person from directly or indirectly benefiting with respect to more than 15,000,000 gallons during the taxable year.
(6) Allocation of small ethanol producer credit to patrons of cooperative
(A) Election to allocate
(i) In general
In the case of a cooperative organization described in section 1381(a), any portion of the credit determined under subsection (a)(3) for the taxable year may, at the election of the organization, be apportioned pro rata among patrons of the organization on the basis of the quantity or value of business done with or for such patrons for the taxable year.
(ii) Form and effect of election
An election under clause (i) for any taxable year shall be made on a timely filed return for such year. Such election, once made, shall be irrevocable for such taxable year. Such election shall not take effect unless the organization designates the apportionment as such in a written notice mailed to its patrons during the payment period described in section 1382(d).
(B) Treatment of organizations and patrons
(i) Organizations
The amount of the credit not apportioned to patrons pursuant to subparagraph (A) shall be included in the amount determined under subsection (a)(3) for the taxable year of the organization.
(ii) Patrons
The amount of the credit apportioned to patrons pursuant to subparagraph (A) shall be included in the amount determined under such subsection for the first taxable year of each patron ending on or after the last day of the payment period (as defined in section 1382(d)) for the taxable year of the organization or, if earlier, for the taxable year of each patron ending on or after the date on which the patron receives notice from the cooperative of the apportionment.
(iii) Special rules for decrease in credits for taxable year
If the amount of the credit of the organization determined under such subsection for a taxable year is less than the amount of such credit shown on the return of the organization for such year, an amount equal to the excess of—
(I) such reduction, over
(II) the amount not apportioned to such patrons under subparagraph (A) for the taxable year,
shall be treated as an increase in tax imposed by this chapter on the organization. Such increase shall not be treated as tax imposed by this chapter for purposes of determining the amount of any credit under this chapter or for purposes of section 55.
(h) Reduced credit for ethanol blenders
(1) In general
In the case of any alcohol mixture credit or alcohol credit with respect to any sale or use of alcohol which is ethanol during calendar years 2001 through 2011—
(A) subsections (b)(1)(A) and (b)(2)(A) shall be applied by substituting "the blender amount" for "60 cents",
(B) subsection (b)(3) shall be applied by substituting "the low-proof blender amount" for "45 cents" and "the blender amount" for "60 cents", and
(C) subparagraphs (A) and (B) of subsection (d)(3) shall be applied by substituting "the blender amount" for "60 cents" and "the low-proof blender amount" for "45 cents".
(2) Amounts
For purposes of paragraph (1), the blender amount and the low-proof blender amount shall be determined in accordance with the following table:
| In the case of any sale or use during calendar year: | The blender amount is: | The low-proof blender amount is: |
|---|---|---|
| 2001 or 2002 | 53 cents | 39.26 cents |
| 2003 or 2004 | 52 cents | 38.52 cents |
| 2005, 2006, 2007, or 2008 | 51 cents | 37.78 cents |
| 2009 through 2011 | 45 cents | 33.33 cents. |
(3) Reduction delayed until annual production or importation of 7,500,000,000 gallons
(A) In general
In the case of any calendar year beginning after 2008, if the Secretary makes a determination described in subparagraph (B) with respect to all preceding calendar years beginning after 2007, the last row in the table in paragraph (2) shall be applied by substituting "51 cents" for "45 cents".
(B) Determination
A determination described in this subparagraph with respect to any calendar year is a determination, in consultation with the Administrator of the Environmental Protection Agency, that an amount less than 7,500,000,000 gallons of ethanol (including cellulosic ethanol) has been produced in or imported into the United States in such year.
(Added
Editorial Notes
Codification
Prior Provisions
A prior section 40, added
Another prior section 40 was renumbered
Amendments
2022—Subsec. (b)(6)(J)(i).
2020—Subsec. (b)(6)(J)(i).
2019—Subsec. (b)(6)(J)(i).
2018—Subsec. (b)(6)(J)(i).
Subsec. (g)(2).
2015—Subsec. (b)(6)(J)(i).
2014—Subsec. (b)(6)(J)(i).
2013—
Subsec. (b)(6).
Subsec. (b)(6)(C), (D).
Subsec. (b)(6)(E).
Subsec. (b)(6)(E)(i)(I).
Subsec. (b)(6)(E)(ii).
Subsec. (b)(6)(F), (G).
Subsec. (b)(6)(H).
Subsec. (b)(6)(I), (J).
Subsec. (d)(3)(D).
Subsec. (d)(6).
Subsec. (e)(2).
Subsec. (e)(3).
2010—Subsec. (b)(6)(E)(iii).
Subsec. (b)(6)(E)(iii)(III).
Subsec. (e)(1)(A).
Subsec. (e)(1)(B).
Subsec. (h)(1), (2).
2008—
Subsec. (a)(4).
Subsec. (b)(4)(C).
Subsec. (b)(6).
Subsec. (d)(3)(C).
Subsec. (d)(3)(D).
Subsec. (d)(3)(E).
Subsec. (d)(4).
Subsec. (d)(6).
Subsec. (d)(7).
Subsec. (e)(2).
Subsec. (e)(3).
Subsec. (h)(2).
Subsec. (h)(3).
2005—Subsec. (g)(1), (2), (5)(A).
Subsec. (g)(6)(A)(ii).
2004—Subsec. (c).
Subsec. (d)(4).
Subsec. (e)(1)(A).
Subsec. (e)(1)(B).
Subsec. (g)(6).
Subsec. (h)(1).
Subsec. (h)(2).
1998—Subsec. (e)(1).
Subsec. (h).
"(1) subsections (b)(1)(A) and (b)(2)(A) shall be applied by substituting '54 cents' for '60 cents';
"(2) subsection (b)(3) shall be applied by substituting '40 cents' for '45 cents' and '54 cents' for '60 cents'; and
"(3) subparagraphs (A) and (B) of subsection (d)(3) shall be applied by substituting '54 cents' for '60 cents' and '40 cents' for '45 cents'."
1996—Subsec. (e)(1)(B).
1990—Subsec. (a)(2).
Subsec. (a)(3).
Subsec. (b).
Subsec. (b)(4), (5).
Subsec. (d)(3)(C), (D).
Subsec. (e).
Subsec. (g).
Subsec. (h).
1987—Subsec. (c).
1984—
Subsec. (a).
Subsec. (b)(1)(A), (2)(A).
Subsec. (b)(3).
Subsec. (c).
Subsec. (d)(1)(A)(i).
Subsec. (d)(3)(A).
Subsec. (d)(3)(A)(i).
Subsec. (d)(3)(B).
Subsec. (d)(3)(B)(i).
Subsec. (e).
Subsec. (e)(2).
Subsec. (f).
1983—Subsec. (b)(1)(A), (2)(A).
Subsec. (b)(3).
Subsec. (c).
Subsec. (d)(3)(A), (B).
1982—Subsec. (d)(5).
1981—Subsec. (e)(2)(A).
Statutory Notes and Related Subsidiaries
Effective Date of 2022 Amendment
Effective Date of 2020 Amendment
Effective Date of 2019 Amendment
Effective Date of 2018 Amendment
Effective Date of 2015 Amendment
Effective Date of 2014 Amendment
Effective Date of 2013 Amendment
Effective Date of 2010 Amendment
Effective Date of 2008 Amendment
Amendment of this section and repeal of
[
[
[
Effective Date of 2005 Amendment
Effective Date of 2004 Amendment
"(1)
"(2)
"(3)
"(4)
Effective Date of 1998 Amendment
Effective Date of 1996 Amendment
Amendment by
Effective Date of 1990 Amendment
"(1) Except as provided in paragraph (2), the amendments made by this section [amending this section] shall apply to alcohol produced, and sold or used, in taxable years beginning after December 31, 1990.
"(2) The amendments made by subsection (g) [amending provisions not classified to the Code] shall apply to articles entered or withdrawn from warehouse on or after January 1, 1991."
Effective Date of 1987 Amendment
Effective Date of 1984 Amendment
Amendment by section 474(k) of
Amendment by section 913(b) of
Effective Date of 1983 Amendment
Amendments by section 511(b)(2), (d)(3) of
Effective Date of 1982 Amendment
Amendment by
Effective Date of 1981 Amendment
Amendment by
Effective Date
"(1) The amendments made by subsections (b) and (c) [enacting sections 44E [now 40] and 86 of this title and amending
"(4) Notwithstanding paragraph (1), the provisions of section 44E(d)(4)(B) [now 40(d)(4)(B)] of such Code, as added by this section, shall take effect on April 2, 1980."
§40A. Biodiesel and renewable diesel used as fuel
(a) General rule
For purposes of section 38, the biodiesel fuels credit determined under this section for the taxable year is an amount equal to the sum of—
(1) the biodiesel mixture credit, plus
(2) the biodiesel credit, plus
(3) in the case of an eligible small agri-biodiesel producer, the small agri-biodiesel producer credit.
(b) Definition of biodiesel mixture credit, biodiesel credit, and small agri-biodiesel producer credit
For purposes of this section—
(1) Biodiesel mixture credit
(A) In general
The biodiesel mixture credit of any taxpayer for any taxable year is $1.00 for each gallon of biodiesel used by the taxpayer in the production of a qualified biodiesel mixture.
(B) Qualified biodiesel mixture
The term "qualified biodiesel mixture" means a mixture of biodiesel and diesel fuel (as defined in section 4083(a)(3)), determined without regard to any use of kerosene, which—
(i) is sold by the taxpayer producing such mixture to any person for use as a fuel, or
(ii) is used as a fuel by the taxpayer producing such mixture.
(C) Sale or use must be in trade or business, etc.
Biodiesel used in the production of a qualified biodiesel mixture shall be taken into account—
(i) only if the sale or use described in subparagraph (B) is in a trade or business of the taxpayer, and
(ii) for the taxable year in which such sale or use occurs.
(D) Casual off-farm production not eligible
No credit shall be allowed under this section with respect to any casual off-farm production of a qualified biodiesel mixture.
(2) Biodiesel credit
(A) In general
The biodiesel credit of any taxpayer for any taxable year is $1.00 for each gallon of biodiesel which is not in a mixture with diesel fuel and which during the taxable year—
(i) is used by the taxpayer as a fuel in a trade or business, or
(ii) is sold by the taxpayer at retail to a person and placed in the fuel tank of such person's vehicle.
(B) User credit not to apply to biodiesel sold at retail
No credit shall be allowed under subparagraph (A)(i) with respect to any biodiesel which was sold in a retail sale described in subparagraph (A)(ii).
(3) Certification for biodiesel
No credit shall be allowed under paragraph (1) or (2) of subsection (a) unless the taxpayer obtains a certification (in such form and manner as prescribed by the Secretary) from the producer or importer of the biodiesel which identifies the product produced and the percentage of biodiesel and agri-biodiesel in the product.
(4) Small agri-biodiesel producer credit
(A) In general
The small agri-biodiesel producer credit of any eligible small agri-biodiesel producer for any taxable year is 10 cents for each gallon of qualified agri-biodiesel production of such producer.
(B) Qualified agri-biodiesel production
For purposes of this paragraph, the term "qualified agri-biodiesel production" means any agri-biodiesel which is produced by an eligible small agri-biodiesel producer, and which during the taxable year—
(i) is sold by such producer to another person—
(I) for use by such other person in the production of a qualified biodiesel mixture in such other person's trade or business (other than casual off-farm production),
(II) for use by such other person as a fuel in a trade or business, or
(III) who sells such agri-biodiesel at retail to another person and places such agri-biodiesel in the fuel tank of such other person, or
(ii) is used or sold by such producer for any purpose described in clause (i).
(C) Limitation
The qualified agri-biodiesel production of any producer for any taxable year shall not exceed 15,000,000 gallons.
(c) Coordination with credit against excise tax
The amount of the credit determined under this section with respect to any biodiesel shall be properly reduced to take into account any benefit provided with respect to such biodiesel solely by reason of the application of section 6426 or 6427(e).
(d) Definitions and special rules
For purposes of this section—
(1) Biodiesel
The term "biodiesel" means the monoalkyl esters of long chain fatty acids derived from plant or animal matter which meet—
(A) the registration requirements for fuels and fuel additives established by the Environmental Protection Agency under section 211 of the Clean Air Act (
(B) the requirements of the American Society of Testing and Materials D6751.
Such term shall not include any liquid with respect to which a credit may be determined under section 40 or 40B.
(2) Agri-biodiesel
The term "agri-biodiesel" means biodiesel derived solely from virgin oils, including esters derived from virgin vegetable oils from corn, soybeans, sunflower seeds, cottonseeds, canola, crambe, rapeseeds, safflowers, flaxseeds, rice bran, mustard seeds, and camelina, and from animal fats.
(3) Mixture or biodiesel not used as a fuel, etc.
(A) Mixtures
If—
(i) any credit was determined under this section with respect to biodiesel used in the production of any qualified biodiesel mixture, and
(ii) any person—
(I) separates the biodiesel from the mixture, or
(II) without separation, uses the mixture other than as a fuel,
then there is hereby imposed on such person a tax equal to the product of the rate applicable under subsection (b)(1)(A) and the number of gallons of such biodiesel in such mixture.
(B) Biodiesel
If—
(i) any credit was determined under this section with respect to the retail sale of any biodiesel, and
(ii) any person mixes such biodiesel or uses such biodiesel other than as a fuel,
then there is hereby imposed on such person a tax equal to the product of the rate applicable under subsection (b)(2)(A) and the number of gallons of such biodiesel.
(C) Producer credit
If—
(i) any credit was determined under subsection (a)(3), and
(ii) any person does not use such fuel for a purpose described in subsection (b)(4)(B),
then there is hereby imposed on such person a tax equal to 10 cents a gallon for each gallon of such agri-biodiesel.
(D) Applicable laws
All provisions of law, including penalties, shall, insofar as applicable and not inconsistent with this section, apply in respect of any tax imposed under subparagraph (A) or (B) as if such tax were imposed by section 4081 and not by this chapter.
(4) Pass-thru in the case of estates and trusts
Under regulations prescribed by the Secretary, rules similar to the rules of subsection (d) of section 52 shall apply.
(5) Limitation to biodiesel with connection to the United States
No credit shall be determined under this section with respect to any biodiesel which is produced outside the United States for use as a fuel outside the United States. For purposes of this paragraph, the term "United States" includes any possession of the United States.
(e) Definitions and special rules for small agri-biodiesel producer credit
For purposes of this section—
(1) Eligible small agri-biodiesel producer
The term "eligible small agri-biodiesel producer" means a person who, at all times during the taxable year, has a productive capacity for agri-biodiesel not in excess of 60,000,000 gallons.
(2) Aggregation rule
For purposes of the 15,000,000 gallon limitation under subsection (b)(4)(C) and the 60,000,000 gallon limitation under paragraph (1), all members of the same controlled group of corporations (within the meaning of section 267(f)) and all persons under common control (within the meaning of section 52(b) but determined by treating an interest of more than 50 percent as a controlling interest) shall be treated as 1 person.
(3) Partnership, S corporation, and other pass-thru entities
In the case of a partnership, trust, S corporation, or other pass-thru entity, the limitations contained in subsection (b)(4)(C) and paragraph (1) shall be applied at the entity level and at the partner or similar level.
(4) Allocation
For purposes of this subsection, in the case of a facility in which more than 1 person has an interest, productive capacity shall be allocated among such persons in such manner as the Secretary may prescribe.
(5) Regulations
The Secretary may prescribe such regulations as may be necessary—
(A) to prevent the credit provided for in subsection (a)(3) from directly or indirectly benefiting any person with a direct or indirect productive capacity of more than 60,000,000 gallons of agri-biodiesel during the taxable year, or
(B) to prevent any person from directly or indirectly benefiting with respect to more than 15,000,000 gallons during the taxable year.
(6) Allocation of small agri-biodiesel credit to patrons of cooperative
(A) Election to allocate
(i) In general
In the case of a cooperative organization described in section 1381(a), any portion of the credit determined under subsection (a)(3) for the taxable year may, at the election of the organization, be apportioned pro rata among patrons of the organization on the basis of the quantity or value of business done with or for such patrons for the taxable year.
(ii) Form and effect of election
An election under clause (i) for any taxable year shall be made on a timely filed return for such year. Such election, once made, shall be irrevocable for such taxable year. Such election shall not take effect unless the organization designates the apportionment as such in a written notice mailed to its patrons during the payment period described in section 1382(d).
(B) Treatment of organizations and patrons
(i) Organizations
The amount of the credit not apportioned to patrons pursuant to subparagraph (A) shall be included in the amount determined under subsection (a)(3) for the taxable year of the organization.
(ii) Patrons
The amount of the credit apportioned to patrons pursuant to subparagraph (A) shall be included in the amount determined under such subsection for the first taxable year of each patron ending on or after the last day of the payment period (as defined in section 1382(d)) for the taxable year of the organization or, if earlier, for the taxable year of each patron ending on or after the date on which the patron receives notice from the cooperative of the apportionment.
(iii) Special rules for decrease in credits for taxable year
If the amount of the credit of the organization determined under such subsection for a taxable year is less than the amount of such credit shown on the return of the organization for such year, an amount equal to the excess of—
(I) such reduction, over
(II) the amount not apportioned to such patrons under subparagraph (A) for the taxable year,
shall be treated as an increase in tax imposed by this chapter on the organization. Such increase shall not be treated as tax imposed by this chapter for purposes of determining the amount of any credit under this chapter or for purposes of section 55.
(f) Renewable diesel
For purposes of this title—
(1) Treatment in the same manner as biodiesel
Except as provided in paragraph (2), renewable diesel shall be treated in the same manner as biodiesel.
(2) Exception
Subsection (b)(4) shall not apply with respect to renewable diesel.
(3) Renewable diesel defined
The term "renewable diesel" means liquid fuel derived from biomass which meets—
(A) the registration requirements for fuels and fuel additives established by the Environmental Protection Agency under section 211 of the Clean Air Act (
(B) the requirements of the American Society of Testing and Materials D975 or D396, or other equivalent standard approved by the Secretary.
Such term shall not include any liquid with respect to which a credit may be determined under section 40. Such term does not include any fuel derived from coprocessing biomass with a feedstock which is not biomass. For purposes of this paragraph, the term "biomass" has the meaning given such term by section 45K(c)(3).
(g) Termination
This section shall not apply to any sale or use after December 31, 2024.
(Added
Editorial Notes
Codification
Amendments
2022—Subsec. (d)(1).
Subsec. (f)(4).
Subsec. (g).
2019—Subsec. (g).
2018—Subsec. (g).
2015—Subsec. (g).
2014—Subsec. (g).
2013—Subsec. (g).
2010—Subsec. (g).
2008—Subsec. (b)(1)(A), (2)(A).
Subsec. (b)(3) to (5).
Subsec. (d)(1).
Subsec. (d)(2).
Subsec. (d)(3)(C)(ii).
Subsec. (d)(5).
Subsec. (e)(2), (3).
Subsec. (f)(2).
"(A)
"(B)
Subsec. (f)(3).
Subsec. (f)(3)(B).
Subsec. (f)(4).
Subsec. (g).
2005—
Subsec. (a).
"(1) the biodiesel mixture credit, plus
"(2) the biodiesel credit."
Subsec. (b).
Subsec. (b)(4).
Subsec. (b)(5).
Subsec. (b)(5)(B).
Subsec. (d)(3)(C), (D).
Subsec. (e).
Subsec. (f).
Subsec. (g).
Statutory Notes and Related Subsidiaries
Effective Date of 2022 Amendment
Amendment by section 13203(c) of
Effective Date of 2019 Amendment
Effective Date of 2018 Amendment
Effective Date of 2015 Amendment
Effective Date of 2014 Amendment
Effective Date of 2013 Amendment
Effective Date of 2010 Amendment
Effective Date of 2008 Amendment
"(1)
"(2)
Amendment by section 203(b) of
Amendment of this section and repeal of
Amendment by section 15321(f) of
Effective Date of 2005 Amendment
Effective Date
Section applicable to fuel produced, and sold or used, after Dec. 31, 2004, in taxable years ending after such date, see section 302(d) of
§40B. Sustainable aviation fuel credit
(a) In general
For purposes of section 38, the sustainable aviation fuel credit determined under this section for the taxable year is, with respect to any sale or use of a qualified mixture which occurs during such taxable year, an amount equal to the product of—
(1) the number of gallons of sustainable aviation fuel in such mixture, multiplied by
(2) the sum of—
(A) $1.25, plus
(B) the applicable supplementary amount with respect to such sustainable aviation fuel.
(b) Applicable supplementary amount
For purposes of this section, the term "applicable supplementary amount" means, with respect to any sustainable aviation fuel, an amount equal to $0.01 for each percentage point by which the lifecycle greenhouse gas emissions reduction percentage with respect to such fuel exceeds 50 percent. In no event shall the applicable supplementary amount determined under this subsection exceed $0.50.
(c) Qualified mixture
For purposes of this section, the term "qualified mixture" means a mixture of sustainable aviation fuel and kerosene if—
(1) such mixture is produced by the taxpayer in the United States,
(2) such mixture is used by the taxpayer (or sold by the taxpayer for use) in an aircraft,
(3) such sale or use is in the ordinary course of a trade or business of the taxpayer, and
(4) the transfer of such mixture to the fuel tank of such aircraft occurs in the United States.
(d) Sustainable aviation fuel
(1) In general
For purposes of this section, the term "sustainable aviation fuel" means liquid fuel, the portion of which is not kerosene, which—
(A) meets the requirements of—
(i) ASTM International Standard D7566, or
(ii) the Fischer Tropsch provisions of ASTM International Standard D1655, Annex A1,
(B) is not derived from coprocessing an applicable material (or materials derived from an applicable material) with a feedstock which is not biomass,
(C) is not derived from palm fatty acid distillates or petroleum, and
(D) has been certified in accordance with subsection (e) as having a lifecycle greenhouse gas emissions reduction percentage of at least 50 percent.
(2) Definitions
In this subsection—
(A) Applicable material
The term "applicable material" means—
(i) monoglycerides, diglycerides, and triglycerides,
(ii) free fatty acids, and
(iii) fatty acid esters.
(B) Biomass
The term "biomass" has the same meaning given such term in section 45K(c)(3).
(e) Lifecycle greenhouse gas emissions reduction percentage
For purposes of this section, the term "lifecycle greenhouse gas emissions reduction percentage" means, with respect to any sustainable aviation fuel, the percentage reduction in lifecycle greenhouse gas emissions achieved by such fuel as compared with petroleum-based jet fuel, as defined in accordance with—
(1) the most recent Carbon Offsetting and Reduction Scheme for International Aviation which has been adopted by the International Civil Aviation Organization with the agreement of the United States, or
(2) any similar methodology which satisfies the criteria under section 211(o)(1)(H) of the Clean Air Act (
(f) Registration of sustainable aviation fuel producers
No credit shall be allowed under this section with respect to any sustainable aviation fuel unless the producer or importer of such fuel—
(1) is registered with the Secretary under section 4101, and
(2) provides—
(A) certification (in such form and manner as the Secretary shall prescribe) from an unrelated party demonstrating compliance with—
(i) any general requirements, supply chain traceability requirements, and information transmission requirements established under the Carbon Offsetting and Reduction Scheme for International Aviation described in paragraph (1) of subsection (e), or
(ii) in the case of any methodology established under paragraph (2) of such subsection, requirements similar to the requirements described in clause (i), and
(B) such other information with respect to such fuel as the Secretary may require for purposes of carrying out this section.
(g) Coordination with credit against excise tax
The amount of the credit determined under this section with respect to any sustainable aviation fuel shall, under rules prescribed by the Secretary, be properly reduced to take into account any benefit provided with respect to such sustainable aviation fuel solely by reason of the application of section 6426 or 6427(e).
(h) Termination
This section shall not apply to any sale or use after December 31, 2024.
(Added
Editorial Notes
References in Text
The date of enactment of this section, referred to in subsec. (e)(2), is the date of enactment of
Statutory Notes and Related Subsidiaries
Effective Date
§41. Credit for increasing research activities
(a) General rule
For purposes of section 38, the research credit determined under this section for the taxable year shall be an amount equal to the sum of—
(1) 20 percent of the excess (if any) of—
(A) the qualified research expenses for the taxable year, over
(B) the base amount,
(2) 20 percent of the basic research payments determined under subsection (e)(1)(A), and
(3) 20 percent of the amounts paid or incurred by the taxpayer in carrying on any trade or business of the taxpayer during the taxable year (including as contributions) to an energy research consortium for energy research.
(b) Qualified research expenses
For purposes of this section—
(1) Qualified research expenses
The term "qualified research expenses" means the sum of the following amounts which are paid or incurred by the taxpayer during the taxable year in carrying on any trade or business of the taxpayer—
(A) in-house research expenses, and
(B) contract research expenses.
(2) In-house research expenses
(A) In general
The term "in-house research expenses" means—
(i) any wages paid or incurred to an employee for qualified services performed by such employee,
(ii) any amount paid or incurred for supplies used in the conduct of qualified research, and
(iii) under regulations prescribed by the Secretary, any amount paid or incurred to another person for the right to use computers in the conduct of qualified research.
Clause (iii) shall not apply to any amount to the extent that the taxpayer (or any person with whom the taxpayer must aggregate expenditures under subsection (f)(1)) receives or accrues any amount from any other person for the right to use substantially identical personal property.
(B) Qualified services
The term "qualified services" means services consisting of—
(i) engaging in qualified research, or
(ii) engaging in the direct supervision or direct support of research activities which constitute qualified research.
If substantially all of the services performed by an individual for the taxpayer during the taxable year consists of services meeting the requirements of clause (i) or (ii), the term "qualified services" means all of the services performed by such individual for the taxpayer during the taxable year.
(C) Supplies
The term "supplies" means any tangible property other than—
(i) land or improvements to land, and
(ii) property of a character subject to the allowance for depreciation.
(D) Wages
(i) In general
The term "wages" has the meaning given such term by section 3401(a).
(ii) Self-employed individuals and owner-employees
In the case of an employee (within the meaning of section 401(c)(1)), the term "wages" includes the earned income (as defined in section 401(c)(2)) of such employee.
(iii) Exclusion for wages to which work opportunity credit applies
The term "wages" shall not include any amount taken into account in determining the work opportunity credit under section 51(a).
(3) Contract research expenses
(A) In general
The term "contract research expenses" means 65 percent of any amount paid or incurred by the taxpayer to any person (other than an employee of the taxpayer) for qualified research.
(B) Prepaid amounts
If any contract research expenses paid or incurred during any taxable year are attributable to qualified research to be conducted after the close of such taxable year, such amount shall be treated as paid or incurred during the period during which the qualified research is conducted.
(C) Amounts paid to certain research consortia
(i) In general
Subparagraph (A) shall be applied by substituting "75 percent" for "65 percent" with respect to amounts paid or incurred by the taxpayer to a qualified research consortium for qualified research on behalf of the taxpayer and 1 or more unrelated taxpayers. For purposes of the preceding sentence, all persons treated as a single employer under subsection (a) or (b) of section 52 shall be treated as related taxpayers.
(ii) Qualified research consortium
The term "qualified research consortium" means any organization which—
(I) is described in section 501(c)(3) or 501(c)(6) and is exempt from tax under section 501(a),
(II) is organized and operated primarily to conduct scientific research, and
(III) is not a private foundation.
(D) Amounts paid to eligible small businesses, universities, and Federal laboratories
(i) In general
In the case of amounts paid by the taxpayer to—
(I) an eligible small business,
(II) an institution of higher education (as defined in section 3304(f)), or
(III) an organization which is a Federal laboratory,
for qualified research which is energy research, subparagraph (A) shall be applied by substituting "100 percent" for "65 percent".
(ii) Eligible small business
For purposes of this subparagraph, the term "eligible small business" means a small business with respect to which the taxpayer does not own (within the meaning of section 318) 50 percent or more of—
(I) in the case of a corporation, the outstanding stock of the corporation (either by vote or value), and
(II) in the case of a small business which is not a corporation, the capital and profits interests of the small business.
(iii) Small business
For purposes of this subparagraph—
(I) In general
The term "small business" means, with respect to any calendar year, any person if the annual average number of employees employed by such person during either of the 2 preceding calendar years was 500 or fewer. For purposes of the preceding sentence, a preceding calendar year may be taken into account only if the person was in existence throughout the year.
(II) Startups, controlled groups, and predecessors
Rules similar to the rules of subparagraphs (B) and (D) of section 220(c)(4) shall apply for purposes of this clause.
(iv) Federal laboratory
For purposes of this subparagraph, the term "Federal laboratory" has the meaning given such term by section 4(6) of the Stevenson-Wydler Technology Innovation Act of 1980 (
(4) Trade or business requirement disregarded for in-house research expenses of certain startup ventures
In the case of in-house research expenses, a taxpayer shall be treated as meeting the trade or business requirement of paragraph (1) if, at the time such in-house research expenses are paid or incurred, the principal purpose of the taxpayer in making such expenditures is to use the results of the research in the active conduct of a future trade or business—
(A) of the taxpayer, or
(B) of 1 or more other persons who with the taxpayer are treated as a single taxpayer under subsection (f)(1).
(c) Base amount
(1) In general
The term "base amount" means the product of—
(A) the fixed-base percentage, and
(B) the average annual gross receipts of the taxpayer for the 4 taxable years preceding the taxable year for which the credit is being determined (hereinafter in this subsection referred to as the "credit year").
(2) Minimum base amount
In no event shall the base amount be less than 50 percent of the qualified research expenses for the credit year.
(3) Fixed-base percentage
(A) In general
Except as otherwise provided in this paragraph, the fixed-base percentage is the percentage which the aggregate qualified research expenses of the taxpayer for taxable years beginning after December 31, 1983, and before January 1, 1989, is of the aggregate gross receipts of the taxpayer for such taxable years.
(B) Start-up companies
(i) Taxpayers to which subparagraph applies
The fixed-base percentage shall be determined under this subparagraph if—
(I) the first taxable year in which a taxpayer had both gross receipts and qualified research expenses begins after December 31, 1983, or
(II) there are fewer than 3 taxable years beginning after December 31, 1983, and before January 1, 1989, in which the taxpayer had both gross receipts and qualified research expenses.
(ii) Fixed-base percentage
In a case to which this subparagraph applies, the fixed-base percentage is—
(I) 3 percent for each of the taxpayer's 1st 5 taxable years beginning after December 31, 1993, for which the taxpayer has qualified research expenses,
(II) in the case of the taxpayer's 6th such taxable year, 1/6 of the percentage which the aggregate qualified research expenses of the taxpayer for the 4th and 5th such taxable years is of the aggregate gross receipts of the taxpayer for such years,
(III) in the case of the taxpayer's 7th such taxable year, 1/3 of the percentage which the aggregate qualified research expenses of the taxpayer for the 5th and 6th such taxable years is of the aggregate gross receipts of the taxpayer for such years,
(IV) in the case of the taxpayer's 8th such taxable year, ½ of the percentage which the aggregate qualified research expenses of the taxpayer for the 5th, 6th, and 7th such taxable years is of the aggregate gross receipts of the taxpayer for such years,
(V) in the case of the taxpayer's 9th such taxable year, 2/3 of the percentage which the aggregate qualified research expenses of the taxpayer for the 5th, 6th, 7th, and 8th such taxable years is of the aggregate gross receipts of the taxpayer for such years,
(VI) in the case of the taxpayer's 10th such taxable year, 5/6 of the percentage which the aggregate qualified research expenses of the taxpayer for the 5th, 6th, 7th, 8th, and 9th such taxable years is of the aggregate gross receipts of the taxpayer for such years, and
(VII) for taxable years thereafter, the percentage which the aggregate qualified research expenses for any 5 taxable years selected by the taxpayer from among the 5th through the 10th such taxable years is of the aggregate gross receipts of the taxpayer for such selected years.
(iii) Treatment of de minimis amounts of gross receipts and qualified research expenses
The Secretary may prescribe regulations providing that de minimis amounts of gross receipts and qualified research expenses shall be disregarded under clauses (i) and (ii).
(C) Maximum fixed-base percentage
In no event shall the fixed-base percentage exceed 16 percent.
(D) Rounding
The percentages determined under subparagraphs (A) and (B)(ii) shall be rounded to the nearest 1/100th of 1 percent.
(4) Election of alternative simplified credit
(A) In general
At the election of the taxpayer, the credit determined under subsection (a)(1) shall be equal to 14 percent of so much of the qualified research expenses for the taxable year as exceeds 50 percent of the average qualified research expenses for the 3 taxable years preceding the taxable year for which the credit is being determined.
(B) Special rule in case of no qualified research expenses in any of 3 preceding taxable years
(i) Taxpayers to which subparagraph applies
The credit under this paragraph shall be determined under this subparagraph if the taxpayer has no qualified research expenses in any one of the 3 taxable years preceding the taxable year for which the credit is being determined.
(ii) Credit rate
The credit determined under this subparagraph shall be equal to 6 percent of the qualified research expenses for the taxable year.
(C) Election
An election under this paragraph shall apply to the taxable year for which made and all succeeding taxable years unless revoked with the consent of the Secretary.
(5) Consistent treatment of expenses required
(A) In general
Notwithstanding whether the period for filing a claim for credit or refund has expired for any taxable year taken into account in determining the fixed-base percentage, the qualified research expenses taken into account in computing such percentage shall be determined on a basis consistent with the determination of qualified research expenses for the credit year.
(B) Prevention of distortions
The Secretary may prescribe regulations to prevent distortions in calculating a taxpayer's qualified research expenses or gross receipts caused by a change in accounting methods used by such taxpayer between the current year and a year taken into account in computing such taxpayer's fixed-base percentage.
(6) Gross receipts
For purposes of this subsection, gross receipts for any taxable year shall be reduced by returns and allowances made during the taxable year. In the case of a foreign corporation, there shall be taken into account only gross receipts which are effectively connected with the conduct of a trade or business within the United States, the Commonwealth of Puerto Rico, or any possession of the United States.
(d) Qualified research defined
For purposes of this section—
(1) In general
The term "qualified research" means research—
(A) with respect to which expenditures may be treated as specified research or experimental expenditures under section 174,
(B) which is undertaken for the purpose of discovering information—
(i) which is technological in nature, and
(ii) the application of which is intended to be useful in the development of a new or improved business component of the taxpayer, and
(C) substantially all of the activities of which constitute elements of a process of experimentation for a purpose described in paragraph (3).
Such term does not include any activity described in paragraph (4).
(2) Tests to be applied separately to each business component
For purposes of this subsection—
(A) In general
Paragraph (1) shall be applied separately with respect to each business component of the taxpayer.
(B) Business component defined
The term "business component" means any product, process, computer software, technique, formula, or invention which is to be—
(i) held for sale, lease, or license, or
(ii) used by the taxpayer in a trade or business of the taxpayer.
(C) Special rule for production processes
Any plant process, machinery, or technique for commercial production of a business component shall be treated as a separate business component (and not as part of the business component being produced).
(3) Purposes for which research may qualify for credit
For purposes of paragraph (1)(C)—
(A) In general
Research shall be treated as conducted for a purpose described in this paragraph if it relates to—
(i) a new or improved function,
(ii) performance, or
(iii) reliability or quality.
(B) Certain purposes not qualified
Research shall in no event be treated as conducted for a purpose described in this paragraph if it relates to style, taste, cosmetic, or seasonal design factors.
(4) Activities for which credit not allowed
The term "qualified research" shall not include any of the following:
(A) Research after commercial production
Any research conducted after the beginning of commercial production of the business component.
(B) Adaptation of existing business components
Any research related to the adaptation of an existing business component to a particular customer's requirement or need.
(C) Duplication of existing business component
Any research related to the reproduction of an existing business component (in whole or in part) from a physical examination of the business component itself or from plans, blueprints, detailed specifications, or publicly available information with respect to such business component.
(D) Surveys, studies, etc.
Any—
(i) efficiency survey,
(ii) activity relating to management function or technique,
(iii) market research, testing, or development (including advertising or promotions),
(iv) routine data collection, or
(v) routine or ordinary testing or inspection for quality control.
(E) Computer software
Except to the extent provided in regulations, any research with respect to computer software which is developed by (or for the benefit of) the taxpayer primarily for internal use by the taxpayer, other than for use in—
(i) an activity which constitutes qualified research (determined with regard to this subparagraph), or
(ii) a production process with respect to which the requirements of paragraph (1) are met.
(F) Foreign research
Any research conducted outside the United States, the Commonwealth of Puerto Rico, or any possession of the United States.
(G) Social sciences, etc.
Any research in the social sciences, arts, or humanities.
(H) Funded research
Any research to the extent funded by any grant, contract, or otherwise by another person (or governmental entity).
(e) Credit allowable with respect to certain payments to qualified organizations for basic research
For purposes of this section—
(1) In general
In the case of any taxpayer who makes basic research payments for any taxable year—
(A) the amount of basic research payments taken into account under subsection (a)(2) shall be equal to the excess of—
(i) such basic research payments, over
(ii) the qualified organization base period amount, and
(B) that portion of such basic research payments which does not exceed the qualified organization base period amount shall be treated as contract research expenses for purposes of subsection (a)(1).
(2) Basic research payments defined
For purposes of this subsection—
(A) In general
The term "basic research payment" means, with respect to any taxable year, any amount paid in cash during such taxable year by a corporation to any qualified organization for basic research but only if—
(i) such payment is pursuant to a written agreement between such corporation and such qualified organization, and
(ii) such basic research is to be performed by such qualified organization.
(B) Exception to requirement that research be performed by the organization
In the case of a qualified organization described in subparagraph (C) or (D) of paragraph (6), clause (ii) of subparagraph (A) shall not apply.
(3) Qualified organization base period amount
For purposes of this subsection, the term "qualified organization base period amount" means an amount equal to the sum of—
(A) the minimum basic research amount, plus
(B) the maintenance-of-effort amount.
(4) Minimum basic research amount
For purposes of this subsection—
(A) In general
The term "minimum basic research amount" means an amount equal to the greater of—
(i) 1 percent of the average of the sum of amounts paid or incurred during the base period for—
(I) any in-house research expenses, and
(II) any contract research expenses, or
(ii) the amounts treated as contract research expenses during the base period by reason of this subsection (as in effect during the base period).
(B) Floor amount
Except in the case of a taxpayer which was in existence during a taxable year (other than a short taxable year) in the base period, the minimum basic research amount for any base period shall not be less than 50 percent of the basic research payments for the taxable year for which a determination is being made under this subsection.
(5) Maintenance-of-effort amount
For purposes of this subsection—
(A) In general
The term "maintenance-of-effort amount" means, with respect to any taxable year, an amount equal to the excess (if any) of—
(i) an amount equal to—
(I) the average of the nondesignated university contributions paid by the taxpayer during the base period, multiplied by
(II) the cost-of-living adjustment for the calendar year in which such taxable year begins, over
(ii) the amount of nondesignated university contributions paid by the taxpayer during such taxable year.
(B) Nondesignated university contributions
For purposes of this paragraph, the term "nondesignated university contribution" means any amount paid by a taxpayer to any qualified organization described in paragraph (6)(A)—
(i) for which a deduction was allowable under section 170, and
(ii) which was not taken into account—
(I) in computing the amount of the credit under this section (as in effect during the base period) during any taxable year in the base period, or
(II) as a basic research payment for purposes of this section.
(C) Cost-of-living adjustment defined
(i) In general
The cost-of-living adjustment for any calendar year is the cost-of-living adjustment for such calendar year determined under section 1(f)(3), by substituting "calendar year 1987" for "calendar year 2016" in subparagraph (A)(ii) thereof.
(ii) Special rule where base period ends in a calendar year other than 1983 or 1984
If the base period of any taxpayer does not end in 1983 or 1984, section 1(f)(3)(A)(ii) shall, for purposes of this paragraph, be applied by substituting the calendar year in which such base period ends for 2016. Such substitution shall be in lieu of the substitution under clause (i).
(6) Qualified organization
For purposes of this subsection, the term "qualified organization" means any of the following organizations:
(A) Educational institutions
Any educational organization which—
(i) is an institution of higher education (within the meaning of section 3304(f)), and
(ii) is described in section 170(b)(1)(A)(ii).
(B) Certain scientific research organizations
Any organization not described in subparagraph (A) which—
(i) is described in section 501(c)(3) and is exempt from tax under section 501(a),
(ii) is organized and operated primarily to conduct scientific research, and
(iii) is not a private foundation.
(C) Scientific tax-exempt organizations
Any organization which—
(i) is described in—
(I) section 501(c)(3) (other than a private foundation), or
(II) section 501(c)(6),
(ii) is exempt from tax under section 501(a),
(iii) is organized and operated primarily to promote scientific research by qualified organizations described in subparagraph (A) pursuant to written research agreements, and
(iv) currently expends—
(I) substantially all of its funds, or
(II) substantially all of the basic research payments received by it,
for grants to, or contracts for basic research with, an organization described in subparagraph (A).
(D) Certain grant organizations
Any organization not described in subparagraph (B) or (C) which—
(i) is described in section 501(c)(3) and is exempt from tax under section 501(a) (other than a private foundation),
(ii) is established and maintained by an organization established before July 10, 1981, which meets the requirements of clause (i),
(iii) is organized and operated exclusively for the purpose of making grants to organizations described in subparagraph (A) pursuant to written research agreements for purposes of basic research, and
(iv) makes an election, revocable only with the consent of the Secretary, to be treated as a private foundation for purposes of this title (other than section 4940, relating to excise tax based on investment income).
(7) Definitions and special rules
For purposes of this subsection—
(A) Basic research
The term "basic research" means any original investigation for the advancement of scientific knowledge not having a specific commercial objective, except that such term shall not include—
(i) basic research conducted outside of the United States, and
(ii) basic research in the social sciences, arts, or humanities.
(B) Base period
The term "base period" means the 3-taxable-year period ending with the taxable year immediately preceding the 1st taxable year of the taxpayer beginning after December 31, 1983.
(C) Exclusion from incremental credit calculation
For purposes of determining the amount of credit allowable under subsection (a)(1) for any taxable year, the amount of the basic research payments taken into account under subsection (a)(2)—
(i) shall not be treated as qualified research expenses under subsection (a)(1)(A), and
(ii) shall not be included in the computation of base amount under subsection (a)(1)(B).
(D) Trade or business qualification
For purposes of applying subsection (b)(1) to this subsection, any basic research payments shall be treated as an amount paid in carrying on a trade or business of the taxpayer in the taxable year in which it is paid (without regard to the provisions of subsection (b)(3)(B)).
(E) Certain corporations not eligible
The term "corporation" shall not include—
(i) an S corporation,
(ii) a personal holding company (as defined in section 542), or
(iii) a service organization (as defined in section 414(m)(3)).
(f) Special rules
For purposes of this section—
(1) Aggregation of expenditures
(A) Controlled group of corporations
In determining the amount of the credit under this section—
(i) all members of the same controlled group of corporations shall be treated as a single taxpayer, and
(ii) the credit (if any) allowable by this section to each such member shall be determined on a proportionate basis to its share of the aggregate of the qualified research expenses, basic research payments, and amounts paid or incurred to energy research consortiums, taken into account by such controlled group for purposes of this section.
(B) Common control
Under regulations prescribed by the Secretary, in determining the amount of the credit under this section—
(i) all trades or businesses (whether or not incorporated) which are under common control shall be treated as a single taxpayer, and
(ii) the credit (if any) allowable by this section to each such person shall be determined on a proportionate basis to its share of the aggregate of the qualified research expenses, basic research payments, and amounts paid or incurred to energy research consortiums, taken into account by all such persons under common control for purposes of this section.
The regulations prescribed under this subparagraph shall be based on principles similar to the principles which apply in the case of subparagraph (A).
(2) Allocations
(A) Pass-thru in the case of estates and trusts
Under regulations prescribed by the Secretary, rules similar to the rules of subsection (d) of section 52 shall apply.
(B) Allocation in the case of partnerships
In the case of partnerships, the credit shall be allocated among partners under regulations prescribed by the Secretary.
(3) Adjustments for certain acquisitions, etc.
Under regulations prescribed by the Secretary—
(A) Acquisitions
(i) In general
If a person acquires the major portion of either a trade or business or a separate unit of a trade or business (hereinafter in this paragraph referred to as the "acquired business") of another person (hereinafter in this paragraph referred to as the "predecessor"), then the amount of qualified research expenses paid or incurred by the acquiring person during the measurement period shall be increased by the amount determined under clause (ii), and the gross receipts of the acquiring person for such period shall be increased by the amount determined under clause (iii).
(ii) Amount determined with respect to qualified research expenses
The amount determined under this clause is—
(I) for purposes of applying this section for the taxable year in which such acquisition is made, the acquisition year amount, and
(II) for purposes of applying this section for any taxable year after the taxable year in which such acquisition is made, the qualified research expenses paid or incurred by the predecessor with respect to the acquired business during the measurement period.
(iii) Amount determined with respect to gross receipts
The amount determined under this clause is the amount which would be determined under clause (ii) if "the gross receipts of" were substituted for "the qualified research expenses paid or incurred by" each place it appears in clauses (ii) and (iv).
(iv) Acquisition year amount
For purposes of clause (ii), the acquisition year amount is the amount equal to the product of—
(I) the qualified research expenses paid or incurred by the predecessor with respect to the acquired business during the measurement period, and
(II) the number of days in the period beginning on the date of the acquisition and ending on the last day of the taxable year in which the acquisition is made,
divided by the number of days in the acquiring person's taxable year.
(v) Special rules for coordinating taxable years
In the case of an acquiring person and a predecessor whose taxable years do not begin on the same date—
(I) each reference to a taxable year in clauses (ii) and (iv) shall refer to the appropriate taxable year of the acquiring person,
(II) the qualified research expenses paid or incurred by the predecessor, and the gross receipts of the predecessor, during each taxable year of the predecessor any portion of which is part of the measurement period shall be allocated equally among the days of such taxable year,
(III) the amount of such qualified research expenses taken into account under clauses (ii) and (iv) with respect to a taxable year of the acquiring person shall be equal to the total of the expenses attributable under subclause (II) to the days occurring during such taxable year, and
(IV) the amount of such gross receipts taken into account under clause (iii) with respect to a taxable year of the acquiring person shall be equal to the total of the gross receipts attributable under subclause (II) to the days occurring during such taxable year.
(vi) Measurement period
For purposes of this subparagraph, the term "measurement period" means, with respect to the taxable year of the acquiring person for which the credit is determined, any period of the acquiring person preceding such taxable year which is taken into account for purposes of determining the credit for such year.
(B) Dispositions
If the predecessor furnished to the acquiring person such information as is necessary for the application of subparagraph (A), then, for purposes of applying this section for any taxable year ending after such disposition, the amount of qualified research expenses paid or incurred by, and the gross receipts of, the predecessor during the measurement period (as defined in subparagraph (A)(vi), determined by substituting "predecessor" for "acquiring person" each place it appears) shall be reduced by—
(i) in the case of the taxable year in which such disposition is made, an amount equal to the product of—
(I) the qualified research expenses paid or incurred by, or gross receipts of, the predecessor with respect to the acquired business during the measurement period (as so defined and so determined), and
(II) the number of days in the period beginning on the date of acquisition (as determined for purposes of subparagraph (A)(iv)(II)) and ending on the last day of the taxable year of the predecessor in which the disposition is made,
divided by the number of days in the taxable year of the predecessor, and
(ii) in the case of any taxable year ending after the taxable year in which such disposition is made, the amount described in clause (i)(I).
(C) Certain reimbursements taken into account in determining fixed-base percentage
If during any of the 3 taxable years following the taxable year in which a disposition to which subparagraph (B) applies occurs, the disposing taxpayer (or a person with whom the taxpayer is required to aggregate expenditures under paragraph (1)) reimburses the acquiring person (or a person required to so aggregate expenditures with such person) for research on behalf of the taxpayer, then the amount of qualified research expenses of the taxpayer for the taxable years taken into account in computing the fixed-base percentage shall be increased by the lesser of—
(i) the amount of the decrease under subparagraph (B) which is allocable to taxable years so taken into account, or
(ii) the product of the number of taxable years so taken into account, multiplied by the amount of the reimbursement described in this subparagraph.
(4) Short taxable years
In the case of any short taxable year, qualified research expenses and gross receipts shall be annualized in such circumstances and under such methods as the Secretary may prescribe by regulation.
(5) Controlled group of corporations
The term "controlled group of corporations" has the same meaning given to such term by section 1563(a), except that—
(A) "more than 50 percent" shall be substituted for "at least 80 percent" each place it appears in section 1563(a)(1), and
(B) the determination shall be made without regard to subsections (a)(4) and (e)(3)(C) of section 1563.
(6) Energy research consortium
(A) In general
The term "energy research consortium" means any organization—
(i) which is—
(I) described in section 501(c)(3) and is exempt from tax under section 501(a) and is organized and operated primarily to conduct energy research, or
(II) organized and operated primarily to conduct energy research in the public interest (within the meaning of section 501(c)(3)),
(ii) which is not a private foundation,
(iii) to which at least 5 unrelated persons paid or incurred during the calendar year in which the taxable year of the organization begins amounts (including as contributions) to such organization for energy research, and
(iv) to which no single person paid or incurred (including as contributions) during such calendar year an amount equal to more than 50 percent of the total amounts received by such organization during such calendar year for energy research.
(B) Treatment of persons
All persons treated as a single employer under subsection (a) or (b) of section 52 shall be treated as related persons for purposes of subparagraph (A)(iii) and as a single person for purposes of subparagraph (A)(iv).
(C) Foreign research
For purposes of subsection (a)(3), amounts paid or incurred for any energy research conducted outside the United States, the Commonwealth of Puerto Rico, or any possession of the United States shall not be taken into account.
(D) Denial of double benefit
Any amount taken into account under subsection (a)(3) shall not be taken into account under paragraph (1) or (2) of subsection (a).
(E) Energy research
The term "energy research" does not include any research which is not qualified research.
(g) Special rule for pass-thru of credit
In the case of an individual who—
(1) owns an interest in an unincorporated trade or business,
(2) is a partner in a partnership,
(3) is a beneficiary of an estate or trust, or
(4) is a shareholder in an S corporation,
the amount determined under subsection (a) for any taxable year shall not exceed an amount (separately computed with respect to such person's interest in such trade or business or entity) equal to the amount of tax attributable to that portion of a person's taxable income which is allocable or apportionable to the person's interest in such trade or business or entity. If the amount determined under subsection (a) for any taxable year exceeds the limitation of the preceding sentence, such amount may be carried to other taxable years under the rules of section 39; except that the limitation of the preceding sentence shall be taken into account in lieu of the limitation of section 38(c) in applying section 39.
(h) Treatment of credit for qualified small businesses
(1) In general
At the election of a qualified small business for any taxable year, section 3111(f) shall apply to the payroll tax credit portion of the credit otherwise determined under subsection (a) for the taxable year and such portion shall not be treated (other than for purposes of section 280C) as a credit determined under subsection (a).
(2) Payroll tax credit portion
For purposes of this subsection, the payroll tax credit portion of the credit determined under subsection (a) with respect to any qualified small business for any taxable year is the least of—
(A) the amount specified in the election made under this subsection,
(B) the credit determined under subsection (a) for the taxable year (determined before the application of this subsection), or
(C) in the case of a qualified small business other than a partnership or S corporation, the amount of the business credit carryforward under section 39 carried from the taxable year (determined before the application of this subsection to the taxable year).
(3) Qualified small business
For purposes of this subsection—
(A) In general
The term "qualified small business" means, with respect to any taxable year—
(i) a corporation or partnership, if—
(I) the gross receipts (as determined under the rules of section 448(c)(3), without regard to subparagraph (A) thereof) of such entity for the taxable year is less than $5,000,000, and
(II) such entity did not have gross receipts (as so determined) for any taxable year preceding the 5-taxable-year period ending with such taxable year, and
(ii) any person (other than a corporation or partnership) who meets the requirements of subclauses (I) and (II) of clause (i), determined—
(I) by substituting "person" for "entity" each place it appears, and
(II) by only taking into account the aggregate gross receipts received by such person in carrying on all trades or businesses of such person.
(B) Limitation
Such term shall not include an organization which is exempt from taxation under section 501.
(4) Election
(A) In general
Any election under this subsection for any taxable year—
(i) shall specify the amount of the credit to which such election applies,
(ii) shall be made on or before the due date (including extensions) of—
(I) in the case of a qualified small business which is a partnership, the return required to be filed under section 6031,
(II) in the case of a qualified small business which is an S corporation, the return required to be filed under section 6037, and
(III) in the case of any other qualified small business, the return of tax for the taxable year, and
(iii) may be revoked only with the consent of the Secretary.
(B) Limitations
(i) Amount
(I) In general
The amount specified in any election made under this subsection shall not exceed $250,000.
(II) Increase
In the case of taxable years beginning after December 31, 2022, the amount in subclause (I) shall be increased by $250,000.
(ii) Number of taxable years
A person may not make an election under this subsection if such person (or any other person treated as a single taxpayer with such person under paragraph (5)(A)) has made an election under this subsection for 5 or more preceding taxable years.
(C) Special rule for partnerships and S corporations
In the case of a qualified small business which is a partnership or S corporation, the election made under this subsection shall be made at the entity level.
(5) Aggregation rules
(A) In general
Except as provided in subparagraph (B), all persons or entities treated as a single taxpayer under subsection (f)(1) shall be treated as a single taxpayer for purposes of this subsection.
(B) Special rules
For purposes of this subsection and section 3111(f)—
(i) each of the persons treated as a single taxpayer under subparagraph (A) may separately make the election under paragraph (1) for any taxable year, and
(ii) each of the $250,000 amounts under paragraph (4)(B)(i) shall be allocated among all persons treated as a single taxpayer under subparagraph (A) in the same manner as under subparagraph (A)(ii) or (B)(ii) of subsection (f)(1), whichever is applicable.
(6) Regulations
The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this subsection, including—
(A) regulations to prevent the avoidance of the purposes of the limitations and aggregation rules under this subsection through the use of successor companies or other means,
(B) regulations to minimize compliance and record-keeping burdens under this subsection, and
(C) regulations for recapturing the benefit of credits determined under section 3111(f) in cases where there is a subsequent adjustment to the payroll tax credit portion of the credit determined under subsection (a), including requiring amended income tax returns in the cases where there is such an adjustment.
(Added
Editorial Notes
References in Text
The date of the enactment of the Energy Tax Incentives Act of 2005, referred to in subsec. (b)(3)(D)(iv), is the date of enactment of title XIII of
Prior Provisions
A prior section 41, added
Another prior section 41 was renumbered
Amendments
2022—Subsec. (h)(4)(B)(i).
Subsec. (h)(5)(B)(ii).
2018—Subsec. (c)(4).
Subsec. (c)(4)(A).
Subsec. (c)(4)(C).
Subsec. (c)(5) to (7).
2017—Subsec. (d)(1)(A).
Subsec. (e)(5)(C)(i).
Subsec. (e)(5)(C)(ii).
2015—Subsec. (h).
2014—Subsec. (h)(1).
"(A) after June 30, 1995, and before July 1, 1996, or
"(B) after December 31, 2013."
2013—Subsec. (f)(1)(A)(ii).
Subsec. (f)(1)(B)(ii).
Subsec. (f)(3)(A).
Subsec. (f)(3)(B).
"(i) a taxpayer disposes of the major portion of any trade or business or the major portion of a separate unit of a trade or business in a transaction to which subparagraph (A) applies, and
"(ii) the taxpayer furnished the acquiring person such information as is necessary for the application of subparagraph (A),
then, for purposes of applying this section for any taxable year ending after such disposition, the amount of qualified research expenses paid or incurred by the taxpayer during periods before such disposition shall be decreased by so much of such expenses as is attributable to the portion of such trade or business or separate unit disposed of by the taxpayer, and the gross receipts of the taxpayer for such periods shall be decreased by so much of the gross receipts as is attributable to such portion."
Subsec. (h)(1)(B).
2010—Subsec. (h)(1)(B).
2008—Subsec. (c)(5)(A).
Subsec. (h)(1)(B).
Subsec. (h)(2).
Subsec. (h)(3).
2007—Subsec. (a)(3).
Subsec. (f)(1)(A)(ii), (B)(ii).
Subsec. (f)(6)(E).
2006—Subsec. (c)(4)(A)(i).
Subsec. (c)(4)(A)(ii).
Subsec. (c)(4)(A)(iii).
Subsec. (c)(5) to (7).
Subsec. (h)(1)(B).
2005—Subsec. (a)(3).
Subsec. (b)(3)(C)(ii).
Subsec. (b)(3)(D).
Subsec. (f)(6).
Subsec. (f)(6)(C), (D).
2004—Subsec. (h)(1)(B).
1999—Subsec. (c)(4)(A)(i).
Subsec. (c)(4)(A)(ii).
Subsec. (c)(4)(A)(iii).
Subsecs. (c)(6), (d)(4)(F).
Subsec. (h)(1).
Subsec. (h)(1)(B).
1998—Subsec. (h)(1).
1997—Subsec. (c)(4)(B).
Subsec. (h)(1).
1996—Subsec. (b)(2)(D)(iii).
Subsec. (b)(3)(C).
Subsec. (c)(3)(B)(i).
Subsec. (c)(4) to (6).
Subsec. (h).
"(1)
"(2)
1993—Subsec. (c)(3)(B)(ii).
Subsec. (c)(3)(B)(iii).
Subsec. (c)(3)(D).
Subsec. (e)(5)(C).
Subsec. (h).
1991—Subsec. (h).
1990—Subsec. (e)(5)(C)(i).
Subsec. (e)(5)(C)(ii).
Subsec. (h).
1989—Subsec. (a)(1)(B).
Subsec. (b)(4).
Subsec. (c).
Subsec. (e)(7)(C)(ii).
Subsec. (f)(1).
Subsec. (f)(3)(A).
Subsec. (f)(3)(B).
Subsec. (f)(3)(C).
"(i) the amount of the decrease under subparagraph (B) which is allocable to such base period, or
"(ii) the product of the number of years in the base period, multiplied by the amount of the reimbursement described in this subparagraph."
Subsec. (f)(4).
Subsec. (h).
Subsec. (h)(1).
Subsec. (h)(2).
Subsec. (i).
1988—Subsec. (g).
Subsec. (h).
Subsec. (i).
1986—
Subsec. (a).
"(1) the qualified research expenses for the taxable year, over
"(2) the base period research expenses."
Subsec. (b)(2)(A)(iii).
Subsec. (b)(2)(D)(iii).
Subsec. (d).
"(1) qualified research conducted outside the United States,
"(2) qualified research in the social sciences or humanities, and
"(3) qualified research to the extent funded by any grant, contract, or otherwise by another person (or any governmental entity)."
Subsec. (e).
Subsec. (g).
Subsec. (h).
1984—
Subsec. (b)(2)(D)(iii).
Subsec. (g)(1)(A).
1983—Subsec. (b)(2)(A).
1982—Subsec. (f)(2)(A).
Subsec. (g)(1)(B)(iv).
Statutory Notes and Related Subsidiaries
Effective Date of 2022 Amendment
Effective Date of 2018 Amendment
Amendment by section 101(c) of
Effective Date of 2017 Amendment
Amendment by section 11002(d)(1)(F), (2) of
Effective Date of 2015 Amendment
Amendment by section 121(a)(1) of
Amendment by section 121(c)(1) of
Effective Date of 2014 Amendment
Effective Date of 2013 Amendment
"(1)
"(2)
Effective Date of 2010 Amendment
Effective Date of 2008 Amendment
"(1)
"(2)
Effective Date of 2007 Amendment
Amendment by section 6(c) of
Effective Date of 2006 Amendment
"(2)
"(3)
"(A)
"(i) the applicable 2006 percentage multiplied by the amount determined under section 41(c)(4)(A) of such Code (as in effect for taxable years ending on December 31, 2006), plus
"(ii) the applicable 2007 percentage multiplied by the amount determined under section 41(c)(4)(A) of such Code (as in effect for taxable years ending on January 1, 2007).
"(B)
"(i)
"(ii)
"(iii)
"(2)
"(3)
"(4)
"(A)
"(i) the applicable 2006 percentage multiplied by the amount determined under section 41(a)(1) of such Code (as in effect for taxable years ending on December 31, 2006), plus
"(ii) the applicable 2007 percentage multiplied by the amount determined under section 41(c)(5) of such Code (as in effect for taxable years ending on January 1, 2007).
"(B)
"(i)
"(ii)
"(iii)
Effective Date of 2005 Amendments
Amendment by
Effective Date of 2004 Amendment
Effective Date of 1999 Amendment
Effective Date of 1998 Amendment
Effective Date of 1997 Amendment
Effective Date of 1996 Amendment
Amendment by section 1201(e)(1), (4) of
"(1)
"(2)
"(3)
Effective Date of 1993 Amendment
Amendment by section 13111(a)(1) of
Amendment by section 13201(b)(3)(C) of
Effective Date of 1991 Amendment
Amendment by
Effective Date of 1990 Amendment
Amendment by section 11101(d)(1)(C) of
Amendment by section 11402(a) of
Effective Date of 1989 Amendment
Amendment by section 7814(e)(2)(C) of
Effective Date of 1988 Amendment
Amendment by section 1002(h)(1) of
Effective Date of 1986 Amendment
"(1)
"(2)
"(3)
Amendment by section 1847(b)(1) of
Effective Date of 1984 Amendment
Amendment by section 474(i)(1) of
Amendment by section 612(e)(1) of
Effective Date of 1983 Amendment
Effective Date of 1982 Amendment
Amendment by
Effective Date
"(1)
"(2)
"(A)
"(B)
Savings Provision
For provisions that nothing in amendment by section 401(b)(6) of
Special Rule for Elections Under Expired Provisions
"(a)
"(b)
Special Rule for Credit Attributable to Suspension Periods
"(1)
"(A) shall not be taken into account prior to October 1, 2000, to the extent such credit is attributable to the first suspension period; and
"(B) shall not be taken into account prior to October 1, 2001, to the extent such credit is attributable to the second suspension period.
On or after the earliest date that an amount of credit may be taken into account, such amount may be taken into account through the filing of an amended return, an application for expedited refund, an adjustment of estimated taxes, or other means allowed by such Code.
"(2)
"(A) the first suspension period is the period beginning on July 1, 1999, and ending on September 30, 2000; and
"(B) the second suspension period is the period beginning on October 1, 2000, and ending on September 30, 2001.
"(3)
"(A)
"(B)
"(C)
"(i) review the application;
"(ii) determine the amount of the overpayment; and
"(iii) apply, credit, or refund such overpayment,
in a manner similar to the manner provided in section 6411(b) of such Code.
"(D)
"(4)
"(A)
"(B)
"(5)
Special Rules for Taxable Years Beginning Before Oct. 1, 1990, and Ending After Sept. 30, 1990
[
Study and Report on Credit Provided by This Section
Plan Amendments Not Required Until January 1, 1989
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101–1147 and 1171–1177] or title XVIII [§§1800–1899A] of
New Section 41 Treated as Continuation of Old Section 44F
"(A) whether any excess credit under old section 44F [now 41] for a taxable year beginning before January 1, 1984, is allowable as a carryover under new section 30 [now 41], and
"(B) the period during which new section 30 [now 41] is in effect,
new section 30 [now 41] shall be treated as a continuation of old section 44F (and shall apply only to the extent old section 44F would have applied)."
§42. Low-income housing credit
(a) In general
For purposes of section 38, the amount of the low-income housing credit determined under this section for any taxable year in the credit period shall be an amount equal to—
(1) the applicable percentage of
(2) the qualified basis of each qualified low-income building.
(b) Applicable percentage: 70 percent present value credit for certain new buildings; 30 percent present value credit for certain other buildings
(1) Determination of applicable percentage
For purposes of this section—
(A) In general
The term "applicable percentage" means, with respect to any building, the appropriate percentage prescribed by the Secretary for the earlier of—
(i) the month in which such building is placed in service, or
(ii) at the election of the taxpayer—
(I) the month in which the taxpayer and the housing credit agency enter into an agreement with respect to such building (which is binding on such agency, the taxpayer, and all successors in interest) as to the housing credit dollar amount to be allocated to such building, or
(II) in the case of any building to which subsection (h)(4)(B) applies, the month in which the tax-exempt obligations are issued.
A month may be elected under clause (ii) only if the election is made not later than the 5th day after the close of such month. Such an election, once made, shall be irrevocable.
(B) Method of prescribing percentages
The percentages prescribed by the Secretary for any month shall be percentages which will yield over a 10-year period amounts of credit under subsection (a) which have a present value equal to—
(i) 70 percent of the qualified basis of a new building which is not federally subsidized for the taxable year, and
(ii) 30 percent of the qualified basis of a building not described in clause (i).
(C) Method of discounting
The present value under subparagraph (B) shall be determined—
(i) as of the last day of the 1st year of the 10-year period referred to in subparagraph (B),
(ii) by using a discount rate equal to 72 percent of the average of the annual Federal mid-term rate and the annual Federal long-term rate applicable under section 1274(d)(1) to the month applicable under clause (i) or (ii) of subparagraph (A) and compounded annually, and
(iii) by assuming that the credit allowable under this section for any year is received on the last day of such year.
(2) Minimum credit rate for non-federally subsidized new buildings
In the case of any new building—
(A) which is placed in service by the taxpayer after the date of the enactment of this paragraph, and
(B) which is not federally subsidized for the taxable year,
the applicable percentage shall not be less than 9 percent.
(3) Minimum credit rate
In the case of any new or existing building to which paragraph (2) does not apply and which is placed in service by the taxpayer after December 31, 2020, the applicable percentage shall not be less than 4 percent.
(4) Cross references
(A) For treatment of certain rehabilitation expenditures as separate new buildings, see subsection (e).
(B) For determination of applicable percentage for increases in qualified basis after the 1st year of the credit period, see subsection (f)(3).
(C) For authority of housing credit agency to limit applicable percentage and qualified basis which may be taken into account under this section with respect to any building, see subsection (h)(7).
(c) Qualified basis; qualified low-income building
For purposes of this section—
(1) Qualified basis
(A) Determination
The qualified basis of any qualified low-income building for any taxable year is an amount equal to—
(i) the applicable fraction (determined as of the close of such taxable year) of
(ii) the eligible basis of such building (determined under subsection (d)(5)).
(B) Applicable fraction
For purposes of subparagraph (A), the term "applicable fraction" means the smaller of the unit fraction or the floor space fraction.
(C) Unit fraction
For purposes of subparagraph (B), the term "unit fraction" means the fraction—
(i) the numerator of which is the number of low-income units in the building, and
(ii) the denominator of which is the number of residential rental units (whether or not occupied) in such building.
(D) Floor space fraction
For purposes of subparagraph (B), the term "floor space fraction" means the fraction—
(i) the numerator of which is the total floor space of the low-income units in such building, and
(ii) the denominator of which is the total floor space of the residential rental units (whether or not occupied) in such building.
(E) Qualified basis to include portion of building used to provide supportive services for homeless
In the case of a qualified low-income building described in subsection (i)(3)(B)(iii), the qualified basis of such building for any taxable year shall be increased by the lesser of—
(i) so much of the eligible basis of such building as is used throughout the year to provide supportive services designed to assist tenants in locating and retaining permanent housing, or
(ii) 20 percent of the qualified basis of such building (determined without regard to this subparagraph).
(2) Qualified low-income building
The term "qualified low-income building" means any building—
(A) which is part of a qualified low-income housing project at all times during the period—
(i) beginning on the 1st day in the compliance period on which such building is part of such a project, and
(ii) ending on the last day of the compliance period with respect to such building, and
(B) to which the amendments made by section 201(a) of the Tax Reform Act of 1986 apply.
(d) Eligible basis
For purposes of this section—
(1) New buildings
The eligible basis of a new building is its adjusted basis as of the close of the 1st taxable year of the credit period.
(2) Existing buildings
(A) In general
The eligible basis of an existing building is—
(i) in the case of a building which meets the requirements of subparagraph (B), its adjusted basis as of the close of the 1st taxable year of the credit period, and
(ii) zero in any other case.
(B) Requirements
A building meets the requirements of this subparagraph if—
(i) the building is acquired by purchase (as defined in section 179(d)(2)),
(ii) there is a period of at least 10 years between the date of its acquisition by the taxpayer and the date the building was last placed in service,
(iii) the building was not previously placed in service by the taxpayer or by any person who was a related person with respect to the taxpayer as of the time previously placed in service, and
(iv) except as provided in subsection (f)(5), a credit is allowable under subsection (a) by reason of subsection (e) with respect to the building.
(C) Adjusted basis
For purposes of subparagraph (A), the adjusted basis of any building shall not include so much of the basis of such building as is determined by reference to the basis of other property held at any time by the person acquiring the building.
(D) Special rules for subparagraph (B)
(i) Special rules for certain transfers
For purposes of determining under subparagraph (B)(ii) when a building was last placed in service, there shall not be taken into account any placement in service—
(I) in connection with the acquisition of the building in a transaction in which the basis of the building in the hands of the person acquiring it is determined in whole or in part by reference to the adjusted basis of such building in the hands of the person from whom acquired,
(II) by a person whose basis in such building is determined under section 1014(a) (relating to property acquired from a decedent),
(III) by any governmental unit or qualified nonprofit organization (as defined in subsection (h)(5)) if the requirements of subparagraph (B)(ii) are met with respect to the placement in service by such unit or organization and all the income from such property is exempt from Federal income taxation,
(IV) by any person who acquired such building by foreclosure (or by instrument in lieu of foreclosure) of any purchase-money security interest held by such person if the requirements of subparagraph (B)(ii) are met with respect to the placement in service by such person and such building is resold within 12 months after the date such building is placed in service by such person after such foreclosure, or
(V) of a single-family residence by any individual who owned and used such residence for no other purpose than as his principal residence.
(ii) Related person
For purposes of subparagraph (B)(iii), a person (hereinafter in this subclause referred to as the "related person") is related to any person if the related person bears a relationship to such person specified in section 267(b) or 707(b)(1), or the related person and such person are engaged in trades or businesses under common control (within the meaning of subsections (a) and (b) of section 52).
(3) Eligible basis reduced where disproportionate standards for units
(A) In general
Except as provided in subparagraph (B), the eligible basis of any building shall be reduced by an amount equal to the portion of the adjusted basis of the building which is attributable to residential rental units in the building which are not low-income units and which are above the average quality standard of the low-income units in the building.
(B) Exception where taxpayer elects to exclude excess costs
(i) In general
Subparagraph (A) shall not apply with respect to a residential rental unit in a building which is not a low-income unit if—
(I) the excess described in clause (ii) with respect to such unit is not greater than 15 percent of the cost described in clause (ii)(II), and
(II) the taxpayer elects to exclude from the eligible basis of such building the excess described in clause (ii) with respect to such unit.
(ii) Excess
The excess described in this clause with respect to any unit is the excess of—
(I) the cost of such unit, over
(II) the amount which would be the cost of such unit if the average cost per square foot of low-income units in the building were substituted for the cost per square foot of such unit.
The Secretary may by regulation provide for the determination of the excess under this clause on a basis other than square foot costs.
(4) Special rules relating to determination of adjusted basis
For purposes of this subsection—
(A) In general
Except as provided in subparagraphs (B) and (C), the adjusted basis of any building shall be determined without regard to the adjusted basis of any property which is not residential rental property.
(B) Basis of property in common areas, etc., included
The adjusted basis of any building shall be determined by taking into account the adjusted basis of property (of a character subject to the allowance for depreciation) used in common areas or provided as comparable amenities to all residential rental units in such building.
(C) Inclusion of basis of property used to provide services for certain nontenants
(i) In general
The adjusted basis of any building located in a qualified census tract (as defined in paragraph (5)(B)(ii)) shall be determined by taking into account the adjusted basis of property (of a character subject to the allowance for depreciation and not otherwise taken into account) used throughout the taxable year in providing any community service facility.
(ii) Limitation
The increase in the adjusted basis of any building which is taken into account by reason of clause (i) shall not exceed the sum of—
(I) 25 percent of so much of the eligible basis of the qualified low-income housing project of which it is a part as does not exceed $15,000,000, plus
(II) 10 percent of so much of the eligible basis of such project as is not taken into account under subclause (I).
For purposes of the preceding sentence, all community service facilities which are part of the same qualified low-income housing project shall be treated as one facility.
(iii) Community service facility
For purposes of this subparagraph, the term "community service facility" means any facility designed to serve primarily individuals whose income is 60 percent or less of area median income (within the meaning of subsection (g)(1)(B)).
(D) No reduction for depreciation
The adjusted basis of any building shall be determined without regard to paragraphs (2) and (3) of section 1016(a).
(5) Special rules for determining eligible basis
(A) Federal grants not taken into account in determining eligible basis
The eligible basis of a building shall not include any costs financed with the proceeds of a federally funded grant.
(B) Increase in credit for buildings in high cost areas
(i) In general
In the case of any building located in a qualified census tract or difficult development area which is designated for purposes of this subparagraph—
(I) in the case of a new building, the eligible basis of such building shall be 130 percent of such basis determined without regard to this subparagraph, and
(II) in the case of an existing building, the rehabilitation expenditures taken into account under subsection (e) shall be 130 percent of such expenditures determined without regard to this subparagraph.
(ii) Qualified census tract
(I) In general
The term "qualified census tract" means any census tract which is designated by the Secretary of Housing and Urban Development and, for the most recent year for which census data are available on household income in such tract, either in which 50 percent or more of the households have an income which is less than 60 percent of the area median gross income for such year or which has a poverty rate of at least 25 percent. If the Secretary of Housing and Urban Development determines that sufficient data for any period are not available to apply this clause on the basis of census tracts, such Secretary shall apply this clause for such period on the basis of enumeration districts.
(II) Limit on MSA's designated
The portion of a metropolitan statistical area which may be designated for purposes of this subparagraph shall not exceed an area having 20 percent of the population of such metropolitan statistical area.
(III) Determination of areas
For purposes of this clause, each metropolitan statistical area shall be treated as a separate area and all nonmetropolitan areas in a State shall be treated as 1 area.
(iii) Difficult development areas
(I) In general
The term "difficult development areas" means any area designated by the Secretary of Housing and Urban Development as an area which has high construction, land, and utility costs relative to area median gross income.
(II) Limit on areas designated
The portions of metropolitan statistical areas which may be designated for purposes of this subparagraph shall not exceed an aggregate area having 20 percent of the population of such metropolitan statistical areas. A comparable rule shall apply to nonmetropolitan areas.
(iv) Special rules and definitions
For purposes of this subparagraph—
(I) population shall be determined on the basis of the most recent decennial census for which data are available,
(II) area median gross income shall be determined in accordance with subsection (g)(4),
(III) the term "metropolitan statistical area" has the same meaning as when used in section 143(k)(2)(B), and
(IV) the term "nonmetropolitan area" means any county (or portion thereof) which is not within a metropolitan statistical area.
(v) Buildings designated by State housing credit agency
Any building which is designated by the State housing credit agency as requiring the increase in credit under this subparagraph in order for such building to be financially feasible as part of a qualified low-income housing project shall be treated for purposes of this subparagraph as located in a difficult development area which is designated for purposes of this subparagraph. The preceding sentence shall not apply to any building if paragraph (1) of subsection (h) does not apply to any portion of the eligible basis of such building by reason of paragraph (4) of such subsection.
(6) Credit allowable for certain buildings acquired during 10-year period described in paragraph (2)(B)(ii)
(A) In general
Paragraph (2)(B)(ii) shall not apply to any federally- or State-assisted building.
(B) Buildings acquired from insured depository institutions in default
On application by the taxpayer, the Secretary may waive paragraph (2)(B)(ii) with respect to any building acquired from an insured depository institution in default (as defined in section 3 of the Federal Deposit Insurance Act) or from a receiver or conservator of such an institution.
(C) Federally- or State-assisted building
For purposes of this paragraph—
(i) Federally-assisted building
The term "federally-assisted building" means any building which is substantially assisted, financed, or operated under section 8 of the United States Housing Act of 1937, section 221(d)(3), 221(d)(4), or 236 of the National Housing Act, section 515 of the Housing Act of 1949, or any other housing program administered by the Department of Housing and Urban Development or by the Rural Housing Service of the Department of Agriculture.
(ii) State-assisted building
The term "State-assisted building" means any building which is substantially assisted, financed, or operated under any State law similar in purposes to any of the laws referred to in clause (i).
