General business credit
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 business credit carryforwards carried to such taxable year,
the amount of the current year business credit, plus
the business credit carrybacks carried to such taxable year.
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:
the investment credit determined under section 46,
the work opportunity credit determined under section 51(a),
the alcohol fuels credit determined under section 40(a),
the research credit determined under section 41(a),
the low-income housing credit determined under section 42(a),
the enhanced oil recovery credit under section 43(a),
in the case of an eligible small business (as defined in section 44(b)), the disabled access credit determined under section 44(a),
the renewable electricity production credit under section 45(a),
the empowerment zone employment credit determined under section 1396(a),
the Indian employment credit as determined under section 45A(a),
the employer social security credit determined under section 45B(a),
the orphan drug credit determined under section 45C(a),
the new markets tax credit determined under section 45D(a),
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),
the employer-provided child care credit determined under section 45F(a),
the railroad track maintenance credit determined under section 45G(a),
the biodiesel fuels credit determined under section 40A(a),
the low sulfur diesel fuel production credit determined under section 45H(a),
the marginal oil and gas well production credit determined under section 45I(a),
the distilled spirits credit determined under section 5011(a),
the advanced nuclear power facility production credit determined under section 45J(a),
the nonconventional source production credit determined under section 45K(a),
the new energy efficient home credit determined under section 45L(a),
the energy efficient appliance credit determined under section 45M(a),
the portion of the alternative motor vehicle credit to which section 30B(g)(1) applies,
the portion of the alternative fuel vehicle refueling property credit to which section 30C(d)(1) applies,
the Hurricane Katrina housing credit determined under section 1400P(b),
the Hurricane Katrina employee retention credit determined under section 1400R(a),
the Hurricane Rita employee retention credit determined under section 1400R(b),
the Hurricane Wilma employee retention credit determined under section 1400R(c),
the mine rescue team training credit determined under section 45N(a),
in the case of an eligible agricultural business (as defined in section 45O(e)), the agricultural chemicals security credit determined under section 45O(a),
the differential wage payment credit determined under section 45P(a),
the carbon dioxide sequestration credit determined under section 45Q(a) 1
the portion of the new qualified plug-in electric drive motor vehicle credit to which section 30D(c)(1) applies, plus
the small employer health insurance credit determined under section 45R.
Limitation based on amount of tax
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—
the tentative minimum tax for the taxable year, or
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.
Empowerment zone employment credit may offset 25 percent of minimum tax
In general
In the case of the empowerment zone employment credit—
this section and section 39 shall be applied separately with respect to such credit, and
for purposes of applying paragraph (1) to such credit—
75 percent of the tentative minimum tax shall be substituted for the tentative minimum tax under subparagraph (A) thereof, and
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, the New York Liberty Zone business employee credit, the eligible small business credits, and the specified credits).
Empowerment zone employment credit
Special rules for New York Liberty Zone business employee credit
In general
In the case of the New York Liberty Zone business employee credit—
this section and section 39 shall be applied separately with respect to such credit, and
in applying paragraph (1) to such credit—
the tentative minimum tax shall be treated as being zero, and
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 New York Liberty Zone business employee credit, the eligible small business credits, and the specified credits).
New York Liberty Zone business employee credit
Special rules for specified credits
In general
In the case of specified credits—
this section and section 39 shall be applied separately with respect to such credits, and
in applying paragraph (1) to such credits—
the tentative minimum tax shall be treated as being zero, and
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 eligible small business credits and the specified credits).
Specified credits
For purposes of this subsection, the term “specified credits” means—
for taxable years beginning after
the credit determined under section 41 for the taxable year with respect to an eligible small business (as defined in paragraph (5)(C), after application of rules similar to the rules of paragraph (5)(D)),
the credit determined under section 42 to the extent attributable to buildings placed in service after
the credit determined under section 45 to the extent that such credit is attributable to electricity or refined coal produced—
at a facility which is originally placed in service after the date of the enactment of this paragraph, and
during the 4-year period beginning on the date that such facility was originally placed in service,
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),
the credit determined under section 45B,
the credit determined under section 45G,
the credit determined under section 45R,
the credit determined under section 46 to the extent that such credit is attributable to the energy credit determined under section 48,
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
the credit determined under section 51.
Special rules for eligible small business credits in 2010
In general
In the case of eligible small business credits determined in taxable years beginning in 2010—
this section and section 39 shall be applied separately with respect to such credits, and
in applying paragraph (1) to such credits—
the tentative minimum tax shall be treated as being zero, and
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 eligible small business credits).
Eligible small business credits
Eligible small business
For purposes of this subsection, the term “eligible small business” means, with respect to any taxable year—
a corporation the stock of which is not publicly traded,
a partnership, or
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.
