PART IV—CREDITS AGAINST TAX
Amendments
1990—
1984—
1977—
1971—
Part Referred to in Other Sections
This part is referred to in
Subpart A—Nonrefundable Personal Credits
Amendments
1990—
1986—
1984—
1983—
1982—
1981—
1980—
1978—
1977—
1976—
1975—
1971—
1970—
1965—
1964—
1962—
Subpart Referred to in Other Sections
This subpart is referred to in
§21. Expenses for household and dependent care services necessary for gainful employment
(a) Allowance of credit
(1) In general
In the case of an individual who maintains a household which includes as a member one or more qualifying individuals (as defined in subsection (b)(1)), there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the applicable percentage of the employment-related expenses (as defined in subsection (b)(2)) paid by such individual during the taxable year.
(2) Applicable percentage defined
For purposes of paragraph (1), the term "applicable percentage" means 30 percent reduced (but not below 20 percent) by 1 percentage point for each $2,000 (or fraction thereof) by which the taxpayer's adjusted gross income for the taxable year exceeds $10,000.
(b) Definitions of qualifying individual and employment-related expenses
For purposes of this section—
(1) Qualifying individual
The term "qualifying individual" means—
(A) a dependent of the taxpayer who is under the age of 13 and with respect to whom the taxpayer is entitled to a deduction under section 151(c),
(B) a dependent of the taxpayer who is physically or mentally incapable of caring for himself, or
(C) the spouse of the taxpayer, if he is physically or mentally incapable of caring for himself.
(2) Employment-related expenses
(A) In general
The term "employment-related expenses" means amounts paid for the following expenses, but only if such expenses are incurred to enable the taxpayer to be gainfully employed for any period for which there are 1 or more qualifying individuals with respect to the taxpayer:
(i) expenses for household services, and
(ii) expenses for the care of a qualifying individual.
Such term shall not include any amount paid for services outside the taxpayer's household at a camp where the qualifying individual stays overnight.
(B) Exception
Employment-related expenses described in subparagraph (A) which are incurred for services outside the taxpayer's household shall be taken into account only if incurred for the care of—
(i) a qualifying individual described in paragraph (1)(A), or
(ii) a qualifying individual (not described in paragraph (1)(A)) who regularly spends at least 8 hours each day in the taxpayer's household.
(C) Dependent care centers
Employment-related expenses described in subparagraph (A) which are incurred for services provided outside the taxpayer's household by a dependent care center (as defined in subparagraph (D)) shall be taken into account only if—
(i) such center complies with all applicable laws and regulations of a State or unit of local government, and
(ii) the requirements of subparagraph (B) are met.
(D) Dependent care center defined
For purposes of this paragraph, the term "dependent care center" means any facility which—
(i) provides care for more than six individuals (other than individuals who reside at the facility), and
(ii) receives a fee, payment, or grant for providing services for any of the individuals (regardless of whether such facility is operated for profit).
(c) Dollar limit on amount creditable
The amount of the employment-related expenses incurred during any taxable year which may be taken into account under subsection (a) shall not exceed—
(1) $2,400 if there is 1 qualifying individual with respect to the taxpayer for such taxable year, or
(2) $4,800 if there are 2 or more qualifying individuals with respect to the taxpayer for such taxable year.
The amount determined under paragraph (1) or (2) (whichever is applicable) shall be reduced by the aggregate amount excludable from gross income under section 129 for the taxable year.
(d) Earned income limitation
(1) In general
Except as otherwise provided in this subsection, the amount of the employment-related expenses incurred during any taxable year which may be taken into account under subsection (a) shall not exceed—
(A) in the case of an individual who is not married at the close of such year, such individual's earned income for such year, or
(B) in the case of an individual who is married at the close of such year, the lesser of such individual's earned income or the earned income of his spouse for such year.
(2) Special rule for spouse who is a student or incapable of caring for himself
In the case of a spouse who is a student or a qualifying individual described in subsection (b)(1)(C), for purposes of paragraph (1), such spouse shall be deemed for each month during which such spouse is a full-time student at an educational institution, or is such a qualifying individual, to be gainfully employed and to have earned income of not less than—
(A) $200 if subsection (c)(1) applies for the taxable year, or
(B) $400 if subsection (c)(2) applies for the taxable year.
In the case of any husband and wife, this paragraph shall apply with respect to only one spouse for any one month.
(e) Special rules
For purposes of this section—
(1) Maintaining household
An individual shall be treated as maintaining a household for any period only if over half the cost of maintaining the household for such period is furnished by such individual (or, if such individual is married during such period, is furnished by such individual and his spouse).
(2) Married couples must file joint return
If the taxpayer is married at the close of the taxable year, the credit shall be allowed under subsection (a) only if the taxpayer and his spouse file a joint return for the taxable year.
(3) Marital status
An individual legally separated from his spouse under a decree of divorce or of separate maintenance shall not be considered as married.
(4) Certain married individuals living apart
If—
(A) an individual who is married and who files a separate return—
(i) maintains as his home a household which constitutes for more than one-half of the taxable year the principal place of abode of a qualifying individual, and
(ii) furnishes over half of the cost of maintaining such household during the taxable year, and
(B) during the last 6 months of such taxable year such individual's spouse is not a member of such household,
such individual shall not be considered as married.
(5) Special dependency test in case of divorced parents, etc.
If—
(A) paragraph (2) or (4) of section 152(e) applies to any child with respect to any calendar year, and
(B) such child is under the age of 13 or is physically or mentally incapable of caring for himself,
in the case of any taxable year beginning in such calendar year, such child shall be treated as a qualifying individual described in subparagraph (A) or (B) of subsection (b)(1) (whichever is appropriate) with respect to the custodial parent (within the meaning of section 152(e)(1)), and shall not be treated as a qualifying individual with respect to the noncustodial parent.
(6) Payments to related individuals
No credit shall be allowed under subsection (a) for any amount paid by the taxpayer to an individual—
(A) with respect to whom, for the taxable year, a deduction under section 151(c) (relating to deduction for personal exemptions for dependents) is allowable either to the taxpayer or his spouse, or
(B) who is a child of the taxpayer (within the meaning of section 151(c)(3)) who has not attained the age of 19 at the close of the taxable year.
For purposes of this paragraph, the term "taxable year" means the taxable year of the taxpayer in which the service is performed.
(7) Student
The term "student" means an individual who during each of 5 calendar months during the taxable year is a full-time student at an educational organization.
(8) Educational organization
The term "educational organization" means an educational organization described in section 170(b)(1)(A)(ii).
(9) Identifying information required with respect to service provider
No credit shall be allowed under subsection (a) for any amount paid to any person unless—
(A) the name, address, and taxpayer identification number of such person are included on the return claiming the credit, or
(B) if such person is an organization described in section 501(c)(3) and exempt from tax under section 501(a), the name and address of such person are included on the return claiming the credit.
In the case of a failure to provide the information required under the preceding sentence, the preceding sentence shall not apply if it is shown that the taxpayer exercised due diligence in attempting to provide the information so required.
(f) Regulations
The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this section.
(Added
Prior Provisions
A prior section 21 was renumbered
Amendments
1988—Subsec. (b)(1)(A).
Subsec. (c).
Subsec. (e)(5)(B).
Subsec. (e)(9).
1987—Subsec. (b)(2)(A).
1986—Subsecs. (b)(1)(A), (e)(6)(A).
Subsec. (e)(6)(B).
1984—
Subsec. (a)(1).
Subsec. (b).
Subsec. (c).
Subsec. (d).
Subsec. (d)(2).
Subsec. (d)(2)(A).
Subsec. (d)(2)(B).
Subsec. (e).
Subsec. (e)(5).
"(A) paragraph (2) or (4) of section 152(e) applies to any child with respect to any calendar year, and
"(B) such child is under the age of 15 or is physically or mentally incapable of caring for himself,"
for former provisions:
"(A) a child (as defined in section 151(e)(3)) who is under the age of 15 or who is physically or mentally incapable of caring for himself receives over half of his support during the calendar year from his parents who are divorced or legally separated under a decree of divorce or separate maintenance or who are separated under a written separation agreement, and
"(B) such child is in the custody of one or both of his parents for more than one-half of the calendar year."
and substituted in concluding text "(whichever is appropriate) with respect to the custodial parent (within the meaning of section 152(e)(1)), and shall not be treated as a qualifying individual with respect to the noncustodial parent" for ", as the case may be, with respect to that parent who has custody for a longer period during such calendar year than the other parent, and shall not be treated as being a qualifying individual with respect to such other parent."
Subsecs. (f), (g).
1983—Subsec. (b)(2).
1981—Subsec. (a).
Subsec. (c)(2)(B).
Subsec. (c)(2)(C), (D).
Subsec. (d)(1).
Subsec. (d)(2).
Subsec. (e)(2)(A).
Subsec. (e)(2)(B).
1978—Subsec. (f)(6).
Effective Date of 1988 Amendment
Section 703(d) of
Effective Date of 1987 Amendment
Section 10101(b) of
"(1)
"(2)
Effective Date of 1986 Amendment
Amendment by
Effective Date of 1984 Amendment
Amendment by section 423(c)(4) of
Section 475(a) of
Effective Date of 1983 Amendment
Amendment by
Effective Date of 1981 Amendment
Section 124(f) of
"(1) Except as provided in paragraph (2), the amendments made by this section [amending this section and enacting
"(2) The amendments made by subsection (e)(2) [amending
Effective Date of 1978 Amendment
Section 121(b) of
Effective Date
Section applicable to taxable years beginning after Dec. 31, 1975, see section 508 of
Program To Increase Public Awareness
Section Referred to in Other Sections
This section is referred to in
§22. Credit for the elderly and the permanently and totally disabled
(a) General rule
In the case of a qualified individual, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to 15 percent of such individual's section 22 amount for such taxable year.
(b) Qualified individual
For purposes of this section, the term "qualified individual" means any individual—
(1) who has attained age 65 before the close of the taxable year, or
(2) who retired on disability before the close of the taxable year and who, when he retired, was permanently and totally disabled.
(c) Section 22 amount
For purposes of subsection (a)—
(1) In general
An individual's section 22 amount for the taxable year shall be the applicable initial amount determined under paragraph (2), reduced as provided in paragraph (3) and in subsection (d).
(2) Initial amount
(A) In general
Except as provided in subparagraph (B), the initial amount shall be—
(i) $5,000 in the case of a single individual, or a joint return where only one spouse is a qualified individual,
(ii) $7,500 in the case of a joint return where both spouses are qualified individuals, or
(iii) $3,750 in the case of a married individual filing a separate return.
(B) Limitation in case of individuals who have not attained age 65
(i) In general
In the case of a qualified individual who has not attained age 65 before the close of the taxable year, except as provided in clause (ii), the initial amount shall not exceed the disability income for the taxable year.
(ii) Special rules in case of joint return
In the case of a joint return where both spouses are qualified individuals and at least one spouse has not attained age 65 before the close of the taxable year—
(I) if both spouses have not attained age 65 before the close of the taxable year, the initial amount shall not exceed the sum of such spouses' disability income, or
(II) if one spouse has attained age 65 before the close of the taxable year, the initial amount shall not exceed the sum of $5,000 plus the disability income for the taxable year of the spouse who has not attained age 65 before the close of the taxable year.
(iii) Disability income
For purposes of this subparagraph, the term "disability income" means the aggregate amount includable in the gross income of the individual for the taxable year under section 72 or 105(a) to the extent such amount constitutes wages (or payments in lieu of wages) for the period during which the individual is absent from work on account of permanent and total disability.
(3) Reduction
(A) In general
The reduction under this paragraph is an amount equal to the sum of the amounts received by the individual (or, in the case of a joint return, by either spouse) as a pension or annuity or as a disability benefit—
(i) which is excluded from gross income and payable under—
(I) title II of the Social Security Act,
(II) the Railroad Retirement Act of 1974, or
(III) a law administered by the Veterans' Administration, or
(ii) which is excluded from gross income under any provision of law not contained in this title.
No reduction shall be made under clause (i)(III) for any amount described in section 104(a)(4).
(B) Treatment of certain workmen's compensation benefits
For purposes of subparagraph (A), any amount treated as a social security benefit under section 86(d)(3) shall be treated as a disability benefit received under title II of the Social Security Act.
(d) Adjusted gross income limitation
If the adjusted gross income of the taxpayer exceeds—
(1) $7,500 in the case of a single individual,
(2) $10,000 in the case of a joint return, or
(3) $5,000 in the case of a married individual filing a separate return,
the section 22 amount shall be reduced by one-half of the excess of the adjusted gross income over $7,500, $10,000, or $5,000, as the case may be.
(e) Definitions and special rules
For purposes of this section—
(1) Married couple must file joint return
Except in the case of a husband and wife who live apart at all times during the taxable year, if the taxpayer is married at the close of the taxable year, the credit provided by this section shall be allowed only if the taxpayer and his spouse file a joint return for the taxable year.
(2) Marital status
Marital status shall be determined under section 7703.
(3) Permanent and total disability defined
An individual is permanently and totally disabled if he is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months. An individual shall not be considered to be permanently and totally disabled unless he furnishes proof of the existence thereof in such form and manner, and at such times, as the Secretary may require.
(f) Nonresident alien ineligible for credit
No credit shall be allowed under this section to any nonresident alien.
(Aug. 16, 1954, ch. 736,
References in Text
The Social Security Act, referred to in subsec. (c)(3)(A)(i)(I), (B), is act Aug. 14, 1935, ch. 531,
The Railroad Retirement Act of 1974, referred to in subsec. (c)(3)(A)(i)(II), is act Aug. 29, 1935, ch. 812, as amended generally by
Amendments
1986—Subsec. (e)(2).
1984—
Subsec. (a).
Subsec. (c).
Subsec. (c)(1).
Subsec. (d).
1983—
Subsec. (a).
Subsec. (b).
Subsec. (c).
Subsec. (d).
Subsec. (e).
Subsec. (f).
1981—Subsec. (e)(9)(B).
1978—Subsec. (e)(2).
Subsec. (e)(4)(B).
Subsec. (e)(5)(B).
Subsec. (e)(8), (9).
1976—
1974—Subsec. (c)(1)(E), (F).
1964—Subsec. (a).
Subsecs. (i), (j).
1962—Subsec. (c)(1).
Subsec. (d).
1956—Subsec. (d)(2). Act Jan. 28, 1956, reduced from 75 to 72 the age at which there will be no limitation on earned income and increased from $900 to $1,200 the amount that an individual over 65 can earn without reducing the $1,200 on which the retirement credit is computed.
1955—Subsec. (f). Act Aug. 9, 1955, extended the retirement income tax credit to members of the Armed Forces.
Effective Date of 1986 Amendment
Amendment by
Effective Date of 1984 Amendment
Amendment by section 474(d) of
Effective Date of 1983 Amendment
Section 122(d) of
"(1)
"(2)
Effective Date of 1981 Amendment
Amendment by
Effective Date of 1978 Amendment
Section 701(a)(4) of
"(A) The amendments made by paragraphs (1) and (2) [amending this section] shall apply to taxable years beginning after December 31, 1975.
"(B) The amendments made by paragraph (3) [amending this section] shall apply to taxable years beginning after December 31, 1977."
Effective Date of 1976 Amendment
Amendment by
Effective Date of 1974 Amendment
Amendment by
Effective Date of 1964 Amendment
Amendment by section 113(a) of
Section 201(e) of
Section 202(b) of
Effective Date of 1962 Amendments
Section 2 of
Section 8 of
Effective Date of 1956 Amendment
Section 2 of act Jan. 28, 1956, provided that: "The amendment made by the first section of this Act [amending this section] shall apply only with respect to taxable years beginning after December 31, 1955."
Effective Date of 1955 Amendment
Section 2 of act Aug. 9, 1955, provided that: "The amendment made by this Act [amending this section] shall be applicable to taxable years beginning after December 31, 1954."
Determination of Retirement Income Credit Under Provisions as They Existed Prior to Amendment by Pub. L. 94–455 Election
Cross References
Dividends received credit not allowed on distributions of electing small business corporations, see
Disallowance of credit where tax is computed by Secretary or his delegate, see
Section Referred to in Other Sections
This section is referred to in
[§23. Repealed. Pub. L. 101–508, title XI, §11801(a)(1), Nov. 5, 1990, 104 Stat. 1388–520 ]
Section, added
[§24. Repealed. Pub. L. 99–514, title I, §112(a), Oct. 22, 1986, 100 Stat. 2108 ]
Section, added
Effective Date of Repeal
Repeal applicable to taxable years beginning after Dec. 31, 1986, see section 151(a) of
§25. Interest on certain home mortgages
(a) Allowance of credit
(1) In general
There shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the product of—
(A) the certificate credit rate, and
(B) the interest paid or accrued by the taxpayer during the taxable year on the remaining principal of the certified indebtedness amount.
(2) Limitation where credit rate exceeds 20 percent
(A) In general
If the certificate credit rate exceeds 20 percent, the amount of the credit allowed to the taxpayer under paragraph (1) for any taxable year shall not exceed $2,000.
(B) Special rule where 2 or more persons hold interests in residence
If 2 or more persons hold interests in any residence, the limitation of subparagraph (A) shall be allocated among such persons in proportion to their respective interests in the residence.
(b) Certificate credit rate; certified indebtedness amount
For purposes of this section—
(1) Certificate credit rate
The term "certificate credit rate" means the rate of the credit allowable by this section which is specified in the mortgage credit certificate.
(2) Certified indebtedness amount
The term "certified indebtedness amount" means the amount of indebtedness which is—
(A) incurred by the taxpayer—
(i) to acquire the principal residence of the taxpayer,
(ii) as a qualified home improvement loan (as defined in section 143(k)(4)) with respect to such residence, or
(iii) as a qualified rehabilitation loan (as defined in section 143(k)(5)) with respect to such residence, and
(B) specified in the mortgage credit certificate.
(c) Mortgage credit certificate; qualified mortgage credit certificate program
For purposes of this section—
(1) Mortgage credit certificate
The term "mortgage credit certificate" means any certificate which—
(A) is issued under a qualified mortgage credit certificate program by the State or political subdivision having the authority to issue a qualified mortgage bond to provide financing on the principal residence of the taxpayer,
(B) is issued to the taxpayer in connection with the acquisition, qualified rehabilitation, or qualified home improvement of the taxpayer's principal residence,
(C) specifies—
(i) the certificate credit rate, and
(ii) the certified indebtedness amount, and
(D) is in such form as the Secretary may prescribe.
(2) Qualified mortgage credit certificate program
(A) In general
The term "qualified mortgage credit certificate program" means any program—
(i) which is established by a State or political subdivision thereof for any calendar year for which it is authorized to issue qualified mortgage bonds,
(ii) under which the issuing authority elects (in such manner and form as the Secretary may prescribe) not to issue an amount of private activity bonds which it may otherwise issue during such calendar year under section 146,
(iii) under which the indebtedness certified by mortgage credit certificates meets the requirements of the following subsections of section 143 (as modified by subparagraph (B) of this paragraph):
(I) subsection (c) (relating to residence requirements),
(II) subsection (d) (relating to 3-year requirement),
(III) subsection (e) (relating to purchase price requirement),
(IV) subsection (f) (relating to income requirements),
(V) subsection (h) (relating to portion of loans required to be placed in targeted areas), and
(VI) paragraph (1) of subsection (i) (relating to other requirements),
(iv) under which no mortgage credit certificate may be issued with respect to any residence any of the financing of which is provided from the proceeds of a qualified mortgage bond or a qualified veterans' mortgage bond,
(v) except to the extent provided in regulations, which is not limited to indebtedness incurred from particular lenders,
(vi) except to the extent provided in regulations, which provides that a mortgage credit certificate is not transferrable, and
(vii) if the issuing authority allocates a block of mortgage credit certificates for use in connection with a particular development, which requires the developer to furnish to the issuing authority and the homebuyer a certificate that the price for the residence is no higher than it would be without the use of a mortgage credit certificate.
Under regulations, rules similar to the rules of subparagraphs (B) and (C) of section 143(a)(2) shall apply to the requirements of this subparagraph.
(B) Modifications of section 143
Under regulations prescribed by the Secretary, in applying section 143 for purposes of subclauses (II), (IV), and (V) of subparagraph (A)(iii)—
(i) each qualified mortgage certificate credit program shall be treated as a separate issue,
(ii) the product determined by multiplying—
(I) the certified indebtedness amount of each mortgage credit certificate issued under such program, by
(II) the certificate credit rate specified in such certificate,
shall be treated as proceeds of such issue and the sum of such products shall be treated as the total proceeds of such issue, and
(iii) paragraph (1) of section 143(d) shall be applied by substituting "100 percent" for "95 percent or more".
Clause (iii) shall not apply if the issuing authority submits a plan to the Secretary for administering the 95-percent requirement of section 143(d)(1) and the Secretary is satisfied that such requirement will be met under such plan.
(d) Determination of certificate credit rate
For purposes of this section—
(1) In general
The certificate credit rate specified in any mortgage credit certificate shall not be less than 10 percent or more than 50 percent.
(2) Aggregate limit on certificate credit rates
(A) In general
In the case of each qualified mortgage credit certificate program, the sum of the products determined by multiplying—
(i) the certified indebtedness amount of each mortgage credit certificate issued under such program, by
(ii) the certificate credit rate with respect to such certificate,
shall not exceed 25 percent of the nonissued bond amount.
(B) Nonissued bond amount
For purposes of subparagraph (A), the term "nonissued bond amount" means, with respect to any qualified mortgage credit certificate program, the amount of qualified mortgage bonds which the issuing authority is otherwise authorized to issue and elects not to issue under subsection (c)(2)(A)(ii).
(e) Special rules and definitions
For purposes of this section—
(1) Carryforward of unused credit
(A) In general
If the credit allowable under subsection (a) for any taxable year exceeds the applicable tax limit for such taxable year, such excess shall be a carryover to each of the 3 succeeding taxable years and, subject to the limitations of subparagraph (B), shall be added to the credit allowable by subsection (a) for such succeeding taxable year.
(B) Limitation
The amount of the unused credit which may be taken into account under subparagraph (A) for any taxable year shall not exceed the amount (if any) by which the applicable tax limit for such taxable year exceeds the sum of—
(i) the credit allowable under subsection (a) for such taxable year determined without regard to this paragraph, and
(ii) the amounts which, by reason of this paragraph, are carried to such taxable year and are attributable to taxable years before the unused credit year.
(C) Applicable tax limit
For purposes of this paragraph, the term "applicable tax limit" means the limitation imposed by section 26(a) for the taxable year reduced by the sum of the credits allowable under this subpart (other than this section).
(2) Indebtedness not treated as certified where certain requirements not in fact met
Subsection (a) shall not apply to any indebtedness if all the requirements of subsection (c)(1), (d), (e), (f), and (i) of section 143 and clauses (iv), (v), and (vii) of subsection (c)(2)(A), were not in fact met with respect to such indebtedness. Except to the extent provided in regulations, the requirements described in the preceding sentence shall be treated as met if there is a certification, under penalty of perjury, that such requirements are met.
(3) Period for which certificate in effect
(A) In general
Except as provided in subparagraph (B), a mortgage credit certificate shall be treated as in effect with respect to interest attributable to the period—
(i) beginning on the date such certificate is issued, and
(ii) ending on the earlier of the date on which—
(I) the certificate is revoked by the issuing authority, or
(II) the residence to which such certificate relates ceases to be the principal residence of the individual to whom the certificate relates.
(B) Certificate invalid unless indebtedness incurred within certain period
A certificate shall not apply to any indebtedness which is incurred after the close of the second calendar year following the calendar year for which the issuing authority made the applicable election under subsection (c)(2)(A)(ii).