(7) Acquisition of building before end of prior compliance period
(A) In general
Under regulations prescribed by the Secretary, in the case of a building described in subparagraph (B) (or interest therein) which is acquired by the taxpayer—
(i) paragraph (2)(B) shall not apply, but
(ii) the credit allowable by reason of subsection (a) to the taxpayer for any period after such acquisition shall be equal to the amount of credit which would have been allowable under subsection (a) for such period to the prior owner referred to in subparagraph (B) had such owner not disposed of the building.
(B) Description of building
A building is described in this subparagraph if—
(i) a credit was allowed by reason of subsection (a) to any prior owner of such building, and
(ii) the taxpayer acquired such building before the end of the compliance period for such building with respect to such prior owner (determined without regard to any disposition by such prior owner).
(e) Rehabilitation expenditures treated as separate new building
(1) In general
Rehabilitation expenditures paid or incurred by the taxpayer with respect to any building shall be treated for purposes of this section as a separate new building.
(2) Rehabilitation expenditures
For purposes of paragraph (1)—
(A) In general
The term "rehabilitation expenditures" means amounts chargeable to capital account and incurred for property (or additions or improvements to property) of a character subject to the allowance for depreciation in connection with the rehabilitation of a building.
(B) Cost of acquisition, etc., not included
Such term does not include the cost of acquiring any building (or interest therein) or any amount not permitted to be taken into account under paragraph (3) or (4) of subsection (d).
(3) Minimum expenditures to qualify
(A) In general
Paragraph (1) shall apply to rehabilitation expenditures with respect to any building only if—
(i) the expenditures are allocable to 1 or more low-income units or substantially benefit such units, and
(ii) the amount of such expenditures during any 24-month period meets the requirements of whichever of the following subclauses requires the greater amount of such expenditures:
(I) The requirement of this subclause is met if such amount is not less than 20 percent of the adjusted basis of the building (determined as of the 1st day of such period and without regard to paragraphs (2) and (3) of section 1016(a)).
(II) The requirement of this subclause is met if the qualified basis attributable to such amount, when divided by the number of low-income units in the building, is $6,000 or more.
(B) Exception from 10 percent rehabilitation
In the case of a building acquired by the taxpayer from a governmental unit, at the election of the taxpayer, subparagraph (A)(ii)(I) shall not apply and the credit under this section for such rehabilitation expenditures shall be determined using the percentage applicable under subsection (b)(2)(B)(ii).
(C) Date of determination
The determination under subparagraph (A) shall be made as of the close of the 1st taxable year in the credit period with respect to such expenditures.
(D) Inflation adjustment
In the case of any expenditures which are treated under paragraph (4) as placed in service during any calendar year after 2009, the $6,000 amount in subparagraph (A)(ii)(II) shall be increased by an amount equal to—
(i) such dollar amount, multiplied by
(ii) the cost-of-living adjustment determined under section 1(f)(3) for such calendar year by substituting "calendar year 2008" for "calendar year 2016" in subparagraph (A)(ii) thereof.
Any increase under the preceding sentence which is not a multiple of $100 shall be rounded to the nearest multiple of $100.
(4) Special rules
For purposes of applying this section with respect to expenditures which are treated as a separate building by reason of this subsection—
(A) such expenditures shall be treated as placed in service at the close of the 24-month period referred to in paragraph (3)(A), and
(B) the applicable fraction under subsection (c)(1) shall be the applicable fraction for the building (without regard to paragraph (1)) with respect to which the expenditures were incurred.
Nothing in subsection (d)(2) shall prevent a credit from being allowed by reason of this subsection.
(5) No double counting
Rehabilitation expenditures may, at the election of the taxpayer, be taken into account under this subsection or subsection (d)(2)(A)(i) but not under both such subsections.
(6) Regulations to apply subsection with respect to group of units in building
The Secretary may prescribe regulations, consistent with the purposes of this subsection, treating a group of units with respect to which rehabilitation expenditures are incurred as a separate new building.
(f) Definition and special rules relating to credit period
(1) Credit period defined
For purposes of this section, the term "credit period" means, with respect to any building, the period of 10 taxable years beginning with—
(A) the taxable year in which the building is placed in service, or
(B) at the election of the taxpayer, the succeeding taxable year,
but only if the building is a qualified low-income building as of the close of the 1st year of such period. The election under subparagraph (B), once made, shall be irrevocable.
(2) Special rule for 1st year of credit period
(A) In general
The credit allowable under subsection (a) with respect to any building for the 1st taxable year of the credit period shall be determined by substituting for the applicable fraction under subsection (c)(1) the fraction—
(i) the numerator of which is the sum of the applicable fractions determined under subsection (c)(1) as of the close of each full month of such year during which such building was in service, and
(ii) the denominator of which is 12.
(B) Disallowed 1st year credit allowed in 11th year
Any reduction by reason of subparagraph (A) in the credit allowable (without regard to subparagraph (A)) for the 1st taxable year of the credit period shall be allowable under subsection (a) for the 1st taxable year following the credit period.
(3) Determination of applicable percentage with respect to increases in qualified basis after 1st year of credit period
(A) In general
In the case of any building which was a qualified low-income building as of the close of the 1st year of the credit period, if—
(i) as of the close of any taxable year in the compliance period (after the 1st year of the credit period) the qualified basis of such building exceeds
(ii) the qualified basis of such building as of the close of the 1st year of the credit period,
the applicable percentage which shall apply under subsection (a) for the taxable year to such excess shall be the percentage equal to 2/3 of the applicable percentage which (after the application of subsection (h)) would but for this paragraph apply to such basis.
(B) 1st year computation applies
A rule similar to the rule of paragraph (2)(A) shall apply to any increase in qualified basis to which subparagraph (A) applies for the 1st year of such increase.
(4) Dispositions of property
If a building (or an interest therein) is disposed of during any year for which credit is allowable under subsection (a), such credit shall be allocated between the parties on the basis of the number of days during such year the building (or interest) was held by each. In any such case, proper adjustments shall be made in the application of subsection (j).
(5) Credit period for existing buildings not to begin before rehabilitation credit allowed
(A) In general
The credit period for an existing building shall not begin before the 1st taxable year of the credit period for rehabilitation expenditures with respect to the building.
(B) Acquisition credit allowed for certain buildings not allowed a rehabilitation credit
(i) In general
In the case of a building described in clause (ii)—
(I) subsection (d)(2)(B)(iv) shall not apply, and
(II) the credit period for such building shall not begin before the taxable year which would be the 1st taxable year of the credit period for rehabilitation expenditures with respect to the building under the modifications described in clause (ii)(II).
(ii) Building described
A building is described in this clause if—
(I) a waiver is granted under subsection (d)(6)(B) with respect to the acquisition of the building, and
(II) a credit would be allowed for rehabilitation expenditures with respect to such building if subsection (e)(3)(A)(ii)(I) did not apply and if the dollar amount in effect under subsection (e)(3)(A)(ii)(II) were two-thirds of such amount.
(g) Qualified low-income housing project
For purposes of this section—
(1) In general
The term "qualified low-income housing project" means any project for residential rental property if the project meets the requirements of subparagraph (A), (B), or (C) whichever is elected by the taxpayer:
(A) 20–50 test
The project meets the requirements of this subparagraph if 20 percent or more of the residential units in such project are both rent-restricted and occupied by individuals whose income is 50 percent or less of area median gross income.
(B) 40–60 test
The project meets the requirements of this subparagraph if 40 percent or more of the residential units in such project are both rent-restricted and occupied by individuals whose income is 60 percent or less of area median gross income.
(C) Average income test
(i) In general
The project meets the minimum requirements of this subparagraph if 40 percent or more (25 percent or more in the case of a project described in section 142(d)(6)) of the residential units in such project are both rent-restricted and occupied by individuals whose income does not exceed the imputed income limitation designated by the taxpayer with respect to the respective unit.
(ii) Special rules relating to income limitation
For purposes of clause (i)—
(I) Designation
The taxpayer shall designate the imputed income limitation of each unit taken into account under such clause.
(II) Average test
The average of the imputed income limitations designated under subclause (I) shall not exceed 60 percent of area median gross income.
(III) 10-percent increments
The designated imputed income limitation of any unit under subclause (I) shall be 20 percent, 30 percent, 40 percent, 50 percent, 60 percent, 70 percent, or 80 percent of area median gross income.
Any election under this paragraph, once made, shall be irrevocable. For purposes of this paragraph, any property shall not be treated as failing to be residential rental property merely because part of the building in which such property is located is used for purposes other than residential rental purposes.
(2) Rent-restricted units
(A) In general
For purposes of paragraph (1), a residential unit is rent-restricted if the gross rent with respect to such unit does not exceed 30 percent of the imputed income limitation applicable to such unit. For purposes of the preceding sentence, the amount of the income limitation under paragraph (1) applicable for any period shall not be less than such limitation applicable for the earliest period the building (which contains the unit) was included in the determination of whether the project is a qualified low-income housing project.
(B) Gross rent
For purposes of subparagraph (A), gross rent—
(i) does not include any payment under section 8 of the United States Housing Act of 1937 or any comparable rental assistance program (with respect to such unit or occupants thereof),
(ii) includes any utility allowance determined by the Secretary after taking into account such determinations under section 8 of the United States Housing Act of 1937,
(iii) does not include any fee for a supportive service which is paid to the owner of the unit (on the basis of the low-income status of the tenant of the unit) by any governmental program of assistance (or by an organization described in section 501(c)(3) and exempt from tax under section 501(a)) if such program (or organization) provides assistance for rent and the amount of assistance provided for rent is not separable from the amount of assistance provided for supportive services, and
(iv) does not include any rental payment to the owner of the unit to the extent such owner pays an equivalent amount to the Farmers' Home Administration under section 515 of the Housing Act of 1949.
For purposes of clause (iii), the term "supportive service" means any service provided under a planned program of services designed to enable residents of a residential rental property to remain independent and avoid placement in a hospital, nursing home, or intermediate care facility for the mentally or physically handicapped. In the case of a single-room occupancy unit or a building described in subsection (i)(3)(B)(iii), such term includes any service provided to assist tenants in locating and retaining permanent housing.
(C) Imputed income limitation applicable to unit
For purposes of this paragraph, the imputed income limitation applicable to a unit is the income limitation which would apply under paragraph (1) to individuals occupying the unit if the number of individuals occupying the unit were as follows:
(i) In the case of a unit which does not have a separate bedroom, 1 individual.
(ii) In the case of a unit which has 1 or more separate bedrooms, 1.5 individuals for each separate bedroom.
In the case of a project with respect to which a credit is allowable by reason of this section and for which financing is provided by a bond described in section 142(a)(7), the imputed income limitation shall apply in lieu of the otherwise applicable income limitation for purposes of applying section 142(d)(4)(B)(ii).
(D) Treatment of units occupied by individuals whose incomes rise above limit
(i) In general
Except as provided in clauses (ii), (iii), and (iv), notwithstanding an increase in the income of the occupants of a low-income unit above the income limitation applicable under paragraph (1), such unit shall continue to be treated as a low-income unit if the income of such occupants initially met such income limitation and such unit continues to be rent-restricted.
(ii) Rental of next available unit in case of 20–50 or 40–60 test
In the case of a project with respect to which the taxpayer elects the requirements of subparagraph (A) or (B) of paragraph (1), if the income of the occupants of the unit increases above 140 percent of the income limitation applicable under paragraph (1), clause (i) shall cease to apply to such unit if any residential rental unit in the building (of a size comparable to, or smaller than, such unit) is occupied by a new resident whose income exceeds such income limitation.
(iii) Rental of next available unit in case of average income test
In the case of a project with respect to which the taxpayer elects the requirements of subparagraph (C) of paragraph (1), if the income of the occupants of the unit increases above 140 percent of the greater of—
(I) 60 percent of area median gross income, or
(II) the imputed income limitation designated with respect to the unit under paragraph (1)(C)(ii)(I),
clause (i) shall cease to apply to any such unit if any residential rental unit in the building (of a size comparable to, or smaller than, such unit) is occupied by a new resident whose income exceeds the limitation described in clause (v).
(iv) Deep rent skewed projects
In the case of a project described in section 142(d)(4)(B), clause (ii) or (iii), whichever is applicable, shall be applied by substituting "170 percent" for "140 percent", and—
(I) in the case of clause (ii), by substituting "any low-income unit in the building is occupied by a new resident whose income exceeds 40 percent of area median gross income" for "any residential rental unit" and all that follows in such clause, and
(II) in the case of clause (iii), by substituting "any low-income unit in the building is occupied by a new resident whose income exceeds the lesser of 40 percent of area median gross income or the imputed income limitation designated with respect to such unit under paragraph (1)(C)(ii)(I)" for "any residential rental unit" and all that follows in such clause.
(v) Limitation described
For purposes of clause (iii), the limitation described in this clause with respect to any unit is—
(I) the imputed income limitation designated with respect to such unit under paragraph (1)(C)(ii)(I), in the case of a unit which was taken into account as a low-income unit prior to becoming vacant, and
(II) the imputed income limitation which would have to be designated with respect to such unit under such paragraph in order for the project to continue to meet the requirements of paragraph (1)(C)(ii)(II), in the case of any other unit.
(E) Units where Federal rental assistance is reduced as tenant's income increases
If the gross rent with respect to a residential unit exceeds the limitation under subparagraph (A) by reason of the fact that the income of the occupants thereof exceeds the income limitation applicable under paragraph (1), such unit shall, nevertheless, be treated as a rent-restricted unit for purposes of paragraph (1) if—
(i) a Federal rental assistance payment described in subparagraph (B)(i) is made with respect to such unit or its occupants, and
(ii) the sum of such payment and the gross rent with respect to such unit does not exceed the sum of the amount of such payment which would be made and the gross rent which would be payable with respect to such unit if—
(I) the income of the occupants thereof did not exceed the income limitation applicable under paragraph (1), and
(II) such units were rent-restricted within the meaning of subparagraph (A).
The preceding sentence shall apply to any unit only if the result described in clause (ii) is required by Federal statute as of the date of the enactment of this subparagraph and as of the date the Federal rental assistance payment is made.
(3) Date for meeting requirements
(A) In general
Except as otherwise provided in this paragraph, a building shall be treated as a qualified low-income building only if the project (of which such building is a part) meets the requirements of paragraph (1) not later than the close of the 1st year of the credit period for such building.
(B) Buildings which rely on later buildings for qualification
(i) In general
In determining whether a building (hereinafter in this subparagraph referred to as the "prior building") is a qualified low-income building, the taxpayer may take into account 1 or more additional buildings placed in service during the 12-month period described in subparagraph (A) with respect to the prior building only if the taxpayer elects to apply clause (ii) with respect to each additional building taken into account.
(ii) Treatment of elected buildings
In the case of a building which the taxpayer elects to take into account under clause (i), the period under subparagraph (A) for such building shall end at the close of the 12-month period applicable to the prior building.
(iii) Date prior building is treated as placed in service
For purposes of determining the credit period and the compliance period for the prior building, the prior building shall be treated for purposes of this section as placed in service on the most recent date any additional building elected by the taxpayer (with respect to such prior building) was placed in service.
(C) Special rule
A building—
(i) other than the 1st building placed in service as part of a project, and
(ii) other than a building which is placed in service during the 12-month period described in subparagraph (A) with respect to a prior building which becomes a qualified low-income building,
shall in no event be treated as a qualified low-income building unless the project is a qualified low-income housing project (without regard to such building) on the date such building is placed in service.
(D) Projects with more than 1 building must be identified
For purposes of this section, a project shall be treated as consisting of only 1 building unless, before the close of the 1st calendar year in the project period (as defined in subsection (h)(1)(F)(ii)), each building which is (or will be) part of such project is identified in such form and manner as the Secretary may provide.
(4) Certain rules made applicable
Paragraphs (2) (other than subparagraph (A) thereof), (3), (4), (5), (6), and (7) of section 142(d), and section 6652(j), shall apply for purposes of determining whether any project is a qualified low-income housing project and whether any unit is a low-income unit; except that, in applying such provisions for such purposes, the term "gross rent" shall have the meaning given such term by paragraph (2)(B) of this subsection.
(5) Election to treat building after compliance period as not part of a project
For purposes of this section, the taxpayer may elect to treat any building as not part of a qualified low-income housing project for any period beginning after the compliance period for such building.
(6) Special rule where de minimis equity contribution
Property shall not be treated as failing to be residential rental property for purposes of this section merely because the occupant of a residential unit in the project pays (on a voluntary basis) to the lessor a de minimis amount to be held toward the purchase by such occupant of a residential unit in such project if—
(A) all amounts so paid are refunded to the occupant on the cessation of his occupancy of a unit in the project, and
(B) the purchase of the unit is not permitted until after the close of the compliance period with respect to the building in which the unit is located.
Any amount paid to the lessor as described in the preceding sentence shall be included in gross rent under paragraph (2) for purposes of determining whether the unit is rent-restricted.
(7) Scattered site projects
Buildings which would (but for their lack of proximity) be treated as a project for purposes of this section shall be so treated if all of the dwelling units in each of the buildings are rent-restricted (within the meaning of paragraph (2)) residential rental units.
(8) Waiver of certain de minimis errors and recertifications
On application by the taxpayer, the Secretary may waive—
(A) any recapture under subsection (j) in the case of any de minimis error in complying with paragraph (1), or
(B) any annual recertification of tenant income for purposes of this subsection, if the entire building is occupied by low-income tenants.
(9) Clarification of general public use requirement
A project does not fail to meet the general public use requirement solely because of occupancy restrictions or preferences that favor tenants—
(A) with special needs,
(B) who are members of a specified group under a Federal program or State program or policy that supports housing for such a specified group, or
(C) who are involved in artistic or literary activities.
(h) Limitation on aggregate credit allowable with respect to projects located in a State
(1) Credit may not exceed credit amount allocated to building
(A) In general
The amount of the credit determined under this section for any taxable year with respect to any building shall not exceed the housing credit dollar amount allocated to such building under this subsection.
(B) Time for making allocation
Except in the case of an allocation which meets the requirements of subparagraph (C), (D), (E), or (F), an allocation shall be taken into account under subparagraph (A) only if it is made not later than the close of the calendar year in which the building is placed in service.
(C) Exception where binding commitment
An allocation meets the requirements of this subparagraph if there is a binding commitment (not later than the close of the calendar year in which the building is placed in service) by the housing credit agency to allocate a specified housing credit dollar amount to such building beginning in a specified later taxable year.
(D) Exception where increase in qualified basis
(i) In general
An allocation meets the requirements of this subparagraph if such allocation is made not later than the close of the calendar year in which ends the taxable year to which it will 1st apply but only to the extent the amount of such allocation does not exceed the limitation under clause (ii).
(ii) Limitation
The limitation under this clause is the amount of credit allowable under this section (without regard to this subsection) for a taxable year with respect to an increase in the qualified basis of the building equal to the excess of—
(I) the qualified basis of such building as of the close of the 1st taxable year to which such allocation will apply, over
(II) the qualified basis of such building as of the close of the 1st taxable year to which the most recent prior housing credit allocation with respect to such building applied.
(iii) Housing credit dollar amount reduced by full allocation
Notwithstanding clause (i), the full amount of the allocation shall be taken into account under paragraph (2).
(E) Exception where 10 percent of cost incurred
(i) In general
An allocation meets the requirements of this subparagraph if such allocation is made with respect to a qualified building which is placed in service not later than the close of the second calendar year following the calendar year in which the allocation is made.
(ii) Qualified building
For purposes of clause (i), the term "qualified building" means any building which is part of a project if the taxpayer's basis in such project (as of the date which is 1 year after the date that the allocation was made) is more than 10 percent of the taxpayer's reasonably expected basis in such project (as of the close of the second calendar year referred to in clause (i)). Such term does not include any existing building unless a credit is allowable under subsection (e) for rehabilitation expenditures paid or incurred by the taxpayer with respect to such building for a taxable year ending during the second calendar year referred to in clause (i) or the prior taxable year.
(F) Allocation of credit on a project basis
(i) In general
In the case of a project which includes (or will include) more than 1 building, an allocation meets the requirements of this subparagraph if—
(I) the allocation is made to the project for a calendar year during the project period,
(II) the allocation only applies to buildings placed in service during or after the calendar year for which the allocation is made, and
(III) the portion of such allocation which is allocated to any building in such project is specified not later than the close of the calendar year in which the building is placed in service.
(ii) Project period
For purposes of clause (i), the term "project period" means the period—
(I) beginning with the 1st calendar year for which an allocation may be made for the 1st building placed in service as part of such project, and
(II) ending with the calendar year the last building is placed in service as part of such project.
(2) Allocated credit amount to apply to all taxable years ending during or after credit allocation year
Any housing credit dollar amount allocated to any building for any calendar year—
(A) shall apply to such building for all taxable years in the compliance period ending during or after such calendar year, and
(B) shall reduce the aggregate housing credit dollar amount of the allocating agency only for such calendar year.
(3) Housing credit dollar amount for agencies
(A) In general
The aggregate housing credit dollar amount which a housing credit agency may allocate for any calendar year is the portion of the State housing credit ceiling allocated under this paragraph for such calendar year to such agency.
(B) State ceiling initially allocated to State housing credit agencies
Except as provided in subparagraphs (D) and (E), the State housing credit ceiling for each calendar year shall be allocated to the housing credit agency of such State. If there is more than 1 housing credit agency of a State, all such agencies shall be treated as a single agency.
(C) State housing credit ceiling
The State housing credit ceiling applicable to any State for any calendar year shall be an amount equal to the sum of—
(i) the unused State housing credit ceiling (if any) of such State for the preceding calendar year,
(ii) the greater of—
(I) $1.75 multiplied by the State population, or
(II) $2,000,000,
(iii) the amount of State housing credit ceiling returned in the calendar year, plus
(iv) the amount (if any) allocated under subparagraph (D) to such State by the Secretary.
For purposes of clause (i), the unused State housing credit ceiling for any calendar year is the excess (if any) of the sum of the amounts described in clauses (ii) through (iv) over the aggregate housing credit dollar amount allocated for such year. For purposes of clause (iii), the amount of State housing credit ceiling returned in the calendar year equals the housing credit dollar amount previously allocated within the State to any project which fails to meet the 10 percent test under paragraph (1)(E)(ii) on a date after the close of the calendar year in which the allocation was made or which does not become a qualified low-income housing project within the period required by this section or the terms of the allocation or to any project with respect to which an allocation is cancelled by mutual consent of the housing credit agency and the allocation recipient.
(D) Unused housing credit carryovers allocated among certain States
(i) In general
The unused housing credit carryover of a State for any calendar year shall be assigned to the Secretary for allocation among qualified States for the succeeding calendar year.
(ii) Unused housing credit carryover
For purposes of this subparagraph, the unused housing credit carryover of a State for any calendar year is the excess (if any) of—
(I) the unused State housing credit ceiling for the year preceding such year, over
(II) the aggregate housing credit dollar amount allocated for such year.
(iii) Formula for allocation of unused housing credit carryovers among qualified States
The amount allocated under this subparagraph to a qualified State for any calendar year shall be the amount determined by the Secretary to bear the same ratio to the aggregate unused housing credit carryovers of all States for the preceding calendar year as such State's population for the calendar year bears to the population of all qualified States for the calendar year. For purposes of the preceding sentence, population shall be determined in accordance with section 146(j).
(iv) Qualified State
For purposes of this subparagraph, the term "qualified State" means, with respect to a calendar year, any State—
(I) which allocated its entire State housing credit ceiling for the preceding calendar year, and
(II) for which a request is made (not later than May 1 of the calendar year) to receive an allocation under clause (iii).
(E) Special rule for States with constitutional home rule cities
For purposes of this subsection—
(i) In general
The aggregate housing credit dollar amount for any constitutional home rule city for any calendar year shall be an amount which bears the same ratio to the State housing credit ceiling for such calendar year as—
(I) the population of such city, bears to
(II) the population of the entire State.
(ii) Coordination with other allocations
In the case of any State which contains 1 or more constitutional home rule cities, for purposes of applying this paragraph with respect to housing credit agencies in such State other than constitutional home rule cities, the State housing credit ceiling for any calendar year shall be reduced by the aggregate housing credit dollar amounts determined for such year for all constitutional home rule cities in such State.
(iii) Constitutional home rule city
For purposes of this paragraph, the term "constitutional home rule city" has the meaning given such term by section 146(d)(3)(C).
(F) State may provide for different allocation
Rules similar to the rules of section 146(e) (other than paragraph (2)(B) thereof) shall apply for purposes of this paragraph.
(G) Population
For purposes of this paragraph, population shall be determined in accordance with section 146(j).
(H) Cost-of-living adjustment
(i) In general
In the case of a calendar year after 2002, the $2,000,000 and $1.75 amounts in subparagraph (C) shall each be increased by an amount equal to—
(I) such dollar amount, multiplied by
(II) the cost-of-living adjustment determined under section 1(f)(3) for such calendar year by substituting "calendar year 2001" for "calendar year 2016" in subparagraph (A)(ii) thereof.
(ii) Rounding
(I) In the case of the $2,000,000 amount, any increase under clause (i) which is not a multiple of $5,000 shall be rounded to the next lowest multiple of $5,000.
(II) In the case of the $1.75 amount, any increase under clause (i) which is not a multiple of 5 cents shall be rounded to the next lowest multiple of 5 cents.
(I) Increase in State housing credit ceiling for 2018, 2019, 2020, and 2021
In the case of calendar years 2018, 2019, 2020, and 2021, each of the dollar amounts in effect under clauses (I) and (II) of subparagraph (C)(ii) for any calendar year (after any increase under subparagraph (H)) shall be increased by multiplying such dollar amount by 1.125.
(4) Credit for buildings financed by tax-exempt bonds subject to volume cap not taken into account
(A) In general
Paragraph (1) shall not apply to the portion of any credit allowable under subsection (a) which is attributable to eligible basis financed by any obligation the interest on which is exempt from tax under section 103 if—
(i) such obligation is taken into account under section 146, and
(ii) principal payments on such financing are applied within a reasonable period to redeem obligations the proceeds of which were used to provide such financing or such financing is refunded as described in section 146(i)(6).
(B) Special rule where 50 percent or more of building is financed with tax-exempt bonds subject to volume cap
For purposes of subparagraph (A), if 50 percent or more of the aggregate basis of any building and the land on which the building is located is financed by any obligation described in subparagraph (A), paragraph (1) shall not apply to any portion of the credit allowable under subsection (a) with respect to such building.
(5) Portion of State ceiling set-aside for certain projects involving qualified nonprofit organizations
(A) In general
Not more than 90 percent of the State housing credit ceiling for any State for any calendar year shall be allocated to projects other than qualified low-income housing projects described in subparagraph (B).
(B) Projects involving qualified nonprofit organizations
For purposes of subparagraph (A), a qualified low-income housing project is described in this subparagraph if a qualified nonprofit organization is to own an interest in the project (directly or through a partnership) and materially participate (within the meaning of section 469(h)) in the development and operation of the project throughout the compliance period.
(C) Qualified nonprofit organization
For purposes of this paragraph, the term "qualified nonprofit organization" means any organization if—
(i) such organization is described in paragraph (3) or (4) of section 501(c) and is exempt from tax under section 501(a),
(ii) such organization is determined by the State housing credit agency not to be affiliated with or controlled by a for-profit organization, and
(iii) 1 of the exempt purposes of such organization includes the fostering of low-income housing.
(D) Treatment of certain subsidiaries
(i) In general
For purposes of this paragraph, a qualified nonprofit organization shall be treated as satisfying the ownership and material participation test of subparagraph (B) if any qualified corporation in which such organization holds stock satisfies such test.
(ii) Qualified corporation
For purposes of clause (i), the term "qualified corporation" means any corporation if 100 percent of the stock of such corporation is held by 1 or more qualified nonprofit organizations at all times during the period such corporation is in existence.
(E) State may not override set-aside
Nothing in subparagraph (F) of paragraph (3) shall be construed to permit a State not to comply with subparagraph (A) of this paragraph.
(6) Buildings eligible for credit only if minimum long-term commitment to low-income housing
(A) In general
No credit shall be allowed by reason of this section with respect to any building for the taxable year unless an extended low-income housing commitment is in effect as of the end of such taxable year.
(B) Extended low-income housing commitment
For purposes of this paragraph, the term "extended low-income housing commitment" means any agreement between the taxpayer and the housing credit agency—
(i) which requires that the applicable fraction (as defined in subsection (c)(1)) for the building for each taxable year in the extended use period will not be less than the applicable fraction specified in such agreement and which prohibits the actions described in subclauses (I) and (II) of subparagraph (E)(ii),
(ii) which allows individuals who meet the income limitation applicable to the building under subsection (g) (whether prospective, present, or former occupants of the building) the right to enforce in any State court the requirement and prohibitions of clause (i),
(iii) which prohibits the disposition to any person of any portion of the building to which such agreement applies unless all of the building to which such agreement applies is disposed of to such person,
(iv) which prohibits the refusal to lease to a holder of a voucher or certificate of eligibility under section 8 of the United States Housing Act of 1937 because of the status of the prospective tenant as such a holder,
(v) which is binding on all successors of the taxpayer, and
(vi) which, with respect to the property, is recorded pursuant to State law as a restrictive covenant.
(C) Allocation of credit may not exceed amount necessary to support commitment
(i) In general
The housing credit dollar amount allocated to any building may not exceed the amount necessary to support the applicable fraction specified in the extended low-income housing commitment for such building, including any increase in such fraction pursuant to the application of subsection (f)(3) if such increase is reflected in an amended low-income housing commitment.
(ii) Buildings financed by tax-exempt bonds
If paragraph (4) applies to any building the amount of credit allowed in any taxable year may not exceed the amount necessary to support the applicable fraction specified in the extended low-income housing commitment for such building. Such commitment may be amended to increase such fraction.
(D) Extended use period
For purposes of this paragraph, the term "extended use period" means the period—
(i) beginning on the 1st day in the compliance period on which such building is part of a qualified low-income housing project, and
(ii) ending on the later of—
(I) the date specified by such agency in such agreement, or
(II) the date which is 15 years after the close of the compliance period.
(E) Exceptions if foreclosure or if no buyer willing to maintain low-income status
(i) In general
The extended use period for any building shall terminate—
(I) on the date the building is acquired by foreclosure (or instrument in lieu of foreclosure) unless the Secretary determines that such acquisition is part of an arrangement with the taxpayer a purpose of which is to terminate such period, or
(II) on the last day of the period specified in subparagraph (I) if the housing credit agency is unable to present during such period a qualified contract for the acquisition of the low-income portion of the building by any person who will continue to operate such portion as a qualified low-income building.
Subclause (II) shall not apply to the extent more stringent requirements are provided in the agreement or in State law.
(ii) Eviction, etc. of existing low-income tenants not permitted
The termination of an extended use period under clause (i) shall not be construed to permit before the close of the 3-year period following such termination—
(I) the eviction or the termination of tenancy (other than for good cause) of an existing tenant of any low-income unit, or
(II) any increase in the gross rent with respect to such unit not otherwise permitted under this section.
(F) Qualified contract
For purposes of subparagraph (E), the term "qualified contract" means a bona fide contract to acquire (within a reasonable period after the contract is entered into) the nonlow-income portion of the building for fair market value and the low-income portion of the building for an amount not less than the applicable fraction (specified in the extended low-income housing commitment) of—
(i) the sum of—
(I) the outstanding indebtedness secured by, or with respect to, the building,
(II) the adjusted investor equity in the building, plus
(III) other capital contributions not reflected in the amounts described in subclause (I) or (II), reduced by
(ii) cash distributions from (or available for distribution from) the project.
The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out this paragraph, including regulations to prevent the manipulation of the amount determined under the preceding sentence.
(G) Adjusted investor equity
(i) In general
For purposes of subparagraph (E), the term "adjusted investor equity" means, with respect to any calendar year, the aggregate amount of cash taxpayers invested with respect to the project increased by the amount equal to—
(I) such amount, multiplied by
(II) the cost-of-living adjustment for such calendar year, determined under section 1(f)(3) by substituting the base calendar year for "calendar year 2016" in subparagraph (A)(ii) thereof.
An amount shall be taken into account as an investment in the project only to the extent there was an obligation to invest such amount as of the beginning of the credit period and to the extent such amount is reflected in the adjusted basis of the project.
(ii) Cost-of-living increases in excess of 5 percent not taken into account
Under regulations prescribed by the Secretary, if the C-CPI-U for any calendar year (as defined in section 1(f)(6)) exceeds the C-CPI-U for the preceding calendar year by more than 5 percent, the C-CPI-U for the base calendar year shall be increased such that such excess shall never be taken into account under clause (i). In the case of a base calendar year before 2017, the C-CPI-U for such year shall be determined by multiplying the CPI for such year by the amount determined under section 1(f)(3)(B).
(iii) Base calendar year
For purposes of this subparagraph, the term "base calendar year" means the calendar year with or within which the 1st taxable year of the credit period ends.
(H) Low-income portion
For purposes of this paragraph, the low-income portion of a building is the portion of such building equal to the applicable fraction specified in the extended low-income housing commitment for the building.
(I) Period for finding buyer
The period referred to in this subparagraph is the 1-year period beginning on the date (after the 14th year of the compliance period) the taxpayer submits a written request to the housing credit agency to find a person to acquire the taxpayer's interest in the low-income portion of the building.
(J) Effect of noncompliance
If, during a taxable year, there is a determination that an extended low-income housing agreement was not in effect as of the beginning of such year, such determination shall not apply to any period before such year and subparagraph (A) shall be applied without regard to such determination if the failure is corrected within 1 year from the date of the determination.
(K) Projects which consist of more than 1 building
The application of this paragraph to projects which consist of more than 1 building shall be made under regulations prescribed by the Secretary.
(7) Special rules
(A) Building must be located within jurisdiction of credit agency
A housing credit agency may allocate its aggregate housing credit dollar amount only to buildings located in the jurisdiction of the governmental unit of which such agency is a part.
(B) Agency allocations in excess of limit
If the aggregate housing credit dollar amounts allocated by a housing credit agency for any calendar year exceed the portion of the State housing credit ceiling allocated to such agency for such calendar year, the housing credit dollar amounts so allocated shall be reduced (to the extent of such excess) for buildings in the reverse of the order in which the allocations of such amounts were made.
(C) Credit reduced if allocated credit dollar amount is less than credit which would be allowable without regard to placed in service convention, etc.
(i) In general
The amount of the credit determined under this section with respect to any building shall not exceed the clause (ii) percentage of the amount of the credit which would (but for this subparagraph) be determined under this section with respect to such building.
(ii) Determination of percentage
For purposes of clause (i), the clause (ii) percentage with respect to any building is the percentage which—
(I) the housing credit dollar amount allocated to such building bears to
(II) the credit amount determined in accordance with clause (iii).
(iii) Determination of credit amount
The credit amount determined in accordance with this clause is the amount of the credit which would (but for this subparagraph) be determined under this section with respect to the building if—
(I) this section were applied without regard to paragraphs (2)(A) and (3)(B) of subsection (f), and
(II) subsection (f)(3)(A) were applied without regard to "the percentage equal to 2/3 of".
(D) Housing credit agency to specify applicable percentage and maximum qualified basis
In allocating a housing credit dollar amount to any building, the housing credit agency shall specify the applicable percentage and the maximum qualified basis which may be taken into account under this section with respect to such building. The applicable percentage and maximum qualified basis so specified shall not exceed the applicable percentage and qualified basis determined under this section without regard to this subsection.
(8) Other definitions
For purposes of this subsection—
(A) Housing credit agency
The term "housing credit agency" means any agency authorized to carry out this subsection.
(B) Possessions treated as States
The term "State" includes a possession of the United States.
(i) Definitions and special rules
For purposes of this section—
(1) Compliance period
The term "compliance period" means, with respect to any building, the period of 15 taxable years beginning with the 1st taxable year of the credit period with respect thereto.
(2) Determination of whether building is federally subsidized
(A) In general
Except as otherwise provided in this paragraph, for purposes of subsection (b)(1), a new building shall be treated as federally subsidized for any taxable year if, at any time during such taxable year or any prior taxable year, there is or was outstanding any obligation the interest on which is exempt from tax under section 103 the proceeds of which 1 are or were used (directly or indirectly) with respect to such building or the operation thereof.
(B) Election to reduce eligible basis by proceeds of obligations
A tax-exempt obligation shall not be taken into account under subparagraph (A) if the taxpayer elects to exclude from the eligible basis of the building for purposes of subsection (d) the proceeds of such obligation.
(C) Special rule for subsidized construction financing
Subparagraph (A) shall not apply to any tax-exempt obligation used to provide construction financing for any building if—
(i) such obligation (when issued) identified the building for which the proceeds of such obligation would be used, and
(ii) such obligation is redeemed before such building is placed in service.
(3) Low-income unit
(A) In general
The term "low-income unit" means any unit in a building if—
(i) such unit is rent-restricted (as defined in subsection (g)(2)), and
(ii) the individuals occupying such unit meet the income limitation applicable under subsection (g)(1) to the project of which such building is a part.
(B) Exceptions
(i) In general
A unit shall not be treated as a low-income unit unless the unit is suitable for occupancy and used other than on a transient basis.
(ii) Suitability for occupancy
For purposes of clause (i), the suitability of a unit for occupancy shall be determined under regulations prescribed by the Secretary taking into account local health, safety, and building codes.
(iii) Transitional housing for homeless
For purposes of clause (i), a unit shall be considered to be used other than on a transient basis if the unit contains sleeping accommodations and kitchen and bathroom facilities and is located in a building—
(I) which is used exclusively to facilitate the transition of homeless individuals (within the meaning of section 103 of the McKinney-Vento Homeless Assistance Act (
(II) in which a governmental entity or qualified nonprofit organization (as defined in subsection (h)(5)) provides such individuals with temporary housing and supportive services designed to assist such individuals in locating and retaining permanent housing.
(iv) Single-room occupancy units
For purposes of clause (i), a single-room occupancy unit shall not be treated as used on a transient basis merely because it is rented on a month-by-month basis.
(C) Special rule for buildings having 4 or fewer units
In the case of any building which has 4 or fewer residential rental units, no unit in such building shall be treated as a low-income unit if the units in such building are owned by—
(i) any individual who occupies a residential unit in such building, or
(ii) any person who is related (as defined in subsection (d)(2)(D)(iii)) to such individual.
(D) Certain students not to disqualify unit
A unit shall not fail to be treated as a low-income unit merely because it is occupied—
(i) by an individual who is—
(I) a student and receiving assistance under title IV of the Social Security Act,
(II) a student who was previously under the care and placement responsibility of the State agency responsible for administering a plan under part B or part E of title IV of the Social Security Act, or
(III) enrolled in a job training program receiving assistance under the Job Training Partnership Act or under other similar Federal, State, or local laws, or
(ii) entirely by full-time students if such students are—
(I) single parents and their children and such parents are not dependents (as defined in section 152, determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B) thereof) of another individual and such children are not dependents (as so defined) of another individual other than a parent of such children, or
(II) married and file a joint return.
(E) Owner-occupied buildings having 4 or fewer units eligible for credit where development plan
(i) In general
Subparagraph (C) shall not apply to the acquisition or rehabilitation of a building pursuant to a development plan of action sponsored by a State or local government or a qualified nonprofit organization (as defined in subsection (h)(5)(C)).
(ii) Limitation on credit
In the case of a building to which clause (i) applies, the applicable fraction shall not exceed 80 percent of the unit fraction.
(iii) Certain unrented units treated as owner-occupied
In the case of a building to which clause (i) applies, any unit which is not rented for 90 days or more shall be treated as occupied by the owner of the building as of the 1st day it is not rented.
(4) New building
The term "new building" means a building the original use of which begins with the taxpayer.
(5) Existing building
The term "existing building" means any building which is not a new building.
(6) Application to estates and trusts
In the case of an estate or trust, the amount of the credit determined under subsection (a) and any increase in tax under subsection (j) shall be apportioned between the estate or trust and the beneficiaries on the basis of the income of the estate or trust allocable to each.
(7) Impact of tenant's right of 1st refusal to acquire property
(A) In general
No Federal income tax benefit shall fail to be allowable to the taxpayer with respect to any qualified low-income building merely by reason of a right of 1st refusal held by the tenants (in cooperative form or otherwise) or resident management corporation of such building or by a qualified nonprofit organization (as defined in subsection (h)(5)(C)) or government agency to purchase the property after the close of the compliance period for a price which is not less than the minimum purchase price determined under subparagraph (B).
(B) Minimum purchase price
For purposes of subparagraph (A), the minimum purchase price under this subparagraph is an amount equal to the sum of—
(i) the principal amount of outstanding indebtedness secured by the building (other than indebtedness incurred within the 5-year period ending on the date of the sale to the tenants), and
(ii) all Federal, State, and local taxes attributable to such sale.
Except in the case of Federal income taxes, there shall not be taken into account under clause (ii) any additional tax attributable to the application of clause (ii).
(8) Treatment of rural projects
For purposes of this section, in the case of any project for residential rental property located in a rural area (as defined in section 520 of the Housing Act of 1949), any income limitation measured by reference to area median gross income shall be measured by reference to the greater of area median gross income or national non-metropolitan median income. The preceding sentence shall not apply with respect to any building if paragraph (1) of section 42(h) does not apply by reason of paragraph (4) thereof to any portion of the credit determined under this section with respect to such building.
(9) Coordination with low-income housing grants
(A) Reduction in State housing credit ceiling for low-income housing grants received in 2009
For purposes of this section, the amounts described in clauses (i) through (iv) of subsection (h)(3)(C) with respect to any State for 2009 shall each be reduced by so much of such amount as is taken into account in determining the amount of any grant to such State under section 1602 of the American Recovery and Reinvestment Tax Act of 2009.
(B) Special rule for basis
Basis of a qualified low-income building shall not be reduced by the amount of any grant described in subparagraph (A).
(j) Recapture of credit
(1) In general
If—
(A) as of the close of any taxable year in the compliance period, the amount of the qualified basis of any building with respect to the taxpayer is less than
(B) the amount of such basis as of the close of the preceding taxable year,
then the taxpayer's tax under this chapter for the taxable year shall be increased by the credit recapture amount.
(2) Credit recapture amount
For purposes of paragraph (1), the credit recapture amount is an amount equal to the sum of—
(A) the aggregate decrease in the credits allowed to the taxpayer under section 38 for all prior taxable years which would have resulted if the accelerated portion of the credit allowable by reason of this section were not allowed for all prior taxable years with respect to the excess of the amount described in paragraph (1)(B) over the amount described in paragraph (1)(A), plus
(B) interest at the overpayment rate established under section 6621 on the amount determined under subparagraph (A) for each prior taxable year for the period beginning on the due date for filing the return for the prior taxable year involved.
No deduction shall be allowed under this chapter for interest described in subparagraph (B).
(3) Accelerated portion of credit
For purposes of paragraph (2), the accelerated portion of the credit for the prior taxable years with respect to any amount of basis is the excess of—
(A) the aggregate credit allowed by reason of this section (without regard to this subsection) for such years with respect to such basis, over
(B) the aggregate credit which would be allowable by reason of this section for such years with respect to such basis if the aggregate credit which would (but for this subsection) have been allowable for the entire compliance period were allowable ratably over 15 years.
(4) Special rules
(A) Tax benefit rule
The tax for the taxable year shall be increased under paragraph (1) only with respect to credits allowed by reason of this section which were used to reduce tax liability. In the case of credits not so used to reduce tax liability, the carryforwards and carrybacks under section 39 shall be appropriately adjusted.
(B) Only basis for which credit allowed taken into account
Qualified basis shall be taken into account under paragraph (1)(B) only to the extent such basis was taken into account in determining the credit under subsection (a) for the preceding taxable year referred to in such paragraph.
(C) No recapture of additional credit allowable by reason of subsection (f)(3)
Paragraph (1) shall apply to a decrease in qualified basis only to the extent such decrease exceeds the amount of qualified basis with respect to which a credit was allowable for the taxable year referred to in paragraph (1)(B) by reason of subsection (f)(3).
(D) No credits against tax
Any increase in tax under this subsection shall not be treated as a tax imposed by this chapter for purposes of determining the amount of any credit under this chapter.
(E) No recapture by reason of casualty loss
The increase in tax under this subsection shall not apply to a reduction in qualified basis by reason of a casualty loss to the extent such loss is restored by reconstruction or replacement within a reasonable period established by the Secretary.
(F) No recapture where de minimis changes in floor space
The Secretary may provide that the increase in tax under this subsection shall not apply with respect to any building if—
(i) such increase results from a de minimis change in the floor space fraction under subsection (c)(1), and
(ii) the building is a qualified low-income building after such change.
(5) Certain partnerships treated as the taxpayer
(A) In general
For purposes of applying this subsection to a partnership to which this paragraph applies—
(i) such partnership shall be treated as the taxpayer to which the credit allowable under subsection (a) was allowed,
(ii) the amount of such credit allowed shall be treated as the amount which would have been allowed to the partnership were such credit allowable to such partnership,
(iii) paragraph (4)(A) shall not apply, and
(iv) the amount of the increase in tax under this subsection for any taxable year shall be allocated among the partners of such partnership in the same manner as such partnership's taxable income for such year is allocated among such partners.
(B) Partnerships to which paragraph applies
This paragraph shall apply to any partnership which has 35 or more partners unless the partnership elects not to have this paragraph apply.
(C) Special rules
(i) Husband and wife treated as 1 partner
For purposes of subparagraph (B)(i), a husband and wife (and their estates) shall be treated as 1 partner.
(ii) Election irrevocable
Any election under subparagraph (B), once made, shall be irrevocable.
(6) No recapture on disposition of building which continues in qualified use
(A) In general
The increase in tax under this subsection shall not apply solely by reason of the disposition of a building (or an interest therein) if it is reasonably expected that such building will continue to be operated as a qualified low-income building for the remaining compliance period with respect to such building.
(B) Statute of limitations
If a building (or an interest therein) is disposed of during any taxable year and there is any reduction in the qualified basis of such building which results in an increase in tax under this subsection for such taxable or any subsequent taxable year, then—
(i) the statutory period for the assessment of any deficiency with respect to such increase in tax shall not expire before the expiration of 3 years from the date the Secretary is notified by the taxpayer (in such manner as the Secretary may prescribe) of such reduction in qualified basis, and
(ii) such deficiency may be assessed before the expiration of such 3-year period notwithstanding the provisions of any other law or rule of law which would otherwise prevent such assessment.
(k) Application of at-risk rules
For purposes of this section—
(1) In general
Except as otherwise provided in this subsection, rules similar to the rules of section 49(a)(1) (other than subparagraphs (D)(ii)(II) and (D)(iv)(I) thereof), section 49(a)(2), and section 49(b)(1) shall apply in determining the qualified basis of any building in the same manner as such sections apply in determining the credit base of property.
(2) Special rules for determining qualified person
For purposes of paragraph (1)—
(A) In general
If the requirements of subparagraphs (B), (C), and (D) are met with respect to any financing borrowed from a qualified nonprofit organization (as defined in subsection (h)(5)), the determination of whether such financing is qualified commercial financing with respect to any qualified low-income building shall be made without regard to whether such organization—
(i) is actively and regularly engaged in the business of lending money, or
(ii) is a person described in section 49(a)(1)(D)(iv)(II).
(B) Financing secured by property
The requirements of this subparagraph are met with respect to any financing if such financing is secured by the qualified low-income building, except that this subparagraph shall not apply in the case of a federally assisted building described in subsection (d)(6)(C) if—
(i) a security interest in such building is not permitted by a Federal agency holding or insuring the mortgage secured by such building, and
(ii) the proceeds from the financing (if any) are applied to acquire or improve such building.
(C) Portion of building attributable to financing
The requirements of this subparagraph are met with respect to any financing for any taxable year in the compliance period if, as of the close of such taxable year, not more than 60 percent of the eligible basis of the qualified low-income building is attributable to such financing (reduced by the principal and interest of any governmental financing which is part of a wrap-around mortgage involving such financing).
(D) Repayment of principal and interest
The requirements of this subparagraph are met with respect to any financing if such financing is fully repaid on or before the earliest of—
(i) the date on which such financing matures,
(ii) the 90th day after the close of the compliance period with respect to the qualified low-income building, or
(iii) the date of its refinancing or the sale of the building to which such financing relates.
In the case of a qualified nonprofit organization which is not described in section 49(a)(1)(D)(iv)(II) with respect to a building, clause (ii) of this subparagraph shall be applied as if the date described therein were the 90th day after the earlier of the date the building ceases to be a qualified low-income building or the date which is 15 years after the close of a compliance period with respect thereto.
(3) Present value of financing
If the rate of interest on any financing described in paragraph (2)(A) is less than the rate which is 1 percentage point below the applicable Federal rate as of the time such financing is incurred, then the qualified basis (to which such financing relates) of the qualified low-income building shall be the present value of the amount of such financing, using as the discount rate such applicable Federal rate. For purposes of the preceding sentence, the rate of interest on any financing shall be determined by treating interest to the extent of government subsidies as not payable.
(4) Failure to fully repay
(A) In general
To the extent that the requirements of paragraph (2)(D) are not met, then the taxpayer's tax under this chapter for the taxable year in which such failure occurs shall be increased by an amount equal to the applicable portion of the credit under this section with respect to such building, increased by an amount of interest for the period—
(i) beginning with the due date for the filing of the return of tax imposed by
(ii) ending with the due date for the taxable year in which such failure occurs,
determined by using the underpayment rate and method under section 6621.
(B) Applicable portion
For purposes of subparagraph (A), the term "applicable portion" means the aggregate decrease in the credits allowed to a taxpayer under section 38 for all prior taxable years which would have resulted if the eligible basis of the building were reduced by the amount of financing which does not meet requirements of paragraph (2)(D).
(C) Certain rules to apply
Rules similar to the rules of subparagraphs (A) and (D) of subsection (j)(4) shall apply for purposes of this subsection.
(l) Certifications and other reports to Secretary
(1) Certification with respect to 1st year of credit period
Following the close of the 1st taxable year in the credit period with respect to any qualified low-income building, the taxpayer shall certify to the Secretary (at such time and in such form and in such manner as the Secretary prescribes)—
(A) the taxable year, and calendar year, in which such building was placed in service,
(B) the adjusted basis and eligible basis of such building as of the close of the 1st year of the credit period,
(C) the maximum applicable percentage and qualified basis permitted to be taken into account by the appropriate housing credit agency under subsection (h),
(D) the election made under subsection (g) with respect to the qualified low-income housing project of which such building is a part, and
(E) such other information as the Secretary may require.
In the case of a failure to make the certification required by the preceding sentence on the date prescribed therefor, unless it is shown that such failure is due to reasonable cause and not to willful neglect, no credit shall be allowable by reason of subsection (a) with respect to such building for any taxable year ending before such certification is made.
(2) Annual reports to the Secretary
The Secretary may require taxpayers to submit an information return (at such time and in such form and manner as the Secretary prescribes) for each taxable year setting forth—
(A) the qualified basis for the taxable year of each qualified low-income building of the taxpayer,
(B) the information described in paragraph (1)(C) for the taxable year, and
(C) such other information as the Secretary may require.
The penalty under section 6652(j) shall apply to any failure to submit the return required by the Secretary under the preceding sentence on the date prescribed therefor.
(3) Annual reports from housing credit agencies
Each agency which allocates any housing credit amount to any building for any calendar year shall submit to the Secretary (at such time and in such manner as the Secretary shall prescribe) an annual report specifying—
(A) the amount of housing credit amount allocated to each building for such year,
(B) sufficient information to identify each such building and the taxpayer with respect thereto, and
(C) such other information as the Secretary may require.
The penalty under section 6652(j) shall apply to any failure to submit the report required by the preceding sentence on the date prescribed therefor.
(m) Responsibilities of housing credit agencies
(1) Plans for allocation of credit among projects
(A) In general
Notwithstanding any other provision of this section, the housing credit dollar amount with respect to any building shall be zero unless—
(i) such amount was allocated pursuant to a qualified allocation plan of the housing credit agency which is approved by the governmental unit (in accordance with rules similar to the rules of section 147(f)(2) (other than subparagraph (B)(ii) thereof)) of which such agency is a part,
(ii) such agency notifies the chief executive officer (or the equivalent) of the local jurisdiction within which the building is located of such project and provides such individual a reasonable opportunity to comment on the project,
(iii) a comprehensive market study of the housing needs of low-income individuals in the area to be served by the project is conducted before the credit allocation is made and at the developer's expense by a disinterested party who is approved by such agency, and
(iv) a written explanation is available to the general public for any allocation of a housing credit dollar amount which is not made in accordance with established priorities and selection criteria of the housing credit agency.
(B) Qualified allocation plan
For purposes of this paragraph, the term "qualified allocation plan" means any plan—
(i) which sets forth selection criteria to be used to determine housing priorities of the housing credit agency which are appropriate to local conditions,
(ii) which also gives preference in allocating housing credit dollar amounts among selected projects to—
(I) projects serving the lowest income tenants,
(II) projects obligated to serve qualified tenants for the longest periods, and
(III) projects which are located in qualified census tracts (as defined in subsection (d)(5)(B)(ii)) and the development of which contributes to a concerted community revitalization plan, and
(iii) which provides a procedure that the agency (or an agent or other private contractor of such agency) will follow in monitoring for noncompliance with the provisions of this section and in notifying the Internal Revenue Service of such noncompliance which such agency becomes aware of and in monitoring for noncompliance with habitability standards through regular site visits.
(C) Certain selection criteria must be used
The selection criteria set forth in a qualified allocation plan must include
(i) project location,
(ii) housing needs characteristics,
(iii) project characteristics, including whether the project includes the use of existing housing as part of a community revitalization plan,
(iv) sponsor characteristics,
(v) tenant populations with special housing needs,
(vi) public housing waiting lists,
(vii) tenant populations of individuals with children,
(viii) projects intended for eventual tenant ownership,
(ix) the energy efficiency of the project, and
(x) the historic nature of the project.
(D) Application to bond financed projects
Subsection (h)(4) shall not apply to any project unless the project satisfies the requirements for allocation of a housing credit dollar amount under the qualified allocation plan applicable to the area in which the project is located.
(2) Credit allocated to building not to exceed amount necessary to assure project feasibility
(A) In general
The housing credit dollar amount allocated to a project shall not exceed the amount the housing credit agency determines is necessary for the financial feasibility of the project and its viability as a qualified low-income housing project throughout the credit period.
(B) Agency evaluation
In making the determination under subparagraph (A), the housing credit agency shall consider—
(i) the sources and uses of funds and the total financing planned for the project,
(ii) any proceeds or receipts expected to be generated by reason of tax benefits,
(iii) the percentage of the housing credit dollar amount used for project costs other than the cost of intermediaries, and
(iv) the reasonableness of the developmental and operational costs of the project.
Clause (iii) shall not be applied so as to impede the development of projects in hard-to-develop areas. Such a determination shall not be construed to be a representation or warranty as to the feasibility or viability of the project.
(C) Determination made when credit amount applied for and when building placed in service
(i) In general
A determination under subparagraph (A) shall be made as of each of the following times:
(I) The application for the housing credit dollar amount.
(II) The allocation of the housing credit dollar amount.
(III) The date the building is placed in service.
(ii) Certification as to amount of other subsidies
Prior to each determination under clause (i), the taxpayer shall certify to the housing credit agency the full extent of all Federal, State, and local subsidies which apply (or which the taxpayer expects to apply) with respect to the building.
(D) Application to bond financed projects
Subsection (h)(4) shall not apply to any project unless the governmental unit which issued the bonds (or on behalf of which the bonds were issued) makes a determination under rules similar to the rules of subparagraphs (A) and (B).
(n) Regulations
The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section, including regulations—
(1) dealing with—
(A) projects which include more than 1 building or only a portion of a building,
(B) buildings which are placed in service in portions,
(2) providing for the application of this section to short taxable years,
(3) preventing the avoidance of the rules of this section, and
(4) providing the opportunity for housing credit agencies to correct administrative errors and omissions with respect to allocations and record keeping within a reasonable period after their discovery, taking into account the availability of regulations and other administrative guidance from the Secretary.
(Added
Inflation Adjusted Items for Certain Years
For inflation adjustment of certain items in this section, see Revenue Procedures listed in a table under
Editorial Notes
References in Text
The date of the enactment of this paragraph, referred to in subsec. (b)(2)(A), is the date of enactment of
Section 201(a) of the Tax Reform Act of 1986, referred to in subsec. (c)(2)(B), is section 201(a) of
Section 3 of the Federal Deposit Insurance Act, referred to in subsec. (d)(6)(B), is classified to
Section 8 of the United States Housing Act of 1937, referred to in subsecs. (d)(6)(C)(i), (g)(2)(B), and (h)(6)(B)(iv), is classified to
Sections 221(d)(3), (4) and 236 of the National Housing Act, referred to in subsec. (d)(6)(C)(i), are classified to sections 1715l(d)(3), (4) and 1715z–1, respectively, of Title 12, Banks and Banking.
Sections 515, 502(c), and 520 of the Housing Act of 1949, referred to in subsecs. (d)(6)(C)(i), (g)(2)(B)(iv), and (i)(8), are classified to sections 1485, 1472(c), and 1490, respectively, of Title 42, The Public Health and Welfare.
The date of the enactment of this subparagraph, referred to in subsec. (g)(2)(E), is the date of enactment of
The date of the enactment of this clause, referred to in subsec. (i)(3)(B)(iii)(I), is date of enactment of
The Social Security Act, referred to in subsec. (i)(3)(D)(i)(I), (II), is act Aug. 14, 1935, ch. 531,
The Job Training Partnership Act, referred to in subsec. (i)(3)(D)(i)(III), is
Section 1602 of the American Recovery and Reinvestment Tax Act of 2009, referred to in subsec. (i)(9)(A), is section 1602 of
Prior Provisions
A prior section 42, added
Another prior section 42 was renumbered
Amendments
2020—Subsec. (b)(3), (4).
2018—Subsec. (d)(4)(C)(i).
Subsec. (e)(2)(B).
Subsec. (f)(5)(B)(ii)(I).
Subsec. (g)(1).
Subsec. (g)(1)(C).
Subsec. (g)(2)(D)(i).
Subsec. (g)(2)(D)(ii).
Subsec. (g)(2)(D)(iii) to (v).
Subsec. (h)(3)(I).
Subsec. (h)(5)(C)(ii).
Subsec. (i)(3)(D)(ii)(I).
Subsec. (k)(2)(B).
Subsec. (k)(2)(B)(ii).
Subsec. (m)(1)(B)(ii)(III).
2017—Subsecs. (e)(3)(D)(ii), (h)(3)(H)(i)(II).
Subsec. (h)(6)(G)(i)(II).
Subsec. (h)(6)(G)(ii).
2015—Subsec. (b)(2).
Subsec. (b)(2)(A).
2014—Subsec. (b)(1).
Subsec. (b)(2)(A).
Subsec. (h)(3)(C)(ii)(I).
2013—Subsec. (b)(2)(A).
2009—Subsec. (i).
2008—Subsec. (b).
Subsec. (c)(2).
Subsec. (d)(2)(B)(ii).
"(I) the date the building was last placed in service, or
"(II) the date of the most recent nonqualified substantial improvement of the building,".
Subsec. (d)(2)(D).
Subsec. (d)(4)(C)(ii).
Subsec. (d)(5)(A).
Subsec. (d)(5)(B), (C).
Subsec. (d)(5)(C)(v).
Subsec. (d)(6).
Subsec. (e)(3)(A)(ii)(I).
Subsec. (e)(3)(A)(ii)(II).
Subsec. (e)(3)(D).
Subsec. (f)(5)(B)(ii)(II).
Subsec. (g)(9).
Subsec. (h)(1)(E)(ii).
Subsec. (h)(3)(I).
Subsec. (h)(4)(A)(ii).
Subsec. (i)(2)(A).
Subsec. (i)(2)(B).
"(i) in the case of a loan, the principal amount of such loan, and
"(ii) in the case of a tax-exempt obligation, the proceeds of such obligation."
Subsec. (i)(2)(C).
Subsec. (i)(2)(C)(i).
Subsec. (i)(2)(C)(ii).
Subsec. (i)(2)(D), (E).
Subsec. (i)(3)(D)(i)(II), (III).
Subsec. (i)(8).
Subsec. (j)(6).
"(A) the taxpayer furnishes to the Secretary a bond in an amount satifactory to the Secretary and for the period required by the Secretary, and
"(B) it is reasonably expected that such building will continue to be operated as a qualified low-income building for the remaining compliance period with respect to such building."
Subsec. (m)(1)(C)(ix), (x).
2007—Subsec. (i)(3)(D)(ii)(I).
2004—Subsec. (d)(2)(D)(iii)(I).
Subsec. (i)(3)(D)(ii)(I).
2002—Subsec. (h)(3)(C).
Subsec. (m)(1)(B)(ii)(II), (III).
2000—Subsec. (c)(2).
Subsec. (d)(4)(A).
Subsec. (d)(4)(C), (D).
Subsec. (d)(5)(C)(ii)(I).
Subsec. (h)(1)(E)(ii).
Subsec. (h)(3)(C).
Subsec. (h)(3)(C)(i), (ii).
"(i) $1.25 multiplied by the State population,
"(ii) the unused State housing credit ceiling (if any) of such State for the preceding calendar year,".
Subsec. (h)(3)(D)(ii).
"(I) the aggregate housing credit dollar amount allocated for such year, over
"(II) the sum of the amounts described in clauses (ii) and (iii) of subparagraph (C)."
Subsec. (h)(3)(H).
Subsec. (i)(2)(E).
Subsec. (i)(2)(E)(i).
Subsec. (i)(3)(B)(iii)(I).
Subsec. (m)(1)(A)(iii), (iv).
Subsec. (m)(1)(B)(ii)(III).
Subsec. (m)(1)(B)(iii).
Subsec. (m)(1)(C)(iii).
Subsec. (m)(1)(C)(v) to (viii).
"(v) participation of local tax-exempt organizations,
"(vi) tenant populations with special housing needs, and
"(vii) public housing waiting lists."
1998—Subsec. (j)(4)(D).
1996—Subsec. (c)(2).
Subsec. (d)(5)(B).
1993—Subsec. (g)(8).
Subsec. (h)(6)(B)(iv) to (vi).
Subsec. (i)(2)(E).
Subsec. (i)(3)(D).
"(i) a student and receiving assistance under title IV of the Social Security Act, or
"(ii) enrolled in a job training program receiving assistance under the Job Training Partnership Act or under other similar Federal, State, or local laws."
Subsec. (m)(2)(B)(iv).
Subsec. (o).
1991—Subsec. (o)(1).
Subsec. (o)(2).
1990—Subsec. (b)(1).
Subsec. (c)(2).
Subsec. (d)(2)(D)(i)(I).
Subsec. (d)(2)(D)(ii)(V).
Subsec. (d)(5)(B).
Subsec. (d)(5)(C)(ii)(I).
Subsec. (g)(2)(B)(iv).
Subsec. (g)(2)(D)(i).
Subsec. (g)(2)(D)(ii).
Subsec. (g)(3)(A).
Subsec. (h)(3)(C).
Subsec. (h)(3)(D)(ii)(II).
Subsec. (h)(5)(B).
Subsec. (h)(5)(C)(i) to (iii).
Subsec. (h)(5)(D)(i).
Subsec. (h)(6)(B)(i).
Subsec. (h)(6)(B)(ii).
Subsec. (h)(6)(B)(iii) to (v).
Subsec. (h)(6)(E)(i)(I).
Subsec. (h)(6)(E)(ii)(II).
Subsec. (h)(6)(F).
Subsec. (h)(6)(J) to (L).
Subsec. (i)(3)(D).
Subsec. (i)(7).
Subsec. (i)(7)(A).
Subsec. (i)(8).
Subsec. (k)(1).
Subsec. (k)(2)(A)(ii), (D).
Subsec. (m)(1)(B)(ii) to (iv).
Subsec. (m)(2)(B).
Subsec. (o)(1).
Subsec. (o)(2).
"(A) the bonds with respect to such building are issued before 1990,
"(B) such building is constructed, reconstructed, or rehabilitated by the taxpayer,
"(C) more than 10 percent of the reasonably anticipated cost of such construction, reconstruction, or rehabilitation has been incurred as of January 1, 1990, and some of such cost is incurred on or after such date, and
"(D) such building is placed in service before January 1, 1992."
1989—Subsec. (b)(1).
Subsec. (b)(3)(C).
Subsec. (c)(1)(E).
Subsec. (d)(1).
Subsec. (d)(2)(A).
"(I) the portion of its adjusted basis attributable to its acquisition cost, plus
"(II) amounts chargeable to capital account and incurred by the taxpayer (before the close of the 1st taxable year of the credit period for such building) for property (or additions or improvements to property) of a character subject to the allowance for depreciation, and".
Subsec. (d)(2)(B)(iv).
Subsec. (d)(2)(C).
Subsec. (d)(5).
Subsec. (d)(5)(A).
Subsec. (d)(5)(B).
Subsec. (d)(5)(C).
Subsec. (d)(5)(D).
Subsec. (d)(6)(A)(i).
Subsec. (d)(6)(C) to (E).
Subsec. (d)(7)(A).
Subsec. (d)(7)(A)(ii).
Subsec. (e)(2)(A).
Subsec. (e)(3).
Subsec. (e)(5).
Subsec. (f)(4).
Subsec. (f)(5).
Subsec. (g)(2)(A).
Subsec. (g)(2)(B).
Subsec. (g)(2)(C) to (E).
Subsec. (g)(3)(D).
Subsec. (g)(4).
Subsec. (g)(7).
Subsec. (h)(1)(B).
Subsec. (h)(1)(F).
Subsec. (h)(3)(C) to (G).
Subsec. (h)(4)(B).
Subsec. (h)(5)(D)(ii).
Subsec. (h)(5)(E).
Subsec. (h)(6).
Subsec. (h)(6)(B) to (E).
Subsec. (h)(7), (8).
Subsec. (i)(2)(D).
Subsec. (i)(3)(B).
Subsec. (i)(3)(D).
Subsec. (i)(3)(E).
Subsec. (i)(6).
Subsec. (i)(8).
Subsec. (k)(2)(D).
Subsec. (l)(1).
Subsec. (m).
Subsec. (m)(4).
Subsec. (n).
Subsec. (o).
1988—Subsec. (b)(2)(A).
Subsec. (b)(2)(C)(ii).
Subsec. (b)(3).
Subsec. (c)(2)(A).
Subsec. (d)(2)(D)(ii).
Subsec. (d)(3).
Subsec. (d)(5)(A).
Subsec. (d)(5)(C).
Subsec. (d)(6)(A)(iii).
Subsec. (d)(6)(B)(ii).
Subsec. (f)(1).
Subsec. (f)(3).
"(A)
"(i) as of the close of any taxable year in the compliance period (after the 1st year of the credit period) the qualified basis of any building exceeds
"(ii) the qualified basis of such building as of the close of the 1st year of the credit period,
the credit allowable under subsection (a) for the taxable year (determined without regard to this paragraph) shall be increased by an amount equal to the product of such excess and the percentage equal to 2/3 of the applicable percentage for such building.
"(B) 1
Subsec. (g)(2)(B)(i).
Subsec. (g)(2)(C).
Subsec. (g)(3).
Subsec. (g)(4).
Subsec. (g)(6).
Subsec. (h)(1).
"(A) the 60th day after the close of the taxable year, or
"(B) the close of the calendar year in which such taxable year ends."
Subsec. (h)(1)(B).
Subsec. (h)(1)(E).
Subsec. (h)(4)(A).
Subsec. (h)(5)(D), (E).
Subsec. (h)(6)(B)(ii).
"(ii)
Subsec. (h)(6)(D).
"(i) without regard to paragraphs (2)(A) and (3)(B) of subsection (f), and
"(ii) by applying subsection (f)(3)(A) without regard to 'the percentage equal to 2/3 of'."
Subsec. (h)(6)(E).
Subsec. (i)(2)(A).
Subsec. (i)(2)(B).
Subsec. (i)(2)(C).
Subsec. (i)(2)(D).
Subsec. (j)(4)(D).
Subsec. (j)(4)(F).
Subsec. (j)(5)(B).
"(i) more than ½ the capital interests, and more than ½ the profit interests, in which are owned by a group of 35 or more partners each of whom is a natural person or an estate, and
"(ii) which elects the application of this paragraph."
Subsec. (j)(5)(B)(i).
Subsec. (j)(6).
Subsec. (k)(2)(B).
Subsec. (l).
Subsec. (l)(2), (3).
Subsec. (n).
Subsec. (n)(1).
1986—Subsec. (k)(1).
Statutory Notes and Related Subsidiaries
Effective Date of 2020 Amendment
"(1) any building which receives an allocation of housing credit dollar amount after December 31, 2020, and
"(2) in the case of any building any portion of which is financed with an obligation described in section 42(h)(4)(A), any such building if any such obligation which so finances such building is issued after December 31, 2020."
Effective Date of 2018 Amendment
Effective Date of 2017 Amendment
Amendment by
Effective Date of 2015 Amendment
Effective Date of 2014 Amendment
Amendment by section 221(a)(7) of
Effective Date of 2013 Amendment
Effective Date of 2008 Amendment
"(1)
"(2)
"(A)
"(B)
"(1)
"(2)
"(A) interests in buildings disposed [of] after the date of the enactment of this Act [July 30, 2008], and
"(B) interests in buildings disposed of on or before such date if—
"(i) it is reasonably expected that such building will continue to be operated as a qualified low-income building (within the meaning of section 42 of the Internal Revenue Code of 1986) for the remaining compliance period (within the meaning of such section) with respect to such building, and
"(ii) the taxpayer elects the application of this subparagraph with respect to such disposition.
"(3)
"(4)
"(5)
"(6)
Effective Date of 2007 Amendment
"(1) housing credit amounts allocated before, on, or after the date of the enactment of this Act [Dec. 20, 2007], and
"(2) buildings placed in service before, on, or after such date to the extent paragraph (1) of section 42(h) of the Internal Revenue Code of 1986 does not apply to any building by reason of paragraph (4) thereof."
Effective Date of 2004 Amendment
Amendment by section 207(8) of
Effective Date of 2000 Amendment
"(1) housing credit dollar amounts allocated after December 31, 2000; and
"(2) buildings placed in service after such date to the extent paragraph (1) of section 42(h) of the Internal Revenue Code of 1986 does not apply to any building by reason of paragraph (4) thereof, but only with respect to bonds issued after such date."
Effective Date of 1998 Amendment
Amendment by
Effective Date of 1993 Amendment
"(A)
"(i) determinations under section 42 of the Internal Revenue Code of 1986 with respect to housing credit dollar amounts allocated from State housing credit ceilings after June 30, 1992, or
"(ii) buildings placed in service after June 30, 1992, to the extent paragraph (1) of section 42(h) of such Code does not apply to any building by reason of paragraph (4) thereof, but only with respect to bonds issued after such date.
"(B)
"(C)
Effective Date of 1991 Amendment
Effective Date of 1990 Amendment
"(A)
"(i) determinations under section 42 of the Internal Revenue Code of 1986 with respect to housing credit dollar amounts allocated from State housing credit ceilings for calendar years after 1990, or
"(ii) buildings placed in service after December 31, 1990, to the extent paragraph (1) of section 42(h) of such Code does not apply to any building by reason of paragraph (4) thereof, but only with respect to bonds issued after such date.
"(B)
"(C)
"(D)
"(i) determinations of qualified basis for taxable years beginning after the date of the enactment of this Act [Nov. 5, 1990], and
"(ii) determinations of qualified basis for taxable years beginning on or before such date except that determinations for such taxable years shall be made without regard to any reduction in gross rent after August 3, 1990, for any period before August 4, 1990."
"(1)
"(2)
"(3)
Amendment by section 11813(b)(3) of
Effective Date of 1989 Amendment
"(1)
"(2)
"(3)
"(4)
"(5)
"(6)
"(7)
"(A) Paragraph (1) of subsection (h) (relating to units rented on a monthly basis) [amending this section].
"(B) Subsection (l) (relating to eligible basis for new buildings to include expenditures before close of 1st year of credit period) [amending this section].
"(8)
"(A) the Secretary of Housing and Urban Development shall publish initial guidance on the designation of difficult development areas under section 42(d)(5)(C) of such Code, as added by this section, and
"(B) the Secretary of the Treasury shall publish initial guidance under section 42(j)(6) of such Code (relating to no recapture on disposition of building (or interest therein) where bond posted)."
[
["(A) Paragraph (11) of section 11701(a) of the Revenue Reconciliation Act of 1990 (and the amendment made by such paragraph) [
["(B) Subparagraph (A) shall not apply to any building if the owner of such building establishes to the satisfaction of the Secretary of the Treasury or his delegate that such owner reasonably relied on the amendment made by such paragraph (11)."]
Amendment by section 7811(a) of
Amendment by section 7831(c) of
Effective Date of 1988 Amendment
Amendment by sections 1002(l)(1)–(25), (32) and 1007(g)(3)(B) of
"(1)
"(2)
Effective Date of 1986 Amendment
Effective Date
"(1)
"(2)
Savings Provision
For provisions that nothing in amendment by sections 11812(b)(3) and 11813(b)(3) of
Grants to States for Low-Income Housing Projects in Lieu of Low-Income Housing Credit Allocations for 2009
"(a)
"(b)
"(1) the sum of—
"(A) 100 percent of the State housing credit ceiling for 2009 which is attributable to amounts described in clauses (i) and (iii) of section 42(h)(3)(C) of the Internal Revenue Code of 1986, and
"(B) 40 percent of the State housing credit ceiling for 2009 which is attributable to amounts described in clauses (ii) and (iv) of such section, multiplied by
"(2) 10.
"(c)
"(1)
"(2)
"(3)
"(4)
"(d)
"(e)
"(f)
Election To Determine Rent Limitation Based on Number of Bedrooms and Deep Rent Skewing
"(1) In the case of a building to which the amendments made by subsection (e)(1) or (n)(2) of section 7108 of the Revenue Reconciliation Act of 1989 [
"(2) In the case of the amendment made by such subsection (e)(1), such election shall apply only with respect to tenants first occupying any unit in the building after the date of the election.
"(3) In the case of the amendment made by such subsection (n)(2), such election shall apply only if rents of low-income tenants in such building do not increase as a result of such election.
"(4) An election under this subsection may be made only during the 180-day period beginning on the date of the enactment of this Act [Aug. 10, 1993] and, once made, shall be irrevocable."
Election To Accelerate Credit Into 1990
"(1)
"(2)
"(3)
Exception to Time Period for Meeting Project Requirements in Order To Qualify as Low-Income Housing
State Housing Credit Ceiling for Calendar Year 1990
Transitional Rules
"(1)
"(A)
"(i) section 42(c)(2)(B) of the Internal Revenue Code of 1986 (as added by this section) shall not apply,
"(ii) such building shall be treated as not federally subsidized for purposes of section 42(b)(1)(A) of such Code,
"(iii) the eligible basis of such building shall be treated, for purposes of section 42(h)(4)(A) of such Code, as if it were financed by an obligation the interest on which is exempt from tax under section 103 of such Code and which is taken into account under section 146 of such Code, and
"(iv) the amendments made by section 803 [enacting
"(B)
"(i) an urban development action grant application with respect to such project was submitted on September 13, 1984,
"(ii) a zoning commission map amendment related to such project was granted on July 17, 1985, and
"(iii) the number assigned to such project by the Federal Housing Administration is 023–36602.
"(C)
"(D)
"(i) rents charged for units in such project are restricted by State regulations,
"(ii) the annual cash flow of such project is restricted by State law,
"(iii) the project is located on land owned by or ground leased from a public housing authority,
"(iv) construction of such project begins on or before December 31, 1986, and units within such project are placed in service on or before June 1, 1990, and
"(v) for a 20-year period, 20 percent or more of the residential units in such project are occupied by individuals whose income is 50 percent or less of area median gross income.
"(E)
"(2)
"(A)
| The additional | |
| "For calendar year: | allocation is: |
| 1987 | $3,900,000 |
| 1988 | $7,600,000 |
| 1989 | $1,300,000. |
"(B)
"(i) A corporate governmental agency constituted as a public benefit corporation and established in 1971 under the provisions of Article XII of the Private Housing Finance Law of the State.