Treatment of partners and S corporation shareholders
Special rules
Married individuals
Controlled groups
Limitations with respect to certain persons
Estates and trusts
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—
In general
Components of investment credit
Source
(Added and amended Pub. L. 98–369, div. A, title IV, § 473, title VI, § 612(e)(1),Notes
References in Text
Codification
Prior Provisions
Amendments
Effective Date of 2015 Amendment
Extension.—
The amendments made by subsection (a) [amending sections 41 and 45C of this title] shall apply to shall apply to [sic] amounts paid or incurred after
Credit allowed against alternative minimum tax in case of eligible small business.—
The amendments made by subsection (b) [amending this section] shall apply to credits determined for taxable years beginning after
Treatment of research credit for certain startup companies.—
The amendments made by subsection (c) [amending sections 41 and 3111 of this title] shall apply to taxable years beginning after
Effective Date of 2014 Amendment
Effective Date of 2010 Amendment
In general.—
The amendments made by this section [enacting section 45R of this title and amending this section and sections 196 and 280C of this title] shall apply to amounts paid or incurred in taxable years beginning after
Minimum tax.—
The amendments made by subsection (c) [amending this section] shall apply to credits determined under section 45R of the Internal Revenue Code of 1986 in taxable years beginning after
Effective Date of 2009 Amendment
Effective Date of 2008 Amendment
Low income housing credit.—
The amendments made by subsection (b) [amending this section] shall apply to credits determined under section 42 of the Internal Revenue Code of 1986 to the extent attributable to buildings placed in service after
Rehabilitation credit.—
The amendments made by subsection (c) [amending this section] shall apply to credits determined under section 47 of the Internal Revenue Code of 1986 to the extent attributable to qualified rehabilitation expenditures properly taken into account for periods after
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
Effective Date of 2000 Amendment
Effective Date of 1996 Amendment
Effective Date of 1993 Amendment
Effective Date of 1992 Amendment
Effective Date of 1990 Amendment
In general.—
Except as provided in paragraph (2), the amendments made by this section [enacting section 44 of this title and amending this section and sections 39 and 190 of this title] shall apply to expenditures paid or incurred after the date of the enactment of this Act [
Subsection (c).—
The amendment made by subsection (c) [amending section 190 of this title] shall apply to taxable years beginning after the date of the enactment of this Act.”
Effective Date of 1988 Amendment
Effective Date of 1986 Amendment
In general.—
Except as provided in paragraph (2), the amendments made by this section [amending this section and sections 56, 108, 401, and 404 of this title and repealing sections 41 and 6699 of this title] shall apply to compensation paid or accrued after
Sections 404(i) and 6699 to continue to apply to pre-1987 credits.—
The provisions of sections 404(i) and 6699 of the Internal Revenue Code of 1986 shall continue to apply with respect to credits under section 41 of such Code attributable to compensation paid or accrued before
Effective Date of 1984 Amendment
Effective Date
Savings Provision
Business Credit for Retention of Certain Newly Hired Individuals in 2010
In General.—
In the case of any taxable year ending after the date of the enactment of this Act [
$1,000, or
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).
Retained Worker.—
For purposes of this section, the term ‘retained worker’ means any qualified individual (as defined in section 3111(d)(3) or section 3221(c)(3) of the Internal Revenue Code of 1986)—
who was employed by the taxpayer on any date during the taxable year,
who was so employed by the taxpayer for a period of not less than 52 consecutive weeks, and
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.
Limitation on Carrybacks.—
No portion of the unused business credit under section 38 of the Internal Revenue Code of 1986 for any taxable year which is attributable to the increase in the current year business credit under this section may be carried to a taxable year beginning before the date of the enactment of this section [
Treatment of Possessions.—
Payments to possessions.—
Mirror code possessions.—
The Secretary of the Treasury shall pay to each possession of the United States with a mirror code tax system amounts equal to the loss to that possession by reason of the application of this section (other than this subsection). Such amounts shall be determined by the Secretary of the Treasury based on information provided by the government of the respective possession.
Other possessions.—
The Secretary of the Treasury shall pay to each possession of the United States which does not have a mirror code tax system amounts estimated by the Secretary of the Treasury as being equal to the aggregate benefits that would have been provided to residents of such possession by reason of the application of this section (other than this subsection) if a mirror code tax system had been in effect in such possession. The preceding sentence shall not apply with respect to any possession of the United States unless such possession has a plan, which has been approved by the Secretary of the Treasury, under which such possession will promptly distribute such payments to the residents of such possession.
Coordination with credit allowed against united states income taxes.—
No increase in the credit determined under section 38(b) of the Internal Revenue Code of 1986 against United States income taxes for any taxable year determined under subsection (a) shall be taken into account with respect to any person—
to whom a credit is allowed against taxes imposed by the possession by reason of this section for such taxable year, or
who is eligible for a payment under a plan described in paragraph (1)(B) with respect to such taxable year.