(C) Notice to Secretary when certificate revoked
Any issuing authority which revokes any mortgage credit certificate shall notify the Secretary of such revocation at such time and in such manner as the Secretary shall prescribe by regulations.
(4) Reissuance of mortgage credit certificates
The Secretary may prescribe regulations which allow the administrator of a mortgage credit certificate program to reissue a mortgage credit certificate specifying a certified mortgage indebtedness that replaces the outstanding balance of the certified mortgage indebtedness specified on the original certificate to any taxpayer to whom the original certificate was issued, under such terms and conditions as the Secretary determines are necessary to ensure that the amount of the credit allowable under subsection (a) with respect to such reissued certificate is equal to or less than the amount of credit which would be allowable under subsection (a) with respect to the original certificate for any taxable year ending after such reissuance.
(5) Public notice that certificates will be issued
At least 90 days before any mortgage credit certificate is to be issued after a qualified mortgage credit certificate program, the issuing authority shall provide reasonable public notice of—
(A) the eligibility requirements for such certificate,
(B) the methods by which such certificates are to be issued, and
(C) such other information as the Secretary may require.
(6) Interest paid or accrued to related persons
No credit shall be allowed under subsection (a) for any interest paid or accrued to a person who is a related person to the taxpayer (within the meaning of section 144(a)(3)(A)).
(7) Principal residence
The term "principal residence" has the same meaning as when used in section 1034.
(8) Qualified rehabilitation and home improvement
(A) Qualified rehabilitation
The term "qualified rehabilitation" has the meaning given such term by section 143(k)(5)(B).
(B) Qualified home improvement
The term "qualified home improvement" means an alteration, repair, or improvement described in section 143(k)(4).
(9) Qualified mortgage bond
The term "qualified mortgage bond" has the meaning given such term by section 143(a)(1).
(10) Manufactured housing
For purposes of this section, the term "single family residence" includes any manufactured home which has a minimum of 400 square feet of living space and a minimum width in excess of 102 inches and which is of a kind customarily used at a fixed location. Nothing in the preceding sentence shall be construed as providing that such a home will be taken into account in making determinations under section 143.
(f) Reduction in aggregate amount of qualified mortgage bonds which may be issued where certain requirements not met
(1) In general
If for any calendar year any mortgage credit certificate program which satisfies procedural requirements with respect to volume limitations prescribed by the Secretary fails to meet the requirements of paragraph (2) of subsection (d), such requirements shall be treated as satisfied with respect to any certified indebtedness of such program, but the applicable State ceiling under subsection (d) of section 146 for the State in which such program operates shall be reduced by 1.25 times the correction amount with respect to such failure. Such reduction shall be applied to such State ceiling for the calendar year following the calendar year in which the Secretary determines the correction amount with respect to such failure.
(2) Correction amount
(A) In general
For purposes of paragraph (1), the term "correction amount" means an amount equal to the excess credit amount divided by 0.25.
(B) Excess credit amount
(i) In general
For purposes of subparagraph (A)(ii), the term "excess credit amount" means the excess of—
(I) the credit amount for any mortgage credit certificate program, over
(II) the amount which would have been the credit amount for such program had such program met the requirements of paragraph (2) of subsection (d).
(ii) Credit amount
For purposes of clause (i), the term "credit amount" means the sum of the products determined under clauses (i) and (ii) of subsection (d)(2)(A).
(3) Special rule for States having constitutional home rule cities
In the case of a State having one or more constitutional home rule cities (within the meaning of section 146(d)(3)(C)), the reduction in the State ceiling by reason of paragraph (1) shall be allocated to the constitutional home rule city, or to the portion of the State not within such city, whichever caused the reduction.
(4) Exception where certification program
The provisions of this subsection shall not apply in any case in which there is a certification program which is designed to ensure that the requirements of this section are met and which meets such requirements as the Secretary may by regulations prescribe.
(5) Waiver
The Secretary may waive the application of paragraph (1) in any case in which he determines that the failure is due to reasonable cause.
(g) Reporting requirements
Each person who makes a loan which is a certified indebtedness amount under any mortgage credit certificate shall file a report with the Secretary containing—
(1) the name, address, and social security account number of the individual to which the certificate was issued,
(2) the certificate's issuer, date of issue, certified indebtedness amount, and certificate credit rate, and
(3) such other information as the Secretary may require by regulations.
Each person who issues a mortgage credit certificate shall file a report showing such information as the Secretary shall by regulations prescribe. Any such report shall be filed at such time and in such manner as the Secretary may require by regulations.
(h) Regulations; contracts
(1) Regulations
The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this section, including regulations which may require recipients of mortgage credit certificates to pay a reasonable processing fee to defray the expenses incurred in administering the program.
(2) Contracts
The Secretary is authorized to enter into contracts with any person to provide services in connection with the administration of this section.
(i) Recapture of portion of Federal subsidy from use of mortgage credit certificates
For provisions increasing the tax imposed by this chapter to recapture a portion of the Federal subsidy from the use of mortgage credit certificates, see section 143(m).
(Added
Prior Provisions
A prior section 25 was renumbered
Amendments
1993—Subsecs. (h) to (j).
1991—Subsec. (h).
1990—Subsec. (h).
1989—Subsec. (h).
1988—Subsec. (c)(2)(A)(ii).
Subsec. (h).
Subsec. (j).
1986—Subsec. (a)(1)(B).
Subsec. (b)(2)(A)(ii).
Subsec. (b)(2)(A)(iii).
Subsec. (c)(2)(A).
Subsec. (c)(2)(A)(ii).
Subsec. (c)(2)(A)(iii).
"(I) subsection (d) (relating to residence requirements),
"(II) subsection (e) (relating to 3-year requirement),
"(III) subsection (f) (relating to purchase price requirement),
"(IV) subsection (h) (relating to portion of loans required to be placed in targeted areas), and
"(V) subsection (j), other than paragraph (2) thereof (relating to other requirements),".
Subsec. (c)(2)(A)(iii)(V).
Subsec. (c)(2)(B).
"(iii) paragraph (1) of section 103A(e) shall be applied by substituting '100 percent' for '90 percent or more'.
Clause (iii) shall not apply if the issuing authority submits a plan to the Secretary for administering the 90-percent requirement of section 103A(e)(1) and the Secretary is satisfied that such requirement will be met under such plan."
Subsec. (d)(2)(A).
Subsec. (d)(3).
"(A) has a State ceiling (as defined in section 103A(g)(4)) for the year an election is made that exceeds 20 percent of the average annual aggregate principal amount of mortgages executed during the immediately preceding 3 calendar years for single family owner-occupied residences located within the jurisdiction of such State, or
"(B) issued qualified mortgage bonds in an aggregate amount less than $150,000,000 for calendar year 1983,
the certificate credit rate for any mortgage credit certificate shall not exceed 20 percent unless the issuing authority submits a plan to the Secretary to ensure that the weighted average of the certificate credit rates in such mortgage credit certificate program does not exceed 20 percent and the Secretary approves such plan."
Subsec. (e)(1)(B).
Subsec. (e)(2).
Subsec. (e)(6).
Subsec. (e)(8)(A).
Subsec. (e)(8)(B).
Subsec. (e)(9).
Subsec. (e)(10).
Subsec. (f)(1).
Subsec. (f)(2)(A).
Subsec. (f)(3).
Subsec. (f)(4).
Effective Date of 1993 Amendment
Section 13141(f)(2) of
Effective Date of 1991 Amendment
Section 108(c)(2) of
Effective Date of 1990 Amendment
Amendment by
Effective Date of 1988 Amendment
Amendment by section 1013(a)(25), (26) of
Amendment by section 4005(a)(2) of
Amendment by section 4005(g)(7) of
Effective Date of 1986 Amendment
Amendment by section 1301(f)(1) of
Amendment by section 1862(a)–(d)(1) of
Effective Date
Section 612(g) of
"(1)
"(2)
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
Section Referred to in Other Sections
This section is referred to in
§26. Limitation based on tax liability; definition of tax liability
(a) Limitation based on amount of tax
The aggregate amount of credits allowed by this subpart for the taxable year shall not exceed the excess (if any) of—
(1) the taxpayer's regular tax liability for the taxable year, over
(2) the tentative minimum tax for the taxable year (determined without regard to the alternative minimum tax foreign tax credit).
(b) Regular tax liability
For purposes of this part—
(1) In general
The term "regular tax liability" means the tax imposed by this chapter for the taxable year.
(2) Exception for certain taxes
For purposes of paragraph (1), any tax imposed by any of the following provisions shall not be treated as tax imposed by this chapter:
(A) section 55 (relating to minimum tax),
(B) section 59A (relating to environmental tax),
(C) subsection (m)(5)(B), (q), (t), or (v) of section 72 (relating to additional taxes on certain distributions),
(D) section 143(m) (relating to recapture of proration of Federal subsidy from use of mortgage bonds and mortgage credit certificates),
(E) section 531 (relating to accumulated earnings tax),
(F) section 541 (relating to personal holding company tax),
(G) section 1351(d)(1) (relating to recoveries of foreign expropriation losses),
(H) section 1374 (relating to tax on certain built-in gains of S corporations),
(I) section 1375 (relating to tax imposed when passive investment income of corporation having subchapter C earnings and profits exceeds 25 percent of gross receipts),
(J) subparagraph (A) of section 7518(g)(6) (relating to nonqualified withdrawals from capital construction funds taxed at highest marginal rate),
(K) sections 871(a) and 881 (relating to certain income of nonresident aliens and foreign corporations),
(L) section 860E(e) (relating to taxes with respect to certain residual interests),
(M) section 884 (relating to branch profits tax), and
(N) sections 453(l)(3) and 453A(c) (relating to interest on certain deferred tax liabilities).
(c) Tentative minimum tax
For purposes of this part, the term "tentative minimum tax" means the amount determined under section 55(b)(1).
(Added §25, renumbered §26,
Amendments
1989—Subsec. (b)(2)(C), (D).
"(C) subsection (m)(5)(B) (q), or (v) of section 72 (relating to additional tax on certain distributions),
"(D) section 72(t) (relating to 10-percent additional tax on early distributions from qualified retirement plans),".
Subsec. (b)(2)(K).
Subsec. (b)(2)(L), (M).
"(L) section 860E(e) (relating to taxes with respect to certain residual interests), and
"(L) section 884 (relating to branch profits tax), and
"(M) section 143(m) (relating to recapture of portion of federal subsidy from use of mortgage bonds and mortgage credit certificates)."
Subsec. (b)(2)(N).
1988—Subsec. (b)(2)(C).
Subsec. (b)(2)(D).
Subsec. (b)(2)(K).
Subsec. (b)(2)(L).
Subsec. (b)(2)(M).
1986—Subsec. (a).
Subsec. (b).
Subsec. (b)(1).
Subsec. (b)(2).
Subsec. (c).
Effective Date of 1989 Amendment
Amendment by section 7811(c)(1), (2) of
Section 7823 of
Effective Date of 1988 Amendment
Amendment by section 1006(t)(16)(C) of
Amendment by sections 1007(g)(1), 1011A(c)(10), and 1012(q)(8) of
Amendment by section 4005(g)(4) of
Amendment by section 5012(b)(2) of
Effective Date of 1986 Amendments
Amendment by section 261(c) of
Amendment by section 632(c)(1) of
Amendment by section 632(c)(1) of
Amendment by section 701(c)(1) of
Section 516(c) of
Effective Date
Section applicable to taxable years beginning after Dec. 31, 1983, and to carrybacks from such years, see section 475(a) 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)(1) of
Treatment of Tax Imposed Under Former Section 409(c)
Section 491(f)(5) of
Section Referred to in Other Sections
This section is referred to in
Subpart B—Foreign Tax Credit, Etc.
Amendments
1992—
1986—
1984—
Subpart Referred to in Other Sections
This subpart is referred to in
§27. Taxes of foreign countries and possessions of the United States; possession tax credit
(a) Foreign tax credit
The amount of taxes imposed by foreign countries and possessions of the United States shall be allowed as a credit against the tax imposed by this chapter to the extent provided in section 901.
(b) Section 936 credit
In the case of a domestic corporation, the amount provided by section 936 (relating to Puerto Rico and possession tax credit) shall be allowed as a credit against the tax imposed by this chapter.
(Aug. 16, 1954, ch. 736,
Amendments
1984—
1976—
Effective Date of 1976 Amendment
Section 1051(i) of
"(1) Except as provided by paragraph (2), the amendments made by this section [enacting
"(2) The amendment made by subsection (d)(2) [amending
Cross References
Foreign tax credit, see
Section Referred to in Other Sections
This section is referred to in
§28. Clinical testing expenses for certain drugs for rare diseases or conditions
(a) General rule
There shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to 50 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).
(D) Special rule
For purposes of this paragraph, section 41 shall be deemed to remain in effect for periods after June 30, 1995.
(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) or 507 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; 1 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) Limitation based on amount of tax
The credit allowed by this section for any taxable year shall not exceed the excess (if any) of—
(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.
(3) Special limitations on foreign testing
(A) In general
No credit shall be allowed under this section with respect to any clinical testing conducted outside the United States unless—
(i) such testing is conducted outside the United States because there is an insufficient testing population in the United States, and
(ii) 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.
(B) Special limitation for corporations to which section 936 applies
No credit shall be allowed under this section with respect to any clinical testing conducted by a corporation to which an election under section 936 applies.
(4) 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.
(5) 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.
(e) Termination
This section shall not apply to any amount paid or incurred after December 31, 1994.
(Added
References in Text
Sections 505(b), (i), 507, and 526 of the Federal Food, Drug, and Cosmetic Act, referred to in subsecs. (b)(2)(A) and (d)(1), (3)(A)(ii), are classified to sections 355(b), (i), 357, 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
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).
Effective Date of 1993 Amendment
Section 13111(c) of
Effective Date of 1991 Amendment
Section 102(c) of
Section 111(b) of
Effective Date of 1990 Amendment
Section 11402(c) of
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
Section 1879(b)(3) of
Effective Date of 1984 Amendment
Amendment by section 474(g) of
Amendment by section 612(e)(1) of
Effective Date
Section 4(d) 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
Section Referred to in Other Sections
This section is referred to in
1 So in original. The semicolon probably should be a comma.
§29. Credit for producing fuel from a nonconventional source
(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—
(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.
(6) Application with other credits
The credit allowed by subsection (a) for any taxable year shall not exceed the excess (if any) of—
(A) the regular tax for the taxable year reduced by the sum of the credits allowable under subpart A and sections 27 and 28, over
(B) the tentative minimum tax for the 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.
(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 with the Natural Gas Policy Act of 1978
(1) No credit if section 107 of the Natural Gas Policy Act of 1978 is utilized
Subsection (a) shall apply with respect to any natural gas described in subsection (c)(1)(B)(i) which is sold during the taxable year only if such natural gas is sold at a lawful price which is determined without regard to the provisions of section 107 of the Natural Gas Policy Act of 1978 and subtitle B of title I of such Act.
(2) Treatment of this section
For purposes of section 107(d) of the Natural Gas Policy Act of 1978, this section shall not be treated as allowing any credit, exemption, deduction, or comparable adjustment applicable to the computation of any Federal tax.
(f) 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.
(g) 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 (f)(1)(B), such facility shall be treated as being placed in service before January 1, 1993, if such facility is placed in service before January 1, 1997, pursuant to a binding written contract in effect before January 1, 1996, and
(B) if such facility is originally placed in service after December 31, 1992, paragraph (2) of subsection (f) 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.
(Added
References in Text
The Natural Gas Policy Act of 1978, referred to in subsecs. (c)(2)(A), (B)(i) and (e), is
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
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).
Effective Date of 1990 Amendment
Section 11501(b)(2) of
Section 11501(c)(2) of
Section 11813(c) of
"(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)."
Section 11821(a) of
Effective Date of 1986 Amendment
Amendment by section 701(c)(3) of
Section 1879(c)(2) of
Effective Date of 1984 Amendment
Amendment by section 474(h) of
Amendment by section 612(e)(1) of
Section 722(d)(3) of
Effective Date of 1983 Amendment
Amendment by
Effective Date of 1982 Amendment
Amendment by
Effective Date of 1981 Amendment
Section 611(b) of
Effective Date
Section 231(c) of
Savings Provision
Section 11821(b) of
"(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
Section Referred to in Other Sections
This section is referred to in
§30. Credit for qualified electric vehicles
(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 10 percent of the cost of any qualified electric vehicle placed in service by the taxpayer during the taxable year.
(b) Limitations
(1) Limitation per vehicle
The amount of the credit allowed under subsection (a) for any vehicle shall not exceed $4,000.
(2) Phaseout
In the case of any qualified electric vehicle placed in service after December 31, 2001, the credit otherwise allowable under subsection (a) (determined after the application of paragraph (1)) shall be reduced by—
(A) 25 percent in the case of property placed in service in calendar year 2002,
(B) 50 percent in the case of property placed in service in calendar year 2003, and
(C) 75 percent in the case of property placed in service in calendar year 2004.
(3) Application with other credits
The credit allowed by subsection (a) for any taxable year shall not exceed the excess (if any) of—
(A) the regular tax for the taxable year reduced by the sum of the credits allowable under subpart A and sections 27, 28, and 29, over—
(B) the tentative minimum tax for the taxable year.
(c) Qualified electric vehicle
For purposes of this section—
(1) In general
The term "qualified electric vehicle" means any motor vehicle—
(A) which is powered primarily by an electric motor drawing current from rechargeable batteries, fuel cells, or other portable sources of electrical current,
(B) the original use of which commences with the taxpayer, and
(C) which is acquired for use by the taxpayer and not for resale.
(2) Motor vehicle
For purposes of paragraph (1), the term "motor vehicle" means any vehicle which is manufactured primarily for use on public streets, roads, and highways (not including a vehicle operated exclusively on a rail or rails) and which has at least 4 wheels.
(d) Special rules
(1) Basis reduction
The basis of any property for which a credit is allowable under subsection (a) shall be reduced by the amount of such credit.
(2) Recapture
The Secretary shall, by regulations, provide for recapturing the benefit of any credit allowable under subsection (a) with respect to any property which ceases to be property eligible for such credit.
(3) Property used outside United States, etc., not qualified
No credit shall be allowed under subsection (a) with respect to any property referred to in section 50(b) or with respect to the portion of the cost of any property taken into account under section 179.
(e) Termination
This section shall not apply to any property placed in service after December 31, 2004.
(Added
Prior Provisions
A prior section 30 was renumbered
Effective Date
Section 1913(c) of
Section Referred to in Other Sections
This section is referred to in
Subpart C—Refundable Credits
Amendments
1984—
Subpart Referred to in Other Sections
This subpart is referred to in
§31. Tax withheld on wages
(a) Wage withholding for income tax purposes
(1) In general
The amount withheld as tax under
(2) Year of credit
The amount so withheld during any calendar year shall be allowed as a credit for the taxable year beginning in such calendar year. If more than one taxable year begins in a calendar year, such amount shall be allowed as a credit for the last taxable year so beginning.
(b) Credit for special refunds of social security tax
(1) In general
The Secretary may prescribe regulations providing for the crediting against the tax imposed by this subtitle of the amount determined by the taxpayer or the Secretary to be allowable under section 6413(c) as a special refund of tax imposed on wages. The amount allowed as a credit under such regulations shall, for purposes of this subtitle, be considered an amount withheld at source as tax under section 3402.
(2) Year of credit
Any amount to which paragraph (1) applies shall be allowed as a credit for the taxable year beginning in the calendar year during which the wages were received. If more than one taxable year begins in the calendar year, such amount shall be allowed as a credit for the last taxable year so beginning.
(c) Special rule for backup withholding
Any credit allowed by subsection (a) for any amount withheld under section 3406 shall be allowed for the taxable year of the recipient of the income in which the income is received.
(Aug. 16, 1954, ch. 736,
Amendments
1984—Subsec. (a)(1).
1983—
1982—
1976—Subsec. (b)(1).
Effective Date of 1984 Amendment
Section 715 of
Effective Date of 1983 Amendments
Section 110 of title I of
"(a)
"(b)
"(c)
Section 311(d) of
Construction of Amendment by Title VII of Division A of Pub. L. 98–369
Section 701 of title VII of div. A of
Cross References
Amount allowable as credit under this section exceeding taxes imposed by
Time tax collected at source deemed paid, see
Section Referred to in Other Sections
This section is referred to in
§32. Earned income
(a) Allowance of credit
(1) In general
In the case of an eligible individual, there shall be allowed as a credit against the tax imposed by this subtitle for the taxable year an amount equal to the credit percentage of so much of the taxpayer's earned income for the taxable year as does not exceed the earned income amount.
(2) Limitation
The amount of the credit allowable to a taxpayer under paragraph (1) for any taxable year shall not exceed the excess (if any) of—
(A) the credit percentage of the earned income amount, over
(B) the phaseout percentage of so much of the adjusted gross income (or, if greater, the earned income) of the taxpayer for the taxable year as exceeds the phaseout amount.
(b) Percentages and amounts
For purposes of subsection (a)—
(1) Percentages
The credit percentage and the phaseout percentage shall be determined as follows:
(A) In general
In the case of taxable years beginning after 1995:
| In the case of an eligible individual with: | The credit percentage is: | The phaseout percentage is: |
|---|---|---|
| 1 qualifying child | 34 | 15.98 |
| 2 or more qualifying children | 40 | 21.06 |
| No qualifying children | 7.65 | 7.65 |
(B) Transitional percentages for 1995
In the case of taxable years beginning in 1995:
| In the case of an eligible individual with: | The credit percentage is: | The phaseout percentage is: |
|---|---|---|
| 1 qualifying child | 34 | 15.98 |
| 2 or more qualifying children | 36 | 20.22 |
| No qualifying children | 7.65 | 7.65 |
(C) Transitional percentages for 1994
In the case of a taxable year beginning in 1994:
| In the case of an eligible individual with: | The credit percentage is: | The phaseout percentage is: |
|---|---|---|
| 1 qualifying child | 26.3 | 15.98 |
| 2 or more qualifying children | 30 | 17.68 |
| No qualifying children | 7.65 | 7.65 |
(2) Amounts
The earned income amount and the phaseout amount shall be determined as follows:
(A) In general
In the case of taxable years beginning after 1994:
| In the case of an eligible individual with: | The earned income amount is: | The phaseout amount is: |
|---|---|---|
| 1 qualifying child | $6,000 | $11,000 |
| 2 or more qualifying children | $8,425 | $11,000 |
| No qualifying children | $4,000 | $5,000 |
(B) Transitional amounts
In the case of a taxable year beginning in 1994:
| In the case of an eligible individual with: | The earned income amount is: | The phaseout amount is: |
|---|---|---|
| 1 qualifying child | $7,750 | $11,000 |
| 2 or more qualifying children | $8,425 | $11,000 |
| No qualifying children | $4,000 | $5,000 |
(c) Definitions and special rules
For purposes of this section—
(1) Eligible individual
(A) In general
The term "eligible individual" means—
(i) any individual who has a qualifying child for the taxable year, or
(ii) any other individual who does not have a qualifying child for the taxable year, if—
(I) such individual's principal place of abode is in the United States for more than one-half of such taxable year,
(II) such individual (or, if the individual is married, either the individual or the individual's spouse) has attained age 25 but not attained age 65 before the close of the taxable year, and
(III) such individual is not a dependent for whom a deduction is allowable under section 151 to another taxpayer for any taxable year beginning in the same calendar year as such taxable year.
For purposes of the preceding sentence, marital status shall be determined under section 7703.
(B) Qualifying child ineligible
If an individual is the qualifying child of a taxpayer for any taxable year of such taxpayer beginning in a calendar year, such individual shall not be treated as an eligible individual for any taxable year of such individual beginning in such calendar year.