"(ii) A city department established on December 20, 1979, pursuant to chapter XVIII of a municipal code of such city for the purpose of supervising and coordinating the formation and execution of projects and programs affecting housing within such city.
"(iii) The State housing finance agency referred to in subparagraph (C), but only with respect to projects described in subparagraph (C).
"(C)
"(i) receives financing from a State housing finance agency from the proceeds of bonds issued pursuant to
"(ii) is subject to subsidy commitments issued pursuant to a program established under
"(D)
"(i) Any building—
"(I) which is allocated any housing credit dollar amount by a housing credit agency described in clause (iii) of subparagraph (B), and
"(II) which is placed in service after June 30, 1986, and before January 1, 1987,
shall be treated for purposes of the amendments made by this section as placed in service on January 1, 1987.
"(ii) Section 42(c)(2)(B) of the Internal Revenue Code of 1986 shall not apply to any building which is allocated any housing credit dollar amount by any agency described in subparagraph (B).
"(E)
"(i) which is allocated any housing credit dollar amount by any agency described in subparagraph (B), and
"(ii) which after the application of subparagraph (D)(ii) is a qualified low-income building at all times during any taxable year,
such building shall be treated as described in section 42(b)(1)(B) of such Code and having an applicable fraction for such year of 1. The preceding sentence shall apply to any building only to the extent of the portion of the additional housing credit dollar amount (allocated to such agency under subparagraph (A)) allocated to such building.
"(3)
"(A)
"(i) section 42(c)(2)(B) of such Code shall not apply,
"(ii) such building shall be treated as placed in service during the first calendar year after 1986 and before 1990 in which such building is a qualified low-income building (determined after the application of clause (i)), and
"(iii) for purposes of section 42(h) of such Code, such building shall be treated as having allocated to it a housing credit dollar amount equal to the dollar amount appearing in the clause of subparagraph (B) in which such building is described.
"(B)
| The housing credit | |
| "The code number is: | dollar amount is: |
| (i) 49284553664 | $16,000 |
| (ii) 4927742022446 | $22,000 |
| (iii) 49270742276087 | $64,000 |
| (iv) 490270742387293 | $48,000 |
| (v) 4927074218234 | $32,000 |
| (vi) 49270742274019 | $36,000 |
| (vii) 51460742345074 | $53,000. |
"(C)
"(D)
"(4)
"(5)
"(A) the amendments made by this section [enacting this section and amending
"(B) paragraph (1) of section 167(k) of the Internal Revenue Code of 1986, shall be applied as if it did not contain the phrase 'and before January 1, 1987'.
The number of units to which the preceding sentence applies shall not exceed 150."
1 So in original. See 2008 Amendment note below.
§43. Enhanced oil recovery credit
(a) General rule
For purposes of section 38, the enhanced oil recovery credit for any taxable year is an amount equal to 15 percent of the taxpayer's qualified enhanced oil recovery costs for such taxable year.
(b) Phase-out of credit as crude oil prices increase
(1) In general
The amount of the credit determined under subsection (a) for any taxable year shall be reduced by an amount which bears the same ratio to the amount of such credit (determined without regard to this paragraph) as—
(A) the amount by which the reference price for the calendar year preceding the calendar year in which the taxable year begins exceeds $28, bears to
(B) $6.
(2) Reference price
For purposes of this subsection, the term "reference price" means, with respect to any calendar year, the reference price determined for such calendar year under section 45K(d)(2)(C).
(3) Inflation adjustment
(A) In general
In the case of any taxable year beginning in a calendar year after 1991, there shall be substituted for the $28 amount under paragraph (1)(A) an amount equal to the product of—
(i) $28, multiplied by
(ii) the inflation adjustment factor for such calendar year.
(B) Inflation adjustment factor
The term "inflation adjustment factor" means, with respect to any calendar year, a fraction the numerator of which is the GNP implicit price deflator for the preceding calendar year and the denominator of which is the GNP implicit price deflator for 1990. For purposes of the preceding sentence, the term "GNP implicit price deflator" means the first revision of the implicit price deflator for the gross national product as computed and published by the Secretary of Commerce. Not later than April 1 of any calendar year, the Secretary shall publish the inflation adjustment factor for the preceding calendar year.
(c) Qualified enhanced oil recovery costs
For purposes of this section—
(1) In general
The term "qualified enhanced oil recovery costs" means any of the following:
(A) Any amount paid or incurred during the taxable year for tangible property—
(i) which is an integral part of a qualified enhanced oil recovery project, and
(ii) with respect to which depreciation (or amortization in lieu of depreciation) is allowable under this chapter.
(B) Any intangible drilling and development costs—
(i) which are paid or incurred in connection with a qualified enhanced oil recovery project, and
(ii) with respect to which the taxpayer may make an election under section 263(c) for the taxable year.
(C) Any qualified tertiary injectant expenses (as defined in section 193(b)) which are paid or incurred in connection with a qualified enhanced oil recovery project and for which a deduction is allowable for the taxable year.
(D) Any amount which is paid or incurred during the taxable year to construct a gas treatment plant which—
(i) is located in the area of the United States (within the meaning of section 638(1)) lying north of 64 degrees North latitude,
(ii) prepares Alaska natural gas for transportation through a pipeline with a capacity of at least 2,000,000,000,000 Btu of natural gas per day, and
(iii) produces carbon dioxide which is injected into hydrocarbon-bearing geological formations.
(2) Qualified enhanced oil recovery project
For purposes of this subsection—
(A) In general
The term "qualified enhanced oil recovery project" means any project—
(i) which involves the application (in accordance with sound engineering principles) of 1 or more tertiary recovery methods (as defined in section 193(b)(3)) which can reasonably be expected to result in more than an insignificant increase in the amount of crude oil which will ultimately be recovered,
(ii) which is located within the United States (within the meaning of section 638(1)), and
(iii) with respect to which the first injection of liquids, gases, or other matter commences after December 31, 1990.
(B) Certification
A project shall not be treated as a qualified enhanced oil recovery project unless the operator submits to the Secretary (at such times and in such manner as the Secretary provides) a certification from a petroleum engineer that the project meets (and continues to meet) the requirements of subparagraph (A).
(3) At-risk limitation
For purposes of determining qualified enhanced oil recovery costs, rules similar to the rules of section 49(a)(1), section 49(a)(2), and section 49(b) shall apply.
(4) Special rule for certain gas displacement projects
For purposes of this section, immiscible non-hydrocarbon gas displacement shall be treated as a tertiary recovery method under section 193(b)(3).
(5) Alaska natural gas
For purposes of paragraph (1)(D)—
(A) In general
The term "Alaska natural gas" means natural gas entering the Alaska natural gas pipeline (as defined in section 168(i)(16) (determined without regard to subparagraph (B) thereof)) which is produced from a well—
(i) located in the area of the State of Alaska lying north of 64 degrees North latitude, determined by excluding the area of the Alaska National Wildlife Refuge (including the continental shelf thereof within the meaning of section 638(1)), and
(ii) pursuant to the applicable State and Federal pollution prevention, control, and permit requirements from such area (including the continental shelf thereof within the meaning of section 638(1)).
(B) Natural gas
The term "natural gas" has the meaning given such term by section 613A(e)(2).
(d) Other rules
(1) Disallowance of deduction
Any deduction allowable under this chapter for any costs taken into account in computing the amount of the credit determined under subsection (a) shall be reduced by the amount of such credit attributable to such costs.
(2) Basis adjustments
For purposes of this subtitle, if a credit is determined under this section for any expenditure with respect to any property, the increase in the basis of such property which would (but for this subsection) result from such expenditure shall be reduced by the amount of the credit so allowed.
(e) Election to have credit not apply
(1) In general
A taxpayer may elect to have this section not apply for any taxable year.
(2) Time for making election
An election under paragraph (1) for any taxable year may be made (or revoked) at any time before the expiration of the 3-year period beginning on the last date prescribed by law for filing the return for such taxable year (determined without regard to extensions).
(3) Manner of making election
An election under paragraph (1) (or revocation thereof) shall be made in such manner as the Secretary may by regulations prescribe.
(Added
Inflation Adjusted Items for Certain Tax Years
For inflation adjustment of certain items in this section, see Internal Revenue Notices listed in a table below.
Editorial Notes
Prior Provisions
A prior section 43 was renumbered
Another prior section 43 was renumbered
Amendments
2005—Subsec. (b)(2).
Subsec. (c)(5).
"(1)
"(A) located in the area of the State of Alaska lying north of 64 degrees North latitude, determined by excluding the area of the Alaska National Wildlife Refuge (including the continental shelf thereof within the meaning of section 638(1)), and
"(B) pursuant to the applicable State and Federal pollution prevention, control, and permit requirements from such area (including the continental shelf thereof within the meaning of section 638(1)).
"(2)
2004—Subsec. (c)(1)(D).
Subsec. (c)(5).
2000—Subsec. (c)(1)(C).
Statutory Notes and Related Subsidiaries
Effective Date of 2005 Amendment
Amendment by
Effective Date of 2004 Amendment
Effective Date of 2000 Amendment
Effective Date
"(1)
"(2)
Inflation Adjusted Items for Certain Years
Provisions relating to inflation adjustment of items in this section for certain years were contained in the following:
2023—Internal Revenue Notice 2023–57.
2022—Internal Revenue Notice 2022–19.
2021—Internal Revenue Notice 2021–47.
2020—Internal Revenue Notice 2020–31.
2019—Internal Revenue Notice 2019–36.
2018—Internal Revenue Notice 2018–49.
2017—Internal Revenue Notice 2017–25.
2016—Internal Revenue Notice 2016–44.
2015—Internal Revenue Notice 2015–64.
2014—Internal Revenue Notice 2014–64.
2013—Internal Revenue Notice 2013–50.
2012—Internal Revenue Notice 2012–49.
2011—Internal Revenue Notice 2011–57.
2010—Internal Revenue Notice 2010–72.
2009—Internal Revenue Notice 2009–73.
2008—Internal Revenue Notice 2008–72.
2007—Internal Revenue Notice 2007–64.
2006—Internal Revenue Notice 2006–62.
2005—Internal Revenue Notice 2005–56.
2004—Internal Revenue Notice 2004–49.
2003—Internal Revenue Notice 2003–43.
2002—Internal Revenue Notice 2002–53.
2001—Internal Revenue Notice 2001–54.
2000—Internal Revenue Notice 2000–51.
1999—Internal Revenue Notice 99–45.
1998—Internal Revenue Notice 98–41.
1997—Internal Revenue Notice 97–39.
1996—Internal Revenue Notice 96–41.
§44. Expenditures to provide access to disabled individuals
(a) General rule
For purposes of section 38, in the case of an eligible small business, the amount of the disabled access credit determined under this section for any taxable year shall be an amount equal to 50 percent of so much of the eligible access expenditures for the taxable year as exceed $250 but do not exceed $10,250.
(b) Eligible small business
For purposes of this section, the term "eligible small business" means any person if—
(1) either—
(A) the gross receipts of such person for the preceding taxable year did not exceed $1,000,000, or
(B) in the case of a person to which subparagraph (A) does not apply, such person employed not more than 30 full-time employees during the preceding taxable year, and
(2) such person elects the application of this section for the taxable year.
For purposes of paragraph (1)(B), an employee shall be considered full-time if such employee is employed at least 30 hours per week for 20 or more calendar weeks in the taxable year.
(c) Eligible access expenditures
For purposes of this section—
(1) In general
The term "eligible access expenditures" means amounts paid or incurred by an eligible small business for the purpose of enabling such eligible small business to comply with applicable requirements under the Americans With Disabilities Act of 1990 (as in effect on the date of the enactment of this section).
(2) Certain expenditures included
The term "eligible access expenditures" includes amounts paid or incurred—
(A) for the purpose of removing architectural, communication, physical, or transportation barriers which prevent a business from being accessible to, or usable by, individuals with disabilities,
(B) to provide qualified interpreters or other effective methods of making aurally delivered materials available to individuals with hearing impairments,
(C) to provide qualified readers, taped texts, and other effective methods of making visually delivered materials available to individuals with visual impairments,
(D) to acquire or modify equipment or devices for individuals with disabilities, or
(E) to provide other similar services, modifications, materials, or equipment.
(3) Expenditures must be reasonable
Amounts paid or incurred for the purposes described in paragraph (2) shall include only expenditures which are reasonable and shall not include expenditures which are unnecessary to accomplish such purposes.
(4) Expenses in connection with new construction are not eligible
The term "eligible access expenditures" shall not include amounts described in paragraph (2)(A) which are paid or incurred in connection with any facility first placed in service after the date of the enactment of this section.
(5) Expenditures must meet standards
The term "eligible access expenditures" shall not include any amount unless the taxpayer establishes, to the satisfaction of the Secretary, that the resulting removal of any barrier (or the provision of any services, modifications, materials, or equipment) meets the standards promulgated by the Secretary with the concurrence of the Architectural and Transportation Barriers Compliance Board and set forth in regulations prescribed by the Secretary.
(d) Definition of disability; special rules
For purposes of this section—
(1) Disability
The term "disability" has the same meaning as when used in the Americans With Disabilities Act of 1990 (as in effect on the date of the enactment of this section).
(2) Controlled groups
(A) In general
All members of the same controlled group of corporations (within the meaning of section 52(a)) and all persons under common control (within the meaning of section 52(b)) shall be treated as 1 person for purposes of this section.
(B) Dollar limitation
The Secretary shall apportion the dollar limitation under subsection (a) among the members of any group described in subparagraph (A) in such manner as the Secretary shall by regulations prescribe.
(3) Partnerships and S corporations
In the case of a partnership, the limitation under subsection (a) shall apply with respect to the partnership and each partner. A similar rule shall apply in the case of an S corporation and its shareholders.
(4) Short years
The Secretary shall prescribe such adjustments as may be appropriate for purposes of paragraph (1) of subsection (b) if the preceding taxable year is a taxable year of less than 12 months.
(5) Gross receipts
Gross receipts for any taxable year shall be reduced by returns and allowances made during such year.
(6) Treatment of predecessors
The reference to any person in paragraph (1) of subsection (b) shall be treated as including a reference to any predecessor.
(7) Denial of double benefit
In the case of the amount of the credit determined under this section—
(A) no deduction or credit shall be allowed for such amount under any other provision of this chapter, and
(B) no increase in the adjusted basis of any property shall result from such amount.
(e) Regulations
The Secretary shall prescribe regulations necessary to carry out the purposes of this section.
(Added
Editorial Notes
References in Text
The Americans With Disabilities Act of 1990, referred to in subsecs. (c)(1) and (d)(1) is
The date of the enactment of this section, referred to in subsecs. (c)(1), (4) and (d)(1), is the date of enactment of
Prior Provisions
A prior section 44, added
Another prior section 44 was renumbered
Statutory Notes and Related Subsidiaries
Effective Date
Section applicable to expenditures paid or incurred after Nov. 5, 1990, see section 11611(e)(1) of
[§44A. Renumbered §21]
[§44B. Repealed. Pub. L. 98–369, div. A, title IV, §474(m)(1), July 18, 1984, 98 Stat. 833 ]
Section, added
Statutory Notes and Related Subsidiaries
Effective Date of Repeal
Repeal applicable to taxable years beginning after Dec. 31, 1983, and to carrybacks from such years, see section 475(a) of
[§44C. Renumbered §23]
[§44D. Renumbered §29]
[§44E. Renumbered §40]
[§44F. Renumbered §30]
[§44G. Renumbered §41]
[§44H. Renumbered §45C]
§45. Electricity produced from certain renewable resources, etc.
(a) General rule
For purposes of section 38, the renewable electricity production credit for any taxable year is an amount equal to the product of—
(1) 0.3 cents, multiplied by
(2) the kilowatt hours of electricity—
(A) produced by the taxpayer—
(i) from qualified energy resources, and
(ii) at a qualified facility during the 10-year period beginning on the date the facility was originally placed in service, and
(B) sold by the taxpayer to an unrelated person during the taxable year.
(b) Limitations and adjustments
(1) Phaseout of credit
The amount of the credit determined under subsection (a) shall be reduced by an amount which bears the same ratio to the amount of the credit (determined without regard to this paragraph) as—
(A) the amount by which the reference price for the calendar year in which the sale occurs exceeds 8 cents, bears to
(B) 3 cents.
(2) Credit and phaseout adjustment based on inflation
The 0.3 cent amount in subsection (a), the 8 cent amount in paragraph (1), the $4.375 amount in subsection (e)(8)(A), the $2 amount in subsection (e)(8)(D)(ii)(I), and in subsection (e)(8)(B)(i) the reference price of fuel used as a feedstock (within the meaning of subsection (c)(7)(A)) in 2002 shall each be adjusted by multiplying such amount by the inflation adjustment factor for the calendar year in which the sale occurs. If the 0.3 cent amount as increased under the preceding sentence is not a multiple of 0.05 cent, such amount shall be rounded to the nearest multiple of 0.05 cent. In any other case, if an amount as increased under this paragraph is not a multiple of 0.1 cent, such amount shall be rounded to the nearest multiple of 0.1 cent.
(3) Credit reduced for tax-exempt bonds
The amount of the credit determined under subsection (a) with respect to any facility for any taxable year (determined after the application of paragraphs (1) and (2)) shall be reduced by the amount which is the product of the amount so determined for such year and the lesser of 15 percent or a fraction—
(A) the numerator of which is the sum, for the taxable year and all prior taxable years, of proceeds of an issue of any obligations the interest on which is exempt from tax under section 103 and which is used to provide financing for the qualified facility, and
(B) the denominator of which is the aggregate amount of additions to the capital account for the qualified facility for the taxable year and all prior taxable years.
The amounts under the preceding sentence for any taxable year shall be determined as of the close of the taxable year.
(4) Credit rate and period for electricity produced and sold from certain facilities
(A) Credit rate
In the case of electricity produced and sold in any calendar year after 2003 at any qualified facility described in paragraph (3), (5), (6), or (7) of subsection (d), the amount in effect under subsection (a)(1) for such calendar year (determined before the application of the last two sentences of paragraph (2) of this subsection) shall be reduced by one-half.
(B) Credit period
(i) In general
Except as provided in clause (ii) or clause (iii), in the case of any facility described in paragraph (3), (4), (5), (6), or (7) of subsection (d), the 5-year period beginning on the date the facility was originally placed in service shall be substituted for the 10-year period in subsection (a)(2)(A)(ii).
(ii) Certain open-loop biomass facilities
In the case of any facility described in subsection (d)(3)(A)(ii) placed in service before the date of the enactment of this paragraph, the 5-year period beginning on January 1, 2005, shall be substituted for the 10-year period in subsection (a)(2)(A)(ii).
(iii) Termination
Clause (i) shall not apply to any facility placed in service after the date of the enactment of this clause.
(5) Phaseout of credit for wind facilities
In the case of any facility using wind to produce electricity which is placed in service before January 1, 2022, the amount of the credit determined under subsection (a) (determined after the application of paragraphs (1), (2), and (3) and without regard to this paragraph) shall be reduced by—
(A) in the case of any facility the construction of which begins after December 31, 2016, and before January 1, 2018, 20 percent,
(B) in the case of any facility the construction of which begins after December 31, 2017, and before January 1, 2019, 40 percent,
(C) in the case of any facility the construction of which begins after December 31, 2018, and before January 1, 2020, 60 percent, and
(D) in the case of any facility the construction of which begins after December 31, 2019, and before January 1, 2022, 40 percent.
(6) Increased credit amount for qualified facilities
(A) In general
In the case of any qualified facility which satisfies the requirements of subparagraph (B), the amount of the credit determined under subsection (a) (determined after the application of paragraphs (1) through (5) and without regard to this paragraph) shall be equal to such amount multiplied by 5.
(B) Qualified facility requirements
A qualified facility meets the requirements of this subparagraph if it is one of the following:
(i) A facility with a maximum net output of less than 1 megawatt (as measured in alternating current).
(ii) A facility the construction of which begins prior to the date that is 60 days after the Secretary publishes guidance with respect to the requirements of paragraphs (7)(A) and (8).
(iii) A facility which satisfies the requirements of paragraphs (7)(A) and (8).
(7) Prevailing wage requirements
(A) In general
The requirements described in this subparagraph with respect to any qualified facility are that the taxpayer shall ensure that any laborers and mechanics employed by the taxpayer or any contractor or subcontractor in—
(i) the construction of such facility, and
(ii) with respect to any taxable year, for any portion of such taxable year which is within the period described in subsection (a)(2)(A)(ii), the alteration or repair of such facility,
shall be paid wages at rates not less than the prevailing rates for construction, alteration, or repair of a similar character in the locality in which such facility is located as most recently determined by the Secretary of Labor, in accordance with subchapter IV of
(B) Correction and penalty related to failure to satisfy wage requirements
(i) In general
In the case of any taxpayer which fails to satisfy the requirement under subparagraph (A) with respect to the construction of any qualified facility or with respect to the alteration or repair of a facility in any year during the period described in subparagraph (A)(ii), such taxpayer shall be deemed to have satisfied such requirement under such subparagraph with respect to such facility for any year if, with respect to any laborer or mechanic who was paid wages at a rate below the rate described in such subparagraph for any period during such year, such taxpayer—
(I) makes payment to such laborer or mechanic in an amount equal to the sum of—
(aa) an amount equal to the difference between—
(AA) the amount of wages paid to such laborer or mechanic during such period, and
(BB) the amount of wages required to be paid to such laborer or mechanic pursuant to such subparagraph during such period, plus
(bb) interest on the amount determined under item (aa) at the underpayment rate established under section 6621 (determined by substituting "6 percentage points" for "3 percentage points" in subsection (a)(2) of such section) for the period described in such item, and
(II) makes payment to the Secretary of a penalty in an amount equal to the product of—
(aa) $5,000, multiplied by
(bb) the total number of laborers and mechanics who were paid wages at a rate below the rate described in subparagraph (A) for any period during such year.
(ii) Deficiency procedures not to apply
Subchapter B of
(iii) Intentional disregard
If the Secretary determines that any failure described in clause (i) is due to intentional disregard of the requirements under subparagraph (A), such clause shall be applied—
(I) in subclause (I), by substituting "three times the sum" for "the sum", and
(II) in subclause (II), by substituting "$10,000" for "5,000 1 " in item (aa) thereof.
(iv) Limitation on period for payment
Pursuant to rules issued by the Secretary, in the case of a final determination by the Secretary with respect to any failure by the taxpayer to satisfy the requirement under subparagraph (A), subparagraph (B)(i) shall not apply unless the payments described in subclauses (I) and (II) of such subparagraph are made by the taxpayer on or before the date which is 180 days after the date of such determination.
(8) Apprenticeship requirements
The requirements described in this paragraph with respect to the construction of any qualified facility are as follows:
(A) Labor hours
(i) Percentage of total labor hours
Taxpayers shall ensure that, with respect to the construction of any qualified facility, not less than the applicable percentage of the total labor hours of the construction, alteration, or repair work (including such work performed by any contractor or subcontractor) with respect to such facility shall, subject to subparagraph (B), be performed by qualified apprentices.
(ii) Applicable percentage
For purposes of clause (i), the applicable percentage shall be—
(I) in the case of a qualified facility the construction of which begins before January 1, 2023, 10 percent,
(II) in the case of a qualified facility the construction of which begins after December 31, 2022, and before January 1, 2024, 12.5 percent, and
(III) in the case of a qualified facility the construction of which begins after December 31, 2023, 15 percent.
(B) Apprentice to journeyworker ratio
The requirement under subparagraph (A)(i) shall be subject to any applicable requirements for apprentice-to-journeyworker ratios of the Department of Labor or the applicable State apprenticeship agency.
(C) Participation
Each taxpayer, contractor, or subcontractor who employs 4 or more individuals to perform construction, alteration, or repair work with respect to the construction of a qualified facility shall employ 1 or more qualified apprentices to perform such work.
(D) Exception
(i) In general
A taxpayer shall not be treated as failing to satisfy the requirements of this paragraph if such taxpayer—
(I) satisfies the requirements described in clause (ii), or
(II) subject to clause (iii), in the case of any failure by the taxpayer to satisfy the requirement under subparagraphs (A) and (C) with respect to the construction, alteration, or repair work on any qualified facility to which subclause (I) does not apply, makes payment to the Secretary of a penalty in an amount equal to the product of—
(aa) $50, multiplied by
(bb) the total labor hours for which the requirement described in such subparagraph was not satisfied with respect to the construction, alteration, or repair work on such qualified facility.
(ii) Good faith effort
For purposes of clause (i), a taxpayer shall be deemed to have satisfied the requirements under this paragraph with respect to a qualified facility if such taxpayer has requested qualified apprentices from a registered apprenticeship program, as defined in section 3131(e)(3)(B), and—
(I) such request has been denied, provided that such denial is not the result of a refusal by the taxpayer or any contractors or subcontractors engaged in the performance of construction, alteration, or repair work with respect to such qualified facility to comply with the established standards and requirements of the registered apprenticeship program, or
(II) the registered apprenticeship program fails to respond to such request within 5 business days after the date on which such registered apprenticeship program received such request.
(iii) Intentional disregard
If the Secretary determines that any failure described in subclause (i)(II) is due to intentional disregard of the requirements under subparagraphs (A) and (C), subclause (i)(II) shall be applied by substituting "$500" for "$50" in item (aa) thereof.
(E) Definitions
For purposes of this paragraph—
(i) Labor hours
The term "labor hours"—
(I) means the total number of hours devoted to the performance of construction, alteration, or repair work by any individual employed by the taxpayer or by any contractor or subcontractor, and
(II) excludes any hours worked by—
(aa) foremen,
(bb) superintendents,
(cc) owners, or
(dd) persons employed in a bona fide executive, administrative, or professional capacity (within the meaning of those terms in part 541 of title 29, Code of Federal Regulations).
(ii) Qualified apprentice
The term "qualified apprentice" means an individual who is employed by the taxpayer or by any contractor or subcontractor and who is participating in a registered apprenticeship program, as defined in section 3131(e)(3)(B).
(9) Domestic content bonus credit amount
(A) In general
In the case of any qualified facility which satisfies the requirement under subparagraph (B)(i), the amount of the credit determined under subsection (a) (determined after the application of paragraphs (1) through (8)) shall be increased by an amount equal to 10 percent of the amount so determined.
(B) Requirement
(i) In general
The requirement described in this clause is satisfied with respect to any qualified facility if the taxpayer certifies to the Secretary (at such time, and in such form and manner, as the Secretary may prescribe) that any steel, iron, or manufactured product which is a component of such facility (upon completion of construction) was produced in the United States (as determined under section 2 661 of title 49, Code of Federal Regulations).
(ii) Steel and iron
In the case of steel or iron, clause (i) shall be applied in a manner consistent with section 661.5 of title 49, Code of Federal Regulations.
(iii) Manufactured product
For purposes of clause (i), the manufactured products which are components of a qualified facility upon completion of construction shall be deemed to have been produced in the United States if not less than the adjusted percentage (as determined under subparagraph (C)) of the total costs of all such manufactured products of such facility are attributable to manufactured products (including components) which are mined, produced, or manufactured in the United States.
(C) Adjusted percentage
(i) In general
Subject to subclause (ii), for purposes of subparagraph (B)(iii), the adjusted percentage shall be 40 percent.
(ii) Offshore wind facility
For purposes of subparagraph (B)(iii), in the case of a qualified facility which is an offshore wind facility, the adjusted percentage shall be 20 percent.
(10) Phaseout for elective payment
(A) In general
In the case of a taxpayer making an election under section 6417 with respect to a credit under this section, the amount of such credit shall be replaced with—
(i) the value of such credit (determined without regard to this paragraph), multiplied by
(ii) the applicable percentage.
(B) 100 percent applicable percentage for certain qualified facilities
In the case of any qualified facility—
(i) which satisfies the requirements under paragraph (9)(B), or
(ii) with a maximum net output of less than 1 megawatt (as measured in alternating current),
the applicable percentage shall be 100 percent.
(C) Phased domestic content requirement
Subject to subparagraph (D), in the case of any qualified facility which is not described in subparagraph (B), the applicable percentage shall be—
(i) if construction of such facility began before January 1, 2024, 100 percent, and
(ii) if construction of such facility began in calendar year 2024, 90 percent.
(D) Exception
(i) In general
For purposes of this paragraph, the Secretary shall provide exceptions to the requirements under this paragraph if—
(I) the inclusion of steel, iron, or manufactured products which are produced in the United States increases the overall costs of construction of qualified facilities by more than 25 percent, or
(II) relevant steel, iron, or manufactured products are not produced in the United States in sufficient and reasonably available quantities or of a satisfactory quality.
(ii) Applicable percentage
In any case in which the Secretary provides an exception pursuant to clause (i), the applicable percentage shall be 100 percent.
(11) Special rule for qualified facility located in energy community
(A) In general
In the case of a qualified facility which is located in an energy community, the credit determined under subsection (a) (determined after the application of paragraphs (1) through (10), without the application of paragraph (9)) shall be increased by an amount equal to 10 percent of the amount so determined.
(B) Energy community
For purposes of this paragraph, the term "energy community" means—
(i) a brownfield site (as defined in subparagraphs (A), (B), and (D)(ii)(III) of section 101(39) of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (
(ii) a metropolitan statistical area or non-metropolitan statistical area which—
(I) has (or, at any time during the period beginning after December 31, 2009, had) 0.17 percent or greater direct employment or 25 percent or greater local tax revenues related to the extraction, processing, transport, or storage of coal, oil, or natural gas (as determined by the Secretary), and
(II) has an unemployment rate at or above the national average unemployment rate for the previous year (as determined by the Secretary), or
(iii) a census tract—
(I) in which—
(aa) after December 31, 1999, a coal mine has closed, or
(bb) after December 31, 2009, a coal-fired electric generating unit has been retired, or
(II) which is directly adjoining to any census tract described in subclause (I).
(12) Regulations and guidance
The Secretary shall issue such regulations or other guidance as the Secretary determines necessary to carry out the purposes of this subsection, including regulations or other guidance which provides for requirements for recordkeeping or information reporting for purposes of administering the requirements of this subsection.
(c) Resources
For purposes of this section:
(1) In general
The term "qualified energy resources" means—
(A) wind,
(B) closed-loop biomass,
(C) open-loop biomass,
(D) geothermal energy,
(E) solar energy,
(F) small irrigation power,
(G) municipal solid waste,
(H) qualified hydropower production, and
(I) marine and hydrokinetic renewable energy.
(2) Closed-loop biomass
The term "closed-loop biomass" means any organic material from a plant which is planted exclusively for purposes of being used at a qualified facility to produce electricity.
(3) Open-loop biomass
(A) In general
The term "open-loop biomass" means—
(i) any agricultural livestock waste nutrients, or
(ii) any solid, nonhazardous, cellulosic waste material or any lignin material which is derived from—
(I) any of the following forest-related resources: mill and harvesting residues, precommercial thinnings, slash, and brush,
(II) solid wood waste materials, including waste pallets, crates, dunnage, manufacturing and construction wood wastes (other than pressure-treated, chemically-treated, or painted wood wastes), and landscape or right-of-way tree trimmings, but not including municipal solid waste, gas derived from the biodegradation of solid waste, or paper which is commonly recycled, or
(III) agriculture sources, including orchard tree crops, vineyard, grain, legumes, sugar, and other crop by-products or residues.
Such term shall not include closed-loop biomass or biomass burned in conjunction with fossil fuel (cofiring) beyond such fossil fuel required for startup and flame stabilization.
(B) Agricultural livestock waste nutrients
(i) In general
The term "agricultural livestock waste nutrients" means agricultural livestock manure and litter, including wood shavings, straw, rice hulls, and other bedding material for the disposition of manure.
(ii) Agricultural livestock
The term "agricultural livestock" includes bovine, swine, poultry, and sheep.
(4) Geothermal energy
The term "geothermal energy" means energy derived from a geothermal deposit (within the meaning of section 613(e)(2)).
(5) Small irrigation power
The term "small irrigation power" means power—
(A) generated without any dam or impoundment of water through an irrigation system canal or ditch, and
(B) the nameplate capacity rating of which is not less than 150 kilowatts but is less than 5 megawatts.
(6) Municipal solid waste
The term "municipal solid waste" has the meaning given the term "solid waste" under section 1004(27) of the Solid Waste Disposal Act (
(7) Refined coal
(A) In general
The term "refined coal" means a fuel—
(i) which—
(I) is a liquid, gaseous, or solid fuel produced from coal (including lignite) or high carbon fly ash, including such fuel used as a feedstock,
(II) is sold by the taxpayer with the reasonable expectation that it will be used for the purpose of producing steam, and
(III) is certified by the taxpayer as resulting (when used in the production of steam) in a qualified emission reduction, or
(ii) which is steel industry fuel.
(B) Qualified emission reduction
The term "qualified emission reduction" means a reduction of at least 20 percent of the emissions of nitrogen oxide and at least 40 percent of the emissions of either sulfur dioxide or mercury released when burning the refined coal (excluding any dilution caused by materials combined or added during the production process), as compared to the emissions released when burning the feedstock coal or comparable coal predominantly available in the marketplace as of January 1, 2003.
(C) Steel industry fuel
(i) In general
The term "steel industry fuel" means a fuel which—
(I) is produced through a process of liquifying coal waste sludge and distributing it on coal, and
(II) is used as a feedstock for the manufacture of coke.
(ii) Coal waste sludge
The term "coal waste sludge" means the tar decanter sludge and related byproducts of the coking process, including such materials that have been stored in ground, in tanks and in lagoons, that have been treated as hazardous wastes under applicable Federal environmental rules absent liquefaction and processing with coal into a feedstock for the manufacture of coke.
(8) Qualified hydropower production
(A) In general
The term "qualified hydropower production" means—
(i) in the case of any hydroelectric dam which was placed in service on or before the date of the enactment of this paragraph, the incremental hydropower production for the taxable year, and
(ii) in the case of any nonhydroelectric dam described in subparagraph (C), the hydropower production from the facility for the taxable year.
(B) Determination of incremental hydropower production
(i) In general
For purposes of subparagraph (A), incremental hydropower production for any taxable year shall be equal to the percentage of average annual hydropower production at the facility attributable to the efficiency improvements or additions of capacity placed in service after the date of the enactment of this paragraph, determined by using the same water flow information used to determine an historic average annual hydropower production baseline for such facility. Such percentage and baseline shall be certified by the Federal Energy Regulatory Commission.
(ii) Operational changes disregarded
For purposes of clause (i), the determination of incremental hydropower production shall not be based on any operational changes at such facility not directly associated with the efficiency improvements or additions of capacity.
(C) Nonhydroelectric dam
For purposes of subparagraph (A), a facility is described in this subparagraph if—
(i) the hydroelectric project installed on the nonhydroelectric dam is licensed by the Federal Energy Regulatory Commission and meets all other applicable environmental, licensing, and regulatory requirements,
(ii) the nonhydroelectric dam was placed in service before the date of the enactment of this paragraph and operated for flood control, navigation, or water supply purposes and did not produce hydroelectric power on the date of the enactment of this paragraph, and
(iii) the hydroelectric project is operated so that the water surface elevation at any given location and time that would have occurred in the absence of the hydroelectric project is maintained, subject to any license requirements imposed under applicable law that change the water surface elevation for the purpose of improving environmental quality of the affected waterway.
The Secretary, in consultation with the Federal Energy Regulatory Commission, shall certify if a hydroelectric project licensed at a nonhydroelectric dam meets the criteria in clause (iii). Nothing in this section shall affect the standards under which the Federal Energy Regulatory Commission issues licenses for and regulates hydropower projects under part I of the Federal Power Act.
(9) Indian coal
(A) In general
The term "Indian coal" means coal which is produced from coal reserves which, on June 14, 2005—
(i) were owned by an Indian tribe, or
(ii) were held in trust by the United States for the benefit of an Indian tribe or its members.
(B) Indian tribe
For purposes of this paragraph, the term "Indian tribe" has the meaning given such term by section 7871(c)(3)(E)(ii).
(10) Marine and hydrokinetic renewable energy
(A) In general
The term "marine and hydrokinetic renewable energy" means energy derived from—
(i) waves, tides, and currents in oceans, estuaries, and tidal areas,
(ii) free flowing water in rivers, lakes, and streams,
(iii) free flowing water in an irrigation system, canal, or other man-made channel, including projects that utilize nonmechanical structures to accelerate the flow of water for electric power production purposes,
(iv) differentials in ocean temperature (ocean thermal energy conversion), or
(v) pressurized water used in a pipeline (or similar man-made water conveyance) which is operated—
(I) for the distribution of water for agricultural, municipal, or industrial consumption, and
(II) not primarily for the generation of electricity.
(B) Exceptions
Such term shall not include any energy which is derived from any source which utilizes a dam, diversionary structure (except as provided in subparagraph (A)(iii)), or impoundment for electric power production purposes.
(d) Qualified facilities
For purposes of this section:
(1) Wind facility
In the case of a facility using wind to produce electricity, the term "qualified facility" means any facility owned by the taxpayer which is originally placed in service after December 31, 1993, and the construction of which begins before January 1, 2025. Such term shall not include any facility with respect to which any qualified small wind energy property expenditure (as defined in subsection (d)(4) of section 25D) is taken into account in determining the credit under such section.
(2) Closed-loop biomass facility
(A) In general
In the case of a facility using closed-loop biomass to produce electricity, the term "qualified facility" means any facility—
(i) owned by the taxpayer which is originally placed in service after December 31, 1992, and the construction of which begins before January 1, 2025, or
(ii) owned by the taxpayer which before January 1, 2025, is originally placed in service and modified to use closed-loop biomass to co-fire with coal, with other biomass, or with both, but only if the modification is approved under the Biomass Power for Rural Development Programs or is part of a pilot project of the Commodity Credit Corporation as described in 65 Fed. Reg. 63052.
For purposes of clause (ii), a facility shall be treated as modified before January 1, 2025, if the construction of such modification begins before such date.
(B) Expansion of facility
Such term shall include a new unit placed in service after the date of the enactment of this subparagraph in connection with a facility described in subparagraph (A)(i), but only to the extent of the increased amount of electricity produced at the facility by reason of such new unit.
(C) Special rules
In the case of a qualified facility described in subparagraph (A)(ii)—
(i) the 10-year period referred to in subsection (a) shall be treated as beginning no earlier than the date of the enactment of this clause, and
(ii) if the owner of such facility is not the producer of the electricity, the person eligible for the credit allowable under subsection (a) shall be the lessee or the operator of such facility.
(3) Open-loop biomass facilities
(A) In general
In the case of a facility using open-loop biomass to produce electricity, the term "qualified facility" means any facility owned by the taxpayer which—
(i) in the case of a facility using agricultural livestock waste nutrients—
(I) is originally placed in service after the date of the enactment of this subclause and the construction of which begins before January 1, 2025, and
(II) the nameplate capacity rating of which is not less than 150 kilowatts, and
(ii) in the case of any other facility, the construction of which begins before January 1, 2025.
(B) Expansion of facility
Such term shall include a new unit placed in service after the date of the enactment of this subparagraph in connection with a facility described in subparagraph (A), but only to the extent of the increased amount of electricity produced at the facility by reason of such new unit.
(C) Credit eligibility
In the case of any facility described in subparagraph (A), if the owner of such facility is not the producer of the electricity, the person eligible for the credit allowable under subsection (a) shall be the lessee or the operator of such facility.
(4) Geothermal or solar energy facility
In the case of a facility using geothermal or solar energy to produce electricity, the term "qualified facility" means any facility owned by the taxpayer which is originally placed in service after the date of the enactment of this paragraph and the construction of which begins before January 1, 2025. Such term shall not include any property described in section 48(a)(3) the basis of which is taken into account by the taxpayer for purposes of determining the energy credit under section 48.
(5) Small irrigation power facility
In the case of a facility using small irrigation power to produce electricity, the term "qualified facility" means any facility owned by the taxpayer which is originally placed in service after the date of the enactment of this paragraph and before October 3, 2008.
(6) Landfill gas facilities
In the case of a facility producing electricity from gas derived from the biodegradation of municipal solid waste, the term "qualified facility" means any facility owned by the taxpayer which is originally placed in service after the date of the enactment of this paragraph and the construction of which begins before January 1, 2025.
(7) Trash facilities
In the case of a facility (other than a facility described in paragraph (6)) which uses municipal solid waste to produce electricity, the term "qualified facility" means any facility owned by the taxpayer which is originally placed in service after the date of the enactment of this paragraph and the construction of which begins before January 1, 2025. Such term shall include a new unit placed in service in connection with a facility placed in service on or before the date of the enactment of this paragraph, but only to the extent of the increased amount of electricity produced at the facility by reason of such new unit.
(8) Refined coal production facility
In the case of a facility that produces refined coal, the term "refined coal production facility" means—
(A) with respect to a facility producing steel industry fuel, any facility (or any modification to a facility) which is placed in service before January 1, 2010, and
(B) with respect to any other facility producing refined coal, any facility placed in service after the date of the enactment of the American Jobs Creation Act of 2004 and before January 1, 2012.
(9) Qualified hydropower facility
(A) In general
In the case of a facility producing qualified hydroelectric production described in subsection (c)(8), the term "qualified facility" means—
(i) in the case of any facility producing incremental hydropower production, such facility but only to the extent of its incremental hydropower production attributable to efficiency improvements or additions to capacity described in subsection (c)(8)(B) placed in service after the date of the enactment of this paragraph and before January 1, 2025, and
(ii) any other facility placed in service after the date of the enactment of this paragraph and the construction of which begins before January 1, 2025.
(B) Credit period
In the case of a qualified facility described in subparagraph (A), the 10-year period referred to in subsection (a) shall be treated as beginning on the date the efficiency improvements or additions to capacity are placed in service.
(C) Special rule
For purposes of subparagraph (A)(i), an efficiency improvement or addition to capacity shall be treated as placed in service before January 1, 2025, if the construction of such improvement or addition begins before such date.
(10) Indian coal production facility
The term "Indian coal production facility" means a facility that produces Indian coal.
(11) Marine and hydrokinetic renewable energy facilities
In the case of a facility producing electricity from marine and hydrokinetic renewable energy, the term "qualified facility" means any facility owned by the taxpayer—
(A) which has a nameplate capacity rating of at least 25 kilowatts, and
(B) which is originally placed in service on or after the date of the enactment of this paragraph and the construction of which begins before January 1, 2025.
(e) Definitions and special rules
For purposes of this section—
(1) Only production in the United States taken into account
Sales shall be taken into account under this section only with respect to electricity the production of which is within—
(A) the United States (within the meaning of section 638(1)), or
(B) a possession of the United States (within the meaning of section 638(2)).
(2) Computation of inflation adjustment factor and reference price
(A) In general
The Secretary shall, not later than April 1 of each calendar year, determine and publish in the Federal Register the inflation adjustment factor and the reference price for such calendar year in accordance with this paragraph.
(B) Inflation adjustment factor
The term "inflation adjustment factor" means, with respect to a calendar year, a fraction the numerator of which is the GDP implicit price deflator for the preceding calendar year and the denominator of which is the GDP implicit price deflator for the calendar year 1992. The term "GDP implicit price deflator" means the most recent revision of the implicit price deflator for the gross domestic product as computed and published by the Department of Commerce before March 15 of the calendar year.
(C) Reference price
The term "reference price" means, with respect to a calendar year, the Secretary's determination of the annual average contract price per kilowatt hour of electricity generated from the same qualified energy resource and sold in the previous year in the United States. For purposes of the preceding sentence, only contracts entered into after December 31, 1989, shall be taken into account.
(3) Production attributable to the taxpayer
In the case of a facility in which more than 1 person has an ownership interest, except to the extent provided in regulations prescribed by the Secretary, production from the facility shall be allocated among such persons in proportion to their respective ownership interests in the gross sales from such facility.
(4) Related persons
Persons shall be treated as related to each other if such persons would be treated as a single employer under the regulations prescribed under section 52(b). In the case of a corporation which is a member of an affiliated group of corporations filing a consolidated return, such corporation shall be treated as selling electricity to an unrelated person if such electricity is sold to such a person by another member of such group.
(5) Pass-thru in the case of estates and trusts
Under regulations prescribed by the Secretary, rules similar to the rules of subsection (d) of section 52 shall apply.
[(6) Repealed. Pub. L. 109–58, title XIII, §1301(f)(3), Aug. 8, 2005, 119 Stat. 990 ]
(7) Credit not to apply to electricity sold to utilities under certain contracts
(A) In general
The credit determined under subsection (a) shall not apply to electricity—
(i) produced at a qualified facility described in subsection (d)(1) which is originally placed in service after June 30, 1999, and
(ii) sold to a utility pursuant to a contract originally entered into before January 1, 1987 (whether or not amended or restated after that date).
(B) Exception
Subparagraph (A) shall not apply if—
(i) the prices for energy and capacity from such facility are established pursuant to an amendment to the contract referred to in subparagraph (A)(ii),
(ii) such amendment provides that the prices set forth in the contract which exceed avoided cost prices determined at the time of delivery shall apply only to annual quantities of electricity (prorated for partial years) which do not exceed the greater of—
(I) the average annual quantity of electricity sold to the utility under the contract during calendar years 1994, 1995, 1996, 1997, and 1998, or
(II) the estimate of the annual electricity production set forth in the contract, or, if there is no such estimate, the greatest annual quantity of electricity sold to the utility under the contract in any of the calendar years 1996, 1997, or 1998, and
(iii) such amendment provides that energy and capacity in excess of the limitation in clause (ii) may be—
(I) sold to the utility only at prices that do not exceed avoided cost prices determined at the time of delivery, or
(II) sold to a third party subject to a mutually agreed upon advance notice to the utility.
For purposes of this subparagraph, avoided cost prices shall be determined as provided for in 18 CFR 292.304(d)(1) or any successor regulation.
(8) Refined coal production facilities
(A) Determination of credit amount
In the case of a producer of refined coal, the credit determined under this section (without regard to this paragraph) for any taxable year shall be increased by an amount equal to $4.375 per ton of qualified refined coal—
(i) produced by the taxpayer at a refined coal production facility during the 10-year period beginning on the date the facility was originally placed in service, and
(ii) sold by the taxpayer—
(I) to an unrelated person, and
(II) during such 10-year period and such taxable year.
(B) Phaseout of credit
The amount of the increase determined under subparagraph (A) shall be reduced by an amount which bears the same ratio to the amount of the increase (determined without regard to this subparagraph) as—
(i) the amount by which the reference price of fuel used as a feedstock (within the meaning of subsection (c)(7)(A)) for the calendar year in which the sale occurs exceeds an amount equal to 1.7 multiplied by the reference price for such fuel in 2002, bears to
(ii) $8.75.
(C) Application of rules
Rules similar to the rules of the subsection (b)(3) and paragraphs (1) through (5) of this subsection shall apply for purposes of determining the amount of any increase under this paragraph.
(D) Special rule for steel industry fuel
(i) In general
In the case of a taxpayer who produces steel industry fuel—
(I) this paragraph shall be applied separately with respect to steel industry fuel and other refined coal, and
(II) in applying this paragraph to steel industry fuel, the modifications in clause (ii) shall apply.
(ii) Modifications
(I) Credit amount
Subparagraph (A) shall be applied by substituting "$2 per barrel-of-oil equivalent" for "$4.375 per ton".
(II) Credit period
In lieu of the 10-year period referred to in clauses (i) and (ii)(II) of subparagraph (A), the credit period shall be the period beginning on the later of the date such facility was originally placed in service, the date the modifications described in clause (iii) were placed in service, or October 1, 2008, and ending on the later of December 31, 2009, or the date which is 1 year after the date such facility or the modifications described in clause (iii) were placed in service.
(III) No phaseout
Subparagraph (B) shall not apply.
(iii) Modifications
The modifications described in this clause are modifications to an existing facility which allow such facility to produce steel industry fuel.
(iv) Barrel-of-oil equivalent
For purposes of this subparagraph, a barrel-of-oil equivalent is the amount of steel industry fuel that has a Btu content of 5,800,000 Btus.
(9) Coordination with credit for producing fuel from a nonconventional source
(A) In general
The term "qualified facility" shall not include any facility which produces electricity from gas derived from the biodegradation of municipal solid waste if such biodegradation occurred in a facility (within the meaning of section 45K) the production from which is allowed as a credit under section 45K for the taxable year or any prior taxable year.
(B) Refined coal facilities
(i) In general
The term "refined coal production facility" shall not include any facility the production from which is allowed as a credit under section 45K for the taxable year or any prior taxable year (or under section 29,3 as in effect on the day before the date of enactment of the Energy Tax Incentives Act of 2005, for any prior taxable year).
(ii) Exception for steel industry coal
In the case of a facility producing steel industry fuel, clause (i) shall not apply to so much of the refined coal produced at such facility as is steel industry fuel.
(10) Indian coal production facilities
(A) Determination of credit amount
In the case of a producer of Indian coal, the credit determined under this section (without regard to this paragraph) for any taxable year shall be increased by an amount equal to the applicable dollar amount per ton of Indian coal—
(i) produced by the taxpayer at an Indian coal production facility during the 16-year period beginning on January 1, 2006, and
(ii) sold by the taxpayer—
(I) to an unrelated person (either directly by the taxpayer or after sale or transfer to one or more related persons), and
(II) during such 16-year period and such taxable year.
(B) Applicable dollar amount
(i) In general
The term "applicable dollar amount" for any taxable year beginning in a calendar year means—
(I) $1.50 in the case of calendar years 2006 through 2009, and
(II) $2.00 in the case of calendar years beginning after 2009.
(ii) Inflation adjustment
In the case of any calendar year after 2006, each of the dollar amounts under clause (i) shall be equal to the product of such dollar amount and the inflation adjustment factor determined under paragraph (2)(B) for the calendar year, except that such paragraph shall be applied by substituting "2005" for "1992".
(C) Application of rules
Rules similar to the rules of the subsection (b)(3) and paragraphs (1), (3), (4), and (5) of this subsection shall apply for purposes of determining the amount of any increase under this paragraph.
(11) Allocation of credit to patrons of agricultural cooperative
(A) Election to allocate
(i) In general
In the case of an eligible cooperative organization, any portion of the credit determined under subsection (a) for the taxable year may, at the election of the organization, be apportioned among patrons of the organization on the basis of the amount of business done by the patrons during the taxable year.
(ii) Form and effect of election
An election under clause (i) for any taxable year shall be made on a timely filed return for such year. Such election, once made, shall be irrevocable for such taxable year. Such election shall not take effect unless the organization designates the apportionment as such in a written notice mailed to its patrons during the payment period described in section 1382(d).
(B) Treatment of organizations and patrons
The amount of the credit apportioned to any patrons under subparagraph (A)—
(i) shall not be included in the amount determined under subsection (a) with respect to the organization for the taxable year, and
(ii) shall be included in the amount determined under subsection (a) for the first taxable year of each patron ending on or after the last day of the payment period (as defined in section 1382(d)) for the taxable year of the organization or, if earlier, for the taxable year of each patron ending on or after the date on which the patron receives notice from the cooperative of the apportionment.
(C) Special rules for decrease in credits for taxable year
If the amount of the credit of a cooperative organization determined under subsection (a) for a taxable year is less than the amount of such credit shown on the return of the cooperative organization for such year, an amount equal to the excess of—
(i) such reduction, over
(ii) the amount not apportioned to such patrons under subparagraph (A) for the taxable year,
shall be treated as an increase in tax imposed by this chapter on the organization. Such increase shall not be treated as tax imposed by this chapter for purposes of determining the amount of any credit under this chapter.
(D) Eligible cooperative defined
For purposes of this section the term "eligible cooperative" means a cooperative organization described in section 1381(a) which is owned more than 50 percent by agricultural producers or by entities owned by agricultural producers. For this purpose an entity owned by an agricultural producer is one that is more than 50 percent owned by agricultural producers.
(12) Coordination with energy credit for qualified biogas property
The term "qualified facility" shall not include any facility which produces electricity from gas produced by qualified biogas property (as defined in section 48(c)(7)) if a credit is allowed under section 48 with respect to such property for the taxable year or any prior taxable year.
(13) Special rule for electricity used at a qualified clean hydrogen production facility
Electricity produced by the taxpayer shall be treated as sold by such taxpayer to an unrelated person during the taxable year if—
(A) such electricity is used during such taxable year by the taxpayer or a person related to the taxpayer at a qualified clean hydrogen production facility (as defined in section 45V(c)(3)) to produce qualified clean hydrogen (as defined in section 45V(c)(2)), and
(B) such use and production is verified (in such form or manner as the Secretary may prescribe) by an unrelated third party.
(Added
Inflation Adjusted Items for Certain Years
For inflation adjustment of certain items in this section, see Internal Revenue Notices listed in a table below.
Editorial Notes
References in Text
The date of the enactment of this paragraph, the date of the enactment of this clause, the date of the enactment of this subclause, and the date of the enactment of the American Jobs Creation Act of 2004, referred to in subsecs. (b)(4)(B)(ii) and (d)(2)(C)(i), (3)(A)(i), (4) to (8), is the date of enactment of
The date of the enactment of this clause and the date of the enactment of this paragraph, referred to in subsecs. (b)(4)(B)(iii), (c)(8), and (d)(9)(A), are the date of enactment of
The Federal Power Act, referred to in subsec. (c)(8)(C), is act June 10, 1920, ch. 285,
The date of the enactment of this subparagraph and the date of the enactment of this paragraph, referred to in subsec. (d)(2)(B), (3)(B), (11), are the date of enactment of
Section 29, referred to in subsec. (e)(9)(B)(i), was redesignated
The date of enactment of the Energy Tax Incentives Act of 2005, referred to in subsec. (e)(9)(B)(i), is the date of enactment of title XIII of
Prior Provisions
A prior section 45 was renumbered
Amendments
2022—Subsec. (a)(1).
Subsec. (b)(2).
Subsec. (b)(3).
Subsec. (b)(4)(A).
Subsec. (b)(5).
Subsec. (b)(6) to (8).
Subsec. (b)(9).
Subsec. (b)(10), (11).
Subsec. (b)(12).
Subsec. (c)(10)(A)(v).
Subsec. (d)(1).
Subsec. (d)(2)(A).
Subsec. (d)(3)(A)(i)(I), (ii).
Subsec. (d)(4).
"(A) in the case of a facility using solar energy, is placed in service before January 1, 2006, or
"(B) in the case of a facility using geothermal energy, the construction of which begins before January 1, 2022".
Concluding provisions following former subpar. (B) were joined with the preceding paragraph to reflect the probable intent of Congress.
Subsec. (d)(6), (7).
Subsec. (d)(9)(A)(i), (ii), (C).
Subsec. (d)(11)(A).
Subsec. (d)(11)(B).
Subsec. (e)(12).
Subsec. (e)(13).
2020—Subsec. (b)(5)(D).
Subsec. (d)(1), (2)(A), (3)(A), (4)(B), (6), (7), (9), (11)(B).
Subsec. (e)(10)(A).
2019—Subsec. (b)(5)(D).
Subsec. (d)(1).
Subsec. (d)(2)(A), (3)(A), (4)(B), (6), (7), (9), (11)(B).
Subsec. (e)(10)(A).
2018—Subsec. (c)(6).
Subsec. (c)(7)(A)(i)(II).
Subsec. (c)(7)(A)(i)(III).
Subsec. (d).
Subsec. (e)(10)(A)(i), (ii)(II).
2015—Subsec. (b)(5).
Subsec. (d)(1).
Subsec. (d)(2)(A).
Subsec. (d)(3)(A)(i)(I), (ii).
Subsec. (d)(4)(B).
Subsec. (d)(6).
Subsec. (d)(7).
Subsec. (d)(9)(A)(i), (ii), (C).
Subsec. (d)(10).
Subsec. (d)(11)(B).
Subsec. (e)(10)(A)(i).
Subsec. (e)(10)(A)(ii)(I).
Subsec. (e)(10)(A)(ii)(II).
Subsec. (e)(10)(D).
2014—Subsec. (b)(2).
Subsec. (d).
Subsec. (e)(10)(A)(i), (ii)(II).
2013—Subsec. (c)(6).
Subsec. (d)(1).
Subsec. (d)(2)(A).
Subsec. (d)(2)(A)(i).
Subsec. (d)(3)(A)(i)(I).
Subsec. (d)(3)(A)(ii).
Subsec. (d)(4).
Subsec. (d)(6).
Subsec. (d)(7).
Subsec. (d)(9).
Subsec. (d)(9)(B).
Subsec. (d)(11)(B).
Subsec. (e)(10)(A)(i), (ii)(II).
2010—Subsec. (d)(8)(B).
2009—Subsec. (d)(1).
Subsec. (d)(2)(A)(i), (ii), (3)(A)(i)(I), (ii), (4).
Subsec. (d)(5).
Subsec. (d)(6), (7), (9)(A), (B).
Subsec. (d)(11)(B).
2008—Subsec. (b)(2).
Subsec. (b)(4)(A).
Subsec. (c)(1)(I).
Subsec. (c)(7)(A).
Subsec. (c)(7)(A)(i).
Subsec. (c)(7)(B).
Subsec. (c)(7)(C).
Subsec. (c)(8)(C).
Subsec. (c)(10).
Subsec. (d)(1).
Subsec. (d)(2)(A).
Subsec. (d)(2)(B), (C).
Subsec. (d)(3)(A).
Subsec. (d)(3)(B), (C).
Subsec. (d)(4).
Subsec. (d)(5).
Subsec. (d)(6).
Subsec. (d)(7).
Subsec. (d)(8).
Subsec. (d)(9)(A), (B).
Subsec. (d)(11).
Subsec. (e)(8)(D).
Subsec. (e)(9)(B).
2007—Subsec. (c)(3)(A)(ii).
Subsec. (d)(2)(B)(i) to (iii).
Subsec. (e)(7)(A)(i).
2006—Subsec. (d)(1) to (7), (9).
2005—Subsec. (b)(4)(A).
Subsec. (b)(4)(B)(i).
Subsec. (b)(4)(B)(ii).
Subsec. (b)(4)(B)(iii).
Subsec. (c).
Subsec. (c)(1)(H).
Subsec. (c)(3)(A)(ii).
Subsec. (c)(7)(A)(i).
Subsec. (c)(8).
Subsec. (c)(9).
Subsec. (d)(1) to (3).
Subsec. (d)(4).
Subsec. (d)(5), (6).
Subsec. (d)(7).
Subsec. (d)(8).
Subsec. (d)(9).
Subsec. (d)(10).
Subsec. (e)(6).
Subsec. (e)(8)(C).
Subsec. (e)(9).
Subsec. (e)(9)(B).
Subsec. (e)(10).
Subsec. (e)(11).
2004—
Subsec. (b)(2).
Subsec. (b)(3).
Subsec. (b)(4).
Subsec. (c).
Subsec. (c)(3).
Subsec. (d).
Subsec. (e).
Subsec. (e)(7)(A)(i).
Subsec. (e)(8).
Subsec. (e)(9).
2002—Subsec. (c)(3).
2000—Subsec. (d)(7)(A)(i).
1999—Subsec. (c)(1)(C).
Subsec. (c)(3).
Subsec. (c)(4).
Subsec. (d)(6), (7).
Statutory Notes and Related Subsidiaries
Effective Date of 2022 Amendment
"(1)
"(2)
"(3)
"(1)
"(2)
"(3)
Effective Date of 2020 Amendment
Effective Date of 2019 Amendment
Effective Date of 2018 Amendment
Effective Date of 2015 Amendment
"(1)
"(2)
Amendment by section 186(d)(2) of
Effective Date of 2014 Amendment
Effective Date of 2013 Amendment
"(1)
"(2)
"(3)
Effective Date of 2010 Amendment
Effective Date of 2009 Amendment
"(1)
"(2)
Effective Date of 2008 Amendment
"(1)
"(2)
"(3)
"(4)
Amendment by section 106(c)(3)(B) of
Effective Date of 2007 Amendment
Amendment by section 7(b) of
Effective Date of 2005 Amendments
Amendment by section 402(b) of
Amendment by section 403(t) of
"(1)
"(2)
Amendment by section 1322(a)(3)(C) of
Effective Date of 2004 Amendments
"(1)
"(2)
"(3)
"(4)
"(5)
Effective Date of 2002 Amendment
Effective Date of 1999 Amendment
Effective Date
Section applicable to taxable years ending after Dec. 31, 1992, see section 1914(e) of
Inflation Adjusted Items for Certain Years
Provisions relating to inflation adjustment of items in this section for certain years were contained in the following:
2023—Internal Revenue Notice 2023–51.
2022–Internal Revenue Notice 2022–20.
2021—Internal Revenue Notice 2021–32.
2020—Internal Revenue Notice 2020–38.
2019—Internal Revenue Notice 2019–41, Internal Revenue Notice 2020–9.
2018—Internal Revenue Notice 2018–50, Internal Revenue Notice 2020–9.
2017—Internal Revenue Notice 2017–33,Internal Revenue Notice 2018–36.
2016—Internal Revenue Notice 2016–34.
2015—Internal Revenue Notice 2015–32, Internal Revenue Notice 2016–11.
2014—Internal Revenue Notice 2014–36.
2013—Internal Revenue Notice 2013–33.
2012—Internal Revenue Notice 2012–35.
2011—Internal Revenue Notice 2011–40.
2010—Internal Revenue Notice 2010–37.
2009—Internal Revenue Notice 2009–40.
2008—Internal Revenue Notice 2008–48.
2007—Internal Revenue Notice 2007–40.
2006—Internal Revenue Notice 2006–51.
2005—Internal Revenue Notice 2005–37.
2004—Internal Revenue Notice 2004–29.
2003—Internal Revenue Notice 2003–29.
2002—Internal Revenue Notice 2002–39.
2001—Internal Revenue Notice 2001–33.
2000—Internal Revenue Notice 2000–52.
1999—Internal Revenue Notice 99–26.
1998—Internal Revenue Notice 98–27.
1997—Internal Revenue Notice 97–30.
1996—Internal Revenue Notice 96–25.
1 So in original. Probably should be "$5,000".
2 So in original. Probably should be "part".
3 See References in Text note below.
§45A. Indian employment credit
(a) Amount of credit
For purposes of section 38, the amount of the Indian employment credit determined under this section with respect to any employer for any taxable year is an amount equal to 20 percent of the excess (if any) of—
(1) the sum of—
(A) the qualified wages paid or incurred during such taxable year, plus
(B) qualified employee health insurance costs paid or incurred during such taxable year, over
(2) the sum of the qualified wages and qualified employee health insurance costs (determined as if this section were in effect) which were paid or incurred by the employer (or any predecessor) during calendar year 1993.
(b) Qualified wages; qualified employee health insurance costs
For purposes of this section—
(1) Qualified wages
(A) In general
The term "qualified wages" means any wages paid or incurred by an employer for services performed by an employee while such employee is a qualified employee.
(B) Coordination with work opportunity credit
The term "qualified wages" shall not include wages attributable to service rendered during the 1-year period beginning with the day the individual begins work for the employer if any portion of such wages is taken into account in determining the credit under section 51. If any portion of wages are taken into account under subsection (e)(1)(A) of section 51, the preceding sentence shall be applied by substituting "2-year period" for "1-year period".
(2) Qualified employee health insurance costs
(A) In general
The term "qualified employee health insurance costs" means any amount paid or incurred by an employer for health insurance to the extent such amount is attributable to coverage provided to any employee while such employee is a qualified employee.
(B) Exception for amounts paid under salary reduction arrangements
No amount paid or incurred for health insurance pursuant to a salary reduction arrangement shall be taken into account under subparagraph (A).
(3) Limitation
The aggregate amount of qualified wages and qualified employee health insurance costs taken into account with respect to any employee for any taxable year (and for the base period under subsection (a)(2)) shall not exceed $20,000.
(c) Qualified employee
For purposes of this section—
(1) In general
Except as otherwise provided in this subsection, the term "qualified employee" means, with respect to any period, any employee of an employer if—
(A) the employee is an enrolled member of an Indian tribe or the spouse of an enrolled member of an Indian tribe,
(B) substantially all of the services performed during such period by such employee for such employer are performed within an Indian reservation, and
(C) the principal place of abode of such employee while performing such services is on or near the reservation in which the services are performed.
(2) Individuals receiving wages in excess of $30,000 not eligible
An employee shall not be treated as a qualified employee for any taxable year of the employer if the total amount of the wages paid or incurred by such employer to such employee during such taxable year (whether or not for services within an Indian reservation) exceeds the amount determined at an annual rate of $30,000.
(3) Inflation adjustment
The Secretary shall adjust the $30,000 amount under paragraph (2) for years beginning after 1994 at the same time and in the same manner as under section 415(d), except that the base period taken into account for purposes of such adjustment shall be the calendar quarter beginning October 1, 1993.
(4) Employment must be trade or business employment
An employee shall be treated as a qualified employee for any taxable year of the employer only if more than 50 percent of the wages paid or incurred by the employer to such employee during such taxable year are for services performed in a trade or business of the employer. Any determination as to whether the preceding sentence applies with respect to any employee for any taxable year shall be made without regard to subsection (e)(2).
(5) Certain employees not eligible
The term "qualified employee" shall not include—
(A) any individual described in subparagraph (A), (B), or (C) of section 51(i)(1),
(B) any 5-percent owner (as defined in section 416(i)(1)(B)), and
(C) any individual if the services performed by such individual for the employer involve the conduct of class I, II, or III gaming as defined in section 4 of the Indian Gaming Regulatory Act (
(6) Indian tribe defined
The term "Indian tribe" means any Indian tribe, band, nation, pueblo, or other organized group or community, including any Alaska Native village, or regional or village corporation, as defined in, or established pursuant to, the Alaska Native Claims Settlement Act (
(7) Indian reservation defined
The term "Indian reservation" has the meaning given such term by section 168(j)(6).
(d) Early termination of employment by employer
(1) In general
If the employment of any employee is terminated by the taxpayer before the day 1 year after the day on which such employee began work for the employer—
(A) no wages (or qualified employee health insurance costs) with respect to such employee shall be taken into account under subsection (a) for the taxable year in which such employment is terminated, and
(B) the tax under this chapter for the taxable year in which such employment is terminated shall be increased by the aggregate credits (if any) allowed under section 38(a) for prior taxable years by reason of wages (or qualified employee health insurance costs) taken into account with respect to such employee.
(2) Carrybacks and carryovers adjusted
In the case of any termination of employment to which paragraph (1) applies, the carrybacks and carryovers under section 39 shall be properly adjusted.
(3) Subsection not to apply in certain cases
(A) In general
Paragraph (1) shall not apply to—
(i) a termination of employment of an employee who voluntarily leaves the employment of the taxpayer,
(ii) a termination of employment of an individual who before the close of the period referred to in paragraph (1) becomes disabled to perform the services of such employment unless such disability is removed before the close of such period and the taxpayer fails to offer reemployment to such individual, or
(iii) a termination of employment of an individual if it is determined under the applicable State unemployment compensation law that the termination was due to the misconduct of such individual.
(B) Changes in form of business
For purposes of paragraph (1), the employment relationship between the taxpayer and an employee shall not be treated as terminated—
(i) by a transaction to which section 381(a) applies if the employee continues to be employed by the acquiring corporation, or
(ii) by reason of a mere change in the form of conducting the trade or business of the taxpayer if the employee continues to be employed in such trade or business and the taxpayer retains a substantial interest in such trade or business.
(4) Special rule
Any increase in tax under paragraph (1) shall not be treated as a tax imposed by this chapter for purposes of—
(A) determining the amount of any credit allowable under this chapter, and
(B) determining the amount of the tax imposed by section 55.
(e) Other definitions and special rules
For purposes of this section—
(1) Wages
The term "wages" has the same meaning given to such term in section 51.
(2) Controlled groups
(A) All employers treated as a single employer under section (a) or (b) of section 52 shall be treated as a single employer for purposes of this section.
(B) The credit (if any) determined under this section with respect to each such employer shall be its proportionate share of the wages and qualified employee health insurance costs giving rise to such credit.
(3) Certain other rules made applicable
Rules similar to the rules of section 51(k) and subsections (c), (d), and (e) of section 52 shall apply.
(4) Coordination with nonrevenue laws
Any reference in this section to a provision not contained in this title shall be treated for purposes of this section as a reference to such provision as in effect on the date of the enactment of this paragraph.
(5) Special rule for short taxable years
For any taxable year having less than 12 months, the amount determined under subsection (a)(2) shall be multiplied by a fraction, the numerator of which is the number of days in the taxable year and the denominator of which is 365.
(f) Termination
This section shall not apply to taxable years beginning after December 31, 2021.
(Added
Inflation Adjusted Items for Certain Years
For inflation adjustment of certain items in this section, see Internal Revenue Notices listed in a table under
Editorial Notes
References in Text
The Alaska Native Claims Settlement Act, referred to in subsec. (c)(6), is
The date of the enactment of this paragraph, referred to in subsec. (e)(4), is the date of enactment of
Amendments
2020—Subsec. (f).
2019—Subsec. (f).
2018—Subsec. (f).
2015—Subsec. (f).
2014—Subsec. (b)(1)(B).
Subsec. (f).
2013—Subsec. (f).
2010—Subsec. (f).
2008—Subsec. (f).
2006—Subsec. (f).
2004—Subsec. (c)(3).
Subsec. (f).
2002—Subsec. (f).
1998—Subsec. (b)(1)(B).
1996—Subsec. (b)(1)(B).
Statutory Notes and Related Subsidiaries
Effective Date of 2020 Amendment
Effective Date of 2019 Amendment
Effective Date of 2018 Amendment
Effective Date of 2015 Amendment
Effective Date of 2014 Amendment
Effective Date of 2013 Amendment
Effective Date of 2010 Amendment
Effective Date of 2008 Amendment
Effective Date of 2006 Amendment
Effective Date of 2004 Amendment
Effective Date of 1996 Amendment
Amendment by
Effective Date
Section applicable to wages paid or incurred after Dec. 31, 1993, see section 13322(f) of
§45B. Credit for portion of employer social security taxes paid with respect to employee cash tips
(a) General rule
For purposes of section 38, the employer social security credit determined under this section for the taxable year is an amount equal to the excess employer social security tax paid or incurred by the taxpayer during the taxable year.
(b) Excess employer social security tax
For purposes of this section—
(1) In general
The term "excess employer social security tax" means any tax paid by an employer under section 3111 with respect to tips received by an employee during any month, to the extent such tips—
(A) are deemed to have been paid by the employer to the employee pursuant to section 3121(q) (without regard to whether such tips are reported under section 6053), and
(B) exceed the amount by which the wages (excluding tips) paid by the employer to the employee during such month are less than the total amount which would be payable (with respect to such employment) at the minimum wage rate applicable to such individual under section 6(a)(1) of the Fair Labor Standards Act of 1938 (as in effect on January 1, 2007, and determined without regard to section 3(m) of such Act).
(2) Only tips received for food or beverages taken into account
In applying paragraph (1), there shall be taken into account only tips received from customers in connection with the providing, delivering, or serving of food or beverages for consumption if the tipping of employees delivering or serving food or beverages by customers is customary.
(c) Denial of double benefit
No deduction shall be allowed under this chapter for any amount taken into account in determining the credit under this section.
(d) Election not to claim credit
This section shall not apply to a taxpayer for any taxable year if such taxpayer elects to have this section not apply for such taxable year.
(Added
Editorial Notes
References in Text
Sections 3(m) and 6(a)(1) of the Fair Labor Standards Act of 1938, referred to in subsec. (b)(1)(B), are classified to sections 203(m) and 206(a)(1), respectively, of Title 29, Labor.
Amendments
2007—Subsec. (b)(1)(B).
1996—Subsec. (b)(1)(A).
Subsec. (b)(2).
Statutory Notes and Related Subsidiaries
Effective Date of 2007 Amendment
Effective Date of 1996 Amendment
Effective Date
Section applicable with respect to taxes paid after Dec. 31, 1993, with respect to services performed before, on, or after such date, see section 13443(d) of
§45C. Clinical testing expenses for certain drugs for rare diseases or conditions
(a) General rule
For purposes of section 38, the credit determined under this section for the taxable year is an amount equal to 25 percent of the qualified clinical testing expenses for the taxable year.
(b) Qualified clinical testing expenses
For purposes of this section—
(1) Qualified clinical testing expenses
(A) In general
Except as otherwise provided in this paragraph, the term "qualified clinical testing expenses" means the amounts which are paid or incurred by the taxpayer during the taxable year which would be described in subsection (b) of section 41 if such subsection were applied with the modifications set forth in subparagraph (B).
(B) Modifications
For purposes of subparagraph (A), subsection (b) of section 41 shall be applied—
(i) by substituting "clinical testing" for "qualified research" each place it appears in paragraphs (2) and (3) of such subsection, and
(ii) by substituting "100 percent" for "65 percent" in paragraph (3)(A) of such subsection.
(C) Exclusion for amounts funded by grants, etc.
The term "qualified clinical testing expenses" shall not include any amount to the extent such amount is funded by any grant, contract, or otherwise by another person (or any governmental entity).
(2) Clinical testing
(A) In general
The term "clinical testing" means any human clinical testing—
(i) which is carried out under an exemption for a drug being tested for a rare disease or condition under section 505(i) of the Federal Food, Drug, and Cosmetic Act (or regulations issued under such section),
(ii) which occurs—
(I) after the date such drug is designated under section 526 of such Act, and
(II) before the date on which an application with respect to such drug is approved under section 505(b) of such Act or, if the drug is a biological product, before the date on which a license for such drug is issued under section 351 of the Public Health Service Act, and
(iii) which is conducted by or on behalf of the taxpayer to whom the designation under such section 526 applies.
(B) Testing must be related to use for rare disease or condition
Human clinical testing shall be taken into account under subparagraph (A) only to the extent such testing is related to the use of a drug for the rare disease or condition for which it was designated under section 526 of the Federal Food, Drug, and Cosmetic Act.
(c) Coordination with credit for increasing research expenditures
(1) In general
Except as provided in paragraph (2), any qualified clinical testing expenses for a taxable year to which an election under this section applies shall not be taken into account for purposes of determining the credit allowable under section 41 for such taxable year.
(2) Expenses included in determining base period research expenses
Any qualified clinical testing expenses for any taxable year which are qualified research expenses (within the meaning of section 41(b)) shall be taken into account in determining base period research expenses for purposes of applying section 41 to subsequent taxable years.
(d) Definition and special rules
(1) Rare disease or condition
For purposes of this section, the term "rare disease or condition" means any disease or condition which—
(A) affects less than 200,000 persons in the United States, or
(B) affects more than 200,000 persons in the United States but for which there is no reasonable expectation that the cost of developing and making available in the United States a drug for such disease or condition will be recovered from sales in the United States of such drug.
Determinations under the preceding sentence with respect to any drug shall be made on the basis of the facts and circumstances as of the date such drug is designated under section 526 of the Federal Food, Drug, and Cosmetic Act.
(2) Special limitations on foreign testing
No credit shall be allowed under this section with respect to any clinical testing conducted outside the United States unless—
(A) such testing is conducted outside the United States because there is an insufficient testing population in the United States, and
(B) such testing is conducted by a United States person or by any other person who is not related to the taxpayer to whom the designation under section 526 of the Federal Food, Drug, and Cosmetic Act applies.
(3) Certain rules made applicable
Rules similar to the rules of paragraphs (1) and (2) of section 41(f) shall apply for purposes of this section.
(4) Election
This section shall apply to any taxpayer for any taxable year only if such taxpayer elects (at such time and in such manner as the Secretary may by regulations prescribe) to have this section apply for such taxable year.
(Added
Editorial Notes
References in Text
Sections 505(b), (i) and 526 of the Federal Food, Drug, and Cosmetic Act, referred to in subsecs. (b)(2)(A) and (d)(1), (2)(B), are classified to sections 355(b), (i) and 360bb, respectively, of Title 21, Food and Drugs.
Section 351 of the Public Health Service Act, referred to in subsec. (b)(2)(A)(ii)(II), is classified to
Amendments
2018—Subsec. (b)(2)(A)(ii)(II).
Subsec. (d)(2).
2017—Subsec. (a).
2015—Subsec. (b)(1)(D).
2014—Subsec. (b)(1)(D).
2013—Subsec. (b)(1)(D).
2010—Subsec. (b)(1)(D).
2008—Subsec. (b)(1)(D).
2006—Subsec. (b)(1)(D).
2004—Subsec. (b)(1)(D).