Definitions and special rules.—
Possession of the united states.—
For purposes of this subsection, the term ‘possession of the United States’ includes the Commonwealth of Puerto Rico and the Commonwealth of the Northern Mariana Islands.
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.
Treatment of payments.—
For purposes of section 1324(b)(2) of title 31, United States Code, rules similar to the rules of section 1001(b)(3)(C) of the American Recovery and Reinvestment Tax Act of 2009 [section 1001(b)(3)(C) of Pub. L. 111–5, formerly set out as a note under section 36A of this title] shall apply.”
Credit for Contributions to Certain Community Development Corporations
In General.—
For purposes of section 38 of the Internal Revenue Code of 1986, the current year business credit shall include the credit determined under this section.
Determination of Credit.—
The credit determined under this section for each taxable year in the credit period with respect to any qualified CDC contribution made by the taxpayer is an amount equal to 5 percent of such contribution.
Credit Period.—
For purposes of this section, the credit period with respect to any qualified CDC contribution is the period of 10 taxable years beginning with the taxable year during which such contribution was made.
Qualified CDC Contribution.—
For purposes of this section—
In general.—
The term ‘qualified CDC contribution’ means any transfer of cash—
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,
the amount of which is available for use by such corporation for at least 10 years,
which is to be used by such corporation for qualified low-income assistance within its operational area, and
which is designated by such corporation for purposes of this section.
Limitations on amount designated.—
The aggregate amount of contributions to a selected community development corporation which may be designated by such corporation shall not exceed $2,000,000.
Selected Community Development Corporations.—
In general.—
For purposes of this section, the term ‘selected community development corporation’ means any corporation—
which is described in section 501(c)(3) of such Code and exempt from tax under section 501(a) of such Code,
the principal purposes of which include promoting employment of, and business opportunities for, low-income individuals who are residents of the operational area, and
which is selected by the Secretary of Housing and Urban Development for purposes of this section.
Only 20 corporations may be selected.—
The Secretary of Housing and Urban Development may select 20 corporations for purposes of this section, subject to the availability of eligible corporations. Such selections may be made only before
Operational areas must have certain characteristics.—
A corporation may be selected for purposes of this section only if its operational area meets the following criteria:
The area meets the size requirements under section 1392(a)(3).
The unemployment rate (as determined by the appropriate available data) is not less than the national unemployment rate.
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.
Qualified Low-Income Assistance.—
For purposes of this section, the term ‘qualified low-income assistance’ means assistance—
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
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
Effective 15-Year Carryback of Existing Carryforwards of Steel Companies
General Rule.—
If a qualified corporation makes an election under this section for its 1st taxable year beginning after
Amount.—
For purposes of subsection (a), the amount determined under this subsection shall be the lesser of—
50 percent of the portion of the corporation’s existing carryforwards to which the election under subsection (a) applies, or
the corporation’s net tax liability for the carryback period.
Corporation Making Election May Not Use Same Amounts Under Section 38.—
In the case of a qualified corporation which makes an election under subsection (a), the portion of such corporation’s existing carryforwards to which such an election applies shall not be taken into account under section 38 of the Internal Revenue Code of 1986 for any taxable year beginning after
Net Tax Liability for Carryback Period.—
For purposes of this section—
In general.—
A corporation’s net tax liability for the carryback period is the aggregate of such corporation’s net tax liability for taxable years in the carryback period.
Net tax liability.—
The term ‘net tax liability’ means, with respect to any taxable year, the amount of the tax imposed by chapter 1 of the Internal Revenue Code of 1954 [now 1986] for such taxable year, reduced by the sum of the credits allowable under part IV of subchapter A of such chapter 1 (other than section 34 thereof). For purposes of the preceding sentence, any tax treated as not imposed by chapter 1 of such Code under section 26(b)(2) of such Code shall not be treated as tax imposed by such chapter 1.
Carryback period.—
The term ‘carryback period’ means the period—
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
which ends with the corporation’s last taxable year beginning before
No Recomputation of Minimum Tax, Etc.—
Nothing in this section shall be construed to affect—
the amount of the tax imposed by section 56 of the Internal Revenue Code of 1986, or
the amount of any credit allowable under such Code,
for any taxable year in the carryback period.
Reinvestment Requirement.—
In general.—
Any amount determined under this section must be committed to reinvestment in, and modernization of the steel industry through investment in modern plant and equipment, research and development, and other appropriate projects, such as working capital for steel operations and programs for the retraining of steel workers.