(C) 2 or more eligible individuals
If 2 or more individuals would (but for this subparagraph and after application of subparagraph (B)) be treated as eligible individuals with respect to the same qualifying child for taxable years beginning in the same calendar year, only the individual with the highest adjusted gross income for such taxable years shall be treated as an eligible individual with respect to such qualifying child.
(D) Exception for individual claiming benefits under section 911
The term "eligible individual" does not include any individual who claims the benefits of section 911 (relating to citizens or residents living abroad) for the taxable year.
(E) Limitation on eligibility of nonresident aliens
The term "eligible individual" shall not include any individual who is a nonresident alien individual for any portion of the taxable year unless such individual is treated for such taxable year as a resident of the United States for purposes of this chapter by reason of an election under subsection (g) or (h) of section 6013.
(2) Earned income
(A) The term "earned income" means—
(i) wages, salaries, tips, and other employee compensation, plus
(ii) the amount of the taxpayer's net earnings from self-employment for the taxable year (within the meaning of section 1402(a)), but such net earnings shall be determined with regard to the deduction allowed to the taxpayer by section 164(f).
(B) For purposes of subparagraph (A)—
(i) the earned income of an individual shall be computed without regard to any community property laws,
(ii) no amount received as a pension or annuity shall be taken into account,
(iii) no amount to which section 871(a) applies (relating to income of nonresident alien individuals not connected with United States business) shall be taken into account, and
(iv) no amount received for services provided by an individual while the individual is an inmate at a penal institution shall be taken into account.
(3) Qualifying child
(A) In general
The term "qualifying child" means, with respect to any taxpayer for any taxable year, an individual—
(i) who bears a relationship to the taxpayer described in subparagraph (B),
(ii) except as provided in subparagraph (B)(iii), who has the same principal place of abode as the taxpayer for more than one-half of such taxable year,
(iii) who meets the age requirements of subparagraph (C), and
(iv) with respect to whom the taxpayer meets the identification requirements of subparagraph (D).
(B) Relationship test
(i) In general
An individual bears a relationship to the taxpayer described in this subparagraph if such individual is—
(I) a son or daughter of the taxpayer, or a descendant of either,
(II) a stepson or stepdaughter of the taxpayer, or
(III) an eligible foster child of the taxpayer.
(ii) Married children
Clause (i) shall not apply to any individual who is married as of the close of the taxpayer's taxable year unless the taxpayer is entitled to a deduction under section 151 for such taxable year with respect to such individual (or would be so entitled but for paragraph (2) or (4) of section 152(e)).
(iii) Eligible foster child
For purposes of clause (i)(III), the term "eligible foster child" means an individual not described in clause (i)(I) or (II) who—
(I) the taxpayer cares for as the taxpayer's own child, and
(II) has the same principal place of abode as the taxpayer for the taxpayer's entire taxable year.
(iv) Adoption
For purposes of this subparagraph, a child who is legally adopted, or who is placed with the taxpayer by an authorized placement agency for adoption by the taxpayer, shall be treated as a child by blood.
(C) Age requirements
An individual meets the requirements of this subparagraph if such individual—
(i) has not attained the age of 19 as of the close of the calendar year in which the taxable year of the taxpayer begins,
(ii) is a student (as defined in section 151(c)(4)) who has not attained the age of 24 as of the close of such calendar year, or
(iii) is permanently and totally disabled (as defined in section 22(e)(3)) at any time during the taxable year.
(D) Identification requirements
(i) In general
The requirements of this subparagraph are met if the taxpayer includes the name, age, and TIN of each qualifying child (without regard to this subparagraph) on the return of tax for the taxable year.
(ii) Other methods
The Secretary may prescribe other methods for providing the information described in clause (i).
(E) Abode must be in the United States
The requirements of subparagraphs (A)(ii) and (B)(iii)(II) shall be met only if the principal place of abode is in the United States.
(4) Treatment of military personnel stationed outside the United States
For purposes of paragraphs (1)(A)(ii)(I) and (3)(E), the principal place of abode of a member of the Armed Forces of the United States shall be treated as in the United States during any period during which such member is stationed outside the United States while serving on extended active duty (as defined in section 1034(h)(3)) with the Armed Forces of the United States.
(d) Married individuals
In the case of an individual who is married (within the meaning of section 7703), this section shall apply only if a joint return is filed for the taxable year under section 6013.
(e) Taxable year must be full taxable year
Except in the case of a taxable year closed by reason of the death of the taxpayer, no credit shall be allowable under this section in the case of a taxable year covering a period of less than 12 months.
(f) Amount of credit to be determined under tables
(1) In general
The amount of the credit allowed by this section shall be determined under tables prescribed by the Secretary.
(2) Requirements for tables
The tables prescribed under paragraph (1) shall reflect the provisions of subsections (a) and (b) and shall have income brackets of not greater than $50 each—
(A) for earned income between $0 and the amount of earned income at which the credit is phased out under subsection (b), and
(B) for adjusted gross income between the dollar amount at which the phaseout begins under subsection (b) and the amount of adjusted gross income at which the credit is phased out under subsection (b).
(g) Coordination with advance payments of earned income credit
(1) Recapture of excess advance payments
If any payment is made to the individual by an employer under section 3507 during any calendar year, then the tax imposed by this chapter for the individual's last taxable year beginning in such calendar year shall be increased by the aggregate amount of such payments.
(2) Reconciliation of payments advanced and credit allowed
Any increase in tax under paragraph (1) shall not be treated as tax imposed by this chapter for purposes of determining the amount of any credit (other than the credit allowed by subsection (a)) allowable under this subpart.
(h) Reduction of credit to taxpayers subject to alternative minimum tax
The credit allowed under this section for the taxable year shall be reduced by the amount of tax imposed by section 55 (relating to alternative minimum tax) with respect to such taxpayer for such taxable year.
(i) Inflation adjustments
(1) In general
In the case of any taxable year beginning after 1994, each dollar amount contained in subsection (b)(2)(A) shall be increased by an amount equal to—
(A) such dollar amount, multiplied by
(B) the cost-of-living adjustment determined under section 1(f)(3), for the calendar year in which the taxable year begins, by substituting "calendar year 1993" for "calendar year 1992".
(2) Rounding
If any dollar amount after being increased under paragraph (1) is not a multiple of $10, such dollar amount shall be rounded to the nearest multiple of $10 (or, if such dollar amount is a multiple of $5, such dollar amount shall be increased to the next higher multiple of $10).
(j) Coordination with certain means-tested programs
For purposes of—
(1) the United States Housing Act of 1937,
(2) title V of the Housing Act of 1949,
(3) section 101 of the Housing and Urban Development Act of 1965,
(4) sections 221(d)(3), 235, and 236 of the National Housing Act, and
(5) the Food Stamp Act of 1977,
any refund made to an individual (or the spouse of an individual) by reason of this section, and any payment made to such individual (or such spouse) by an employer under section 3507, shall not be treated as income (and shall not be taken into account in determining resources for the month of its receipt and the following month).
(Added
Earned Income Credit Adjustment for Tax Years Beginning in 1995
For adjustment of earned income credit under this section for tax years beginning in 1995, see section 3.03 of Revenue Procedure 94–72, set out as a note under
References in Text
The United States Housing Act of 1937, referred to in subsec. (j)(1), is act Sept. 1, 1937, ch. 896, as revised generally by
The Housing Act of 1949, referred to in subsec. (j)(2), is act July 15, 1949, ch. 338,
Section 101 of the Housing and Urban Development Act of 1965, referred to in subsec. (j)(3), is section 101 of
Sections 221(d)(3), 235, and 236 of the National Housing Act, referred to in subsec. (j)(4), are classified to sections 1715l(d)(3), 1715z, and 1715z–1, respectively, of Title 12.
The Food Stamp Act of 1977, referred to in subsec. (j)(5), is
Prior Provisions
A prior section 32 was renumbered
Amendments
1994—Subsec. (c)(1)(E).
Subsec. (c)(2)(B)(iv).
Subsec. (c)(3)(D)(i).
"(I) the taxpayer includes the name and age of each qualifying child (without regard to this subparagraph) on the return of tax for the taxable year, and
"(II) in the case of an individual who has attained the age of 1 year before the close of the taxpayer's taxable year, the taxpayer includes the taxpayer identification number of such individual on such return of tax for such taxable year."
Subsec. (c)(4).
1993—Subsec. (a).
"(1) the basic earned income credit, and
"(2) the health insurance credit."
Subsec. (b).
Subsec. (c)(1)(A).
Subsec. (c)(3)(D)(ii).
Subsec. (i)(1).
"(A) such dollar amount, multiplied by
"(B) the cost-of-living adjustment determined under section 1(f)(3), for the calendar year in which the taxable year begins, by substituting 'calendar year 1984' for 'calendar year 1989' in subparagraph (B) thereof."
Subsec. (i)(2), (3).
1990—Subsec. (a).
Subsec. (b).
"(1) the maximum credit allowable under subsection (a) to any taxpayer, over
"(2) 10 percent of so much of the adjusted gross income (or, if greater, the earned income) of the taxpayer for the taxable year as exceeds $9,000.
In the case of any taxable year beginning in 1987, paragraph (2) shall be applied by substituting '$6,500' for '$9,000'."
Subsec. (c).
Subsec. (i)(1)(B).
Subsec. (i)(2)(A).
Subsec. (i)(2)(B).
"(i) the $5,714 amount contained in subsection (a),
"(ii) the $6,500 amount contained in the last sentence of subsection (b), and
"(iii) the $9,000 amount contained in subsection (b)(2)."
Subsec. (j).
1988—Subsec. (h).
Subsec. (i)(3).
1986—Subsec. (a).
Subsec. (b).
"(1) $550, over
"(2) 122/9 percent of so much of the adjusted gross income (or, if greater, the earned income) of the taxpayer for the taxable year as exceeds $6,500."
Subsec. (c)(1)(A)(i).
Subsec. (c)(1)(C).
"(i) section 911 (relating to citizens or residents of the United States living abroad),
"(ii) section 931 (relating to income from sources within possessions of the United States)."
Subsec. (d).
Subsec. (f)(2)(A), (B).
"(A) for earned income between $0 and $11,000, and
"(B) for adjusted gross income between $6,500 and $11,000."
Subsec. (i).
1984—
Subsec. (a).
Subsec. (b)(1).
Subsec. (b)(2).
Subsec. (c)(1)(A)(i).
Subsec. (c)(1)(B).
Subsec. (f)(2)(A).
Subsec. (f)(2)(B).
Subsec. (h).
1983—Subsec. (c)(2)(A)(ii).
1981—Subsec. (c)(1)(C).
1980—Subsec. (c)(1)(C).
Subsecs. (g), (h).
1978—Subsec. (a).
Subsec. (b).
Subsec. (c)(1).
Subsec. (c)(1)(C).
Subsec. (c)(2)(B).
Subsec. (f).
Subsec. (h).
1976—Subsec. (a).
Subsec. (b).
Subsec. (c)(1)(A).
1975—Subsec. (a).
Subsec. (b).
Effective Date of 1994 Amendment
Section 721(d)(1) of
Section 722(b) of
Section 723(b) of
Section 742(c) of
"(1)
"(2)
"(A) returns for taxable years beginning in 1995 with respect to individuals who are born after October 31, 1995, and
"(B) returns for taxable years beginning in 1996 with respect to individuals who are born after November 30, 1996."
Effective Date of 1993 Amendment
Section 13131(e) of
Effective Date of 1990 Amendment
Amendment by section 11101(d)(1)(B) of
Section 11111(f) of
Effective Date of 1988 Amendment
Amendment by
Effective Date of 1986 Amendment
Amendment by sections 104(b)(1)(B) and 111(a)–(d)(1) of
Amendment by section 1272(d)(4) of
Amendment by section 1301(j)(8) of
Effective Date of 1984 Amendment
Amendment by section 423(c)(3) of
Section 1042(e) of
Effective Date of 1983 Amendment
Amendment by
Effective Date of 1981 Amendment
Amendment by
Effective Date of 1980 Amendment
Section 101(b)(1)(A) of
Section 201 of
Effective Date of 1978 Amendment
Section 104(f) of
Section 105(g)(1) of
Effective Date of 1978 Amendment; Election of Prior Law
Amendment by
Effective and Termination Dates of 1976 Amendment
Section 401(e) of
Effective and Termination Dates of 1975 Amendments
Section 2(g) of
Section 209(b) of
Program To Increase Public Awareness
Secretary of the Treasury, or Secretary's delegate, to establish taxpayer awareness program to inform taxpaying public of availability of earned income credit and child health insurance under this section, see section 11114 of
Employee Notification
Section 111(e) of
Disregard of Refund for Determination of Eligibility for Federal Benefits or Assistance
Section 2(d) of
[Section 105(g)(3) of
Section Referred to in Other Sections
This section is referred to in
§33. Tax withheld at source on nonresident aliens and foreign corporations
There shall be allowed as a credit against the tax imposed by this subtitle the amount of tax withheld at source under subchapter A of
(Aug. 16, 1954, ch. 736,
Prior Provisions
A prior section 33 was renumbered
Amendments
1984—
Effective Date of 1984 Amendment
Section 475(b) of
Section Referred to in Other Sections
This section is referred to in
§34. Certain uses of gasoline and special fuels
(a) General rule
There shall be allowed as a credit against the tax imposed by this subtitle for the taxable year an amount equal to the sum of the amounts payable to the taxpayer—
(1) under section 6420 with respect to gasoline used during the taxable year on a farm for farming purposes (determined without regard to section 6420(g)),
(2) under section 6421 with respect to gasoline used during the taxable year (A) otherwise than as a fuel in a highway vehicle or (B) in vehicles while engaged in furnishing certain public passenger land transportation service (determined without regard to section 6421(i)),1 and
(3) under section 6427—
(A) with respect to fuels used for nontaxable purposes or resold, or
(B) with respect to any qualified diesel-powered highway vehicle purchased (or deemed purchased under section 6427(g)(6)),
during the taxable year (determined without regard to section 6427(k)).
(b) Exception
Credit shall not be allowed under subsection (a) for any amount payable under section 6421 or 6427, if a claim for such amount is timely filed and, under section 6421(j) or 6427(k), is payable under such section.
(Added
References in Text
Section 6421(i), referred to in subsec. (a)(2), was repealed by
Prior Provisions
A prior section 34, acts Aug. 16, 1954, ch. 736,
Amendments
1988—Subsec. (b).
1986—Subsec. (a)(3).
1984—
Subsec. (a)(3).
Subsec. (b).
1983—
Subsec. (a)(2) to (4).
Subsec. (b).
1980—Subsec. (a)(4).
Subsec. (b).
1978—Subsec. (a)(3).
Subsec. (a)(4).
Subsec. (b).
1976—Subsec. (a)(1).
Subsec. (a)(3).
Subsec. (a)(4).
Subsec. (b).
Subsec. (c).
1970—
Subsec. (a)(4).
Subsec. (c).
Effective Date of 1988 Amendment
Amendment by
Effective Date of 1986 Amendment
Amendment by section 1703(e)(2)(F) of
Amendment by section 1877(a) of
Effective Date of 1984 Amendment
Amendment by section 911(d)(2)(A) of
Effective Date of 1983 Amendment
Section 515(c) of
Effective Date of 1980 Amendment
Amendment by
Effective Date of 1978 Amendments
Section 233(d) of
Amendment by
Effective Date of 1976 Amendments
Amendment by
Amendment by section 1901(a)(3) of
Amendment by section 1906(b)(8), (9) of
Effective Date of 1970 Amendment
Amendment by
Effective Date
Section applicable to taxable years beginning on or after July 1, 1965, see section 809(f) of
Section Referred to in Other Sections
This section is referred to in
1 See References in Text note below.
§35. Overpayments of tax
For credit against the tax imposed by this subtitle for overpayments of tax, see section 6401.
(Aug. 16, 1954, ch. 736,
Prior Provisions
A prior section 35, acts Aug. 16, 1954, ch. 736,
[§36. Repealed. Pub. L. 95–30, title I, §101(d)(3), May 23, 1977, 91 Stat. 133 ]
Section, acts Aug. 16, 1954, ch. 736,
Effective Date of Repeal
Repeal applicable to taxable years beginning after Dec. 31, 1976, see section 106(a) of
Subpart D—Business Related Credits
Amendments
1993—
1992—
1990—
1986—
1984—
Subpart Referred to in Other Sections
This subpart is referred to in
1 Section 41 repealed by
§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 targeted jobs 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), plus
(11) the employer social security credit determined under section 45B(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 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).
(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) 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.
(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.
(3) Credits no longer listed
For purposes of this subsection—
(A) the credit allowable by section 40, as in effect on the day before the date of the enactment of the Tax Reform Act of 1984, (relating to expenses of work incentive programs) and the credit allowable by section 41(a), as in effect on the day before the date of the enactment of the Tax Reform Act of 1986, (relating to employee stock ownership credit) shall be treated as referred to in that order after the last paragraph of subsection (b), and
(B) the credit determined under section 46—
(i) to the extent attributable to the employee plan percentage (as defined in section 46(a)(2)(E) as in effect on the day before the date of the enactment of the Tax Reform Act of 1984) shall be treated as a credit listed after paragraph (1) of section 46, and
(ii) to the extent attributable to the regular percentage (as defined in section 46(b)(1) as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990) shall be treated as the first credit listed in section 46.
(Added and amended
References in Text
The date of the enactment of the Revenue Reconciliation Act of 1990, referred to in subsecs. (c)(3)(C) and (d)(3)(B)(ii), is the date of enactment of
The date of the enactment of the Tax Reform Act of 1984, referred to in subsec. (d)(3)(A), (B)(i), is the date of enactment of
The date of the enactment of the Tax Reform Act of 1986, referred to in subsec. (d)(3)(A), is the date of enactment of
Prior Provisions
A prior section 38, added
Another prior section 38 was renumbered
Amendments
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).
Effective Date of 1993 Amendment
Section 13303 of
Section 13322(f) of
Section 13443(d) of
Effective Date of 1992 Amendment
Section 1914(e) of
Effective Date of 1990 Amendment
Amendment by section 11511(b)(1) of
Section 11611(e) of
"(1)
"(2)
Amendment by section 11813(b)(2) of
Effective Date of 1988 Amendment
Section 1002(e)(8)(C) of
Amendment by section 1007(g)(2), (8) of
Effective Date of 1986 Amendment
Section 221(b) of
Amendment by section 231(d)(1), (3)(B) of
Amendment by section 252(b) of
Amendment by section 701(c)(4) of
Section 1171(c) 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 nothing in amendment by section 11813(b)(2) of
Credit for Contributions to Certain Community Development Corporations
Section 13311 of
"(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
Section 212 of
"(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
Section 213 of
"(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
Section 1177 of subtitle C (§§1171–1177) of title XI of
"(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."
Section 1011B(l)(3) of
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)
[Section 450(b) of
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
Section Referred to in Other Sections
This section is referred to in
§39. Carryback and carryforward of unused credits
(a) In general
(1) 3-year carryback and 15-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 each of the 3 taxable years preceding the unused credit year, and
(B) a business credit carryforward to each of the 15 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 18 taxable years to which (by reason of paragraph (1)) such credit may be carried.
(B) Amount carried to other 17 years
The amount of the unused credit for the unused credit year shall be carried to each of the other 17 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).
(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 rules
(1) No carryback of enhanced oil recovery credit before 1991
No portion of the unused business credit for any taxable year which is attributable to the credit determined under section 43(a) (relating to enhanced oil recovery credit) may be carried to a taxable year beginning before January 1, 1991.
(2) No carryback of section 44 credit before enactment
No portion of the unused business credit for any taxable year which is attributable to the disabled access credit determined under section 44 may be carried to a taxable year ending before the date of the enactment of section 44.
(3) No carryback of renewable electricity production credit before effective date
No portion of the unused business credit for any taxable year which is attributable to the credit determined under section 45 (relating to electricity produced from certain renewable resources) may be carried back to any taxable year ending before January 1, 1993 (before January 1, 1994, to the extent such credit is attributable to wind as a qualified energy resource).
(4) Empowerment zone employment credit
No portion of the unused business credit which is attributable to the credit determined under section 1396 (relating to empowerment zone employment credit) may be carried to any taxable year ending before January 1, 1994.
(5) No carryback of section 45 credit before enactment
No portion of the unused business credit for any taxable year which is attributable to the Indian employment credit determined under section 45A may be carried to a taxable year ending before the date of the enactment of section 45A.
(6) No carryback of section 45 credit before enactment
No portion of the unused business credit for any taxable year which is attributable to the employer social security credit determined under section 45B may be carried back to a taxable year ending before the date of the enactment of section 45B.
(Added
References in Text
The date of the enactment of section 44, referred to in subsec. (d)(2), means the date of the enactment of
The date of the enactment of section 45A, referred to in subsec. (d)(5), means the date of the enactment of
The date of the enactment of section 45B, referred to in subsec. (d)(6), means the date of the enactment of
Prior Provisions
A prior section 39 was renumbered
Another prior section 39 was renumbered
Amendments
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).
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 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
Section Referred to in Other Sections
This section is referred to in
§40. Alcohol 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, plus
(2) the alcohol credit, plus
(3) in the case of an eligible small ethanol producer, the small ethanol 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.
(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.
(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 subsection (b)(2), (k), or (m) of section 4041, section 4081(c), or section 4091(c).
(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) 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) 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), or (C) as if such tax were imposed by section 4081 and not by this chapter.
(4) Volume of alcohol
For purposes of determining—
(A) under subsection (a) the number of gallons of alcohol with respect to which a credit is allowable under subsection (a), or
(B) under section 4041(k) or 4081(c) the percentage of any mixture which consists of alcohol,
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 5 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.
(e) Termination
(1) In general
This section shall not apply to any sale or use—
(A) for any period after December 31, 2000, or
(B) for any period before January 1, 2001, during which the Highway Trust Fund financing rate under section 4081(a)(2) 1 is not in effect.
(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.
(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 30,000,000 gallons.
(2) Aggregration 2 rule
For purposes of the 15,000,000 gallon limitation under subsection (b)(4)(C) and the 30,000,000 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 30,000,000 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.
(h) Reduced credit for ethanol blenders
In the case of any alcohol mixture credit or alcohol credit with respect to any alcohol which is ethanol—
(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".
(Added
References in Text
Prior Provisions
A prior section 40, added
Another prior section 40 was renumbered
Amendments
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).
Effective Date of 1990 Amendment
Section 11502(h) of
"(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
Section 10502(e) of
Effective Date of 1984 Amendment
Amendment by section 474(k) of
Section 912(g) 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
Section 232(h)(1), (4) of
"(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."
Section Referred to in Other Sections
This section is referred to in
1 See References in Text note below.
2 So in original. Probably should be "Aggregation".
§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, and
(2) 20 percent of the basic research payments determined under subsection (e)(1)(A).
(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 targeted jobs credit applies
The term "wages" shall not include any amount taken into account in determining the targeted jobs 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.
(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 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) 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.
(5) 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.
(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 expenses 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.
(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 1992" in subparagraph (B) 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)(B) shall, for purposes of this paragraph, be applied by substituting the calendar year in which such base period ends for 1992. 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 its proportionate shares of the qualified research expenses and basic research payments giving rise to the credit.
(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 its proportionate shares of the qualified research expenses and basic research payments giving rise to the credit.
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
If, after December 31, 1983, a taxpayer acquires the major portion of a trade or business of another person (hereinafter in this paragraph referred to as the "predecessor") or the major portion of a separate unit of a trade or business of a predecessor, then, for purposes of applying this section for any taxable year ending after such acquisition, the amount of qualified research expenses paid or incurred by the taxpayer during periods before such acquisition shall be increased by so much of such expenses paid or incurred by the predecessor with respect to the acquired trade or business as is attributable to the portion of such trade or business or separate unit acquired by the taxpayer, and the gross receipts of the taxpayer for such periods shall be increased by so much of the gross receipts of such predecessor with respect to the acquired trade or business as is attributable to such portion.
