Collapse to view only § 45R. Employee health insurance expenses of small employers
- § 38. General business credit
- § 39. Carryback and carryforward of unused credits
- § 40. Alcohol, etc., used as fuel
- § 40A. Biodiesel and renewable diesel used as fuel
- § 40B. Sustainable aviation fuel credit
- § 41. Credit for increasing research activities
- § 42. Low-income housing credit
- § 43. Enhanced oil recovery credit
- § 44. Expenditures to provide access to disabled individuals
- [§ 44A. Renumbered § 21]
- [§ 44B. Repealed.
- [§ 44C. Renumbered § 23]
- [§ 44D. Renumbered § 29]
- [§ 44E. Renumbered § 40]
- [§ 44F. Renumbered § 30]
- [§ 44G. Renumbered § 41]
- [§ 44H. Renumbered § 45C]
- § 45. Electricity produced from certain renewable resources, etc.
- § 45A. Indian employment credit
- § 45B. Credit for portion of employer social security taxes paid with respect to employee cash tips
- § 45C. Clinical testing expenses for certain drugs for rare diseases or conditions
- § 45D. New markets tax credit
- § 45E. Small employer pension plan startup costs
- § 45F. Employer-provided child care credit
- § 45G. Railroad track maintenance credit
- § 45H. Credit for production of low sulfur diesel fuel
- § 45I. Credit for producing oil and gas from marginal wells
- § 45J. Credit for production from advanced nuclear power facilities
- § 45K. Credit for producing fuel from a nonconventional source
- § 45L. New energy efficient home credit
- [§ 45M. Repealed.
- § 45N. Mine rescue team training credit
- § 45O. Agricultural chemicals security credit
- § 45P. Employer wage credit for employees who are active duty members of the uniformed services
- § 45Q. Credit for carbon oxide sequestration
- § 45R. Employee health insurance expenses of small employers
- § 45S. Employer credit for paid family and medical leave
- § 45T. Auto-enrollment option for retirement savings options provided by small employers
- § 45U. Zero-emission nuclear power production credit
- § 45V. Credit for production of clean hydrogen
- § 45W. Credit for qualified commercial clean vehicles
- § 45X. Advanced manufacturing production credit
- § 45Y. Clean electricity production credit
- § 45Z. Clean fuel production credit
- § 45AA. Military spouse retirement plan eligibility credit for small employers
§ 38. General business credit
(a) Allowance of creditThere 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 creditFor purposes of this subpart, the amount of the current year business credit is the sum of the following credits determined for the taxable year:
(1) the investment credit determined under section 46,
(2) the work opportunity credit determined under section 51(a),
(3) the alcohol fuels credit determined under section 40(a),
(4) the research credit determined under section 41(a),
(5) the low-income housing credit determined under section 42(a),
(6) the enhanced oil recovery credit under section 43(a),
(7) in the case of an eligible small business (as defined in section 44(b)), the disabled access credit determined under section 44(a),
(8) the renewable electricity production credit under section 45(a),
(9) the empowerment zone employment credit determined under section 1396(a),
(10) the Indian employment credit as determined under section 45A(a),
(11) the employer social security credit determined under section 45B(a),
(12) the orphan drug credit determined under section 45C(a),
(13) the new markets tax credit determined under section 45D(a),
(14) in the case of an eligible employer (as defined in section 45E(c)), the small employer pension plan startup cost credit determined under section 45E(a),
(15) the employer-provided child care credit determined under section 45F(a),
(16) the railroad track maintenance credit determined under section 45G(a),
(17) the biodiesel fuels credit determined under section 40A(a),
(18) the low sulfur diesel fuel production credit determined under section 45H(a),
(19) the marginal oil and gas well production credit determined under section 45I(a),
(20) the distilled spirits credit determined under section 5011(a),
(21) the advanced nuclear power facility production credit determined under section 45J(a),
(22) the nonconventional source production credit determined under section 45K(a),
(23) the new energy efficient home credit determined under section 45L(a),
(24) the portion of the alternative motor vehicle credit to which section 30B(g)(1) applies,
(25) the portion of the alternative fuel vehicle refueling property credit to which section 30C(d)(1) applies,
(26) the mine rescue team training credit determined under section 45N(a),
(27) in the case of an eligible agricultural business (as defined in section 45O(e)), the agricultural chemicals security credit determined under section 45O(a),
(28) the differential wage payment credit determined under section 45P(a),
(29) the carbon dioxide sequestration credit determined under section 45Q(a),
(30) the portion of the new clean vehicle credit to which section 30D(c)(1) applies,
(31) the small employer health insurance credit determined under section 45R,
(32) in the case of an eligible employer (as defined in section 45S(c)), the paid family and medical leave credit determined under section 45S(a),
(33) in the case of an eligible employer (as defined in section 45T(c)), the retirement auto-enrollment credit determined under section 45T(a), plus
(34) the zero-emission nuclear power production credit determined under section 45U(a).