Special rule.—
In the case of the LTV Corporation, in lieu of the requirements of paragraph (1)—
such corporation shall place such refund in a separate account; and
amounts in such separate account—
shall only be used by the corporation—
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
directly in connection with the trade or business of the corporation in the manufacturer or production of steel; and
shall be used (or obligated) for purposes described in clause (i) not later than 3 months after the corporation receives the refund.
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 title 11, United States Code.
Definitions.—
For purposes of this section—
Qualified corporation.—
In general.—
The term ‘qualified corporation’ means any corporation which is described in section 806(b) of the Steel Import Stabilization Act [19 U.S.C. 2253 note] and a company which was incorporated on
Certain predecessors included.—
In the case of any qualified corporation which has carryforward attributable to a predecessor corporation described in such section 806(b), the qualified corporation and the predecessor corporation shall be treated as 1 corporation for purposes of subsections (d) and (e).
Existing carryforwards.—
The term ‘existing carryforward’ means the aggregate of the amounts which—
are unused business credit carryforwards to the taxpayer’s 1st taxable year beginning after
are attributable to the amount of the regular investment credit determined for periods before
Special rule for restructuring.—
In the case of any corporation, any restructuring shall not limit, increase, or otherwise affect the benefits which would have been available under this section but for such restructuring.
Tentative Refunds.—
Rules similar to the rules of section 6425 of the Internal Revenue Code of 1986 shall apply to any overpayment resulting from the application of this section.”
Effective 15-Year Carryback of Existing Carryforwards of Qualified Farmers
General Rule.—
If a taxpayer who is a qualified farmer makes an election under this section for its 1st taxable year beginning after
Amount.—
For purposes of subsection (a), the amount determined under this subsection shall be equal to the smallest of—
50 percent of the portion of the taxpayer’s existing carryforwards to which the election under subsection (a) applies,
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
$750.
Taxpayer Making Election May Not Use Same Amounts Under Section 38.—
In the case of a qualified farmer who makes an election under subsection (a), the portion of such farmer’s existing carryforwards to which such an election applies shall not be taken into account under section 38 of the Internal Revenue Code of 1986 for any taxable year beginning after
No Recomputation of Minimum Tax, Etc.—
Nothing in this section shall be construed to affect—
the amount of the tax imposed by section 56 of the Internal Revenue Code of 1954 [now 1986], or
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]).
Definitions and Special Rules.—
For purposes of this section—
Qualified farmer.—
The term ‘qualified farmer’ means any taxpayer who, during the 3-taxable year period preceding the taxable year for which an election is made under subsection (a), derived 50 percent or more of the taxpayer’s gross income from the trade or business of farming.
Existing carryforward.—
The term ‘existing carryforward’ means the aggregate of the amounts which—
are unused business credit carryforwards to the taxpayer’s 1st taxable year beginning after
are attributable to the amount of the investment credit determined for periods before
Farming.—
The term ‘farming’ has the meaning given such term by section 2032A(e)(4) and (5) of such Code.”
Treatment of Investment Tax Credits With Respect to Certain Public Utilities
Plan Amendments Not Required Until January 1, 1989
Transition Rules
Section 1171.—
The amendments made by section 1171 [amending this section and sections 56, 108, 401, and 404 of this title and repealing sections 41 and 6699 of this title] shall not apply in the case of a tax credit employee stock ownership plan if—
such plan was favorably approved on
not later than
Subtitle Not To Apply to Certain Newspaper.—
The amendments made by section 1175 [amending section 401 of this title] shall not apply to any daily newspaper—
which was first published on
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
In general.—
It was the intent of Congress in enacting, in the Revenue Act of 1962 [see Short Title of 1962 Amendment note set out under section 1 of this title], the investment credit allowed by section 38 of the Internal Revenue Code of 1986 [formerly I.R.C. 1954], and it is the intent of the Congress in restoring that credit in this Act [section 50 of this title], to provide an incentive for modernization and growth of private industry. Accordingly, notwithstanding any other provision of law, on and after the date of the enactment of this Act [
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
a taxpayer shall disclose, in any such report, the method of accounting for such credit used by him for purposes of such report.
Exceptions.—
Paragraph (1) shall not apply to taxpayers who are subject to the provisions of section 46(e) of the Internal Revenue Code of 1986 (as added by section 105(c) of this Act) or to section 203(e) of the Revenue Act of 1964 (as modified by section 105(e) of this Act) [set out as note below].”
Treatment of Investment Credit by Federal Regulatory Agencies
“It was the intent of the Congress in providing an investment credit under section 38 of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] and it is the intent of the Congress in repealing the reduction in basis required by section 48(g) of such Code to provide an incentive for modernization and growth of private industry (including that portion thereof which is regulated). Accordingly, Congress does not intend that any agency or instrumentality of the United States having jurisdiction with respect to a taxpayer shall, without the consent of the taxpayer, use—
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
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.”