(B) Dispositions
If, after December 31, 1983—
(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.
(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.
(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) Termination
(1) In general
This section shall not apply to any amount paid or incurred after June 30, 1995.
(2) Computation of base amount
In the case of any taxable year which begins before July 1, 1995, and ends after June 30, 1995, the base amount with respect to such taxable year shall be the amount which bears the same ratio to the base amount for such year (determined without regard to this paragraph) as the number of days in such taxable year before July 1, 1995, bears to the total number of days in such taxable year.
(Added
Prior Provisions
A prior section 41, added
Another prior section 41 was renumbered
Amendments
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).
Effective Date of 1993 Amendment
Amendment by section 13111(a)(1) of
Section 13112(c) 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
Section 7110(e) of
Amendment by section 7814(e)(2)(C) of
Effective Date of 1988 Amendment
Amendment by section 1002(h)(1) of
Section 4008(d) of
Effective Date of 1986 Amendment
Section 231(g) of
"(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
Section 102(h)(2) of
Effective Date of 1982 Amendment
Amendment by
Effective Date
Section 221(d) of
"(1)
"(2)
"(A)
"(B)
Special Rules for Taxable Years Beginning Before Oct. 1, 1990, and Ending After Sept. 30, 1990
Section 7110(a)(2) of
Study and Report on Credit Provided by This Section
Section 4007(b) 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
New Section 41 Treated as Continuation of Old Section 44F
Section 474(i)(2) of
"(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)."
Section Referred to in Other Sections
This section is referred to in
§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
For purposes of this section—
(1) Building placed in service during 1987
In the case of any qualified low-income building placed in service by the taxpayer during 1987, the term "applicable percentage" means—
(A) 9 percent for new buildings which are not federally subsidized for the taxable year, or
(B) 4 percent for—
(i) new buildings which are federally subsidized for the taxable year, and
(ii) existing buildings.
(2) Buildings placed in service after 1987
(A) In general
In the case of any qualified low-income building placed in service by the taxpayer after 1987, the term "applicable percentage" means 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 building described in paragraph (1)(A), and
(ii) 30 percent of the qualified basis of a building described in paragraph (1)(B).
(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.
(3) 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.
Such term does not include any building with respect to which moderate rehabilitation assistance is provided, at any time during the compliance period, under section 8(e)(2) 1 of the United States Housing Act of 1937 (other than assistance under the Stewart B. McKinney Homeless Assistance Act of 1988 (as in effect on the date of the enactment of this sentence)).
(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 later of—
(I) the date the building was last placed in service, or
(II) the date of the most recent nonqualified substantial improvement of the building,
(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) Nonqualified substantial improvement
For purposes of subparagraph (B)(ii)—
(I) In general
The term "nonqualified substantial improvement" means any substantial improvement if section 167(k) (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990) was elected with respect to such improvement or section 168 (as in effect on the day before the date of the enactment of the Tax Reform Act of 1986) applied to such improvement.
(II) Date of substantial improvement
The date of a substantial improvement is the last day of the 24-month period referred to in subclause (III).
(III) Substantial improvement
The term "substantial improvement" means the improvements added to capital account with respect to the building during any 24-month period, but only if the sum of the amounts added to such account during such period equals or exceeds 25 percent of the adjusted basis of the building (determined without regard to paragraphs (2) and (3) of section 1016(a)) as of the 1st day of such period.
(ii) 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.
(iii) Related person, etc.
(I) Application of section 179
For purposes of subparagraph (B)(i), section 179(d) shall be applied by substituting "10 percent" for "50 percent" in section 2 267(b) and 707(b) and in section 179(b)(7).
(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). For purposes of the preceding sentence, in applying section 267(b) or 707(b)(1), "10 percent" shall be substituted for "50 percent".
(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 subparagraph (B), 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) 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) Eligible basis reduced by Federal grants
If, during any taxable year of the compliance period, a grant is made with respect to any building or the operation thereof and any portion of such grant is funded with Federal funds (whether or not includible in gross income), the eligible basis of such building for such taxable year and all succeeding taxable years shall be reduced by the portion of such grant which is so funded.
(B) Eligible basis not to include expenditures where section 167(k) elected
The eligible basis of any building shall not include any portion of its adjusted basis which is attributable to amounts with respect to which an election is made under section 167(k) (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990).
(C) 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, 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. 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.
(6) Credit allowable for certain federally-assisted buildings acquired during 10-year period described in paragraph (2)(B)(ii)
(A) In general
On application by the taxpayer, the Secretary (after consultation with the appropriate Federal official) may waive paragraph (2)(B)(ii) with respect to any federally-assisted building if the Secretary determines that such waiver is necessary—
(i) to avert an assignment of the mortgage secured by property in the project (of which such building is a part) to the Department of Housing and Urban Development or the Farmers Home Administration, or
(ii) to avert a claim against a Federal mortgage insurance fund (or such Department or Administration) with respect to a mortgage which is so secured.
The preceding sentence shall not apply to any building described in paragraph (7)(B).
(B) Federally-assisted building
For purposes of subparagraph (A), the term "federally-assisted building" means any building which is substantially assisted, financed, or operated under—
(i) section 8 of the United States Housing Act of 1937,
(ii) section 221(d)(3) or 236 of the National Housing Act, or
(iii) section 515 of the Housing Act of 1949,
as such Acts are in effect on the date of the enactment of the Tax Reform Act of 1986.
(C) Low-income buildings where mortgage may be prepaid
A waiver may be granted under subparagraph (A) (without regard to any clause thereof) with respect to a federally-assisted building described in clause (ii) or (iii) of subparagraph (B) if—
(i) the mortgage on such building is eligible for prepayment under subtitle B of the Emergency Low Income Housing Preservation Act of 1987 or under section 502(c) of the Housing Act of 1949 at any time within 1 year after the date of the application for such a waiver,
(ii) the appropriate Federal official certifies to the Secretary that it is reasonable to expect that, if the waiver is not granted, such building will cease complying with its low-income occupancy requirements, and
(iii) the eligibility to prepay such mortgage without the approval of the appropriate Federal official is waived by all persons who are so eligible and such waiver is binding on all successors of such persons.
(D) Buildings acquired from insured depository institutions in default
A waiver may be granted under subparagraph (A) (without regard to any clause thereof) 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.
(E) Appropriate Federal official
For purposes of subparagraph (A), the term "appropriate Federal official" means—
(i) the Secretary of Housing and Urban Development in the case of any building described in subparagraph (B) by reason of clause (i) or (ii) thereof, and
(ii) the Secretary of Agriculture in the case of any building described in subparagraph (B) by reason of clause (iii) thereof.
(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,3 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 10 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 $3,000 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.
(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)(C) 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 subsection (e)(3)(A)(ii)(II) were applied by substituting "$2,000" for "$3,000".
(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) or (B) 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.
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 clause (ii), 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) Next available unit must be rented to low-income tenant if income rises above 140 percent of income limit
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. In the case of a project described in section 142(d)(4)(B), the preceding sentence shall be applied by substituting "170 percent" for "140 percent" and 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 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".
(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.
(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 close of the calendar year in which the allocation is 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) $1.25 multiplied by the State population,
(ii) the unused State housing credit ceiling (if any) of such State for the preceding calendar year,
(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 (ii), the unused State housing credit ceiling for any calendar year is the excess (if any) of the sum of the amounts described in clauses (i) and (iii) 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 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 the unused State housing credit ceiling for such year (as defined in subparagraph (C)(ii)) over the excess (if any) of—
(I) the aggregate housing credit dollar amount allocated for such year, over
(II) the sum of the amounts described in clauses (i) and (iii) of subparagraph (C).
(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).
(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.
(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; 4 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 1987".
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 CPI for any calendar year (as defined in section 1(f)(4)) exceeds the CPI for the preceding calendar year by more than 5 percent, the CPI for the base calendar year shall be increased such that such excess shall never be taken into account under clause (i).
(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, or any below market Federal loan, the proceeds of which are or were used (directly or indirectly) with respect to such building or the operation thereof.
(B) Election to reduce eligible basis by balance of loan or proceeds of obligations
A loan or 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)—
(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.
(C) Special rule for subsidized construction financing
Subparagraph (A) shall not apply to any tax-exempt obligation or below market Federal loan used to provide construction financing for any building if—
(i) such obligation or loan (when issued or made) identified the building for which the proceeds of such obligation or loan would be used, and
(ii) such obligation is redeemed, and such loan is repaid, before such building is placed in service.
(D) Below market Federal loan
For purposes of this paragraph, the term "below market Federal loan" means any loan funded in whole or in part with Federal funds if the interest rate payable on such loan is less than the applicable Federal rate in effect under section 1274(d)(1) (as of the date on which the loan was made). Such term shall not include any loan which would be a below market Federal loan solely by reason of assistance provided under section 106, 107, or 108 of the Housing and Community Development Act of 1974 (as in effect on the date of the enactment of this sentence).
(E) Buildings receiving HOME assistance
(i) In general
Assistance provided under the HOME Investment Partnerships Act (as in effect on the date of the enactment of this subparagraph) with respect to any building shall not be taken into account under subparagraph (D) if 40 percent or more of the residential units in the building are occupied by individuals whose income is 50 percent or less of area median gross income. Subsection (d)(5)(C) shall not apply to any building to which the preceding sentence applies.
(ii) Special rule for certain high-cost housing areas
In the case of a building located in a city described in section 142(d)(6), clause (i) shall be applied by substituting "25 percent" for "40 percent".
(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 Stewart B. McKinney 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, 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, or
(ii) entirely by full-time students if such students are—
(I) single parents and their children and such parents and children are not dependents (as defined in section 152) of another individual, 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).
(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 subpart A, B, D, or G of this part.
(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 (or interest therein) where bond posted
In the case of a disposition of a building or an interest therein, the taxpayer shall be discharged from liability for any additional tax under this subsection by reason of such disposition if—
(A) the taxpayer furnishes to the Secretary a bond in an amount satifactory 5 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.
(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)(B) 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..6
(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, and
(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.
(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, and
(II) projects obligated to serve qualified tenants for the longest periods, 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.
(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,
(iv) sponsor characteristics,
(v) participation of local tax-exempt organizations,
(vi) tenant populations with special housing needs, and
(vii) public housing waiting lists.
(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
References in Text
Section 8 of the United States Housing Act of 1937, referred to in subsecs. (c)(2), (d)(6)(B)(i), (g)(2)(B), and (h)(6)(B)(iv), is classified to
The Stewart B. McKinney Homeless Assistance Act of 1988, referred to in subsec. (c)(2), probably means the Stewart B. McKinney Homeless Assistance Act,
The date of the enactment of this sentence, referred to in subsec. (c)(2), is the date of the enactment of
Section 201(a) of the Tax Reform Act of 1986, referred to in subsec. (c)(2)(B), is section 201(a) of
The date of the enactment of the Tax Reform Act of 1986, referred to in subsec. (d)(2)(D)(i)(I), (6)(B), is the date of enactment of
The date of the enactment of the Revenue Reconciliation Act of 1990, referred to in subsec. (d)(2)(D)(i)(I), (5)(B), is the date of the enactment of
Sections 221(d)(3) and 236 of the National Housing Act, referred to in subsec. (d)(6)(B)(ii), are classified to sections 1715l(d)(3) and 1715z–1, respectively, of Title 12, Banks and Banking.
Sections 515 and 502(c) of the Housing Act of 1949, referred to in subsecs. (d)(6)(B)(iii), (C)(i) and (g)(2)(B)(iv), are classified to sections 1485 and 1472(c), respectively, of Title 42, The Public Health and Welfare.
The Emergency Low Income Housing Preservation Act of 1987, referred to in subsec. (d)(6)(C)(i), now the Low-Income Housing Preservation and Resident Homeownership Act of 1990, is title II of
Section 3 of the Federal Deposit Insurance Act, referred to in subsec. (d)(6)(D), is classified to
The date of the enactment of this subparagraph, referred to in subsec. (g)(2)(E), is the date of enactment of
Sections 106, 107, and 108 of the Housing and Community Development Act of 1974 (as in effect on the date of the enactment of this sentence), referred to in subsec. (i)(2)(D), are classified to
The HOME Investment Partnerships Act (as in effect on the date of the enactment of this subparagraph), referred to in subsec. (i)(2)(E)(i), is title II 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), is act Aug. 14, 1935, ch. 531,
The Job Training Partnership Act, referred to in subsec. (i)(3)(D)(i)(II), is
Prior Provisions
A prior section 42, added
Another prior section 42 was renumbered
Amendments
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).
Effective Date of 1993 Amendment
Section 13142(a)(2) of
Section 13142(b)(6) of
"(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
Section 107(b) of
Effective Date of 1990 Amendment
Section 11407(a)(3) of
Section 11407(b)(10) of
"(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)
Section 11701(a)(3)(B) of
"(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."
Section 11701(n) of
Section 11812(c) of
"(1)
"(2)
"(3)
Amendment by section 11813(b)(3) of
Effective Date of 1989 Amendment
Section 7108(r) of
"(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)."
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
Section 4003(c) of
Section 4004(b) of
"(1)
"(2)
Effective Date of 1986 Amendment
Section 8072(b) of
Effective Date
Section 252(e) of
"(1)
"(2)
Savings Provision
For provisions that nothing in amendment by sections 11812(b)(3) and 11813(b)(3) of
Election To Determine Rent Limitation Based on Number of Bedrooms and Deep Rent Skewing
Section 13142(c) of
"(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
Section 11407(c) of
"(1)
"(2)
"(3)
Exception to Time Period for Meeting Project Requirements in Order To Qualify as Low-Income Housing
Section 11701(a)(5)(B) of
State Housing Credit Ceiling for Calendar Year 1990
Section 7108(a)(2) of
Transitional Rules
Section 252(f) of
"(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."
Section Referred to in Other Sections
This section is referred to in
1 See References in Text note below.
2 So in original. Probably should be "sections".
3 So in original. Probably should be "etc.,".
4 So in original. The semicolon probably should be a comma.
5 So in original. Probably should be "satisfactory".
§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 29(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 which are paid or incurred in connection with a qualified enhanced oil recovery project and for which a deduction is allowable under section 193 for the taxable year.
(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).
(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
Prior Provisions
A prior section 43 was renumbered
Another prior section 43 was renumbered
Effective Date
Section 11511(d) of
"(1)
"(2)
Section Referred to in Other Sections
This section is referred to in
§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
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
Effective Date
Section applicable to expenditures paid or incurred after Nov. 5, 1990, see section 11611(e)(1) of
Section Referred to in Other Sections
This section is referred to in
[§44A. Renumbered §21]
[§44B. Repealed. Pub. L. 98–369, div. A, title IV, §474(m)(1), July 18, 1984, 98 Stat. 833 ]
Section, added
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 §28]
§45. Electricity produced from certain renewable resources
(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) 1.5 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 1.5 cent amount in subsection (a) and the 8 cent amount 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. 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.
(3) Credit reduced for grants, tax-exempt bonds, subsidized energy financing, and other credits
The amount of the credit determined 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—
(A) 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 an 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,
(iii) the aggregate amount of subsidized energy financing provided (directly or indirectly) under a Federal, State, or local program provided in connection with the project, and
(iv) the amount of any other credit allowable with respect to any property which is part of the project, and
(B) 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.
The amounts under the preceding sentence for any taxable year shall be determined as of the close of the taxable year.
(c) Definitions
For purposes of this section—
(1) Qualified energy resources
The term "qualified energy resources" means—
(A) wind, and
(B) closed-loop biomass.
(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) Qualified facility
The term "qualified facility" means any facility owned by the taxpayer which is originally placed in service after December 31, 1993 (December 31, 1992, in the case of a facility using closed-loop biomass to produce electricity), and before July 1, 1999.
(d) 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.
(Added
Prior Provisions
A prior section 45 was renumbered
Effective Date
Section applicable to taxable years ending after Dec. 31, 1992, see section 1914(e) of
Section Referred to in Other Sections
This section is referred to in
§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 targeted jobs 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.
(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).
(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, 2003.
(Added
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
Effective Date
Section applicable to wages paid or incurred after Dec. 31, 1993, see section 13322(f) of
Section Referred to in Other Sections
This section is referred to in
§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), 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 (determined without regard to section 3(m) of such Act).
(2) Only tips received at food and beverage establishments taken into account
In applying paragraph (1), there shall be taken into account only tips received from customers in connection with the provision of food or beverages for consumption on the premises of an establishment with respect to which the tipping of employees 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
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.
Effective Date
Section applicable with respect to taxes paid after Dec. 31, 1993, see section 13443(d) of
Section Referred to in Other Sections
This section is referred to in
Subpart E—Rules for Computing Investment Credit
Amendments
1990—
1986—
1984—
1978—
1971—
1969—
1962—
Subpart Referred to in Other Sections
This subpart is referred to in
§46. Amount of credit
For purposes of section 38, the amount of the investment credit determined under this section for any taxable year shall be the sum of—
(1) the rehabilitation credit,
(2) the energy credit, and
(3) the reforestation credit.
(Added
Amendments
1990—
Subsec. (b)(2)(A).
1989—Subsec. (b)(2)(A).
1988—Subsec. (b)(2)(A).
Subsec. (c)(5)(B).
Subsec. (c)(7).
Subsec. (d)(1)(B)(i).
Subsec. (d)(1)(B)(ii).
Subsec. (e)(3).
Subsec. (e)(4)(B).
Subsec. (e)(4)(C).
Subsec. (e)(4)(D).
Subsec. (e)(4)(E).
1986—Subsec. (b)(2)(A).
Subsec. (b)(2)(E).
Subsec. (b)(4).
Subsec. (c)(8)(D)(v).
Subsec. (c)(9)(A).
Subsec. (c)(9)(C)(i).
Subsec. (e)(4)(D), (E).
Subsec. (f)(9).
1984—Subsec. (a).
Subsec. (a)(4).
Subsec. (b).
Subsec. (c)(7)(A).
Subsec. (c)(8).
Subsec. (c)(8)(A).
Subsec. (c)(8)(B).
Subsec. (c)(8)(C).
Subsec. (c)(8)(D).
Subsec. (c)(8)(D)(i)(I).
Subsec. (c)(8)(E).
Subsec. (c)(8)(F)(i).
Subsec. (c)(8)(F)(ii)(II).
Subsec. (c)(8)(F)(ii)(III).
Subsec. (c)(8)(F)(ii)(IV).
Subsec. (c)(9).
Subsec. (e)(1).
Subsec. (e)(2).
Subsec. (e)(4).
Subsec. (f)(1).
Subsec. (f)(1)(A), (B).
Subsec. (f)(2).
Subsec. (f)(2)(A), (B).
Subsec. (f)(4)(B).
Subsec. (f)(8).
Subsec. (g)(2).
Subsec. (h)(1).
1983—Subsec. (a)(2)(C)(i).
Subsec. (a)(2)(C)(iii)(I).
Subsec. (a)(2)(F)(iii)(II).
Subsec. (a)(2)(F)(iii)(III).
Subsec. (a)(4)(B).
Subsec. (c)(7).
Subsec. (f)(10).
1982—Subsec. (a)(3)(B).
Subsec. (a)(4).
Subsec. (a)(7).
Subsec. (a)(8).
Subsec. (a)(9).
Subsec. (c)(8)(C).
Subsec. (e)(3).
1981—Subsec. (a)(2)(A)(iv).
Subsec. (a)(2)(E).
Subsec. (a)(2)(F).
Subsec. (b)(1).
Subsec. (c)(2).
Subsec. (c)(6)(A).
Subsec. (c)(7).
Subsec. (c)(8).
Subsec. (c)(8)(D)(i)(I).
Subsec. (c)(9).
Subsec. (d)(1).
Subsec. (d)(2)(A)(ii).
Subsec. (e)(3).
1980—Subsec. (a)(2)(A).
Subsec. (a)(2)(C).
Subsec. (a)(2)(D).
Subsec. (a)(2)(E).
Subsec. (a)(9).
Subsec. (a)(9)(A).
Subsec. (a)(9)(B).
Subsec. (a)(9)(C).
Subsec. (a)(10).
Subsec. (c)(5)(B).
Subsec. (e)(3).
Subsec. (f)(1), (2).
Subsec. (f)(8).
Subsec. (f)(9).
1978—Subsec. (a)(2).
Subsec. (a)(2)(B).
Subsec. (a)(2)(E).
Subsec. (a)(3).
Subsec. (a)(7).
Subsec. (a)(8).
Subsec. (a)(9).
Subsec. (a)(10).
Subsec. (c)(3)(A).
Subsec. (c)(5).
Subsec. (c)(6).
Subsec. (e)(1)(C).
Subsec. (e)(2)(C).
Subsec. (f)(1), (2).
Subsec. (f)(8).
Subsec. (g)(5).
Subsec. (h).
1976—Subsec. (a)(1).
Subsec. (a)(2).
Subsec. (a)(3).
Subsec. (a)(4).
Subsec. (a)(5).
Subsec. (a)(6).
Subsec. (a)(7).
Subsec. (a)(8).
Subsec. (a)(9).
Subsec. (b).
Subsec. (c)(3)(A).
Subsec. (c)(3)(B)(iii).
Subsec. (c)(5).
Subsec. (d)(4)(D), (6).
Subsec. (e)(1)(C).
Subsec. (e)(2).
Subsec. (f)(1)(B), (2), (3).
Subsec. (f)(4)(A).
Subsec. (f)(4)(B)(ii).
Subsec. (f)(7).
Subsec. (f)(8).
Subsec. (f)(9).
Subsec. (g).
1975—Subsec. (a)(1).
Subsec. (a)(6).
Subsec. (c)(3)(A).
Subsec. (c)(4).
Subsecs. (d), (e).
Subsec. (f).
1974—Subsec. (a)(3).
1971—Subsec. (b)(1).
Subsec. (b)(3).
Subsec. (b)(5).
Subsec. (b)(6).
Subsec. (c)(2).
Subsec. (c)(3)(A).
Subsec. (c)(3)(B).
Subsec. (c)(3)(C).
Subsec. (c)(4).
Subsec. (d)(3).
Subsec. (e).
1969—Subsec. (a)(3).
Subsec. (a)(5).
Subsec. (b)(5), (6).
1967—Subsec. (b).
1966—Subsec. (a)(2).
Subsec. (a)(3).
Subsec. (b)(1).
1964—Subsec. (a)(3)(B) to (D).
Effective Date of 1990 Amendment
Amendment by section 11813(a) of
Effective Date of 1989 Amendment
Amendment by section 7814(d) of
Effective Date of 1988 Amendment
Amendment by sections 1002(a)(4), (15), (17), (25), 1009(a)(1), and 1013(a)(44) of
Effective Date of 1986 Amendment
Amendment by section 201(d)(7)(B) of
Section 251(d) of
"(1)
"(2)
"(A) a rehabilitation which was completed pursuant to a written contract which was binding on March 1, 1986, or
"(B) a rehabilitation incurred in connection with property (including any leasehold interest) acquired before March 2, 1986, or acquired on or after such date pursuant to a written contract that was binding on March 1, 1986, if—
"(i) parts 1 and 2 of the Historic Preservation Certification Application were filed with the Department of the Interior (or its designee) before March 2, 1986, or
"(ii) the lesser of $1,000,000 or 5 percent of the cost of the rehabilitation is incurred before March 2, 1986, or is required to be incurred pursuant to a written contract which was binding on March 1, 1986.