(35) the sustainable aviation fuel credit determined under section 40B,
(36) the clean hydrogen production credit determined under section 45V(a),
(37) the qualified commercial clean vehicle credit determined under section 45W, plus
(38) the advanced manufacturing production credit determined under section 45X(a).
(41)1
1 See Amendment of Subsection (b) note below.
in the case of an eligible small employer (as defined in section 45AA(c)), the military spouse retirement plan eligibility credit determined under section 45AA(a).(c) Limitation based on amount of tax
(1) In generalThe 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 generalIn the case of the empowerment zone employment credit—
(i) this section and section 39 shall be applied separately with respect to such credit, and
(ii) for purposes of applying paragraph (1) to such credit—(I) 75 percent of the tentative minimum tax shall be substituted for the tentative minimum tax under subparagraph (A) thereof, and(II) the limitation under paragraph (1) (as modified by subclause (I)) shall be reduced by the credit allowed under subsection (a) for the taxable year (other than the empowerment zone employment credit and the specified credits).
(B) Empowerment zone employment credit
[(3) Repealed. Pub. L. 115–141, div. U, title IV, § 401(d)(6)(B)(iii), Mar. 23, 2018, 132 Stat. 1211]
(4) Special rules for specified credits
(A) In generalIn the case of specified credits—
(i) this section and section 39 shall be applied separately with respect to such credits, and
(ii) in applying paragraph (1) to such credits—(I) the tentative minimum tax shall be treated as being zero, and(II) the limitation under paragraph (1) (as modified by subclause (I)) shall be reduced by the credit allowed under subsection (a) for the taxable year (other than the specified credits).
(B) Specified creditsFor purposes of this subsection, the term “specified credits” means—
(i) for taxable years beginning after December 31, 2004, the credit determined under section 40,
(ii) the credit determined under section 41 for the taxable year with respect to an eligible small business (as defined in paragraph (5)(A) after application of the rules of paragraph (5)(B)),
(iii) the credit determined under section 42 to the extent attributable to buildings placed in service after December 31, 2007,
(iv) the credit determined under section 45 to the extent that such credit is attributable to electricity or refined coal produced—(I) at a facility which is originally placed in service after the date of the enactment of this paragraph, and(II) during the 4-year period beginning on the date that such facility was originally placed in service,
(v) the credit determined under section 45 to the extent that such credit is attributable to section 45(e)(10) (relating to Indian coal production facilities),
(vi) the credit determined under section 45B,
(vii) the credit determined under section 45G,
(viii) the credit determined under section 45R,
(ix) the credit determined under section 45S,
(x) the credit determined under section 46 to the extent that such credit is attributable to the energy credit determined under section 48,
(xi) the credit determined under section 46 to the extent that such credit is attributable to the rehabilitation credit under section 47, but only with respect to qualified rehabilitation expenditures properly taken into account for periods after December 31, 2007, and
(xii) the credit determined under section 51.
(5) Rules related to eligible small businesses
(A) Eligible small businessFor purposes of this subsection, the term “eligible small business” means, with respect to any taxable year—
(i) a corporation the stock of which is not publicly traded,
(ii) a partnership, or
(iii) a sole proprietorship,
if the average annual gross receipts of such corporation, partnership, or sole proprietorship for the 3-taxable-year period preceding such taxable year does not exceed $50,000,000. For purposes of applying the test under the preceding sentence, rules similar to the rules of paragraphs (2) and (3) of section 448(c) shall apply.
(B) Treatment of partners and S corporation shareholders
(6) Special rules
(A) Married individuals
(B) Controlled groups
(C) Limitations with respect to certain persons
(D) Estates and trusts
(E) CorporationsIn the case of a corporation—
(i) the first sentence of paragraph (1) shall be applied by substituting “25 percent of the taxpayer’s net income tax as exceeds $25,000” for “the greater of” and all that follows,
(ii) paragraph (2)(A) shall be applied without regard to clause (ii)(I) thereof, and
(iii) paragraph (4)(A) shall be applied without regard to clause (ii)(I) thereof.
