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.