"(3)
"(A) the rehabilitation of 8 bathhouses within the Hot Springs National Park or of buildings in the Central Avenue Historic District at such Park,
"(B) the rehabilitation of the Upper Pontalba Building in New Orleans, Louisiana,
"(C) the rehabilitation of at least 60 buildings listed on the National Register at the Frankford Arsenal,
"(D) the rehabilitation of De Baliveriere Arcade, St. Louis Centre, and Drake Apartments in Missouri,
"(E) the rehabilitation of The Tides in Bristol, Rhode Island,
"(F) the rehabilitation and renovation of the Outlet Company building and garage in Providence, Rhode Island,
"(G) the rehabilitation of 10 structures in Harrisburg, Pennsylvania, with respect to which the Harristown Development Corporation was designated redeveloper and received an option to acquire title to the entire project site for $1 on June 27, 1984,
"(H) the rehabilitation of a project involving the renovation of 3 historic structures on the Minneapolis riverfront, with respect to which the developer of the project entered into a redevelopment agreement with a municipality dated January 4, 1985, and industrial development bonds were sold in 3 separate issues in May, July, and October 1985,
"(I) the rehabilitation of a bank's main office facilities of approximately 120,000 square feet, in connection with which the bank's board of directors authorized a $3,300,000 expenditure for the renovation and retrofit on March 20, 1984,
"(J) the rehabilitation of 10 warehouse buildings built between 1906 and 1910 and purchased under a contract dated February 17, 1986,
"(K) the rehabilitation of a facility which is customarily used for conventions and sporting events if an analysis of operations and recommendations of utilization of such facility was prepared by a certified public accounting firm pursuant to an engagement authorized on March 6, 1984, and presented on June 11, 1984, to officials of the city in which such facility is located,
"(L) Mount Vernon Mills in Columbia, South Carolina,
"(M) the Barbara Jordan II Apartments,
"(N) the rehabilitation of the Federal Building and Post Office, 120 Hanover Street, Manchester, New Hampshire,
"(O) the rehabilitation of the Charleston Waterfront project in South Carolina,
"(P) the Hayes Mansion in San Jose, California,
"(Q) the renovation of a facility owned by the National Railroad Passenger Corporation ('Amtrak') for which project Amtrak engaged a development team by letter agreement dated August 23, 1985, as modified by letter agreement dated September 9, 1985,
"(R) the rehabilitation of a structure or its components which is listed in the National Register of Historic Places, is located in Allegheny County, Pennsylvania, will be substantially rehabilitated (as defined in section 48(g)(1)(C) prior to amendment by this Act), prior to December 31, 1989; and was previously utilized as a market and an auto dealership,
"(S) The Bellevue Stratford Hotel in Philadelphia, Pennsylvania,
"(T) the Dixon Mill Housing project in Jersey City, New Jersey,
"(U) Motor Square Garden,
"(V) the Blackstone Apartments, and the Shriver-Johnson building, in Sioux Falls, South Dakota,
"(W) the Holy Name Academy in Spokane, Washington,
"(X) the Nike/Clemson Mill in Exeter, New Hampshire,
"(Y) the Central Bank Building in Grand Rapids, Michigan, and
"(Z) the Heritage Hotel, in the City of Marquette, Michigan.
"(4)
"(A) the Fort Worth Town Square Project in Texas,
"(B) the American Youth Hostel in New York, New York,
"(C) The Riverwest Loft Development (including all three phases, two of which do not involve rehabilitations),
"(D) the Gaslamp Quarter Historic District in California,
"(E) the Eberhardt & Ober Brewery, in Pennsylvania,
"(F) the Captain's Walk Limited Partnership-Harris Place Development, in Connecticut,
"(G) the Velvet Mills in Connecticut,
"(H) the Roycroft Inn, in New York,
"(I) Old Main Village, in Mankato, Minnesota,
"(J) the Washburn-Crosby A Mill, in Minneapolis, Minnesota,
"(K) the Marble Arcade office building in Lakeland, Florida,
"(L) the Willard Hotel, in Washington, D.C.,
"(M) the H. P. Lau Building in Lincoln, Nebraska,
"(N) the Starks Building, in Louisville, Kentucky,
"(O) the Bellevue High School, in Bellevue, Kentucky,
"(P) the Major Hampden Smith House, in Owensboro, Kentucky,
"(Q) the Doe Run Inn, in Brandenburg, Kentucky,
"(R) the State National Bank, in Frankfort, Kentucky,
"(S) the Captain Jack House, in Fleming, Kentucky,
"(T) the Elizabeth Arlinghaus House, in Covington, Kentucky,
"(U) Limerick Shamrock, in Louisville, Kentucky,
"(V) the Robert Mills Project, in South Carolina,
"(W) the 620 Project, consisting of 3 buildings, in Kentucky,
"(X) the Warrior Hotel, Ltd., the first two floors of the Martin Hotel, and the 105,000 square foot warehouse constructed in 1910, all in Sioux City, Iowa,
"(Y) the waterpark condominium residential project, to the extent of $2 million of expenditures,
"(Z) the Bigelow-Hartford Carpet Mill in Enfield, Connecticut,
"(AA) properties abutting 125th street in New York County from 7th Avenue west to Morningside and the pier area on the Hudson River at the end of such 125th Street,
"(BB) the City of Los Angeles Central Library project pursuant to an agreement dated December 28, 1983,
"(CC) the Warehouse Row project in Chattanooga, Tennessee,
"(DD) any project described in section 204(a)(1)(F) of this Act [
"(EE) the Wood Street Commons project in Pittsburgh, Pennsylvania,
"(FF) any project described in section 803(d)(6) of this Act [
"(GG) Union Station, Indianapolis, Indiana,
"(HH) the Mattress Factory project in Pittsburgh, Pennsylvania,
"(II) Union Station in Providence, Rhode Island,
"(JJ) South Pack Plaza, Asheville, North Carolina,
"(KK) Old Louisville Trust Project, Louisville, Kentucky,
"(LL) Stewarts Rehabilitation Project, Louisville, Kentucky,
"(MM) Bernheim Officenter, Louisville, Kentucky,
"(NN) Springville Mill Project, Rockville, Connecticut, and
"(OO) the D.J. Stewart Company Building, State and Main Streets, Rockford, Illinois.
"(5)
"(A) by substituting '10 percent' for '15 percent', and
"(B) by substituting '13 percent' for '20 percent'.
"(6)
"(A) be treated as made (and allowable as a deduction) during 1986,
"(B) be treated as qualified rehabilitation expenditures made during 1986, and
"(C) be allocated in accordance with the partnership agreement regardless of when the interest in the partnership was acquired, except that—
"(i) if the taxpayer is not the original holder of such interest, no person (other than the taxpayer) had claimed any benefits by reason of this paragraph,
"(ii) no interest under section 6611 of the 1986 Code on any refund of income taxes which is solely attributable to this paragraph shall be paid for the period—
"(I) beginning on the date which is 45 days after the later of April 15, 1987, or the date on which the return for such taxes was filed, and
"(II) ending on the date the taxpayer acquired the interest in the partnership, and
"(iii) if the expenditures to be made under this provision are not paid or incurred before January 1, 1994, then the tax imposed by
"(7)
Section 421(c) of
Amendment by sections 1802(a)(6), (8), 1844(a), (b)(3), (5), 1847(b)(11), 1848(a) of
Effective Date of 1984 Amendment
Amendment by section 16 of
Amendment by section 31(f) of
Amendment by section 113(b)(2)(B) of
Section 431(e) of
"(1)
"(2)
Amendment by section 474(o)(1)–(7) of
Amendment by section 713 of
Effective Date of 1983 Amendments
Amendment by section 122(c)(1) of
Amendment by title I of
Amendment by section 202(f) of
Section 541(c) of
"(1)
"(2)
"(A)
"(i) any estimates or projections relating to the amounts of the taxpayer's tax expense, depreciation expense, deferred tax reserve, credit allowable under section 38 of such code, or rate base, or
"(ii) any adjustments to the taxpayer's rate of return,
shall not be treated as inconsistent with the requirements of subparagraph (G) of such section 167(l)(3) nor inconsistent with the requirements of paragraph (1) or (2) of such section 46(f), where such estimates or projections, or such rate of return adjustments, were included in a qualified order.
"(B)
"(i) by a public utility commission which was entered before March 13, 1980,
"(ii) which used the estimates, projections, or rate of return adjustments referred to in subparagraph (A) to determine the amount of the rates to be collected by the taxpayer or the amount of a refund with respect to rates previously collected, and
"(iii) which ordered such rates to be collected or refunds to be made (whether or not such order actually was implemented or enforced).
"(3)
"(A)
"(i) rate reduction, or
"(ii) refund,
which was actually made pursuant to a qualified order.
"(B)
"(i) July 1, 1983, or
"(ii) 6 months after the refunds or rate reductions are actually made pursuant to a qualified order.
the taxpayer enters into a closing agreement (within the meaning of section 7121 of the Internal Revenue Code of 1986) which provides for the payment by the taxpayer of the amount of which paragraph (2) does not apply by reason of subparagraph (A).
"(4)
"(A)
"(B)
"(C)
"(i)
"(ii)
"(5)
Effective Date of 1982 Amendments
Amendment by
Amendment by section 201(d)(8)(A), formerly section 201(c)(8)(A), of
Section 205(c)(2) of
Amendment by section 265(b)(2)(A)(i) of
Effective Date of 1981 Amendment
Amendment by section 207(c)(1) of
Section 211(i) of
"(1)
"(2)
"(3)
"(4)
"(5)
"(A)
"(i) property placed in service by the taxpayer on or before February 18, 1981, and
"(ii) property placed in service by the taxpayer after February 18, 1981, where such property is acquired by the taxpayer pursuant to a binding contract entered into on or before that date.
"(B)
"(6)
Section 212(e) of
"(1)
"(2)
"(A) the physical work on such rehabilitation began before January 1, 1982, and
"(B) such building does not meet the requirements of paragraph (1) of section 48(g) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] (as amended by this Act [
Section 332(c)(1) of
Effective Date of 1980 Amendment
Amendment by section 222(e)(2) of
Section 223(b)(3) of
Effective Date of 1978 Amendment
Amendment by section 141(e), (f)(2) of
Section 312(d) of
Section 313(b) of
"The amendment made by subsection (a) [amending this section] shall apply to—
"(1) property acquired by the taxpayer after December 31, 1978, and
"(2) property the construction, reconstruction, or erection of which was completed by the taxpayer after December 31, 1978 (but only to the extent of the basis thereof attributable to construction, reconstruction, or erection after such date)."
Section 316(c) of
Section 703(r) of
Effective Date of 1976 Amendment
Amendment by section 503(b)(4) of
Section 802(c) of
Section 803(j) of
"(1)
"(2)
"(A) Section 301(e) of the Tax Reduction Act of 1975 [set out below], as added by subsection (d), shall apply for taxable years beginning after December 31, 1976.
"(B) The amendments made by subsections (a) and (b)(1) shall apply for taxable years beginning after December 31, 1975.
"(C) The amendments made by subsections (b)(4) and (f) shall apply for years beginning after December 31, 1975."
Section 805(b) of
"(1)
"(2)
Amendment by section 1607(b)(1)(B) of
Amendment by section 1901(a)(4)(A), (B), (b)(1)(C) of
Section 2112(d)(1) of
"(A) property acquired by the taxpayer after December 31, 1976, and
"(B) property the construction, reconstruction, or erection of which was completed by the taxpayer after December 31, 1976, (but only to the extent of the basis thereof attributable to construction, reconstruction, or erection after such date), in taxable years beginning after such date."
Effective Date of 1975 Amendment
Section 301(b)(4) of
Section 305(a) of
Effective Date of 1974 Amendment
Amendment by section 2001(g)(2)(B) of
Amendment by section 2002(g)(2) of
Amendment by section 2005(c)(4) of
Effective Date of 1971 Amendment
Section 102(d)(1), (2) of
"(1) The amendments made by subsections (a) and (b) [amending this section and
"(2) In redetermining qualified investment for purposes of section 47(a) of the Internal Revenue Code of 1986 in the case of any property which ceases to be section 38 property with respect to the taxpayer after August 15, 1971, or which becomes public utility property after such date, section 46(c)(2) of such Code shall be applied as amended by subsection (a)."
Section 105(d) of
Section 106(d) of
Section 107(a)(2) of
Section 108(d) of
Effective Date of 1969 Amendment
Amendment by section 301(b)(4) of
Amendment by section 401(e)(1) of
Effective Date of 1967 Amendment
Section 2(g) of
Effective Date of 1966 Amendments
Section 4 of
Section 2(c) of
Amendment by
Effective Date of 1964 Amendment
Amendment by
Effective Date
Section 2(h) of
Savings Provision
For provisions that nothing in amendment by section 11813(a) of
Plan Amendments Not Required Until January 1, 1989
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101–1147 and 1171–1177] or title XVIII [§§1800–1899A] of
Clarification of Effect of 1984 Amendment on Investment Tax Credit
Section 475(c) of
Regulated Public Utilities; Special Transitional Rule
Section 209(d)(2) of
Plan Requirements for Taxpayers Electing Additional Credits
Section 301(d), (e), (f) of
Public Utility Property Subject to Subsec. (e); Provisions Respecting Treatment of Investment Credit by Federal Regulatory Agencies Inapplicable
Section 105(e) of
Section Referred to in Other Sections
This section is referred to in
§47. Rehabilitation credit
(a) General rule
For purposes of section 46, the rehabilitation credit for any taxable year is the sum of—
(1) 10 percent of the qualified rehabilitation expenditures with respect to any qualified rehabilitated building other than a certified historic structure, and
(2) 20 percent of the qualified rehabilitation expenditures with respect to any certified historic structure.
(b) When expenditures taken into account
(1) In general
Qualified rehabilitation expenditures with respect to any qualified rehabilitated building shall be taken into account for the taxable year in which such qualified rehabilitated building is placed in service.
(2) Coordination with subsection (d)
The amount which would (but for this paragraph) be taken into account under paragraph (1) with respect to any qualified rehabilitated building shall be reduced (but not below zero) by any amount of qualified rehabilitation expenditures taken into account under subsection (d) by the taxpayer or a predecessor of the taxpayer (or, in the case of a sale and leaseback described in section 50(a)(2)(C), by the lessee), to the extent any amount so taken into account has not been required to be recaptured under section 50(a).
(c) Definitions
For purposes of this section—
(1) Qualified rehabilitated building
(A) In general
The term "qualified rehabilitated building" means any building (and its structural components) if—
(i) such building has been substantially rehabilitated,
(ii) such building was placed in service before the beginning of the rehabilitation,
(iii) in the case of any building other than a certified historic structure, in the rehabilitation process—
(I) 50 percent or more of the existing external walls of such building are retained in place as external walls,
(II) 75 percent or more of the existing external walls of such building are retained in place as internal or external walls, and
(III) 75 percent or more of the existing internal structural framework of such building is retained in place, and
(iv) depreciation (or amortization in lieu of depreciation) is allowable with respect to such building.
(B) Building must be first placed in service before 1936
In the case of a building other than a certified historic structure, a building shall not be a qualified rehabilitated building unless the building was first placed in service before 1936.
(C) Substantially rehabilitated defined
(i) In general
For purposes of subparagraph (A)(i), a building shall be treated as having been substantially rehabilitated only if the qualified rehabilitation expenditures during the 24-month period selected by the taxpayer (at the time and in the manner prescribed by regulation) and ending with or within the taxable year exceed the greater of—
(I) the adjusted basis of such building (and its structural components), or
(II) $5,000.
The adjusted basis of the building (and its structural components) shall be determined as of the beginning of the 1st day of such 24-month period, or of the holding period of the building, whichever is later. For purposes of the preceding sentence, the determination of the beginning of the holding period shall be made without regard to any reconstruction by the taxpayer in connection with the rehabilitation.
(ii) Special rule for phased rehabilitation
In the case of any rehabilitation which may reasonably be expected to be completed in phases set forth in architectural plans and specifications completed before the rehabilitation begins, clause (i) shall be applied by substituting "60-month period" for "24-month period".
(iii) Lessees
The Secretary shall prescribe by regulation rules for applying this subparagraph to lessees.
(D) Reconstruction
Rehabilitation includes reconstruction.
(2) Qualified rehabilitation expenditure defined
(A) In general
The term "qualified rehabilitation expenditure" means any amount properly chargeable to capital account—
(i) for property for which depreciation is allowable under section 168 and which is—
(I) nonresidential real property,
(II) residential rental property,
(III) real property which has a class life of more than 12.5 years, or
(IV) an addition or improvement to property described in subclause (I), (II), or (III), and
(ii) in connection with the rehabilitation of a qualified rehabilitated building.
(B) Certain expenditures not included
The term "qualified rehabilitation expenditure" does not include—
(i) Straight line depreciation must be used
Any expenditure with respect to which the taxpayer does not use the straight line method over a recovery period determined under subsection (c) or (g) of section 168. The preceding sentence shall not apply to any expenditure to the extent the alternative depreciation system of section 168(g) applies to such expenditure by reason of subparagraph (B) or (C) of section 168(g)(1).
(ii) Cost of acquisition
The cost of acquiring any building or interest therein.
(iii) Enlargements
Any expenditure attributable to the enlargement of an existing building.
(iv) Certified historic structure, etc.
Any expenditure attributable to the rehabilitation of a certified historic structure or a building in a registered historic district, unless the rehabilitation is a certified rehabilitation (within the meaning of subparagraph (C)). The preceding sentence shall not apply to a building in a registered historic district if—
(I) such building was not a certified historic structure,
(II) the Secretary of the Interior certified to the Secretary that such building is not of historic significance to the district, and
(III) if the certification referred to in subclause (II) occurs after the beginning of the rehabilitation of such building, the taxpayer certifies to the Secretary that, at the beginning of such rehabilitation, he in good faith was not aware of the requirements of subclause (II).
(v) Tax-exempt use property
(I) In general
Any expenditure in connection with the rehabilitation of a building which is allocable to the portion of such property which is (or may reasonably be expected to be) tax-exempt use property (within the meaning of section 168(h)).
(II) Clause not to apply for purposes of paragraph (1)(C)
This clause shall not apply for purposes of determining under paragraph (1)(C) whether a building has been substantially rehabilitated.
(vi) Expenditures of lessee
Any expenditure of a lessee of a building if, on the date the rehabilitation is completed, the remaining term of the lease (determined without regard to any renewal periods) is less than the recovery period determined under section 168(c).
(C) Certified rehabilitation
For purposes of subparagraph (B), the term "certified rehabilitation" means any rehabilitation of a certified historic structure which the Secretary of the Interior has certified to the Secretary as being consistent with the historic character of such property or the district in which such property is located.
(D) Nonresidential real property; residential rental property; class life
For purposes of subparagraph (A), the terms "nonresidential real property," "residential rental property," and "class life" have the respective meanings given such terms by section 168.
(3) Certified historic structure defined
(A) In general
The term "certified historic structure" means any building (and its structural components) which—
(i) is listed in the National Register, or
(ii) is located in a registered historic district and is certified by the Secretary of the Interior to the Secretary as being of historic significance to the district.
(B) Registered historic district
The term "registered historic district" means—
(i) any district listed in the National Register, and
(ii) any district—
(I) which is designated under a statute of the appropriate State or local government, if such statute is certified by the Secretary of the Interior to the Secretary as containing criteria which will substantially achieve the purpose of preserving and rehabilitating buildings of historic significance to the district, and
(II) which is certified by the Secretary of the Interior to the Secretary as meeting substantially all of the requirements for the listing of districts in the National Register.
(d) Progress expenditures
(1) In general
In the case of any building to which this subsection applies, except as provided in paragraph (3)—
(A) if such building is self-rehabilitated property, any qualified rehabilitation expenditure with respect to such building shall be taken into account for the taxable year for which such expenditure is properly chargeable to capital account with respect to such building, and
(B) if such building is not self-rehabilitated property, any qualified rehabilitation expenditure with respect to such building shall be taken into account for the taxable year in which paid.
(2) Property to which subsection applies
(A) In general
This subsection shall apply to any building which is being rehabilitated by or for the taxpayer if—
(i) the normal rehabilitation period for such building is 2 years or more, and
(ii) it is reasonable to expect that such building will be a qualified rehabilitated building in the hands of the taxpayer when it is placed in service.
Clauses (i) and (ii) shall be applied on the basis of facts known as of the close of the taxable year of the taxpayer in which the rehabilitation begins (or, if later, at the close of the first taxable year to which an election under this subsection applies).
(B) Normal rehabilitation period
For purposes of subparagraph (A), the term "normal rehabilitation period" means the period reasonably expected to be required for the rehabilitation of the building—
(i) beginning with the date on which physical work on the rehabilitation begins (or, if later, the first day of the first taxable year to which an election under this subsection applies), and
(ii) ending on the date on which it is expected that the property will be available for placing in service.
(3) Special rules for applying paragraph (1)
For purposes of paragraph (1)—
(A) Component parts, etc.
Property which is to be a component part of, or is otherwise to be included in, any building to which this subsection applies shall be taken into account—
(i) at a time not earlier than the time at which it becomes irrevocably devoted to use in the building, and
(ii) as if (at the time referred to in clause (i)) the taxpayer had expended an amount equal to that portion of the cost to the taxpayer of such component or other property which, for purposes of this subpart, is properly chargeable (during such taxable year) to capital account with respect to such building.
(B) Certain borrowing disregarded
Any amount borrowed directly or indirectly by the taxpayer from the person rehabilitating the property for him shall not be treated as an amount expended for such rehabilitation.
(C) Limitation for buildings which are not self-rehabilitated
(i) In general
In the case of a building which is not self-rehabilitated, the amount taken into account under paragraph (1)(B) for any taxable year shall not exceed the amount which represents the portion of the overall cost to the taxpayer of the rehabilitation which is properly attributable to the portion of the rehabilitation which is completed during such taxable year.
(ii) Carryover of certain amounts
In the case of a building which is not a self-rehabilitated building, if for the taxable year—
(I) the amount which (but for clause (i)) would have been taken into account under paragraph (1)(B) exceeds the limitation of clause (i), then the amount of such excess shall be taken into account under paragraph (1)(B) for the succeeding taxable year, or
(II) the limitation of clause (i) exceeds the amount taken into account under paragraph (1)(B), then the amount of such excess shall increase the limitation of clause (i) for the succeeding taxable year.
(D) Determination of percentage of completion
The determination under subparagraph (C)(i) of the portion of the overall cost to the taxpayer of the rehabilitation which is properly attributable to rehabilitation completed during any taxable year shall be made, under regulations prescribed by the Secretary, on the basis of engineering or architectural estimates or on the basis of cost accounting records. Unless the taxpayer establishes otherwise by clear and convincing evidence, the rehabilitation shall be deemed to be completed not more rapidly than ratably over the normal rehabilitation period.
(E) No progress expenditures for certain prior periods
No qualified rehabilitation expenditures shall be taken into account under this subsection for any period before the first day of the first taxable year to which an election under this subsection applies.
(F) No progress expenditures for property for year it is placed in service, etc.
In the case of any building, no qualified rehabilitation expenditures shall be taken into account under this subsection for the earlier of—
(i) the taxable year in which the building is placed in service, or
(ii) the first taxable year for which recapture is required under section 50(a)(2) with respect to such property,
or for any taxable year thereafter.
(4) Self-rehabilitated building
For purposes of this subsection, the term "self-rehabilitated building" means any building if it is reasonable to believe that more than half of the qualified rehabilitation expenditures for such building will be made directly by the taxpayer.
(5) Election
This subsection shall apply to any taxpayer only if such taxpayer has made an election under this paragraph. Such an election shall apply to the taxable year for which made and all subsequent taxable years. Such an election, once made, may be revoked only with the consent of the Secretary.
(Added
Amendments
1990—
Subsec. (b)(1) to (3).
1988—Subsec. (a)(5)(D).
Subsec. (a)(5)(E)(iii).
Subsec. (a)(5)(E)(v).
Subsec. (a)(9)(A).
Subsec. (c).