1999—Subsec. (b)(1)(D).
1998—Subsec. (b)(1)(D).
1997—Subsec. (b)(1)(D).
Subsec. (b)(2)(A)(ii)(II).
Subsec. (e).
"(e)
"(1) after December 31, 1994, and before July 1, 1996, or
"(2) after May 31, 1997."
1996—
Subsec. (a).
Subsec. (b)(1)(D).
Subsec. (d)(2) to (5).
"(A) the regular tax (reduced by the sum of the credits allowable under subpart A and section 27), over
"(B) the tentative minimum tax for the taxable year."
Subsec. (e).
1993—Subsec. (b)(1)(D).
Subsec. (e).
1991—Subsec. (b)(1)(D).
Subsec. (e).
1990—Subsec. (b)(1)(D).
Subsec. (e).
1989—Subsec. (b)(1)(D).
1988—Subsec. (b)(1)(D).
Subsec. (b)(2)(A)(ii)(II).
1986—Subsec. (b)(1).
Subsec. (b)(2)(A)(ii)(I).
Subsec. (b)(2)(A)(ii)(II).
Subsec. (c).
Subsec. (d)(1).
Subsec. (d)(2).
Subsec. (d)(3)(B).
Subsec. (d)(4).
Subsec. (e).
1984—
Subsec. (b)(1)(A), (B), (D).
Subsec. (c)(1).
Subsec. (c)(2).
Subsec. (d)(2).
Subsec. (d)(4).
Statutory Notes and Related Subsidiaries
Effective Date of 2017 Amendment
Effective Date of 2015 Amendment
Amendment by
Effective Date of 2014 Amendment
Amendment by
Effective Date of 2013 Amendment
Amendment by
Effective Date of 2010 Amendment
Amendment by
Effective Date of 2008 Amendment
Amendment by
Effective Date of 2006 Amendment
Amendment by
Effective Date of 2004 Amendment
Amendment by
Effective Date of 1999 Amendment
Amendment by
Effective Date of 1998 Amendment
Amendment by
Effective Date of 1997 Amendment
Amendment by section 601(b)(2) of
Effective Date of 1996 Amendment
Amendment by section 1204(e) of
Amendment by section 1205(a)(1), (b), (d)(1), (2) of
Effective Date of 1993 Amendment
Effective Date of 1991 Amendment
Effective Date of 1990 Amendment
Effective Date of 1988 Amendment
Amendment by section 1018(q)(1) of
Amendment by section 4008(c)(1) of
Effective Date of 1986 Amendment
Amendment by section 231(d)(3)(A) of
Amendment by section 701(c)(2) of
Amendment by section 1275(c)(4) of
Effective Date of 1984 Amendment
Amendment by section 474(g) of
Amendment by section 612(e)(1) of
Effective Date
Savings Provision
For provisions that nothing in amendment by section 401(d)(1)(D)(iii) of
Applicability of Certain Amendments by Public Law 99–514 in Relation to Treaty Obligations of United States
For applicability of amendment by section 701(c)(2) of
Plan Amendments Not Required Until January 1, 1989
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101–1147 and 1171–1177] or title XVIII [§§1800–1899A] of
§45D. New markets tax credit
(a) Allowance of credit
(1) In general
For purposes of section 38, in the case of a taxpayer who holds a qualified equity investment on a credit allowance date of such investment which occurs during the taxable year, the new markets tax credit determined under this section for such taxable year is an amount equal to the applicable percentage of the amount paid to the qualified community development entity for such investment at its original issue.
(2) Applicable percentage
For purposes of paragraph (1), the applicable percentage is—
(A) 5 percent with respect to the first 3 credit allowance dates, and
(B) 6 percent with respect to the remainder of the credit allowance dates.
(3) Credit allowance date
For purposes of paragraph (1), the term "credit allowance date" means, with respect to any qualified equity investment—
(A) the date on which such investment is initially made, and
(B) each of the 6 anniversary dates of such date thereafter.
(b) Qualified equity investment
For purposes of this section—
(1) In general
The term "qualified equity investment" means any equity investment in a qualified community development entity if—
(A) such investment is acquired by the taxpayer at its original issue (directly or through an underwriter) solely in exchange for cash,
(B) substantially all of such cash is used by the qualified community development entity to make qualified low-income community investments, and
(C) such investment is designated for purposes of this section by the qualified community development entity.
Such term shall not include any equity investment issued by a qualified community development entity more than 5 years after the date that such entity receives an allocation under subsection (f). Any allocation not used within such 5-year period may be reallocated by the Secretary under subsection (f).
(2) Limitation
The maximum amount of equity investments issued by a qualified community development entity which may be designated under paragraph (1)(C) by such entity shall not exceed the portion of the limitation amount allocated under subsection (f) to such entity.
(3) Safe harbor for determining use of cash
The requirement of paragraph (1)(B) shall be treated as met if at least 85 percent of the aggregate gross assets of the qualified community development entity are invested in qualified low-income community investments.
(4) Treatment of subsequent purchasers
The term "qualified equity investment" includes any equity investment which would (but for paragraph (1)(A)) be a qualified equity investment in the hands of the taxpayer if such investment was a qualified equity investment in the hands of a prior holder.
(5) Redemptions
A rule similar to the rule of section 1202(c)(3) shall apply for purposes of this subsection.
(6) Equity investment
The term "equity investment" means—
(A) any stock (other than nonqualified preferred stock as defined in section 351(g)(2)) in an entity which is a corporation, and
(B) any capital interest in an entity which is a partnership.
(c) Qualified community development entity
For purposes of this section—
(1) In general
The term "qualified community development entity" means any domestic corporation or partnership if—
(A) the primary mission of the entity is serving, or providing investment capital for, low-income communities or low-income persons,
(B) the entity maintains accountability to residents of low-income communities through their representation on any governing board of the entity or on any advisory board to the entity, and
(C) the entity is certified by the Secretary for purposes of this section as being a qualified community development entity.
(2) Special rules for certain organizations
The requirements of paragraph (1) shall be treated as met by—
(A) any specialized small business investment company (as defined in section 1044(c)(3)),1 and
(B) any community development financial institution (as defined in section 103 of the Community Development Banking and Financial Institutions Act of 1994 (
(d) Qualified low-income community investments
For purposes of this section—
(1) In general
The term "qualified low-income community investment" means—
(A) any capital or equity investment in, or loan to, any qualified active low-income community business,
(B) the purchase from another qualified community development entity of any loan made by such entity which is a qualified low-income community investment,
(C) financial counseling and other services specified in regulations prescribed by the Secretary to businesses located in, and residents of, low-income communities, and
(D) any equity investment in, or loan to, any qualified community development entity.
(2) Qualified active low-income community business
(A) In general
For purposes of paragraph (1), the term "qualified active low-income community business" means, with respect to any taxable year, any corporation (including a nonprofit corporation) or partnership if for such year—
(i) at least 50 percent of the total gross income of such entity is derived from the active conduct of a qualified business within any low-income community,
(ii) a substantial portion of the use of the tangible property of such entity (whether owned or leased) is within any low-income community,
(iii) a substantial portion of the services performed for such entity by its employees are performed in any low-income community,
(iv) less than 5 percent of the average of the aggregate unadjusted bases of the property of such entity is attributable to collectibles (as defined in section 408(m)(2)) other than collectibles that are held primarily for sale to customers in the ordinary course of such business, and
(v) less than 5 percent of the average of the aggregate unadjusted bases of the property of such entity is attributable to nonqualified financial property (as defined in section 1397C(e)).
(B) Proprietorship
Such term shall include any business carried on by an individual as a proprietor if such business would meet the requirements of subparagraph (A) were it incorporated.
(C) Portions of business may be qualified active low-income community business
The term "qualified active low-income community business" includes any trades or businesses which would qualify as a qualified active low-income community business if such trades or businesses were separately incorporated.
(3) Qualified business
For purposes of this subsection, the term "qualified business" has the meaning given to such term by section 1397C(d); except that—
(A) in lieu of applying paragraph (2)(B) thereof, the rental to others of real property located in any low-income community shall be treated as a qualified business if there are substantial improvements located on such property, and
(B) paragraph (3) thereof shall not apply.
(e) Low-income community
For purposes of this section—
(1) In general
The term "low-income community" means any population census tract if—
(A) the poverty rate for such tract is at least 20 percent, or
(B)(i) in the case of a tract not located within a metropolitan area, the median family income for such tract does not exceed 80 percent of statewide median family income, or
(ii) in the case of a tract located within a metropolitan area, the median family income for such tract does not exceed 80 percent of the greater of statewide median family income or the metropolitan area median family income.
Subparagraph (B) shall be applied using possessionwide median family income in the case of census tracts located within a possession of the United States.
(2) Targeted populations
The Secretary shall prescribe regulations under which 1 or more targeted populations (within the meaning of section 103(20) of the Riegle Community Development and Regulatory Improvement Act of 1994 (
(3) Areas not within census tracts
In the case of an area which is not tracted for population census tracts, the equivalent county divisions (as defined by the Bureau of the Census for purposes of defining poverty areas) shall be used for purposes of determining poverty rates and median family income.
(4) Tracts with low population
A population census tract with a population of less than 2,000 shall be treated as a low-income community for purposes of this section if such tract—
(A) is within an empowerment zone the designation of which is in effect under section 1391, and
(B) is contiguous to 1 or more low-income communities (determined without regard to this paragraph).
(5) Modification of income requirement for census tracts within high migration rural counties
(A) In general
In the case of a population census tract located within a high migration rural county, paragraph (1)(B)(i) shall be applied by substituting "85 percent" for "80 percent".
(B) High migration rural county
For purposes of this paragraph, the term "high migration rural county" means any county which, during the 20-year period ending with the year in which the most recent census was conducted, has a net out-migration of inhabitants from the county of at least 10 percent of the population of the county at the beginning of such period.
(f) National limitation on amount of investments designated
(1) In general
There is a new markets tax credit limitation for each calendar year. Such limitation is—
(A) $1,000,000,000 for 2001,
(B) $1,500,000,000 for 2002 and 2003,
(C) $2,000,000,000 for 2004 and 2005,
(D) $3,500,000,000 for 2006 and 2007,
(E) $5,000,000,000 for 2008,
(F) $5,000,000,000 for 2009,
(G) $3,500,000,000 for each of calendar years 2010 through 2019, and
(H) $5,000,000,000 for for 2 each of calendar years 2020 through 2025.
(2) Allocation of limitation
The limitation under paragraph (1) shall be allocated by the Secretary among qualified community development entities selected by the Secretary. In making allocations under the preceding sentence, the Secretary shall give priority to any entity—
(A) with a record of having successfully provided capital or technical assistance to disadvantaged businesses or communities, or
(B) which intends to satisfy the requirement under subsection (b)(1)(B) by making qualified low-income community investments in 1 or more businesses in which persons unrelated to such entity (within the meaning of section 267(b) or 707(b)(1)) hold the majority equity interest.
(3) Carryover of unused limitation
If the new markets tax credit limitation for any calendar year exceeds the aggregate amount allocated under paragraph (2) for such year, such limitation for the succeeding calendar year shall be increased by the amount of such excess. No amount may be carried under the preceding sentence to any calendar year after 2030.
(g) Recapture of credit in certain cases
(1) In general
If, at any time during the 7-year period beginning on the date of the original issue of a qualified equity investment in a qualified community development entity, there is a recapture event with respect to such investment, then the tax imposed by this chapter for the taxable year in which such event occurs shall be increased by the credit recapture amount.
(2) Credit recapture amount
For purposes of paragraph (1), the credit recapture amount is an amount equal to the sum of—
(A) the aggregate decrease in the credits allowed to the taxpayer under section 38 for all prior taxable years which would have resulted if no credit had been determined under this section with respect to such investment, plus
(B) interest at the underpayment rate established under section 6621 on the amount determined under subparagraph (A) for each prior taxable year for the period beginning on the due date for filing the return for the prior taxable year involved.
No deduction shall be allowed under this chapter for interest described in subparagraph (B).
(3) Recapture event
For purposes of paragraph (1), there is a recapture event with respect to an equity investment in a qualified community development entity if—
(A) such entity ceases to be a qualified community development entity,
(B) the proceeds of the investment cease to be used as required of subsection (b)(1)(B), or
(C) such investment is redeemed by such entity.
(4) Special rules
(A) Tax benefit rule
The tax for the taxable year shall be increased under paragraph (1) only with respect to credits allowed by reason of this section which were used to reduce tax liability. In the case of credits not so used to reduce tax liability, the carryforwards and carrybacks under section 39 shall be appropriately adjusted.
(B) No credits against tax
Any increase in tax under this subsection shall not be treated as a tax imposed by this chapter for purposes of determining the amount of any credit under this chapter or for purposes of section 55.
(h) Basis reduction
The basis of any qualified equity investment shall be reduced by the amount of any credit determined under this section with respect to such investment. This subsection shall not apply for purposes of section 1202.
(i) Regulations
The Secretary shall prescribe such regulations as may be appropriate to carry out this section, including regulations—
(1) which limit the credit for investments which are directly or indirectly subsidized by other Federal tax benefits (including the credit under section 42 and the exclusion from gross income under section 103),
(2) which prevent the abuse of the purposes of this section,
(3) which provide rules for determining whether the requirement of subsection (b)(1)(B) is treated as met,
(4) which impose appropriate reporting requirements,
(5) which apply the provisions of this section to newly formed entities, and
(6) which ensure that non-metropolitan counties receive a proportional allocation of qualified equity investments.
(Added
Editorial Notes
References in Text
Section 1044, referred to in subsec. (c)(2)(A), was repealed by
Amendments
2020—Subsec. (f)(1)(H).
Subsec. (f)(3).
2019—Subsec. (f)(1)(H).
Subsec. (f)(3).
2018—Subsec. (f)(1)(F).
Subsec. (h).
2015—Subsec. (f)(1)(G).
Subsec. (f)(3).
2014—Subsec. (f)(1)(G).
Subsec. (f)(3).
2013—Subsec. (f)(1)(G).
Subsec. (f)(3).
2010—Subsec. (f)(1)(G).
Subsec. (f)(3).
2009—Subsec. (f)(1)(D).
Subsec. (f)(1)(E), (F).
2008—Subsec. (f)(1)(D).
2006—Subsec. (f)(1)(D).
Subsec. (i)(6).
2004—Subsec. (e)(2).
Subsec. (e)(4).
Subsec. (e)(5).
Statutory Notes and Related Subsidiaries
Effective Date of 2020 Amendment
Effective Date of 2019 Amendment
Effective Date of 2015 Amendment
Effective Date of 2014 Amendment
Effective Date of 2013 Amendment
Effective Date of 2010 Amendment
Effective Date of 2006 Amendment
Effective Date of 2004 Amendment
"(1)
"(2)
Effective Date
Section applicable to investments made after Dec. 31, 2000, see §1(a)(7) [title I, §121(e)] of
Savings Provision
Amendment by section 401(d)(4)(B)(iii) of
For provisions that nothing in amendment by section 401(d)(4)(B)(iii) of
Special Rule for Allocation of Increased 2008 Limitation
"(1) submitted an allocation application with respect to calendar year 2008, and
"(2)(A) did not receive an allocation for such calendar year, or
"(B) received an allocation for such calendar year in an amount less than the amount requested in the allocation application."
Guidance on Allocation of National Limitation
"(1) how entities shall apply for an allocation under section 45D(f)(2) of the Internal Revenue Code of 1986, as added by this section;
"(2) the competitive procedure through which such allocations are made; and
"(3) the actions that such Secretary or delegate shall take to ensure that such allocations are properly made to appropriate entities."
Audit and Report
1 See References in Text note below.
§45E. Small employer pension plan startup costs
(a) General rule
For purposes of section 38, in the case of an eligible employer, the small employer pension plan startup cost credit determined under this section for any taxable year is an amount equal to 50 percent of the qualified startup costs paid or incurred by the taxpayer during the taxable year.
(b) Dollar limitation
The amount of the credit determined under this section for any taxable year shall not exceed—
(1) for the first credit year and each of the 2 taxable years immediately following the first credit year, the greater of—
(A) $500, or
(B) the lesser of—
(i) $250 for each employee of the eligible employer who is not a highly compensated employee (as defined in section 414(q)) and who is eligible to participate in the eligible employer plan maintained by the eligible employer, or
(ii) $5,000, and
(2) zero for any other taxable year.
(c) Eligible employer
For purposes of this section—
(1) In general
The term "eligible employer" has the meaning given such term by section 408(p)(2)(C)(i).
(2) Requirement for new qualified employer plans
Such term shall not include an employer if, during the 3-taxable year period immediately preceding the 1st taxable year for which the credit under this section is otherwise allowable for a qualified employer plan of the employer, the employer or any member of any controlled group including the employer (or any predecessor of either) established or maintained a qualified employer plan with respect to which contributions were made, or benefits were accrued, for substantially the same employees as are in the qualified employer plan.
(d) Other definitions
For purposes of this section—
(1) Qualified startup costs
(A) In general
The term "qualified startup costs" means any ordinary and necessary expenses of an eligible employer which are paid or incurred in connection with—
(i) the establishment or administration of an eligible employer plan, or
(ii) the retirement-related education of employees with respect to such plan.
(B) Plan must have at least 1 participant
Such term shall not include any expense in connection with a plan that does not have at least 1 employee eligible to participate who is not a highly compensated employee.
(2) Eligible employer plan
The term "eligible employer plan" means a qualified employer plan within the meaning of section 4972(d).
(3) First credit year
The term "first credit year" means—
(A) the taxable year which includes the date that the eligible employer plan to which such costs relate becomes effective with respect to the eligible employer, or
(B) at the election of the eligible employer, the taxable year preceding the taxable year referred to in subparagraph (A).
(e) Special rules
For purposes of this section—
(1) Aggregation rules
All persons treated as a single employer under subsection (a) or (b) of section 52, or subsection (m) or (o) of section 414, shall be treated as one person. All eligible employer plans shall be treated as 1 eligible employer plan.
(2) Disallowance of deduction
No deduction shall be allowed—
(A) for that portion of the qualified startup costs paid or incurred for the taxable year which is equal to so much of the portion of the credit determined under subsection (a) as is properly allocable to such costs, and
(B) for that portion of the employer contributions by the employer for the taxable year which is equal to so much of the credit increase determined under subsection (f) as is properly allocable to such contributions.
(3) Election not to claim credit
This section shall not apply to a taxpayer for any taxable year if such taxpayer elects to have this section not apply for such taxable year.
(4) Increased credit for certain small employers
In the case of an employer which would be an eligible employer under subsection (c) if section 408(p)(2)(C)(i) was applied by substituting "50 employees" for "100 employees", subsection (a) shall be applied by substituting "100 percent" for "50 percent".
(f) Additional credit for employer contributions by certain eligible employers
(1) In general
In the case of an eligible employer, the credit allowed for the taxable year under subsection (a) (determined without regard to this subsection) shall be increased by an amount equal to the applicable percentage of employer contributions (other than any elective deferrals (as defined in section 402(g)(3)) by the employer to an eligible employer plan (other than a defined benefit plan (as defined in section 414(j))).
(2) Limitations
(A) Dollar limitation
The amount determined under paragraph (1) (before the application of subparagraph (B)) with respect to any employee of the employer shall not exceed $1,000.
(B) Credit phase-in
In the case of any eligible employer which had for the preceding taxable year more than 50 employees, the amount determined under paragraph (1) (without regard to this subparagraph) shall be reduced by an amount equal to the product of—
(i) the amount otherwise so determined under paragraph (1), multiplied by
(ii) a percentage equal to 2 percentage points for each employee of the employer for the preceding taxable year in excess of 50 employees.
(C) Wage limitation
(i) In general
No contributions with respect to any employee who receives wages from the employer for the taxable year in excess of $100,000 may be taken into account for such taxable year under subparagraph (A).
(ii) Wages
For purposes of the preceding sentence, the term "wages" has the meaning given such term by section 3121(a).
(iii) Inflation adjustment
In the case of any taxable year beginning in a calendar year after 2023, the $100,000 amount under clause (i) shall be increased by an amount equal to—
(I) such dollar amount, multiplied by
(II) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting "calendar year 2007" for "calendar year 2016" in subparagraph (A)(ii) thereof.
If any amount as adjusted under this clause is not a multiple of $5,000, such amount shall be rounded to the next lowest multiple of $5,000.
(3) Applicable percentage
For purposes of this section, the applicable percentage for the taxable year during which the eligible employer plan is established with respect to the eligible employer shall be 100 percent, and for taxable years thereafter shall be determined under the following table:
| In the case of the following taxable year beginning after the taxable year during which plan is established with respect to the eligible employer: | The applicable percentage shall be: |
|---|---|
| 1st | 100% |
| 2nd | 75% |
| 3rd | 50% |
| 4th | 25% |
| Any taxable year thereafter | 0% |
(4) Determination of eligible employer; number of employees
For purposes of this subsection, whether an employer is an eligible employer and the number of employees of an employer shall be determined under the rules of subsection (c), except that paragraph (2) thereof shall only apply to the taxable year during which the eligible employer plan to which this section applies is established with respect to the eligible employer.
(Added
Editorial Notes
Amendments
2022—Subsec. (d)(3)(A).
Subsec. (e)(2).
Subsec. (e)(4).
Subsec. (f).
2019—Subsec. (b)(1).
2002—Subsec. (e)(1).
Statutory Notes and Related Subsidiaries
Effective Date of 2022 Amendment
Effective Date of 2019 Amendment
Effective Date of 2002 Amendment
Amendment by
Effective Date
Section applicable to costs paid or incurred in taxable years beginning after Dec. 31, 2001, with respect to qualified employer plans first effective after such date, see section 619(d) of
§45F. Employer-provided child care credit
(a) In general
For purposes of section 38, the employer-provided child care credit determined under this section for the taxable year is an amount equal to the sum of—
(1) 25 percent of the qualified child care expenditures, and
(2) 10 percent of the qualified child care resource and referral expenditures,
of the taxpayer for such taxable year.
(b) Dollar limitation
The credit allowable under subsection (a) for any taxable year shall not exceed $150,000.
(c) Definitions
For purposes of this section—
(1) Qualified child care expenditure
(A) In general
The term "qualified child care expenditure" means any amount paid or incurred—
(i) to acquire, construct, rehabilitate, or expand property—
(I) which is to be used as part of a qualified child care facility of the taxpayer,
(II) with respect to which a deduction for depreciation (or amortization in lieu of depreciation) is allowable, and
(III) which does not constitute part of the principal residence (within the meaning of section 121) of the taxpayer or any employee of the taxpayer,
(ii) for the operating costs of a qualified child care facility of the taxpayer, including costs related to the training of employees, to scholarship programs, and to the providing of increased compensation to employees with higher levels of child care training, or
(iii) under a contract with a qualified child care facility to provide child care services to employees of the taxpayer.
(B) Fair market value
The term "qualified child care expenditures" shall not include expenses in excess of the fair market value of such care.
(2) Qualified child care facility
(A) In general
The term "qualified child care facility" means a facility—
(i) the principal use of which is to provide child care assistance, and
(ii) which meets the requirements of all applicable laws and regulations of the State or local government in which it is located, including the licensing of the facility as a child care facility.
Clause (i) shall not apply to a facility which is the principal residence (within the meaning of section 121) of the operator of the facility.
(B) Special rules with respect to a taxpayer
A facility shall not be treated as a qualified child care facility with respect to a taxpayer unless—
(i) enrollment in the facility is open to employees of the taxpayer during the taxable year,
(ii) if the facility is the principal trade or business of the taxpayer, at least 30 percent of the enrollees of such facility are dependents of employees of the taxpayer, and
(iii) the use of such facility (or the eligibility to use such facility) does not discriminate in favor of employees of the taxpayer who are highly compensated employees (within the meaning of section 414(q)).
(3) Qualified child care resource and referral expenditure
(A) In general
The term "qualified child care resource and referral expenditure" means any amount paid or incurred under a contract to provide child care resource and referral services to an employee of the taxpayer.
(B) Nondiscrimination
The services shall not be treated as qualified unless the provision of such services (or the eligibility to use such services) does not discriminate in favor of employees of the taxpayer who are highly compensated employees (within the meaning of section 414(q)).
(d) Recapture of acquisition and construction credit
(1) In general
If, as of the close of any taxable year, there is a recapture event with respect to any qualified child care facility of the taxpayer, then the tax of the taxpayer under this chapter for such taxable year shall be increased by an amount equal to the product of—
(A) the applicable recapture percentage, and
(B) the aggregate decrease in the credits allowed under section 38 for all prior taxable years which would have resulted if the qualified child care expenditures of the taxpayer described in subsection (c)(1)(A) with respect to such facility had been zero.
(2) Applicable recapture percentage
(A) In general
For purposes of this subsection, the applicable recapture percentage shall be determined from the following table:
| If the recapture event occurs in: | The applicable recapture percentage is: |
|---|---|
| Years 1–3 | 100 |
| Year 4 | 85 |
| Year 5 | 70 |
| Year 6 | 55 |
| Year 7 | 40 |
| Year 8 | 25 |
| Years 9 and 10 | 10 |
| Years 11 and thereafter | 0. |
(B) Years
For purposes of subparagraph (A), year 1 shall begin on the first day of the taxable year in which the qualified child care facility is placed in service by the taxpayer.
(3) Recapture event defined
For purposes of this subsection, the term "recapture event" means—
(A) Cessation of operation
The cessation of the operation of the facility as a qualified child care facility.
(B) Change in ownership
(i) In general
Except as provided in clause (ii), the disposition of a taxpayer's interest in a qualified child care facility with respect to which the credit described in subsection (a) was allowable.
(ii) Agreement to assume recapture liability
Clause (i) shall not apply if the person acquiring such interest in the facility agrees in writing to assume the recapture liability of the person disposing of such interest in effect immediately before such disposition. In the event of such an assumption, the person acquiring the interest in the facility shall be treated as the taxpayer for purposes of assessing any recapture liability (computed as if there had been no change in ownership).
(4) Special rules
(A) Tax benefit rule
The tax for the taxable year shall be increased under paragraph (1) only with respect to credits allowed by reason of this section which were used to reduce tax liability. In the case of credits not so used to reduce tax liability, the carryforwards and carrybacks under section 39 shall be appropriately adjusted.
(B) No credits against tax
Any increase in tax under this subsection shall not be treated as a tax imposed by this chapter for purposes of determining the amount of any credit under this chapter or for purposes of section 55.
(C) No recapture by reason of casualty loss
The increase in tax under this subsection shall not apply to a cessation of operation of the facility as a qualified child care facility by reason of a casualty loss to the extent such loss is restored by reconstruction or replacement within a reasonable period established by the Secretary.
(e) Special rules
For purposes of this section—
(1) Aggregation rules
All persons which are treated as a single employer under subsections (a) and (b) of section 52 shall be treated as a single taxpayer.
(2) Pass-thru in the case of estates and trusts
Under regulations prescribed by the Secretary, rules similar to the rules of subsection (d) of section 52 shall apply.
(3) Allocation in the case of partnerships
In the case of partnerships, the credit shall be allocated among partners under regulations prescribed by the Secretary.
(f) No double benefit
(1) Reduction in basis
For purposes of this subtitle—
(A) In general
If a credit is determined under this section with respect to any property by reason of expenditures described in subsection (c)(1)(A), the basis of such property shall be reduced by the amount of the credit so determined.
(B) Certain dispositions
If, during any taxable year, there is a recapture amount determined with respect to any property the basis of which was reduced under subparagraph (A), the basis of such property (immediately before the event resulting in such recapture) shall be increased by an amount equal to such recapture amount. For purposes of the preceding sentence, the term "recapture amount" means any increase in tax (or adjustment in carrybacks or carryovers) determined under subsection (d).
(2) Other deductions and credits
No deduction or credit shall be allowed under any other provision of this chapter with respect to the amount of the credit determined under this section.
(Added
Editorial Notes
Amendments
2002—Subsec. (d)(4)(B).
Statutory Notes and Related Subsidiaries
Effective Date of 2002 Amendment
Amendment by
Effective Date
Section applicable to taxable years beginning after Dec. 31, 2001, see section 205(c) of
§45G. Railroad track maintenance credit
(a) General rule
For purposes of section 38, the railroad track maintenance credit determined under this section for the taxable year is an amount equal to 40 percent (50 percent in the case of any taxable year beginning before January 1, 2023) of the qualified railroad track maintenance expenditures paid or incurred by an eligible taxpayer during the taxable year.
(b) Limitation
(1) In general
The credit allowed under subsection (a) for any taxable year shall not exceed the product of—
(A) $3,500, multiplied by
(B) the sum of—
(i) the number of miles of railroad track owned or leased by the eligible taxpayer as of the close of the taxable year, and
(ii) the number of miles of railroad track assigned for purposes of this subsection to the eligible taxpayer by a Class II or Class III railroad which owns or leases such railroad track as of the close of the taxable year.
(2) Assignments
With respect to any assignment of a mile of railroad track under paragraph (1)(B)(ii)—
(A) such assignment may be made only once per taxable year of the Class II or Class III railroad and shall be treated as made as of the close of such taxable year,
(B) such mile may not be taken into account under this section by such railroad for such taxable year, and
(C) such assignment shall be taken into account for the taxable year of the assignee which includes the date that such assignment is treated as effective.
(c) Eligible taxpayer
For purposes of this section, the term "eligible taxpayer" means—
(1) any Class II or Class III railroad, and
(2) any person who transports property using the rail facilities of a Class II or Class III railroad or who furnishes railroad-related property or services to a Class II or Class III railroad, but only with respect to miles of railroad track assigned to such person by such Class II or Class III railroad for purposes of subsection (b).
(d) Qualified railroad track maintenance expenditures
For purposes of this section, the term "qualified railroad track maintenance expenditures" means gross expenditures (whether or not otherwise chargeable to capital account) for maintaining railroad track (including roadbed, bridges, and related track structures) owned or leased as of January 1, 2015, by a Class II or Class III railroad (determined without regard to any consideration for such expenditures given by the Class II or Class III railroad which made the assignment of such track).
(e) Other definitions and special rules
(1) Class II or Class III railroad
For purposes of this section, the terms "Class II railroad" and "Class III railroad" have the respective meanings given such terms by the Surface Transportation Board.
(2) Controlled groups
Rules similar to the rules of paragraph (1) of section 41(f) shall apply for purposes of this section.
(3) Basis adjustment
For purposes of this subtitle, if a credit is allowed under this section with respect to any railroad track, the basis of such track shall be reduced by the amount of the credit so allowed.
(Added
Editorial Notes
Amendments
2020—Subsec. (a).
Subsec. (f).
2019—Subsec. (f).
2018—Subsec. (f).
2015—Subsec. (d).
Subsec. (f).
2014—Subsec. (f).
2013—Subsec. (f).
2010—Subsec. (f).
2008—Subsec. (f).
2006—Subsec. (d).
2005—Subsec. (b).
"(1) $3,500, and
"(2) the number of miles of railroad track owned or leased by the eligible taxpayer as of the close of the taxable year.
A mile of railroad track may be taken into account by a person other than the owner only if such mile is assigned to such person by the owner for purposes of this subsection. Any mile which is so assigned may not be taken into account by the owner for purposes of this subsection."
Subsec. (c)(2).
Statutory Notes and Related Subsidiaries
Effective Date of 2020 Amendment
Effective Date of 2019 Amendment
Effective Date of 2018 Amendment
"(1)
"(2)
Effective Date of 2015 Amendment
"(1)
"(2)
Effective Date of 2014 Amendment
Effective Date of 2013 Amendment
Effective Date of 2010 Amendment
Effective Date of 2008 Amendment
Effective Date of 2006 Amendment
Effective Date of 2005 Amendment
Amendment by
Effective Date
Section applicable to taxable years beginning after Dec. 31, 2004, see section 245(e) of
Safe Harbor Assignments
§45H. Credit for production of low sulfur diesel fuel
(a) In general
For purposes of section 38, the amount of the low sulfur diesel fuel production credit determined under this section with respect to any facility of a small business refiner is an amount equal to 5 cents for each gallon of low sulfur diesel fuel produced during the taxable year by such small business refiner at such facility.
(b) Maximum credit
(1) In general
The aggregate credit determined under subsection (a) for any taxable year with respect to any facility shall not exceed—
(A) 25 percent of the qualified costs incurred by the small business refiner with respect to such facility, reduced by
(B) the aggregate credits determined under this section for all prior taxable years with respect to such facility.
(2) Reduced percentage
In the case of a small business refiner with average daily domestic refinery runs for the 1-year period ending on December 31, 2002, in excess of 155,000 barrels, the number of percentage points described in paragraph (1) shall be reduced (not below zero) by the product of such number (before the application of this paragraph) and the ratio of such excess to 50,000 barrels.
(c) Definitions and special rule
For purposes of this section—
(1) Small business refiner
The term "small business refiner" means, with respect to any taxable year, a refiner of crude oil—
(A) with respect to which not more than 1,500 individuals are engaged in the refinery operations of the business on any day during such taxable year, and
(B) the average daily domestic refinery run or average retained production of which for all facilities of the taxpayer for the 1-year period ending on December 31, 2002, did not exceed 205,000 barrels.
(2) Qualified costs
The term "qualified costs" means, with respect to any facility, those costs paid or incurred during the applicable period for compliance with the applicable EPA regulations with respect to such facility, including expenditures for the construction of new process operation units or the dismantling and reconstruction of existing process units to be used in the production of low sulfur diesel fuel, associated adjacent or offsite equipment (including tankage, catalyst, and power supply), engineering, construction period interest, and sitework.
(3) Applicable EPA regulations
The term "applicable EPA regulations" means the Highway Diesel Fuel Sulfur Control Requirements of the Environmental Protection Agency.
(4) Applicable period
The term "applicable period" means, with respect to any facility, the period beginning on January 1, 2003, and ending on the earlier of the date which is 1 year after the date on which the taxpayer must comply with the applicable EPA regulations with respect to such facility or December 31, 2009.
(5) Low sulfur diesel fuel
The term "low sulfur diesel fuel" means diesel fuel with a sulfur content of 15 parts per million or less.
(d) Special rule for determination of refinery runs
For purposes of this section and section 179B(b), in the calculation of average daily domestic refinery run or retained production, only refineries which on April 1, 2003, were refineries of the refiner or a related person (within the meaning of section 613A(d)(3)), shall be taken into account.
(e) Certification
(1) Required
No credit shall be allowed unless, not later than the date which is 30 months after the first day of the first taxable year in which the low sulfur diesel fuel production credit is determined with respect to a facility, the small business refiner obtains certification from the Secretary, after consultation with the Administrator of the Environmental Protection Agency, that the taxpayer's qualified costs with respect to such facility will result in compliance with the applicable EPA regulations.
(2) Contents of application
An application for certification shall include relevant information regarding unit capacities and operating characteristics sufficient for the Secretary, after consultation with the Administrator of the Environmental Protection Agency, to determine that such qualified costs are necessary for compliance with the applicable EPA regulations.
(3) Review period
Any application shall be reviewed and notice of certification, if applicable, shall be made within 60 days of receipt of such application. In the event the Secretary does not notify the taxpayer of the results of such certification within such period, the taxpayer may presume the certification to be issued until so notified.
(4) Statute of limitations
With respect to the credit allowed under this section—
(A) the statutory period for the assessment of any deficiency attributable to such credit shall not expire before the end of the 3-year period ending on the date that the review period described in paragraph (3) ends with respect to the taxpayer, and
(B) such deficiency may be assessed before the expiration of such 3-year period notwithstanding the provisions of any other law or rule of law which would otherwise prevent such assessment.
(f) Cooperative organizations
(1) Apportionment of credit
(A) In general
In the case of a cooperative organization described in section 1381(a), any portion of the credit determined under subsection (a) for the taxable year may, at the election of the organization, be apportioned among patrons eligible to share in patronage dividends on the basis of the quantity or value of business done with or for such patrons for the taxable year.
(B) Form and effect of election
An election under subparagraph (A) for any taxable year shall be made on a timely filed return for such year. Such election, once made, shall be irrevocable for such taxable year.
(2) Treatment of organizations and patrons
(A) Organizations
The amount of the credit not apportioned to patrons pursuant to paragraph (1) shall be included in the amount determined under subsection (a) for the taxable year of the organization.
(B) Patrons
The amount of the credit apportioned to patrons pursuant to paragraph (1) shall be included in the amount determined under subsection (a) for the first taxable year of each patron ending on or after the last day of the payment period (as defined in section 1382(d)) for the taxable year of the organization or, if earlier, for the taxable year of each patron ending on or after the date on which the patron receives notice from the cooperative of the apportionment.
(3) Special rule
If the amount of a credit which has been apportioned to any patron under this subsection is decreased for any reason—
(A) such amount shall not increase the tax imposed on such patron, and
(B) the tax imposed by this chapter on such organization shall be increased by such amount.
The increase under subparagraph (B) shall not be treated as tax imposed by this chapter for purposes of determining the amount of any credit under this chapter or for purposes of section 55.
(g) Election to not take credit
No credit shall be determined under subsection (a) for the taxable year if the taxpayer elects not to have subsection (a) apply to such taxable year.
(Added
Editorial Notes
Amendments
2018—Subsec. (d).
2007—Subsec. (b)(1)(A).
Subsec. (c)(2).
Subsec. (d).
Subsec. (e).
Subsec. (e)(1), (2).
Subsec. (f).
Subsec. (g).
Statutory Notes and Related Subsidiaries
Effective Date of 2007 Amendment
Amendment by
Effective Date
Section applicable to expenses paid or incurred after Dec. 31, 2002, in taxable years ending after such date, see section 339(f) of
§45I. Credit for producing oil and gas from marginal wells
(a) General rule
For purposes of section 38, the marginal well production credit for any taxable year is an amount equal to the product of—
(1) the credit amount, and
(2) the qualified crude oil production and the qualified natural gas production which is attributable to the taxpayer.
(b) Credit amount
For purposes of this section—
(1) In general
The credit amount is—
(A) $3 per barrel of qualified crude oil production, and
(B) 50 cents per 1,000 cubic feet of qualified natural gas production.
(2) Reduction as oil and gas prices increase
(A) In general
The $3 and 50 cents amounts under paragraph (1) shall each be reduced (but not below zero) by an amount which bears the same ratio to such amount (determined without regard to this paragraph) as—
(i) the excess (if any) of the applicable reference price over $15 ($1.67 for qualified natural gas production), bears to
(ii) $3 ($0.33 for qualified natural gas production).
The applicable reference price for a taxable year is the reference price of the calendar year preceding the calendar year in which the taxable year begins.
(B) Inflation adjustment
In the case of any taxable year beginning in a calendar year after 2005, each of the dollar amounts contained in subparagraph (A) shall be increased to an amount equal to such dollar amount multiplied by the inflation adjustment factor for such calendar year (determined under section 43(b)(3)(B) by substituting "2004" for "1990").
(C) Reference price
For purposes of this paragraph, the term "reference price" means, with respect to any calendar year—
(i) in the case of qualified crude oil production, the reference price determined under section 45K(d)(2)(C), and
(ii) in the case of qualified natural gas production, the Secretary's estimate of the annual average wellhead price per 1,000 cubic feet for all domestic natural gas.
(c) Qualified crude oil and natural gas production
For purposes of this section—
(1) In general
The terms "qualified crude oil production" and "qualified natural gas production" mean domestic crude oil or natural gas which is produced from a qualified marginal well.
(2) Limitation on amount of production which may qualify
(A) In general
Crude oil or natural gas produced during any taxable year from any well shall not be treated as qualified crude oil production or qualified natural gas production to the extent production from the well during the taxable year exceeds 1,095 barrels or barrel-of-oil equivalents (as defined in section 45K(d)(5)).
(B) Proportionate reductions
(i) Short taxable years
In the case of a short taxable year, the limitations under this paragraph shall be proportionately reduced to reflect the ratio which the number of days in such taxable year bears to 365.
(ii) Wells not in production entire year
In the case of a well which is not capable of production during each day of a taxable year, the limitations under this paragraph applicable to the well shall be proportionately reduced to reflect the ratio which the number of days of production bears to the total number of days in the taxable year.
(3) Definitions
(A) Qualified marginal well
The term "qualified marginal well" means a domestic well—
(i) the production from which during the taxable year is treated as marginal production under section 613A(c)(6), or
(ii) which, during the taxable year—
(I) has average daily production of not more than 25 barrel-of-oil equivalents (as so defined), and
(II) produces water at a rate not less than 95 percent of total well effluent.
(B) Crude oil, etc.
The terms "crude oil", "natural gas", "domestic", and "barrel" have the meanings given such terms by section 613A(e).
(d) Other rules
(1) Production attributable to the taxpayer
In the case of a qualified marginal well in which there is more than one owner of operating interests in the well and the crude oil or natural gas production exceeds the limitation under subsection (c)(2), qualifying crude oil production or qualifying natural gas production attributable to the taxpayer shall be determined on the basis of the ratio which taxpayer's revenue interest in the production bears to the aggregate of the revenue interests of all operating interest owners in the production.
(2) Operating interest required
Any credit under this section may be claimed only on production which is attributable to the holder of an operating interest.
(3) Production from nonconventional sources excluded
In the case of production from a qualified marginal well which is eligible for the credit allowed under section 45K for the taxable year, no credit shall be allowable under this section unless the taxpayer elects not to claim the credit under section 45K with respect to the well.
(Added
Inflation Adjusted Items for Certain Tax Years
For inflation adjustment of certain items in this section, see Internal Revenue Notices listed in a table below.
Editorial Notes
Amendments
2005—Subsec. (a)(2).
Subsec. (b)(2)(C)(i).
Subsec. (c)(2)(A).
Subsec. (d)(3).
Statutory Notes and Related Subsidiaries
Effective Date of 2005 Amendment
Amendment by
Effective Date
Section applicable to production in taxable years beginning after Dec. 31, 2004, see section 341(e) of
Inflation Adjusted Items for Certain Years
Provisions relating to inflation adjustment of items in this section for certain years were contained in the following:
2023—Internal Revenue Notice 2023–58.
2022—Internal Revenue Notice 2023–41.
2021—Internal Revenue Notice 2022–18.
2020—Internal Revenue Notice 2021–34.
2019—Internal Revenue Notice 2020–21.
2018—Internal Revenue Notice 2019–37.
2017—Internal Revenue Notice 2018–52.
2016—Internal Revenue Notice 2017–51.
§45J. Credit for production from advanced nuclear power facilities
(a) General rule
For purposes of section 38, the advanced nuclear power facility production credit of any taxpayer for any taxable year is equal to the product of—
(1) 1.8 cents, multiplied by
(2) the kilowatt hours of electricity—
(A) produced by the taxpayer at an advanced nuclear power facility during the 8-year period beginning on the date the facility was originally placed in service, and
(B) sold by the taxpayer to an unrelated person during the taxable year.
(b) National limitation
(1) In general
The amount of credit which would (but for this subsection and subsection (c)) be allowed with respect to any facility for any taxable year shall not exceed the amount which bears the same ratio to such amount of credit as—
(A) the national megawatt capacity limitation allocated to the facility, bears to
(B) the total megawatt nameplate capacity of such facility.
(2) Amount of national limitation
The aggregate amount of national megawatt capacity limitation allocated by the Secretary under paragraph (3) shall not exceed 6,000 megawatts.
(3) Allocation of limitation
The Secretary shall allocate the national megawatt capacity limitation in such manner as the Secretary may prescribe.
(4) Regulations
Not later than 6 months after the date of the enactment of or any amendment to this section, the Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this subsection. Such regulations shall provide a certification process under which the Secretary, after consultation with the Secretary of Energy, shall approve and allocate the national megawatt capacity limitation.
(5) Allocation of unutilized limitation
(A) In general
Any unutilized national megawatt capacity limitation shall be allocated by the Secretary under paragraph (3) as rapidly as is practicable after December 31, 2020—
(i) first to facilities placed in service on or before such date to the extent that such facilities did not receive an allocation equal to their full nameplate capacity, and
(ii) then to facilities placed in service after such date in the order in which such facilities are placed in service.
(B) Unutilized national megawatt capacity limitation
The term "unutilized national megawatt capacity limitation" means the excess (if any) of—
(i) 6,000 megawatts, over
(ii) the aggregate amount of national megawatt capacity limitation allocated by the Secretary before January 1, 2021, reduced by any amount of such limitation which was allocated to a facility which was not placed in service before such date.
(C) Coordination with other provisions
In the case of any unutilized national megawatt capacity limitation allocated by the Secretary pursuant to this paragraph—
(i) such allocation shall be treated for purposes of this section in the same manner as an allocation of national megawatt capacity limitation, and
(ii) subsection (d)(1)(B) shall not apply to any facility which receives such allocation.
(c) Other limitations
(1) Annual limitation
The amount of the credit allowable under subsection (a) (after the application of subsection (b)) for any taxable year with respect to any facility shall not exceed an amount which bears the same ratio to $125,000,000 as—
(A) the national megawatt capacity limitation allocated under subsection (b) to the facility, bears to
(B) 1,000.
(2) Phaseout of credit
(A) In general
The amount of the credit determined under subsection (a) shall be reduced by an amount which bears the same ratio to the amount of the credit (determined without regard to this paragraph) as—
(i) the amount by which the reference price (as defined in section 45(e)(2)(C)) for the calendar year in which the sale occurs exceeds 8 cents, bears to
(ii) 3 cents.
(B) Phaseout adjustment based on inflation
The 8 cent amount in subparagraph (A) shall be adjusted by multiplying such amount by the inflation adjustment factor (as defined in section 45(e)(2)(B)) for the calendar year in which the sale occurs. If any amount as increased under the preceding sentence is not a multiple of 0.1 cent, such amount shall be rounded to the nearest multiple of 0.1 cent.
(d) Advanced nuclear power facility
For purposes of this section—
(1) In general
The term "advanced nuclear power facility" means any advanced nuclear facility—
(A) which is owned by the taxpayer and which uses nuclear energy to produce electricity, and
(B) which is placed in service after the date of the enactment of this paragraph and before January 1, 2021.
(2) Advanced nuclear facility
For purposes of paragraph (1), the term "advanced nuclear facility" means any nuclear facility the reactor design for which is approved after December 31, 1993, by the Nuclear Regulatory Commission (and such design or a substantially similar design of comparable capacity was not approved on or before such date).
(e) Transfer of credit by certain public entities
(1) In general
If, with respect to a credit under subsection (a) for any taxable year—
(A) a qualified public entity would be the taxpayer (but for this paragraph), and
(B) such entity elects the application of this paragraph for such taxable year with respect to all (or any portion specified in such election) of such credit,
the eligible project partner specified in such election, and not the qualified public entity, shall be treated as the taxpayer for purposes of this title with respect to such credit (or such portion thereof).
(2) Definitions
For purposes of this subsection—
(A) Qualified public entity
The term "qualified public entity" means—
(i) a Federal, State, or local government entity, or any political subdivision, agency, or instrumentality thereof,
(ii) a mutual or cooperative electric company described in section 501(c)(12) or 1381(a)(2), or
(iii) a not-for-profit electric utility which had or has received a loan or loan guarantee under the Rural Electrification Act of 1936.
(B) Eligible project partner
The term "eligible project partner" means any person who—
(i) is responsible for, or participates in, the design or construction of the advanced nuclear power facility to which the credit under subsection (a) relates,
(ii) participates in the provision of the nuclear steam supply system to such facility,
(iii) participates in the provision of nuclear fuel to such facility,
(iv) is a financial institution providing financing for the construction or operation of such facility, or
(v) has an ownership interest in such facility.
(3) Special rules
(A) Application to partnerships
In the case of a credit under subsection (a) which is determined at the partnership level—
(i) for purposes of paragraph (1)(A), a qualified public entity shall be treated as the taxpayer with respect to such entity's distributive share of such credit, and
(ii) the term "eligible project partner" shall include any partner of the partnership.
(B) Taxable year in which credit taken into account
In the case of any credit (or portion thereof) with respect to which an election is made under paragraph (1), such credit shall be taken into account in the first taxable year of the eligible project partner ending with, or after, the qualified public entity's taxable year with respect to which the credit was determined.
(C) Treatment of transfer under private use rules
For purposes of section 141(b)(1), any benefit derived by an eligible project partner in connection with an election under this subsection shall not be taken into account as a private business use.
(f) Other rules to apply
Rules similar to the rules of paragraphs (1), (3), (4), and (5) of section 45(e) shall apply for purposes of this section.
(Added
Editorial Notes
References in Text
The date of the enactment of this section and the date of the enactment of this paragraph, referred to in subsecs. (b)(4) and (d)(1)(B), are the date of enactment of
The Rural Electrification Act of 1936, referred to in subsec. (e)(2)(A)(iii), is act May 20, 1936, ch. 432,
Amendments
2018—Subsec. (b)(4).
Subsec. (b)(5).
Subsecs. (e), (f).
2007—Subsec. (b)(2).
2005—Subsec. (c)(2).
Subsec. (e).
Statutory Notes and Related Subsidiaries
Effective Date of 2018 Amendment
"(1)
"(2)
Effective Date of 2007 Amendment
Amendment by
Effective Date of 2005 Amendment
Amendment by
Effective Date
Section applicable to production in taxable years beginning after Aug. 8, 2005, see section 1306(d) of
§45K. Credit for producing fuel from a nonconventional source
(a) Allowance of credit
For purposes of section 38, the nonconventional source production credit determined under this section for the taxable year is an amount equal to—
(1) $3, multiplied by
(2) the barrel-of-oil equivalent of qualified fuels—
(A) sold by the taxpayer to an unrelated person during the taxable year, and
(B) the production of which is attributable to the taxpayer.
(b) Limitations and adjustments
(1) Phaseout of credit
The amount of the credit allowable under subsection (a) shall be reduced by an amount which bears the same ratio to the amount of the credit (determined without regard to this paragraph) as—
(A) the amount by which the reference price for the calendar year in which the sale occurs exceeds $23.50, bears to
(B) $6.
(2) Credit and phaseout adjustment based on inflation
The $3 amount in subsection (a) and the $23.50 and $6 amounts in paragraph (1) shall each be adjusted by multiplying such amount by the inflation adjustment factor for the calendar year in which the sale occurs. In the case of gas from a tight formation, the $3 amount in subsection (a) shall not be adjusted.
(3) Credit reduced for grants, tax-exempt bonds, and subsidized energy financing
(A) In general
The amount of the credit allowable under subsection (a) with respect to any project for any taxable year (determined after the application of paragraphs (1) and (2)) shall be reduced by the amount which is the product of the amount so determined for such year and a fraction—
(i) the numerator of which is the sum, for the taxable year and all prior taxable years, of—
(I) grants provided by the United States, a State, or a political subdivision of a State for use in connection with the project,
(II) proceeds of any issue of State or local government obligations used to provide financing for the project the interest on which is exempt from tax under section 103, and
(III) the aggregate amount of subsidized energy financing (within the meaning of section 48(a)(4)(C)) provided in connection with the project, and
(ii) the denominator of which is the aggregate amount of additions to the capital account for the project for the taxable year and all prior taxable years.
(B) Amounts determined at close of year
The amounts under subparagraph (A) for any taxable year shall be determined as of the close of the taxable year.
(4) Credit reduced for energy credit
The amount allowable as a credit under subsection (a) with respect to any project for any taxable year (determined after the application of paragraphs (1), (2), and (3)) shall be reduced by the excess of—
(A) the aggregate amount allowed under section 38 for the taxable year or any prior taxable year by reason of the energy percentage with respect to property used in the project, over
(B) the aggregate amount recaptured with respect to the amount described in subparagraph (A)—
(i) under section 49(b) or 50(a) for the taxable year or any prior taxable year, or
(ii) under this paragraph for any prior taxable year.
The amount recaptured under section 49(b) or 50(a) with respect to any property shall be appropriately reduced to take into account any reduction in the credit allowed by this section by reason of the preceding sentence.
(5) Credit reduced for enhanced oil recovery credit
The amount allowable as a credit under subsection (a) with respect to any project for any taxable year (determined after application of paragraphs (1), (2), (3), and (4)) shall be reduced by the excess (if any) of—
(A) the aggregate amount allowed under section 38 for the taxable year and any prior taxable year by reason of any enhanced oil recovery credit determined under section 43 with respect to such project, over
(B) the aggregate amount recaptured with respect to the amount described in subparagraph (A) under this paragraph for any prior taxable year.
(c) Definition of qualified fuels
For purposes of this section—
(1) In general
The term "qualified fuels" means—
(A) oil produced from shale and tar sands,
(B) gas produced from—
(i) geopressured brine, Devonian shale, coal seams, or a tight formation, or
(ii) biomass, and
(C) liquid, gaseous, or solid synthetic fuels produced from coal (including lignite), including such fuels when used as feedstocks.
(2) Gas from geopressured brine, etc.
(A) In general
Except as provided in subparagraph (B), the determination of whether any gas is produced from geopressured brine, Devonian shale, coal seams, or a tight formation shall be made in accordance with section 503 of the Natural Gas Policy Act of 1978 (as in effect before the repeal of such section).
(B) Special rules for gas from tight formations
The term "gas produced from a tight formation" shall only include gas from a tight formation—
(i) which, as of April 20, 1977, was committed or dedicated to interstate commerce (as defined in section 2(18) of the Natural Gas Policy Act of 1978, as in effect on the date of the enactment of this clause), or
(ii) which is produced from a well drilled after such date of enactment.
(3) Biomass
The term "biomass" means any organic material other than—
(A) oil and natural gas (or any product thereof), and
(B) coal (including lignite) or any product thereof.
(d) Other definitions and special rules
For purposes of this section—
(1) Only production within the United States taken into account
Sales shall be taken into account under this section only with respect to qualified fuels the production of which is within—
(A) the United States (within the meaning of section 638(1)), or
(B) a possession of the United States (within the meaning of section 638(2)).
(2) Computation of inflation adjustment factor and reference price
(A) In general
The Secretary shall, not later than April 1 of each calendar year, determine and publish in the Federal Register the inflation adjustment factor and the reference price for the preceding calendar year in accordance with this paragraph.
(B) Inflation adjustment factor
The term "inflation adjustment factor" means, with respect to a calendar year, a fraction the numerator of which is the GNP implicit price deflator for the calendar year and the denominator of which is the GNP implicit price deflator for calendar year 1979. The term "GNP implicit price deflator" means the first revision of the implicit price deflator for the gross national product as computed and published by the Department of Commerce.
(C) Reference price
The term "reference price" means with respect to a calendar year the Secretary's estimate of the annual average wellhead price per barrel for all domestic crude oil the price of which is not subject to regulation by the United States.
(3) Production attributable to the taxpayer
In the case of a property or facility in which more than 1 person has an interest, except to the extent provided in regulations prescribed by the Secretary, production from the property or facility (as the case may be) shall be allocated among such persons in proportion to their respective interests in the gross sales from such property or facility.
(4) Gas from geopressured brine, Devonian shale, coal seams, or a tight formation
The amount of the credit allowable under subsection (a) shall be determined without regard to any production attributable to a property from which gas from Devonian shale, coal seams, geopressured brine, or a tight formation was produced in marketable quantities before January 1, 1980.
(5) Barrel-of-oil equivalent
The term "barrel-of-oil equivalent" with respect to any fuel means that amount of such fuel which has a Btu content of 5.8 million; except that in the case of qualified fuels described in subparagraph (C) of subsection (c)(1), the Btu content shall be determined without regard to any material from a source not described in such subparagraph.
(6) Barrel defined
The term "barrel" means 42 United States gallons.
(7) Related persons
Persons shall be treated as related to each other if such persons would be treated as a single employer under the regulations prescribed under section 52(b). In the case of a corporation which is a member of an affiliated group of corporations filing a consolidated return, such corporation shall be treated as selling qualified fuels to an unrelated person if such fuels are sold to such a person by another member of such group.
(8) Pass-thru in the case of estates and trusts
Under regulations prescribed by the Secretary, rules similar to the rules of subsection (d) of section 52 shall apply.
(e) Application of section
This section shall apply with respect to qualified fuels—
(1) which are—
(A) produced from a well drilled after December 31, 1979, and before January 1, 1993, or
(B) produced in a facility placed in service after December 31, 1979, and before January 1, 1993, and
(2) which are sold before January 1, 2003.
(f) Extension for certain facilities
(1) In general
In the case of a facility for producing qualified fuels described in subparagraph (B)(ii) or (C) of subsection (c)(1)—
(A) for purposes of subsection (e)(1)(B), such facility shall be treated as being placed in service before January 1, 1993, if such facility is placed in service before July 1, 1998, pursuant to a binding written contract in effect before January 1, 1997, and
(B) if such facility is originally placed in service after December 31, 1992, paragraph (2) of subsection (e) shall be applied with respect to such facility by substituting "January 1, 2008" for "January 1, 2003".
(2) Special rule
Paragraph (1) shall not apply to any facility which produces coke or coke gas unless the original use of the facility commences with the taxpayer.
(g) Extension for facilities producing coke or coke gas
Notwithstanding subsection (e)—
(1) In general
In the case of a facility for producing coke or coke gas (other than from petroleum based products) which was placed in service before January 1, 1993, or after June 30, 1998, and before January 1, 2010, this section shall apply with respect to coke and coke gas produced in such facility and sold during the period—
(A) beginning on the later of January 1, 2006, or the date that such facility is placed in service, and
(B) ending on the date which is 4 years after the date such period began.
(2) Special rules
In determining the amount of credit allowable under this section solely by reason of this subsection—
(A) Daily limit
The amount of qualified fuels sold during any taxable year which may be taken into account by reason of this subsection with respect to any facility shall not exceed an average barrel-of-oil equivalent of 4,000 barrels per day. Days before the date the facility is placed in service shall not be taken into account in determining such average.
(B) Extension period to commence with unadjusted credit amount
For purposes of applying subsection (b)(2) to the $3 amount in subsection (a), in the case of fuels sold after 2005, subsection (d)(2)(B) shall be applied by substituting "2004" for "1979".
(C) Denial of double benefit
This subsection shall not apply to any facility producing qualified fuels for which a credit was allowed under this section for the taxable year or any preceding taxable year by reason of subsection (f).
(D) Nonapplication of phaseout
Subsection (b)(1) shall not apply.
(E) Coordination with section 45
No credit shall be allowed with respect to any coke or coke gas which is produced using steel industry fuel (as defined in section 45(c)(7)) as feedstock if a credit is allowed to any taxpayer under section 45 with respect to the production of such steel industry fuel.
(Added
Inflation Adjusted Items for Certain Tax Years
For inflation adjustment of certain items in this section, see Internal Revenue Notices listed in a table below.
Editorial Notes
References in Text
Section 503 of the Natural Gas Policy Act of 1978 (as in effect before the repeal of such section), referred to in subsec. (c)(2)(A), was classified to
Section 2(18) of the Natural Gas Policy Act of 1978, referred to in subsec. (c)(2)(B)(i), is classified to
The date of the enactment of this clause, and such date of enactment, referred to in subsec. (c)(2)(B), probably mean the date of enactment of
Amendments
2014—Subsec. (g)(2)(E).
2008—Subsec. (g)(2)(E).
2006—Subsec. (g)(1).
Subsec. (g)(2)(D).
2005—
Subsec. (a).
Subsec. (b)(6).
"(A) the regular tax for the taxable year reduced by the sum of the credits allowable under subpart A and section 27, over
"(B) the tentative minimum tax for the taxable year."
Subsec. (c)(2)(A).
Subsecs. (e), (f).
Subsec. (g).
Subsec. (g)(1)(A).
Subsec. (g)(1)(B).
Subsec. (g)(2)(C).
Subsec. (h).
1996—Subsec. (b)(6)(A).
Subsec. (g)(1)(A).
1992—Subsec. (g).
1990—Subsec. (b)(3)(A)(i)(III).
Subsec. (b)(4).
Subsec. (b)(5), (6).
Subsec. (c)(1)(B) to (E).
Subsec. (c)(2)(B).
"(i) gas the price of which is regulated by the United States, and
"(ii) gas for which the maximum lawful price applicable under the Natural Gas Policy Act of 1978 is at least 150 percent of the then applicable price under section 103 of such Act."
Subsec. (c)(3).
Subsec. (c)(4).
"(A)
"(B)
"(i) shall apply to all production from a facility; and
"(ii) shall be effective for the taxable year with respect to which it is made and for all subsequent taxable years and, once made, may be revoked only with the consent of the Secretary."
Subsec. (c)(5).
Subsec. (d)(4).
Subsec. (d)(5), (6).
"(A) qualifying processed wood fuel,
or
"(B) steam from solid agricultural byproducts,
paragraph (1) of subsection (b) shall not apply with respect to the amount of the credit allowable under subsection (a) for fuels sold during the 3-year period beginning on the date the facility is placed in service."
Subsec. (d)(7) to (9).
Subsec. (f).
Subsec. (f)(1)(A)(i), (ii).
Subsec. (f)(1)(B).
1988—Subsec. (f)(1)(A)(i), (ii).
1986—Subsec. (b)(5).
Subsec. (d)(8).
1984—
Subsec. (b)(1)(A).
Subsec. (b)(2).
Subsec. (b)(5).
1983—Subsec. (f)(1)(B), (2)(A)(i).
1982—Subsec. (d)(9).
1981—Subsec. (e).
Statutory Notes and Related Subsidiaries
Effective Date of 2014 Amendment
Amendment by
Effective Date of 2008 Amendment
Amendment by
Effective Date of 2006 Amendment
Effective Date of 2005 Amendments
Amendment by section 402(g) of
"(1)
"(2)
Effective Date of 1996 Amendment
Effective Date of 1990 Amendment
"(1)
"(2)
"(A) any transition property (as defined in section 49(e) of the Internal Revenue Code of 1986 (as in effect on the day before the date of the enactment of this Act [Nov. 5, 1990]),
"(B) any property with respect to which qualified progress expenditures were previously taken into account under section 46(d) of such Code (as so in effect), and
"(C) any property described in section 46(b)(2)(C) of such Code (as so in effect)."
Effective Date of 1986 Amendment
Amendment by section 701(c)(3) of
Effective Date of 1984 Amendment
Amendment by section 474(h) of
Amendment by section 612(e)(1) of
Effective Date of 1983 Amendment
Amendment by
Effective Date of 1982 Amendment
Amendment by
Effective Date of 1981 Amendment
Effective Date
Savings Provision
"(1) any provision amended or repealed by this part [part I (§§11801–11821) of subtitle H of title XI of
"(A) any transaction occurring before the date of the enactment of this Act [Nov. 5, 1990],
"(B) any property acquired before such date of enactment, or
"(C) any item of income, loss, deduction, or credit taken into account before such date of enactment, and
"(2) the treatment of such transaction, property, or item under such provision would (without regard to the amendments made by this part) affect liability for tax for periods ending after such date of enactment,
nothing in the amendments made by this part shall be construed to affect the treatment of such transaction, property, or item for purposes of determining liability for tax for periods ending after such date of enactment."
Applicability of Certain Amendments by Pub. L. 99–514 in Relation to Treaty Obligations of United States
For applicability of amendment by section 701(c)(3) of
Plan Amendments Not Required Until January 1, 1989
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101–1147 and 1171–1177] or title XVIII [§§1800–1899A] of
Inflation Adjusted Items and Reference Price for Certain Years
Provisions relating to inflation adjustment of items in this section and reference price for certain years were contained in the following:
2022—Internal Revenue Notice 2023–49.
2021—Internal Revenue Notice 2022–17.
2020—Internal Revenue Notice 2021–29.
2019—Internal Revenue Notice 2020–28.
2018—Internal Revenue Notice 2019–28.
2017—Internal Revenue Notice 2018–32.
2016—Internal Revenue Notice 2017–24.
2015—Internal Revenue Notice 2016–43.
2014—Internal Revenue Notice 2015–45.
2013—Internal Revenue Notice 2014–25.
2012—Internal Revenue Notice 2013–25.
2011—Internal Revenue Notice 2012–30.
2010—Internal Revenue Notice 2011–30.
2009—Internal Revenue Notice 2010–31.
2008—Internal Revenue Notice 2009–32.
2007—Internal Revenue Notice 2008–44.
2006—Internal Revenue Notice 2007–38.
§45L. New energy efficient home credit
(a) Allowance of credit
(1) In general
For purposes of section 38, in the case of an eligible contractor, the new energy efficient home credit for the taxable year is the applicable amount for each qualified new energy efficient home which is—
(A) constructed by the eligible contractor, and
(B) acquired by a person from such eligible contractor for use as a residence during the taxable year.
(2) Applicable amount
For purposes of paragraph (1), the applicable amount is an amount equal to—
(A) in the case of a dwelling unit which is eligible to participate in the Energy Star Residential New Construction Program or the Energy Star Manufactured New Homes program—
(i) which meets the requirements of subsection (c)(1)(A) (and which does not meet the requirements of subsection (c)(1)(B)), $2,500, and
(ii) which meets the requirements of subsection (c)(1)(B), $5,000, and
(B) in the case of a dwelling unit which is part of a building eligible to participate in the Energy Star Multifamily New Construction Program—
(i) which meets the requirements of subsection (c)(1)(A) (and which does not meet the requirements of subsection (c)(1)(B)), $500, and
(ii) which meets the requirements of subsection (c)(1)(B), $1,000.
(b) Definitions
For purposes of this section—
(1) Eligible contractor
The term "eligible contractor" means—
(A) the person who constructed the qualified new energy efficient home, or
(B) in the case of a qualified new energy efficient home which is a manufactured home, the manufactured home producer of such home.
(2) Qualified new energy efficient home
The term "qualified new energy efficient home" means a dwelling unit—
(A) located in the United States,
(B) the construction of which is substantially completed after the date of the enactment of this section, and
(C) which meets the energy saving requirements of subsection (c).
(3) Construction
The term "construction" includes substantial reconstruction and rehabilitation.
(4) Acquire
The term "acquire" includes purchase.
(c) Energy saving requirements
(1) In general
(A) In general
A dwelling unit meets the requirements of this subparagraph if such dwelling unit meets the requirements of paragraph (2) or (3) (whichever is applicable).
(B) Zero energy ready home program
A dwelling unit meets the requirements of this subparagraph if such dwelling unit is certified as a zero energy ready home under the zero energy ready home program of the Department of Energy as in effect on January 1, 2023 (or any successor program determined by the Secretary).
(2) Single-family home requirements
A dwelling unit meets the requirements of this paragraph if—
(A) such dwelling unit meets—
(i)(I) in the case of a dwelling unit acquired before January 1, 2025, the Energy Star Single-Family New Homes National Program Requirements 3.1, or
(II) in the case of a dwelling unit acquired after December 31, 2024, the Energy Star Single-Family New Homes National Program Requirements 3.2, and
(ii) the most recent Energy Star Single-Family New Homes Program Requirements applicable to the location of such dwelling unit (as in effect on the latter of January 1, 2023, or January 1 of two calendar years prior to the date the dwelling unit was acquired), or
(B) such dwelling unit meets the most recent Energy Star Manufactured Home National program requirements as in effect on the latter of January 1, 2023, or January 1 of two calendar years prior to the date such dwelling unit is acquired.
(3) Multi-family home requirements
A dwelling unit meets the requirements of this paragraph if—
(A) such dwelling unit meets the most recent Energy Star Multifamily New Construction National Program Requirements (as in effect on either January 1, 2023, or January 1 of three calendar years prior to the date the dwelling was acquired, whichever is later), and
(B) such dwelling unit meets the most recent Energy Star Multifamily New Construction Regional Program Requirements applicable to the location of such dwelling unit (as in effect on either January 1, 2023, or January 1 of three calendar years prior to the date the dwelling was acquired, whichever is later).
(d) Certification
(1) Method of certification
A certification described in subsection (c) shall be made in accordance with guidance prescribed by the Secretary, after consultation with the Secretary of Energy. Such guidance shall specify procedures and methods for calculating energy and cost savings.
(2) Form
Any certification described in subsection (c) shall be made in writing in a manner which specifies in readily verifiable fashion the energy efficient building envelope components and energy efficient heating or cooling equipment installed and their respective rated energy efficiency performance.
(e) Basis adjustment
For purposes of this subtitle, if a credit is allowed under this section in connection with any expenditure for any property, the increase in the basis of such property which would (but for this subsection) result from such expenditure shall be reduced by the amount of the credit so determined. This subsection shall not apply for purposes of determining the adjusted basis of any building under section 42.
(f) Coordination with investment credit
For purposes of this section, expenditures taken into account under section 47 or 48(a) shall not be taken into account under this section.
(g) Prevailing wage requirement
(1) In general
In the case of a qualifying residence described in subsection (a)(2)(B) meeting the prevailing wage requirements of paragraph (2)(A), the credit amount allowed with respect to such residence shall be—
(A) $2,500 in the case of a residence which meets the requirements of subparagraph (A) of subsection (c)(1) (and which does not meet the requirements of subparagraph (B) of such subsection), and
(B) $5,000 in the case of a residence which meets the requirements of subsection (c)(1)(B).
(2) Prevailing wage requirements
(A) In general
The requirements described in this subparagraph with respect to any qualified residence are that the taxpayer shall ensure that any laborers and mechanics employed by the taxpayer or any contractor or subcontractor in the construction of such residence shall be paid wages at rates not less than the prevailing rates for construction, alteration, or repair of a similar character in the locality in which such residence is located as most recently determined by the Secretary of Labor, in accordance with subchapter IV of
(B) Correction and penalty related to failure to satisfy wage requirements
Rules similar to the rules of section 45(b)(7)(B) shall apply.
(3) Regulations and guidance
The Secretary shall issue such regulations or other guidance as the Secretary determines necessary to carry out the purposes of this subsection, including regulations or other guidance which provides for requirements for recordkeeping or information reporting for purposes of administering the requirements of this subsection.
(h) Termination
This section shall not apply to any qualified new energy efficient home acquired after December 31, 2032.
(Added
Editorial Notes
References in Text
The date of the enactment of this section, referred to in subsec. (b)(2)(B), is the date of enactment of
Amendments
2022—Subsec. (a)(2).
Subsec. (c).
Subsec. (e).
Subsec. (g).
Subsec. (h).
2020—Subsec. (g).
2019—Subsec. (g).
2018—Subsec. (g).
2015—Subsec. (g).
2014—Subsec. (g).
2013—Subsec. (c)(1)(A)(i).
Subsec. (g).
2010—Subsec. (g).
2008—Subsec. (g).
2007—Subsec. (c)(2), (3).
2006—Subsec. (g).
Statutory Notes and Related Subsidiaries
Effective Date of 2022 Amendment
"(1)
"(2)
Effective Date of 2020 Amendment
Effective Date of 2019 Amendment
Effective Date of 2018 Amendment
Effective Date of 2015 Amendment
Effective Date of 2014 Amendment
Effective Date of 2013 Amendment
Effective Date of 2010 Amendment
Effective Date
Section applicable to qualified new energy efficient homes acquired after Dec. 31, 2005, in taxable years ending after such date, see section 1332(f) of
[§45M. Repealed. Pub. L. 115–141, div. U, title IV, §401(d)(2)(A), Mar. 23, 2018, 132 Stat. 1208 ]
Section, added
Statutory Notes and Related Subsidiaries
Savings Provision
For provisions that nothing in repeal by
§45N. Mine rescue team training credit
(a) Amount of credit
For purposes of section 38, the mine rescue team training credit determined under this section with respect to each qualified mine rescue team employee of an eligible employer for any taxable year is an amount equal to the lesser of—
(1) 20 percent of the amount paid or incurred by the taxpayer during the taxable year with respect to the training program costs of such qualified mine rescue team employee (including wages of such employee while attending such program), or
(2) $10,000.
(b) Qualified mine rescue team employee
For purposes of this section, the term "qualified mine rescue team employee" means with respect to any taxable year any full-time employee of the taxpayer who is—
(1) a miner eligible for more than 6 months of such taxable year to serve as a mine rescue team member as a result of completing, at a minimum, an initial 20-hour course of instruction as prescribed by the Mine Safety and Health Administration's Office of Educational Policy and Development, or
(2) a miner eligible for more than 6 months of such taxable year to serve as a mine rescue team member by virtue of receiving at least 40 hours of refresher training in such instruction.
(c) Eligible employer
For purposes of this section, the term "eligible employer" means any taxpayer which employs individuals as miners in underground mines in the United States.
(d) Wages
For purposes of this section, the term "wages" has the meaning given to such term by subsection (b) of section 3306 (determined without regard to any dollar limitation contained in such section).
(e) Termination
This section shall not apply to taxable years beginning after December 31, 2021.
(Added
Editorial Notes
Amendments
2020—Subsec. (e).
2019—Subsec. (e).
2018—Subsec. (e).
2015—Subsec. (e).
2014—Subsec. (e).
2013—Subsec. (e).
2010—Subsec. (e).
2008—Subsec. (e).
Statutory Notes and Related Subsidiaries
Effective Date of 2020 Amendment
Effective Date of 2019 Amendment
Effective Date of 2018 Amendment
Effective Date of 2015 Amendment
Effective Date of 2014 Amendment
Effective Date of 2013 Amendment
Effective Date of 2010 Amendment
Effective Date
Section applicable to taxable years beginning after Dec. 31, 2005, see section 405(e) of
§45O. Agricultural chemicals security credit
(a) In general
For purposes of section 38, in the case of an eligible agricultural business, the agricultural chemicals security credit determined under this section for the taxable year is 30 percent of the qualified security expenditures for the taxable year.
(b) Facility limitation
The amount of the credit determined under subsection (a) with respect to any facility for any taxable year shall not exceed—
(1) $100,000, reduced by
(2) the aggregate amount of credits determined under subsection (a) with respect to such facility for the 5 prior taxable years.
(c) Annual limitation
The amount of the credit determined under subsection (a) with respect to any taxpayer for any taxable year shall not exceed $2,000,000.
(d) Qualified chemical security expenditure
For purposes of this section, the term "qualified chemical security expenditure" means, with respect to any eligible agricultural business for any taxable year, any amount paid or incurred by such business during such taxable year for—
(1) employee security training and background checks,
(2) limitation and prevention of access to controls of specified agricultural chemicals stored at the facility,
(3) tagging, locking tank valves, and chemical additives to prevent the theft of specified agricultural chemicals or to render such chemicals unfit for illegal use,
(4) protection of the perimeter of specified agricultural chemicals,
(5) installation of security lighting, cameras, recording equipment, and intrusion detection sensors,
(6) implementation of measures to increase computer or computer network security,
(7) conducting a security vulnerability assessment,
(8) implementing a site security plan, and
(9) such other measures for the protection of specified agricultural chemicals as the Secretary may identify in regulation.
Amounts described in the preceding sentence shall be taken into account only to the extent that such amounts are paid or incurred for the purpose of protecting specified agricultural chemicals.
(e) Eligible agricultural business
For purposes of this section, the term "eligible agricultural business" means any person in the trade or business of—
(1) selling agricultural products, including specified agricultural chemicals, at retail predominantly to farmers and ranchers, or
(2) manufacturing, formulating, distributing, or aerially applying specified agricultural chemicals.
(f) Specified agricultural chemical
For purposes of this section, the term "specified agricultural chemical" means—
(1) any fertilizer commonly used in agricultural operations which is listed under—
(A) section 302(a)(2) of the Emergency Planning and Community Right-to-Know Act of 1986,
(B) section 101 of part 172 of title 49, Code of Federal Regulations, or
(C) part 126, 127, or 154 of title 33, Code of Federal Regulations, and
(2) any pesticide (as defined in section 2(u) of the Federal Insecticide, Fungicide, and Rodenticide Act), including all active and inert ingredients thereof, which is customarily used on crops grown for food, feed, or fiber.
(g) Controlled groups
Rules similar to the rules of paragraphs (1) and (2) of section 41(f) shall apply for purposes of this section.
(h) Regulations
The Secretary may prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section, including regulations which—
(1) provide for the proper treatment of amounts which are paid or incurred for purpose of protecting any specified agricultural chemical and for other purposes, and
(2) provide for the treatment of related properties as one facility for purposes of subsection (b).
(i) Termination
This section shall not apply to any amount paid or incurred after December 31, 2012.