Subsec. (d)(1).
Subsec. (d)(3)(C)(i).
1986—Subsec. (a)(9).
Subsec. (d)(1).
Subsec. (d)(3)(E)(i).
Subsec. (d)(3)(F).
Subsec. (d)(3)(G).
1985—Subsec. (a)(5)(B).
1984—Subsec. (a)(5)(D), (6).
Subsec. (a)(7)(C).
Subsec. (c).
Subsec. (d).
Subsec. (d)(1).
Subsec. (d)(2).
Subsec. (d)(3)(A).
Subsec. (d)(3)(B)(i).
Subsec. (e).
1983—Subsec. (d)(2).
Subsec. (d)(3)(A).
1982—Subsec. (a)(5)(D).
1981—Subsec. (a)(3)(D).
Subsec. (a)(5), (6).
Subsec. (a)(7), (8).
Subsec. (d).
1978—Subsec. (a)(4), (5).
Subsec. (a)(6)(B).
Subsec. (b)(3).
1976—Subsec. (a).
Subsec. (a)(7).
1975—Subsec. (a)(3), (4).
Subsec. (a)(5), (6)(B).
1971—Subsec. (a)(4).
Subsec. (a)(5).
Subsec. (a)(6)(A).
Subsec. (a)(6).
1969—Subsec. (a)(5).
Subsec. (a)(4).
Effective Date of 1990 Amendment
Amendment by section 11813(a) of
Effective Date of 1988 Amendment
Amendment by
Effective Date of 1986 Amendment
Section 1511(d) of
Amendment by sections 1802(a)(5)(A) and 1844(b)(1), (2), (4) of
Effective Date of 1985 Amendment
Amendment by
Effective Date of 1984 Amendments
Amendment by
Amendment by section 421(b)(7) of
Amendment by section 431(b)(2), (d)(4), (5) of
Amendment by section 474(o)(8), (9) of
Effective Date of 1983 Amendment
Amendment by
Effective Date of 1982 Amendment
Amendment by
Effective Date of 1981 Amendment
Amendment by section 211(g) of
Amendment by section 211(f)(2) of
Effective Date of 1978 Amendment
Section 317(b) of
Effective Date of 1976 Amendment
Amendment by section 804(b) of
Effective Date of 1975 Amendment
Amendment by
Effective Date of 1971 Amendments
In redetermining qualified investment for purposes of subsec. (a) of this section in the case of any property which ceases to be section 38 property with respect to the taxpayer after Aug. 15, 1971, or which becomes public utility property after such date,
Amendment by section 107(a)(1) of
Section 107(b)(2) of
Section 102(d)(3) of
Section 2 of
Effective Date
Section applicable with respect to taxable years ending after Dec. 31, 1961, see section 2(h) of
Savings Provision
For provisions that nothing in amendment by
Plan Amendments Not Required Until January 1, 1989
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101–1147 and 1171–1177] or title XVIII [§§1800–1899A] of
Clarification of Effect of 1984 Amendment on Investment Tax Credit
For provision that nothing in the amendments made by section 474(o) of
Transfer of Functions
Functions, powers, and duties of Federal Aviation Agency and of Administrator and other offices and officers thereof transferred by
Section Referred to in Other Sections
This section is referred to in
§48. Energy credit; reforestation credit
(a) Energy credit
(1) In general
For purposes of section 46, the energy credit for any taxable year is the energy percentage of the basis of each energy property placed in service during such taxable year.
(2) Energy percentage
(A) In general
The energy percentage is 10 percent.
(B) Coordination with rehabilitation credit
The energy percentage shall not apply to that portion of the basis of any property which is attributable to qualified rehabilitation expenditures.
(3) Energy property
For purposes of this subpart, the term "energy property" means any property—
(A) which is—
(i) equipment which uses solar energy to generate electricity, to heat or cool (or provide hot water for use in) a structure, or to provide solar process heat, or
(ii) equipment used to produce, distribute, or use energy derived from a geothermal deposit (within the meaning of section 613(e)(2)), but only, in the case of electricity generated by geothermal power, up to (but not including) the electrical transmission stage,
(B)(i) the construction, reconstruction, or erection of which is completed by the taxpayer, or
(ii) which is acquired by the taxpayer if the original use of such property commences with the taxpayer,
(C) with respect to which depreciation (or amortization in lieu of depreciation) is allowable, and
(D) which meets the performance and quality standards (if any) which—
(i) have been prescribed by the Secretary by regulations (after consultation with the Secretary of Energy), and
(ii) are in effect at the time of the acquisition of the property.
The term "energy property" shall not include any property which is public utility property (as defined in section 46(f)(5) as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990).
(4) Special rule for property financed by subsidized energy financing or industrial development bonds
(A) Reduction of basis
For purposes of applying the energy percentage to any property, if such property is financed in whole or in part by—
(i) subsidized energy financing, or
(ii) the proceeds of a private activity bond (within the meaning of section 141) the interest on which is exempt from tax under section 103,
the amount taken into account as the basis of such property shall not exceed the amount which (but for this subparagraph) would be so taken into account multiplied by the fraction determined under subparagraph (B).
(B) Determination of fraction
For purposes of subparagraph (A), the fraction determined under this subparagraph is 1 reduced by a fraction—
(i) the numerator of which is that portion of the basis of the property which is allocable to such financing or proceeds, and
(ii) the denominator of which is the basis of the property.
(C) Subsidized energy financing
For purposes of subparagraph (A), the term "subsidized energy financing" means financing provided under a Federal, State, or local program a principal purpose of which is to provide subsidized financing for projects designed to conserve or produce energy.
(5) Certain progress expenditure rules made applicable
Rules similar to the rules of subsections (c)(4) and (d) of section 46 (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990) shall apply for purposes of this subsection.
(b) Reforestation credit
(1) In general
For purposes of section 46, the reforestation credit for any taxable year is 10 percent of the portion of the amortizable basis of any qualified timber property which was acquired during such taxable year and which is taken into account under section 194 (after the application of section 194(b)(1)).
(2) Definitions
For purposes of this subpart, the terms "amortizable basis" and "qualified timber property" have the respective meanings given to such terms by section 194.
(Added
References in Text
The date of the enactment of the Revenue Reconciliation Act of 1990, referred to in subsec. (a)(3), (5), is the date of enactment of
Amendments
1992—Subsec. (a)(2).
1991—Subsec. (a)(2)(B).
1990—
Subsec. (a)(8).
1988—Subsec. (a)(1).
Subsec. (a)(5)(A)(ii).
Subsec. (a)(5)(B)(i).
Subsec. (a)(5)(B)(ii).
Subsec. (a)(5)(D).
Subsec. (a)(5)(E).
Subsec. (l)(2)(C).
Subsec. (l)(11)(A)(ii).
Subsec. (s).
Subsec. (s)(9).
Subsec. (t).
1986—Subsec. (a)(2)(B)(vii).
Subsec. (a)(4).
Subsec. (a)(5)(B)(iii).
Subsec. (a)(5)(D), (E).
Subsec. (b)(1).
Subsec. (b)(2).
Subsec. (d)(4)(D).
Subsec. (d)(6)(C)(ii).
Subsec. (g)(1).
Subsec. (g)(2).
Subsec. (g)(2)(B)(vi)(I).
Subsec. (g)(3).
Subsec. (g)(4).
Subsec. (l)(5).
Subsec. (q)(3).
Subsec. (q)(7).
Subsec. (r).
Subsec. (s).
Subsec. (s)(5).
1985—Subsec. (g)(2)(A)(i), (B)(v).
1984—Subsec. (a)(5).
Subsec. (b).
Subsec. (c)(2)(A).
Subsec. (c)(2)(B).
Subsec. (c)(3)(B).
Subsec. (d)(1)(B).
Subsec. (d)(6).
Subsec. (f)(3).
Subsec. (g)(1)(E).
Subsec. (g)(2)(A)(i).
Subsec. (g)(2)(B)(i).
Subsec. (g)(2)(B)(v).
Subsec. (g)(2)(B)(vi).
Subsec. (g)(2)(D).
Subsec. (k)(4).
Subsec. (k)(4)(A).
Subsec. (k)(4)(B).
Subsec. (k)(5)(D)(i).
Subsec. (l)(1).
Subsec. (l)(16)(B)(i).
Subsec. (m).
Subsec. (n).
Subsec. (o)(3) to (8).
Subsec. (q)(1), (3).
Subsec. (q)(4)(A)(i).
Subsec. (q)(4)(B)(ii).
Subsec. (q)(6).
Subsec. (r).
Subsec. (s).
1983—Subsec. (a)(1)(G).
Subsec. (a)(10).
Subsec. (g)(1)(C)(i).
Subsec. (g)(5)(A).
Subsec. (l)(5).
Subsec. (l)(5)(M), (N).
Subsec. (q)(3).
1982—Subsec. (b).
Subsec. (c)(2)(D).
Subsec. (d)(5).
Subsec. (e).
Subsec. (g)(5).
Subsec. (k)(5)(D)(i).
Subsec. (l)(7).
Subsecs. (q), (r).
1981—Subsec. (a)(1).
Subsec. (a)(1)(G).
Subsec. (a)(2)(B)(ii).
Subsec. (a)(3)(D).
Subsec. (a)(4).
Subsec. (a)(5).
Subsec. (a)(8).
Subsec. (a)(9).
Subsec. (c)(2)(A) to (C).
Subsec. (g).
Subsec. (l)(2)(C).
Subsec. (n)(1)(A)(i).
Subsec. (o)(8).
1980—Subsec. (a)(1).
Subsec. (a)(2)(B)(xi).
Subsec. (a)(5).
Subsec. (a)(7)(B).
Subsec. (a)(10)(A).
Subsec. (a)(10)(B).
Subsec. (g)(2)(B)(i).
Subsec. (l)(1).
Subsec. (l)(2)(A).
Subsec. (l)(3)(A).
Subsec. (l)(3)(B).
Subsec. (l)(3)(C), (D).
Subsec. (l)(4)(C).
Subsec. (l)(5).
Subsec. (l)(11).
Subsec. (l)(13).
Subsec. (l)(14).
Subsec. (l)(15).
Subsec. (l)(16).
Subsec. (l)(17).
Subsec. (n).
Subsec. (n)(6)(B)(i).
Subsec. (o).
1978—Subsec. (a)(1)(A).
Subsec. (a)(1)(D).
Subsec. (a)(1)(E).
Subsec. (a)(2)(B)(ii).
Subsec. (a)(7)(A).
Subsec. (a)(7)(B).
Subsec. (a)(8).
Subsec. (a)(10).
Subsec. (d)(1)(B).
Subsec. (d)(4)(D).
Subsec. (g).
Subsec. (h).
Subsec. (i).
Subsec. (j).
Subsecs. (l), (m).
Subsec. (n).
Subsec. (o).
Subsecs. (p), (q).
1976—Subsec. (a)(2)(B)(vi).
Subsec. (a)(2)(B)(vii).
Subsec. (a)(2)(B)(viii).
Subsec. (a)(8).
Subsecs. (c)(2)(A), (d)(1), (2)(A).
Subsec. (f).
Subsec. (i)(2).
Subsecs. (k), (l).
1975—Subsec. (a)(2)(B).
Subsec. (c)(2)(A).
Subsec. (c)(2)(B).
Subsec. (c)(2)(C).
Subsec. (d)(1), (2)(A).
1971—Subsec. (a)(1).
Subsec. (a)(1)(B)(ii), (iii).
Subsec. (a)(2)(B).
Subsec. (a)(3)(C).
Subsec. (a)(5).
Subsec. (a)(6).
Subsec. (a)(7) to (9).
Subsec. (d).
1969—Subsec. (a)(4).
Subsec. (c)(2)(C).
Subsec. (c)(3)(C).
Subsec. (d)(2).
1967—Subsec. (a)(2)(B)(i).
Subsec. (h)(2).
Subsec. (j).
1966—Subsec. (a)(2)(B).
Subsec. (d).
Subsecs. (h) to (k).
1964—Subsec. (a)(1)(C).
Subsec. (d).
Subsec. (g).
Effective Date of 1992 Amendment
Section 1916(b) of
Effective Date of 1990 Amendment
Amendment by section 11813(a) of
Effective Date of 1988 Amendment
Amendment by
Effective Date of 1986 Amendment
If any interest costs incurred after Dec. 31, 1986, are attributable to costs incurred before Jan. 1, 1987, the amendment by section 803(b)(2)(B) of
Amendment by section 251(b), (c) of
Amendment by section 701(e)(4)(C) of
Amendment by section 803(b)(2)(B) of
Amendment by sections 1272(d)(5) and 1275(c)(5) of
Amendment by section 1511(c)(3) of
Section 1879(j)(2) of
Section 1881 of title XVIII of
Effective Date of 1985 Amendment
Amendment by
Effective Date of 1984 Amendment
Section 18 of
"(a)
"(b)
"(1) such plan was favorably approved on September 23, 1983, by employees, and
"(2) not later than January 11, 1984, the employer of such employees was 100 percent owned by such plan."
Amendment by section 31(b), (c)(1) of
Amendment by section 111(e)(8) of
Amendment by section 113(b)(3) of
Amendment by section 113(b)(4) of
Section 113(c)(1) of
Section 114(b) of
Amendment by section 431(c) of
Amendment by section 474(o)(10)–(18) of
Section 474(o)(15) of
Amendment by section 712(b) of
Amendment by section 721(x)(1) of
Amendment by section 735(c)(1) of
Section 1043(b) of
Effective Date of 1983 Amendment
Amendment by title I of
Amendment by section 202(c) of
Amendment by section 306(a)(3) of
Effective and Termination Dates of 1982 Amendments
Section 104(b) of
Amendment by
Amendment by section 205(a)(1), (4), (5)(A) of
Amendment by section 209(c) of
Effective Date of 1981 Amendment
Section 213(b) of
Section 214(c) of
Section 332(c)(2) of
Amendment by section 211(a)(2), (e)(3), (4) of
Amendment by section 211(c) of
Amendment by section 211(h) of
Amendment by section 212(a)(3), (b), (c), (d)(2)(A) of
Effective Date of 1980 Amendments
Section 109(b) of
Section 223(b) of
Section 302(b) of
Section 222(j) of
"(1)
"(2)
Section 223(a)(2) of
Section 223(c)(2) of
"(A)
"(B)
"(i) qualified hydroelectric generating property (described in section 48(l)(2)(A)(vii) of such Code),
"(ii) cogeneration equipment (described in section 48(l)(2)(A)(viii) of such Code),
"(iii) qualified intercity buses (described in section 48(l)(2)(A)(ix) of such Code),
"(iv) ocean thermal property (described in section 48(l)(3)(A)(ix) of such Code), or
"(v) expanded energy credit property,
the amendment made by paragraph (1) shall apply to periods after December 31, 1979, under rules similar to the rules of section 48(m) of the Internal Revenue Code of 1986.
"(C)
"(i) property to which section 48(l)(3)(A) of such Code applies because of the amendments made by paragraphs (1) and (2) of section 222(b) [amending this section],
"(ii) property described in section 48(l)(4)(C) of such Code (relating to solar process heat),
"(iii) property described in section 48(l)(5)(L) of such Code (relating to alumina electrolytic cells), and
"(iv) property described in the last sentence of section 48(l)(3)(A) of such Code (relating to storage equipment for refuse-derived fuel).
"(D)
Amendment by
Section 108(c)(7) of
Effective Date of 1978 Amendments
Section 301(d)(4) of
"(A)
"(B)
Amendment by section 141(b) of
Amendment by section 312(c)(1), (2), (3) of
Section 314(c) of
Section 315(d) of
Amendment by section 703(a)(3), (4) of
Effective Date of 1976 Amendment
Amendment by section 802(b)(6) of
Section 804(e) of
"(1)
"(2)
Amendment by section 1051(h)(1) of
Amendment by section 1901(a)(5), (b)(11)(A) of
Amendment by section 2112(a) of
Effective and Termination Dates of 1975 Amendment
Section 301(c)(2) of
Amendment by section 302(c)(3) of
Section 604(b) of
"(1)
"(2)
"(3)
Effective Date of 1971 Amendment
Section 104(h) of
Amendment by section 108(b), (c) of
Effective Date of 1969 Amendment
Amendment by section 121(d)(2)(A) of
Amendment by section 401(e)(2)–(4) of
Effective Date of 1967 Amendment
Section 4 of
Effective Date of 1966 Amendments
Section 201(b) of
Amendment by
Effective Date of 1964 Amendment
Section 203(a)(4) of
"(A) in the case of property placed in service after December 31, 1963, with respect to taxable years ending after such date, and
"(B) in the case of property placed in service before January 1, 1964, with respect to taxable years beginning after December 31, 1963."
Section 203(f) of
"(1) The amendments made by subsection (b) [amending this section] shall apply with respect to property possession of which is transferred to a lessee on or after the date of enactment of this Act [Feb. 26, 1964].
"(2) The amendments made by subsection (c) [amending this section] shall apply with respect to taxable years ending after June 30, 1963.
"(3) The amendments made by subsection (d) [amending
Effective Date
Section applicable with respect to taxable years ending after Dec. 31, 1961, see section 2(h) of
Savings Provision
For provisions that nothing in amendment by
Transfer of Functions
Functions, powers, and duties of Federal Aviation Agency and of Administrator and other offices and officers thereof transferred by
Plan Amendments Not Required Until January 1, 1989
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101–1147 and 1171–1177] or title XVIII [§§1800–1899A] of
Applicability of Certain Amendments by Pub. L. 99–514 in Relation to Treaty Obligations of United States
For applicability of amendment by section 701(e)(4)(C) of
Special Rule
Section 1879(j)(3) of
Clarification of Effect of 1984 Amendment on Investment Tax Credit
For provision that nothing in the amendments made by section 474(o) of
Alternative Methods of Computing Credit for Past Periods
Section 804(c) of
"(1)
"(A) the applicable percentage under section 46(c)(2) of such Code shall be determined as if the useful life of the film would have expired at the close of the first taxable year by the close of which the aggregate amount allowable as a deduction under section 167 of such Code would equal or exceed 90 percent of the basis of such property (adjusted for any partial dispositions),
"(B) for purposes of section 46(c)(1) of such Code, the basis of the property shall be determined by taking into account the total production costs (within the meaning of section 48(k)(5)(B) of such Code),
"(C) for purposes of section 48(a)(2) of such Code, such film shall be considered to be used predominantly outside the United States in the first taxable year for which 50 percent or more of the gross revenues received or accrued during the taxable year from showing the film were received or accrued from showing the film outside the United States, and
"(D) Section 47(a)(7) of such Code shall apply.
"(2)
"(A)
"(B)
"(i) subparagraph (B) of paragraph (4) shall not apply, but in determining qualified investment under section 46(c)(1) of such Code there shall be used (in lieu of the basis of such property) an amount equal to 40 percent of the aggregate production costs (within the meaning of paragraph (5)(B) of such section 48(k)),
"(ii) paragraph (2) shall be applied by substituting '100 percent' for '662/3 percent', and
"(iii) paragraph (3) and paragraph (5) (other than subparagraph (B)) shall not apply.
"(C)
"(D)
"(3)
"(A)
"(B)
"(C)
"(i) paragraphs (1) and (2) of this subsection, and subsection (d) shall not apply to any film placed in service by the taxpayer, and
"(ii) subsection 48(k) of the Internal Revenue Code of 1986 shall not apply to any film placed in service by the taxpayer in any taxable year beginning before January 1, 1975, and with respect to which an election under subsection (e)(2) is not made,
and the right of the taxpayer to the allowance of a credit against tax under section 38 of such Code with respect to any film placed in service in any taxable year beginning before January 1, 1975, and as to which an election under subsection (e)(2) is not made, shall be determined as though this section (other than this paragraph) has not been enacted.
"(D)
Entitlement to Credit
Section 804(d) of
Increase in Basis of Property Placed in Service Before January 1, 1964
Section 203(a)(2) of
"(A) The basis of any section 38 property (as defined in section 48(a) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954]) placed in service before January 1, 1964, shall be increased, under regulations prescribed by the Secretary of the Treasury or his delegate, by an amount equal to 7 percent of the qualified investment with respect to such property under section 46(c) of the Internal Revenue Code of 1986. If there has been any increase with respect to such property under section 48(g)(2) of such Code, the increase under the preceding sentence shall be appropriately reduced therefor.
"(B) If a lessor made the election provided by section 48(d) of the Internal Revenue Code of 1986 with respect to property placed in service before January 1, 1964—
"(i) subparagraph (A) shall not apply with respect to such property, but
"(ii) under regulations prescribed by the Secretary of the Treasury or his delegate, the deductions otherwise allowable under section 162 of such Code to the lessee for amounts paid to the lessor under the lease (or, if such lessee has purchased such property, the basis of such property) shall be adjusted in a manner consistent with subparagraph (A).
"(C) The adjustments under this paragraph shall be made as of the first day of the taxpayer's first taxable year which begins after December 31, 1963."
Section Referred to in Other Sections
This section is referred to in
§49. At-risk rules
(a) General rule
(1) Certain nonrecourse financing excluded from credit base
(A) Limitation
The credit base of any property to which this paragraph applies shall be reduced by the nonqualified nonrecourse financing with respect to such credit base (as of the close of the taxable year in which placed in service).
(B) Property to which paragraph applies
This paragraph applies to any property which—
(i) is placed in service during the taxable year by a taxpayer described in section 465(a)(1), and
(ii) is used in connection with an activity with respect to which any loss is subject to limitation under section 465.
(C) Credit base defined
For purposes of this paragraph, the term "credit base" means—
(i) the portion of the basis of any qualified rehabilitated building attributable to qualified rehabilitation expenditures,
(ii) the basis of any energy property, and
(iii) the amortizable basis of any qualified timber property.
(D) Nonqualified nonrecourse financing
(i) In general
For purposes of this paragraph and paragraph (2), the term "nonqualified nonrecourse financing" means any nonrecourse financing which is not qualified commercial financing.
(ii) Qualified commercial financing
For purposes of this paragraph, the term "qualified commercial financing" means any financing with respect to any property if—
(I) such property is acquired by the taxpayer from a person who is not a related person,
(II) the amount of the nonrecourse financing with respect to such property does not exceed 80 percent of the credit base of such property, and
(III) such financing is borrowed from a qualified person or represents a loan from any Federal, State, or local government or instrumentality thereof, or is guaranteed by any Federal, State, or local government.
Such term shall not include any convertible debt.
(iii) Nonrecourse financing
For purposes of this subparagraph, the term "nonrecourse financing" includes—
(I) any amount with respect to which the taxpayer is protected against loss through guarantees, stop-loss agreements, or other similar arrangements, and
(II) except to the extent provided in regulations, any amount borrowed from a person who has an interest (other than as a creditor) in the activity in which the property is used or from a related person to a person (other than the taxpayer) having such an interest.
In the case of amounts borrowed by a corporation from a shareholder, subclause (II) shall not apply to an interest as a share-holder.1
(iv) Qualified person
For purposes of this paragraph, the term "qualified person" means any person which is actively and regularly engaged in the business of lending money and which is not—
(I) a related person with respect to the taxpayer,
(II) a person from which the taxpayer acquired the property (or a related person to such person), or
(III) a person who receives a fee with respect to the taxpayer's investment in the property (or a related person to such person).
(v) Related person
For purposes of this subparagraph, the term "related person" has the meaning given such term by section 465(b)(3)(C). Except as otherwise provided in regulations prescribed by the Secretary, the determination of whether a person is a related person shall be made as of the close of the taxable year in which the property is placed in service.
(E) Application to partnerships and S corporations
For purposes of this paragraph and paragraph (2)—
(i) In general
Except as otherwise provided in this subparagraph, in the case of any partnership or S corporation, the determination of whether a partner's or shareholder's allocable share of any financing is nonqualified nonrecourse financing shall be made at the partner or shareholder level.
(ii) Special rule for certain recourse financing of S corporation
A shareholder of an S corporation shall be treated as liable for his allocable share of any financing provided by a qualified person to such corporation if—
(I) such financing is recourse financing (determined at the corporate level), and
(II) such financing is provided with respect to qualified business property of such corporation.
(iii) Qualified business property
For purposes of clause (ii), the term "qualified business property" means any property if—
(I) such property is used by the corporation in the active conduct of a trade or business,
(II) during the entire 12-month period ending on the last day of the taxable year, such corporation had at least 3 full-time employees who were not owner-employees (as defined in section 465(c)(7)(E)(i)) and substantially all the services of whom were services directly related to such trade or business, and
(III) during the entire 12-month period ending on the last day of such taxable year, such corporation had at least 1 full-time employee substantially all of the services of whom were in the active management of the trade or business.
(iv) Determination of allocable share
The determination of any partner's or shareholder's allocable share of any financing shall be made in the same manner as the credit allowable by section 38 with respect to such property.
(F) Special rules for energy property
Rules similar to the rules of subparagraph (F) of section 46(c)(8) (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990) shall apply for purposes of this paragraph.
(2) Subsequent decreases in nonqualified nonrecourse financing with respect to the property
(A) In general
If, at the close of a taxable year following the taxable year in which the property was placed in service, there is a net decrease in the amount of nonqualified nonrecourse financing with respect to such property, such net decrease shall be taken into account as an increase in the credit base for such property in accordance with subparagraph (C).
(B) Certain transactions not taken into account
For purposes of this paragraph, nonqualified nonrecourse financing shall not be treated as decreased through the surrender or other use of property financed by nonqualified nonrecourse financing.
(C) Manner in which taken into account
(i) Credit determined by reference to taxable year property placed in service
For purposes of determining the amount of credit allowable under section 38 and the amount of credit subject to the early disposition or cessation rules under section 50(a), any increase in a taxpayer's credit base for any property by reason of this paragraph shall be taken into account as if it were property placed in service by the taxpayer in the taxable year in which the property referred to in subparagraph (A) was first placed in service.
(ii) Credit allowed for year of decrease in nonqualified nonrecourse financing
Any credit allowable under this subpart for any increase in qualified investment by reason of this paragraph shall be treated as earned during the taxable year of the decrease in the amount of nonqualified nonrecourse financing.
(b) Increases in nonqualified nonrecourse financing
(1) In general
If, as of the close of the taxable year, there is a net increase with respect to the taxpayer in the amount of nonqualified nonrecourse financing (within the meaning of subsection (a)(1)) with respect to any property to which subsection (a)(1) applied, then the tax under this chapter for such taxable year shall be increased by an amount equal to the aggregate decrease in credits allowed under section 38 for all prior taxable years which would have resulted from reducing the credit base (as defined in subsection (a)(1)(C)) taken into account with respect to such property by the amount of such net increase. For purposes of determining the amount of credit subject to the early disposition or cessation rules of section 50(a), the net increase in the amount of the nonqualified nonrecourse financing with respect to the property shall be treated as reducing the property's credit base in the year in which the property was first placed in service.
(2) Transfers of debt more than 1 year after initial borrowing not treated as increasing nonqualified nonrecourse financing
For purposes of paragraph (1), the amount of nonqualified nonrecourse financing (within the meaning of subsection (a)(1)(D)) with respect to the taxpayer shall not be treated as increased by reason of a transfer of (or agreement to transfer) any evidence of any indebtedness if such transfer occurs (or such agreement is entered into) more than 1 year after the date such indebtedness was incurred.
(3) Special rules for certain energy property
Rules similar to the rules of section 47(d)(3) (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990) shall apply for purposes of this subsection.
(4) Special rule
Any increase in tax under paragraph (1) shall not be treated as tax imposed by this chapter for purposes of determining the amount of any credit allowable under subpart A, B, D, or G.
(Added
References in Text
The date of the enactment of the Revenue Reconciliation Act of 1990, referred to in subsecs. (a)(1)(F) and (b)(3), is the date of enactment of
Prior Provisions
A prior section 49,
Amendments
1990—
1988—Subsec. (c)(4)(B).
"(i) may not be carried back to any taxable year, but
"(ii) shall be added to the carryforwards from the taxable year before applying paragraph (2)."
Subsec. (c)(5)(B)(i).
Subsec. (c)(5)(C).
Subsec. (d)(1).
"(A) by substituting '100 percent' for '50 percent' in paragraph (1), and
"(B) without regard to paragraph (4) thereof (relating to election of reduced credit in lieu of basis adjustment)."
Effective Date of 1990 Amendment
Amendment by
Effective Date of 1988 Amendment
Amendment by section 1002(e)(1)–(3) of
Amendment by section 1002(e)(8)(B) of
Effective Date of 1986 Amendment
Section 211(e) of
"(1)
"(2)
"(A) in the case of any motion picture or television film, construction shall be treated as including production for purposes of section 203(b)(1) of this Act [enacting provisions set out as a note under
"(B) in the case of any television film, a license agreement or agreement for production services between a television network and a producer shall be treated as a binding contract for purposes of section 203(b)(1)(A) of this Act, and
"(C) a motion picture film shall be treated as described in section 203(b)(1)(A) of this Act if—
"(i) funds were raised pursuant to a public offering before September 26, 1985, for the production of such film,
"(ii) 40 percent of the funds raised pursuant to such public offering are being spent on films the production of which commenced before such date, and
"(iii) all of the films funded by such public offering are required to be distributed pursuant to distribution agreements entered into before September 26, 1985.
"(3)
"(4)
"(A) Subsections (c) and (d) of section 49 of the Internal Revenue Code of 1986 shall not apply to any continuous caster facility for slabs and blooms which is subject to a lease and which is part of a project the second phase of which is a continuous slab caster which was placed in service before December 31, 1985.
"(B) For purposes of determining whether an automobile manufacturing facility (including equipment and incidental appurtenances) is transition property within the meaning of section 49(e), property with respect to which the Board of Directors of an automobile manufacturer formally approved the plan for the project on January 7, 1985 shall be treated as transition property and subsections (c) and (d) of section 49 of such Code shall not apply to such property, but only with respect to $70,000,000 of regular investment tax credits.
"(C) Any solid waste disposal facility which will process and incinerate solid waste of one or more public or private entities including Dakota County, Minnesota, and with respect to which a bond carryforward from 1985 was elected in an amount equal to $12,500,000 shall be treated as transition property within the meaning of section 49(e) of the Internal Revenue Code of 1986.
"(D) For purposes of section 49 of such Code, the following property shall be treated as transition property:
"(i) 2 catamarans built by a shipbuilder incorporated in the State of Washington in 1964, the contracts for which were signed on April 22, 1986 and November 12, 1985, and 1 barge built by such shipbuilder the contract for which was signed on August 7, 1985.
"(ii) 2 large passenger ocean-going United States flag cruise ships with a passenger rated capacity of up to 250 which are built by the shipbuilder described in clause (i), which are the first such ships built in the United States since 1952, and which were designed at the request of a Pacific Coast cruise line pursuant to a contract entered into in October 1985. This clause shall apply only to that portion of the cost of each ship which does not exceed $40,000,000.
"(iii) Property placed in service during 1986 by Satellite Industries, Inc., with headquarters in Minneapolis, Minnesota, to the extent that the cost of such property does not exceed $1,950,000.
"(E) Subsections (c) and (d) of section 49 of such Code shall not apply to property described in section 204(a)(4) of this Act [enacting provisions set out as a note under
Savings Provision
For provisions that nothing in amendment by
Normalization Rules
Section 211(b) of
"(1) all credits for open taxable years as of the time of the final determination referred to in section 46(f)(4)(A) of such Code shall be recaptured, and
"(2) if the amount of the taxpayer's unamortized credits (or the credits not previously restored to rate base) with respect to such property (whether or not for open years) exceeds the amount referred to in paragraph (1), the taxpayer's tax for the taxable year shall be increased by the amount of such excess.
If any portion of the excess described in paragraph (2) is attributable to a credit which is allowable as a carryover to a taxable year beginning after December 31, 1985, in lieu of applying paragraph (2) with respect to such portion, the amount of such carryover shall be reduced by the amount of such portion. Rules similar to the rules of this subsection shall apply in the case of any property with respect to which the requirements of section 46(f)(9) of such Code are met."
Exception for Certain Aircraft Used in Alaska
Section 211(d) of
"(1) The amendments made by subsection (a) [enacting this section and provisions set out above] shall not apply to property originally placed in service after December 29, 1982, and before August 1, 1985, by a corporation incorporated in Alaska on May 21, 1953, and used by it—
"(A) in part, for the transportation of mail for the United States Postal Service in the State of Alaska, and
"(B) in part, to provide air service in the State of Alaska on routes which had previously been served by an air carrier that received compensation from the Civil Aeronautics Board for providing service.
"(2) In the case of property described in subparagraph (A)—
"(A) such property shall be treated as recovery property described in section 208(d)(5) of the Tax Equity and Fiscal Responsibility Act of 1982 ('TEFRA') [section 208(d)(5) of
"(B) '48 months' shall be substituted for '3 months' each place it appears in applying—
"(i) section 48(b)(2)(B) of the Code [
"(ii) section 168(f)(8)(D) of the Code [
"(C) the limitation of section 168(f)(8)(D)(ii)(III) (as then in effect) shall be read by substituting 'the lessee's original cost basis.', for 'the adjusted basis of the lessee at the time of the lease.'
"(3) The aggregate amount of property to which this paragraph shall apply shall not exceed $60,000,000."
Section Referred to in Other Sections
This section is referred to in
1 So in original. Probably should not be hyphenated.
§50. Other special rules
(a) Recapture in case of dispositions, etc.
Under regulations prescribed by the Secretary—
(1) Early disposition, etc.
(A) General rule
If, during any taxable year, investment credit property is disposed of, or otherwise ceases to be investment credit property with respect to the taxpayer, before the close of the recapture period, then the tax under this chapter for such taxable year shall be increased by the recapture percentage of the aggregate decrease in the credits allowed under section 38 for all prior taxable years which would have resulted solely from reducing to zero any credit determined under this subpart with respect to such property.
(B) Recapture percentage
For purposes of subparagraph (A), the recapture percentage shall be determined in accordance with the following table:
| If the property ceases to be | The recapture |
| investment credit property within— | percentage is: |
| (i) One full year after placed in service | 100 |
| (ii) One full year after the close of the period described in clause (i) | 80 |
| (iii) One full year after the close of the period described in clause (ii) | 60 |
| (iv) One full year after the close of the period described in clause (iii) | 40 |
| (v) One full year after the close of the period described in clause (iv) | 20 |
(2) Property ceases to qualify for progress expenditures
(A) In general
If during any taxable year any building to which section 47(d) applied ceases (by reason of sale or other disposition, cancellation or abandonment of contract, or otherwise) to be, with respect to the taxpayer, property which, when placed in service, will be a qualified rehabilitated building, then the tax under this chapter for such taxable year shall be increased by an amount equal to the aggregate decrease in the credits allowed under section 38 for all prior taxable years which would have resulted solely from reducing to zero the credit determined under this subpart with respect to such building.
(B) Certain excess credit recaptured
Any amount which would have been applied as a reduction under paragraph (2) of section 47(b) but for the fact that a reduction under such paragraph cannot reduce the amount taken into account under section 47(b)(1) below zero shall be treated as an amount required to be recaptured under subparagraph (A) for the taxable year during which the building is placed in service.
(C) Certain sales and leasebacks
Under regulations prescribed by the Secretary, a sale by, and leaseback to, a taxpayer who, when the property is placed in service, will be a lessee to whom the rules referred to in subsection (c)(4) apply shall not be treated as a cessation described in subparagraph (A) to the extent that the amount which will be passed through to the lessee under such rules with respect to such property is not less than the qualified rehabilitation expenditures properly taken into account by the lessee under section 47(d) with respect to such property.
(D) Coordination with paragraph (1)
If, after property is placed in service, there is a disposition or other cessation described in paragraph (1), then paragraph (1) shall be applied as if any credit which was allowable by reason of section 47(d) and which has not been required to be recaptured before such disposition, cessation, or change in use were allowable for the taxable year the property was placed in service.
(E) Special rules
Rules similar to the rules of this paragraph shall apply in cases where qualified progress expenditures were taken into account under the rules referred to in section 48(a)(5)(A).
(3) Carrybacks and carryovers adjusted
In the case of any cessation described in paragraph (1) or (2), the carrybacks and carryovers under section 39 shall be adjusted by reason of such cessation.
(4) Subsection not to apply in certain cases
Paragraphs (1) and (2) shall not apply to—
(A) a transfer by reason of death, or
(B) a transaction to which section 381(a) applies.
For purposes of this subsection, property shall not be treated as ceasing to be investment credit property with respect to the taxpayer by reason of a mere change in the form of conducting the trade or business so long as the property is retained in such trade or business as investment credit property and the taxpayer retains a substantial interest in such trade or business.
(5) Definitions and special rules
(A) Investment credit property
For purposes of this subsection, the term "investment credit property" means any property eligible for a credit determined under this subpart.
(B) Transfer between spouses or incident to divorce
In the case of any transfer described in subsection (a) of section 1041—
(i) the foregoing provisions of this subsection shall not apply, and
(ii) the same tax treatment under this subsection with respect to the transferred property shall apply to the transferee as would have applied to the transferor.
(C) Special rule
Any increase in tax under paragraph (1) or (2) shall not be treated as tax imposed by this chapter for purposes of determining the amount of any credit allowable under subpart A, B, D, or G.
(b) Certain property not eligible
No credit shall be determined under this subpart with respect to—
(1) Property used outside United States
(A) In general
Except as provided in subparagraph (B), no credit shall be determined under this subpart with respect to any property which is used predominantly outside the United States.
(B) Exceptions
Subparagraph (A) shall not apply to any property described in section 168(g)(4).
(2) Property used for lodging
No credit shall be determined under this subpart with respect to any property which is used predominantly to furnish lodging or in connection with the furnishing of lodging. The preceding sentence shall not apply to—
(A) nonlodging commercial facilities which are available to persons not using the lodging facilities on the same basis as they are available to persons using the lodging facilities.1
(B) property used by a hotel or motel in connection with the trade or business of furnishing lodging where the predominant portion of the accommodations is used by transients;
(C) a certified historic structure to the extent of that portion of the basis which is attributable to qualified rehabilitation expenditures; and
(D) any energy property.
(3) Property used by certain tax-exempt organization
No credit shall be determined under this subpart with respect to any property used by an organization (other than a cooperative described in section 521) which is exempt from the tax imposed by this chapter unless such property is used predominantly in an unrelated trade or business the income of which is subject to tax under section 511. If the property is debt-financed property (as defined in section 514(b)), the amount taken into account for purposes of determining the amount of the credit under this subpart with respect to such property shall be that percentage of the amount (which but for this paragraph would be so taken into account) which is the same percentage as is used under section 514(a), for the year the property is placed in service, in computing the amount of gross income to be taken into account during such taxable year with respect to such property. If any qualified rehabilitated building is used by the tax-exempt organization pursuant to a lease, this paragraph shall not apply for purposes of determining the amount of the rehabilitation credit.
(4) Property used by governmental units or foreign persons or entities
(A) In general
No credit shall be determined under this subpart with respect to any property used—
(i) by the United States, any State or political subdivision thereof, any possession of the United States, or any agency or instrumentality of any of the foregoing, or
(ii) by any foreign person or entity (as defined in section 168(h)(2)(C)), but only with respect to property to which section 168(h)(2)(A)(iii) applies (determined after the application of section 168(h)(2)(B)).
(B) Exception for short-term leases
This paragraph and paragraph (3) shall not apply to any property by reason of use under a lease with a term of less than 6 months (determined under section 168(i)(3)).
(C) Exception for qualified rehabilitated buildings leased to governments, etc.
If any qualified rehabilitated building is leased to a governmental unit (or a foreign person or entity) this paragraph shall not apply for purposes of determining the rehabilitation credit with respect to such building.
(D) Special rules for partnerships, etc.
For purposes of this paragraph and paragraph (3), rules similar to the rules of paragraphs (5) and (6) of section 168(h) shall apply.
(E) Cross reference
For special rules for the application of this paragraph and paragraph (3), see section 168(h).
(c) Basis adjustment to investment credit property
(1) In general
For purposes of this subtitle, if a credit is determined under this subpart with respect to any property, the basis of such property shall be reduced by the amount of the credit so determined.
(2) Certain dispositions
If during any taxable year there is a recapture amount determined with respect to any property the basis of which was reduced under paragraph (1), the basis of such property (immediately before the event resulting in such recapture) shall be increased by an amount equal to such recapture amount. For purposes of the preceding sentence, the term "recapture amount" means any increase in tax (or adjustment in carrybacks or carryovers) determined under subsection (a).
(3) Special rule
In the case of any energy credit or reforestation credit—
(A) only 50 percent of such credit shall be taken into account under paragraph (1), and
(B) only 50 percent of any recapture amount attributable to such credit shall be taken into account under paragraph (2).
(4) Recapture of reductions
(A) In general
For purposes of sections 1245 and 1250, any reduction under this subsection shall be treated as a deduction allowed for depreciation.
(B) Special rule for section 1250
For purposes of section 1250(b), the determination of what would have been the depreciation adjustments under the straight line method shall be made as if there had been no reduction under this section.
(5) Adjustment in basis of interest in partnership or S corporation
The adjusted basis of—
(A) a partner's interest in a partnership, and
(B) stock in an S corporation,
shall be appropriately adjusted to take into account adjustments made under this subsection in the basis of property held by the partnership or S corporation (as the case may be).
(d) Certain rules made applicable
For purposes of this subpart, rules similar to the rules of the following provisions (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990) shall apply:
(1) Section 46(e) (relating to limitations with respect to certain persons).
(2) Section 46(f) (relating to limitation in case of certain regulated companies).
(3) Section 46(h) (relating to special rules for cooperatives).
(4) Paragraphs (2) and (3) of section 48(b) (relating to special rule for sale-leasebacks).
(5) Section 48(d) (relating to certain leased property).
(6) Section 48(f) (relating to estates and trusts).
(7) Section 48(r) (relating to certain 501(d) organizations).
(Added
References in Text
The date of the enactment of the Revenue Reconciliation Act of 1990, referred to in subsec. (d), is the date of enactment of
Prior Provisions
A prior section 50,
Effective Date
Section applicable to property placed in service after Dec. 31, 1990, but not applicable to any transition property (as defined in
Savings Provision
For provisions that nothing in this section be construed to affect treatment of certain transactions occurring, property acquired, or items of income, loss, deduction, or credit taken into account prior to Nov. 5, 1990, for purposes of determining liability for tax for periods ending after Nov. 5, 1990, see section 11821(b) of
Section Referred to in Other Sections
This section is referred to in
1 So in original. The period probably should be a semicolon.
[§§50A, 50B. Repealed. Pub. L. 98–369, div. A, title IV, §474(m)(2), July 18, 1984, 98 Stat. 833 ]
Section 50A, added
Section 50B, added
Subsequent to repeal,
"(a)
" '(A) who has been certified (or for whom a written request for certification has been made) on or before the day the individual began work for the taxpayer by the Secretary of Labor or by the appropriate agency of State or local government as—'.
"(b)
Effective Date of Repeal
Repeal applicable to taxable years beginning after Dec. 31, 1983, and to carrybacks from such years, see section 475(a) of
Subpart F—Rules for Computing Targeted Jobs Credit
Amendments
1984—
Subpart Referred to in Other Sections
This subpart is referred to in
§51. Amount of credit
(a) Determination of amount
For purposes of section 38, the amount of the targeted jobs credit determined under this section for the taxable year shall be equal to 40 percent of the qualified first-year wages for such year.
(b) Qualified wages defined
For purposes of this subpart—
(1) In general
The term "qualified wages" means the wages paid or incurred by the employer during the taxable year to individuals who are members of a targeted group.
(2) Qualified first-year wages
The term "qualified first-year wages" means, with respect to any individual, qualified wages attributable to service rendered during the 1-year period beginning with the day the individual begins work for the employer.
(3) Only first $6,000 of wages per year taken into account
The amount of the qualified first-year wages which may be taken into account with respect to any individual shall not exceed $6,000 per year.
(c) Wages defined
For purposes of this subpart—
(1) In general
Except as otherwise provided in this subsection, subsection (d)(8)(D), and subsection (h)(2), the term "wages" has the meaning given to such term by subsection (b) of section 3306 (determined without regard to any dollar limitation contained in such section).
(2) On-the-job training and work supplementation payments
(A) Exclusion for employers receiving on-the-job training payments
The term "wages" shall not include any amounts paid or incurred by an employer for any period to any individual for whom the employer receives federally funded payments for on-the-job training of such individual for such period.
(B) Reduction for work supplementation payments to employers
The amount of wages which would (but for this subparagraph) be qualified wages under this section for an employer with respect to an individual for a taxable year shall be reduced by an amount equal to the amount of the payments made to such employer (however utilized by such employer) with respect to such individual for such taxable year under a program established under section 482(e) of the Social Security Act.
(3) Payments for services during labor disputes
If—
(A) the principal place of employment of an individual with the employer is at a plant or facility, and
(B) there is a strike or lockout involving employees at such plant or facility,
the term "wages" shall not include any amount paid or incurred by the employer to such individual for services which are the same as, or substantially similar to, those services performed by employees participating in, or affected by, the strike or lockout during the period of such strike or lockout.
(4) Termination
The term "wages" shall not include any amount paid or incurred to an individual who begins work for the employer after December 31, 1994.
(d) Members of targeted groups
For purposes of this subpart—
(1) In general
An individual is a member of a targeted group if such individual is—
(A) a vocational rehabilitation referral,
(B) an economically disadvantaged youth,
(C) an economically disadvantaged Vietnam-era veteran,
(D) an SSI recipient,
(E) a general assistance recipient,
(F) a youth participating in a cooperative education program,
(G) an economically disadvantaged ex-convict,
(H) an eligible work incentive employee,
(I) an involuntarily terminated CETA employee, or
(J) a qualified summer youth employee.
(2) Vocational rehabilitation referral
The term "vocational rehabilitation referral" means any individual who is certified by the designated local agency as—
(A) having a physical or mental disability which, for such individual, constitutes or results in a substantial handicap to employment, and
(B) having been referred to the employer upon completion of (or while receiving) rehabilitative services pursuant to—
(i) an individualized written rehabilitation plan under a State plan for vocational rehabilitation services approved under the Rehabilitation Act of 1973, or
(ii) a program of vocational rehabilitation carried out under
(3) Economically disadvantaged youth
(A) In general
The term "economically disadvantaged youth" means any individual who is certified by the designated local agency as—
(i) meeting the age requirements of subparagraph (B), and
(ii) being a member of an economically disadvantaged family (as determined under paragraph (11)).
(B) Age requirements
An individual meets the age requirements of this subparagraph if such individual has attained age 18 but not age 23 on the hiring date.
(4) Vietnam veteran who is a member of an economically disadvantaged family
The term "Vietnam veteran who is a member of an economically disadvantaged family" means any individual who is certified by the designated local agency as—
(A)(i) having served on active duty (other than active duty for training) in the Armed Forces of the United States for a period of more than 180 days, any part of which occurred after August 4, 1964, and before May 8, 1975, or
(ii) having been discharged or released from active duty in the Armed Forces of the United States for a service-connected disability if any part of such active duty was performed after August 4, 1964, and before May 8, 1975,
(B) not having any day during the preemployment period which was a day of extended active duty in the Armed Forces of the United States, and
(C) being a member of an economically disadvantaged family (determined under paragraph (11)).