(Added
Editorial Notes
References in Text
Section 302(a)(2) of the Emergency Planning and Community Right-to-Know Act of 1986, referred to in subsec. (f)(1)(A), is classified to
Section 2(u) of the Federal Insecticide, Fungicide, and Rodenticide Act, referred to in subsec. (f)(2), is classified to
Codification
Statutory Notes and Related Subsidiaries
Effective Date
Enactment of this section and repeal of
Section applicable to amounts paid or incurred after June 18, 2008, see section 15343(e) of
§45P. Employer wage credit for employees who are active duty members of the uniformed services
(a) General rule
For purposes of section 38, the differential wage payment credit for any taxable year is an amount equal to 20 percent of the sum of the eligible differential wage payments for each of the qualified employees of the taxpayer during such taxable year.
(b) Definitions
For purposes of this section—
(1) Eligible differential wage payments
The term "eligible differential wage payments" means, with respect to each qualified employee, so much of the differential wage payments (as defined in section 3401(h)(2)) paid to such employee for the taxable year as does not exceed $20,000.
(2) Qualified employee
The term "qualified employee" means a person who has been an employee of the taxpayer for the 91-day period immediately preceding the period for which any differential wage payment is made.
(3) Controlled groups
All persons treated as a single employer under subsection (b), (c), (m), or (o) of section 414 shall be treated as a single employer.
(c) Coordination with other credits
The amount of credit otherwise allowable under this chapter with respect to compensation paid to any employee shall be reduced by the credit determined under this section with respect to such employee.
(d) Disallowance for failure to comply with employment or reemployment rights of members of the reserve components of the Armed Forces of the United States
No credit shall be allowed under subsection (a) to a taxpayer for—
(1) any taxable year, beginning after the date of the enactment of this section, in which the taxpayer is under a final order, judgment, or other process issued or required by a district court of the United States under
(2) the 2 succeeding taxable years.
(e) Certain rules to apply
For purposes of this section, rules similar to the rules of subsections (c), (d), and (e) of section 52 shall apply.
(Added
Editorial Notes
References in Text
The date of the enactment of this section, referred to in subsec. (d)(1), is the date of the enactment of
Amendments
2015—Subsec. (a).
Subsec. (b)(3).
Subsec. (f).
2014—Subsec. (f).
2013—Subsec. (f).
2010—Subsec. (f).
Statutory Notes and Related Subsidiaries
Effective Date of 2015 Amendment
"(1)
"(2)
Effective Date of 2014 Amendment
Effective Date of 2013 Amendment
Effective Date of 2010 Amendment
Effective Date
Section applicable to amounts paid after June 17, 2008, see section 111(e) of
§45Q. Credit for carbon oxide sequestration
(a) General rule
For purposes of section 38, the carbon oxide sequestration credit for any taxable year is an amount equal to the sum of—
(1) $20 per metric ton of qualified carbon oxide which is—
(A) captured by the taxpayer using carbon capture equipment which is originally placed in service at a qualified facility before the date of the enactment of the Bipartisan Budget Act of 2018, and
(B) disposed of by the taxpayer in secure geological storage and not used by the taxpayer as described in paragraph (2)(B),
(2) $10 per metric ton of qualified carbon oxide which is—
(A) captured by the taxpayer using carbon capture equipment which is originally placed in service at a qualified facility before the date of the enactment of the Bipartisan Budget Act of 2018, and
(B)(i) used by the taxpayer as a tertiary injectant in a qualified enhanced oil or natural gas recovery project and disposed of by the taxpayer in secure geological storage, or
(ii) utilized by the taxpayer in a manner described in subsection (f)(5),
(3) the applicable dollar amount (as determined under subsection (b)(1)) per metric ton of qualified carbon oxide which is—
(A) captured by the taxpayer using carbon capture equipment which is originally placed in service at a qualified facility on or after the date of the enactment of the Bipartisan Budget Act of 2018, during the 12-year period beginning on the date the equipment was originally placed in service, and
(B) disposed of by the taxpayer in secure geological storage and not used by the taxpayer as described in paragraph (4)(B), and
(4) the applicable dollar amount (as determined under subsection (b)(1)) per metric ton of qualified carbon oxide which is—
(A) captured by the taxpayer using carbon capture equipment which is originally placed in service at a qualified facility on or after the date of the enactment of the Bipartisan Budget Act of 2018, during the 12-year period beginning on the date the equipment was originally placed in service, and
(B)(i) used by the taxpayer as a tertiary injectant in a qualified enhanced oil or natural gas recovery project and disposed of by the taxpayer in secure geological storage, or
(ii) utilized by the taxpayer in a manner described in subsection (f)(5).
(b) Applicable dollar amount; additional equipment; election
(1) Applicable dollar amount
(A) In general
Except as provided in subparagraph (B) or (C), the applicable dollar amount shall be an amount equal to—
(i) for any taxable year beginning in a calendar year after 2016 and before 2027—
(I) for purposes of paragraph (3) of subsection (a), $17, and
(II) for purposes of paragraph (4) of such subsection, $12, and
(ii) for any taxable year beginning in a calendar year after 2026—
(I) for purposes of paragraph (3) of subsection (a), an amount equal to the product of $17 and the inflation adjustment factor for such calendar year determined under section 43(b)(3)(B) for such calendar year, determined by substituting "2025" for "1990", and
(II) for purposes of paragraph (4) of such subsection, an amount equal to the product of $12 and the inflation adjustment factor for such calendar year determined under section 43(b)(3)(B) for such calendar year, determined by substituting "2025" for "1990".
(B) Special rule for direct air capture facilities
In the case of any qualified facility described in subsection (d)(2)(A) which is placed in service after December 31, 2022, the applicable dollar amount shall be an amount equal to the applicable dollar amount otherwise determined with respect to such qualified facility under subparagraph (A), except that such subparagraph shall be applied—
(i) by substituting "$36" for "$17" each place it appears, and
(ii) by substituting "$26" for "$12" each place it appears.
(C) Applicable dollar amount for additional carbon capture equipment
In the case of any qualified facility which is placed in service before January 1, 2023, if any additional carbon capture equipment is installed at such facility and such equipment is placed in service after December 31, 2022, the applicable dollar amount shall be an amount equal to the applicable dollar amount otherwise determined under this paragraph, except that subparagraph (B) shall be applied—
(i) by substituting "before January 1, 2023" for "after December 31, 2022", and
(ii) by substituting "the additional carbon capture equipment installed at such qualified facility" for "such qualified facility".
(D) Rounding
The applicable dollar amount determined under subparagraph (A), (B), or (C) shall be rounded to the nearest cent.
(2) Installation of additional carbon capture equipment on existing qualified facility
In the case of a qualified facility placed in service before the date of the enactment of the Bipartisan Budget Act of 2018, for which additional carbon capture equipment is placed in service on or after the date of the enactment of such Act, the amount of qualified carbon oxide which is captured by the taxpayer shall be equal to—
(A) for purposes of paragraphs (1)(A) and (2)(A) of subsection (a), the lesser of—
(i) the total amount of qualified carbon oxide captured at such facility for the taxable year, or
(ii) the total amount of the carbon dioxide capture capacity of the carbon capture equipment in service at such facility on the day before the date of the enactment of the Bipartisan Budget Act of 2018, and
(B) for purposes of paragraphs (3)(A) and (4)(A) of such subsection, an amount (not less than zero) equal to the excess of—
(i) the amount described in clause (i) of subparagraph (A), over
(ii) the amount described in clause (ii) of such subparagraph.
(3) Election
For purposes of determining the carbon oxide sequestration credit under this section, a taxpayer may elect to have the dollar amounts applicable under paragraph (1) or (2) of subsection (a) apply in lieu of the dollar amounts applicable under paragraph (3) or (4) of such subsection for each metric ton of qualified carbon oxide which is captured by the taxpayer using carbon capture equipment which is originally placed in service at a qualified facility on or after the date of the enactment of the Bipartisan Budget Act of 2018.
(c) Qualified carbon oxide
For purposes of this section—
(1) In general
The term "qualified carbon oxide" means—
(A) any carbon dioxide which—
(i) is captured from an industrial source by carbon capture equipment which is originally placed in service before the date of the enactment of the Bipartisan Budget Act of 2018,
(ii) would otherwise be released into the atmosphere as industrial emission of greenhouse gas or lead to such release, and
(iii) is measured at the source of capture and verified at the point of disposal, injection, or utilization,
(B) any carbon dioxide or other carbon oxide which—
(i) is captured from an industrial source by carbon capture equipment which is originally placed in service on or after the date of the enactment of the Bipartisan Budget Act of 2018,
(ii) would otherwise be released into the atmosphere as industrial emission of greenhouse gas or lead to such release, and
(iii) is measured at the source of capture and verified at the point of disposal, injection, or utilization, or
(C) in the case of a direct air capture facility, any carbon dioxide which—
(i) is captured directly from the ambient air, and
(ii) is measured at the source of capture and verified at the point of disposal, injection, or utilization.
(2) Recycled carbon oxide
The term "qualified carbon oxide" includes the initial deposit of captured carbon oxide used as a tertiary injectant. Such term does not include carbon oxide that is recaptured, recycled, and re-injected as part of the enhanced oil and natural gas recovery process.
(d) Qualified facility
For purposes of this section, the term "qualified facility" means any industrial facility or direct air capture facility—
(1) the construction of which begins before January 1, 2033, and either—
(A) construction of carbon capture equipment begins before such date, or
(B) the original planning and design for such facility includes installation of carbon capture equipment, and
(2) which—
(A) in the case of a direct air capture facility, captures not less than 1,000 metric tons of qualified carbon oxide during the taxable year,
(B) in the case of an electricity generating facility—
(i) captures not less than 18,750 metric tons of qualified carbon oxide during the taxable year, and
(ii) with respect to any carbon capture equipment for the applicable electric generating unit at such facility, has a capture design capacity of not less than 75 percent of the baseline carbon oxide production of such unit, or
(C) in the case of any other facility, captures not less than 12,500 metric tons of qualified carbon oxide during the taxable year.
(e) Definitions
For purposes of this section—
(1) Applicable electric generating unit
The term "applicable electric generating unit" means the principal electric generating unit for which the carbon capture equipment is originally planned and designed.
(2) Baseline carbon oxide production
(A) In general
The term "baseline carbon oxide production" means either of the following:
(i) In the case of an applicable electric generating unit which was originally placed in service more than 1 year prior to the date on which construction of the carbon capture equipment begins, the average annual carbon oxide production, by mass, from such unit during—
(I) in the case of an applicable electric generating unit which was originally placed in service more than 1 year prior to the date on which construction of the carbon capture equipment begins and on or after the date which is 3 years prior to the date on which construction of such equipment begins, the period beginning on the date such unit was placed in service and ending on the date on which construction of such equipment began, and
(II) in the case of an applicable electric generating unit which was originally placed in service more than 3 years prior to the date on which construction of the carbon capture equipment begins, the 3 years with the highest annual carbon oxide production during the 12-year period preceding the date on which construction of such equipment began.
(ii) In the case of an applicable electric generating unit which—
(I) as of the date on which construction of the carbon capture equipment begins, is not yet placed in service, or
(II) was placed in service during the 1-year period prior to the date on which construction of the carbon capture equipment begins,
the designed annual carbon oxide production, by mass, as determined based on an assumed capacity factor of 60 percent.
(B) Capacity factor
The term "capacity factor" means the ratio (expressed as a percentage) of the actual electric output from the applicable electric generating unit to the potential electric output from such unit.
(3) Direct air capture facility
(A) In general
Subject to subparagraph (B), the term "direct air capture facility" means any facility which uses carbon capture equipment to capture carbon dioxide directly from the ambient air.
(B) Exception
The term "direct air capture facility" shall not include any facility which captures carbon dioxide—
(i) which is deliberately released from naturally occurring subsurface springs, or
(ii) using natural photosynthesis.
(4) Qualified enhanced oil or natural gas recovery project
The term "qualified enhanced oil or natural gas recovery project" has the meaning given the term "qualified enhanced oil recovery project" by section 43(c)(2), by substituting "crude oil or natural gas" for "crude oil" in subparagraph (A)(i) thereof.
(5) Tertiary injectant
The term "tertiary injectant" has the same meaning as when used within section 193(b)(1).
(f) Special rules
(1) Only qualified carbon oxide captured and disposed of or used within the united states taken into account
The credit under this section shall apply only with respect to qualified carbon oxide the capture and disposal, use, or utilization of which is within—
(A) the United States (within the meaning of section 638(1)), or
(B) a possession of the United States (within the meaning of section 638(2)).
(2) Secure geological storage
The Secretary, in consultation with the Administrator of the Environmental Protection Agency, the Secretary of Energy, and the Secretary of the Interior, shall establish regulations for determining adequate security measures for the geological storage of qualified carbon oxide under subsection (a) such that the qualified carbon oxide does not escape into the atmosphere. Such term shall include storage at deep saline formations, oil and gas reservoirs, and unminable coal seams under such conditions as the Secretary may determine under such regulations.
(3) Credit attributable to taxpayer
(A) In general
Except as provided in subparagraph (B) or in any regulations prescribed by the Secretary, any credit under this section shall be attributable to—
(i) in the case of qualified carbon oxide captured using carbon capture equipment which is originally placed in service at a qualified facility before the date of the enactment of the Bipartisan Budget Act of 2018, the person that captures and physically or contractually ensures the disposal, utilization, or use as a tertiary injectant of such qualified carbon oxide, and
(ii) in the case of qualified carbon oxide captured using carbon capture equipment which is originally placed in service at a qualified facility on or after the date of the enactment of the Bipartisan Budget Act of 2018, the person that owns the carbon capture equipment and physically or contractually ensures the capture and disposal, utilization, or use as a tertiary injectant of such qualified carbon oxide.
(B) Election
If the person described in subparagraph (A) makes an election under this subparagraph in such time and manner as the Secretary may prescribe by regulations, the credit under this section—
(i) shall be allowable to the person that disposes of the qualified carbon oxide, utilizes the qualified carbon oxide, or uses the qualified carbon oxide as a tertiary injectant, and
(ii) shall not be allowable to the person described in subparagraph (A).
(4) Recapture
The Secretary shall, by regulations, provide for recapturing the benefit of any credit allowable under subsection (a) with respect to any qualified carbon oxide which ceases to be captured, disposed of, or used as a tertiary injectant in a manner consistent with the requirements of this section.
(5) Utilization of qualified carbon oxide
(A) In general
For purposes of this section, utilization of qualified carbon oxide means—
(i) the fixation of such qualified carbon oxide through photosynthesis or chemosynthesis, such as through the growing of algae or bacteria,
(ii) the chemical conversion of such qualified carbon oxide to a material or chemical compound in which such qualified carbon oxide is securely stored, or
(iii) the use of such qualified carbon oxide for any other purpose for which a commercial market exists (with the exception of use as a tertiary injectant in a qualified enhanced oil or natural gas recovery project), as determined by the Secretary.
(B) Measurement
(i) In general
For purposes of determining the amount of qualified carbon oxide utilized by the taxpayer under paragraph (2)(B)(ii) or (4)(B)(ii) of subsection (a), such amount shall be equal to the metric tons of qualified carbon oxide which the taxpayer demonstrates, based upon an analysis of lifecycle greenhouse gas emissions and subject to such requirements as the Secretary, in consultation with the Secretary of Energy and the Administrator of the Environmental Protection Agency, determines appropriate, were—
(I) captured and permanently isolated from the atmosphere, or
(II) displaced from being emitted into the atmosphere,
through use of a process described in subparagraph (A).
(ii) Lifecycle greenhouse gas emissions
For purposes of clause (i), the term "lifecycle greenhouse gas emissions" has the same meaning given such term under subparagraph (H) of section 211(o)(1) of the Clean Air Act (
(6) Election for applicable facilities
(A) In general
For purposes of this section, in the case of an applicable facility, for any taxable year in which such facility captures not less than 500,000 metric tons of qualified carbon oxide during the taxable year, the person described in paragraph (3)(A)(ii) may elect to have such facility, and any carbon capture equipment placed in service at such facility, deemed as having been placed in service on the date of the enactment of the Bipartisan Budget Act of 2018.
(B) Applicable facility
For purposes of this paragraph, the term "applicable facility" means a qualified facility—
(i) which was placed in service before the date of the enactment of the Bipartisan Budget Act of 2018, and
(ii) for which no taxpayer claimed a credit under this section in regards to such facility for any taxable year ending before the date of the enactment of such Act.
(7) Inflation adjustment
In the case of any taxable year beginning in a calendar year after 2009, there shall be substituted for each dollar amount contained in paragraphs (1) and (2) of subsection (a) an amount equal to the product of—
(A) such dollar amount, multiplied by
(B) the inflation adjustment factor for such calendar year determined under section 43(b)(3)(B) for such calendar year, determined by substituting "2008" for "1990".
(8) Credit reduced for tax-exempt bonds
Rules similar to the rule under section 45(b)(3) shall apply for purposes of this section.
(9) Election
For purposes of paragraphs (3) and (4) of subsection (a), a person described in paragraph (3)(A)(ii) may elect, at such time and in such manner as the Secretary may prescribe, to have the 12–year period begin on the first day of the first taxable year in which a credit under this section is claimed with respect to carbon capture equipment which is originally placed in service at a qualified facility on or after the date of the enactment of the Bipartisan Budget Act of 2018 (after application of paragraph (6), where applicable) if—
(A) no taxpayer claimed a credit under this section with respect to such carbon capture equipment for any prior taxable year,
(B) the qualified facility at which such carbon capture equipment is placed in service is located in an area affected by a federally-declared disaster (as defined by section 165(i)(5)(A)) after the carbon capture equipment is originally placed in service, and
(C) such federally-declared disaster results in a cessation of the operation of the qualified facility or the carbon capture equipment after such equipment is originally placed in service.
(g) Application of section for certain carbon capture equipment
In the case of any carbon capture equipment placed in service before the date of the enactment of the Bipartisan Budget Act of 2018, the credit under this section shall apply with respect to qualified carbon oxide captured using such equipment before the earlier of January 1, 2023, and the end of the calendar year in which the Secretary, in consultation with the Administrator of the Environmental Protection Agency, certifies that, during the period beginning after October 3, 2008, a total of 75,000,000 metric tons of qualified carbon oxide have been taken into account in accordance with—
(1) subsection (a) of this section, as in effect on the day before the date of the enactment of the Bipartisan Budget Act of 2018, and
(2) paragraphs (1) and (2) of subsection (a) of this section.
(h) Increased credit amount for qualified facilities and carbon capture equipment
(1) In general
In the case of any qualified facility or any carbon capture equipment which satisfy the requirements of paragraph (2), the amount of the credit determined under subsection (a) shall be equal to such amount (determined without regard to this sentence) multiplied by 5.
(2) Requirements
The requirements described in this paragraph are that—
(A) with respect to any qualified facility the construction of which begins on or after the date that is 60 days after the Secretary publishes guidance with respect to the requirements of paragraphs (3)(A) and (4), as well as any carbon capture equipment placed in service at such facility—
(i) subject to subparagraph (B) of paragraph (3), the taxpayer satisfies the requirements under subparagraph (A) of such paragraph with respect to such facility and equipment, and
(ii) the taxpayer satisfies the requirements under paragraph (4) with respect to the construction of such facility and equipment,
(B) with respect to any carbon capture equipment the construction of which begins on or after the date that is 60 days after the Secretary publishes guidance with respect to the requirements of paragraphs (3)(A) and (4), and which is installed at a qualified facility the construction of which began prior to such date—
(i) subject to subparagraph (B) of paragraph (3), the taxpayer satisfies the requirements under subparagraph (A) of such paragraph with respect to such equipment, and
(ii) the taxpayer satisfies the requirements under paragraph (4) with respect to the construction of such equipment, or
(C) the construction of carbon capture equipment begins prior to the date that is 60 days after the Secretary publishes guidance with respect to the requirements of paragraphs (3)(A) and (4), and such equipment is installed at a qualified facility the construction of which begins prior to such date.
(3) Prevailing wage requirements
(A) In general
The requirements described in this subparagraph with respect to any qualified facility and any carbon capture equipment placed in service at such facility are that the taxpayer shall ensure that any laborers and mechanics employed by the taxpayer or any contractor or subcontractor in—
(i) the construction of such facility or equipment, and
(ii) with respect to any taxable year, for any portion of such taxable year which is within the period described in paragraph (3)(A) or (4)(A) of subsection (a), the alteration or repair of such facility or such equipment,
shall be paid wages at rates not less than the prevailing rates for construction, alteration, or repair of a similar character in the locality in which such facility and equipment are located as most recently determined by the Secretary of Labor, in accordance with subchapter IV of
(B) Correction and penalty related to failure to satisfy wage requirements
Rules similar to the rules of section 45(b)(7)(B) shall apply.
(4) Apprenticeship requirements
Rules similar to the rules of section 45(b)(8) shall apply.
(5) Regulations and guidance
The Secretary shall issue such regulations or other guidance as the Secretary determines necessary to carry out the purposes of this subsection, including regulations or other guidance which provides for requirements for recordkeeping or information reporting for purposes of administering the requirements of this subsection.
(i) Regulations
The Secretary may prescribe such regulations and other guidance as may be necessary or appropriate to carry out this section, including regulations or other guidance to—
(1) ensure proper allocation under subsection (a) for qualified carbon oxide captured by a taxpayer during the taxable year ending after the date of the enactment of the Bipartisan Budget Act of 2018,
(2) determine whether a facility satisfies the requirements under subsection (d)(1) during such taxable year, and
(3) for purposes of subsection (d)(2)(B)(ii), adjust the baseline carbon oxide production with respect to any applicable electric generating unit at any electricity generating facility if, after the date on which the carbon capture equipment is placed in service, modifications which are chargeable to capital account are made to such unit which result in a significant increase or decrease in carbon oxide production.
(Added
Inflation Adjusted Items for Certain Tax Years
For inflation adjustment of certain items in this section, see Internal Revenue Notices listed in a table below.
Editorial Notes
References in Text
The date of the enactment of the Bipartisan Budget Act of 2018 and the date of the enactment of such Act, referred to in text, is the date of enactment of
Amendments
2022—Subsec. (b)(1)(A).
Subsec. (b)(1)(A)(i)(I).
Subsec. (b)(1)(A)(i)(II).
Subsec. (b)(1)(A)(ii)(I).
Subsec. (b)(1)(A)(ii)(II).
Subsec. (b)(1)(B), (C).
Subsec. (b)(1)(D).
Subsec. (d).
Subsec. (e).
Subsec. (f)(3).
Subsec. (f)(8).
Subsec. (f)(9).
Subsec. (g).
Subsecs. (h), (i).
Subsec. (i)(3).
2021—Subsec. (f)(3).
2020—Subsec. (d)(1).
2018—
2014—Subsec. (d)(2).
2009—Subsec. (a)(1)(B).
Subsec. (a)(2)(C).
Subsec. (d)(2).
Subsec. (e).
Statutory Notes and Related Subsidiaries
Effective Date of 2022 Amendment
"(1)
"(2)
"(3)
"(4)
Effective Date of 2021 Amendment
Effective Date of 2018 Amendment
Effective Date of 2014 Amendment
Amendment by
Effective Date of 2009 Amendment
Effective Date
Section applicable to carbon dioxide captured after Oct. 3, 2008, see section 115(d) of
Inflation Adjusted Items for Certain Years
Provisions relating to inflation adjustment of items in this section for certain years were contained in the following:
2023—Internal Revenue Notice 2023–46.
2022—Internal Revenue Notice 2022–38.
2021—Internal Revenue Notice 2021–35.
2020—Internal Revenue Notice 2020–40.
2019—Internal Revenue Notice 2019–31.
2018—Internal Revenue Notice 2018–40.
2017—Internal Revenue Notice 2017–32.
2016—Internal Revenue Notice 2016–53.
2015—Internal Revenue Notice 2015–44.
2014—Internal Revenue Notice 2014–40.
2013—Internal Revenue Notice 2013–34.
2012—Internal Revenue Notice 2012—42.
2011—Internal Revenue Notice 2011–50.
2010—Internal Revenue Notice 2010–75.
§45R. Employee health insurance expenses of small employers
(a) General rule
For purposes of section 38, in the case of an eligible small employer, the small employer health insurance credit determined under this section for any taxable year in the credit period is the amount determined under subsection (b).
(b) Health insurance credit amount
Subject to subsection (c), the amount determined under this subsection with respect to any eligible small employer is equal to 50 percent (35 percent in the case of a tax-exempt eligible small employer) of the lesser of—
(1) the aggregate amount of nonelective contributions the employer made on behalf of its employees during the taxable year under the arrangement described in subsection (d)(4) for premiums for qualified health plans offered by the employer to its employees through an Exchange, or
(2) the aggregate amount of nonelective contributions which the employer would have made during the taxable year under the arrangement if each employee taken into account under paragraph (1) had enrolled in a qualified health plan which had a premium equal to the average premium (as determined by the Secretary of Health and Human Services) for the small group market in the rating area in which the employee enrolls for coverage.
(c) Phaseout of credit amount based on number of employees and average wages
The amount of the credit determined under subsection (b) without regard to this subsection shall be reduced (but not below zero) by the sum of the following amounts:
(1) Such amount multiplied by a fraction the numerator of which is the total number of full-time equivalent employees of the employer in excess of 10 and the denominator of which is 15.
(2) Such amount multiplied by a fraction the numerator of which is the average annual wages of the employer in excess of the dollar amount in effect under subsection (d)(3)(B) and the denominator of which is such dollar amount.
(d) Eligible small employer
For purposes of this section—
(1) In general
The term "eligible small employer" means, with respect to any taxable year, an employer—
(A) which has no more than 25 full-time equivalent employees for the taxable year,
(B) the average annual wages of which do not exceed an amount equal to twice the dollar amount in effect under paragraph (3)(B) for the taxable year, and
(C) which has in effect an arrangement described in paragraph (4).
(2) Full-time equivalent employees
(A) In general
The term "full-time equivalent employees" means a number of employees equal to the number determined by dividing—
(i) the total number of hours of service for which wages were paid by the employer to employees during the taxable year, by
(ii) 2,080.
Such number shall be rounded to the next lowest whole number if not otherwise a whole number.
(B) Excess hours not counted
If an employee works in excess of 2,080 hours of service during any taxable year, such excess shall not be taken into account under subparagraph (A).
(C) Hours of service
The Secretary, in consultation with the Secretary of Labor, shall prescribe such regulations, rules, and guidance as may be necessary to determine the hours of service of an employee, including rules for the application of this paragraph to employees who are not compensated on an hourly basis.
(3) Average annual wages
(A) In general
The average annual wages of an eligible small employer for any taxable year is the amount determined by dividing—
(i) the aggregate amount of wages which were paid by the employer to employees during the taxable year, by
(ii) the number of full-time equivalent employees of the employee determined under paragraph (2) for the taxable year.
Such amount shall be rounded to the next lowest multiple of $1,000 if not otherwise such a multiple.
(B) Dollar amount
For purposes of paragraph (1)(B) and subsection (c)(2)—
(i) 2010, 2011, 2012, and 2013
The dollar amount in effect under this paragraph for taxable years beginning in 2010, 2011, 2012, or 2013 is $25,000.
(ii) Subsequent years
In the case of a taxable year beginning in a calendar year after 2013, the dollar amount in effect under this paragraph shall be equal to $25,000, multiplied by the cost-of-living adjustment under section 1(f)(3) for the calendar year, determined by substituting "calendar year 2012" for "calendar year 2016" in subparagraph (A)(ii) thereof.
(4) Contribution arrangement
An arrangement is described in this paragraph if it requires an eligible small employer to make a nonelective contribution on behalf of each employee who enrolls in a qualified health plan offered to employees by the employer through an exchange in an amount equal to a uniform percentage (not less than 50 percent) of the premium cost of the qualified health plan.
(5) Seasonal worker hours and wages not counted
For purposes of this subsection—
(A) In general
The number of hours of service worked by, and wages paid to, a seasonal worker of an employer shall not be taken into account in determining the full-time equivalent employees and average annual wages of the employer unless the worker works for the employer on more than 120 days during the taxable year.
(B) Definition of seasonal worker
The term "seasonal worker" means a worker who performs labor or services on a seasonal basis as defined by the Secretary of Labor, including workers covered by section 500.20(s)(1) of title 29, Code of Federal Regulations and retail workers employed exclusively during holiday seasons.
(e) Other rules and definitions
For purposes of this section—
(1) Employee
(A) Certain employees excluded
The term "employee" shall not include—
(i) an employee within the meaning of section 401(c)(1),
(ii) any 2-percent shareholder (as defined in section 1372(b)) of an eligible small business which is an S corporation,
(iii) any 5-percent owner (as defined in section 416(i)(1)(B)(i)) of an eligible small business, or
(iv) any individual who bears any of the relationships described in subparagraphs (A) through (G) of section 152(d)(2) to, or is a dependent described in section 152(d)(2)(H) of, an individual described in clause (i), (ii), or (iii).
(B) Leased employees
The term "employee" shall include a leased employee within the meaning of section 414(n).
(2) Credit period
The term "credit period" means, with respect to any eligible small employer, the 2-consecutive-taxable year period beginning with the 1st taxable year in which the employer (or any predecessor) offers 1 or more qualified health plans to its employees through an Exchange.
(3) Nonelective contribution
The term "nonelective contribution" means an employer contribution other than an employer contribution pursuant to a salary reduction arrangement.
(4) Wages
The term "wages" has the meaning given such term by section 3121(a) (determined without regard to any dollar limitation contained in such section).
(5) Aggregation and other rules made applicable
(A) Aggregation rules
All employers treated as a single employer under subsection (b), (c), (m), or (o) of section 414 shall be treated as a single employer for purposes of this section.
(B) Other rules
Rules similar to the rules of subsections (c), (d), and (e) of section 52 shall apply.
(f) Credit made available to tax-exempt eligible small employers
(1) In general
In the case of a tax-exempt eligible small employer, there shall be treated as a credit allowable under subpart C (and not allowable under this subpart) the lesser of—
(A) the amount of the credit determined under this section with respect to such employer, or
(B) the amount of the payroll taxes of the employer during the calendar year in which the taxable year begins.
(2) Tax-exempt eligible small employer
For purposes of this section, the term "tax-exempt eligible small employer" means an eligible small employer which is any organization described in section 501(c) which is exempt from taxation under section 501(a).
(3) Payroll taxes
For purposes of this subsection—
(A) In general
The term "payroll taxes" means—
(i) amounts required to be withheld from the employees of the tax-exempt eligible small employer under section 3401(a),
(ii) amounts required to be withheld from such employees under section 3101(b), and
(iii) amounts of the taxes imposed on the tax-exempt eligible small employer under section 3111(b).
(B) Special rule
A rule similar to the rule of section 24(d)(2)(C) shall apply for purposes of subparagraph (A).
(g) Application of section for calendar years 2010, 2011, 2012, and 2013
In the case of any taxable year beginning in 2010, 2011, 2012, or 2013, the following modifications to this section shall apply in determining the amount of the credit under subsection (a):
(1) No credit period required
The credit shall be determined without regard to whether the taxable year is in a credit period and for purposes of applying this section to taxable years beginning after 2013, no credit period shall be treated as beginning with a taxable year beginning before 2014.
(2) Amount of credit
The amount of the credit determined under subsection (b) shall be determined—
(A) by substituting "35 percent (25 percent in the case of a tax-exempt eligible small employer)" for "50 percent (35 percent in the case of a tax-exempt eligible small employer)",
(B) by reference to an eligible small employer's nonelective contributions for premiums paid for health insurance coverage (within the meaning of section 9832(b)(1)) of an employee, and
(C) by substituting for the average premium determined under subsection (b)(2) the amount the Secretary of Health and Human Services determines is the average premium for the small group market in the State in which the employer is offering health insurance coverage (or for such area within the State as is specified by the Secretary).
(3) Contribution arrangement
An arrangement shall not fail to meet the requirements of subsection (d)(4) solely because it provides for the offering of insurance outside of an Exchange.
(h) Insurance definitions
Any term used in this section which is also used in the Public Health Service Act or subtitle A of title I of the Patient Protection and Affordable Care Act shall have the meaning given such term by such Act or subtitle.
(i) Regulations
The Secretary shall prescribe such regulations as may be necessary to carry out the provisions of this section, including regulations to prevent the avoidance of the 2-year limit on the credit period through the use of successor entities and the avoidance of the limitations under subsection (c) through the use of multiple entities.
(Added and amended
Inflation Adjusted Items for Certain Years
For inflation adjustment of certain items in this section, see Revenue Procedures listed in a table under
Editorial Notes
References in Text
The Public Health Service Act, referred to in subsec. (h), is act July 1, 1944, ch. 373,
The Patient Protection and Affordable Care Act, referred to in subsec. (h), is
Amendments
2017—Subsec. (d)(3)(B)(ii).
2010—Subsec. (d)(3)(B).
Subsec. (g).
Statutory Notes and Related Subsidiaries
Effective Date of 2017 Amendment
Amendment by
Effective Date of 2010 Amendment
Effective Date
Section applicable to amounts paid or incurred in taxable years beginning after Dec. 31, 2009, see section 1421(f)(1) of
§45S. Employer credit for paid family and medical leave
(a) Establishment of credit
(1) In general
For purposes of section 38, in the case of an eligible employer, the paid family and medical leave credit is an amount equal to the applicable percentage of the amount of wages paid to qualifying employees during any period in which such employees are on family and medical leave.
(2) Applicable percentage
For purposes of paragraph (1), the term "applicable percentage" means 12.5 percent increased (but not above 25 percent) by 0.25 percentage points for each percentage point by which the rate of payment (as described under subsection (c)(1)(B)) exceeds 50 percent.
(b) Limitation
(1) In general
The credit allowed under subsection (a) with respect to any employee for any taxable year shall not exceed an amount equal to the product of the normal hourly wage rate of such employee for each hour (or fraction thereof) of actual services performed for the employer and the number of hours (or fraction thereof) for which family and medical leave is taken.
(2) Non-hourly wage rate
For purposes of paragraph (1), in the case of any employee who is not paid on an hourly wage rate, the wages of such employee shall be prorated to an hourly wage rate under regulations established by the Secretary.
(3) Maximum amount of leave subject to credit
The amount of family and medical leave that may be taken into account with respect to any employee under subsection (a) for any taxable year shall not exceed 12 weeks.
(c) Eligible employer
For purposes of this section—
(1) In general
The term "eligible employer" means any employer who has in place a written policy that meets the following requirements:
(A) The policy provides—
(i) in the case of a qualifying employee who is not a part-time employee (as defined in section 4980E(d)(4)(B)), not less than 2 weeks of annual paid family and medical leave, and
(ii) in the case of a qualifying employee who is a part-time employee, an amount of annual paid family and medical leave that is not less than an amount which bears the same ratio to the amount of annual paid family and medical leave that is provided to a qualifying employee described in clause (i) as—
(I) the number of hours the employee is expected to work during any week, bears to
(II) the number of hours an equivalent qualifying employee described in clause (i) is expected to work during the week.
(B) The policy requires that the rate of payment under the program is not less than 50 percent of the wages normally paid to such employee for services performed for the employer.
(2) Special rule for certain employers
(A) In general
An added employer shall not be treated as an eligible employer unless such employer provides paid family and medical leave in compliance with a written policy which ensures that the employer—
(i) will not interfere with, restrain, or deny the exercise of or the attempt to exercise, any right provided under the policy, and
(ii) will not discharge or in any other manner discriminate against any individual for opposing any practice prohibited by the policy.
(B) Added employer; added employee
For purposes of this paragraph—
(i) Added employee
The term "added employee" means a qualifying employee who is not covered by title I of the Family and Medical Leave Act of 1993, as amended.
(ii) Added employer
The term "added employer" means an eligible employer (determined without regard to this paragraph), whether or not covered by that title I, who offers paid family and medical leave to added employees.
(3) Aggregation rule
All persons which are treated as a single employer under subsections (a) and (b) of section 52 shall be treated as a single taxpayer.
(4) Treatment of benefits mandated or paid for by state or local governments
For purposes of this section, any leave which is paid by a State or local government or required by State or local law shall not be taken into account in determining the amount of paid family and medical leave provided by the employer.
(5) No inference
Nothing in this subsection shall be construed as subjecting an employer to any penalty, liability, or other consequence (other than ineligibility for the credit allowed by reason of subsection (a) or recapturing the benefit of such credit) for failure to comply with the requirements of this subsection.
(d) Qualifying employees
For purposes of this section, the term "qualifying employee" means any employee (as defined in section 3(e) of the Fair Labor Standards Act of 1938, as amended) who—
(1) has been employed by the employer for 1 year or more, and
(2) for the preceding year, had compensation not in excess of an amount equal to 60 percent of the amount applicable for such year under clause (i) of section 414(q)(1)(B).
(e) Family and medical leave
(1) In general
Except as provided in paragraph (2), for purposes of this section, the term "family and medical leave" means leave for any 1 or more of the purposes described under subparagraph (A), (B), (C), (D), or (E) of paragraph (1), or paragraph (3), of section 102(a) of the Family and Medical Leave Act of 1993, as amended, whether the leave is provided under that Act or by a policy of the employer.
(2) Exclusion
If an employer provides paid leave as vacation leave, personal leave, or medical or sick leave (other than leave specifically for 1 or more of the purposes referred to in paragraph (1)), that paid leave shall not be considered to be family and medical leave under paragraph (1).
(3) Definitions
In this subsection, the terms "vacation leave", "personal leave", and "medical or sick leave" mean those 3 types of leave, within the meaning of section 102(d)(2) of that Act.
(f) Determinations made by Secretary of Treasury
For purposes of this section, any determination as to whether an employer or an employee satisfies the applicable requirements for an eligible employer (as described in subsection (c)) or qualifying employee (as described in subsection (d)), respectively, shall be made by the Secretary based on such information, to be provided by the employer, as the Secretary determines to be necessary or appropriate.
(g) Wages
For purposes of this section, the term "wages" has the meaning given such term by subsection (b) of section 3306 (determined without regard to any dollar limitation contained in such section). Such term shall not include any amount taken into account for purposes of determining any other credit allowed under this subpart.
(h) Election to have credit not apply
(1) In general
A taxpayer may elect to have this section not apply for any taxable year.
(2) Other rules
Rules similar to the rules of paragraphs (2) and (3) of section 51(j) shall apply for purposes of this subsection.
(i) Termination
This section shall not apply to wages paid in taxable years beginning after December 31, 2025.
(Added
Editorial Notes
References in Text
The Family and Medical Leave Act of 1993 and that Act, referred to in subsecs. (c)(2)(B) and (e)(1), (3), is
Section 3(e) of the Fair Labor Standards Act of 1938, referred to in subsec. (d), is classified to
Amendments
2020—Subsec. (i).
2019—Subsec. (i).
Statutory Notes and Related Subsidiaries
Effective Date of 2020 Amendment
Effective Date of 2019 Amendment
Effective Date
Section applicable to wages paid in taxable years beginning after Dec. 31, 2017, see section 13403(e) of
§45T. Auto-enrollment option for retirement savings options provided by small employers
(a) In general
For purposes of section 38, in the case of an eligible employer, the retirement auto-enrollment credit determined under this section for any taxable year is an amount equal to—
(1) $500 for any taxable year occurring during the credit period, and
(2) zero for any other taxable year.
(b) Credit period
For purposes of subsection (a)—
(1) In general
The credit period with respect to any eligible employer is the 3-taxable-year period beginning with the first taxable year for which the employer includes an eligible automatic contribution arrangement (as defined in section 414(w)(3)) in a qualified employer plan (as defined in section 4972(d)) sponsored by the employer.
(2) Maintenance of arrangement
No taxable year with respect to an employer shall be treated as occurring within the credit period unless the arrangement described in paragraph (1) is included in the plan for such year.
(c) Eligible employer
For purposes of this section, the term "eligible employer" has the meaning given such term in section 408(p)(2)(C)(i).
(Added
Statutory Notes and Related Subsidiaries
Effective Date
Section applicable to taxable years beginning after Dec. 31, 2019, see section 105(d) of
§45U. Zero-emission nuclear power production credit
(a) Amount of credit
For purposes of section 38, the zero-emission nuclear power production credit for any taxable year is an amount equal to the amount by which—
(1) the product of—
(A) 0.3 cents, multiplied by
(B) the kilowatt hours of electricity—
(i) produced by the taxpayer at a qualified nuclear power facility, and
(ii) sold by the taxpayer to an unrelated person during the taxable year, exceeds
(2) the reduction amount for such taxable year.
(b) Definitions
(1) Qualified nuclear power facility
For purposes of this section, the term "qualified nuclear power facility" means any nuclear facility—
(A) which is owned by the taxpayer and which uses nuclear energy to produce electricity,
(B) which is not an advanced nuclear power facility as defined in subsection (d)(1) of section 45J, and
(C) which is placed in service before the date of the enactment of this section.
(2) Reduction amount
(A) In general
For purposes of this section, the term "reduction amount" means, with respect to any qualified nuclear power facility for any taxable year, the amount equal to the lesser of—
(i) the amount determined under subsection (a)(1), or
(ii) the amount equal to 16 percent of the excess of—
(I) subject to subparagraph (B), the gross receipts from any electricity produced by such facility (including any electricity services or products provided in conjunction with the electricity produced by such facility) and sold to an unrelated person during such taxable year, over
(II) the amount equal to the product of—
(aa) 2.5 cents, multiplied by
(bb) the amount determined under subsection (a)(1)(B).
(B) Treatment of certain receipts
(i) In general
Subject to clause (iii), the amount determined under subparagraph (A)(ii)(I) shall include any amount received by the taxpayer during the taxable year with respect to the qualified nuclear power facility from a zero-emission credit program. For purposes of determining the amount received during such taxable year, the taxpayer shall take into account any reductions required under such program.
(ii) Zero-emission credit program
For purposes of this subparagraph, the term "zero-emission credit program" means any payments with respect to a qualified nuclear power facility as a result of any Federal, State or local government program for, in whole or in part, the zero-emission, zero-carbon, or air quality attributes of any portion of the electricity produced by such facility.
(iii) Exclusion
For purposes of clause (i), any amount received by the taxpayer from a zero-emission credit program shall be excluded from the amount determined under subparagraph (A)(ii)(I) if the full amount of the credit calculated pursuant to subsection (a) (determined without regard to this subparagraph) is used to reduce payments from such zero-emission credit program.
(3) Electricity
For purposes of this section, the term "electricity" means the energy produced by a qualified nuclear power facility from the conversion of nuclear fuel into electric power.
(c) Other rules
(1) Inflation adjustment
The 0.3 cent amount in subsection (a)(1)(A) and the 2.5 cent amount in subsection (b)(2)(A)(ii)(II)(aa) shall each be adjusted by multiplying such amount by the inflation adjustment factor (as determined under section 45(e)(2), as applied by substituting "calendar year 2023" for "calendar year 1992" in subparagraph (B) thereof) for the calendar year in which the sale occurs. If the 0.3 cent amount as increased under this paragraph is not a multiple of 0.05 cent, such amount shall be rounded to the nearest multiple of 0.05 cent. If the 2.5 cent amount as increased under this paragraph is not a multiple of 0.1 cent, such amount shall be rounded to the nearest multiple of 0.1 cent.
(2) Special rules
Rules similar to the rules of paragraphs (1), (3), (4), (5), and (13) of section 45(e) shall apply for purposes of this section.
(d) Wage requirements
(1) Increased credit amount for qualified nuclear power facilities
In the case of any qualified nuclear power facility which satisfies the requirements of paragraph (2)(A), the amount of the credit determined under subsection (a) shall be equal to such amount (as determined without regard to this sentence) multiplied by 5.
(2) Prevailing wage requirements
(A) In general
The requirements described in this subparagraph with respect to any qualified nuclear power facility are that the taxpayer shall ensure that any laborers and mechanics employed by the taxpayer or any contractor or subcontractor in the alteration or repair of such facility shall be paid wages at rates not less than the prevailing rates for alteration or repair of a similar character in the locality in which such facility is located as most recently determined by the Secretary of Labor, in accordance with subchapter IV of
(B) Correction and penalty related to failure to satisfy wage requirements
Rules similar to the rules of section 45(b)(7)(B) shall apply.
(3) Regulations and guidance
The Secretary shall issue such regulations or other guidance as the Secretary determines necessary to carry out the purposes of this subsection, including regulations or other guidance which provides for requirements for recordkeeping or information reporting for purposes of administering the requirements of this subsection.
(e) Termination
This section shall not apply to taxable years beginning after December 31, 2032.
(Added and amended
Editorial Notes
References in Text
The date of the enactment of this section, referred to in subsec. (b)(1)(C), is the date of enactment of
Amendments
2022—Subsec. (c)(2).
Statutory Notes and Related Subsidiaries
Effective Date of 2022 Amendment
Amendment by section 13204(b)(2) of
Effective Date
§45V. Credit for production of clean hydrogen
(a) Amount of credit
For purposes of section 38, the clean hydrogen production credit for any taxable year is an amount equal to the product of—
(1) the kilograms of qualified clean hydrogen produced by the taxpayer during such taxable year at a qualified clean hydrogen production facility during the 10-year period beginning on the date such facility was originally placed in service, multiplied by
(2) the applicable amount (as determined under subsection (b)) with respect to such hydrogen.
(b) Applicable amount
(1) In general
For purposes of subsection (a)(2), the applicable amount shall be an amount equal to the applicable percentage of $0.60. If any amount as determined under the preceding sentence is not a multiple of 0.1 cent, such amount shall be rounded to the nearest multiple of 0.1 cent.
(2) Applicable percentage
For purposes of paragraph (1), the applicable percentage shall be determined as follows:
(A) In the case of any qualified clean hydrogen which is produced through a process that results in a lifecycle greenhouse gas emissions rate of—
(i) not greater than 4 kilograms of CO2e per kilogram of hydrogen, and
(ii) not less than 2.5 kilograms of CO2e per kilogram of hydrogen,
the applicable percentage shall be 20 percent.
(B) In the case of any qualified clean hydrogen which is produced through a process that results in a lifecycle greenhouse gas emissions rate of—
(i) less than 2.5 kilograms of CO2e per kilogram of hydrogen, and
(ii) not less than 1.5 kilograms of CO2e per kilogram of hydrogen,
the applicable percentage shall be 25 percent.
(C) In the case of any qualified clean hydrogen which is produced through a process that results in a lifecycle greenhouse gas emissions rate of—
(i) less than 1.5 kilograms of CO2e per kilogram of hydrogen, and
(ii) not less than 0.45 kilograms of CO2e per kilogram of hydrogen,
the applicable percentage shall be 33.4 percent.
(D) In the case of any qualified clean hydrogen which is produced through a process that results in a lifecycle greenhouse gas emissions rate of less than 0.45 kilograms of CO2e per kilogram of hydrogen, the applicable percentage shall be 100 percent.
(3) Inflation adjustment
The $0.60 amount in paragraph (1) shall be adjusted by multiplying such amount by the inflation adjustment factor (as determined under section 45(e)(2), determined by substituting "2022" for "1992" in subparagraph (B) thereof) for the calendar year in which the qualified clean hydrogen is produced. If any amount as increased under the preceding sentence is not a multiple of 0.1 cent, such amount shall be rounded to the nearest multiple of 0.1 cent.
(c) Definitions
For purposes of this section—
(1) Lifecycle greenhouse gas emissions
(A) In general
Subject to subparagraph (B), the term "lifecycle greenhouse gas emissions" has the same meaning given such term under subparagraph (H) of section 211(o)(1) of the Clean Air Act (
(B) GREET model
The term "lifecycle greenhouse gas emissions" shall only include emissions through the point of production (well-to-gate), as determined under the most recent Greenhouse gases, Regulated Emissions, and Energy use in Transportation model (commonly referred to as the "GREET model") developed by Argonne National Laboratory, or a successor model (as determined by the Secretary).
(2) Qualified clean hydrogen
(A) In general
The term "qualified clean hydrogen" means hydrogen which is produced through a process that results in a lifecycle greenhouse gas emissions rate of not greater than 4 kilograms of CO2e per kilogram of hydrogen.
(B) Additional requirements
Such term shall not include any hydrogen unless—
(i) such hydrogen is produced—
(I) in the United States (as defined in section 638(1)) or a possession of the United States (as defined in section 638(2)),
(II) in the ordinary course of a trade or business of the taxpayer, and
(III) for sale or use, and
(ii) the production and sale or use of such hydrogen is verified by an unrelated party.
(C) Provisional emissions rate
In the case of any hydrogen for which a lifecycle greenhouse gas emissions rate has not been determined for purposes of this section, a taxpayer producing such hydrogen may file a petition with the Secretary for determination of the lifecycle greenhouse gas emissions rate with respect to such hydrogen.
(3) Qualified clean hydrogen production facility
The term "qualified clean hydrogen production facility" means a facility—
(A) owned by the taxpayer,
(B) which produces qualified clean hydrogen, and
(C) the construction of which begins before January 1, 2033.
(d) Special rules
(1) Treatment of facilities owned by more than 1 taxpayer
Rules similar to the rules section 45(e)(3) shall apply for purposes of this section.
(2) Coordination with credit for carbon oxide sequestration
No credit shall be allowed under this section with respect to any qualified clean hydrogen produced at a facility which includes carbon capture equipment for which a credit is allowed to any taxpayer under section 45Q for the taxable year or any prior taxable year.
(3) Credit reduced for tax-exempt bonds
Rules similar to the rule under section 45(b)(3) shall apply for purposes of this section.
(4) Modification of existing facilities
For purposes of subsection (a)(1), in the case of any facility which—
(A) was originally placed in service before January 1, 2023, and, prior to the modification described in subparagraph (B), did not produce qualified clean hydrogen, and
(B) after the date such facility was originally placed in service—
(i) is modified to produce qualified clean hydrogen, and
(ii) amounts paid or incurred with respect to such modification are properly chargeable to capital account of the taxpayer,
such facility shall be deemed to have been originally placed in service as of the date that the property required to complete the modification described in subparagraph (B) is placed in service.
(e) Increased credit amount for qualified clean hydrogen production facilities
(1) In general
In the case of any qualified clean hydrogen production facility which satisfies the requirements of paragraph (2), the amount of the credit determined under subsection (a) with respect to qualified clean hydrogen described in subsection (b)(2) shall be equal to such amount (determined without regard to this sentence) multiplied by 5.
(2) Requirements
A facility meets the requirements of this paragraph if it is one of the following:
(A) A facility—
(i) the construction of which begins prior to the date that is 60 days after the Secretary publishes guidance with respect to the requirements of paragraphs (3)(A) and (4), and
(ii) which meets the requirements of paragraph (3)(A) with respect to alteration or repair of such facility which occurs after such date.
(B) A facility which satisfies the requirements of paragraphs (3)(A) and (4).
(3) Prevailing wage requirements
(A) In general
The requirements described in this subparagraph with respect to any qualified clean hydrogen production facility are that the taxpayer shall ensure that any laborers and mechanics employed by the taxpayer or any contractor or subcontractor in—
(i) the construction of such facility, and
(ii) with respect to any taxable year, for any portion of such taxable year which is within the period described in subsection (a)(2), the alteration or repair of such facility,
shall be paid wages at rates not less than the prevailing rates for construction, alteration, or repair of a similar character in the locality in which such facility is located as most recently determined by the Secretary of Labor, in accordance with subchapter IV of
(B) Correction and penalty related to failure to satisfy wage requirements
Rules similar to the rules of section 45(b)(7)(B) shall apply.
(4) Apprenticeship requirements
Rules similar to the rules of section 45(b)(8) shall apply.
(5) Regulations and guidance
The Secretary shall issue such regulations or other guidance as the Secretary determines necessary to carry out the purposes of this subsection, including regulations or other guidance which provides for requirements for recordkeeping or information reporting for purposes of administering the requirements of this subsection.
(f) Regulations
Not later than 1 year after the date of enactment of this section, the Secretary shall issue regulations or other guidance to carry out the purposes of this section, including regulations or other guidance for determining lifecycle greenhouse gas emissions.
(Added and amended
Editorial Notes
References in Text
The date of enactment of this section, referred to in subsecs. (c)(1)(A) and (f), is the date of enactment of
Amendments
2022—Subsec. (d)(3).
Subsec. (d)(4).
Statutory Notes and Related Subsidiaries
Effective Date
"(A)
"(B)
"(C)
§45W. Credit for qualified commercial clean vehicles
(a) In general
For purposes of section 38, the qualified commercial clean vehicle credit for any taxable year is an amount equal to the sum of the credit amounts determined under subsection (b) with respect to each qualified commercial clean vehicle placed in service by the taxpayer during the taxable year.
(b) Per vehicle amount
(1) In general
Subject to paragraph (4), the amount determined under this subsection with respect to any qualified commercial clean vehicle shall be equal to the lesser of—
(A) 15 percent of the basis of such vehicle (30 percent in the case of a vehicle not powered by a gasoline or diesel internal combustion engine), or
(B) the incremental cost of such vehicle.
(2) Incremental cost
For purposes of paragraph (1)(B), the incremental cost of any qualified commercial clean vehicle is an amount equal to the excess of the purchase price for such vehicle over such price of a comparable vehicle.
(3) Comparable vehicle
For purposes of this subsection, the term "comparable vehicle" means, with respect to any qualified commercial clean vehicle, any vehicle which is powered solely by a gasoline or diesel internal combustion engine and which is comparable in size and use to such vehicle.
(4) Limitation
The amount determined under this subsection with respect to any qualified commercial clean vehicle shall not exceed—
(A) in the case of a vehicle which has a gross vehicle weight rating of less than 14,000 pounds, $7,500, and
(B) in the case of a vehicle not described in subparagraph (A), $40,000.
(c) Qualified commercial clean vehicle
For purposes of this section, the term "qualified commercial clean vehicle" means any vehicle which—
(1) meets the requirements of section 30D(d)(1)(C) and is acquired for use or lease by the taxpayer and not for resale,
(2) either—
(A) meets the requirements of subparagraph (D) of section 30D(d)(1) and is manufactured primarily for use on public streets, roads, and highways (not including a vehicle operated exclusively on a rail or rails), or
(B) is mobile machinery, as defined in section 4053(8) (including vehicles that are not designed to perform a function of transporting a load over the public highways),
(3) either—
(A) is propelled to a significant extent by an electric motor which draws electricity from a battery which has a capacity of not less than 15 kilowatt hours (or, in the case of a vehicle which has a gross vehicle weight rating of less than 14,000 pounds, 7 kilowatt hours) and is capable of being recharged from an external source of electricity, or
(B) is a motor vehicle which satisfies the requirements under subparagraphs (A) and (B) of section 30B(b)(3), and
(4) is of a character subject to the allowance for depreciation.
(d) Special rules
(1) In general
Rules similar to the rules under subsection (f) of section 30D (without regard to paragraph (10) or (11) thereof) shall apply for purposes of this section.
(2) Vehicles placed in service by tax-exempt entities
Subsection (c)(4) shall not apply to any vehicle which is not subject to a lease and which is placed in service by a tax-exempt entity described in clause (i), (ii), or (iv) of section 168(h)(2)(A).
(3) No double benefit
No credit shall be allowed under this section with respect to any vehicle for which a credit was allowed under section 30D.
(e) VIN number requirement
No credit shall be determined under subsection (a) with respect to any vehicle unless the taxpayer includes the vehicle identification number of such vehicle on the return of tax for the taxable year.
(f) Regulations and guidance
The Secretary shall issue such regulations or other guidance as the Secretary determines necessary to carry out the purposes of this section, including regulations or other guidance relating to determination of the incremental cost of any qualified commercial clean vehicle.
(g) Termination
No credit shall be determined under this section with respect to any vehicle acquired after December 31, 2032.
(Added
Statutory Notes and Related Subsidiaries
Effective Date
§45X. Advanced manufacturing production credit
(a) In general
(1) Allowance of credit
For purposes of section 38, the advanced manufacturing production credit for any taxable year is an amount equal to the sum of the credit amounts determined under subsection (b) with respect to each eligible component which is—
(A) produced by the taxpayer, and
(B) during the taxable year, sold by such taxpayer to an unrelated person.
(2) Production and sale must be in trade or business
Any eligible component produced and sold by the taxpayer shall be taken into account only if the production and sale described in paragraph (1) is in a trade or business of the taxpayer.
(3) Unrelated person
(A) In general
For purposes of this subsection, a taxpayer shall be treated as selling components to an unrelated person if such component is sold to such person by a person related to the taxpayer.
(B) Election
(i) In general
At the election of the taxpayer (in such form and manner as the Secretary may prescribe), a sale of components by such taxpayer to a related person shall be deemed to have been made to an unrelated person.
(ii) Requirement
As a condition of, and prior to, any election described in clause (i), the Secretary may require such information or registration as the Secretary deems necessary for purposes of preventing duplication, fraud, or any improper or excessive amount determined under paragraph (1).
(b) Credit amount
(1) In general
Subject to paragraph (3), the amount determined under this subsection with respect to any eligible component, including any eligible component it incorporates, shall be equal to—
(A) in the case of a thin film photovoltaic cell or a crystalline photovoltaic cell, an amount equal to the product of—
(i) 4 cents, multiplied by
(ii) the capacity of such cell (expressed on a per direct current watt basis),
(B) in the case of a photovoltaic wafer, $12 per square meter,
(C) in the case of solar grade polysilicon, $3 per kilogram,
(D) in the case of a polymeric backsheet, 40 cents per square meter,
(E) in the case of a solar module, an amount equal to the product of—
(i) 7 cents, multiplied by
(ii) the capacity of such module (expressed on a per direct current watt basis),
(F) in the case of a wind energy component—
(i) if such component is a related offshore wind vessel, an amount equal to 10 percent of the sales price of such vessel, and
(ii) if such component is not described in clause (i), an amount equal to the product of—
(I) the applicable amount with respect to such component (as determined under paragraph (2)(A)), multiplied by
(II) the total rated capacity (expressed on a per watt basis) of the completed wind turbine for which such component is designed,
(G) in the case of a torque tube, 87 cents per kilogram,
(H) in the case of a structural fastener, $2.28 per kilogram,
(I) in the case of an inverter, an amount equal to the product of—
(i) the applicable amount with respect to such inverter (as determined under paragraph (2)(B)), multiplied by
(ii) the capacity of such inverter (expressed on a per alternating current watt basis),
(J) in the case of electrode active materials, an amount equal to 10 percent of the costs incurred by the taxpayer with respect to production of such materials,
(K) in the case of a battery cell, an amount equal to the product of—
(i) $35, multiplied by
(ii) subject to paragraph (4), the capacity of such battery cell (expressed on a kilowatt-hour basis),
(L) in the case of a battery module, an amount equal to the product of—
(i) $10 (or, in the case of a battery module which does not use battery cells, $45), multiplied by
(ii) subject to paragraph (4), the capacity of such battery module (expressed on a kilowatt-hour basis), and
(M) in the case of any applicable critical mineral, an amount equal to 10 percent of the costs incurred by the taxpayer with respect to production of such mineral.
(2) Applicable amounts
(A) Wind energy components
For purposes of paragraph (1)(F)(ii), the applicable amount with respect to any wind energy component shall be—
(i) in the case of a blade, 2 cents,
(ii) in the case of a nacelle, 5 cents,
(iii) in the case of a tower, 3 cents, and
(iv) in the case of an offshore wind foundation—
(I) which uses a fixed platform, 2 cents, or
(II) which uses a floating platform, 4 cents.
(B) Inverters
For purposes of paragraph (1)(I), the applicable amount with respect to any inverter shall be—
(i) in the case of a central inverter, 0.25 cents,
(ii) in the case of a utility inverter, 1.5 cents,
(iii) in the case of a commercial inverter, 2 cents,
(iv) in the case of a residential inverter, 6.5 cents, and
(v) in the case of a microinverter or a distributed wind inverter, 11 cents.
(3) Phase out
(A) In general
Subject to subparagraph (C), in the case of any eligible component sold after December 31, 2029, the amount determined under this subsection with respect to such component shall be equal to the product of—
(i) the amount determined under paragraph (1) with respect to such component, as determined without regard to this paragraph, multiplied by
(ii) the phase out percentage under subparagraph (B).
(B) Phase out percentage
The phase out percentage under this subparagraph is equal to—
(i) in the case of an eligible component sold during calendar year 2030, 75 percent,
(ii) in the case of an eligible component sold during calendar year 2031, 50 percent,
(iii) in the case of an eligible component sold during calendar year 2032, 25 percent,
(iv) in the case of an eligible component sold after December 31, 2032, 0 percent.
(C) Exception
For purposes of determining the amount under this subsection with respect to any applicable critical mineral, this paragraph shall not apply.
(4) Limitation on capacity of battery cells and battery modules
(A) In general
For purposes of subparagraph (K)(ii) or (L)(ii) of paragraph (1), the capacity determined under either subparagraph with respect to a battery cell or battery module shall not exceed a capacity-to-power ratio of 100:1.
(B) Capacity-to-power ratio
For purposes of this paragraph, the term "capacity-to-power ratio" means, with respect to a battery cell or battery module, the ratio of the capacity of such cell or module to the maximum discharge amount of such cell or module.
(c) Definitions
For purposes of this section—
(1) Eligible component
(A) In general
The term "eligible component" means—
(i) any solar energy component,
(ii) any wind energy component,
(iii) any inverter described in subparagraphs (B) through (G) of paragraph (2),
(iv) any qualifying battery component, and
(v) any applicable critical mineral.
(B) Application with other credits
The term "eligible component" shall not include any property which is produced at a facility if the basis of any property which is part of such facility is taken into account for purposes of the credit allowed under section 48C after the date of the enactment of this section.
(2) Inverters
(A) In general
The term "inverter" means an end product which is suitable to convert direct current electricity from 1 or more solar modules or certified distributed wind energy systems into alternating current electricity.
(B) Central inverter
The term "central inverter" means an inverter which is suitable for large utility-scale systems and has a capacity which is greater than 1,000 kilowatts (expressed on a per alternating current watt basis).
(C) Commercial inverter
The term "commercial inverter" means an inverter which—
(i) is suitable for commercial or utility-scale applications,
(ii) has a rated output of 208, 480, 600, or 800 volt three-phase power, and
(iii) has a capacity which is not less than 20 kilowatts and not greater than 125 kilowatts (expressed on a per alternating current watt basis).
(D) Distributed wind inverter
(i) In general
The term "distributed wind inverter" means an inverter which—
(I) is used in a residential or non-residential system which utilizes 1 or more certified distributed wind energy systems, and
(II) has a rated output of not greater than 150 kilowatts.
(ii) Certified distributed wind energy system
The term "certified distributed wind energy system" means a wind energy system which is certified by an accredited certification agency to meet Standard 9.1-2009 of the American Wind Energy Association (including any subsequent revisions to or modifications of such Standard which have been approved by the American National Standards Institute).
(E) Microinverter
The term "microinverter" means an inverter which—
(i) is suitable to connect with one solar module,
(ii) has a rated output of—
(I) 120 or 240 volt single-phase power, or
(II) 208 or 480 volt three-phase power, and
(iii) has a capacity which is not greater than 650 watts (expressed on a per alternating current watt basis).
(F) Residential inverter
The term "residential inverter" means an inverter which—
(i) is suitable for a residence,
(ii) has a rated output of 120 or 240 volt single-phase power, and
(iii) has a capacity which is not greater than 20 kilowatts (expressed on a per alternating current watt basis).
(G) Utility inverter
The term "utility inverter" means an inverter which—
(i) is suitable for commercial or utility-scale systems,
(ii) has a rated output of not less than 600 volt three-phase power, and
(iii) has a capacity which is greater than 125 kilowatts and not greater than 1000 kilowatts (expressed on a per alternating current watt basis) 1
(3) Solar energy component
(A) In general
The term "solar energy component" means any of the following:
(i) Solar modules.
(ii) Photovoltaic cells.
(iii) Photovoltaic wafers.
(iv) Solar grade polysilicon.
(v) Torque tubes or structural fasteners.
(vi) Polymeric backsheets.
(B) Associated definitions
(i) Photovoltaic cell
The term "photovoltaic cell" means the smallest semiconductor element of a solar module which performs the immediate conversion of light into electricity.
(ii) Photovoltaic wafer
The term "photovoltaic wafer" means a thin slice, sheet, or layer of semiconductor material of at least 240 square centimeters—
(I) produced by a single manufacturer either—
(aa) directly from molten or evaporated solar grade polysilicon or deposition of solar grade thin film semiconductor photon absorber layer, or
(bb) through formation of an ingot from molten polysilicon and subsequent slicing, and
(II) which comprises the substrate or absorber layer of one or more photovoltaic cells.
(iii) Polymeric backsheet
The term "polymeric backsheet" means a sheet on the back of a solar module which acts as an electric insulator and protects the inner components of such module from the surrounding environment.
(iv) Solar grade polysilicon
The term "solar grade polysilicon" means silicon which is—
(I) suitable for use in photovoltaic manufacturing, and
(II) purified to a minimum purity of 99.999999 percent silicon by mass.
(v) Solar module
The term "solar module" means the connection and lamination of photovoltaic cells into an environmentally protected final assembly which is—
(I) suitable to generate electricity when exposed to sunlight, and
(II) ready for installation without an additional manufacturing process.
(vi) Solar tracker
The term "solar tracker" means a mechanical system that moves solar modules according to the position of the sun and to increase energy output.
(vii) Solar tracker components
(I) Torque tube
The term "torque tube" means a structural steel support element (including longitudinal purlins) which—
(aa) is part of a solar tracker,
(bb) is of any cross-sectional shape,
(cc) may be assembled from individually manufactured segments,
(dd) spans longitudinally between foundation posts,
(ee) supports solar panels and is connected to a mounting attachment for solar panels (with or without separate module interface rails), and
(ff) is rotated by means of a drive system.
(II) Structural fastener
The term "structural fastener" means a component which is used—
(aa) to connect the mechanical and drive system components of a solar tracker to the foundation of such solar tracker,
(bb) to connect torque tubes to drive assemblies, or
(cc) to connect segments of torque tubes to one another.
(4) Wind energy component
(A) In general
The term "wind energy component" means any of the following:
(i) Blades.
(ii) Nacelles.
(iii) Towers.
(iv) Offshore wind foundations.
(v) Related offshore wind vessels.
(B) Associated definitions
(i) Blade
The term "blade" means an airfoil-shaped blade which is responsible for converting wind energy to low-speed rotational energy.
(ii) Offshore wind foundation
The term "offshore wind foundation" means the component (including transition piece) which secures an offshore wind tower and any above-water turbine components to the seafloor using—
(I) fixed platforms, such as offshore wind monopiles, jackets, or gravity-based foundations, or
(II) floating platforms and associated mooring systems.
(iii) Nacelle
The term "nacelle" means the assembly of the drivetrain and other tower-top components of a wind turbine (with the exception of the blades and the hub) within their cover housing.
(iv) Related offshore wind vessel
The term "related offshore wind vessel" means any vessel which is purpose-built or retrofitted for purposes of the development, transport, installation, operation, or maintenance of offshore wind energy components.
(v) Tower
The term "tower" means a tubular or lattice structure which supports the nacelle and rotor of a wind turbine.
(5) Qualifying battery component
(A) In general
The term "qualifying battery component" means any of the following:
(i) Electrode active materials.
(ii) Battery cells.
(iii) Battery modules.
(B) Associated definitions
(i) Electrode active material
The term "electrode active material" means cathode materials, anode materials, anode foils, and electrochemically active materials, including solvents, additives, and electrolyte salts that contribute to the electrochemical processes necessary for energy storage.
(ii) Battery cell
The term "battery cell" means an electrochemical cell—
(I) comprised of 1 or more positive electrodes and 1 or more negative electrodes,
(II) with an energy density of not less than 100 watt-hours per liter, and
(III) capable of storing at least 12 watt-hours of energy.
(iii) Battery module
The term "battery module" means a module—
(I)(aa) in the case of a module using battery cells, with 2 or more battery cells which are configured electrically, in series or parallel, to create voltage or current, as appropriate, to a specified end use, or
(bb) with no battery cells, and
(II) with an aggregate capacity of not less than 7 kilowatt-hours (or, in the case of a module for a hydrogen fuel cell vehicle, not less than 1 kilowatt-hour).
(6) Applicable critical minerals
The term "applicable critical mineral" means any of the following:
(A) Aluminum
Aluminum which is—
(i) converted from bauxite to a minimum purity of 99 percent alumina by mass, or
(ii) purified to a minimum purity of 99.9 percent aluminum by mass.
(B) Antimony
Antimony which is—
(i) converted to antimony trisulfide concentrate with a minimum purity of 90 percent antimony trisulfide by mass, or
(ii) purified to a minimum purity of 99.65 percent antimony by mass.
(C) Barite
Barite which is barium sulfate purified to a minimum purity of 80 percent barite by mass.
(D) Beryllium
Beryllium which is—
(i) converted to copper-beryllium master alloy, or
(ii) purified to a minimum purity of 99 percent beryllium by mass.
(E) Cerium
Cerium which is—
(i) converted to cerium oxide which is purified to a minimum purity of 99.9 percent cerium oxide by mass, or
(ii) purified to a minimum purity of 99 percent cerium by mass.
(F) Cesium
Cesium which is—
(i) converted to cesium formate or cesium carbonate, or
(ii) purified to a minimum purity of 99 percent cesium by mass.
(G) Chromium
Chromium which is—
(i) converted to ferrochromium consisting of not less than 60 percent chromium by mass, or
(ii) purified to a minimum purity of 99 percent chromium by mass.
(H) Cobalt
Cobalt which is—
(i) converted to cobalt sulfate, or
(ii) purified to a minimum purity of 99.6 percent cobalt by mass.
(I) Dysprosium
Dysprosium which is—
(i) converted to not less than 99 percent pure dysprosium iron alloy by mass, or
(ii) purified to a minimum purity of 99 percent dysprosium by mass.
(J) Europium
Europium which is—
(i) converted to europium oxide which is purified to a minimum purity of 99.9 percent europium oxide by mass, or
(ii) purified to a minimum purity of 99 percent by mass.
(K) Fluorspar
Fluorspar which is—
(i) converted to fluorspar which is purified to a minimum purity of 97 percent calcium fluoride by mass, or
(ii) purified to a minimum purity of 99 percent fluorspar by mass.
(L) Gadolinium
Gadolinium which is—
(i) converted to gadolinium oxide which is purified to a minimum purity of 99.9 percent gadolinium oxide by mass, or
(ii) purified to a minimum purity of 99 percent gadolinium by mass.
(M) Germanium
Germanium which is—
(i) converted to germanium tetrachloride, or
(ii) purified to a minimum purity of 99.99 percent germanium by mass.
(N) Graphite
Graphite which is purified to a minimum purity of 99.9 percent graphitic carbon by mass.
(O) Indium
Indium which is—
(i) converted to—
(I) indium tin oxide, or
(II) indium oxide which is purified to a minimum purity of 99.9 percent indium oxide by mass, or
(ii) purified to a minimum purity of 99 percent indium by mass.
(P) Lithium
Lithium which is—
(i) converted to lithium carbonate or lithium hydroxide, or
(ii) purified to a minimum purity of 99.9 percent lithium by mass.
(Q) Manganese
Manganese which is—
(i) converted to manganese sulphate, or
(ii) purified to a minimum purity of 99.7 percent manganese by mass.
(R) Neodymium
Neodymium which is—
(i) converted to neodymium-praseodymium oxide which is purified to a minimum purity of 99 percent neodymium-praseodymium oxide by mass,
(ii) converted to neodymium oxide which is purified to a minimum purity of 99.5 percent neodymium oxide by mass 2
(iii) purified to a minimum purity of 99.9 percent neodymium by mass.
(S) Nickel
Nickel which is—
(i) converted to nickel sulphate, or
(ii) purified to a minimum purity of 99 percent nickel by mass.
(T) Niobium
Niobium which is—
(i) converted to ferronibium, or
(ii) purified to a minimum purity of 99 percent niobium by mass.
(U) Tellurium
Tellurium which is—
(i) converted to cadmium telluride, or
(ii) purified to a minimum purity of 99 percent tellurium by mass.
(V) Tin
Tin which is purified to low alpha emitting tin which—
(i) has a purity of greater than 99.99 percent by mass, and
(ii) possesses an alpha emission rate of not greater than 0.01 counts per hour per centimeter square.
(W) Tungsten
Tungsten which is converted to ammonium paratungstate or ferrotungsten.
(X) Vanadium
Vanadium which is converted to ferrovanadium or vanadium pentoxide.
(Y) Yttrium
Yttrium which is—
(i) converted to yttrium oxide which is purified to a minimum purity of 99.999 percent yttrium oxide by mass, or
(ii) purified to a minimum purity of 99.9 percent yttrium by mass.
(Z) Other minerals
Any of the following minerals, provided that such mineral is purified to a minimum purity of 99 percent by mass:
(i) Arsenic.
(ii) Bismuth.
(iii) Erbium.
(iv) Gallium.
(v) Hafnium.
(vi) Holmium.
(vii) Iridium.
(viii) Lanthanum.
(ix) Lutetium.
(x) Magnesium.
(xi) Palladium.
(xii) Platinum.
(xiii) Praseodymium.
(xiv) Rhodium.
(xv) Rubidium.
(xvi) Ruthenium.
(xvii) Samarium.
(xviii) Scandium.
(xix) Tantalum.
(xx) Terbium.
(xxi) Thulium.
(xxii) Titanium.
(xxiii) Ytterbium.
(xxiv) Zinc.
(xxv) Zirconium.
(d) Special rules
In this section—
(1) Related persons
Persons shall be treated as related to each other if such persons would be treated as a single employer under the regulations prescribed under section 52(b).
(2) Only production in the United States taken into account
Sales shall be taken into account under this section only with respect to eligible components the production of which is within—
(A) the United States (within the meaning of section 638(1)), or
(B) a possession of the United States (within the meaning of section 638(2)).
(3) Pass-thru in the case of estates and trusts
Under regulations prescribed by the Secretary, rules similar to the rules of subsection (d) of section 52 shall apply.
(4) Sale of integrated components
For purposes of this section, a person shall be treated as having sold an eligible component to an unrelated person if such component is integrated, incorporated, or assembled into another eligible component which is sold to an unrelated person.
(Added
Editorial Notes
References in Text
The date of the enactment of this section, referred to in subsec. (c)(1)(B), is the date of enactment of
Statutory Notes and Related Subsidiaries
Effective Date
1 So in original. Probably should be followed by a period.
2 So in original. Probably should be followed by ", or".
§45Y. Clean electricity production credit
(a) Amount of credit
(1) In general
For purposes of section 38, the clean electricity production credit for any taxable year is an amount equal to the product of—
(A) the kilowatt hours of electricity—
(i) produced by the taxpayer at a qualified facility, and
(ii)(I) sold by the taxpayer to an unrelated person during the taxable year, or
(II) in the case of a qualified facility which is equipped with a metering device which is owned and operated by an unrelated person, sold, consumed, or stored by the taxpayer during the taxable year, multiplied by
(B) the applicable amount with respect to such qualified facility.
(2) Applicable amount
(A) Base amount
Subject to subsection (g)(7), in the case of any qualified facility which is not described in clause (i) or (ii) of subparagraph (B) and does not satisfy the requirements described in clause (iii) of such subparagraph, the applicable amount shall be 0.3 cents.
(B) Alternative amount
Subject to subsection (g)(7), in the case of any qualified facility—
(i) with a maximum net output of less than 1 megawatt (as measured in alternating current),
(ii) the construction of which begins prior to the date that is 60 days after the Secretary publishes guidance with respect to the requirements of paragraphs (9) and (10) of subsection (g), or
(iii) which—
(I) satisfies the requirements under paragraph (9) of subsection (g), and
(II) with respect to the construction of such facility, satisfies the requirements under paragraph (10) of subsection (g),
the applicable amount shall be 1.5 cents.
(b) Qualified facility
(1) In general
(A) Definition
Subject to subparagraphs (B), (C), and (D), the term "qualified facility" means a facility owned by the taxpayer—
(i) which is used for the generation of electricity,
(ii) which is placed in service after December 31, 2024, and
(iii) for which the greenhouse gas emissions rate (as determined under paragraph (2)) is not greater than zero.
(B) 10-year production credit
For purposes of this section, a facility shall only be treated as a qualified facility during the 10-year period beginning on the date the facility was originally placed in service.
(C) Expansion of facility; incremental production
The term "qualified facility" shall include either of the following in connection with a facility described in subparagraph (A) (without regard to clause (ii) of such subparagraph) which was placed in service before January 1, 2025, but only to the extent of the increased amount of electricity produced at the facility by reason of the following:
(i) A new unit which is placed in service after December 31, 2024.