For purposes of subparagraph (B), the term "extended active duty" means a period of more than 90 days during which the individual was on active duty (other than active duty for training).
(5) SSI recipients
The term "SSI recipient" means any individual who is certified by the designated local agency as receiving supplemental security income benefits under title XVI of the Social Security Act (including supplemental security income benefits of the type described in section 1616 of such Act or section 212 of
(6) General assistance recipients
(A) In general
The term "general assistance recipient" means any individual who is certified by the designated local agency as receiving assistance under a qualified general assistance program for any period of not less than 30 days ending within the preemployment period.
(B) Qualified general assistance program
The term "qualified general assistance program" means any program of a State or a political subdivision of a State—
(i) which provides general assistance or similar assistance which—
(I) is based on need, and
(II) consists of money payments or voucher or scrip, and
(ii) which is designated by the Secretary (after consultation with the Secretary of Health and Human Services) as meeting the requirements of clause (i).
(7) Economically disadvantaged ex-convict
The term "economically disadvantaged ex-convict" means any individual who is certified by the designated local agency—
(A) as having been convicted of a felony under any statute of the United States or any State,
(B) as being a member of an economically disadvantaged family (as determined under paragraph (11)), and
(C) as having a hiring date which is not more than 5 years after the last date on which such individual was so convicted or was released from prison.
(8) Youth participating in a qualified cooperative education program
(A) In general
The term "youth participating in a qualified cooperative education program" means any individual who is certified by the school participating in the program as—
(i) having attained age 16 and not having attained age 20,
(ii) not having graduated from a high school or vocational school,
(iii) being enrolled in and actively pursuing a qualified cooperative education program, and
(iv) being a member of an economically disadvantaged family (as determined under paragraph (11)).
(B) Qualified cooperative education program defined
The term "qualified cooperative education program" means a program of vocational education for individuals who (through written cooperative arrangements between a qualified school and 1 or more employers) receive instruction (including required academic instruction) by alternation of study and school with a job in any occupational field (but only if these 2 experiences are planned by the school and employer so that each contributes to the student's education and employability).
(C) Qualified school defined
The term "qualified school" means—
(i) a specialized high school used exclusively or principally for the provision of vocational education to individuals who are available for study in preparation for entering the labor market,
(ii) the department of a high school exclusively or principally used for providing vocational education to persons who are available for study in preparation for entering the labor market, or
(iii) a technical or vocational school used exclusively or principally for the provision of vocational education to persons who have completed or left high school and who are available for study in preparation for entering the labor market.
A school which is not a public school shall be treated as a qualified school only if it is exempt from tax under section 501(a).
(D) Wages
In the case of remuneration attributable to services performed while the individual meets the requirements of clauses (i), (ii), and (iii) of subparagraph (A), wages, and unemployment insurance wages, shall be determined without regard to section 3306(c)(10)(C).
(9) Eligible work incentive employees
The term "eligible work incentive employee" means an individual who has been certified by the designated local agency as—
(A) being eligible for financial assistance under part A of title IV of the Social Security Act and as having continually received such financial assistance during the 90-day period which immediately precedes the date on which such individual is hired by the employer, or
(B) having been placed in employment under a work incentive program established under section 432(b)(1) or 445 1 of the Social Security Act.
(10) Involuntarily terminated CETA employee
The term "involuntarily terminated CETA employee" means an individual who is certified by the designated local agency as having been involuntarily terminated after December 31, 1980, from employment financed in whole or in part under a program under part D of title II or title VI of the Comprehensive Employment and Training Act. This paragraph shall not apply to any individual who begins work for the employer after December 31, 1982.
(11) Members of economically disadvantaged families
An individual is a member of an economically disadvantaged family if the designated local agency determines that such individual was a member of a family which had an income during the 6 months immediately preceding the earlier of the month in which such determination occurs or the month in which the hiring date occurs, which, on an annual basis, would be 70 percent or less of the Bureau of Labor Statistics lower living standard. Any such determination shall be valid for the 45-day period beginning on the date such determination is made. Any such determination with respect to an individual who is a qualified summer youth employee or youth participating in a qualified cooperative education program with respect to any employer shall also apply for purposes of determining whether such individual is a member of another targeted group with respect to such employer.
(12) Qualified summer youth employee
(A) In general
The term "qualified summer youth employee" means an individual—
(i) who performs services for the employer between May 1 and September 15,
(ii) who is certified by the designated local agency as having attained age 16 but not 18 on the hiring date (or if later, on May 1 of the calendar year involved),
(iii) who has not been an employee of the employer during any period prior to the 90-day period described in subparagraph (B)(iii), and
(iv) who is certified by the designated local agency as being a member of an economically disadvantaged family (as determined under paragraph (11)).
(B) Special rules for determining amount of credit
For purposes of applying this subpart to wages paid or incurred to any qualified summer youth employee—
(i) subsection (b)(2) shall be applied by substituting "any 90-day period between May 1 and September 15" for "the 1-year period beginning with the day the individual begins work for the employer", and
(ii) subsection (b)(3) shall be applied by substituting "$3,000" for "$6,000".
(C) Special rule for continued employment for same employer
In the case of an individual who, with respect to the same employer, is certified as a member of another targeted group after such individual has been a qualified summer youth employee, paragraph (14) shall be applied by substituting "certified" for "hired by the employer".
(13) Preemployment period
The term "preemployment period" means the 60-day period ending on the hiring date.
(14) Hiring date
The term "hiring date" means the day the individual is hired by the employer.
(15) Designated local agency
The term "designated local agency" means a State employment security agency established in accordance with the Act of June 6, 1933, as amended (
(16) Special rules for certifications
(A) In general
An individual shall not be treated as a member of a targeted group unless, on or before the day on which such individual begins work for the employer, the employer—
(i) has received a certification from a designated local agency that such individual is a member of a targeted group, or
(ii) has requested in writing such certification from the designated local agency.
For purposes of the preceding sentence, if on or before the day on which such individual begins work for the employer, such individual has received from a designated local agency (or other agency or organization designated pursuant to a written agreement with such designated local agency) a written preliminary determination that such individual is a member of a targeted group, then "the fifth day" shall be substituted for "the day" in such sentence.
(B) Incorrect certifications
If—
(i) an individual has been certified as a member of a targeted group, and
(ii) such certification is incorrect because it was based on false information provided by such individual,
the certification shall be revoked and wages paid by the employer after the date on which notice of revocation is received by the employer shall not be treated as qualified wages.
(C) Employer request must specify potential basis for eligibility
In any request for a certification of an individual as a member of a targeted group, the employer shall—
(i) specify each subparagraph (but not more than 2) of paragraph (1) by reason of which the employer believes that such individual is such a member, and
(ii) certify that a good faith effort was made to determine that such individual is such a member.
[(e) Repealed. Pub. L. 97–34, title II, §261(e)(1), Aug. 13, 1981, 95 Stat. 262 ]
(f) Remuneration must be for trade or business employment
(1) In general
For purposes of this subpart, remuneration paid by an employer to an employee during any taxable year shall be taken into account only if more than one-half of the remuneration so paid is for services performed in a trade or business of the employer.
(2) Special rule for certain determination
Any determination as to whether paragraph (1), or subparagraph (A) or (B) of subsection (h)(1), applies with respect to any employee for any taxable year shall be made without regard to subsections (a) and (b) of section 52.
(g) United States Employment Service to notify employers of availability of credit
The United States Employment Service, in consultation with the Internal Revenue Service, shall take such steps as may be necessary or appropriate to keep employers apprised of the availability of the targeted jobs credit determined under this subpart.
(h) Special rules for agricultural labor and railway labor
For purposes of this subpart—
(1) Unemployment insurance wages
(A) Agricultural labor
If the services performed by any employee for an employer during more than one-half of any pay period (within the meaning of section 3306(d)) taken into account with respect to any year constitute agricultural labor (within the meaning of section 3306(k)), the term "unemployment insurance wages" means, with respect to the remuneration paid by the employer to such employee for such year, an amount equal to so much of such remuneration as constitutes "wages" within the meaning of section 3121(a), except that the contribution and benefit base for each calendar year shall be deemed to be $6,000.
(B) Railway labor
If more than one-half of remuneration paid by an employer to an employee during any year is remuneration for service described in section 3306(c)(9), the term "unemployment insurance wages" means, with respect to such employee for such year, an amount equal to so much of the remuneration paid to such employee during such year which would be subject to contributions under section 8(a) of the Railroad Unemployment Insurance Act (
(2) Wages
In any case to which subparagraph (A) or (B) of paragraph (1) applies, the term "wages" means unemployment insurance wages (determined without regard to any dollar limitation).
(i) Certain individuals ineligible
(1) Related individuals
No wages shall be taken into account under subsection (a) with respect to an individual who—
(A) bears any of the relationships described in paragraphs (1) through (8) of section 152(a) to the taxpayer, or, if the taxpayer is a corporation, to an individual who owns, directly or indirectly, more than 50 percent in value of the outstanding stock of the corporation, or, if the taxpayer is an entity other than a corporation, to any individual who owns, directly or indirectly, more than 50 percent of the capital and profits interests in the entity,2 (determined with the application of section 267(c)),
(B) if the taxpayer is an estate or trust, is a grantor, beneficiary, or fiduciary of the estate or trust, or is an individual who bears any of the relationships described in paragraphs (1) through (8) of section 152(a) to a grantor, beneficiary, or fiduciary of the estate or trust, or
(C) is a dependent (described in section 152(a)(9)) of the taxpayer, or, if the taxpayer is a corporation, of an individual described in subparagraph (A), or, if the taxpayer is an estate or trust, of a grantor, beneficiary, or fiduciary of the estate or trust.
(2) Nonqualifying rehires
No wages shall be taken into account under subsection (a) with respect to any individual if, prior to the hiring date of such individual, such individual had been employed by the employer at any time during which he was not a member of a targeted group.
(3) Individuals not meeting minimum employment period
No wages shall be taken into account under subsection (a) with respect to any individual unless such individual either—
(A) is employed by the employer at least 90 days (14 days in the case of an individual described in subsection (d)(12)), or
(B) has completed at least 120 hours (20 hours in the case of an individual described in subsection (d)(12)) of services performed for the employer.
(j) Election to have targeted jobs credit not apply
(1) In general
A taxpayer may elect to have this section not apply for any taxable year.
(2) Time for making election
An election under paragraph (1) for any taxable year may be made (or revoked) at any time before the expiration of the 3-year period beginning on the last date prescribed by law for filing the return for such taxable year (determined without regard to extensions).
(3) Manner of making election
An election under paragraph (1) (or revocation thereof) shall be made in such manner as the Secretary may by regulations prescribe.
(k) Treatment of successor employers; treatment of employees performing services for other persons
(1) Treatment of successor employers
Under regulations prescribed by the Secretary, in the case of a successor employer referred to in section 3306(b)(1), the determination of the amount of the credit under this section with respect to wages paid by such successor employer shall be made in the same manner as if such wages were paid by the predecessor employer referred to in such section.
(2) Treatment of employees performing services for other persons
No credit shall be determined under this section with respect to remuneration paid by an employer to an employee for services performed by such employee for another person unless the amount reasonably expected to be received by the employer for such services from such other person exceeds the remuneration paid by the employer to such employee for such services.
(Added
References in Text
The Social Security Act, referred to in subsecs. (c)(2)(B) and (d)(5), (9), is act Aug. 14, 1935, ch. 531,
The Rehabilitation Act of 1973, referred to in subsec. (d)(2)(B)(i), is
Section 212 of
The Comprehensive Employment and Training Act, referred to in subsec. (d)(10), is
Act of June 6, 1933, as amended (
Prior Provisions
A prior section 51, added
Amendments
1993—Subsec. (c)(4).
Subsec. (i)(1)(A).
1991—Subsec. (c)(4).
1990—Subsec. (c)(4).
1989—Subsec. (c)(4).
Subsec. (d)(16)(C).
1988—Subsec. (c)(2)(B).
Subsec. (c)(4).
Subsec. (d)(3)(B).
Subsec. (d)(12)(B).
1987—Subsec. (c)(3), (4).
1986—Subsec. (a).
"(1) 50 percent of the qualified first-year wages for such year, and
"(2) 25 percent of the qualified second-year wages for such year."
Subsec. (b)(3), (4).
Subsec. (c)(3).
Subsec. (d)(12)(B).
Subsec. (i)(3).
Subsec. (k).
1984—Subsec. (a).
Subsec. (b)(2).
Subsec. (c)(2).
Subsec. (c)(3).
Subsec. (d)(6)(B)(ii).
Subsec. (d)(11).
Subsec. (d)(12)(A)(ii).
Subsec. (d)(16)(A).
Subsec. (g).
Subsec. (j).
1983—Subsec. (d)(8)(D).
Subsec. (d)(9)(B).
Subsec. (d)(11).
1982—Subsec. (c)(3).
Subsec. (d)(1)(J).
Subsec. (d)(6)(B)(i)(II).
Subsec. (d)(10).
Subsec. (d)(12) to (15).
Subsec. (d)(16).
1981—Subsec. (c)(3), (4).
Subsec. (d)(1)(H), (I).
Subsec. (d)(3)(A)(ii).
Subsec. (d)(4).
Subsec. (d)(7)(B).
Subsec. (d)(8)(A)(iv).
Subsec. (d)(9), (10).
Subsec. (d)(11).
Subsec. (d)(12), (13).
Subsec. (d)(14).
Subsec. (d)(15).
Subsec. (e).
Subsec. (f).
Subsec. (g).
Subsec. (i).
1980—Subsec. (c)(1).
Subsec. (c)(2).
Subsec. (c)(4).
Subsec. (d)(1)(E).
Subsec. (d)(4)(A)(i).
Subsec. (d)(4)(B).
Subsec. (d)(5).
Subsec. (d)(8)(A).
Subsec. (d)(8)(D).
Subsec. (d)(12).
Subsec. (e).
1978—
Effective Date of 1993 Amendment
Section 13102(b) of
Effective Date of 1991 Amendment
Section 105(b) of
Effective Date of 1990 Amendment
Section 11405(c) of
"(1)
"(2)
Effective Date of 1989 Amendment
Section 7103(c)(2) of
Effective Date of 1988 Amendments
Amendment by section 1017(a) of
Section 4010(c)(2) of
Section 4010(d)(2) of
Amendment by
Effective Date of 1987 Amendment
Section 10601(b) of
Effective Date of 1986 Amendment
Section 1701(e) of
Amendment by section 1878(f)(1) of
Effective Date of 1984 Amendment
Amendment by section 474(p)(1)–(3) of
Amendment by section 712 of
Section 1041(c)(5) of
"(A)
"(B)
Section 2638(c)(2) of
Amendment by section 2663 of
Effective Date of 1983 Amendment
Section 102(l)(4) of
Amendment by title I of
Effective Date of 1982 Amendment
Section 233(f) of
Section 233(g) of
"(1)
"(2)
Effective Date of 1981 Amendment
Section 261(g) of
"(1)
"(A)
"(B)
"(C)
"(D)
"(2)
"(A)
"(B)
"(C)
"(3)
Effective Date of 1980 Amendment
Section 103(b)(1) of
Amendment by
Effective Date of 1978 Amendment
Section 321(d)(1) of
Effective Date
Section 202(e) of
Authorization of Appropriations
Section 261(f)(2) of
"(A) $5,000,000 shall be used to test whether individuals certified as members of targeted groups under section 51 of such Code are eligible for such certification (including the use of statistical sampling techniques), and
"(B) the remainder shall be distributed under performance standards prescribed by the Secretary of Labor.
The Secretary of Labor shall each calendar year beginning with calendar year 1983 report to the Committee on Ways and Means of the House of Representatives and to the Committee on Finance of the Senate with respect to the results of the testing conducted under subparagraph (A) during the preceding calendar year."
[Amendment by
Plan Amendments Not Required Until January 1, 1989
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101–1147 and 1171–1177] or title XVIII [§§1800–1899A] of
Special Rules for Newly Targeted Groups
Section 321(d)(2) of
"(A)
"(i) such individual shall be taken into account for purposes of the credit allowable by section 44B of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] only if such individual is first hired by the employer after September 26, 1978, and
"(ii) such individual shall be treated for purposes of such credit as having first begun work for the employer not earlier than January 1, 1979.
"(i) such individual meets the requirements of paragraph (1) of section 51(d) of such Code, and
"(ii) in the case of an individual meeting the requirements of subparagraph (A) of such paragraph (1), a credit was not claimed for such individual by the taxpayer for a taxable year beginning before January 1, 1979."
Credit Allowable by Section 44B in Case of Taxable Year Beginning in 1978 and Ending After December 31, 1978
Section 321(d)(3) of
"(A) the amount of the credit which would be so determined without regard to the amendments made by this section, plus
"(B) the amount of the credit which would be so determined by reason of the amendments made by this section."
Section Referred to in Other Sections
This section is referred to in
1 See References in Text note below.
2 So in original. The comma probably should not appear.
§52. Special rules
(a) Controlled group of corporations
For purposes of this subpart, all employees of all corporations which are members of the same controlled group of corporations shall be treated as employed by a single employer. In any such case, the credit (if any) determined under section 51(a) with respect to each such member shall be its proportionate share of the wages giving rise to such credit. For purposes of this subsection, the term "controlled group of corporations" has the meaning given to such term by section 1563(a), except that—
(1) "more than 50 percent" shall be substituted for "at least 80 percent" each place it appears in section 1563(a)(1), and
(2) the determination shall be made without regard to subsections (a)(4) and (e)(3)(C) of section 1563.
(b) Employees of partnerships, proprietorships, etc., which are under common control
For purposes of this subpart, under regulations prescribed by the Secretary—
(1) all employees of trades or business (whether or not incorporated) which are under common control shall be treated as employed by a single employer, and
(2) the credit (if any) determined under section 51(a) with respect to each trade or business shall be its proportionate share of the wages giving rise to such credit.
The regulations prescribed under this subsection shall be based on principles similar to the principles which apply in the case of subsection (a).
(c) Tax-exempt organizations
No credit shall be allowed under section 38 for any targeted jobs credit determined under this subpart to any organization (other than a cooperative described in section 521) which is exempt from income tax under this chapter.
(d) Estates and trusts
In the case of an estate or trust—
(1) the amount of the credit determined under this subpart for any taxable year shall be apportioned between the estate or trust and the beneficiaries on the basis of the income of the estate or trust allocable to each, and
(2) any beneficiary to whom any amount has been apportioned under paragraph (1) shall be allowed, subject to section 38(c), a credit under section 38(a) for such amount.
(e) Limitations with respect to certain persons
Under regulations prescribed by the Secretary, in the case of—
(1) an organization to which section 593 (relating to reserves for losses on loans) applies,
(2) a regulated investment company or a real estate investment trust subject to taxation under subchapter M (section 851 and following), and
(3) a cooperative organization described in section 1381(a),
rules similar to the rules provided in subsections (e) and (h) of section 46 (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990) shall apply in determining the amount of the credit under this subpart.
(Added
References in Text
The date of the enactment of the Revenue Reconciliation Act of 1990, referred to in subsec. (e), is the date of enactment of
Amendments
1990—Subsec. (e).
1984—Subsec. (a).
Subsec. (b)(2).
Subsec. (c).
Subsec. (d)(2).
1982—Subsecs. (d) to (f).
1980—Subsec. (f).
1978—Subsecs. (a), (b).
Subsecs. (c), (d).
Subsec. (e).
Subsecs. (f) to (h).
Subsec. (i).
Subsec. (j).
Effective Date of 1990 Amendment
Amendment by
Effective Date of 1984 Amendment
Amendment by
Effective Date of 1982 Amendment
Amendment by
Effective Date of 1980 Amendment
Amendment by
Effective Date of 1978 Amendment
Amendment by
Effective Date
Section applicable to taxable years beginning after Dec. 31, 1976, and to credit carrybacks from such years, see section 202(e) of
Savings Provision
For provisions that nothing in amendment by
Section Referred to in Other Sections
This section is referred to in
Subpart G—Credit Against Regular Tax for Prior Year Minimum Tax Liability
Subpart Referred to in Other Sections
This subpart is referred to in
§53. Credit for prior year minimum tax liability
(a) Allowance of credit
There shall be allowed as a credit against the tax imposed by this chapter for any taxable year an amount equal to the minimum tax credit for such taxable year.
(b) Minimum tax credit
For purposes of subsection (a), the minimum tax credit for any taxable year is the excess (if any) of—
(1) the adjusted net minimum tax imposed for all prior taxable years beginning after 1986, over
(2) the amount allowable as a credit under subsection (a) for such prior taxable years.
(c) Limitation
The credit allowable under subsection (a) for any taxable year shall not exceed the excess (if any) of—
(1) the regular tax liability of the taxpayer for such taxable year reduced by the sum of the credits allowable under subparts A, B, D, E, and F of this part, over
(2) the tentative minimum tax for the taxable year.
(d) Definitions
For purposes of this section—
(1) Net minimum tax
(A) In general
The term "net minimum tax" means the tax imposed by section 55.
(B) Credit not allowed for exclusion preferences
(i) Adjusted net minimum tax
The adjusted net minimum tax for any taxable year is—
(I) the amount of the net minimum tax for such taxable year, reduced by
(II) the amount which would be the net minimum tax for such taxable year if the only adjustments and items of tax preference taken into account were those specified in clause (ii) and if section 59(a)(2) did not apply.
(ii) Specified items
The following are specified in this clause—
(I) the adjustments provided for in subsection (b)(1) of section 56, and
(II) the items of tax preference described in paragraphs (1), (5), and (7) of section 57(a).
(iii) Special rule
The adjusted net minimum tax for the taxable year shall be increased by the amount of the credit not allowed under section 29 (relating to credit for producing fuel from a nonconventional source) solely by reason of the application of section 29(b)(6)(B), not allowed under section 28 solely by reason of the application of section 28(d)(2)(B), or not allowed under section 30 solely by reason of the application of section 30(b)(3)(B).
(iv) Credit allowable for exclusion preferences of corporations
In the case of a corporation—
(I) the preceding provisions of this subparagraph shall not apply, and
(II) the adjusted net minimum tax for any taxable year is the amount of the net minimum tax for such year increased by the amount of any credit not allowed under section 29 solely by reason of the application of section 29(b)(5)(B) 1 or not allowed under section 28 solely by reason of the application of section 28(d)(2)(B).
(2) Tentative minimum tax
The term "tentative minimum tax" has the meaning given to such term by section 55(b).
(Added
References in Text
Section 29(b)(5)(B), referred to in subsec. (d)(1)(B)(iv)(II), was redesignated section 29(b)(6)(B) and a new section 29(b)(5)(B) was added by
Prior Provisions
A prior section 53, added
Amendments
1993—Subsec. (d)(1)(B)(ii)(II).
1992—Subsec. (d)(1)(B)(iii).
1989—Subsec. (d)(1)(B)(i)(II).
Subsec. (d)(1)(B)(ii).
Subsec. (d)(1)(B)(iii).
Subsec. (d)(1)(B)(iv).
1988—Subsec. (d)(1)(B)(ii).
Subsec. (d)(1)(B)(iii).
Effective Date of 1993 Amendment
Section 13113(e) of
Section 13171(d) of
Effective Date of 1992 Amendment
Amendment by
Effective Date of 1989 Amendment
Section 7612(a)(3) of
Section 7612(b)(2) of
Amendment by section 7811(d)(2) of
Effective Date of 1988 Amendment
Amendment by section 1007(g)(4) of
Section 6304(b) of
Effective Date
Section applicable to taxable years beginning after Dec. 31, 1986, with certain exceptions and qualifications, see section 701(f) of
Applicability of Certain Amendments by Pub. L. 99–514 in Relation to Treaty Obligations of United States
For applicability of amendment by section 701(b) of
Section Referred to in Other Sections
This section is referred to in