(ii) Any additions of capacity which are placed in service after December 31, 2024.
(D) Coordination with other credits
The term "qualified facility" shall not include any facility for which a credit determined under section 45, 45J, 45Q, 45U, 48, 48A, or 48E is allowed under section 38 for the taxable year or any prior taxable year.
(2) Greenhouse gas emissions rate
(A) In general
For purposes of this section, the term "greenhouse gas emissions rate" means the amount of greenhouse gases emitted into the atmosphere by a facility in the production of electricity, expressed as grams of CO2e per KWh.
(B) Fuel combustion and gasification
In the case of a facility which produces electricity through combustion or gasification, the greenhouse gas emissions rate for such facility shall be equal to the net rate of greenhouse gases emitted into the atmosphere by such facility (taking into account lifecycle greenhouse gas emissions, as described in section 211(o)(1)(H) of the Clean Air Act (
(C) Establishment of emissions rates for facilities
(i) Publishing emissions rates
The Secretary shall annually publish a table that sets forth the greenhouse gas emissions rates for types or categories of facilities, which a taxpayer shall use for purposes of this section.
(ii) Provisional emissions rate
In the case of any facility for which an emissions rate has not been established by the Secretary, a taxpayer which owns such facility may file a petition with the Secretary for determination of the emissions rate with respect to such facility.
(D) Carbon capture and sequestration equipment
For purposes of this subsection, the amount of greenhouse gases emitted into the atmosphere by a facility in the production of electricity shall not include any qualified carbon dioxide that is captured by the taxpayer and—
(i) pursuant to any regulations established under paragraph (2) of section 45Q(f), disposed of by the taxpayer in secure geological storage, or
(ii) utilized by the taxpayer in a manner described in paragraph (5) of such section.
(c) Inflation adjustment
(1) In general
In the case of a calendar year beginning after 2024, the 0.3 cent amount in paragraph (2)(A) of subsection (a) and the 1.5 cent amount in paragraph (2)(B) of such subsection shall each be adjusted by multiplying such amount by the inflation adjustment factor for the calendar year in which the sale, consumption, or storage of the electricity occurs. If the 0.3 cent amount as increased under this paragraph is not a multiple of 0.05 cent, such amount shall be rounded to the nearest multiple of 0.05 cent. If the 1.5 cent amount as increased under this paragraph is not a multiple of 0.1 cent, such amount shall be rounded to the nearest multiple of 0.1 cent.
(2) Annual computation
The Secretary shall, not later than April 1 of each calendar year, determine and publish in the Federal Register the inflation adjustment factor for such calendar year in accordance with this subsection.
(3) Inflation adjustment factor
The term "inflation adjustment factor" means, with respect to a calendar year, a fraction the numerator of which is the GDP implicit price deflator for the preceding calendar year and the denominator of which is the GDP implicit price deflator for the calendar year 1992. The term "GDP implicit price deflator" means the most recent revision of the implicit price deflator for the gross domestic product as computed and published by the Department of Commerce before March 15 of the calendar year.
(d) Credit phase-out
(1) In general
The amount of the clean electricity production credit under subsection (a) for any qualified facility the construction of which begins during a calendar year described in paragraph (2) shall be equal to the product of—
(A) the amount of the credit determined under subsection (a) without regard to this subsection, multiplied by
(B) the phase-out percentage under paragraph (2).
(2) Phase-out percentage
The phase-out percentage under this paragraph is equal to—
(A) for a facility the construction of which begins during the first calendar year following the applicable year, 100 percent,
(B) for a facility the construction of which begins during the second calendar year following the applicable year, 75 percent,
(C) for a facility the construction of which begins during the third calendar year following the applicable year, 50 percent, and
(D) for a facility the construction of which begins during any calendar year subsequent to the calendar year described in subparagraph (C), 0 percent.
(3) Applicable year
For purposes of this subsection, the term "applicable year" means the later of—
(A) the calendar year in which the Secretary determines that the annual greenhouse gas emissions from the production of electricity in the United States are equal to or less than 25 percent of the annual greenhouse gas emissions from the production of electricity in the United States for calendar year 2022, or
(B) 2032.
(e) Definitions
For purposes of this section:
(1) CO2e per KWh
The term "CO2e per KWh" means, with respect to any greenhouse gas, the equivalent carbon dioxide (as determined based on global warming potential) per kilowatt hour of electricity produced.
(2) Greenhouse gas
The term "greenhouse gas" has the same meaning given such term under section 211(o)(1)(G) of the Clean Air Act (
(3) Qualified carbon dioxide
The term "qualified carbon dioxide" means carbon dioxide captured from an industrial source which—
(A) would otherwise be released into the atmosphere as industrial emission of greenhouse gas,
(B) is measured at the source of capture and verified at the point of disposal or utilization, and
(C) is captured and disposed or utilized within the United States (within the meaning of section 638(1)) or a possession of the United States (within the meaning of section 638(2)).
(f) Guidance
Not later than January 1, 2025, the Secretary shall issue guidance regarding implementation of this section, including calculation of greenhouse gas emission rates for qualified facilities and determination of clean electricity production credits under this section.
(g) Special rules
(1) Only production in the United States taken into account
Consumption, sales, or storage shall be taken into account under this section only with respect to electricity the production of which is within—
(A) the United States (within the meaning of section 638(1)), or
(B) a possession of the United States (within the meaning of section 638(2)).
(2) Combined heat and power system property
(A) In general
For purposes of subsection (a)—
(i) the kilowatt hours of electricity produced by a taxpayer at a qualified facility shall include any production in the form of useful thermal energy by any combined heat and power system property within such facility, and
(ii) the amount of greenhouse gases emitted into the atmosphere by such facility in the production of such useful thermal energy shall be included for purposes of determining the greenhouse gas emissions rate for such facility.
(B) Combined heat and power system property
For purposes of this paragraph, the term "combined heat and power system property" has the same meaning given such term by section 48(c)(3) (without regard to subparagraphs (A)(iv), (B), and (D) thereof).
(C) Conversion from BTU to KWh
(i) In general
For purposes of subparagraph (A)(i), the amount of kilowatt hours of electricity produced in the form of useful thermal energy shall be equal to the quotient of—
(I) the total useful thermal energy produced by the combined heat and power system property within the qualified facility, divided by
(II) the heat rate for such facility.
(ii) Heat rate
For purposes of this subparagraph, the term "heat rate" means the amount of energy used by the qualified facility to generate 1 kilowatt hour of electricity, expressed as British thermal units per net kilowatt hour generated.
(3) Production attributable to the taxpayer
In the case of a qualified facility in which more than 1 person has an ownership interest, except to the extent provided in regulations prescribed by the Secretary, production from the facility shall be allocated among such persons in proportion to their respective ownership interests in the gross sales from such facility.
(4) Related persons
Persons shall be treated as related to each other if such persons would be treated as a single employer under the regulations prescribed under section 52(b). In the case of a corporation which is a member of an affiliated group of corporations filing a consolidated return, such corporation shall be treated as selling electricity to an unrelated person if such electricity is sold to such a person by another member of such group.
(5) Pass-thru in the case of estates and trusts
Under regulations prescribed by the Secretary, rules similar to the rules of subsection (d) of section 52 shall apply.
(6) Allocation of credit to patrons of agricultural cooperative
(A) Election to allocate
(i) In general
In the case of an eligible cooperative organization, any portion of the credit determined under subsection (a) for the taxable year may, at the election of the organization, be apportioned among patrons of the organization on the basis of the amount of business done by the patrons during the taxable year.
(ii) Form and effect of election
An election under clause (i) for any taxable year shall be made on a timely filed return for such year. Such election, once made, shall be irrevocable for such taxable year. Such election shall not take effect unless the organization designates the apportionment as such in a written notice mailed to its patrons during the payment period described in section 1382(d).
(B) Treatment of organizations and patrons
The amount of the credit apportioned to any patrons under subparagraph (A)—
(i) shall not be included in the amount determined under subsection (a) with respect to the organization for the taxable year, and
(ii) shall be included in the amount determined under subsection (a) for the first taxable year of each patron ending on or after the last day of the payment period (as defined in section 1382(d)) for the taxable year of the organization or, if earlier, for the taxable year of each patron ending on or after the date on which the patron receives notice from the cooperative of the apportionment.
(C) Special rules for decrease in credits for taxable year
If the amount of the credit of a cooperative organization determined under subsection (a) for a taxable year is less than the amount of such credit shown on the return of the cooperative organization for such year, an amount equal to the excess of—
(i) such reduction, over
(ii) the amount not apportioned to such patrons under subparagraph (A) for the taxable year,
shall be treated as an increase in tax imposed by this chapter on the organization. Such increase shall not be treated as tax imposed by this chapter for purposes of determining the amount of any credit under this chapter.
(D) Eligible cooperative defined
For purposes of this section, the term "eligible cooperative" means a cooperative organization described in section 1381(a) which is owned more than 50 percent by agricultural producers or by entities owned by agricultural producers. For this purpose an entity owned by an agricultural producer is one that is more than 50 percent owned by agricultural producers.
(7) Increase in credit in energy communities
In the case of any qualified facility which is located in an energy community (as defined in section 45(b)(11)(B)), for purposes of determining the amount of the credit under subsection (a) with respect to any electricity produced by the taxpayer at such facility during the taxable year, the applicable amount under paragraph (2) of such subsection shall be increased by an amount equal to 10 percent of the amount otherwise in effect under such paragraph.
(8) Credit reduced for tax-exempt bonds
Rules similar to the rules of section 45(b)(3) shall apply.
(9) Wage requirements
Rules similar to the rules of section 45(b)(7) shall apply.
(10) Apprenticeship requirements
Rules similar to the rules of section 45(b)(8) shall apply.
(11) Domestic content bonus credit amount
(A) In general
In the case of any qualified facility which satisfies the requirement under subparagraph (B)(i), the amount of the credit determined under subsection (a) shall be increased by an amount equal to 10 percent of the amount so determined (as determined without application of paragraph (7)).
(B) Requirement
(i) In general
The requirement described in this subclause is satisfied with respect to any qualified facility if the taxpayer certifies to the Secretary (at such time, and in such form and manner, as the Secretary may prescribe) that any steel, iron, or manufactured product which is a component of such facility (upon completion of construction) was produced in the United States (as determined under
(ii) Steel and iron
In the case of steel or iron, clause (i) shall be applied in a manner consistent with section 661.5 of title 49, Code of Federal Regulations.
(iii) Manufactured product
For purposes of clause (i), the manufactured products which are components of a qualified facility upon completion of construction shall be deemed to have been produced in the United States if not less than the adjusted percentage (as determined under subparagraph (C)) of the total costs of all such manufactured products of such facility are attributable to manufactured products (including components) which are mined, produced, or manufactured in the United States.
(C) Adjusted percentage
(i) In general
Subject to subclause (ii), for purposes of subparagraph (B)(iii), the adjusted percentage shall be—
(I) in the case of a facility the construction of which begins before January 1, 2025, 40 percent,
(II) in the case of a facility the construction of which begins after December 31, 2024, and before January 1, 2026, 45 percent,
(III) in the case of a facility the construction of which begins after December 31, 2025, and before January 1, 2027, 50 percent, and
(IV) in the case of a facility the construction of which begins after December 31, 2026, 55 percent.
(ii) Offshore wind facility
For purposes of subparagraph (B)(iii), in the case of a qualified facility which is an offshore wind facility, the adjusted percentage shall be—
(I) in the case of a facility the construction of which begins before January 1, 2025, 20 percent,
(II) in the case of a facility the construction of which begins after December 31, 2024, and before January 1, 2026, 27.5 percent,
(III) in the case of a facility the construction of which begins after December 31, 2025, and before January 1, 2027, 35 percent,
(IV) in the case of a facility the construction of which begins after December 31, 2026, and before January 1, 2028, 45 percent, and
(V) in the case of a facility the construction of which begins after December 31, 2027, 55 percent.
(12) Phaseout for elective payment
(A) In general
In the case of a taxpayer making an election under section 6417 with respect to a credit under this section, the amount of such credit shall be replaced with—
(i) the value of such credit (determined without regard to this paragraph), multiplied by
(ii) the applicable percentage.
(B) 100 percent applicable percentage for certain qualified facilities
In the case of any qualified facility—
(i) which satisfies the requirements under paragraph (11)(B), or
(ii) with a maximum net output of less than 1 megawatt (as measured in alternating current),
the applicable percentage shall be 100 percent.
(C) Phased domestic content requirement
Subject to subparagraph (D), in the case of any qualified facility which is not described in subparagraph (B), the applicable percentage shall be—
(i) if construction of such facility began before January 1, 2024, 100 percent,
(ii) if construction of such facility began in calendar year 2024, 90 percent,
(iii) if construction of such facility began in calendar year 2025, 85 percent, and
(iv) if construction of such facility began after December 31, 2025, 0 percent.
(D) Exception
(i) In general
For purposes of this paragraph, the Secretary shall provide exceptions to the requirements under this paragraph if—
(I) the inclusion of steel, iron, or manufactured products which are produced in the United States increases the overall costs of construction of qualified facilities by more than 25 percent, or
(II) relevant steel, iron, or manufactured products are not produced in the United States in sufficient and reasonably available quantities or of a satisfactory quality.
(ii) Applicable percentage
In any case in which the Secretary provides an exception pursuant to clause (i), the applicable percentage shall be 100 percent.
(Added
Editorial Notes
References in Text
The date of the enactment of this section, referred to in subsec. (e)(2), is the date of enactment of
Statutory Notes and Related Subsidiaries
Effective Date
§45Z. Clean fuel production credit
(a) Amount of credit
(1) In general
For purposes of section 38, the clean fuel production credit for any taxable year is an amount equal to the product of—
(A) the applicable amount per gallon (or gallon equivalent) with respect to any transportation fuel which is—
(i) produced by the taxpayer at a qualified facility, and
(ii) sold by the taxpayer in a manner described in paragraph (4) during the taxable year, and
(B) the emissions factor for such fuel (as determined under subsection (b)).
(2) Applicable amount
(A) Base amount
In the case of any transportation fuel produced at a qualified facility which does not satisfy the requirements described in subparagraph (B), the applicable amount shall be 20 cents.
(B) Alternative amount
In the case of any transportation fuel produced at a qualified facility which satisfies the requirements under paragraphs (6) and (7) of subsection (f), the applicable amount shall be $1.00.
(3) Special rate for sustainable aviation fuel
(A) In general
In the case of a transportation fuel which is sustainable aviation fuel, paragraph (2) shall be applied—
(i) in the case of fuel produced at a qualified facility described in paragraph (2)(A), by substituting "35 cents" for "20 cents", and
(ii) in the case of fuel produced at a qualified facility described in paragraph (2)(B), by substituting "$1.75" for "$1.00".
(B) Sustainable aviation fuel
For purposes of this subparagraph (A),1 the term "sustainable aviation fuel" means liquid fuel, the portion of which is not kerosene, which is sold for use in an aircraft and which—
(i) meets the requirements of—
(I) ASTM International Standard D7566, or
(II) the Fischer Tropsch provisions of ASTM International Standard D1655, Annex A1, and
(ii) is not derived from palm fatty acid distillates or petroleum.
(4) Sale
For purposes of paragraph (1), the transportation fuel is sold in a manner described in this paragraph if such fuel is sold by the taxpayer to an unrelated person—
(A) for use by such person in the production of a fuel mixture,
(B) for use by such person in a trade or business, or
(C) who sells such fuel at retail to another person and places such fuel in the fuel tank of such other person.
(5) Rounding
If any amount determined under paragraph (1) is not a multiple of 1 cent, such amount shall be rounded to the nearest cent.
(b) Emissions factors
(1) Emissions factor
(A) Calculation
(i) In general
The emissions factor of a transportation fuel shall be an amount equal to the quotient of—
(I) an amount equal to—
(aa) 50 kilograms of CO2e per mmBTU, minus
(bb) the emissions rate for such fuel, divided by
(II) 50 kilograms of CO2e per mmBTU.
(B) Establishment of emissions rate
(i) In general
Subject to clauses (ii) and (iii), the Secretary shall annually publish a table which sets forth the emissions rate for similar types and categories of transportation fuels based on the amount of lifecycle greenhouse gas emissions (as described in section 211(o)(1)(H) of the Clean Air Act (
(ii) Non-aviation fuel
In the case of any transportation fuel which is not a sustainable aviation fuel, the lifecycle greenhouse gas emissions of such fuel shall be based on the most recent determinations under the Greenhouse gases, Regulated Emissions, and Energy use in Transportation model developed by Argonne National Laboratory, or a successor model (as determined by the Secretary).
(iii) Aviation fuel
In the case of any transportation fuel which is a sustainable aviation fuel, the lifecycle greenhouse gas emissions of such fuel shall be determined in accordance with—
(I) the most recent Carbon Offsetting and Reduction Scheme for International Aviation which has been adopted by the International Civil Aviation Organization with the agreement of the United States, or
(II) any similar methodology which satisfies the criteria under section 211(o)(1)(H) of the Clean Air Act (
(C) Rounding of emissions rate
(i) In general
Subject to clause (ii), the Secretary may round the emissions rates under subparagraph (B) to the nearest multiple of 5 kilograms of CO2e per mmBTU.
(ii) Exception
In the case of an emissions rate that is between 2.5 kilograms of CO2e per mmBTU and -2.5 kilograms of CO2e per mmBTU, the Secretary may round such rate to zero.
(D) Provisional emissions rate
In the case of any transportation fuel for which an emissions rate has not been established under subparagraph (B), a taxpayer producing such fuel may file a petition with the Secretary for determination of the emissions rate with respect to such fuel.
(2) Rounding
If any amount determined under paragraph (1)(A) is not a multiple of 0.1, such amount shall be rounded to the nearest multiple of 0.1.
(c) Inflation adjustment
(1) In general
In the case of calendar years beginning after 2024, the 20 cent amount in subsection (a)(2)(A), the $1.00 amount in subsection (a)(2)(B), the 35 cent amount in subsection (a)(3)(A)(i), and the $1.75 amount in subsection (a)(3)(A)(ii) shall each be adjusted by multiplying such amount by the inflation adjustment factor for the calendar year in which the sale of the transportation fuel occurs. If any amount as increased under the preceding sentence is not a multiple of 1 cent, such amount shall be rounded to the nearest multiple of 1 cent.
(2) Inflation adjustment factor
For purposes of paragraph (1), the inflation adjustment factor shall be the inflation adjustment factor determined and published by the Secretary pursuant to section 45Y(c), determined by substituting "calendar year 2022" for "calendar year 1992" in paragraph (3) thereof.
(d) Definitions
In this section:
(1) mmBTU
The term "mmBTU" means 1,000,000 British thermal units.
(2) CO2e
The term "CO2e" means, with respect to any greenhouse gas, the equivalent carbon dioxide (as determined based on relative global warming potential).
(3) Greenhouse gas
The term "greenhouse gas" has the same meaning given that term under section 211(o)(1)(G) of the Clean Air Act (
(4) Qualified facility
The term "qualified facility"—
(A) means a facility used for the production of transportation fuels, and
(B) does not include any facility for which one of the following credits is allowed under section 38 for the taxable year:
(i) The credit for production of clean hydrogen under section 45V.
(ii) The credit determined under section 46 to the extent that such credit is attributable to the energy credit determined under section 48 with respect to any specified clean hydrogen production facility for which an election is made under subsection (a)(15) of such section.
(iii) The credit for carbon oxide sequestration under section 45Q.
(5) Transportation fuel
(A) In general
The term "transportation fuel" means a fuel which—
(i) is suitable for use as a fuel in a highway vehicle or aircraft,
(ii) has an emissions rate which is not greater than 50 kilograms of CO2e per mmBTU, and
(iii) is not derived from coprocessing an applicable material (or materials derived from an applicable material) with a feedstock which is not biomass.
(B) Definitions
In this paragraph—
(i) Applicable material
The term "applicable material" means—
(I) monoglycerides, diglycerides, and triglycerides,
(II) free fatty acids, and
(III) fatty acid esters.
(ii) Biomass
The term "biomass" has the same meaning given such term in section 45K(c)(3).
(e) Guidance
Not later than January 1, 2025, the Secretary shall issue guidance regarding implementation of this section, including calculation of emissions factors for transportation fuel, the table described in subsection (b)(1)(B)(i), and the determination of clean fuel production credits under this section.
(f) Special rules
(1) Only registered production in the United States taken into account
(A) In general
No clean fuel production credit shall be determined under subsection (a) with respect to any transportation fuel unless—
(i) the taxpayer—
(I) is registered as a producer of clean fuel under section 4101 at the time of production, and
(II) in the case of any transportation fuel which is a sustainable aviation fuel, provides—
(aa) certification (in such form and manner as the Secretary shall prescribe) from an unrelated party demonstrating compliance with—
(AA) any general requirements, supply chain traceability requirements, and information transmission requirements established under the Carbon Offsetting and Reduction Scheme for International Aviation described in subclause (I) of subsection (b)(1)(B)(iii), or
(BB) in the case of any methodology described in subclause (II) of such subsection, requirements similar to the requirements described in subitem (AA), and
(bb) such other information with respect to such fuel as the Secretary may require for purposes of carrying out this section, and
(ii) such fuel is produced in the United States.
(B) United States
For purposes of this paragraph, the term "United States" includes any possession of the United States.
(2) Production attributable to the taxpayer
In the case of a facility in which more than 1 person has an ownership interest, except to the extent provided in regulations prescribed by the Secretary, production from the facility shall be allocated among such persons in proportion to their respective ownership interests in the gross sales from such facility.
(3) Related persons
Persons shall be treated as related to each other if such persons would be treated as a single employer under the regulations prescribed under section 52(b). In the case of a corporation which is a member of an affiliated group of corporations filing a consolidated return, such corporation shall be treated as selling fuel to an unrelated person if such fuel is sold to such a person by another member of such group.
(4) Pass-thru in the case of estates and trusts
Under regulations prescribed by the Secretary, rules similar to the rules of subsection (d) of section 52 shall apply.
(5) Allocation of credit to patrons of agricultural cooperative
Rules similar to the rules of section 45Y(g)(6) shall apply.
(6) Prevailing wage requirements
(A) In general
Subject to subparagraph (B), rules similar to the rules of section 45(b)(7) shall apply.
(B) Special rule for facilities placed in service before January 1, 2025
For purposes of subparagraph (A), in the case of any qualified facility placed in service before January 1, 2025—
(i) clause (i) of section 45(b)(7)(A) shall not apply, and
(ii) clause (ii) of such section shall be applied by substituting "with respect to any taxable year beginning after December 31, 2024, for which the credit is allowed under this section" for "with respect to any taxable year, for any portion of such taxable year which is within the period described in subsection (a)(2)(A)(ii)".
(7) Apprenticeship requirements
Rules similar to the rules of section 45(b)(8) shall apply.
(g) Termination
This section shall not apply to transportation fuel sold after December 31, 2027.
(Added
Editorial Notes
References in Text
The date of the enactment of this section, referred to in subsecs. (b)(1)(B)(i), (iii)(II) and (d)(3), is the date of enactment of
Statutory Notes and Related Subsidiaries
Effective Date
§45AA. Military spouse retirement plan eligibility credit for small employers
(a) In general
For purposes of section 38, in the case of any eligible small employer, the military spouse retirement plan eligibility credit determined under this section for any taxable year is an amount equal to the sum of—
(1) $200 with respect to each military spouse who is an employee of such employer and who participates in an eligible defined contribution plan of such employer at any time during such taxable year, plus
(2) so much of the contributions made by such employer (other than an elective deferral (as defined in section 402(g)(3)) 1 to all such plans with respect to such employee during such taxable year as do not exceed $300.
(b) Limitation
An individual shall only be taken into account as a military spouse under subsection (a) for the taxable year which includes the date on which such individual began participating in the eligible defined contribution plan of the employer and the 2 succeeding taxable years.
(c) Eligible small employer
For purposes of this section, the term "eligible small employer" means an eligible employer (as defined in section 408(p)(2)(C)(i)(I).2
(d) Military spouse
For purposes of this section—
(1) In general
The term "military spouse" means, with respect to any employer, any individual who is married (within the meaning of section 7703 as of the first date that the employee is employed by the employer) to an individual who is a member of the uniformed services (as defined
(2) Exclusion of highly compensated employees
With respect to any employer, the term "military spouse" shall not include any individual if such individual is a highly compensated employee of such employer (within the meaning of section 414(q)).
(e) Eligible defined contribution plan
For purposes of this section, the term "eligible defined contribution plan" means, with respect to any eligible small employer, any defined contribution plan (as defined in section 414(i)) of such employer if, under the terms of such plan—
(1) military spouses employed by such employer are eligible to participate in such plan not later than the date which is 2 months after the date on which such individual begins employment with such employer, and
(2) military spouses who are eligible to participate in such plan—
(A) are immediately eligible to receive an amount of employer contributions under such plan which is not less the amount of such contributions that a similarly situated participant who is not a military spouse would be eligible to receive under such plan after 2 years of service, and
(B) immediately have a nonforfeitable right to the employee's accrued benefit derived from employer contributions under such plan.
(f) Aggregation rule
All persons treated as a single employer under subsection (b), (c), (m), or (o) of section 414 shall be treated as one employer for purposes of this section.
(Added
Statutory Notes and Related Subsidiaries
Effective Date
Section applicable to taxable years beginning after Dec. 29, 2022, see section 112(e) of
1 So in original. Probably should be followed by another closing parenthesis.
2 So in original. Another closing parenthesis probably should precede the period.
Subpart E—Rules for Computing Investment Credit
Editorial Notes
Amendments
2022—
2018—
2010—
2009—
2005—
2004—
1990—
1986—
1984—
1978—
1971—
1969—
1962—
§46. Amount of credit
For purposes of section 38, the amount of the investment credit determined under this section for any taxable year shall be the sum of—
(1) the rehabilitation credit,
(2) the energy credit,
(3) the qualifying advanced coal project credit,
(4) the qualifying gasification project credit,
(5) the qualifying advanced energy project credit, and
(6) the advanced manufacturing investment credit.
(Added
Amendment of Section
(7) the clean electricity investment credit.
See 2022 Amendment note below.
Editorial Notes
Amendments
2022—Par. (6).
Par. (7).
2014—Par. (4).
2010—Par. (2).
Par. (6).
2009—Par. (5).
2005—
2004—
1990—
Subsec. (b)(2)(A).
1989—Subsec. (b)(2)(A).
1988—Subsec. (b)(2)(A).
Subsec. (c)(5)(B).
Subsec. (c)(7).
Subsec. (d)(1)(B)(i).
Subsec. (d)(1)(B)(ii).
Subsec. (e)(3).
Subsec. (e)(4)(B).
Subsec. (e)(4)(C).
Subsec. (e)(4)(D).
Subsec. (e)(4)(E).
1986—Subsec. (b)(2)(A).
Subsec. (b)(2)(E).
Subsec. (b)(4).
Subsec. (c)(8)(D)(v).
Subsec. (c)(9)(A).
Subsec. (c)(9)(C)(i).
Subsec. (e)(4)(D), (E).
Subsec. (f)(9).
1984—Subsec. (a).
Subsec. (a)(4).
Subsec. (b).
Subsec. (c)(7)(A).
Subsec. (c)(8).
Subsec. (c)(8)(A).
Subsec. (c)(8)(B).
Subsec. (c)(8)(C).
Subsec. (c)(8)(D).
Subsec. (c)(8)(D)(i)(I).
Subsec. (c)(8)(E).
Subsec. (c)(8)(F)(i).
Subsec. (c)(8)(F)(ii)(II).
Subsec. (c)(8)(F)(ii)(III).
Subsec. (c)(8)(F)(ii)(IV).
Subsec. (c)(9).
Subsec. (e)(1).
Subsec. (e)(2).
Subsec. (e)(4).
Subsec. (f)(1).
Subsec. (f)(1)(A), (B).
Subsec. (f)(2).
Subsec. (f)(2)(A), (B).
Subsec. (f)(4)(B).
Subsec. (f)(8).
Subsec. (g)(2).
Subsec. (h)(1).
1983—Subsec. (a)(2)(C)(i).
Subsec. (a)(2)(C)(iii)(I).
Subsec. (a)(2)(F)(iii)(II).
Subsec. (a)(2)(F)(iii)(III).
Subsec. (a)(4)(B).
Subsec. (c)(7).
Subsec. (f)(10).
1982—Subsec. (a)(3)(B).
Subsec. (a)(4).
Subsec. (a)(7).
Subsec. (a)(8).
Subsec. (a)(9).
Subsec. (c)(8)(C).
Subsec. (e)(3).
1981—Subsec. (a)(2)(A)(iv).
Subsec. (a)(2)(E).
Subsec. (a)(2)(F).
Subsec. (b)(1).
Subsec. (c)(2).
Subsec. (c)(6)(A).
Subsec. (c)(7).
Subsec. (c)(8).
Subsec. (c)(8)(D)(i)(I).
Subsec. (c)(9).
Subsec. (d)(1).
Subsec. (d)(2)(A)(ii).
Subsec. (e)(3).
1980—Subsec. (a)(2)(A).
Subsec. (a)(2)(C).
Subsec. (a)(2)(D).
Subsec. (a)(2)(E).
Subsec. (a)(9).
Subsec. (a)(9)(A).
Subsec. (a)(9)(B).
Subsec. (a)(9)(C).
Subsec. (a)(10).
Subsec. (c)(5)(B).
Subsec. (e)(3).
Subsec. (f)(1), (2).
Subsec. (f)(8).
Subsec. (f)(9).
1978—Subsec. (a)(2).
Subsec. (a)(2)(B).
Subsec. (a)(2)(E).
Subsec. (a)(3).
Subsec. (a)(7).
Subsec. (a)(8).
Subsec. (a)(9).
Subsec. (a)(10).
Subsec. (c)(3)(A).
Subsec. (c)(5).
Subsec. (c)(6).
Subsec. (e)(1)(C).
Subsec. (e)(2)(C).
Subsec. (f)(1), (2).
Subsec. (f)(8).
Subsec. (g)(5).
Subsec. (h).
1976—Subsec. (a)(1).
Subsec. (a)(2).
Subsec. (a)(3).
Subsec. (a)(4).
Subsec. (a)(5).
Subsec. (a)(6).
Subsec. (a)(7).
Subsec. (a)(8).
Subsec. (a)(9).
Subsec. (b).
Subsec. (c)(3)(A).
Subsec. (c)(3)(B)(iii).
Subsec. (c)(5).
Subsec. (d)(4)(D), (6).
Subsec. (e)(1)(C).
Subsec. (e)(2).
Subsec. (f)(1)(B), (2), (3).
Subsec. (f)(4)(A).
Subsec. (f)(4)(B)(ii).
Subsec. (f)(7).
Subsec. (f)(8).
Subsec. (f)(9).
Subsec. (g).
1975—Subsec. (a)(1).
Subsec. (a)(6).
Subsec. (c)(3)(A).
Subsec. (c)(4).
Subsecs. (d), (e).
Subsec. (f).
1974—Subsec. (a)(3).
1971—Subsec. (b)(1).
Subsec. (b)(3).
Subsec. (b)(5).
Subsec. (b)(6).
Subsec. (c)(2).
Subsec. (c)(3)(A).
Subsec. (c)(3)(B).
Subsec. (c)(3)(C).
Subsec. (c)(4).
Subsec. (d)(3).
Subsec. (e).
1969—Subsec. (a)(3).
Subsec. (a)(5).
Subsec. (b)(5), (6).
1967—Subsec. (b).
1966—Subsec. (a)(2).
Subsec. (a)(3).
Subsec. (b)(1).
1964—Subsec. (a)(3)(B) to (D).
Statutory Notes and Related Subsidiaries
Effective Date of 2022 Amendment
Amendment by
Amendment by
Effective Date of 2010 Amendment
Effective Date of 2009 Amendment
Effective Date of 2005 Amendment
Effective Date of 2004 Amendment
Effective Date of 1990 Amendment
Amendment by section 11813(a) of
Effective Date of 1989 Amendment
Amendment by section 7814(d) of
Effective Date of 1988 Amendment
Amendment by sections 1002(a)(4), (15), (17), (25), 1009(a)(1), and 1013(a)(44) of
Effective Date of 1986 Amendment
Amendment by section 201(d)(7)(B) of
"(1)
"(2)
"(A) a rehabilitation which was completed pursuant to a written contract which was binding on March 1, 1986, or
"(B) a rehabilitation incurred in connection with property (including any leasehold interest) acquired before March 2, 1986, or acquired on or after such date pursuant to a written contract that was binding on March 1, 1986, if—
"(i) parts 1 and 2 of the Historic Preservation Certification Application were filed with the Department of the Interior (or its designee) before March 2, 1986, or
"(ii) the lesser of $1,000,000 or 5 percent of the cost of the rehabilitation is incurred before March 2, 1986, or is required to be incurred pursuant to a written contract which was binding on March 1, 1986.
"(3)
"(A) the rehabilitation of 8 bathhouses within the Hot Springs National Park or of buildings in the Central Avenue Historic District at such Park,
"(B) the rehabilitation of the Upper Pontalba Building in New Orleans, Louisiana,
"(C) the rehabilitation of at least 60 buildings listed on the National Register at the Frankford Arsenal,
"(D) the rehabilitation of De Baliveriere Arcade, St. Louis Centre, and Drake Apartments in Missouri,
"(E) the rehabilitation of The Tides in Bristol, Rhode Island,
"(F) the rehabilitation and renovation of the Outlet Company building and garage in Providence, Rhode Island,
"(G) the rehabilitation of 10 structures in Harrisburg, Pennsylvania, with respect to which the Harristown Development Corporation was designated redeveloper and received an option to acquire title to the entire project site for $1 on June 27, 1984,
"(H) the rehabilitation of a project involving the renovation of 3 historic structures on the Minneapolis riverfront, with respect to which the developer of the project entered into a redevelopment agreement with a municipality dated January 4, 1985, and industrial development bonds were sold in 3 separate issues in May, July, and October 1985,
"(I) the rehabilitation of a bank's main office facilities of approximately 120,000 square feet, in connection with which the bank's board of directors authorized a $3,300,000 expenditure for the renovation and retrofit on March 20, 1984,
"(J) the rehabilitation of 10 warehouse buildings built between 1906 and 1910 and purchased under a contract dated February 17, 1986,
"(K) the rehabilitation of a facility which is customarily used for conventions and sporting events if an analysis of operations and recommendations of utilization of such facility was prepared by a certified public accounting firm pursuant to an engagement authorized on March 6, 1984, and presented on June 11, 1984, to officials of the city in which such facility is located,
"(L) Mount Vernon Mills in Columbia, South Carolina,
"(M) the Barbara Jordan II Apartments,
"(N) the rehabilitation of the Federal Building and Post Office, 120 Hanover Street, Manchester, New Hampshire,
"(O) the rehabilitation of the Charleston Waterfront project in South Carolina,
"(P) the Hayes Mansion in San Jose, California,
"(Q) the renovation of a facility owned by the National Railroad Passenger Corporation ('Amtrak') for which project Amtrak engaged a development team by letter agreement dated August 23, 1985, as modified by letter agreement dated September 9, 1985,
"(R) the rehabilitation of a structure or its components which is listed in the National Register of Historic Places, is located in Allegheny County, Pennsylvania, will be substantially rehabilitated (as defined in section 48(g)(1)(C) prior to amendment by this Act), prior to December 31, 1989; and was previously utilized as a market and an auto dealership,
"(S) The Bellevue Stratford Hotel in Philadelphia, Pennsylvania,
"(T) the Dixon Mill Housing project in Jersey City, New Jersey,
"(U) Motor Square Garden,
"(V) the Blackstone Apartments, and the Shriver-Johnson building, in Sioux Falls, South Dakota,
"(W) the Holy Name Academy in Spokane, Washington,
"(X) the Nike/Clemson Mill in Exeter, New Hampshire,
"(Y) the Central Bank Building in Grand Rapids, Michigan, and
"(Z) the Heritage Hotel, in the City of Marquette, Michigan.
"(4)
"(A) the Fort Worth Town Square Project in Texas,
"(B) the American Youth Hostel in New York, New York,
"(C) The Riverwest Loft Development (including all three phases, two of which do not involve rehabilitations),
"(D) the Gaslamp Quarter Historic District in California,
"(E) the Eberhardt & Ober Brewery, in Pennsylvania,
"(F) the Captain's Walk Limited Partnership-Harris Place Development, in Connecticut,
"(G) the Velvet Mills in Connecticut,
"(H) the Roycroft Inn, in New York,
"(I) Old Main Village, in Mankato, Minnesota,
"(J) the Washburn-Crosby A Mill, in Minneapolis, Minnesota,
"(K) the Marble Arcade office building in Lakeland, Florida,
"(L) the Willard Hotel, in Washington, D.C.,
"(M) the H. P. Lau Building in Lincoln, Nebraska,
"(N) the Starks Building, in Louisville, Kentucky,
"(O) the Bellevue High School, in Bellevue, Kentucky,
"(P) the Major Hampden Smith House, in Owensboro, Kentucky,
"(Q) the Doe Run Inn, in Brandenburg, Kentucky,
"(R) the State National Bank, in Frankfort, Kentucky,
"(S) the Captain Jack House, in Fleming, Kentucky,
"(T) the Elizabeth Arlinghaus House, in Covington, Kentucky,
"(U) Limerick Shamrock, in Louisville, Kentucky,
"(V) the Robert Mills Project, in South Carolina,
"(W) the 620 Project, consisting of 3 buildings, in Kentucky,
"(X) the Warrior Hotel, Ltd., the first two floors of the Martin Hotel, and the 105,000 square foot warehouse constructed in 1910, all in Sioux City, Iowa,
"(Y) the waterpark condominium residential project, to the extent of $2 million of expenditures,
"(Z) the Bigelow-Hartford Carpet Mill in Enfield, Connecticut,
"(AA) properties abutting 125th street in New York County from 7th Avenue west to Morningside and the pier area on the Hudson River at the end of such 125th Street,
"(BB) the City of Los Angeles Central Library project pursuant to an agreement dated December 28, 1983,
"(CC) the Warehouse Row project in Chattanooga, Tennessee,
"(DD) any project described in section 204(a)(1)(F) of this Act [
"(EE) the Wood Street Commons project in Pittsburgh, Pennsylvania,
"(FF) any project described in section 803(d)(6) of this Act [
"(GG) Union Station, Indianapolis, Indiana,
"(HH) the Mattress Factory project in Pittsburgh, Pennsylvania,
"(II) Union Station in Providence, Rhode Island,
"(JJ) South Pack Plaza, Asheville, North Carolina,
"(KK) Old Louisville Trust Project, Louisville, Kentucky,
"(LL) Stewarts Rehabilitation Project, Louisville, Kentucky,
"(MM) Bernheim Officenter, Louisville, Kentucky,
"(NN) Springville Mill Project, Rockville, Connecticut, and
"(OO) the D.J. Stewart Company Building, State and Main Streets, Rockford, Illinois.
"(5)
"(A) by substituting '10 percent' for '15 percent', and
"(B) by substituting '13 percent' for '20 percent'.
"(6)
"(A) be treated as made (and allowable as a deduction) during 1986,
"(B) be treated as qualified rehabilitation expenditures made during 1986, and
"(C) be allocated in accordance with the partnership agreement regardless of when the interest in the partnership was acquired, except that—
"(i) if the taxpayer is not the original holder of such interest, no person (other than the taxpayer) had claimed any benefits by reason of this paragraph,
"(ii) no interest under section 6611 of the 1986 Code on any refund of income taxes which is solely attributable to this paragraph shall be paid for the period—
"(I) beginning on the date which is 45 days after the later of April 15, 1987, or the date on which the return for such taxes was filed, and
"(II) ending on the date the taxpayer acquired the interest in the partnership, and
"(iii) if the expenditures to be made under this provision are not paid or incurred before January 1, 1994, then the tax imposed by
"(7)
Amendment by sections 1802(a)(6), (8), 1844(a), (b)(3), (5), 1847(b)(11), 1848(a) of
Effective Date of 1984 Amendment
Amendment by section 16 of
Amendment by section 31(f) of
Amendment by section 113(b)(2)(B) of
"(1)
"(2)
Amendment by section 474(o)(1)–(7) of
Amendment by section 713 of
Effective Date of 1983 Amendment
Amendment by section 122(c)(1) of
Amendment by title I of
Amendment by section 202(f) of
"(1)
"(2)
"(A)
"(i) any estimates or projections relating to the amounts of the taxpayer's tax expense, depreciation expense, deferred tax reserve, credit allowable under section 38 of such code, or rate base, or
"(ii) any adjustments to the taxpayer's rate of return,
shall not be treated as inconsistent with the requirements of subparagraph (G) of such section 167(l)(3) nor inconsistent with the requirements of paragraph (1) or (2) of such section 46(f), where such estimates or projections, or such rate of return adjustments, were included in a qualified order.
"(B)
"(i) by a public utility commission which was entered before March 13, 1980,
"(ii) which used the estimates, projections, or rate of return adjustments referred to in subparagraph (A) to determine the amount of the rates to be collected by the taxpayer or the amount of a refund with respect to rates previously collected, and
"(iii) which ordered such rates to be collected or refunds to be made (whether or not such order actually was implemented or enforced).
"(3)
"(A)
"(i) rate reduction, or
"(ii) refund,
which was actually made pursuant to a qualified order.
"(B)
"(i) July 1, 1983, or
"(ii) 6 months after the refunds or rate reductions are actually made pursuant to a qualified order.
the taxpayer enters into a closing agreement (within the meaning of section 7121 of the Internal Revenue Code of 1986) which provides for the payment by the taxpayer of the amount of which paragraph (2) does not apply by reason of subparagraph (A).
"(4)
"(A)
"(B)
"(C)
"(i)
"(ii)
"(5)
Effective Date of 1982 Amendment
Amendment by
Amendment by section 201(d)(8)(A), formerly section 201(c)(8)(A), of
Amendment by section 265(b)(2)(A)(i) of
Effective Date of 1981 Amendment
Amendment by section 207(c)(1) of
"(1)
"(2)
"(3)
"(4)
"(5)
"(A)
"(i) property placed in service by the taxpayer on or before February 18, 1981, and
"(ii) property placed in service by the taxpayer after February 18, 1981, where such property is acquired by the taxpayer pursuant to a binding contract entered into on or before that date.
"(B)
"(6)
"(1)
"(2)
"(A) the physical work on such rehabilitation began before January 1, 1982, and
"(B) such building does not meet the requirements of paragraph (1) of section 48(g) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] (as amended by this Act [
Effective Date of 1980 Amendment
Amendment by section 222(e)(2) of
Effective Date of 1978 Amendment
Amendment by section 141(e), (f)(2) of
"The amendment made by subsection (a) [amending this section] shall apply to—
"(1) property acquired by the taxpayer after December 31, 1978, and
"(2) property the construction, reconstruction, or erection of which was completed by the taxpayer after December 31, 1978 (but only to the extent of the basis thereof attributable to construction, reconstruction, or erection after such date)."
Effective Date of 1976 Amendment
Amendment by section 503(b)(4) of
"(1)
"(2)
"(A) Section 301(e) of the Tax Reduction Act of 1975 [set out below], as added by subsection (d), shall apply for taxable years beginning after December 31, 1976.
"(B) The amendments made by subsections (a) and (b)(1) shall apply for taxable years beginning after December 31, 1975.
"(C) The amendments made by subsections (b)(4) and (f) shall apply for years beginning after December 31, 1975."
"(1)
"(2)
Amendment by section 1607(b)(1)(B) of
Amendment by section 1901(a)(4)(A), (B), (b)(1)(C) of
"(A) property acquired by the taxpayer after December 31, 1976, and
"(B) property the construction, reconstruction, or erection of which was completed by the taxpayer after December 31, 1976, (but only to the extent of the basis thereof attributable to construction, reconstruction, or erection after such date), in taxable years beginning after such date."
Effective Date of 1975 Amendment
Effective Date of 1974 Amendment
Amendment by section 2001(g)(2)(B) of
Amendment by section 2002(g)(2) of
Amendment by section 2005(c)(4) of
Effective Date of 1971 Amendment
"(1) The amendments made by subsections (a) and (b) [amending this section and
"(2) In redetermining qualified investment for purposes of section 47(a) of the Internal Revenue Code of 1986 in the case of any property which ceases to be section 38 property with respect to the taxpayer after August 15, 1971, or which becomes public utility property after such date, section 46(c)(2) of such Code shall be applied as amended by subsection (a)."
Effective Date of 1969 Amendment
Amendment by section 301(b)(4) of
Amendment by section 401(e)(1) of
Effective Date of 1967 Amendment
Effective Date of 1966 Amendment
Amendment by
Effective Date of 1964 Amendment
Amendment by
Effective Date
Savings Provision
For provisions that nothing in amendment by section 11813(a) of
Plan Amendments Not Required Until January 1, 1989
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101–1147 and 1171–1177] or title XVIII [§§1800–1899A] of
Clarification of Effect of 1984 Amendment on Investment Tax Credit
Regulated Public Utilities; Special Transitional Rule
Plan Requirements for Taxpayers Electing Additional Credits
Public Utility Property Subject to Subsec. (e); Provisions Respecting Treatment of Investment Credit by Federal Regulatory Agencies Inapplicable
§47. Rehabilitation credit
(a) General rule
(1) In general
For purposes of section 46, for any taxable year during the 5-year period beginning in the taxable year in which a qualified rehabilitated building is placed in service, the rehabilitation credit for such year is an amount equal to the ratable share for such year.
(2) Ratable share
For purposes of paragraph (1), the ratable share for any taxable year during the period described in such paragraph is the amount equal to 20 percent of the qualified rehabilitation expenditures with respect to the qualified rehabilitated building, as allocated ratably to each year during such period.
(b) When expenditures taken into account
(1) In general
Qualified rehabilitation expenditures with respect to any qualified rehabilitated building shall be taken into account for the taxable year in which such qualified rehabilitated building is placed in service.
(2) Coordination with subsection (d)
The amount which would (but for this paragraph) be taken into account under paragraph (1) with respect to any qualified rehabilitated building shall be reduced (but not below zero) by any amount of qualified rehabilitation expenditures taken into account under subsection (d) by the taxpayer or a predecessor of the taxpayer (or, in the case of a sale and leaseback described in section 50(a)(2)(C), by the lessee), to the extent any amount so taken into account has not been required to be recaptured under section 50(a).
(c) Definitions
For purposes of this section—
(1) Qualified rehabilitated building
(A) In general
The term "qualified rehabilitated building" means any building (and its structural components) if—
(i) such building has been substantially rehabilitated,
(ii) such building was placed in service before the beginning of the rehabilitation,
(iii) such building is a certified historic structure, and
(iv) depreciation (or amortization in lieu of depreciation) is allowable with respect to such building.
(B) Substantially rehabilitated defined
(i) In general
For purposes of subparagraph (A)(i), a building shall be treated as having been substantially rehabilitated only if the qualified rehabilitation expenditures during the 24-month period selected by the taxpayer (at the time and in the manner prescribed by regulation) and ending with or within the taxable year exceed the greater of—
(I) the adjusted basis of such building (and its structural components), or
(II) $5,000.
The adjusted basis of the building (and its structural components) shall be determined as of the beginning of the 1st day of such 24-month period, or of the holding period of the building, whichever is later. For purposes of the preceding sentence, the determination of the beginning of the holding period shall be made without regard to any reconstruction by the taxpayer in connection with the rehabilitation.
(ii) Special rule for phased rehabilitation
In the case of any rehabilitation which may reasonably be expected to be completed in phases set forth in architectural plans and specifications completed before the rehabilitation begins, clause (i) shall be applied by substituting "60-month period" for "24-month period".
(iii) Lessees
The Secretary shall prescribe by regulation rules for applying this subparagraph to lessees.
(C) Reconstruction
Rehabilitation includes reconstruction.
(2) Qualified rehabilitation expenditure defined
(A) In general
The term "qualified rehabilitation expenditure" means any amount properly chargeable to capital account—
(i) for property for which depreciation is allowable under section 168 and which is—
(I) nonresidential real property,
(II) residential rental property,
(III) real property which has a class life of more than 12.5 years, or
(IV) an addition or improvement to property described in subclause (I), (II), or (III), and
(ii) in connection with the rehabilitation of a qualified rehabilitated building.
(B) Certain expenditures not included
The term "qualified rehabilitation expenditure" does not include—
(i) Straight line depreciation must be used
Any expenditure with respect to which the taxpayer does not use the straight line method over a recovery period determined under subsection (c) or (g) of section 168. The preceding sentence shall not apply to any expenditure to the extent the alternative depreciation system of section 168(g) applies to such expenditure by reason of subparagraph (B) or (C) of section 168(g)(1).
(ii) Cost of acquisition
The cost of acquiring any building or interest therein.
(iii) Enlargements
Any expenditure attributable to the enlargement of an existing building.
(iv) Certified historic structure
Any expenditure attributable to the rehabilitation of a qualified rehabilitated building unless the rehabilitation is a certified rehabilitation (within the meaning of subparagraph (C)).
(v) Tax-exempt use property
(I) In general
Any expenditure in connection with the rehabilitation of a building which is allocable to the portion of such property which is (or may reasonably be expected to be) tax-exempt use property (within the meaning of section 168(h), except that "50 percent" shall be substituted for "35 percent" in paragraph (1)(B)(iii) thereof).
(II) Clause not to apply for purposes of paragraph (1)(C)
This clause shall not apply for purposes of determining under paragraph (1)(C) whether a building has been substantially rehabilitated.
(vi) Expenditures of lessee
Any expenditure of a lessee of a building if, on the date the rehabilitation is completed, the remaining term of the lease (determined without regard to any renewal periods) is less than the recovery period determined under section 168(c).
(C) Certified rehabilitation
For purposes of subparagraph (B), the term "certified rehabilitation" means any rehabilitation of a certified historic structure which the Secretary of the Interior has certified to the Secretary as being consistent with the historic character of such property or the district in which such property is located.
(D) Nonresidential real property; residential rental property; class life
For purposes of subparagraph (A), the terms "nonresidential real property," "residential rental property," and "class life" have the respective meanings given such terms by section 168.
(3) Certified historic structure defined
(A) In general
The term "certified historic structure" means any building (and its structural components) which—
(i) is listed in the National Register, or
(ii) is located in a registered historic district and is certified by the Secretary of the Interior to the Secretary as being of historic significance to the district.
(B) Registered historic district
The term "registered historic district" means—
(i) any district listed in the National Register, and
(ii) any district—
(I) which is designated under a statute of the appropriate State or local government, if such statute is certified by the Secretary of the Interior to the Secretary as containing criteria which will substantially achieve the purpose of preserving and rehabilitating buildings of historic significance to the district, and
(II) which is certified by the Secretary of the Interior to the Secretary as meeting substantially all of the requirements for the listing of districts in the National Register.
(d) Progress expenditures
(1) In general
In the case of any building to which this subsection applies, except as provided in paragraph (3)—
(A) if such building is self-rehabilitated property, any qualified rehabilitation expenditure with respect to such building shall be taken into account for the taxable year for which such expenditure is properly chargeable to capital account with respect to such building, and
(B) if such building is not self-rehabilitated property, any qualified rehabilitation expenditure with respect to such building shall be taken into account for the taxable year in which paid.
(2) Property to which subsection applies
(A) In general
This subsection shall apply to any building which is being rehabilitated by or for the taxpayer if—
(i) the normal rehabilitation period for such building is 2 years or more, and
(ii) it is reasonable to expect that such building will be a qualified rehabilitated building in the hands of the taxpayer when it is placed in service.
Clauses (i) and (ii) shall be applied on the basis of facts known as of the close of the taxable year of the taxpayer in which the rehabilitation begins (or, if later, at the close of the first taxable year to which an election under this subsection applies).
(B) Normal rehabilitation period
For purposes of subparagraph (A), the term "normal rehabilitation period" means the period reasonably expected to be required for the rehabilitation of the building—
(i) beginning with the date on which physical work on the rehabilitation begins (or, if later, the first day of the first taxable year to which an election under this subsection applies), and
(ii) ending on the date on which it is expected that the property will be available for placing in service.
(3) Special rules for applying paragraph (1)
For purposes of paragraph (1)—
(A) Component parts, etc.
Property which is to be a component part of, or is otherwise to be included in, any building to which this subsection applies shall be taken into account—
(i) at a time not earlier than the time at which it becomes irrevocably devoted to use in the building, and
(ii) as if (at the time referred to in clause (i)) the taxpayer had expended an amount equal to that portion of the cost to the taxpayer of such component or other property which, for purposes of this subpart, is properly chargeable (during such taxable year) to capital account with respect to such building.
(B) Certain borrowing disregarded
Any amount borrowed directly or indirectly by the taxpayer from the person rehabilitating the property for him shall not be treated as an amount expended for such rehabilitation.
(C) Limitation for buildings which are not self-rehabilitated
(i) In general
In the case of a building which is not self-rehabilitated, the amount taken into account under paragraph (1)(B) for any taxable year shall not exceed the amount which represents the portion of the overall cost to the taxpayer of the rehabilitation which is properly attributable to the portion of the rehabilitation which is completed during such taxable year.
(ii) Carryover of certain amounts
In the case of a building which is not a self-rehabilitated building, if for the taxable year—
(I) the amount which (but for clause (i)) would have been taken into account under paragraph (1)(B) exceeds the limitation of clause (i), then the amount of such excess shall be taken into account under paragraph (1)(B) for the succeeding taxable year, or
(II) the limitation of clause (i) exceeds the amount taken into account under paragraph (1)(B), then the amount of such excess shall increase the limitation of clause (i) for the succeeding taxable year.
(D) Determination of percentage of completion
The determination under subparagraph (C)(i) of the portion of the overall cost to the taxpayer of the rehabilitation which is properly attributable to rehabilitation completed during any taxable year shall be made, under regulations prescribed by the Secretary, on the basis of engineering or architectural estimates or on the basis of cost accounting records. Unless the taxpayer establishes otherwise by clear and convincing evidence, the rehabilitation shall be deemed to be completed not more rapidly than ratably over the normal rehabilitation period.
(E) No progress expenditures for certain prior periods
No qualified rehabilitation expenditures shall be taken into account under this subsection for any period before the first day of the first taxable year to which an election under this subsection applies.
(F) No progress expenditures for property for year it is placed in service, etc.
In the case of any building, no qualified rehabilitation expenditures shall be taken into account under this subsection for the earlier of—
(i) the taxable year in which the building is placed in service, or
(ii) the first taxable year for which recapture is required under section 50(a)(2) with respect to such property,
or for any taxable year thereafter.
(4) Self-rehabilitated building
For purposes of this subsection, the term "self-rehabilitated building" means any building if it is reasonable to believe that more than half of the qualified rehabilitation expenditures for such building will be made directly by the taxpayer.
(5) Election
This subsection shall apply to any taxpayer only if such taxpayer has made an election under this paragraph. Such an election shall apply to the taxable year for which made and all subsequent taxable years. Such an election, once made, may be revoked only with the consent of the Secretary.
(Added
Editorial Notes
Prior Provisions
Provisions similar to this section were contained in
Amendments
2017—Subsec. (a).
"(1) 10 percent of the qualified rehabilitation expenditures with respect to any qualified rehabilitated building other than a certified historic structure, and
"(2) 20 percent of the qualified rehabilitation expenditures with respect to any certified historic structure."
Subsec. (c)(1)(A)(iii).
"(I) 50 percent or more of the existing external walls of such building are retained in place as external walls,
"(II) 75 percent or more of the existing external walls of such building are retained in place as internal or external walls, and
"(III) 75 percent or more of the existing internal structural framework of such building is retained in place, and".
Subsec. (c)(1)(B) to (D).
Subsec. (c)(2)(B)(iv).
"(I) such building was not a certified historic structure,
"(II) the Secretary of the Interior certified to the Secretary that such building is not of historic significance to the district, and
"(III) if the certification referred to in subclause (II) occurs after the beginning of the rehabilitation of such building, the taxpayer certifies to the Secretary that, at the beginning of such rehabilitation, he in good faith was not aware of the requirements of subclause (II)."
2008—Subsec. (c)(2)(B)(v)(I).
1990—
Subsec. (b)(1) to (3).
1988—Subsec. (a)(5)(D).
Subsec. (a)(5)(E)(iii).
Subsec. (a)(5)(E)(v).
Subsec. (a)(9)(A).
Subsec. (c).
Subsec. (d)(1).
Subsec. (d)(3)(C)(i).
1986—Subsec. (a)(9).
Subsec. (d)(1).
Subsec. (d)(3)(E)(i).
Subsec. (d)(3)(F).
Subsec. (d)(3)(G).
1985—Subsec. (a)(5)(B).
1984—Subsec. (a)(5)(D), (6).
Subsec. (a)(7)(C).
Subsec. (c).
Subsec. (d).
Subsec. (d)(1).
Subsec. (d)(2).
Subsec. (d)(3)(A).
Subsec. (d)(3)(B)(i).
Subsec. (e).
1983—Subsec. (d)(2).
Subsec. (d)(3)(A).
1982—Subsec. (a)(5)(D).
1981—Subsec. (a)(3)(D).
Subsec. (a)(5), (6).
Subsec. (a)(7), (8).
Subsec. (d).
1978—Subsec. (a)(4), (5).
Subsec. (a)(6)(B).
Subsec. (b)(3).
1976—Subsec. (a).
Subsec. (a)(7).
1975—Subsec. (a)(3), (4).
Subsec. (a)(5), (6)(B).
1971—Subsec. (a)(4).
Subsec. (a)(5).
Subsec. (a)(6)(A).
Subsec. (a)(6).
1969—Subsec. (a)(5).
Subsec. (a)(4).
Statutory Notes and Related Subsidiaries
Effective Date of 2017 Amendment
"(1)
"(2)
"(A) owned or leased by the taxpayer during the entirety of the period after December 31, 2017, and
"(B) with respect to which the 24-month period selected by the taxpayer under clause (i) of section 47(c)(1)(B) of the Internal Revenue Code (as amended by subsection (b)), or the 60-month period applicable under clause (ii) of such section, begins not later than 180 days after the date of the enactment of this Act [Dec. 22, 2017],
the amendments made by this section shall apply to such expenditures paid or incurred after the end of the taxable year in which the 24-month period, or the 60-month period, referred to in subparagraph (B) ends."
Effective Date of 2008 Amendment
Effective Date of 1990 Amendment
Amendment by section 11813(a) of
Effective Date of 1988 Amendment
Amendment by
Effective Date of 1986 Amendment
Amendment by sections 1802(a)(5)(A) and 1844(b)(1), (2), (4) of
Effective Date of 1985 Amendment
Amendment by
Effective Date of 1984 Amendment
Amendment by
Amendment by section 421(b)(7) of
Amendment by section 431(b)(2), (d)(4), (5) of
Amendment by section 474(o)(8), (9) of
Effective Date of 1983 Amendment
Amendment by
Effective Date of 1982 Amendment
Amendment by
Effective Date of 1981 Amendment
Amendment by section 211(g) of
Amendment by section 211(f)(2) of
Effective Date of 1978 Amendment
Effective Date of 1976 Amendment
Amendment by section 804(b) of
Effective Date of 1975 Amendment
Amendment by
Effective Date of 1971 Amendment
In redetermining qualified investment for purposes of subsec. (a) of this section in the case of any property which ceases to be section 38 property with respect to the taxpayer after Aug. 15, 1971, or which becomes public utility property after such date,
Amendment by section 107(a)(1) of
Effective Date
Section applicable with respect to taxable years ending after Dec. 31, 1961, see section 2(h) of
Savings Provision
For provisions that nothing in amendment by
Plan Amendments Not Required Until January 1, 1989
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101–1147 and 1171–1177] or title XVIII [§§1800–1899A] of
Clarification of Effect of 1984 Amendment on Investment Tax Credit
For provision that nothing in the amendments made by section 474(o) of
Transfer of Functions
Functions, powers, and duties of Federal Aviation Agency and of Administrator and other offices and officers thereof transferred by
§48. Energy credit
(a) Energy credit
(1) In general
For purposes of section 46, except as provided in paragraphs (1)(B), (2)(B), and (3)(B) of subsection (c), the energy credit for any taxable year is the energy percentage of the basis of each energy property placed in service during such taxable year.
(2) Energy percentage
(A) In general
Except as provided in paragraphs (6) and (7), the energy percentage is—
(i) 6 percent in the case of—
(I) qualified fuel cell property,
(II) energy property described in clause (i) or (iii) of paragraph (3)(A) but only with respect to property the construction of which begins before January 1, 2025,
(III) energy property described in paragraph (3)(A)(ii),
(IV) qualified small wind energy property,
(V) waste energy recovery property,
(VI) energy storage technology,
(VII) qualified biogas property,
(VIII) microgrid controllers, and
(IX) energy property described in clauses (v) and (vii) of paragraph (3)(A), and
(ii) in the case of any energy property to which clause (i) does not apply, 2 percent.
(B) Coordination with rehabilitation credit
The energy percentage shall not apply to that portion of the basis of any property which is attributable to qualified rehabilitation expenditures.
(3) Energy property
For purposes of this subpart, the term "energy property" means any property—
(A) which is—
(i) equipment which uses solar energy to generate electricity, to heat or cool (or provide hot water for use in) a structure, or to provide solar process heat, excepting property used to generate energy for the purposes of heating a swimming pool,
(ii) equipment which uses solar energy to illuminate the inside of a structure using fiber-optic distributed sunlight, or electrochromic glass which uses electricity to change its light transmittance properties in order to heat or cool a structure, but only with respect to property the construction of which begins before January 1, 2025,
(iii) equipment used to produce, distribute, or use energy derived from a geothermal deposit (within the meaning of section 613(e)(2)), but only, in the case of electricity generated by geothermal power, up to (but not including) the electrical transmission stage,
(iv) qualified fuel cell property or qualified microturbine property,
(v) combined heat and power system property,
(vi) qualified small wind energy property,
(vii) equipment which uses the ground or ground water as a thermal energy source to heat a structure or as a thermal energy sink to cool a structure, but only with respect to property the construction of which begins before January 1, 2035,
(viii) waste energy recovery property,
(ix) energy storage technology,
(x) qualified biogas property, or
(xi) microgrid controllers,
(B)(i) the construction, reconstruction, or erection of which is completed by the taxpayer, or
(ii) which is acquired by the taxpayer if the original use of such property commences with the taxpayer,
(C) with respect to which depreciation (or amortization in lieu of depreciation) is allowable, and
(D) which meets the performance and quality standards (if any) which—
(i) have been prescribed by the Secretary by regulations (after consultation with the Secretary of Energy), and
(ii) are in effect at the time of the acquisition of the property.
Such term shall not include any property which is part of a facility the production from which is allowed as a credit under section 45 for the taxable year or any prior taxable year.
(4) Special rule for property financed by tax-exempt bonds
Rules similar to the rule under section 45(b)(3) shall apply for purposes of this section.
(5) Election to treat qualified facilities as energy property
(A) In general
In the case of any qualified property which is part of a qualified investment credit facility—
(i) such property shall be treated as energy property for purposes of this section, and
(ii) the energy percentage with respect to such property shall be 6 percent.
(B) Denial of production credit
No credit shall be allowed under section 45 for any taxable year with respect to any qualified investment credit facility.
(C) Qualified investment credit facility
For purposes of this paragraph, the term "qualified investment credit facility" means any facility—
(i) which is a qualified facility (within the meaning of section 45) described in paragraph (1), (2), (3), (4), (6), (7), (9), or (11) of section 45(d),
(ii) which is placed in service after 2008 and the construction of which begins before January 1, 2025, and
(iii) with respect to which—
(I) no credit has been allowed under section 45, and
(II) the taxpayer makes an irrevocable election to have this paragraph apply.
(D) Qualified property
For purposes of this paragraph, the term "qualified property" means property—
(i) which is—
(I) tangible personal property, or
(II) other tangible property (not including a building or its structural components), but only if such property is used as an integral part of the qualified investment credit facility,
(ii) with respect to which depreciation (or amortization in lieu of depreciation) is allowable,
(iii) which is constructed, reconstructed, erected, or acquired by the taxpayer, and
(iv) the original use of which commences with the taxpayer.
(E) Phaseout of credit for wind facilities
In the case of any facility using wind to produce electricity which is placed in service before January 1, 2022, and treated as energy property by reason of this paragraph, the amount of the credit determined under this section (determined after the application of paragraphs (1) and (2) and without regard to this subparagraph) shall be reduced by—
(i) in the case of any facility the construction of which begins after December 31, 2016, and before January 1, 2018, 20 percent,
(ii) in the case of any facility the construction of which begins after December 31, 2017, and before January 1, 2019, 40 percent,
(iii) in the case of any facility the construction of which begins after December 31, 2018, and before January 1, 2020, 60 percent, and
(iv) in the case of any facility the construction of which begins after December 31, 2019, and before January 1, 2022, 40 percent.
(F) Qualified offshore wind facilities
(i) In general
In the case of any qualified offshore wind facility, subparagraph (E) shall not apply.
(ii) Qualified offshore wind facility
For purposes of this subparagraph, the term "qualified offshore wind facility" means a qualified facility (within the meaning of section 45) described in paragraph (1) of section 45(d) (determined without regard to any date by which the construction of the facility is required to begin) which is located in the inland navigable waters of the United States or in the coastal waters of the United States.
(6) Phaseout for certain energy property
In the case of any qualified fuel cell property, qualified small wind property, or energy property described in clause (i) or clause (ii) of paragraph (3)(A) the construction of which begins after December 31, 2019, and which is placed in service before January 1, 2022, the energy percentage determined under paragraph (2) shall be equal to 26 percent.
(7) Phaseout for certain energy property
In the case of any energy property described in clause (vii) of paragraph (3)(A), the energy percentage determined under paragraph (2) shall be equal to—
(A) in the case of any property the construction of which begins before January 1, 2033, and which is placed in service after December 31, 2021, 6 percent,
(B) in the case of any property the construction of which begins after December 31, 2032, and before January 1, 2034, 5.2 percent, and
(C) in the case of any property the construction of which begins after December 31, 2033, and before January 1, 2035, 4.4 percent.
(8) Interconnection property
(A) In general
For purposes of determining the credit under subsection (a), energy property shall include amounts paid or incurred by the taxpayer for qualified interconnection property in connection with the installation of energy property (as defined in paragraph (3)) which has a maximum net output of not greater than 5 megawatts (as measured in alternating current), to provide for the transmission or distribution of the electricity produced or stored by such property, and which are properly chargeable to the capital account of the taxpayer.
(B) Qualified interconnection property
The term "qualified interconnection property" means, with respect to an energy project which is not a microgrid controller, any tangible property—
(i) which is part of an addition, modification, or upgrade to a transmission or distribution system which is required at or beyond the point at which the energy project interconnects to such transmission or distribution system in order to accommodate such interconnection,
(ii) either—
(I) which is constructed, reconstructed, or erected by the taxpayer, or
(II) for which the cost with respect to the construction, reconstruction, or erection of such property is paid or incurred by such taxpayer, and
(iii) the original use of which, pursuant to an interconnection agreement, commences with a utility.
(C) Interconnection agreement
The term "interconnection agreement" means an agreement with a utility for the purposes of interconnecting the energy property owned by such taxpayer to the transmission or distribution system of such utility.
(D) Utility
For purposes of this paragraph, the term "utility" means the owner or operator of an electrical transmission or distribution system which is subject to the regulatory authority of a State or political subdivision thereof, any agency or instrumentality of the United States, a public service or public utility commission or other similar body of any State or political subdivision thereof, or the governing or ratemaking body of an electric cooperative.
(E) Special rule for interconnection property
In the case of expenses paid or incurred for interconnection property, amounts otherwise chargeable to capital account with respect to such expenses shall be reduced under rules similar to the rules of section 50(c).
(9) Increased credit amount for energy projects
(A) In general
(i) Rule
In the case of any energy project which satisfies the requirements of subparagraph (B), the amount of the credit determined under this subsection (determined after the application of paragraphs (1) through (8) and paragraph (15) and without regard to this clause) shall be equal to such amount multiplied by 5.
(ii) Energy project defined
For purposes of this subsection, the term "energy project" means a project consisting of one or more energy properties that are part of a single project.
(B) Project requirements
A project meets the requirements of this subparagraph if it is one of the following:
(i) A project with a maximum net output of less than 1 megawatt of electrical (as measured in alternating current) or thermal energy.
(ii) A project the construction of which begins before the date that is 60 days after the Secretary publishes guidance with respect to the requirements of paragraphs (10)(A) and (11).
(iii) A project which satisfies the requirements of paragraphs (10)(A) and (11).
(10) Prevailing wage requirements
(A) In general
The requirements described in this subparagraph with respect to any energy project are that the taxpayer shall ensure that any laborers and mechanics employed by the taxpayer or any contractor or subcontractor in—
(i) the construction of such energy project, and
(ii) for the 5-year period beginning on the date such project is originally placed in service, the alteration or repair of such project,
shall be paid wages at rates not less than the prevailing rates for construction, alteration, or repair of a similar character in the locality in which such project is located as most recently determined by the Secretary of Labor, in accordance with subchapter IV of
(B) Correction and penalty related to failure to satisfy wage requirements
Rules similar to the rules of section 45(b)(7)(B) shall apply.
(C) Recapture
The Secretary shall, by regulations or other guidance, provide for recapturing the benefit of any increase in the credit allowed under this subsection by reason of this paragraph with respect to any project which does not satisfy the requirements under subparagraph (A) (after application of subparagraph (B)) for the period described in clause (ii) of subparagraph (A) (but which does not cease to be investment credit property within the meaning of section 50(a)). The period and percentage of such recapture shall be determined under rules similar to the rules of section 50(a).
(11) Apprenticeship requirements
Rules similar to the rules of section 45(b)(8) shall apply.
(12) Domestic content bonus credit amount
(A) In general
In the case of any energy project which satisfies the requirement under subparagraph (B), for purposes of applying paragraph (2) with respect to such property, the energy percentage shall be increased by the applicable credit rate increase.
(B) Requirement
Rules similar to the rules of section 45(b)(9)(B) shall apply.
(C) Applicable credit rate increase
For purposes of subparagraph (A), the applicable credit rate increase shall be—
(i) in the case of an energy project which does not satisfy the requirements of paragraph (9)(B), 2 percentage points, and
(ii) in the case of an energy project which satisfies the requirements of paragraph (9)(B), 10 percentage points.
(13) Phaseout for elective payment
In the case of a taxpayer making an election under section 6417 with respect to a credit under this section, rules similar to the rules of section 45(b)(10) shall apply.
(14) Increase in credit rate for energy communities
(A) In general
In the case of any energy project that is placed in service within an energy community (as defined in section 45(b)(11)(B), as applied by substituting "energy project" for "qualified facility" each place it appears), for purposes of applying paragraph (2) with respect to energy property which is part of such project, the energy percentage shall be increased by the applicable credit rate increase.
(B) Applicable credit rate increase
For purposes of subparagraph (A), the applicable credit rate increase shall be equal to—
(i) in the case of any energy project which does not satisfy the requirements of paragraph (9)(B), 2 percentage points, and
(ii) in the case of any energy project which satisfies the requirements of paragraph (9)(B), 10 percentage points.
(15) Election to treat clean hydrogen production facilities as energy property
(A) In general
In the case of any qualified property (as defined in paragraph (5)(D)) which is part of a specified clean hydrogen production facility—
(i) such property shall be treated as energy property for purposes of this section, and
(ii) the energy percentage with respect to such property is—
(I) in the case of a facility which is designed and reasonably expected to produce qualified clean hydrogen which is described in a subparagraph (A) of section 45V(b)(2), 1.2 percent,
(II) in the case of a facility which is designed and reasonably expected to produce qualified clean hydrogen which is described in a subparagraph (B) of such section, 1.5 percent,
(III) in the case of a facility which is designed and reasonably expected to produce qualified clean hydrogen which is described in a subparagraph (C) of such section, 2 percent, and
(IV) in the case of a facility which is designed and reasonably expected to produce qualified clean hydrogen which is described in subparagraph (D) of such section, 6 percent.
(B) Denial of production credit
No credit shall be allowed under section 45V or section 45Q for any taxable year with respect to any specified clean hydrogen production facility or any carbon capture equipment included at such facility.
(C) Specified clean hydrogen production facility
For purposes of this paragraph, the term "specified clean hydrogen production facility" means any qualified clean hydrogen production facility (as defined in section 45V(c)(3))—
(i) which is placed in service after December 31, 2022,
(ii) with respect to which—
(I) no credit has been allowed under section 45V or 45Q, and
(II) the taxpayer makes an irrevocable election to have this paragraph apply, and
(iii) for which an unrelated third party has verified (in such form or manner as the Secretary may prescribe) that such facility produces hydrogen through a process which results in lifecycle greenhouse gas emissions which are consistent with the hydrogen that such facility was designed and expected to produce under subparagraph (A)(ii).
(D) Qualified clean hydrogen
For purposes of this paragraph, the term "qualified clean hydrogen" has the meaning given such term by section 45V(c)(2).
(E) Regulations
The Secretary shall issue such regulations or other guidance as the Secretary determines necessary to carry out the purposes of this section, including regulations or other guidance which recaptures so much of any credit allowed under this section as exceeds the amount of the credit which would have been allowed if the expected production were consistent with the actual verified production (or all of the credit so allowed in the absence of such verification).
(16) Regulations and guidance
The Secretary shall issue such regulations or other guidance as the Secretary determines necessary to carry out the purposes of this subsection, including regulations or other guidance which provides for requirements for recordkeeping or information reporting for purposes of administering the requirements of this subsection.
(b) Certain progress expenditure rules made applicable
Rules similar to the rules of subsections (c)(4) and (d) of section 46 (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990) shall apply for purposes of subsection (a).
(c) Definitions
For purposes of this section—
(1) Qualified fuel cell property
(A) In general
The term "qualified fuel cell property" means a fuel cell power plant which—
(i) has a nameplate capacity of at least 0.5 kilowatt (1 kilowatt in the case of a fuel cell power plant with a linear generator assembly) of electricity using an electrochemical or electromechanical process, and
(ii) has an electricity-only generation efficiency greater than 30 percent.
(B) Limitation
In the case of qualified fuel cell property placed in service during the taxable year, the credit otherwise determined under subsection (a) for such year with respect to such property shall not exceed an amount equal to $1,500 for each 0.5 kilowatt of capacity of such property.
(C) Fuel cell power plant
The term "fuel cell power plant" means an integrated system comprised of a fuel cell stack assembly, or linear generator assembly, and associated balance of plant components which converts a fuel into electricity using electrochemical or electromechanical means.
(D) Linear generator assembly
The term "linear generator assembly" does not include any assembly which contains rotating parts.
(E) Termination
The term "qualified fuel cell property" shall not include any property the construction of which does not begin before January 1, 2025.
(2) Qualified microturbine property
(A) In general
The term "qualified microturbine property" means a stationary microturbine power plant which—
(i) has a nameplate capacity of less than 2,000 kilowatts, and
(ii) has an electricity-only generation efficiency of not less than 26 percent at International Standard Organization conditions.
(B) Limitation
In the case of qualified microturbine property placed in service during the taxable year, the credit otherwise determined under subsection (a) for such year with respect to such property shall not exceed an amount equal to $200 for each kilowatt of capacity of such property.
(C) Stationary microturbine power plant
The term "stationary microturbine power plant" means an integrated system comprised of a gas turbine engine, a combustor, a recuperator or regenerator, a generator or alternator, and associated balance of plant components which converts a fuel into electricity and thermal energy. Such term also includes all secondary components located between the existing infrastructure for fuel delivery and the existing infrastructure for power distribution, including equipment and controls for meeting relevant power standards, such as voltage, frequency, and power factors.
(D) Termination
The term "qualified microturbine property" shall not include any property the construction of which does not begin before January 1, 2025.
(3) Combined heat and power system property
(A) Combined heat and power system property
The term "combined heat and power system property" means property comprising a system—
(i) which uses the same energy source for the simultaneous or sequential generation of electrical power, mechanical shaft power, or both, in combination with the generation of steam or other forms of useful thermal energy (including heating and cooling applications),
(ii) which produces—
(I) at least 20 percent of its total useful energy in the form of thermal energy which is not used to produce electrical or mechanical power (or combination thereof), and
(II) at least 20 percent of its total useful energy in the form of electrical or mechanical power (or combination thereof),
(iii) the energy efficiency percentage of which exceeds 60 percent, and
(iv) the construction of which begins before January 1, 2025.
(B) Limitation
(i) In general
In the case of combined heat and power system property with an electrical capacity in excess of the applicable capacity placed in service during the taxable year, the credit under subsection (a)(1) (determined without regard to this paragraph) for such year shall be equal to the amount which bears the same ratio to such credit as the applicable capacity bears to the capacity of such property.
(ii) Applicable capacity
For purposes of clause (i), the term "applicable capacity" means 15 megawatts or a mechanical energy capacity of more than 20,000 horsepower or an equivalent combination of electrical and mechanical energy capacities.
(iii) Maximum capacity
The term "combined heat and power system property" shall not include any property comprising a system if such system has a capacity in excess of 50 megawatts or a mechanical energy capacity in excess of 67,000 horsepower or an equivalent combination of electrical and mechanical energy capacities.
(C) Special rules
(i) Energy efficiency percentage
For purposes of this paragraph, the energy efficiency percentage of a system is the fraction—
(I) the numerator of which is the total useful electrical, thermal, and mechanical power produced by the system at normal operating rates, and expected to be consumed in its normal application, and
(II) the denominator of which is the lower heating value of the fuel sources for the system.
(ii) Determinations made on Btu basis
The energy efficiency percentage and the percentages under subparagraph (A)(ii) shall be determined on a Btu basis.
(iii) Input and output property not included
The term "combined heat and power system property" does not include property used to transport the energy source to the facility or to distribute energy produced by the facility.
(D) Systems using biomass
If a system is designed to use biomass (within the meaning of paragraphs (2) and (3) of section 45(c) without regard to the last sentence of paragraph (3)(A)) for at least 90 percent of the energy source—
(i) subparagraph (A)(iii) shall not apply, but
(ii) the amount of credit determined under subsection (a) with respect to such system shall not exceed the amount which bears the same ratio to such amount of credit (determined without regard to this subparagraph) as the energy efficiency percentage of such system bears to 60 percent.
(4) Qualified small wind energy property
(A) In general
The term "qualified small wind energy property" means property which uses a qualifying small wind turbine to generate electricity.
(B) Qualifying small wind turbine
The term "qualifying small wind turbine" means a wind turbine which has a nameplate capacity of not more than 100 kilowatts.
(C) Termination
The term "qualified small wind energy property" shall not include any property the construction of which does not begin before January 1, 2025.
(5) Waste energy recovery property
(A) In general
The term "waste energy recovery property" means property that generates electricity solely from heat from buildings or equipment if the primary purpose of such building or equipment is not the generation of electricity.
(B) Capacity limitation
The term "waste energy recovery property" shall not include any property which has a capacity in excess of 50 megawatts.
(C) No double benefit
Any waste energy recovery property (determined without regard to this subparagraph) which is part of a system which is a combined heat and power system property shall not be treated as waste energy recovery property for purposes of this section unless the taxpayer elects to not treat such system as a combined heat and power system property for purposes of this section.
(D) Termination
The term "waste energy recovery property" shall not include any property the construction of which does not begin before January 1, 2025.
(6) Energy storage technology
(A) In general
The term "energy storage technology" means—
(i) property (other than property primarily used in the transportation of goods or individuals and not for the production of electricity) which receives, stores, and delivers energy for conversion to electricity (or, in the case of hydrogen, which stores energy), and has a nameplate capacity of not less than 5 kilowatt hours, and
(ii) thermal energy storage property.
(B) Modifications of certain property
In the case of any property which either—
(i) was placed in service before the date of enactment of this section 1 and would be described in subparagraph (A)(i), except that such property has a capacity of less than 5 kilowatt hours and is modified in a manner that such property (after such modification) has a nameplate capacity of not less than 5 kilowatt hours, or
(ii) is described in subparagraph (A)(i) and is modified in a manner that such property (after such modification) has an increase in nameplate capacity of not less than 5 kilowatt hours,
such property shall be treated as described in subparagraph (A)(i) except that the basis of any existing property prior to such modification shall not be taken into account for purposes of this section. In the case of any property to which this subparagraph applies, subparagraph (D) shall be applied by substituting "modification" for "construction".
(C) Thermal energy storage property
(i) In general
Subject to clause (ii), for purposes of this paragraph, the term "thermal energy storage property" means property comprising a system which—
(I) is directly connected to a heating, ventilation, or air conditioning system,
(II) removes heat from, or adds heat to, a storage medium for subsequent use, and
(III) provides energy for the heating or cooling of the interior of a residential or commercial building.
(ii) Exclusion
The term "thermal energy storage property" shall not include—
(I) a swimming pool,
(II) combined heat and power system property, or
(III) a building or its structural components.
(D) Termination
The term "energy storage technology" shall not include any property the construction of which begins after December 31, 2024.
(7) Qualified biogas property
(A) In general
The term "qualified biogas property" means property comprising a system which—
(i) converts biomass (as defined in section 45K(c)(3), as in effect on the date of enactment of this paragraph) into a gas which—
(I) consists of not less than 52 percent methane by volume, or
(II) is concentrated by such system into a gas which consists of not less than 52 percent methane, and
(ii) captures such gas for sale or productive use, and not for disposal via combustion.
(B) Inclusion of cleaning and conditioning property
The term "qualified biogas property" includes any property which is part of such system which cleans or conditions such gas.
(C) Termination
The term "qualified biogas property" shall not include any property the construction of which begins after December 31, 2024.
(8) Microgrid controller
(A) In general
The term "microgrid controller" means equipment which is—
(i) part of a qualified microgrid, and
(ii) designed and used to monitor and control the energy resources and loads on such microgrid.
(B) Qualified microgrid
The term "qualified microgrid" means an electrical system which—
(i) includes equipment which is capable of generating not less than 4 kilowatts and not greater than 20 megawatts of electricity,
(ii) is capable of operating—
(I) in connection with the electrical grid and as a single controllable entity with respect to such grid, and
(II) independently (and disconnected) from such grid, and
(iii) is not part of a bulk-power system (as defined in section 215 of the Federal Power Act (
(C) Termination
The term "microgrid controller" shall not include any property the construction of which begins after December 31, 2024.
(d) Coordination with Department of Treasury grants
In the case of any property with respect to which the Secretary makes a grant under section 1603 of the American Recovery and Reinvestment Tax Act of 2009—
(1) Denial of production and investment credits
No credit shall be determined under this section or section 45 with respect to such property for the taxable year in which such grant is made or any subsequent taxable year.
(2) Recapture of credits for progress expenditures made before grant
If a credit was determined under this section with respect to such property for any taxable year ending before such grant is made—
(A) the tax imposed under subtitle A on the taxpayer for the taxable year in which such grant is made shall be increased by so much of such credit as was allowed under section 38,
(B) the general business carryforwards under section 39 shall be adjusted so as to recapture the portion of such credit which was not so allowed, and
(C) the amount of such grant shall be determined without regard to any reduction in the basis of such property by reason of such credit.
(3) Treatment of grants
Any such grant—
(A) shall not be includible in the gross income or alternative minimum taxable income of the taxpayer, but
(B) shall be taken into account in determining the basis of the property to which such grant relates, except that the basis of such property shall be reduced under section 50(c) in the same manner as a credit allowed under subsection (a).
(e) Special rules for certain solar and wind facilities placed in service in connection with low-income communities
(1) In general
In the case of any qualified solar and wind facility with respect to which the Secretary makes an allocation of environmental justice solar and wind capacity limitation under paragraph (4)—
(A) the energy percentage otherwise determined under paragraph (2) or (5) of subsection (a) with respect to any eligible property which is part of such facility shall be increased by—
(i) in the case of a facility described in subclause (I) of paragraph (2)(A)(iii) and not described in subclause (II) of such paragraph, 10 percentage points, and
(ii) in the case of a facility described in subclause (II) of paragraph (2)(A)(iii), 20 percentage points, and
(B) the increase in the credit determined under subsection (a) by reason of this subsection for any taxable year with respect to all property which is part of such facility shall not exceed the amount which bears the same ratio to the amount of such increase (determined without regard to this subparagraph) as—
(i) the environmental justice solar and wind capacity limitation allocated to such facility, bears to
(ii) the total megawatt nameplate capacity of such facility, as measured in direct current.
(2) Qualified solar and wind facility
For purposes of this subsection—
(A) In general
The term "qualified solar and wind facility" means any facility—
(i) which generates electricity solely from property described in section 45(d)(1) or in clause (i) or (vi) of subsection (a)(3)(A),
(ii) which has a maximum net output of less than 5 megawatts (as measured in alternating current), and
(iii) which—
(I) is located in a low-income community (as defined in section 45D(e)) or on Indian land (as defined in section 2601(2) of the Energy Policy Act of 1992 (
(II) is part of a qualified low-income residential building project or a qualified low-income economic benefit project.
(B) Qualified low-income residential building project
A facility shall be treated as part of a qualified low-income residential building project if—
(i) such facility is installed on a residential rental building which participates in a covered housing program (as defined in section 41411(a) of the Violence Against Women Act of 1994 (
(ii) the financial benefits of the electricity produced by such facility are allocated equitably among the occupants of the dwelling units of such building.
(C) Qualified low-income economic benefit project
A facility shall be treated as part of a qualified low-income economic benefit project if at least 50 percent of the financial benefits of the electricity produced by such facility are provided to households with income of—
(i) less than 200 percent of the poverty line (as defined in section 36B(d)(3)(A)) applicable to a family of the size involved, or
(ii) less than 80 percent of area median gross income (as determined under section 142(d)(2)(B)).
(D) Financial benefit
For purposes of subparagraphs (B) and (C), electricity acquired at a below-market rate shall not fail to be taken into account as a financial benefit.
(3) Eligible property
For purposes of this section, the term "eligible property" means energy property which—
(A) is part of a facility described in section 45(d)(1) for which an election was made under subsection (a)(5), or
(B) is described in clause (i) or (vi) of subsection (a)(3)(A),
including energy storage technology (as described in subsection (a)(3)(A)(ix)) installed in connection with such energy property.
(4) Allocations
(A) In general
Not later than 180 days after the date of enactment of this subsection, the Secretary shall establish a program to allocate amounts of environmental justice solar and wind capacity limitation to qualified solar and wind facilities. In establishing such program and to carry out the purposes of this subsection, the Secretary shall provide procedures to allow for an efficient allocation process, including, when determined appropriate, consideration of multiple projects in a single application if such projects will be placed in service by a single taxpayer.
(B) Limitation
The amount of environmental justice solar and wind capacity limitation allocated by the Secretary under subparagraph (A) during any calendar year shall not exceed the annual capacity limitation with respect to such year.
(C) Annual capacity limitation
For purposes of this paragraph, the term "annual capacity limitation" means 1.8 gigawatts of direct current capacity for each of calendar years 2023 and 2024, and zero thereafter.
(D) Carryover of unused limitation
If the annual capacity limitation for any calendar year exceeds the aggregate amount allocated for such year under this paragraph, such limitation for the succeeding calendar year shall be increased by the amount of such excess. No amount may be carried under the preceding sentence to any calendar year after 2024 except as provided in section 48E(h)(4)(D)(ii).
(E) Placed in service deadline
(i) In general
Paragraph (1) shall not apply with respect to any property which is placed in service after the date that is 4 years after the date of the allocation with respect to the facility of which such property is a part.
(ii) Application of carryover
Any amount of environmental justice solar and wind capacity limitation which expires under clause (i) during any calendar year shall be taken into account as an excess described in subparagraph (D) (or as an increase in such excess) for such calendar year, subject to the limitation imposed by the last sentence of such subparagraph.
(5) Recapture
The Secretary shall, by regulations or other guidance, provide for recapturing the benefit of any increase in the credit allowed under subsection (a) by reason of this subsection with respect to any property which ceases to be property eligible for such increase (but which does not cease to be investment credit property within the meaning of section 50(a)). The period and percentage of such recapture shall be determined under rules similar to the rules of section 50(a). To the extent provided by the Secretary, such recapture may not apply with respect to any property if, within 12 months after the date the taxpayer becomes aware (or reasonably should have become aware) of such property ceasing to be property eligible for such increase, the eligibility of such property for such increase is restored. The preceding sentence shall not apply more than once with respect to any facility.
(Added
Editorial Notes
References in Text
The date of the enactment of the Revenue Reconciliation Act of 1990, referred to in subsec. (b), is the date of enactment of
The date of enactment of this section, referred to in subsec. (c)(6)(B)(i), probably should be "the date of enactment of this paragraph" which is the date of enactment of
The date of enactment of this paragraph, referred to in subsec. (c)(7)(A)(i), is the date of enactment of
Section 1603 of the American Recovery and Reinvestment Tax Act of 2009, referred to in subsec. (d), is section 1603 of
The Housing Act of 1949, referred to in subsec. (e)(2)(B)(i), is act July 15, 1949, ch. 338,
The date of enactment of this subsection, referred to in subsec. (e)(4)(A), is the date of enactment of
Amendments
2022—Subsec. (a)(2)(A)(i).
Subsec. (a)(2)(A)(i)(II).
Subsec. (a)(2)(A)(i)(VI) to (IX).
Subsec. (a)(2)(A)(ii).
Subsec. (a)(3)(A)(ii).
Subsec. (a)(3)(A)(vii).
Subsec. (a)(3)(A)(ix) to (xi).
Subsec. (a)(4).
Subsec. (a)(5)(A)(ii).
Subsec. (a)(5)(C)(ii).
Subsec. (a)(5)(E).
Subsec. (a)(5)(F)(i).
"(I) subparagraph (C)(ii) shall be applied by substituting 'January 1, 2026' for 'January 1, 2022',
"(II) subparagraph (E) shall not apply, and
"(III) for purposes of this paragraph, section 45(d)(1) shall be applied by substituting 'January 1, 2026' for 'January 1, 2022'."
Subsec. (a)(6).
Subsec. (a)(7).
Subsec. (a)(8).
Subsec. (a)(9).
Subsec. (a)(9)(A)(i).
Subsec. (a)(10), (11).
Subsec. (a)(12), (13).
Subsec. (a)(14).
Subsec. (a)(15).
Subsec. (a)(16).
Subsec. (c)(1)(A)(i).
Subsec. (c)(1)(C).
Subsec. (c)(1)(D).
Subsec. (c)(1)(E).
Subsec. (c)(2)(D).
Subsec. (c)(3)(A)(iv).
Subsec. (c)(4)(C).
Subsec. (c)(5)(D).
Subsec. (c)(6) to (8).
Subsec. (e).
2020—Subsec. (a)(2)(A)(i)(II).
Subsec. (a)(2)(A)(i)(V).
Subsec. (a)(3)(A)(ii), (vii).
Subsec. (a)(3)(A)(viii).
Subsec. (a)(5)(C)(ii).
Subsec. (a)(5)(E)(iv).
Subsec. (a)(5)(F).
Subsec. (a)(6)(A).
Subsec. (a)(6)(A)(i).
Subsec. (a)(6)(A)(ii).
Subsec. (a)(6)(B).
Subsec. (a)(7).
Subsec. (a)(7)(A).
Subsec. (a)(7)(A)(i).
Subsec. (a)(7)(A)(ii).
Subsec. (a)(7)(B).
Subsec. (c)(1)(D), (2)(D), (3)(A)(iv), (4)(C).
Subsec. (c)(5).
2019—Subsec. (a)(5)(C)(ii).
Subsec. (a)(5)(E)(iv).
2018—Subsec. (a)(1).
Subsec. (a)(2)(A).
Subsec. (a)(3)(A)(ii), (vii).
Subsec. (a)(5)(C)(ii).
Subsec. (a)(5)(E).
Subsec. (a)(6)(B).
Subsec. (a)(7).
Subsec. (c)(1)(D).
Subsec. (c)(2)(B).
Subsec. (c)(2)(D).
Subsec. (c)(3)(A)(iv).
Subsec. (c)(4)(C).
Subsec. (d)(3).
Subsec. (d)(3)(A).
2015—Subsec. (a)(2)(A).
Subsec. (a)(2)(A)(i)(II).
Subsec. (a)(5)(C)(ii).
Subsec. (a)(5)(E).
Subsec. (a)(6).
2014—Subsec. (a)(5)(C)(ii).
Subsec. (d)(3)(A).
2013—Subsec. (a)(5)(C).
"(i)
"(ii)
Subsec. (a)(5)(D)(iii), (iv).
2009—Subsec. (a)(4)(D).
Subsec. (a)(5).
Subsec. (c)(4)(B) to (D).
Subsec. (d).
2008—Subsec. (a)(1).
Subsec. (a)(2)(A)(i)(II).
Subsec. (a)(2)(A)(i)(IV).
Subsec. (a)(3).
Subsec. (a)(3)(A)(ii).
Subsec. (a)(3)(A)(v).
Subsec. (a)(3)(A)(vi).
Subsec. (a)(3)(A)(vii).
Subsec. (c).
Subsec. (c)(1)(B).
Subsec. (c)(1)(D).
Subsec. (c)(1)(E).
Subsec. (c)(2)(D).
Subsec. (c)(2)(E).
Subsec. (c)(3).
Subsec. (c)(4).
2007—Subsec. (c).
Subsec. (c)(1)(B), (2)(B).
2006—Subsec. (a)(2)(A)(i)(II), (3)(A)(ii).
Subsec. (c)(1)(E), (2)(E).
2005—Subsec. (a)(1).
Subsec. (a)(2)(A).
"(i) in the case of qualified fuel cell property, 30 percent, and
"(ii) in the case of any other energy property, 10 percent."
Subsec. (a)(3)(A)(i).
Subsec. (a)(3)(A)(ii).
Subsec. (a)(3)(A)(iii).
Subsec. (a)(3)(A)(iv).
Subsec. (c).
2004—
Subsec. (a)(3).
Subsec. (a)(5).
Subsec. (b).
"(1)
"(2)
1992—Subsec. (a)(2).
1991—Subsec. (a)(2)(B).
1990—
Subsec. (a)(8).
1988—Subsec. (a)(1).
Subsec. (a)(5)(A)(ii).
Subsec. (a)(5)(B)(i).
Subsec. (a)(5)(B)(ii).
Subsec. (a)(5)(D).
Subsec. (a)(5)(E).
Subsec. (l)(2)(C).
Subsec. (l)(11)(A)(ii).
Subsec. (s).
Subsec. (s)(9).
Subsec. (t).
1986—Subsec. (a)(2)(B)(vii).
Subsec. (a)(4).
Subsec. (a)(5)(B)(iii).
Subsec. (a)(5)(D), (E).
Subsec. (b)(1).
Subsec. (b)(2).
Subsec. (d)(4)(D).
Subsec. (d)(6)(C)(ii).
Subsec. (g)(1).
Subsec. (g)(2).
Subsec. (g)(2)(B)(vi)(I).
Subsec. (g)(3).
Subsec. (g)(4).
Subsec. (l)(5).
Subsec. (q)(3).
Subsec. (q)(7).
Subsec. (r).
Subsec. (s).
Subsec. (s)(5).
1985—Subsec. (g)(2)(A)(i), (B)(v).
1984—Subsec. (a)(5).
Subsec. (b).
Subsec. (c)(2)(A).
Subsec. (c)(2)(B).
Subsec. (c)(3)(B).
Subsec. (d)(1)(B).
Subsec. (d)(6).
Subsec. (f)(3).
Subsec. (g)(1)(E).
Subsec. (g)(2)(A)(i).
Subsec. (g)(2)(B)(i).
Subsec. (g)(2)(B)(v).
Subsec. (g)(2)(B)(vi).
Subsec. (g)(2)(D).
Subsec. (k)(4).
Subsec. (k)(4)(A).
Subsec. (k)(4)(B).
Subsec. (k)(5)(D)(i).
Subsec. (l)(1).
Subsec. (l)(16)(B)(i).
Subsec. (m).
Subsec. (n).
Subsec. (o)(3) to (8).
Subsec. (q)(1), (3).
Subsec. (q)(4)(A)(i).
Subsec. (q)(4)(B)(ii).
Subsec. (q)(6).
Subsec. (r).
Subsec. (s).
1983—Subsec. (a)(1)(G).
Subsec. (a)(10).
Subsec. (g)(1)(C)(i).
Subsec. (g)(5)(A).
Subsec. (l)(5).
Subsec. (l)(5)(M), (N).
Subsec. (q)(3).
1982—Subsec. (b).
Subsec. (c)(2)(D).
Subsec. (d)(5).
Subsec. (e).
Subsec. (g)(5).
Subsec. (k)(5)(D)(i).
Subsec. (l)(7).
Subsecs. (q), (r).
1981—Subsec. (a)(1).
Subsec. (a)(1)(G).
Subsec. (a)(2)(B)(ii).
Subsec. (a)(3)(D).
Subsec. (a)(4).
Subsec. (a)(5).
Subsec. (a)(8).
Subsec. (a)(9).
Subsec. (c)(2)(A) to (C).
Subsec. (g).
Subsec. (l)(2)(C).
Subsec. (n)(1)(A)(i).
Subsec. (o)(8).
1980—Subsec. (a)(1).
Subsec. (a)(2)(B)(xi).
Subsec. (a)(5).
Subsec. (a)(7)(B).
Subsec. (a)(10)(A).
Subsec. (a)(10)(B).
Subsec. (g)(2)(B)(i).
Subsec. (l)(1).
Subsec. (l)(2)(A).
Subsec. (l)(3)(A).
Subsec. (l)(3)(B).
Subsec. (l)(3)(C), (D).
Subsec. (l)(4)(C).
Subsec. (l)(5).
Subsec. (l)(11).
Subsec. (l)(13).
Subsec. (l)(14).
Subsec. (l)(15).
Subsec. (l)(16).
Subsec. (l)(17).
Subsec. (n).
Subsec. (n)(6)(B)(i).
Subsec. (o).
1978—Subsec. (a)(1)(A).
Subsec. (a)(1)(D).
Subsec. (a)(1)(E).
Subsec. (a)(2)(B)(ii).
Subsec. (a)(7)(A).
Subsec. (a)(7)(B).
Subsec. (a)(8).
Subsec. (a)(10).
Subsec. (d)(1)(B).
Subsec. (d)(4)(D).
Subsec. (g).
Subsec. (h).
Subsec. (i).
Subsec. (j).
Subsecs. (l), (m).
Subsec. (n).
Subsec. (o).
Subsecs. (p), (q).
1976—Subsec. (a)(2)(B)(vi).
Subsec. (a)(2)(B)(vii).
Subsec. (a)(2)(B)(viii).
Subsec. (a)(8).
Subsecs. (c)(2)(A), (d)(1), (2)(A).
Subsec. (f).
Subsec. (i)(2).
Subsecs. (k), (l).
1975—Subsec. (a)(2)(B).
Subsec. (c)(2)(A).
Subsec. (c)(2)(B).
Subsec. (c)(2)(C).
Subsec. (d)(1), (2)(A).
1971—Subsec. (a)(1).
Subsec. (a)(1)(B)(ii), (iii).
Subsec. (a)(2)(B).
Subsec. (a)(3)(C).
Subsec. (a)(5).
Subsec. (a)(6).
Subsec. (a)(7) to (9).
Subsec. (d).
1969—Subsec. (a)(4).
Subsec. (c)(2)(C).
Subsec. (c)(3)(C).
Subsec. (d)(2).
1967—Subsec. (a)(2)(B)(i).
Subsec. (h)(2).
Subsec. (j).
1966—Subsec. (a)(2)(B).
Subsec. (d).
Subsecs. (h) to (k).
1964—Subsec. (a)(1)(C).
Subsec. (d).
Subsec. (g).
Statutory Notes and Related Subsidiaries
Effective Date of 2022 Amendment
Amendment by section 13101(d), (e)(2)(B), (3) of
Amendment by section 13102(a)–(e), (k), (p) of
Amendment by section 13102(f)(3), (g), (h), (j), (l), (o) of
Amendment by section 13102(m) of
Effective Date of 2020 Amendment
Amendment by section 131 of
Effective Date of 2019 Amendment
Amendment by
Effective Date of 2018 Amendment
Amendment by section 40409(b) of
"(1)
"(2)
"(3)
Effective Date of 2015 Amendment
Amendment by section 187(b) of
Effective Date of 2014 Amendment
Amendment by section 155(b) of
Amendment by section 209(d) of
Effective Date of 2013 Amendment
Amendment by
Effective Date of 2009 Amendment
Amendment by section 1103(a), (b)(1) of
Effective Date of 2008 Amendment
"(1)
"(2)
"(3)
"(4)
Effective Date of 2005 Amendment
Effective Date of 2004 Amendment
Amendment by section 322(d)(2)(A), (B) of
Amendment by section 710(e) of
Effective Date of 1992 Amendment
Effective Date of 1990 Amendment
Amendment by section 11813(a) of
Effective Date of 1988 Amendment
Amendment by
Effective Date of 1986 Amendment
If any interest costs incurred after Dec. 31, 1986, are attributable to costs incurred before Jan. 1, 1987, the amendment by section 803(b)(2)(B) of
Amendment by section 251(b), (c) of
Amendment by section 701(e)(4)(C) of
Amendment by section 803(b)(2)(B) of
Amendment by sections 1272(d)(5) and 1275(c)(5) of
Amendment by section 1511(c)(3) of
Effective Date of 1985 Amendment
Amendment by
Effective Date of 1984 Amendment
"(a)
"(b)
"(1) such plan was favorably approved on September 23, 1983, by employees, and
"(2) not later than January 11, 1984, the employer of such employees was 100 percent owned by such plan."
Amendment by section 31(b), (c)(1) of
Amendment by section 111(e)(8) of
Amendment by section 113(b)(3) of
Amendment by section 113(b)(4) of
Amendment by section 431(c) of
Amendment by section 474(o)(10)–(18) of
Amendment by section 712(b) of
Amendment by section 721(x)(1) of
Amendment by section 735(c)(1) of
Effective Date of 1983 Amendment
Amendment by title I of
Amendment by section 202(c) of
Amendment by section 306(a)(3) of
Effective and Termination Dates of 1982 Amendment
Amendment by
Amendment by section 205(a)(1), (4), (5)(A) of
Amendment by section 209(c) of
Effective Date of 1981 Amendment
Amendment by section 211(a)(2), (e)(3), (4) of
Amendment by section 211(c) of
Amendment by section 211(h) of
Amendment by section 212(a)(3), (b), (c), (d)(2)(A) of
Effective Date of 1980 Amendment
"(1)
"(2)
"(A)
"(B)
"(i) qualified hydroelectric generating property (described in section 48(l)(2)(A)(vii) of such Code),
"(ii) cogeneration equipment (described in section 48(l)(2)(A)(viii) of such Code),
"(iii) qualified intercity buses (described in section 48(l)(2)(A)(ix) of such Code),
"(iv) ocean thermal property (described in section 48(l)(3)(A)(ix) of such Code), or
"(v) expanded energy credit property,
the amendment made by paragraph (1) shall apply to periods after December 31, 1979, under rules similar to the rules of section 48(m) of the Internal Revenue Code of 1986.
"(C)
"(i) property to which section 48(l)(3)(A) of such Code applies because of the amendments made by paragraphs (1) and (2) of section 222(b) [amending this section],
"(ii) property described in section 48(l)(4)(C) of such Code (relating to solar process heat),
"(iii) property described in section 48(l)(5)(L) of such Code (relating to alumina electrolytic cells), and
"(iv) property described in the last sentence of section 48(l)(3)(A) of such Code (relating to storage equipment for refuse-derived fuel).
"(D)
Amendment by
Effective Date of 1978 Amendment
"(A)
"(B)
Amendment by section 141(b) of
Amendment by section 312(c)(1), (2), (3) of
Amendment by section 703(a)(3), (4) of
Effective Date of 1976 Amendment
Amendment by section 802(b)(6) of
"(1)
"(2)
Amendment by section 1051(h)(1) of
Amendment by section 1901(a)(5), (b)(11)(A) of
Amendment by section 2112(a) of
Effective and Termination Dates of 1975 Amendment
Amendment by section 302(c)(3) of
"(1)
"(2)
"(3)
Effective Date of 1971 Amendment
Amendment by section 108(b), (c) of
Effective Date of 1969 Amendment
Amendment by section 121(d)(2)(A) of
Amendment by section 401(e)(2)–(4) of
Effective Date of 1967 Amendment
Effective Date of 1966 Amendment
Amendment by
Effective Date of 1964 Amendment
"(A) in the case of property placed in service after December 31, 1963, with respect to taxable years ending after such date, and
"(B) in the case of property placed in service before January 1, 1964, with respect to taxable years beginning after December 31, 1963."
"(1) The amendments made by subsection (b) [amending this section] shall apply with respect to property possession of which is transferred to a lessee on or after the date of enactment of this Act [Feb. 26, 1964].
"(2) The amendments made by subsection (c) [amending this section] shall apply with respect to taxable years ending after June 30, 1963.
"(3) The amendments made by subsection (d) [amending
Effective Date
Section applicable with respect to taxable years ending after Dec. 31, 1961, see section 2(h) of
Savings Provision
For provisions that nothing in amendment by
Transfer of Functions
Functions, powers, and duties of Federal Aviation Agency and of Administrator and other offices and officers thereof transferred by
Grants for Specified Energy Property in Lieu of Tax Credits
"(a)
"(1) is originally placed in service by such person during 2009, 2010, or 2011, or
"(2) is originally placed in service by such person after 2011 and before the credit termination date with respect to such property, but only if the construction of such property began during 2009, 2010, or 2011.
"(b)
"(1)
"(2)
"(A) 30 percent in the case of any property described in paragraphs (1) through (4) of subsection (d), and
"(B) 10 percent in the case of any other property.
"(3)
"(c)
"(1) the date of the application for such grant, or
"(2) the date the specified energy property for which the grant is being made is placed in service.
"(d)
"(1)
"(2)
"(3)
"(4)
"(5)
"(6)
"(7)
"(8)
Such term shall not include any property unless depreciation (or amortization in lieu of depreciation) is allowable with respect to such property.
"(e)
"(1) in the case of any specified energy property which is part of a facility described in paragraph (1) of section 45(d) of the Internal Revenue Code of 1986, January 1, 2013,
"(2) in the case of any specified energy property which is part of a facility described in paragraph (2), (3), (4), (6), (7), (9), or (11) of section 45(d) of such Code, January 1, 2014, and
"(3) in the case of any specified energy property described in section 48 of such Code, January 1, 2017.
In the case of any property which is described in paragraph (3) and also in another paragraph of this subsection, paragraph (3) shall apply with respect to such property.
"(f)
"(g)
"(1) any Federal, State, or local government (or any political subdivision, agency, or instrumentality thereof),
"(2) any organization described in section 501(c) of the Internal Revenue Code of 1986 and exempt from tax under section 501(a) of such Code,
"(3) any entity referred to in paragraph (4) of [former] section 54(j) of such Code, or
"(4) any partnership or other pass-thru entity any partner (or other holder of an equity or profits interest) of which is described in paragraph (1), (2) or (3).
"(h)
"(i)
"(j)
[
Plan Amendments Not Required Until January 1, 1989
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101–1147 and 1171–1177] or title XVIII [§§1800–1899A] of
Applicability of Certain Amendments by Pub. L. 99–514 in Relation to Treaty Obligations of United States
For applicability of amendment by section 701(e)(4)(C) of
Special Rule
Clarification of Effect of 1984 Amendment on Investment Tax Credit
For provision that nothing in the amendments made by section 474(o) of
Alternative Methods of Computing Credit for Past Periods
"(1)
"(A) the applicable percentage under section 46(c)(2) of such Code shall be determined as if the useful life of the film would have expired at the close of the first taxable year by the close of which the aggregate amount allowable as a deduction under section 167 of such Code would equal or exceed 90 percent of the basis of such property (adjusted for any partial dispositions),
"(B) for purposes of section 46(c)(1) of such Code, the basis of the property shall be determined by taking into account the total production costs (within the meaning of section 48(k)(5)(B) of such Code),
"(C) for purposes of section 48(a)(2) of such Code, such film shall be considered to be used predominantly outside the United States in the first taxable year for which 50 percent or more of the gross revenues received or accrued during the taxable year from showing the film were received or accrued from showing the film outside the United States, and
"(D) Section 47(a)(7) of such Code shall apply.
"(2)
"(A)
"(B)
"(i) subparagraph (B) of paragraph (4) shall not apply, but in determining qualified investment under section 46(c)(1) of such Code there shall be used (in lieu of the basis of such property) an amount equal to 40 percent of the aggregate production costs (within the meaning of paragraph (5)(B) of such section 48(k)),
"(ii) paragraph (2) shall be applied by substituting '100 percent' for '662/3 percent', and
"(iii) paragraph (3) and paragraph (5) (other than subparagraph (B)) shall not apply.
"(C)
"(D)
"(3)
"(A)
"(B)
"(C)
"(i) paragraphs (1) and (2) of this subsection, and subsection (d) shall not apply to any film placed in service by the taxpayer, and
"(ii) subsection 48(k) of the Internal Revenue Code of 1986 shall not apply to any film placed in service by the taxpayer in any taxable year beginning before January 1, 1975, and with respect to which an election under subsection (e)(2) is not made,
and the right of the taxpayer to the allowance of a credit against tax under section 38 of such Code with respect to any film placed in service in any taxable year beginning before January 1, 1975, and as to which an election under subsection (e)(2) is not made, shall be determined as though this section (other than this paragraph) has not been enacted.
"(D)
Entitlement to Credit
Increase in Basis of Property Placed in Service Before January 1, 1964
"(A) The basis of any section 38 property (as defined in section 48(a) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954]) placed in service before January 1, 1964, shall be increased, under regulations prescribed by the Secretary of the Treasury or his delegate, by an amount equal to 7 percent of the qualified investment with respect to such property under section 46(c) of the Internal Revenue Code of 1986. If there has been any increase with respect to such property under section 48(g)(2) of such Code, the increase under the preceding sentence shall be appropriately reduced therefor.
"(B) If a lessor made the election provided by section 48(d) of the Internal Revenue Code of 1986 with respect to property placed in service before January 1, 1964—
"(i) subparagraph (A) shall not apply with respect to such property, but
"(ii) under regulations prescribed by the Secretary of the Treasury or his delegate, the deductions otherwise allowable under section 162 of such Code to the lessee for amounts paid to the lessor under the lease (or, if such lessee has purchased such property, the basis of such property) shall be adjusted in a manner consistent with subparagraph (A).
"(C) The adjustments under this paragraph shall be made as of the first day of the taxpayer's first taxable year which begins after December 31, 1963."
1 See References in Text note below.
2 So in original. Another closing parenthesis probably should precede the comma.
§48A. Qualifying advanced coal project credit
(a) In general
For purposes of section 46, the qualifying advanced coal project credit for any taxable year is an amount equal to—
(1) 20 percent of the qualified investment for such taxable year in the case of projects described in subsection (d)(3)(B)(i),
(2) 15 percent of the qualified investment for such taxable year in the case of projects described in subsection (d)(3)(B)(ii), and
(3) 30 percent of the qualified investment for such taxable year in the case of projects described in clause (iii) of subsection (d)(3)(B).
(b) Qualified investment
(1) In general
For purposes of subsection (a), the qualified investment for any taxable year is the basis of eligible property placed in service by the taxpayer during such taxable year which is part of a qualifying advanced coal project—
(A)(i) the construction, reconstruction, or erection of which is completed by the taxpayer, or
(ii) which is acquired by the taxpayer if the original use of such property commences with the taxpayer, and
(B) with respect to which depreciation (or amortization in lieu of depreciation) is allowable.
(2) Special rule for certain subsidized property
Rules similar to section 48(a)(4) (without regard to subparagraph (D) thereof) shall apply for purposes of this section.
(3) Certain qualified progress expenditures rules made applicable
Rules similar to the rules of subsections (c)(4) and (d) of section 46 (as in effect on the day before the enactment of the Revenue Reconciliation Act of 1990) shall apply for purposes of this section.
(c) Definitions
For purposes of this section—
(1) Qualifying advanced coal project
The term "qualifying advanced coal project" means a project which meets the requirements of subsection (e).
(2) Advanced coal-based generation technology
The term "advanced coal-based generation technology" means a technology which meets the requirements of subsection (f).
(3) Eligible property
The term "eligible property" means—
(A) in the case of any qualifying advanced coal project using an integrated gasification combined cycle, any property which is a part of such project and is necessary for the gasification of coal, including any coal handling and gas separation equipment, and
(B) in the case of any other qualifying advanced coal project, any property which is a part of such project.
(4) Coal
The term "coal" means anthracite, bituminous coal, subbituminous coal, lignite, and peat.
(5) Greenhouse gas capture capability
The term "greenhouse gas capture capability" means an integrated gasification combined cycle technology facility capable of adding components which can capture, separate on a long-term basis, isolate, remove, and sequester greenhouse gases which result from the generation of electricity.
(6) Electric generation unit
The term "electric generation unit" means any facility at least 50 percent of the total annual net output of which is electrical power, including an otherwise eligible facility which is used in an industrial application.
(7) Integrated gasification combined cycle
The term "integrated gasification combined cycle" means an electric generation unit which produces electricity by converting coal to synthesis gas which is used to fuel a combined-cycle plant which produces electricity from both a combustion turbine (including a combustion turbine/fuel cell hybrid) and a steam turbine.
(d) Qualifying advanced coal project program
(1) Establishment
Not later than 180 days after the date of enactment of this section, the Secretary, in consultation with the Secretary of Energy, shall establish a qualifying advanced coal project program for the deployment of advanced coal-based generation technologies.
(2) Certification
(A) Application period
Each applicant for certification under this paragraph shall submit an application meeting the requirements of subparagraph (B). An applicant may only submit an application—
(i) for an allocation from the dollar amount specified in clause (i) or (ii) of paragraph (3)(B) during the 3-year period beginning on the date the Secretary establishes the program under paragraph (1), and
(ii) for an allocation from the dollar amount specified in paragraph (3)(B)(iii) during the 3-year period beginning at the earlier of the termination of the period described in clause (i) or the date prescribed by the Secretary.
(B) Requirements for applications for certification
An application under subparagraph (A) shall contain such information as the Secretary may require in order to make a determination to accept or reject an application for certification as meeting the requirements under subsection (e)(1). Any information contained in the application shall be protected as provided in
(C) Time to act upon applications for certification
The Secretary shall issue a determination as to whether an applicant has met the requirements under subsection (e)(1) within 60 days following the date of submittal of the application for certification.
(D) Time to meet criteria for certification
Each applicant for certification shall have 2 years from the date of acceptance by the Secretary of the application during which to provide to the Secretary evidence that the criteria set forth in subsection (e)(2) have been met.
(E) Period of issuance
An applicant which receives a certification shall have 5 years from the date of issuance of the certification in order to place the project in service and if such project is not placed in service by that time period then the certification shall no longer be valid.
(3) Aggregate credits
(A) In general
The aggregate credits allowed under subsection (a) for projects certified by the Secretary under paragraph (2) may not exceed $2,550,000,000.
(B) Particular projects
Of the dollar amount in subparagraph (A), the Secretary is authorized to certify—
(i) $800,000,000 for integrated gasification combined cycle projects the application for which is submitted during the period described in paragraph (2)(A)(i),
(ii) $500,000,000 for projects which use other advanced coal-based generation technologies the application for which is submitted during the period described in paragraph (2)(A)(i), and
(iii) $1,250,000,000 for advanced coal-based generation technology projects the application for which is submitted during the period described in paragraph (2)(A)(ii).
(4) Review and redistribution
(A) Review
Not later than 6 years after the date of enactment of this section, the Secretary shall review the credits allocated under this section as of the date which is 6 years after the date of enactment of this section.
(B) Redistribution
The Secretary may reallocate credits available under clauses (i) and (ii) of paragraph (3)(B) if the Secretary determines that—
(i) there is an insufficient quantity of qualifying applications for certification pending at the time of the review, or
(ii) any certification made pursuant to paragraph (2) has been revoked pursuant to paragraph (2)(D) because the project subject to the certification has been delayed as a result of third party opposition or litigation to the proposed project.
(C) Reallocation
If the Secretary determines that credits under clause (i) or (ii) of paragraph (3)(B) are available for reallocation pursuant to the requirements set forth in paragraph (2), the Secretary is authorized to conduct an additional program for applications for certification.
(5) Disclosure of allocations
The Secretary shall, upon making a certification under this subsection or section 48B(d), publicly disclose the identity of the applicant and the amount of the credit certified with respect to such applicant.
(e) Qualifying advanced coal projects
(1) Requirements
For purposes of subsection (c)(1), a project shall be considered a qualifying advanced coal project that the Secretary may certify under subsection (d)(2) if the Secretary determines that, at a minimum—
(A) the project uses an advanced coal-based generation technology—
(i) to power a new electric generation unit; or
(ii) to retrofit or repower an existing electric generation unit (including an existing natural gas-fired combined cycle unit);
(B) the fuel input for the project, when completed, is at least 75 percent coal;
(C) the project, consisting of one or more electric generation units at one site, will have a total nameplate generating capacity of at least 400 megawatts;
(D) the applicant provides evidence that a majority of the output of the project is reasonably expected to be acquired or utilized;
(E) the applicant provides evidence of ownership or control of a site of sufficient size to allow the proposed project to be constructed and to operate on a long-term basis;
(F) the project will be located in the United States; and
(G) in the case of any project the application for which is submitted during the period described in subsection (d)(2)(A)(ii), the project includes equipment which separates and sequesters at least 65 percent (70 percent in the case of an application for reallocated credits under subsection (d)(4)) of such project's total carbon dioxide emissions.
(2) Requirements for certification
For the purpose of subsection (d)(2)(D), a project shall be eligible for certification only if the Secretary determines that—
(A) the applicant for certification has received all Federal and State environmental authorizations or reviews necessary to commence construction of the project; and
(B) the applicant for certification, except in the case of a retrofit or repower of an existing electric generation unit, has purchased or entered into a binding contract for the purchase of the main steam turbine or turbines for the project, except that such contract may be contingent upon receipt of a certification under subsection (d)(2).
(3) Priority for certain projects
In determining which qualifying advanced coal projects to certify under subsection (d)(2), the Secretary shall—
(A) certify capacity, in accordance with the procedures set forth in subsection (d), in relatively equal amounts to—
(i) projects using bituminous coal as a primary feedstock,
(ii) projects using subbituminous coal as a primary feedstock, and
(iii) projects using lignite as a primary feedstock,
(B) give high priority to projects which include, as determined by the Secretary—
(i) greenhouse gas capture capability,
(ii) increased by-product utilization,
(iii) applicant participants who have a research partnership with an eligible educational institution (as defined in section 529(e)(5)), and
(iv) other benefits, and
(C) give highest priority to projects with the greatest separation and sequestration percentage of total carbon dioxide emissions.
(f) Advanced coal-based generation technology
(1) In general
For the purpose of this section, an electric generation unit uses advanced coal-based generation technology if—
(A) the unit—
(i) uses integrated gasification combined cycle technology, or
(ii) except as provided in paragraph (3), has a design net heat rate of 8530 Btu/kWh (40 percent efficiency), and
(B) the unit is designed to meet the performance requirements in the following table:
| Performance characteristic: | Design level for project: |
|---|---|
| SO2 (percent removal) | 99 percent |
| NOx (emissions) | 0.07 lbs/MMBTU |
| PM* (emissions) | 0.015 lbs/MMBTU |
| Hg (percent removal) | 90 percent |
For purposes of the performance requirement specified for the removal of SO2 in the table contained in subparagraph (B), the SO2 removal design level in the case of a unit designed for the use of feedstock substantially all of which is subbituminous coal shall be 99 percent SO2 removal or the achievement of an emission level of 0.04 pounds or less of SO2 per million Btu, determined on a 30-day average.
(2) Design net heat rate
For purposes of this subsection, design net heat rate with respect to an electric generation unit shall—
(A) be measured in Btu per kilowatt hour (higher heating value),
(B) be based on the design annual heat input to the unit and the rated net electrical power, fuels, and chemicals output of the unit (determined without regard to the cogeneration of steam by the unit),
(C) be adjusted for the heat content of the design coal to be used by the unit—
(i) if the heat content is less than 13,500 Btu per pound, but greater than 7,000 Btu per pound, according to the following formula: design net heat rate = unit net heat rate x [1–[((13,500-design coal heat content, Btu per pound)/1,000)* 0.013]], and
(ii) if the heat content is less than or equal to 7,000 Btu per pound, according to the following formula: design net heat rate = unit net heat rate x [1–[((13,500-design coal heat content, Btu per pound)/1,000)* 0.018]], and
(D) be corrected for the site reference conditions of—
(i) elevation above sea level of 500 feet,
(ii) air pressure of 14.4 pounds per square inch absolute,
(iii) temperature, dry bulb of 63°F,
(iv) temperature, wet bulb of 54°F, and
(v) relative humidity of 55 percent.
(3) Existing units
In the case of any electric generation unit in existence on the date of the enactment of this section, such unit uses advanced coal-based generation technology if, in lieu of the requirements under paragraph (1)(A)(ii), such unit achieves a minimum efficiency of 35 percent and an overall thermal design efficiency improvement, compared to the efficiency of the unit as operated, of not less than—
(A) 7 percentage points for coal of more than 9,000 Btu,
(B) 6 percentage points for coal of 7,000 to 9,000 Btu, or
(C) 4 percentage points for coal of less than 7,000 Btu.
(g) Applicability
No use of technology (or level of emission reduction solely by reason of the use of the technology), and no achievement of any emission reduction by the demonstration of any technology or performance level, by or at one or more facilities with respect to which a credit is allowed under this section, shall be considered to indicate that the technology or performance level is—
(1) adequately demonstrated for purposes of section 111 of the Clean Air Act (
(2) achievable for purposes of section 169 of that Act (
(3) achievable in practice for purposes of section 171 of such Act (
(h) Competitive certification awards modification authority
In implementing this section or section 48B, the Secretary is directed to modify the terms of any competitive certification award and any associated closing agreement where such modification—
(1) is consistent with the objectives of such section,
(2) is requested by the recipient of the competitive certification award, and
(3) involves moving the project site to improve the potential to capture and sequester carbon dioxide emissions, reduce costs of transporting feedstock, and serve a broader customer base,
unless the Secretary determines that the dollar amount of tax credits available to the taxpayer under such section would increase as a result of the modification or such modification would result in such project not being originally certified. In considering any such modification, the Secretary shall consult with other relevant Federal agencies, including the Department of Energy.
(i) Recapture of credit for failure to sequester
The Secretary shall provide for recapturing the benefit of any credit allowable under subsection (a) with respect to any project which fails to attain or maintain the separation and sequestration requirements of subsection (e)(1)(G).
(Added
Editorial Notes
References in Text
The enactment of the Revenue Reconciliation Act of 1990, referred to in subsec. (b)(3), is the date of enactment of title XI of
The date of enactment of this section, referred to in subsecs. (d)(1), (4)(A) and (f)(3), is the date of enactment of
Codification
Amendments
2009—Subsec. (b)(2).
2008—Subsec. (a)(3).
Subsec. (d)(2)(A).
Subsec. (d)(3)(A).
Subsec. (d)(3)(B).
"(i) $800,000,000 for integrated gasification combined cycle projects, and
"(ii) $500,000,000 for projects which use other advanced coal-based generation technologies."
Subsec. (d)(5).
Subsec. (e)(1)(G).
Subsec. (e)(3).
Subsec. (e)(3)(B)(iii), (iv).
Subsec. (e)(3)(C).
Subsec. (h).
Subsec. (i).
2007—Subsec. (d)(4)(B)(ii).
2006—Subsec. (f)(1).
Statutory Notes and Related Subsidiaries
Effective Date of 2009 Amendment
Amendment by
Effective Date of 2008 Amendment
"(1)
"(2)
"(3)
Amendment of this section and repeal of
[
Effective Date of 2006 Amendment
Effective Date
Section applicable to periods after Aug. 8, 2005, under rules similar to the rules of
§48B. Qualifying gasification project credit
(a) In general
For purposes of section 46, the qualifying gasification project credit for any taxable year is an amount equal to 20 percent (30 percent in the case of credits allocated under subsection (d)(1)(B)) of the qualified investment for such taxable year.
(b) Qualified investment
(1) In general
For purposes of subsection (a), the qualified investment for any taxable year is the basis of eligible property placed in service by the taxpayer during such taxable year which is part of a qualifying gasification project—
(A)(i) the construction, reconstruction, or erection of which is completed by the taxpayer, or
(ii) which is acquired by the taxpayer if the original use of such property commences with the taxpayer, and
(B) with respect to which depreciation (or amortization in lieu of depreciation) is allowable.
(2) Special rule for certain subsidized property
Rules similar to section 48(a)(4) (without regard to subparagraph (D) thereof) shall apply for purposes of this section.
(3) Certain qualified progress expenditures rules made applicable
Rules similar to the rules of subsections (c)(4) and (d) of section 46 (as in effect on the day before the enactment of the Revenue Reconciliation Act of 1990) shall apply for purposes of this section.
(c) Definitions
For purposes of this section—
(1) Qualifying gasification project
The term "qualifying gasification project" means any project which—
(A) employs gasification technology,
(B) will be carried out by an eligible entity, and
(C) any portion of the qualified investment of which is certified under the qualifying gasification program as eligible for credit under this section in an amount (not to exceed $650,000,000) determined by the Secretary.
(2) Gasification technology
The term "gasification technology" means any process which converts a solid or liquid product from coal, petroleum residue, biomass, or other materials which are recovered for their energy or feedstock value into a synthesis gas composed primarily of carbon monoxide and hydrogen for direct use or subsequent chemical or physical conversion.
(3) Eligible property
The term "eligible property" means any property which is a part of a qualifying gasification project and is necessary for the gasification technology of such project.
(4) Biomass
(A) In general
The term "biomass" means any—
(i) agricultural or plant waste,
(ii) byproduct of wood or paper mill operations, including lignin in spent pulping liquors, and
(iii) other products of forestry maintenance.
(B) Exclusion
The term "biomass" does not include paper which is commonly recycled.
(5) Carbon capture capability
The term "carbon capture capability" means a gasification plant design which is determined by the Secretary to reflect reasonable consideration for, and be capable of, accommodating the equipment likely to be necessary to capture carbon dioxide from the gaseous stream, for later use or sequestration, which would otherwise be emitted in the flue gas from a project which uses a nonrenewable fuel.
(6) Coal
The term "coal" means anthracite, bituminous coal, subbituminous coal, lignite, and peat.
(7) Eligible entity
The term "eligible entity" means any person whose application for certification is principally intended for use in a domestic project which employs domestic gasification applications related to—
(A) chemicals,
(B) fertilizers,
(C) glass,
(D) steel,
(E) petroleum residues,
(F) forest products,
(G) agriculture, including feedlots and dairy operations, and
(H) transportation grade liquid fuels.
(8) Petroleum residue
The term "petroleum residue" means the carbonized product of high-boiling hydrocarbon fractions obtained in petroleum processing.
(d) Qualifying gasification project program
(1) In general
Not later than 180 days after the date of the enactment of this section, the Secretary, in consultation with the Secretary of Energy, shall establish a qualifying gasification project program to consider and award certifications for qualified investment eligible for credits under this section to qualifying gasification project sponsors under this section. The total amounts of credit that may be allocated under the program shall not exceed—
(A) $350,000,000, plus
(B) $250,000,000 for qualifying gasification projects that include equipment which separates and sequesters at least 75 percent of such project's total carbon dioxide emissions.
(2) Period of issuance
A certificate of eligibility under paragraph (1) may be issued only during the 10-fiscal year period beginning on October 1, 2005.
(3) Selection criteria
The Secretary shall not make a competitive certification award for qualified investment for credit eligibility under this section unless the recipient has documented to the satisfaction of the Secretary that—
(A) the award recipient is financially viable without the receipt of additional Federal funding associated with the proposed project,
(B) the recipient will provide sufficient information to the Secretary for the Secretary to ensure that the qualified investment is spent efficiently and effectively,
(C) a market exists for the products of the proposed project as evidenced by contracts or written statements of intent from potential customers,
(D) the fuels identified with respect to the gasification technology for such project will comprise at least 90 percent of the fuels required by the project for the production of chemical feedstocks, liquid transportation fuels, or coproduction of electricity,
(E) the award recipient's project team is competent in the construction and operation of the gasification technology proposed, with preference given to those recipients with experience which demonstrates successful and reliable operations of the technology on domestic fuels so identified, and
(F) the award recipient has met other criteria established and published by the Secretary.
(4) Selection priorities
In determining which qualifying gasification projects to certify under this section, the Secretary shall—
(A) give highest priority to projects with the greatest separation and sequestration percentage of total carbon dioxide emissions, and
(B) give high priority to applicant participants who have a research partnership with an eligible educational institution (as defined in section 529(e)(5)).
(e) Denial of double benefit
A credit shall not be allowed under this section for any qualified investment for which a credit is allowed under section 48A.
(f) Recapture of credit for failure to sequester
The Secretary shall provide for recapturing the benefit of any credit allowable under subsection (a) with respect to any project which fails to attain or maintain the separation and sequestration requirements for such project under subsection (d)(1).
(Added
Editorial Notes
References in Text
The enactment of the Revenue Reconciliation Act of 1990, referred to in subsec. (b)(3), is the date of enactment of title XI of
The date of the enactment of this section, referred to in subsec. (d)(1), is the date of enactment of
Amendments
2009—Subsec. (b)(2).
2008—Subsec. (a).
Subsec. (c)(7)(H).
Subsec. (d)(1).
Subsec. (d)(4).
Subsec. (f).
Statutory Notes and Related Subsidiaries
Effective Date of 2009 Amendment
Amendment by
Effective Date of 2008 Amendment
Effective Date
Section applicable to periods after Aug. 8, 2005, under rules similar to the rules of
§48C. Qualifying advanced energy project credit
(a) In general
For purposes of section 46, the qualifying advanced energy project credit for any taxable year is an amount equal to 30 percent of the qualified investment for such taxable year with respect to any qualifying advanced energy project of the taxpayer.
(b) Qualified investment
(1) In general
For purposes of subsection (a), the qualified investment for any taxable year is the basis of eligible property placed in service by the taxpayer during such taxable year which is part of a qualifying advanced energy project.
(2) Certain qualified progress expenditures rules made applicable
Rules similar to the rules of subsections (c)(4) and (d) of section 46 (as in effect on the day before the enactment of the Revenue Reconciliation Act of 1990) shall apply for purposes of this section.
(3) Limitation
The amount which is treated as the qualified investment for all taxable years with respect to any qualifying advanced energy project shall not exceed the amount designated by the Secretary as eligible for the credit under this section.
(c) Definitions
(1) Qualifying advanced energy project
(A) In general
The term "qualifying advanced energy project" means a project, any portion of the qualified investment of which is certified by the Secretary under subsection (e) as eligible for a credit under this section—
(i) which re-equips, expands, or establishes an industrial or manufacturing facility for the production or recycling of—
(I) property designed to be used to produce energy from the sun, water, wind, geothermal deposits (within the meaning of section 613(e)(2)), or other renewable resources,
(II) fuel cells, microturbines, or energy storage systems and components,
(III) electric grid modernization equipment or components,
(IV) property designed to capture, remove, use, or sequester carbon oxide emissions,
(V) equipment designed to refine, electrolyze, or blend any fuel, chemical, or product which is—
(aa) renewable, or
(bb) low-carbon and low-emission,
(VI) property designed to produce energy conservation technologies (including residential, commercial, and industrial applications),
(VII) light-, medium-, or heavy-duty electric or fuel cell vehicles, as well as—
(aa) technologies, components, or materials for such vehicles, and
(bb) associated charging or refueling infrastructure,
(VIII) hybrid vehicles with a gross vehicle weight rating of not less than 14,000 pounds, as well as technologies, components, or materials for such vehicles, or
(IX) other advanced energy property designed to reduce greenhouse gas emissions as may be determined by the Secretary,
(ii) which re-equips an industrial or manufacturing facility with equipment designed to reduce greenhouse gas emissions by at least 20 percent through the installation of—
(I) low- or zero-carbon process heat systems,
(II) carbon capture, transport, utilization and storage systems,
(III) energy efficiency and reduction in waste from industrial processes, or
(IV) any other industrial technology designed to reduce greenhouse gas emissions, as determined by the Secretary, or
(iii) which re-equips, expands, or establishes an industrial facility for the processing, refining, or recycling of critical materials (as defined in section 7002(a) of the Energy Act of 2020 (
(B) Exception
Such term shall not include any portion of a project for the production of any property which is used in the refining or blending of any transportation fuel (other than renewable fuels).
(2) Eligible property
The term "eligible property" means any property—
(A) which is necessary for—
(i) the production or recycling of property described in clause (i) of paragraph (1)(A),
(ii) re-equipping an industrial or manufacturing facility described in clause (ii) of such paragraph, or
(iii) re-equipping, expanding, or establishing an industrial facility described in clause (iii) of such paragraph,
(B) which is—
(i) tangible personal property, or
(ii) other tangible property (not including a building or its structural components), but only if such property is used as an integral part of the qualified investment credit facility, and
(C) with respect to which depreciation (or amortization in lieu of depreciation) is allowable.
(d) Qualifying advanced energy project program
(1) Establishment
(A) In general
Not later than 180 days after the date of enactment of this section, the Secretary, in consultation with the Secretary of Energy, shall establish a qualifying advanced energy project program to consider and award certifications for qualified investments eligible for credits under this section to qualifying advanced energy project sponsors.
(B) Limitation
The total amount of credits that may be allocated under the program shall not exceed $2,300,000,000.
(2) Certification
(A) Application period
Each applicant for certification under this paragraph shall submit an application containing such information as the Secretary may require during the 2-year period beginning on the date the Secretary establishes the program under paragraph (1).
(B) Time to meet criteria for certification
Each applicant for certification shall have 1 year from the date of acceptance by the Secretary of the application during which to provide to the Secretary evidence that the requirements of the certification have been met.
(C) Period of issuance
An applicant which receives a certification shall have 3 years from the date of issuance of the certification in order to place the project in service and if such project is not placed in service by that time period, then the certification shall no longer be valid.
(3) Selection criteria
In determining which qualifying advanced energy projects to certify under this section, the Secretary—
(A) shall take into consideration only those projects where there is a reasonable expectation of commercial viability, and
(B) shall take into consideration which projects—
(i) will provide the greatest domestic job creation (both direct and indirect) during the credit period,
(ii) will provide the greatest net impact in avoiding or reducing air pollutants or anthropogenic emissions of greenhouse gases,
(iii) have the greatest potential for technological innovation and commercial deployment,
(iv) have the lowest levelized cost of generated or stored energy, or of measured reduction in energy consumption or greenhouse gas emission (based on costs of the full supply chain), and
(v) have the shortest project time from certification to completion.
(4) Review and redistribution
(A) Review
Not later than 4 years after the date of enactment of this section, the Secretary shall review the credits allocated under this section as of such date.
(B) Redistribution
The Secretary may reallocate credits awarded under this section if the Secretary determines that—
(i) there is an insufficient quantity of qualifying applications for certification pending at the time of the review, or
(ii) any certification made pursuant to paragraph (2) has been revoked pursuant to paragraph (2)(B) because the project subject to the certification has been delayed as a result of third party opposition or litigation to the proposed project.
(C) Reallocation
If the Secretary determines that credits under this section are available for reallocation pursuant to the requirements set forth in paragraph (2), the Secretary is authorized to conduct an additional program for applications for certification.
(5) Disclosure of allocations
The Secretary shall, upon making a certification under this subsection, publicly disclose the identity of the applicant and the amount of the credit with respect to such applicant.
(e) Additional allocations
(1) In general
Not later than 180 days after the date of enactment of this subsection, the Secretary shall establish a program to consider and award certifications for qualified investments eligible for credits under this section to qualifying advanced energy project sponsors.
(2) Limitation
The total amount of credits which may be allocated under the program established under paragraph (1) shall not exceed $10,000,000,000, of which not greater than $6,000,000,000 may be allocated to qualified investments which are not located within a census tract which—
(A) is described in clause (iii) of section 45(b)(11)(B), and
(B) prior to the date of enactment of this subsection, had no project which received a certification and allocation of credits under subsection (d).
(3) Certifications
(A) Application requirement
Each applicant for certification under this subsection shall submit an application at such time and containing such information as the Secretary may require.
(B) Time to meet criteria for certification
Each applicant for certification shall have 2 years from the date of acceptance by the Secretary of the application during which to provide to the Secretary evidence that the requirements of the certification have been met.
(C) Period of issuance
An applicant which receives a certification shall have 2 years from the date of issuance of the certification in order to place the project in service and to notify the Secretary that such project has been so placed in service, and if such project is not placed in service by that time period, then the certification shall no longer be valid. If any certification is revoked under this subparagraph, the amount of the limitation under paragraph (2) shall be increased by the amount of the credit with respect to such revoked certification.
(D) Location of project
In the case of an applicant which receives a certification, if the Secretary determines that the project has been placed in service at a location which is materially different than the location specified in the application for such project, the certification shall no longer be valid.
(4) Credit rate conditioned upon wage and apprenticeship requirements
(A) Base rate
For purposes of allocations under this subsection, the amount of the credit determined under subsection (a) shall be determined by substituting "6 percent" for "30 percent".
(B) Alternative rate
In the case of any project which satisfies the requirements of paragraphs (5)(A) and (6), subparagraph (A) shall not apply.
(5) Prevailing wage requirements
(A) In general
The requirements described in this subparagraph with respect to a project are that the taxpayer shall ensure that any laborers and mechanics employed by the taxpayer or any contractor or subcontractor in the re-equipping, expansion, or establishment of a manufacturing facility shall be paid wages at rates not less than the prevailing rates for construction, alteration, or repair of a similar character in the locality in which such project is located as most recently determined by the Secretary of Labor, in accordance with subchapter IV of
(B) Correction and penalty related to failure to satisfy wage requirements
Rules similar to the rules of section 45(b)(7)(B) shall apply.
(6) Apprenticeship requirements
Rules similar to the rules of section 45(b)(8) shall apply.
(7) Disclosure of allocations
The Secretary shall, upon making a certification under this subsection, publicly disclose the identity of the applicant and the amount of the credit with respect to such applicant.
(f) Denial of double benefit
A credit shall not be allowed under this section for any qualified investment for which a credit is allowed under section 48, 48A, 48B, 48E, 45Q, or 45V.
(Added
Editorial Notes
References in Text
Subsections (c)(4) and (d) of section 46 (as in effect on the day before the enactment of the Revenue Reconciliation Act of 1990), referred to in subsec. (b)(2), means section 46(c)(4) and (d) as in effect before enactment of
The date of enactment of this section, referred to in subsec. (d)(1)(A), (4)(A), is the date of enactment of
The date of enactment of this subsection, referred to in subsec. (e)(1), (2)(B), is the date of enactment of
Amendments
2022—Subsec. (c)(1)(A).
Subsec. (c)(1)(A)(i).
Subsec. (c)(1)(A)(i)(I).
Subsec. (c)(1)(A)(i)(II).
Subsec. (c)(1)(A)(i)(III).
Subsec. (c)(1)(A)(i)(IV).
Subsec. (c)(1)(A)(i)(V).
Subsec. (c)(1)(A)(i)(VI) to (IX).
Subsec. (c)(1)(A)(ii), (iii).
Subsec. (c)(2)(A).
Subsec. (e).
Subsec. (f).
2014—Subsec. (b)(3).
Subsec. (c)(1)(A)(i)(VI).
Statutory Notes and Related Subsidiaries
Effective Date of 2022 Amendment
Effective Date of 2014 Amendment
Amendment by section 209(g) of
Amendment by section 221(a)(2)(C) of
Effective Date
Section applicable to periods after Feb. 17, 2009, under rules similar to the rules of
1 So in original. Probably should be followed by a closing parenthesis.
§48D. Advanced manufacturing investment credit
(a) Establishment of credit
For purposes of section 46, the advanced manufacturing investment credit for any taxable year is an amount equal to 25 percent of the qualified investment for such taxable year with respect to any advanced manufacturing facility of an eligible taxpayer.
(b) Qualified investment
(1) In general
For purposes of subsection (a), the qualified investment with respect to any advanced manufacturing facility for any taxable year is the basis of any qualified property placed in service by the taxpayer during such taxable year which is part of an advanced manufacturing facility.
(2) Qualified property
(A) In general
For purposes of this subsection, the term "qualified property" means property—
(i) which is tangible property,
(ii) with respect to which depreciation (or amortization in lieu of depreciation) is allowable,
(iii) which is—
(I) constructed, reconstructed, or erected by the taxpayer, or
(II) acquired by the taxpayer if the original use of such property commences with the taxpayer, and
(iv) which is integral to the operation of the advanced manufacturing facility.
(B) Buildings and structural components
(i) In general
The term "qualified property" includes any building or its structural components which otherwise satisfy the requirements under subparagraph (A).
(ii) Exception
Clause (i) shall not apply with respect to a building or portion of a building used for offices, administrative services, or other functions unrelated to manufacturing.
(3) Advanced manufacturing facility
For purposes of this section, the term "advanced manufacturing facility" means a facility for which the primary purpose is the manufacturing of semiconductors or semiconductor manufacturing equipment.
(4) Coordination with rehabilitation credit
The qualified investment with respect to any advanced manufacturing facility for any taxable year shall not include that portion of the basis of any property which is attributable to qualified rehabilitation expenditures (as defined in section 47(c)(2)).
(5) Certain progress expenditure rules made applicable
Rules similar to the rules of subsections (c)(4) and (d) of section 46 (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990) shall apply for purposes of subsection (a).
(c) Eligible taxpayer
For purposes of this section, the term "eligible taxpayer" means any taxpayer which—
(1) is not a foreign entity of concern (as defined in section 9901(6) 1 of the William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021), and
(2) has not made an applicable transaction (as defined in section 50(a)) during the taxable year.
(d) Elective payment
(1) In general
Except as otherwise provided in paragraph (2)(A), in the case of a taxpayer making an election (at such time and in such manner as the Secretary may provide) under this subsection with respect to the credit determined under subsection (a) with respect to such taxpayer, such taxpayer shall be treated as making a payment against the tax imposed by subtitle A (for the taxable year with respect to which such credit was determined) equal to the amount of such credit.
(2) Special rules
For purposes of this subsection—
(A) Application to partnerships and s corporations
(i) In general
In the case of the credit determined under subsection (a) with respect to any property held directly by a partnership or S corporation, any election under paragraph (1) shall be made by such partnership or S corporation. If such partnership or S corporation makes an election under such paragraph (in such manner as the Secretary may provide) with respect to such credit—
(I) the Secretary shall make a payment to such partnership or S corporation equal to the amount of such credit,
(II) paragraph (3) shall be applied with respect to such credit before determining any partner's distributive share, or shareholder's pro rata share, of such credit,
(III) any amount with respect to which the election in paragraph (1) is made shall be treated as tax exempt income for purposes of sections 705 and 1366, and
(IV) a partner's distributive share of such tax exempt income shall be based on such partner's distributive share of the otherwise applicable credit for each taxable year.
(ii) Coordination with application at partner or shareholder level
In the case of any property held directly by a partnership or S corporation, no election by any partner or shareholder shall be allowed under paragraph (1) with respect to any credit determined under subsection (a) with respect to such property.
(B) Elections
Any election under paragraph (1) shall be made not later than the due date (including extensions of time) for the return of tax for the taxable year for which the election is made, but in no event earlier than 270 days after the date of the enactment of this section. Any such election, once made, shall be irrevocable. Except as otherwise provided in this subparagraph, any election under paragraph (1) shall apply with respect to any credit for the taxable year for which the election is made.
(C) Timing
The payment described in paragraph (1) shall be treated as made on the later of the due date (determined without regard to extensions) of the return of tax for the taxable year or the date on which such return is filed.
(D) Treatment of payments to partnerships and s corporations
For purposes of
(E) Additional information
As a condition of, and prior to, any amount being treated as a payment which is made by the taxpayer under paragraph (1) or any payment being made pursuant to subparagraph (A), the Secretary may require such information or registration as the Secretary deems necessary or appropriate for purposes of preventing duplication, fraud, improper payments, or excessive payments under this section.
(F) Excessive payment
(i) In general
In the case of any amount treated as a payment which is made by the taxpayer under paragraph (1), or any payment made pursuant to subparagraph (A), which the Secretary determines constitutes an excessive payment, the tax imposed on such taxpayer by
(I) the amount of such excessive payment, plus
(II) an amount equal to 20 percent of such excessive payment.
(ii) Reasonable cause
Clause (i)(II) shall not apply if the taxpayer demonstrates to the satisfaction of the Secretary that the excessive payment resulted from reasonable cause.
(iii) Excessive payment defined
For purposes of this subparagraph, the term "excessive payment" means, with respect to property for which an election is made under this subsection for any taxable year, an amount equal to the excess of—
(I) the amount treated as a payment which is made by the taxpayer under paragraph (1), or the amount of the payment made pursuant to subparagraph (A), with respect to such property for such taxable year, over
(II) the amount of the credit which, without application of this subsection, would be otherwise allowable (determined without regard to section 38(c)) under subsection (a) with respect to such property for such taxable year.
(3) Denial of double benefit
In the case of a taxpayer making an election under this subsection with respect to the credit determined under subsection (a), such credit shall be reduced to zero and shall, for any other purposes under this title, be deemed to have been allowed to the taxpayer for such taxable year.
(4) Mirror code possessions
In the case of any possession of the United States with a mirror code tax system (as defined in section 24(k)), this subsection shall not be treated as part of the income tax laws of the United States for purposes of determining the income tax law of such possession unless such possession elects to have this subsection be so treated.
(5) Basis reduction and recapture
Rules similar to the rules of subsections (a) and (c) of section 50 shall apply with respect to—
(A) any amount treated as a payment which is made by the taxpayer under paragraph (1), and
(B) any payment made pursuant to paragraph (2)(A).
(6) Regulations
The Secretary shall issue such regulations or other guidance as may be necessary or appropriate to carry out the purposes of this subsection, including—
(A) regulations or other guidance providing rules for determining a partner's distributive share of the tax exempt income described in paragraph (2)(A)(i)(III), and
(B) guidance to ensure that the amount of the payment or deemed payment made under this subsection is commensurate with the amount of the credit that would be otherwise allowable (determined without regard to section 38(c)).
(e) Termination of credit
The credit allowed under this section shall not apply to property the construction of which begins after December 31, 2026.
(Added
Editorial Notes
References in Text
The date of the enactment of the Revenue Reconciliation Act of 1990, referred to in subsec. (b)(5), is the date of enactment of
Section 9901(6) of the William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021, referred to in subsec. (c)(1), means section 9901(6) of
The date of the enactment of this section, referred to in subsec. (d)(2)(B), is the date of enactment of
Prior Provisions
A prior section 48D, added
Statutory Notes and Related Subsidiaries
Effective Date
Section applicable to property placed in service after Dec. 31, 2022, and, for any property the construction of which begins prior to Jan. 1, 2023, only to the extent of the basis thereof attributable to the construction, reconstruction, or erection after Aug. 9, 2022, see section 107(f) of
1 See References in Text note below.
§48E. Clean electricity investment credit
(a) Investment credit for qualified property
(1) In general
For purposes of section 46, the clean electricity investment credit for any taxable year is an amount equal to the applicable percentage of the qualified investment for such taxable year with respect to—
(A) any qualified facility, and
(B) any energy storage technology.
(2) Applicable percentage
(A) Qualified facilities
Subject to paragraph (3)—
(i) Base rate
In the case of any qualified facility which is not described in subclause (I) or (II) of clause (ii) and does not satisfy the requirements described in subclause (III) of such clause, the applicable percentage shall be 6 percent.
(ii) Alternative rate
In the case of any qualified facility—
(I) with a maximum net output of less than 1 megawatt (as measured in alternating current),
(II) the construction of which begins prior to the date that is 60 days after the Secretary publishes guidance with respect to the requirements of paragraphs (3) and (4) of subsection (d), or
(III) which—
(aa) satisfies the requirements of subsection (d)(3), and
(bb) with respect to the construction of such facility, satisfies the requirements of subsection (d)(4),
the applicable percentage shall be 30 percent.
(B) Energy storage technology
Subject to paragraph (3)—
(i) Base rate
In the case of any energy storage technology which is not described in subclause (I) or (II) of clause (ii) and does not satisfy the requirements described in subclause (III) of such clause, the applicable percentage shall be 6 percent.
(ii) Alternative rate
In the case of any energy storage technology—
(I) with a capacity of less than 1 megawatt,
(II) the construction of which begins prior to the date that is 60 days after the Secretary publishes guidance with respect to the requirements of paragraphs (3) and (4) of subsection (d), or
(III) which—
(aa) satisfies the requirements of subsection (d)(3), and
(bb) with respect to the construction of such property, satisfies the requirements of subsection (d)(4),
the applicable percentage shall be 30 percent.
(3) Increase in credit rate in certain cases
(A) Energy communities
(i) In general
In the case of any qualified investment with respect to a qualified facility or with respect to energy storage technology which is placed in service within an energy community (as defined in section 45(b)(11)(B)), for purposes of applying paragraph (2) with respect to such property or investment, the applicable percentage shall be increased by the applicable credit rate increase.
(ii) Applicable credit rate increase
For purposes of clause (i), the applicable credit rate increase shall be an amount equal to—
(I) in the case of any qualified investment with respect to a qualified facility described in paragraph (2)(A)(i) or with respect to energy storage technology described in paragraph (2)(B)(i), 2 percentage points, and
(II) in the case of any qualified investment with respect to a qualified facility described in paragraph (2)(A)(ii) or with respect to energy storage technology described in paragraph (2)(B)(ii), 10 percentage points.
(B) Domestic content
Rules similar to the rules of section 48(a)(12) shall apply.
(b) Qualified investment with respect to a qualified facility
(1) In general
For purposes of subsection (a), the qualified investment with respect to any qualified facility for any taxable year is the sum of—
(A) the basis of any qualified property placed in service by the taxpayer during such taxable year which is part of a qualified facility, plus
(B) the amount of any expenditures which are—
(i) paid or incurred by the taxpayer for qualified interconnection property—
(I) in connection with a qualified facility which has a maximum net output of not greater than 5 megawatts (as measured in alternating current), and
(II) placed in service during the taxable year of the taxpayer, and
(ii) properly chargeable to capital account of the taxpayer.
(2) Qualified property
For purposes of this section, the term "qualified property" means property—
(A) which is—
(i) tangible personal property, or
(ii) other tangible property (not including a building or its structural components), but only if such property is used as an integral part of the qualified facility,
(B) with respect to which depreciation (or amortization in lieu of depreciation) is allowable, and
(C)(i) the construction, reconstruction, or erection of which is completed by the taxpayer, or
(ii) which is acquired by the taxpayer if the original use of such property commences with the taxpayer.
(3) Qualified facility
(A) In general
For purposes of this section, the term "qualified facility" means a facility—
(i) which is used for the generation of electricity,
(ii) which is placed in service after December 31, 2024, and
(iii) for which the anticipated greenhouse gas emissions rate (as determined under subparagraph (B)(ii)) is not greater than zero.
(B) Additional rules
(i) Expansion of facility; incremental production
Rules similar to the rules of section 45Y(b)(1)(C) shall apply for purposes of this paragraph.
(ii) Greenhouse gas emissions rate
Rules similar to the rules of section 45Y(b)(2) shall apply for purposes of this paragraph.
(C) Exclusion
The term "qualified facility" shall not include any facility for which—
(i) a renewable electricity production credit determined under section 45,
(ii) an advanced nuclear power facility production credit determined under section 45J,
(iii) a carbon oxide sequestration credit determined under section 45Q,
(iv) a zero-emission nuclear power production credit determined under section 45U,
(v) a clean electricity production credit determined under section 45Y,
(vi) an energy credit determined under section 48, or
(vii) a qualifying advanced coal project credit under section 48A,
is allowed under section 38 for the taxable year or any prior taxable year.
(4) Qualified interconnection property
For purposes of this paragraph, the term "qualified interconnection property" has the meaning given such term in section 48(a)(8)(B).
(5) Coordination with rehabilitation credit
The qualified investment with respect to any qualified facility for any taxable year shall not include that portion of the basis of any property which is attributable to qualified rehabilitation expenditures (as defined in section 47(c)(2)).
(6) Definitions
For purposes of this subsection, the terms "CO2e per KWh" and "greenhouse gas emissions rate" have the same meaning given such terms under section 45Y.
(c) Qualified investment with respect to energy storage technology
(1) Qualified investment
For purposes of subsection (a), the qualified investment with respect to energy storage technology for any taxable year is the basis of any energy storage technology placed in service by the taxpayer during such taxable year.
(2) Energy storage technology
For purposes of this section, the term "energy storage technology" has the meaning given such term in section 48(c)(6) (except that subparagraph (D) of such section shall not apply).
(d) Special rules
(1) Certain progress expenditure rules made applicable
Rules similar to the rules of subsections (c)(4) and (d) of section 46 (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990) shall apply for purposes of subsection (a).
(2) Special rule for property financed by subsidized energy financing or private activity bonds
Rules similar to the rules of section 45(b)(3) shall apply.
(3) Prevailing wage requirements
Rules similar to the rules of section 48(a)(10) shall apply.
(4) Apprenticeship requirements
Rules similar to the rules of section 45(b)(8) shall apply.
(5) Domestic content requirement for elective payment
In the case of a taxpayer making an election under section 6417 with respect to a credit under this section, rules similar to the rules of section 45Y(g)(12) shall apply.
(e) Credit phase-out
(1) In general
The amount of the clean electricity investment credit under subsection (a) for any qualified investment with respect to any qualified facility or energy storage technology the construction of which begins during a calendar year described in paragraph (2) shall be equal to the product of—
(A) the amount of the credit determined under subsection (a) without regard to this subsection, multiplied by
(B) the phase-out percentage under paragraph (2).
(2) Phase-out percentage
The phase-out percentage under this paragraph is equal to—
(A) for any qualified investment with respect to any qualified facility or energy storage technology the construction of which begins during the first calendar year following the applicable year, 100 percent,
(B) for any qualified investment with respect to any qualified facility or energy storage technology the construction of which begins during the second calendar year following the applicable year, 75 percent,
(C) for any qualified investment with respect to any qualified facility or energy storage technology the construction of which begins during the third calendar year following the applicable year, 50 percent, and
(D) for any qualified investment with respect to any qualified facility or energy storage technology the construction of which begins during any calendar year subsequent to the calendar year described in subparagraph (C), 0 percent.
(3) Applicable year
For purposes of this subsection, the term "applicable year" has the same meaning given such term in section 45Y(d)(3).
(f) Greenhouse gas
In this section, the term "greenhouse gas" has the same meaning given such term under section 45Y(e)(2).
(g) Recapture of credit
For purposes of section 50, if the Secretary determines that the greenhouse gas emissions rate for a qualified facility is greater than 10 grams of CO2e per KWh, any property for which a credit was allowed under this section with respect to such facility shall cease to be investment credit property in the taxable year in which the determination is made.
(h) Special rules for certain facilities placed in service in connection with low-income communities
(1) In general
In the case of any applicable facility with respect to which the Secretary makes an allocation of environmental justice capacity limitation under paragraph (4)—
(A) the applicable percentage otherwise determined under subsection (a)(2) with respect to any eligible property which is part of such facility shall be increased by—
(i) in the case of a facility described in subclause (I) of paragraph (2)(A)(iii) and not described in subclause (II) of such paragraph, 10 percentage points, and
(ii) in the case of a facility described in subclause (II) of paragraph (2)(A)(iii), 20 percentage points, and
(B) the increase in the credit determined under subsection (a) by reason of this subsection for any taxable year with respect to all property which is part of such facility shall not exceed the amount which bears the same ratio to the amount of such increase (determined without regard to this subparagraph) as—
(i) the environmental justice capacity limitation allocated to such facility, bears to
(ii) the total megawatt nameplate capacity of such facility, as measured in direct current.
(2) Applicable facility
For purposes of this subsection—
(A) In general
The term "applicable facility" means any qualified facility—
(i) which is not described in section 45Y(b)(2)(B),
(ii) which has a maximum net output of less than 5 megawatts (as measured in alternating current), and
(iii) which—
(I) is located in a low-income community (as defined in section 45D(e)) or on Indian land (as defined in section 2601(2) of the Energy Policy Act of 1992 (
(II) is part of a qualified low-income residential building project or a qualified low-income economic benefit project.
(B) Qualified low-income residential building project
A facility shall be treated as part of a qualified low-income residential building project if—
(i) such facility is installed on a residential rental building which participates in a covered housing program (as defined in section 41411(a) of the Violence Against Women Act of 1994 (
(ii) the financial benefits of the electricity produced by such facility are allocated equitably among the occupants of the dwelling units of such building.
(C) Qualified low-income economic benefit project
A facility shall be treated as part of a qualified low-income economic benefit project if at least 50 percent of the financial benefits of the electricity produced by such facility are provided to households with income of—
(i) less than 200 percent of the poverty line (as defined in section 36B(d)(3)(A)) applicable to a family of the size involved, or
(ii) less than 80 percent of area median gross income (as determined under section 142(d)(2)(B)).
(D) Financial benefit
For purposes of subparagraphs (B) and (C), electricity acquired at a below-market rate shall not fail to be taken into account as a financial benefit.
(3) Eligible property
For purposes of this subsection, the term "eligible property" means a qualified investment with respect to any applicable facility.
(4) Allocations
(A) In general
Not later than January 1, 2025, the Secretary shall establish a program to allocate amounts of environmental justice capacity limitation to applicable facilities. In establishing such program and to carry out the purposes of this subsection, the Secretary shall provide procedures to allow for an efficient allocation process, including, when determined appropriate, consideration of multiple projects in a single application if such projects will be placed in service by a single taxpayer.
(B) Limitation
The amount of environmental justice capacity limitation allocated by the Secretary under subparagraph (A) during any calendar year shall not exceed the annual capacity limitation with respect to such year.
(C) Annual capacity limitation
For purposes of this paragraph, the term "annual capacity limitation" means 1.8 gigawatts of direct current capacity for each calendar year during the period beginning on January 1, 2025, and ending on December 31 of the applicable year (as defined in section 45Y(d)(3)), and zero thereafter.
(D) Carryover of unused limitation
(i) In general
If the annual capacity limitation for any calendar year exceeds the aggregate amount allocated for such year under this paragraph, such limitation for the succeeding calendar year shall be increased by the amount of such excess. No amount may be carried under the preceding sentence to any calendar year after the third calendar year following the applicable year (as defined in section 45Y(d)(3)).
(ii) Carryover from section 48 for calendar year 2025
If the annual capacity limitation for calendar year 2024 under section 48(e)(4)(D) exceeds the aggregate amount allocated for such year under such section, such excess amount may be carried over and applied to the annual capacity limitation under this subsection for calendar year 2025. The annual capacity limitation for calendar year 2025 shall be increased by the amount of such excess.
(E) Placed in service deadline
(i) In general
Paragraph (1) shall not apply with respect to any property which is placed in service after the date that is 4 years after the date of the allocation with respect to the facility of which such property is a part.
(ii) Application of carryover
Any amount of environmental justice capacity limitation which expires under clause (i) during any calendar year shall be taken into account as an excess described in subparagraph (D)(i) (or as an increase in such excess) for such calendar year, subject to the limitation imposed by the last sentence of such subparagraph.
(5) Recapture
The Secretary shall, by regulations or other guidance, provide for recapturing the benefit of any increase in the credit allowed under subsection (a) by reason of this subsection with respect to any property which ceases to be property eligible for such increase (but which does not cease to be investment credit property within the meaning of section 50(a)). The period and percentage of such recapture shall be determined under rules similar to the rules of section 50(a). To the extent provided by the Secretary, such recapture may not apply with respect to any property if, within 12 months after the date the taxpayer becomes aware (or reasonably should have become aware) of such property ceasing to be property eligible for such increase, the eligibility of such property for such increase is restored. The preceding sentence shall not apply more than once with respect to any facility.
(i) Guidance
Not later than January 1, 2025, the Secretary shall issue guidance regarding implementation of this section.
(Added
Editorial Notes
References in Text
The date of the enactment of the Revenue Reconciliation Act of 1990, referred to in subsec. (d)(1), is the date of enactment of
The Housing Act of 1949, referred to in subsec. (h)(2)(B)(i), is act July 15, 1949, ch. 338,
Statutory Notes and Related Subsidiaries
Effective Date
1 So in original. Another closing parenthesis probably should precede the comma.
§49. At-risk rules
(a) General rule
(1) Certain nonrecourse financing excluded from credit base
(A) Limitation
The credit base of any property to which this paragraph applies shall be reduced by the nonqualified nonrecourse financing with respect to such credit base (as of the close of the taxable year in which placed in service).
(B) Property to which paragraph applies
This paragraph applies to any property which—
(i) is placed in service during the taxable year by a taxpayer described in section 465(a)(1), and
(ii) is used in connection with an activity with respect to which any loss is subject to limitation under section 465.
(C) Credit base defined
For purposes of this paragraph, the term "credit base" means—
(i) the portion of the basis of any qualified rehabilitated building attributable to qualified rehabilitation expenditures,
(ii) the basis of any energy property,
(iii) the basis of any property which is part of a qualifying advanced coal project under section 48A,
(iv) the basis of any property which is part of a qualifying gasification project under section 48B,
(v) the basis of any property which is part of a qualifying advanced energy project under section 48C, and
(vi) the basis of any qualified property (as defined in subsection (b)(2) of section 48D) which is part of an advanced manufacturing facility (as defined in subsection (b)(3) of such section).
(D) Nonqualified nonrecourse financing
(i) In general
For purposes of this paragraph and paragraph (2), the term "nonqualified nonrecourse financing" means any nonrecourse financing which is not qualified commercial financing.
(ii) Qualified commercial financing
For purposes of this paragraph, the term "qualified commercial financing" means any financing with respect to any property if—
(I) such property is acquired by the taxpayer from a person who is not a related person,
(II) the amount of the nonrecourse financing with respect to such property does not exceed 80 percent of the credit base of such property, and
(III) such financing is borrowed from a qualified person or represents a loan from any Federal, State, or local government or instrumentality thereof, or is guaranteed by any Federal, State, or local government.
Such term shall not include any convertible debt.
(iii) Nonrecourse financing
For purposes of this subparagraph, the term "nonrecourse financing" includes—
(I) any amount with respect to which the taxpayer is protected against loss through guarantees, stop-loss agreements, or other similar arrangements, and
(II) except to the extent provided in regulations, any amount borrowed from a person who has an interest (other than as a creditor) in the activity in which the property is used or from a related person to a person (other than the taxpayer) having such an interest.
In the case of amounts borrowed by a corporation from a shareholder, subclause (II) shall not apply to an interest as a shareholder.
(iv) Qualified person
For purposes of this paragraph, the term "qualified person" means any person which is actively and regularly engaged in the business of lending money and which is not—
(I) a related person with respect to the taxpayer,
(II) a person from which the taxpayer acquired the property (or a related person to such person), or
(III) a person who receives a fee with respect to the taxpayer's investment in the property (or a related person to such person).
(v) Related person
For purposes of this subparagraph, the term "related person" has the meaning given such term by section 465(b)(3)(C). Except as otherwise provided in regulations prescribed by the Secretary, the determination of whether a person is a related person shall be made as of the close of the taxable year in which the property is placed in service.
(E) Application to partnerships and S corporations
For purposes of this paragraph and paragraph (2)—
(i) In general
Except as otherwise provided in this subparagraph, in the case of any partnership or S corporation, the determination of whether a partner's or shareholder's allocable share of any financing is nonqualified nonrecourse financing shall be made at the partner or shareholder level.
(ii) Special rule for certain recourse financing of S corporation
A shareholder of an S corporation shall be treated as liable for his allocable share of any financing provided by a qualified person to such corporation if—
(I) such financing is recourse financing (determined at the corporate level), and
(II) such financing is provided with respect to qualified business property of such corporation.
(iii) Qualified business property
For purposes of clause (ii), the term "qualified business property" means any property if—
(I) such property is used by the corporation in the active conduct of a trade or business,
(II) during the entire 12-month period ending on the last day of the taxable year, such corporation had at least 3 full-time employees who were not owner-employees (as defined in section 465(c)(7)(E)(i)) and substantially all the services of whom were services directly related to such trade or business, and
(III) during the entire 12-month period ending on the last day of such taxable year, such corporation had at least 1 full-time employee substantially all of the services of whom were in the active management of the trade or business.
(iv) Determination of allocable share
The determination of any partner's or shareholder's allocable share of any financing shall be made in the same manner as the credit allowable by section 38 with respect to such property.
(F) Special rules for energy property
Rules similar to the rules of subparagraph (F) of section 46(c)(8) (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990) shall apply for purposes of this paragraph.
(2) Subsequent decreases in nonqualified nonrecourse financing with respect to the property
(A) In general
If, at the close of a taxable year following the taxable year in which the property was placed in service, there is a net decrease in the amount of nonqualified nonrecourse financing with respect to such property, such net decrease shall be taken into account as an increase in the credit base for such property in accordance with subparagraph (C).
(B) Certain transactions not taken into account
For purposes of this paragraph, nonqualified nonrecourse financing shall not be treated as decreased through the surrender or other use of property financed by nonqualified nonrecourse financing.
(C) Manner in which taken into account
(i) Credit determined by reference to taxable year property placed in service
For purposes of determining the amount of credit allowable under section 38 and the amount of credit subject to the early disposition or cessation rules under section 50(a), any increase in a taxpayer's credit base for any property by reason of this paragraph shall be taken into account as if it were property placed in service by the taxpayer in the taxable year in which the property referred to in subparagraph (A) was first placed in service.
(ii) Credit allowed for year of decrease in nonqualified nonrecourse financing
Any credit allowable under this subpart for any increase in qualified investment by reason of this paragraph shall be treated as earned during the taxable year of the decrease in the amount of nonqualified nonrecourse financing.
(b) Increases in nonqualified nonrecourse financing
(1) In general
If, as of the close of the taxable year, there is a net increase with respect to the taxpayer in the amount of nonqualified nonrecourse financing (within the meaning of subsection (a)(1)) with respect to any property to which subsection (a)(1) applied, then the tax under this chapter for such taxable year shall be increased by an amount equal to the aggregate decrease in credits allowed under section 38 for all prior taxable years which would have resulted from reducing the credit base (as defined in subsection (a)(1)(C)) taken into account with respect to such property by the amount of such net increase. For purposes of determining the amount of credit subject to the early disposition or cessation rules of section 50(a), the net increase in the amount of the nonqualified nonrecourse financing with respect to the property shall be treated as reducing the property's credit base in the year in which the property was first placed in service.
(2) Transfers of debt more than 1 year after initial borrowing not treated as increasing nonqualified nonrecourse financing
For purposes of paragraph (1), the amount of nonqualified nonrecourse financing (within the meaning of subsection (a)(1)(D)) with respect to the taxpayer shall not be treated as increased by reason of a transfer of (or agreement to transfer) any evidence of any indebtedness if such transfer occurs (or such agreement is entered into) more than 1 year after the date such indebtedness was incurred.
(3) Special rules for certain energy property
Rules similar to the rules of section 47(d)(3) (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990) shall apply for purposes of this subsection.
(4) Special rule
Any increase in tax under paragraph (1) shall not be treated as tax imposed by this chapter for purposes of determining the amount of any credit allowable under this chapter.
(Added
Amendment of Subsection (a)(1)(C)
(1) by striking "and" at the end of clause (v),
(2) by striking the period at the end of clause (vi) and inserting a comma, and
(3) by adding at the end the following new clauses:
(vii) the basis of any qualified property which is part of a qualified facility under section 48E, and
(viii) the basis of any energy storage technology under section 48E.
See 2022 Amendment note below.
Editorial Notes
References in Text
The date of the enactment of the Revenue Reconciliation Act of 1990, referred to in subsecs. (a)(1)(F) and (b)(3), is the date of enactment of
Prior Provisions
A prior section 49,
Amendments
2022—Subsec. (a)(1)(C)(vi).
Subsec. (a)(1)(C)(vii), (viii).
2018—Subsec. (a)(1)(C)(vi).
Subsec. (a)(1)(D)(iii).
2010—Subsec. (a)(1)(C)(vi).
2009—Subsec. (a)(1)(C)(v).
2005—Subsec. (a)(1)(C)(iii), (iv).
1998—Subsec. (b)(4).
1990—
1988—Subsec. (c)(4)(B).
"(i) may not be carried back to any taxable year, but
"(ii) shall be added to the carryforwards from the taxable year before applying paragraph (2)."
Subsec. (c)(5)(B)(i).
Subsec. (c)(5)(C).
Subsec. (d)(1).
"(A) by substituting '100 percent' for '50 percent' in paragraph (1), and
"(B) without regard to paragraph (4) thereof (relating to election of reduced credit in lieu of basis adjustment)."
Statutory Notes and Related Subsidiaries
Effective Date of 2022 Amendment
Amendment by
Amendment by
Effective Date of 2010 Amendment
Amendment by
Effective Date of 2009 Amendment
Amendment by
Effective Date of 2005 Amendment
Amendment by
Effective Date of 1998 Amendment
Amendment by
Effective Date of 1990 Amendment
Amendment by
Effective Date of 1988 Amendment
Amendment by section 1002(e)(1)–(3) of
Amendment by section 1002(e)(8)(B) of
Effective Date of 1986 Amendment
"(1)
"(2)
"(A) in the case of any motion picture or television film, construction shall be treated as including production for purposes of section 203(b)(1) of this Act [enacting provisions set out as a note under
"(B) in the case of any television film, a license agreement or agreement for production services between a television network and a producer shall be treated as a binding contract for purposes of section 203(b)(1)(A) of this Act, and
"(C) a motion picture film shall be treated as described in section 203(b)(1)(A) of this Act if—
"(i) funds were raised pursuant to a public offering before September 26, 1985, for the production of such film,
"(ii) 40 percent of the funds raised pursuant to such public offering are being spent on films the production of which commenced before such date, and
"(iii) all of the films funded by such public offering are required to be distributed pursuant to distribution agreements entered into before September 26, 1985.
"(3)
"(4)
"(A) Subsections (c) and (d) of section 49 of the Internal Revenue Code of 1986 shall not apply to any continuous caster facility for slabs and blooms which is subject to a lease and which is part of a project the second phase of which is a continuous slab caster which was placed in service before December 31, 1985.
"(B) For purposes of determining whether an automobile manufacturing facility (including equipment and incidental appurtenances) is transition property within the meaning of section 49(e), property with respect to which the Board of Directors of an automobile manufacturer formally approved the plan for the project on January 7, 1985 shall be treated as transition property and subsections (c) and (d) of section 49 of such Code shall not apply to such property, but only with respect to $70,000,000 of regular investment tax credits.
"(C) Any solid waste disposal facility which will process and incinerate solid waste of one or more public or private entities including Dakota County, Minnesota, and with respect to which a bond carryforward from 1985 was elected in an amount equal to $12,500,000 shall be treated as transition property within the meaning of section 49(e) of the Internal Revenue Code of 1986.
"(D) For purposes of section 49 of such Code, the following property shall be treated as transition property:
"(i) 2 catamarans built by a shipbuilder incorporated in the State of Washington in 1964, the contracts for which were signed on April 22, 1986 and November 12, 1985, and 1 barge built by such shipbuilder the contract for which was signed on August 7, 1985.
"(ii) 2 large passenger ocean-going United States flag cruise ships with a passenger rated capacity of up to 250 which are built by the shipbuilder described in clause (i), which are the first such ships built in the United States since 1952, and which were designed at the request of a Pacific Coast cruise line pursuant to a contract entered into in October 1985. This clause shall apply only to that portion of the cost of each ship which does not exceed $40,000,000.
"(iii) Property placed in service during 1986 by Satellite Industries, Inc., with headquarters in Minneapolis, Minnesota, to the extent that the cost of such property does not exceed $1,950,000.
"(E) Subsections (c) and (d) of section 49 of such Code shall not apply to property described in section 204(a)(4) of this Act [enacting provisions set out as a note under
Savings Provision
For provisions that nothing in amendment by section 401(d)(3)(B)(i) of
For provisions that nothing in amendment by
Normalization Rules
"(1) all credits for open taxable years as of the time of the final determination referred to in section 46(f)(4)(A) of such Code shall be recaptured, and
"(2) if the amount of the taxpayer's unamortized credits (or the credits not previously restored to rate base) with respect to such property (whether or not for open years) exceeds the amount referred to in paragraph (1), the taxpayer's tax for the taxable year shall be increased by the amount of such excess.
If any portion of the excess described in paragraph (2) is attributable to a credit which is allowable as a carryover to a taxable year beginning after December 31, 1985, in lieu of applying paragraph (2) with respect to such portion, the amount of such carryover shall be reduced by the amount of such portion. Rules similar to the rules of this subsection shall apply in the case of any property with respect to which the requirements of section 46(f)(9) of such Code are met."
Exception for Certain Aircraft Used in Alaska
"(1) The amendments made by subsection (a) [enacting this section and provisions set out above] shall not apply to property originally placed in service after December 29, 1982, and before August 1, 1985, by a corporation incorporated in Alaska on May 21, 1953, and used by it—
"(A) in part, for the transportation of mail for the United States Postal Service in the State of Alaska, and
"(B) in part, to provide air service in the State of Alaska on routes which had previously been served by an air carrier that received compensation from the Civil Aeronautics Board for providing service.
"(2) In the case of property described in subparagraph (A)—
"(A) such property shall be treated as recovery property described in section 208(d)(5) of the Tax Equity and Fiscal Responsibility Act of 1982 ('TEFRA') [section 208(d)(5) of
"(B) '48 months' shall be substituted for '3 months' each place it appears in applying—
"(i) section 48(b)(2)(B) of the Code [
"(ii) section 168(f)(8)(D) of the Code [
"(C) the limitation of section 168(f)(8)(D)(ii)(III) (as then in effect) shall be read by substituting 'the lessee's original cost basis.', for 'the adjusted basis of the lessee at the time of the lease.'
"(3) The aggregate amount of property to which this paragraph shall apply shall not exceed $60,000,000."
§50. Other special rules
(a) Recapture in case of dispositions, etc.
Under regulations prescribed by the Secretary—
(1) Early disposition, etc.
(A) General rule
If, during any taxable year, investment credit property is disposed of, or otherwise ceases to be investment credit property with respect to the taxpayer, before the close of the recapture period, then the tax under this chapter for such taxable year shall be increased by the recapture percentage of the aggregate decrease in the credits allowed under section 38 for all prior taxable years which would have resulted solely from reducing to zero any credit determined under this subpart with respect to such property.
(B) Recapture percentage
For purposes of subparagraph (A), the recapture percentage shall be determined in accordance with the following table:
| If the property ceases to be investment credit property within— | The recapture percentage is: |
|---|---|
| (i) One full year after placed in service | 100 |
| (ii) One full year after the close of the period described in clause (i) | 80 |
| (iii) One full year after the close of the period described in clause (ii) | 60 |
| (iv) One full year after the close of the period described in clause (iii) | 40 |
| (v) One full year after the close of the period described in clause (iv) | 20 |
(2) Property ceases to qualify for progress expenditures
(A) In general
If during any taxable year any building to which section 47(d) applied ceases (by reason of sale or other disposition, cancellation or abandonment of contract, or otherwise) to be, with respect to the taxpayer, property which, when placed in service, will be a qualified rehabilitated building, then the tax under this chapter for such taxable year shall be increased by an amount equal to the aggregate decrease in the credits allowed under section 38 for all prior taxable years which would have resulted solely from reducing to zero the credit determined under this subpart with respect to such building.
(B) Certain excess credit recaptured
Any amount which would have been applied as a reduction under paragraph (2) of section 47(b) but for the fact that a reduction under such paragraph cannot reduce the amount taken into account under section 47(b)(1) below zero shall be treated as an amount required to be recaptured under subparagraph (A) for the taxable year during which the building is placed in service.
(C) Certain sales and leasebacks
Under regulations prescribed by the Secretary, a sale by, and leaseback to, a taxpayer who, when the property is placed in service, will be a lessee to whom the rules referred to in subsection (d)(5) apply shall not be treated as a cessation described in subparagraph (A) to the extent that the amount which will be passed through to the lessee under such rules with respect to such property is not less than the qualified rehabilitation expenditures properly taken into account by the lessee under section 47(d) with respect to such property.
(D) Coordination with paragraph (1)
If, after property is placed in service, there is a disposition or other cessation described in paragraph (1), then paragraph (1) shall be applied as if any credit which was allowable by reason of section 47(d) and which has not been required to be recaptured before such disposition, cessation, or change in use were allowable for the taxable year the property was placed in service.
(E) Special rules
Rules similar to the rules of this paragraph shall apply in cases where qualified progress expenditures were taken into account under the rules referred to in section 48(b), 48A(b)(3), 48B(b)(3), 48C(b)(2), or 48D(b)(5).
(3) Certain expansions in connection with advanced manufacturing facilities
(A) In general
If there is a an applicable transaction by an applicable taxpayer before the close of the 10-year period beginning on the date such taxpayer placed in service investment credit property which is eligible for the advanced manufacturing investment credit under section 48D(a), then the tax under this chapter for the taxable year in which such transaction occurs shall be increased by 100 percent of the aggregate decrease in the credits allowed under section 38 for all prior taxable years which would have resulted solely from reducing to zero any credit determined under section 46 which is attributable to the advanced manufacturing investment credit under section 48D(a) with respect to such property.
(B) Exception
Subparagraph (A) shall not apply if the applicable taxpayer demonstrates to the satisfaction of the Secretary that the applicable transaction has been ceased or abandoned within 45 days of a determination and notice by the Secretary.
(C) Regulations and guidance
The Secretary shall issue such regulations or other guidance as the Secretary determines necessary or appropriate to carry out the purposes of this paragraph, including regulations or other guidance which provide for requirements for recordkeeping or information reporting for purposes of administering the requirements of this paragraph.
(4) Carrybacks and carryovers adjusted
In the case of any cessation described in paragraph (1) or (2), or any applicable transaction to which paragraph (3)(A) applies, the carrybacks and carryovers under section 39 shall be adjusted by reason of such cessation or applicable transaction.
(5) Subsection not to apply in certain cases
Paragraphs (1) and (2) shall not apply to—
(A) a transfer by reason of death, or
(B) a transaction to which section 381(a) applies.
For purposes of this subsection, property shall not be treated as ceasing to be investment credit property with respect to the taxpayer by reason of a mere change in the form of conducting the trade or business so long as the property is retained in such trade or business as investment credit property and the taxpayer retains a substantial interest in such trade or business.
(6) Definitions and special rules
(A) Investment credit property
For purposes of this subsection, the term "investment credit property" means any property eligible for a credit determined under this subpart.
(B) Transfer between spouses or incident to divorce
In the case of any transfer described in subsection (a) of section 1041—
(i) the foregoing provisions of this subsection shall not apply, and
(ii) the same tax treatment under this subsection with respect to the transferred property shall apply to the transferee as would have applied to the transferor.
(C) Special rule
Any increase in tax under paragraph (1), (2), or (3) shall not be treated as tax imposed by this chapter for purposes of determining the amount of any credit allowable under this chapter.
(D) Applicable transaction
For purposes of this subsection—
(i) In general
The term "applicable transaction" means, with respect to any applicable taxpayer, any significant transaction (as determined by the Secretary, in coordination with the Secretary of Commerce and the Secretary of Defense) involving the material expansion of semiconductor manufacturing capacity of such applicable taxpayer in the People's Republic of China or a foreign country of concern (as defined in section 9901(7) of the William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021).
(ii) Exception
Such term shall not include a transaction which primarily involves the expansion of manufacturing capacity for legacy semiconductors (as defined in section 9902(a)(6) of the William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021).
(E) Applicable taxpayer
For purposes of this subsection, the term "applicable taxpayer" means any taxpayer who has been allowed a credit under section 48D(a) for any prior taxable year.
(b) Certain property not eligible
No credit shall be determined under this subpart with respect to—
(1) Property used outside United States
(A) In general
Except as provided in subparagraph (B), no credit shall be determined under this subpart with respect to any property which is used predominantly outside the United States.
(B) Exceptions
Subparagraph (A) shall not apply to any property described in section 168(g)(4).
(2) Property used for lodging
No credit shall be determined under this subpart with respect to any property which is used predominantly to furnish lodging or in connection with the furnishing of lodging. The preceding sentence shall not apply to—
(A) nonlodging commercial facilities which are available to persons not using the lodging facilities on the same basis as they are available to persons using the lodging facilities;
(B) property used by a hotel or motel in connection with the trade or business of furnishing lodging where the predominant portion of the accommodations is used by transients;
(C) a certified historic structure to the extent of that portion of the basis which is attributable to qualified rehabilitation expenditures; and
(D) any energy property.
(3) Property used by certain tax-exempt organization
No credit shall be determined under this subpart with respect to any property used by an organization (other than a cooperative described in section 521) which is exempt from the tax imposed by this chapter unless such property is used predominantly in an unrelated trade or business the income of which is subject to tax under section 511. If the property is debt-financed property (as defined in section 514(b)), the amount taken into account for purposes of determining the amount of the credit under this subpart with respect to such property shall be that percentage of the amount (which but for this paragraph would be so taken into account) which is the same percentage as is used under section 514(a), for the year the property is placed in service, in computing the amount of gross income to be taken into account during such taxable year with respect to such property. If any qualified rehabilitated building is used by the tax-exempt organization pursuant to a lease, this paragraph shall not apply for purposes of determining the amount of the rehabilitation credit.
(4) Property used by governmental units or foreign persons or entities
(A) In general
No credit shall be determined under this subpart with respect to any property used—
(i) by the United States, any State or political subdivision thereof, any possession of the United States, or any agency or instrumentality of any of the foregoing, or
(ii) by any foreign person or entity (as defined in section 168(h)(2)(C)), but only with respect to property to which section 168(h)(2)(A)(iii) applies (determined after the application of section 168(h)(2)(B)).
(B) Exception for short-term leases
This paragraph and paragraph (3) shall not apply to any property by reason of use under a lease with a term of less than 6 months (determined under section 168(i)(3)).
(C) Exception for qualified rehabilitated buildings leased to governments, etc.
If any qualified rehabilitated building is leased to a governmental unit (or a foreign person or entity) this paragraph shall not apply for purposes of determining the rehabilitation credit with respect to such building.
(D) Special rules for partnerships, etc.
For purposes of this paragraph and paragraph (3), rules similar to the rules of paragraphs (5) and (6) of section 168(h) shall apply.
(E) Cross reference
For special rules for the application of this paragraph and paragraph (3), see section 168(h).
(c) Basis adjustment to investment credit property
(1) In general
For purposes of this subtitle, if a credit is determined under this subpart with respect to any property, the basis of such property shall be reduced by the amount of the credit so determined.
(2) Certain dispositions
If during any taxable year there is a recapture amount determined with respect to any property the basis of which was reduced under paragraph (1), the basis of such property (immediately before the event resulting in such recapture) shall be increased by an amount equal to such recapture amount. For purposes of the preceding sentence, the term "recapture amount" means any increase in tax (or adjustment in carrybacks or carryovers) determined under subsection (a).
(3) Special rule
In the case of any energy credit—
(A) only 50 percent of such credit shall be taken into account under paragraph (1),
(B) only 50 percent of any recapture amount attributable to such credit shall be taken into account under paragraph (2), and
(C) paragraph (1) shall not apply for purposes of determining eligible basis under section 42.
(4) Recapture of reductions
(A) In general
For purposes of sections 1245 and 1250, any reduction under this subsection shall be treated as a deduction allowed for depreciation.
(B) Special rule for section 1250
For purposes of section 1250(b), the determination of what would have been the depreciation adjustments under the straight line method shall be made as if there had been no reduction under this section.
(5) Adjustment in basis of interest in partnership or S corporation
The adjusted basis of—
(A) a partner's interest in a partnership, and
(B) stock in an S corporation,
shall be appropriately adjusted to take into account adjustments made under this subsection in the basis of property held by the partnership or S corporation (as the case may be).
(d) Certain rules made applicable
For purposes of this subpart, rules similar to the rules of the following provisions (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990) shall apply:
(1) Section 46(e) (relating to limitations with respect to certain persons).
(2) Section 46(f) (relating to limitation in case of certain regulated companies). At the election of a taxpayer, this paragraph shall not apply to any energy storage technology (as defined in section 48(c)(6)), provided—
(A) no election under this paragraph shall be permitted if the making of such election is prohibited by a State or political subdivision thereof, by any agency or instrumentality of the United States, or by a public service or public utility commission or other similar body of any State or political subdivision that regulates public utilities as described in section 7701(a)(33)(A),
(B) an election under this paragraph shall be made separately with respect to each energy storage technology by the due date (including extensions) of the Federal tax return for the taxable year in which the energy storage technology is placed in service by the taxpayer, and once made, may be revoked only with the consent of the Secretary, and
(C) an election shall not apply with respect to any energy storage technology if such energy storage technology has a maximum capacity equal to or less than 500 kilowatt hours.
(3) Section 46(h) (relating to special rules for cooperatives).
(4) Paragraphs (2) and (3) of section 48(b) (relating to special rule for sale-leasebacks).
(5) Section 48(d) (relating to certain leased property).
(6) Section 48(f) (relating to estates and trusts).
(7) Section 48(r) (relating to certain 501(d) organizations).
Paragraphs (1)(A), (2)(A), and (4) of the section 46(e) referred to in paragraph (1) of this subsection shall not apply to any taxable year beginning after December 31, 1995. In the case of a real estate investment trust making an election under section 6418, paragraphs (1)(B) and (2)(B) of the section 46(e) referred to in paragraph (1) of this subsection shall not apply to any investment credit property of such real estate investment trust to which such election applies.
(Added
Amendment of Section
(1) in subsection (a)(2)(E), by striking "or 48D(b)(5)" and inserting "48D(b)(5), or 48E(e)"; and
(2) in subsection (c)(3), by inserting "or clean electricity investment credit" after "In the case of any energy credit".
See 2022 Amendment notes below.
Editorial Notes
References in Text
Section 9901(7) of the William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021, referred to in subsec. (a)(6)(D)(i), is section 9901(7) of
Section 9902(a)(6) of the William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021, referred to in subsec. (a)(6)(D)(ii), is section 9902(a)(6) of
The date of the enactment of the Revenue Reconciliation Act of 1990, referred to in subsec. (d), is the date of enactment of
Prior Provisions
A prior section 50,
Amendments
2022—Subsec. (a)(2)(E).
Subsec. (a)(3).
Subsec. (a)(4).
Subsec. (a)(5), (6).
Subsec. (a)(6)(C).
Subsec. (a)(6)(D), (E).
Subsec. (c)(3).
Subsec. (c)(3)(C).
Subsec. (d).
Subsec. (d)(2).
2018—Subsec. (a)(2)(E).
Subsec. (b)(2)(A).
2014—Subsec. (a)(2)(E).
2005—Subsec. (a)(2)(E).
2004—Subsec. (c)(3).
1998—Subsec. (a)(5)(C).
1996—Subsec. (a)(2)(C).
Subsec. (a)(2)(E).
Subsec. (d).
Statutory Notes and Related Subsidiaries
Effective Date of 2022 Amendment
Amendment by section 13102(f)(5), (i) of
Amendment by section 13702(b)(3), (4) of
Amendment by section 13801(c) of
Amendment by
Effective Date of 2004 Amendment
Amendment by
Effective Date of 1998 Amendment
Amendment by
Effective Date of 1996 Amendment
Amendment by section 1616(b)(1) of
Amendment by section 1702(h)(11) of
Effective Date
Section applicable to property placed in service after Dec. 31, 1990, but not applicable to any transition property (as defined in
Savings Provision
For provisions that amendment made by section 401(d)(3)(B)(ii) of
For provisions that nothing in amendment by section 401(d)(3)(B)(ii) of
For provisions that nothing in this section be construed to affect treatment of certain transactions occurring, property acquired, or items of income, loss, deduction, or credit taken into account prior to Nov. 5, 1990, for purposes of determining liability for tax for periods ending after Nov. 5, 1990, see section 11821(b) of
[§§50A, 50B. Repealed. Pub. L. 98–369, div. A, title IV, §474(m)(2), July 18, 1984, 98 Stat. 833 ]
Section 50A, added
Section 50B, added
Subsequent to repeal,
"(a)
" '(A) who has been certified (or for whom a written request for certification has been made) on or before the day the individual began work for the taxpayer by the Secretary of Labor or by the appropriate agency of State or local government as—'.
"(b)
Statutory Notes and Related Subsidiaries
Effective Date of Repeal
Repeal applicable to taxable years beginning after Dec. 31, 1983, and to carrybacks from such years, see section 475(a) of
Subpart F—Rules for Computing Work Opportunity Credit
Editorial Notes
Amendments
2006—
1997—
1996—
1984—
§51. Amount of credit
(a) Determination of amount
For purposes of section 38, the amount of the work opportunity credit determined under this section for the taxable year shall be equal to 40 percent of the qualified first-year wages for such year.
(b) Qualified wages defined
For purposes of this subpart—
(1) In general
The term "qualified wages" means the wages paid or incurred by the employer during the taxable year to individuals who are members of a targeted group.
(2) Qualified first-year wages
The term "qualified first-year wages" means, with respect to any individual, qualified wages attributable to service rendered during the 1-year period beginning with the day the individual begins work for the employer.
(3) Limitation on wages per year taken into account
The amount of the qualified first-year wages which may be taken into account with respect to any individual shall not exceed $6,000 per year ($12,000 per year in the case of any individual who is a qualified veteran by reason of subsection (d)(3)(A)(ii)(I), $14,000 per year in the case of any individual who is a qualified veteran by reason of subsection (d)(3)(A)(iv), and $24,000 per year in the case of any individual who is a qualified veteran by reason of subsection (d)(3)(A)(ii)(II)).
(c) Wages defined
For purposes of this subpart—
(1) In general
Except as otherwise provided in this subsection and subsection (h)(2), the term "wages" has the meaning given to such term by subsection (b) of section 3306 (determined without regard to any dollar limitation contained in such section).
(2) On-the-job training and work supplementation payments
(A) Exclusion for employers receiving on-the-job training payments
The term "wages" shall not include any amounts paid or incurred by an employer for any period to any individual for whom the employer receives federally funded payments for on-the-job training of such individual for such period.
(B) Reduction for work supplementation payments to employers
The amount of wages which would (but for this subparagraph) be qualified wages under this section for an employer with respect to an individual for a taxable year shall be reduced by an amount equal to the amount of the payments made to such employer (however utilized by such employer) with respect to such individual for such taxable year under a program established under section 482(e) 1 of the Social Security Act.
(3) Payments for services during labor disputes
If—
(A) the principal place of employment of an individual with the employer is at a plant or facility, and
(B) there is a strike or lockout involving employees at such plant or facility,
the term "wages" shall not include any amount paid or incurred by the employer to such individual for services which are the same as, or substantially similar to, those services performed by employees participating in, or affected by, the strike or lockout during the period of such strike or lockout.
(4) Termination
The term "wages" shall not include any amount paid or incurred to an individual who begins work for the employer after December 31, 2025.
(5) Coordination with payroll tax forgiveness
The term "wages" shall not include any amount paid or incurred to a qualified individual (as defined in section 3111(d)(3)) 1 during the 1-year period beginning on the hiring date of such individual by a qualified employer (as defined in section 3111(d)) 1 unless such qualified employer makes an election not to have section 3111(d) 1 apply.
(d) Members of targeted groups
For purposes of this subpart—
(1) In general
An individual is a member of a targeted group if such individual is—
(A) a qualified IV–A recipient,
(B) a qualified veteran,
(C) a qualified ex-felon,
(D) a designated community resident,
(E) a vocational rehabilitation referral,
(F) a qualified summer youth employee,
(G) a qualified supplemental nutrition assistance program benefits recipient,
(H) a qualified SSI recipient,
(I) a long-term family assistance recipient, or
(J) a qualified long-term unemployment recipient.
(2) Qualified IV–A recipient
(A) In general
The term "qualified IV–A recipient" means any individual who is certified by the designated local agency as being a member of a family receiving assistance under a IV–A program for any 9 months during the 18-month period ending on the hiring date.
(B) IV–A program
For purposes of this paragraph, the term "IV–A program" means any program providing assistance under a State program funded under part A of title IV of the Social Security Act and any successor of such program.
(3) Qualified veteran
(A) In general
The term "qualified veteran" means any veteran who is certified by the designated local agency as—
(i) being a member of a family receiving assistance under a supplemental nutrition assistance program under the Food and Nutrition Act of 2008 for at least a 3-month period ending during the 12-month period ending on the hiring date,
(ii) entitled to compensation for a service-connected disability, and—
(I) having a hiring date which is not more that 1 year after having been discharged or released from active duty in the Armed Forces of the United States, or
(II) having aggregate periods of unemployment during the 1-year period ending on the hiring date which equal or exceed 6 months,
(iii) having aggregate periods of unemployment during the 1-year period ending on the hiring date which equal or exceed 4 weeks (but less than 6 months), or
(iv) having aggregate periods of unemployment during the 1-year period ending on the hiring date which equal or exceed 6 months.
(B) Veteran
For purposes of subparagraph (A), the term "veteran" means any individual who is certified by the designated local agency as—
(i)(I) having served on active duty (other than active duty for training) in the Armed Forces of the United States for a period of more than 180 days, or
(II) having been discharged or released from active duty in the Armed Forces of the United States for a service-connected disability, and
(ii) not having any day during the 60-day period ending on the hiring date which was a day of extended active duty in the Armed Forces of the United States.
For purposes of clause (ii), the term "extended active duty" means a period of more than 90 days during which the individual was on active duty (other than active duty for training).
(C) Other definitions
For purposes of subparagraph (A), the terms "compensation" and "service-connected" have the meanings given such terms under
(4) Qualified ex-felon
The term "qualified ex-felon" means any individual who is certified by the designated local agency—
(A) as having been convicted of a felony under any statute of the United States or any State, and
(B) as having a hiring date which is not more than 1 year after the last date on which such individual was so convicted or was released from prison.
(5) Designated community residents
(A) In general
The term "designated community resident" means any individual who is certified by the designated local agency—
(i) as having attained age 18 but not age 40 on the hiring date, and
(ii) as having his principal place of abode within an empowerment zone, enterprise community, renewal community, or rural renewal county.
(B) Individual must continue to reside in zone, community, or county
In the case of a designated community resident, the term "qualified wages" shall not include wages paid or incurred for services performed while the individual's principal place of abode is outside an empowerment zone, enterprise community, renewal community, or rural renewal county.
(C) Rural renewal county
For purposes of this paragraph, the term "rural renewal county" means any county which—
(i) is outside a metropolitan statistical area (defined as such by the Office of Management and Budget), and
(ii) during the 5-year periods 1990 through 1994 and 1995 through 1999 had a net population loss.
(6) Vocational rehabilitation referral
The term "vocational rehabilitation referral" means any individual who is certified by the designated local agency as—
(A) having a physical or mental disability which, for such individual, constitutes or results in a substantial handicap to employment, and
(B) having been referred to the employer upon completion of (or while receiving) rehabilitative services pursuant to—
(i) an individualized written plan for employment under a State plan for vocational rehabilitation services approved under the Rehabilitation Act of 1973,
(ii) a program of vocational rehabilitation carried out under
(iii) an individual work plan developed and implemented by an employment network pursuant to subsection (g) of section 1148 of the Social Security Act with respect to which the requirements of such subsection are met.
(7) Qualified summer youth employee
(A) In general
The term "qualified summer youth employee" means any individual—
(i) who performs services for the employer between May 1 and September 15,
(ii) who is certified by the designated local agency as having attained age 16 but not 18 on the hiring date (or if later, on May 1 of the calendar year involved),
(iii) who has not been an employee of the employer during any period prior to the 90-day period described in subparagraph (B)(i), and
(iv) who is certified by the designated local agency as having his principal place of abode within an empowerment zone, enterprise community, or renewal community.
(B) Special rules for determining amount of credit
For purposes of applying this subpart to wages paid or incurred to any qualified summer youth employee—
(i) subsection (b)(2) shall be applied by substituting "any 90-day period between May 1 and September 15" for "the 1-year period beginning with the day the individual begins work for the employer", and
(ii) subsection (b)(3) shall be applied by substituting "$3,000" for "$6,000".
The preceding sentence shall not apply to an individual who, with respect to the same employer, is certified as a member of another targeted group after such individual has been a qualified summer youth employee.
(C) Youth must continue to reside in zone or community
Paragraph (5)(B) shall apply for purposes of subparagraph (A)(iv).
(8) Qualified supplemental nutrition assistance program benefits recipient
(A) In general
The term "qualified supplemental nutrition assistance program benefits recipient" means any individual who is certified by the designated local agency—
(i) as having attained age 18 but not age 40 on the hiring date, and
(ii) as being a member of a family—
(I) receiving assistance under a supplemental nutrition assistance program under the Food and Nutrition Act of 2008 for the 6-month period ending on the hiring date, or
(II) receiving such assistance for at least 3 months of the 5-month period ending on the hiring date, in the case of a member of a family who ceases to be eligible for such assistance under section 6(o) of the Food and Nutrition Act of 2008.
(B) Participation information
Notwithstanding any other provision of law, the Secretary of the Treasury and the Secretary of Agriculture shall enter into an agreement to provide information to designated local agencies with respect to participation in the supplemental nutrition assistance program.
(9) Qualified SSI recipient
The term "qualified SSI recipient" means any individual who is certified by the designated local agency as receiving supplemental security income benefits under title XVI of the Social Security Act (including supplemental security income benefits of the type described in section 1616 of such Act or section 212 of
(10) Long-term family assistance recipient
The term "long-term family assistance recipient" means any individual who is certified by the designated local agency—
(A) as being a member of a family receiving assistance under a IV–A program (as defined in paragraph (2)(B)) for at least the 18-month period ending on the hiring date,
(B)(i) as being a member of a family receiving such assistance for 18 months beginning after August 5, 1997, and
(ii) as having a hiring date which is not more than 2 years after the end of the earliest such 18-month period, or
(C)(i) as being a member of a family which ceased to be eligible for such assistance by reason of any limitation imposed by Federal or State law on the maximum period such assistance is payable to a family, and
(ii) as having a hiring date which is not more than 2 years after the date of such cessation.
(11) Hiring date
The term "hiring date" means the day the individual is hired by the employer.
(12) Designated local agency
The term "designated local agency" means a State employment security agency established in accordance with the Act of June 6, 1933, as amended (
(13) Special rules for certifications
(A) In general
An individual shall not be treated as a member of a targeted group unless—
(i) on or before the day on which such individual begins work for the employer, the employer has received a certification from a designated local agency that such individual is a member of a targeted group, or
(ii)(I) on or before the day the individual is offered employment with the employer, a pre-screening notice is completed by the employer with respect to such individual, and
(II) not later than the 28th day after the individual begins work for the employer, the employer submits such notice, signed by the employer and the individual under penalties of perjury, to the designated local agency as part of a written request for such a certification from such agency.
For purposes of this paragraph, the term "pre-screening notice" means a document (in such form as the Secretary shall prescribe) which contains information provided by the individual on the basis of which the employer believes that the individual is a member of a targeted group.
(B) Incorrect certifications
If—
(i) an individual has been certified by a designated local agency as a member of a targeted group, and
(ii) such certification is incorrect because it was based on false information provided by such individual,
the certification shall be revoked and wages paid by the employer after the date on which notice of revocation is received by the employer shall not be treated as qualified wages.
(C) Explanation of denial of request
If a designated local agency denies a request for certification of membership in a targeted group, such agency shall provide to the person making such request a written explanation of the reasons for such denial.
(D) Credit for unemployed veterans
(i) In general
Notwithstanding subparagraph (A), for purposes of paragraph (3)(A)—
(I) a veteran will be treated as certified by the designated local agency as having aggregate periods of unemployment meeting the requirements of clause (ii)(II) or (iv) of such paragraph (whichever is applicable) if such veteran is certified by such agency as being in receipt of unemployment compensation under State or Federal law for not less than 6 months during the 1-year period ending on the hiring date, and
(II) a veteran will be treated as certified by the designated local agency as having aggregate periods of unemployment meeting the requirements of clause (iii) of such paragraph if such veteran is certified by such agency as being in receipt of unemployment compensation under State or Federal law for not less than 4 weeks (but less than 6 months) during the 1-year period ending on the hiring date.
(ii) Regulatory authority
The Secretary may provide alternative methods for certification of a veteran as a qualified veteran described in clause (ii)(II), (iii), or (iv) of paragraph (3)(A), at the Secretary's discretion.
(14) Credit allowed for unemployed veterans and disconnected youth hired in 2009 or 2010
(A) In general
Any unemployed veteran or disconnected youth who begins work for the employer during 2009 or 2010 shall be treated as a member of a targeted group for purposes of this subpart.
(B) Definitions
For purposes of this paragraph—
(i) Unemployed veteran
The term "unemployed veteran" means any veteran (as defined in paragraph (3)(B), determined without regard to clause (ii) thereof) who is certified by the designated local agency as—
(I) having been discharged or released from active duty in the Armed Forces at any time during the 5-year period ending on the hiring date, and
(II) being in receipt of unemployment compensation under State or Federal law for not less than 4 weeks during the 1-year period ending on the hiring date.
(ii) Disconnected youth
The term "disconnected youth" means any individual who is certified by the designated local agency—
(I) as having attained age 16 but not age 25 on the hiring date,
(II) as not regularly attending any secondary, technical, or post-secondary school during the 6-month period preceding the hiring date,
(III) as not regularly employed during such 6-month period, and
(IV) as not readily employable by reason of lacking a sufficient number of basic skills.
(15) Qualified long-term unemployment recipient
The term "qualified long-term unemployment recipient" means any individual who is certified by the designated local agency as being in a period of unemployment which—
(A) is not less than 27 consecutive weeks, and
(B) includes a period in which the individual was receiving unemployment compensation under State or Federal law.
(e) Credit for second-year wages for employment of long-term family assistance recipients
(1) In general
With respect to the employment of a long-term family assistance recipient—
(A) the amount of the work opportunity credit determined under this section for the taxable year shall include 50 percent of the qualified second-year wages for such year, and
(B) in lieu of applying subsection (b)(3), the amount of the qualified first-year wages, and the amount of qualified second-year wages, which may be taken into account with respect to such a recipient shall not exceed $10,000 per year.
(2) Qualified second-year wages
For purposes of this subsection, the term "qualified second-year wages" means qualified wages—
(A) which are paid to a long-term family assistance recipient, and
(B) which are attributable to service rendered during the 1-year period beginning on the day after the last day of the 1-year period with respect to such recipient determined under subsection (b)(2).
(3) Special rules for agricultural and railway labor
If such recipient is an employee to whom subparagraph (A) or (B) of subsection (h)(1) applies, rules similar to the rules of such subparagraphs shall apply except that—
(A) such subparagraph (A) shall be applied by substituting "$10,000" for "$6,000", and
(B) such subparagraph (B) shall be applied by substituting "$833.33" for "$500".
(f) Remuneration must be for trade or business employment
(1) In general
For purposes of this subpart, remuneration paid by an employer to an employee during any taxable year shall be taken into account only if more than one-half of the remuneration so paid is for services performed in a trade or business of the employer.
(2) Special rule for certain determination
Any determination as to whether paragraph (1), or subparagraph (A) or (B) of subsection (h)(1), applies with respect to any employee for any taxable year shall be made without regard to subsections (a) and (b) of section 52.
(g) United States Employment Service to notify employers of availability of credit
The United States Employment Service, in consultation with the Internal Revenue Service, shall take such steps as may be necessary or appropriate to keep employers apprised of the availability of the work opportunity credit determined under this subpart.
(h) Special rules for agricultural labor and railway labor
For purposes of this subpart—
(1) Unemployment insurance wages
(A) Agricultural labor
If the services performed by any employee for an employer during more than one-half of any pay period (within the meaning of section 3306(d)) taken into account with respect to any year constitute agricultural labor (within the meaning of section 3306(k)), the term "unemployment insurance wages" means, with respect to the remuneration paid by the employer to such employee for such year, an amount equal to so much of such remuneration as constitutes "wages" within the meaning of section 3121(a), except that the contribution and benefit base for each calendar year shall be deemed to be $6,000.
(B) Railway labor
If more than one-half of remuneration paid by an employer to an employee during any year is remuneration for service described in section 3306(c)(9), the term "unemployment insurance wages" means, with respect to such employee for such year, an amount equal to so much of the remuneration paid to such employee during such year which would be subject to contributions under section 8(a) of the Railroad Unemployment Insurance Act (
(2) Wages
In any case to which subparagraph (A) or (B) of paragraph (1) applies, the term "wages" means unemployment insurance wages (determined without regard to any dollar limitation).
(i) Certain individuals ineligible
(1) Related individuals
No wages shall be taken into account under subsection (a) with respect to an individual who—
(A) bears any of the relationships described in subparagraphs (A) through (G) of section 152(d)(2) to the taxpayer, or, if the taxpayer is a corporation, to an individual who owns, directly or indirectly, more than 50 percent in value of the outstanding stock of the corporation, or, if the taxpayer is an entity other than a corporation, to any individual who owns, directly or indirectly, more than 50 percent of the capital and profits interests in the entity (determined with the application of section 267(c)),
(B) if the taxpayer is an estate or trust, is a grantor, beneficiary, or fiduciary of the estate or trust, or is an individual who bears any of the relationships described in subparagraphs (A) through (G) of section 152(d)(2) to a grantor, beneficiary, or fiduciary of the estate or trust, or
(C) is a dependent (described in section 152(d)(2)(H)) of the taxpayer, or, if the taxpayer is a corporation, of an individual described in subparagraph (A), or, if the taxpayer is an estate or trust, of a grantor, beneficiary, or fiduciary of the estate or trust.
(2) Nonqualifying rehires
No wages shall be taken into account under subsection (a) with respect to any individual if, prior to the hiring date of such individual, such individual had been employed by the employer at any time.
(3) Individuals not meeting minimum employment periods
(A) Reduction of credit for individuals performing fewer than 400 hours of service
In the case of an individual who has performed at least 120 hours, but less than 400 hours, of service for the employer, subsection (a) shall be applied by substituting "25 percent" for "40 percent".
(B) Denial of credit for individuals performing fewer than 120 hours of service
No wages shall be taken into account under subsection (a) with respect to any individual unless such individual has performed at least 120 hours of service for the employer.
(j) Election to have work opportunity credit not apply
(1) In general
A taxpayer may elect to have this section not apply for any taxable year.
(2) Time for making election
An election under paragraph (1) for any taxable year may be made (or revoked) at any time before the expiration of the 3-year period beginning on the last date prescribed by law for filing the return for such taxable year (determined without regard to extensions).
(3) Manner of making election
An election under paragraph (1) (or revocation thereof) shall be made in such manner as the Secretary may by regulations prescribe.
(k) Treatment of successor employers; treatment of employees performing services for other persons
(1) Treatment of successor employers
Under regulations prescribed by the Secretary, in the case of a successor employer referred to in section 3306(b)(1), the determination of the amount of the credit under this section with respect to wages paid by such successor employer shall be made in the same manner as if such wages were paid by the predecessor employer referred to in such section.
(2) Treatment of employees performing services for other persons
No credit shall be determined under this section with respect to remuneration paid by an employer to an employee for services performed by such employee for another person unless the amount reasonably expected to be received by the employer for such services from such other person exceeds the remuneration paid by the employer to such employee for such services.
(Added
Editorial Notes
References in Text
The Social Security Act, referred to in subsecs. (c)(2)(B) and (d)(2)(B), (6)(B)(iii), (9), is act Aug. 14, 1935, ch. 531,
Section 3111(d), referred to in subsec. (c)(5), was repealed by
The Food and Nutrition Act of 2008, referred to in subsec. (d)(3)(A)(i), (8)(A)(ii), is
The Rehabilitation Act of 1973, referred to in subsec. (d)(6)(B)(i), is
Section 212 of
Act of June 6, 1933, referred to in subsec. (d)(12), is act June 6, 1933, ch. 49,
Codification
Prior Provisions
A prior section 51, added
Amendments
2020—Subsec. (c)(4).
2019—Subsec. (c)(4).
2018—Subsec. (c)(4).
Subsec. (d)(3)(A)(ii)(II).
Subsec. (d)(8).
Subsec. (i)(1)(A).
2015—Subsec. (c)(4).
Subsec. (d)(1)(J).
Subsec. (d)(15).
2014—Subsec. (c)(4).
"(A) after December 31, 1994, and before October 1, 1996, or
"(B) after December 31, 2013".
2013—Subsec. (c)(4)(B).
"(i) December 31, 2012, in the case of a qualified veteran, and
"(ii) December 31, 2011, in the case of any other individual."
2011—Subsec. (b)(3).
Subsec. (c)(4)(B).
Subsec. (d)(3)(A)(iii), (iv).
Subsec. (d)(13)(D).
2010—Subsec. (c)(4)(B).
Subsec. (c)(5).
2009—Subsec. (d)(14).
2008—Subsec. (d)(1)(G).
Subsec. (d)(3)(A)(i).
Subsec. (d)(8)(A).
Subsec. (d)(8)(A)(ii)(I).
Subsec. (d)(8)(A)(ii)(II).
Subsec. (d)(8)(B).
2007—Subsec. (b)(3).
Subsec. (c)(4)(B).
Subsec. (d)(1)(D).
Subsec. (d)(3)(A).
Subsec. (d)(3)(C).
Subsec. (d)(5).
"(A)
"(i) as having attained age 18 but not age 25 on the hiring date, and
"(ii) as having his principal place of abode within an empowerment zone, enterprise community, or renewal community.
"(B)
Subsec. (d)(6)(B)(iii).
2006—Subsec. (c)(4)(B).
Subsec. (d)(1)(I).
Subsec. (d)(4).
"(C) as being a member of a family which had an income during the 6 months immediately preceding the earlier of the month in which such income determination occurs or the month in which the hiring date occurs, which, on an annual basis, would be 70 percent or less of the Bureau of Labor Statistics lower living standard.
Any determination under subparagraph (C) shall be valid for the 45-day period beginning on the date such determination is made."
Subsec. (d)(8)(A)(i).
Subsec. (d)(10) to (12).
Subsec. (d)(12)(A)(ii)(II).
Subsec. (d)(13).
Subsec. (e).
2004—Subsec. (c)(4)(B).
Subsec. (i)(1)(A), (B).
Subsec. (i)(1)(C).
2002—Subsec. (c)(4)(B).
2000—Subsec. (d)(2)(B).
Subsec. (d)(5)(A)(ii).
Subsec. (d)(5)(B).
Subsec. (d)(7)(A)(iv).
Subsec. (d)(7)(C).
1999—Subsec. (c)(4)(B).
Subsec. (i)(2).
1998—Subsec. (c)(4)(B).
Subsec. (d)(6)(B)(i).
1997—Subsec. (a).
Subsec. (c)(4)(B).
Subsec. (d)(1)(H).
Subsec. (d)(2)(A).
Subsec. (d)(3)(A).
"(i) a member of a family receiving assistance under a IV–A program (as defined in paragraph (2)(B)) for at least a 9-month period ending during the 12-month period ending on the hiring date, or
"(ii) a member of a family receiving assistance under a food stamp program under the Food Stamp Act of 1977 for at least a 3-month period ending during the 12-month period ending on the hiring date."
Subsec. (d)(9).
Subsec. (d)(10) to (12).
Subsec. (i)(3).
"(A) is employed by the employer at least 180 days (20 days in the case of a qualified summer youth employee), or
"(B) has completed at least 400 hours (120 hours in the case of a qualified summer youth employee) of services performed for the employer."
1996—Subsec. (a).
Subsec. (c)(1).
Subsec. (c)(4).
Subsec. (d).
Subsec. (d)(9).
Subsec. (g).
Subsec. (i)(3).
"(A) is employed by the employer at least 90 days (14 days in the case of an individual described in subsection (d)(12)), or
"(B) has completed at least 120 hours (20 hours in the case of an individual described in subsection (d)(12)) of services performed for the employer."
Subsec. (j).
1993—Subsec. (c)(4).
Subsec. (i)(1)(A).
1991—Subsec. (c)(4).
1990—Subsec. (c)(4).
1989—Subsec. (c)(4).
Subsec. (d)(16)(C).
1988—Subsec. (c)(2)(B).
Subsec. (c)(4).
Subsec. (d)(3)(B).
Subsec. (d)(12)(B).
1987—Subsec. (c)(3), (4).
1986—Subsec. (a).
"(1) 50 percent of the qualified first-year wages for such year, and
"(2) 25 percent of the qualified second-year wages for such year."
Subsec. (b)(3), (4).
Subsec. (c)(3).
Subsec. (d)(12)(B).
Subsec. (i)(3).
Subsec. (k).
1984—Subsec. (a).
Subsec. (b)(2).
Subsec. (c)(2).
Subsec. (c)(3).
Subsec. (d)(6)(B)(ii).
Subsec. (d)(11).
Subsec. (d)(12)(A)(ii).
Subsec. (d)(16)(A).
Subsec. (g).
Subsec. (j).
1983—Subsec. (d)(8)(D).
Subsec. (d)(9)(B).
Subsec. (d)(11).
1982—Subsec. (c)(3).
Subsec. (d)(1)(J).
Subsec. (d)(6)(B)(i)(II).
Subsec. (d)(10).
Subsec. (d)(12) to (15).
Subsec. (d)(16).
1981—Subsec. (c)(3), (4).
Subsec. (d)(1)(H), (I).
Subsec. (d)(3)(A)(ii).
Subsec. (d)(4).
Subsec. (d)(7)(B).
Subsec. (d)(8)(A)(iv).
Subsec. (d)(9), (10).
Subsec. (d)(11).
Subsec. (d)(12), (13).
Subsec. (d)(14).
Subsec. (d)(15).
Subsec. (e).
Subsec. (f).
Subsec. (g).
Subsec. (i).
1980—Subsec. (c)(1).
Subsec. (c)(2).
Subsec. (c)(4).
Subsec. (d)(1)(E).
Subsec. (d)(4)(A)(i).
Subsec. (d)(4)(B).
Subsec. (d)(5).
Subsec. (d)(8)(A).
Subsec. (d)(8)(D).
Subsec. (d)(12).
Subsec. (e).
1978—
Statutory Notes and Related Subsidiaries
Effective Date of 2020 Amendment
Effective Date of 2019 Amendment
Effective Date of 2015 Amendment
"(1)
"(2)
Effective Date of 2014 Amendment
Effective Date of 2013 Amendment
Effective Date of 2011 Amendment
Effective Date of 2010 Amendment
"(1)
"(2)
Effective Date of 2009 Amendment
Effective Date of 2008 Amendment
Amendment of this section and repeal of
Amendment by section 4002(b)(1)(A), (B), (D), (2)(O) of
Effective Date of 2007 Amendment
Effective Date of 2006 Amendment
"(1)
"(2)
Effective Date of 2004 Amendment
Amendment by section 207(5) of
Effective Date of 2002 Amendment
Effective Date of 2000 Amendment
Effective Date of 1999 Amendment
Effective Date of 1998 Amendment
Effective Date of 1997 Amendment
Effective Date of 1996 Amendment
Amendment by
Amendment by
Effective Date of 1993 Amendment
Effective Date of 1991 Amendment
Effective Date of 1990 Amendment
"(1)
"(2)
Effective Date of 1989 Amendment
Effective Date of 1988 Amendment
Amendment by section 1017(a) of
Amendment by
Effective Date of 1987 Amendment
Effective Date of 1986 Amendment
Amendment by section 1878(f)(1) of
Effective Date of 1984 Amendment
Amendment by section 474(p)(1)–(3) of
Amendment by section 712 of
"(A)
"(B)
Amendment by section 2663 of
Effective Date of 1983 Amendment
Amendment by title I of
Effective Date of 1982 Amendment
"(1)
"(2)
Effective Date of 1981 Amendment
"(1)
"(A)
"(B)
"(C)
"(D)
"(2)
"(A)
"(B)
"(C)
"(3)
Effective Date of 1980 Amendment
Amendment by
Effective Date of 1978 Amendment
Effective Date
Returning Heroes and Wounded Warriors Work Opportunity Tax Credits; Treatment of Possessions of United States
"(1)
"(A)
"(B)
"(2)
"(3)
"(A)
"(B)
"(C)
Reference to Plan for Employment
Authorization of Appropriations
"(A) $5,000,000 shall be used to test whether individuals certified as members of targeted groups under section 51 of such Code are eligible for such certification (including the use of statistical sampling techniques), and
"(B) the remainder shall be distributed under performance standards prescribed by the Secretary of Labor.
The Secretary of Labor shall each calendar year beginning with calendar year 1983 report to the Committee on Ways and Means of the House of Representatives and to the Committee on Finance of the Senate with respect to the results of the testing conducted under subparagraph (A) during the preceding calendar year."
[For termination, effective May 15, 2000, of reporting provisions in section 261(f)(2) of
[Amendment by
Plan Amendments Not Required Until January 1, 1989
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101–1147 and 1171–1177] or title XVIII [§§1800–1899A] of
Special Rules for Newly Targeted Groups
"(A)
"(i) such individual shall be taken into account for purposes of the credit allowable by section 44B of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] only if such individual is first hired by the employer after September 26, 1978, and
"(ii) such individual shall be treated for purposes of such credit as having first begun work for the employer not earlier than January 1, 1979.
"(i) such individual meets the requirements of paragraph (1) of section 51(d) of such Code, and
"(ii) in the case of an individual meeting the requirements of subparagraph (A) of such paragraph (1), a credit was not claimed for such individual by the taxpayer for a taxable year beginning before January 1, 1979."
Credit Allowable by Section 44B in Case of Taxable Year Beginning in 1978 and Ending After December 31, 1978
"(A) the amount of the credit which would be so determined without regard to the amendments made by this section, plus
"(B) the amount of the credit which would be so determined by reason of the amendments made by this section."
1 See References in Text note below.
[§51A. Repealed. Pub. L. 109–432, div. A, title I, §105(e)(4)(A), Dec. 20, 2006, 120 Stat. 2937 ]
Section, added
Statutory Notes and Related Subsidiaries
Effective Date of Repeal
Repeal applicable to individuals who begin work for the employer after Dec. 31, 2006, see section 105(f)(2) of
§52. Special rules
(a) Controlled group of corporations
For purposes of this subpart, all employees of all corporations which are members of the same controlled group of corporations shall be treated as employed by a single employer. In any such case, the credit (if any) determined under section 51(a) with respect to each such member shall be its proportionate share of the wages giving rise to such credit. For purposes of this subsection, the term "controlled group of corporations" has the meaning given to such term by section 1563(a), except that—
(1) "more than 50 percent" shall be substituted for "at least 80 percent" each place it appears in section 1563(a)(1), and
(2) the determination shall be made without regard to subsections (a)(4) and (e)(3)(C) of section 1563.
(b) Employees of partnerships, proprietorships, etc., which are under common control
For purposes of this subpart, under regulations prescribed by the Secretary—
(1) all employees of trades or business (whether or not incorporated) which are under common control shall be treated as employed by a single employer, and
(2) the credit (if any) determined under section 51(a) with respect to each trade or business shall be its proportionate share of the wages giving rise to such credit.
The regulations prescribed under this subsection shall be based on principles similar to the principles which apply in the case of subsection (a).
(c) Tax-exempt organizations
(1) In general
No credit shall be allowed under section 38 for any work opportunity credit determined under this subpart to any organization (other than a cooperative described in section 521) which is exempt from income tax under this chapter.
(2) Credit made available to qualified tax-exempt organizations employing qualified veterans
For credit against payroll taxes for employment of qualified veterans by qualified tax-exempt organizations, see section 3111(e).
(d) Estates and trusts
In the case of an estate or trust—
(1) the amount of the credit determined under this subpart for any taxable year shall be apportioned between the estate or trust and the beneficiaries on the basis of the income of the estate or trust allocable to each, and
(2) any beneficiary to whom any amount has been apportioned under paragraph (1) shall be allowed, subject to section 38(c), a credit under section 38(a) for such amount.
(e) Limitations with respect to certain persons
Under regulations prescribed by the Secretary, in the case of—
(1) a regulated investment company or a real estate investment trust subject to taxation under subchapter M (section 851 and following), and
(2) a cooperative organization described in section 1381(a),
rules similar to the rules provided in subsections (e) and (h) of section 46 (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990) shall apply in determining the amount of the credit under this subpart.
(Added
Editorial Notes
References in Text
The date of the enactment of the Revenue Reconciliation Act of 1990, referred to in subsec. (e), is the date of enactment of
Amendments
2011—Subsec. (c).
1997—Subsec. (c).
1996—Subsec. (e)(1) to (3).
1990—Subsec. (e).
1984—Subsec. (a).
Subsec. (b)(2).
Subsec. (c).
Subsec. (d)(2).
1982—Subsecs. (d) to (f).
1980—Subsec. (f).
1978—Subsecs. (a), (b).
Subsecs. (c), (d).
Subsec. (e).
Subsecs. (f) to (h).
Subsec. (i).
Subsec. (j).
Statutory Notes and Related Subsidiaries
Effective Date of 2011 Amendment
Amendment by
Effective Date of 1997 Amendment
Amendment by
Effective Date of 1996 Amendment
Amendment by
Effective Date of 1990 Amendment
Amendment by
Effective Date of 1984 Amendment
Amendment by
Effective Date of 1982 Amendment
Amendment by
Effective Date of 1980 Amendment
Amendment by
Effective Date of 1978 Amendment
Amendment by
Effective Date
Section applicable to taxable years beginning after Dec. 31, 1976, and to credit carrybacks from such years, see section 202(e) of
Savings Provision
For provisions that nothing in amendment by
Subpart G—Credit Against Regular Tax for Prior Year Minimum Tax Liability
§53. Credit for prior year minimum tax liability
(a) Allowance of credit
There shall be allowed as a credit against the tax imposed by this chapter for any taxable year an amount equal to the minimum tax credit for such taxable year.
(b) Minimum tax credit
For purposes of subsection (a), the minimum tax credit for any taxable year is the excess (if any) of—
(1) the adjusted net minimum tax imposed for all prior taxable years beginning after 1986, over
(2) the amount allowable as a credit under subsection (a) for such prior taxable years.
(c) Limitation
The credit allowable under subsection (a) for any taxable year shall not exceed the excess (if any) of—
(1) the regular tax liability of the taxpayer for such taxable year reduced by the sum of the credits allowable under subparts A, B, D, E, and F of this part, over
(2) the tentative minimum tax for the taxable year.
(d) Definitions
For purposes of this section—
(1) Net minimum tax
(A) In general
The term "net minimum tax" means the tax imposed by section 55.
(B) Credit not allowed for exclusion preferences
(i) Adjusted net minimum tax
The adjusted net minimum tax for any taxable year is—
(I) the amount of the net minimum tax for such taxable year, reduced by
(II) the amount which would be the net minimum tax for such taxable year if the only adjustments and items of tax preference taken into account were those specified in clause (ii).
(ii) Specified items
The following are specified in this clause—
(I) the adjustments provided for in subsection (b)(1) of section 56, and
(II) the items of tax preference described in paragraphs (1), (5), and (7) of section 57(a).
(iii) Credit allowable for exclusion preferences of corporations
In the case of a corporation—
(I) the preceding provisions of this subparagraph shall not apply, and
(II) the adjusted net minimum tax for any taxable year is the amount of the net minimum tax for such year.
(2) Tentative minimum tax
The term "tentative minimum tax" has the meaning given to such term by section 55(b).
(e) Application to applicable corporations
In the case of a corporation—
(1) subsection (b)(1) shall be applied by substituting "the net minimum tax for all prior taxable years beginning after 2022" for "the adjusted net minimum tax imposed for all prior taxable years beginning after 1986", and
(2) the amount determined under subsection (c)(1) shall be increased by the amount of tax imposed under section 59A for the taxable year.
(Added
Editorial Notes
Prior Provisions
A prior section 53, added
Amendments
2022—Subsec. (d)(2).
Subsec. (d)(3).
Subsec. (e).
2020—Subsec. (e)(1).
Subsec. (e)(2).
Subsec. (e)(5).
2017—Subsec. (d)(2).
Subsec. (d)(3).
Subsec. (e).
2014—Subsecs. (e), (f).
2009—Subsec. (d)(1)(B)(iii).
Subsec. (d)(1)(B)(iii)(II).
Subsec. (d)(1)(B)(iv).
2008—Subsec. (e)(2).
Subsec. (f).
2007—Subsec. (e)(2)(A).
"(i) the lesser of—
"(I) $5,000, or
"(II) the amount of long-term unused minimum tax credit for such taxable year, or
"(ii) 20 percent of the amount of such credit."
2006—Subsec. (e).
2005—Subsec. (d)(1)(B)(iii).
2004—Subsec. (d)(1)(B)(i)(II).
1996—Subsec. (d)(1)(B)(iii).
Subsec. (d)(1)(B)(iv)(II).
1993—Subsec. (d)(1)(B)(ii)(II).
1992—Subsec. (d)(1)(B)(iii).
1989—Subsec. (d)(1)(B)(i)(II).
Subsec. (d)(1)(B)(ii).
Subsec. (d)(1)(B)(iii).
Subsec. (d)(1)(B)(iv).
1988—Subsec. (d)(1)(B)(ii).
Subsec. (d)(1)(B)(iii).
Statutory Notes and Related Subsidiaries
Effective Date of 2022 Amendment
Amendment by
Effective Date of 2020 Amendment
Effective Date of 2017 Amendment
Amendment by section 12001(b)(2) of
"(1)
"(2)
Effective Date of 2014 Amendment
Amendment by
Effective Date of 2009 Amendment
Amendment by
Effective Date of 2008 Amendment
"(1)
"(2)
Effective Date of 2007 Amendment
Effective Date of 2006 Amendment
Effective Date of 2005 Amendment
Amendment by
Effective Date of 2004 Amendment
Effective Date of 1996 Amendment
Amendment by section 1205(d)(5) of
Effective Date of 1993 Amendment
Effective Date of 1992 Amendment
Effective Date of 1989 Amendment
Amendment by section 7811(d)(2) of
Effective Date of 1988 Amendment
Amendment by section 1007(g)(4) of
Effective Date
Section applicable to taxable years beginning after Dec. 31, 1986, with certain exceptions and qualifications, see section 701(f) of
Applicability of Certain Amendments by Pub. L. 99–514 in Relation to Treaty Obligations of United States
For applicability of amendment by section 701(b) of
Construction
Special Rule
"(1)
"(2)
"(A)
"(i) be verified in the same manner as an application under section 6411(a) of such Code,
"(ii) be filed prior to December 31, 2020, and
"(iii) set forth—
"(I) the amount of the refundable credit claimed under section 53(e) of such Code for such taxable year,
"(II) the amount of the refundable credit claimed under such section for any previously filed return for such taxable year, and
"(III) the amount of the refund claimed.
"(B)
"(i) review the application,
"(ii) determine the amount of the overpayment, and
"(iii) apply, credit, or refund such overpayment,
in a manner similar to the manner provided in section 6411(b) of the Internal Revenue Code of 1986.
"(C)
[Subpart H—Repealed]
[§54. Repealed. Pub. L. 115–97, title I, §13404(a), Dec. 22, 2017, 131 Stat. 2138 ]
Section, added
Statutory Notes and Related Subsidiaries
Effective Date of Repeal
Regulations
[Subpart I—Repealed]
[§§54A to 54F. Repealed. Pub. L. 115–97, title I, §13404(a), Dec. 22, 2017, 131 Stat. 2138 ]
Section 54A, added
Section 54B, added
Section 54C, added
Section 54D, added
Section 54E, added
Section 54F, added
Statutory Notes and Related Subsidiaries
Effective Date of Repeal
Repeal applicable to bonds issued after Dec. 31, 2017, see section 13404(d) of
[Subpart J—Repealed]
[§54AA. Repealed. Pub. L. 115–97, title I, §13404(a), Dec. 22, 2017, 131 Stat. 2138 ]
Section, added
Statutory Notes and Related Subsidiaries
Effective Date of Repeal
Repeal applicable to bonds issued after Dec. 31, 2017, see section 13404(d) of