(d) Ordering rulesFor 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
(2) Components of investment credit
(Added and amended Pub. L. 98–369, div. A, title IV, § 473, title VI, § 612(e)(1), July 18, 1984, 98 Stat. 827, 912; Pub. L. 99–514, title II, §§ 221(a), 231(d)(1), (3)(B), 252(b), title VII, § 701(c)(4), title XI, § 1171(b)(1), (2), Oct. 22, 1986, 100 Stat. 2173, 2178, 2179, 2205, 2341, 2513; Pub. L. 100–647, title I, §§ 1002(e)(8)(A), 1007(g)(2), (8), Nov. 10, 1988, 102 Stat. 3368, 3434, 3435; Pub. L. 101–508, title XI, §§ 11511(b)(1), 11611(b)(1), 11813(b)(2), Nov. 5, 1990, 104 Stat. 1388–485, 1388–503, 1388–551; Pub. L. 102–486, title XIX, § 1914(b), Oct. 24, 1992, 106 Stat. 3023; Pub. L. 103–66, title XIII, §§ 13302(a)(1), (c)(1), 13322(a), 13443(b)(1), Aug. 10, 1993, 107 Stat. 555, 559, 569; Pub. L. 104–188, title I, §§ 1201(e)(1), 1205(a)(2), 1702(e)(4), Aug. 20, 1996, 110 Stat. 1772, 1775, 1870; Pub. L. 106–554, § 1(a)(7) [title I, § 121(b)(1)], Dec. 21, 2000, 114 Stat. 2763, 2763A–609; Pub. L. 107–16, title II, § 205(b)(1), title VI, § 619(b), June 7, 2001, 115 Stat. 53, 110; Pub. L. 107–147, title III, § 301(b)(1), (2), title IV, § 411(d)(2), Mar. 9, 2002, 116 Stat. 39, 46; Pub. L. 108–357, title II, § 245(c)(1), title III, §§ 302(b), 339(b), 341(b), title VII, § 711(a), (b), Oct. 22, 2004, 118 Stat. 1448, 1465, 1484, 1487, 1557, 1558; Pub. L. 109–58, title XIII, §§ 1306(b), 1322(a)(2), 1332(b), 1334(b), 1341(b)(1), 1342(b)(1), Aug. 8, 2005, 119 Stat. 999, 1011, 1026, 1033, 1049, 1051; Pub. L. 109–59, title XI, §§ 11126(b), 11151(d)(1), Aug. 10, 2005, 119 Stat. 1958, 1968; Pub. L. 109–135, title I, § 103(b)(1), title II, § 201(b)(1), title IV, § 412(f), Dec. 21, 2005, 119 Stat. 2595, 2607, 2637; Pub. L. 109–432, div. A, title IV, § 405(b), Dec. 20, 2006, 120 Stat. 2957; Pub. L. 110–28, title VIII, § 8214(a), May 25, 2007, 121 Stat. 193; Pub. L. 110–172, § 11(a)(6), Dec. 29, 2007, 121 Stat. 2485; Pub. L. 110–234, title XV, § 15343(b), May 22, 2008, 122 Stat. 1519; Pub. L. 110–245, title I, § 111(b), June 17, 2008, 122 Stat. 1635; Pub. L. 110–246, § 4(a), title XV, § 15343(b), June 18, 2008, 122 Stat. 1664, 2281; Pub. L. 110–289, div. C, title I, § 3022(b), (c), July 30, 2008, 122 Stat. 2894; Pub. L. 110–343, div. B, title I, §§ 103(b), 115(b), title II, § 205(c), div. C, title III, § 316(b), Oct. 3, 2008, 122 Stat. 3811, 3831, 3838, 3872; Pub. L. 111–5, div. B, title I, § 1141(b)(2), Feb. 17, 2009, 123 Stat. 328; Pub. L. 111–148, title I, § 1421(b), (c), Mar. 23, 2010, 124 Stat. 241, 242; Pub. L. 111–240, title II, § 2013(a), (c), Sept. 27, 2010, 124 Stat. 2555; Pub. L. 113–295, div. A, title II, §§ 209(f)(1), 220(b), 221(a)(2)(B), (6), Dec. 19, 2014, 128 Stat. 4028, 4035, 4037, 4038; Pub. L. 114–113, div. Q, title I, §§ 121(b), 186(d)(1), Dec. 18, 2015, 129 Stat. 3049, 3074; Pub. L. 115–97, title I, §§ 12001(b)(1), 13403(b), (c), Dec. 22, 2017, 131 Stat. 2092, 2137; Pub. L. 115–141, div. U, title IV, § 401(a)(8), (b)(5)(A)–(D), (d)(2)(B), (6)(B)(i)–(iii), Mar. 23, 2018, 132 Stat. 1184, 1201, 1208, 1211; Pub. L. 116–94, div. O, title I, § 105(b), Dec. 20, 2019, 133 Stat. 3148; Pub. L. 117–169, title I, §§ 10101(d), 13105(b)(1), 13203(b), 13204(a)(4)(A), 13401(i)(3), 13403(b)(1), 13502(b)(1), 13701(b)(1), 13704(b)(3), Aug. 16, 2022, 136 Stat. 1828, 1931, 1934, 1939, 1961, 1965, 1981, 1990, 2002; Pub. L. 117–328, div. T, title I, § 112(b), Dec. 29, 2022, 136 Stat. 5295.)
§ 39. Carryback and carryforward of unused credits
(a) In general
(1) 1-year carryback and 20-year carryforwardIf the sum of the business credit carryforwards to the taxable year plus the amount of the current year business credit for the taxable year exceeds the amount of the limitation imposed by subsection (c) of section 38 for such taxable year (hereinafter in this section referred to as the “unused credit year”), such excess (to the extent attributable to the amount of the current year business credit) shall be—
(A) a business credit carryback to the taxable year preceding the unused credit year, and
(B) a business credit carryforward to each of the 20 taxable years following the unused credit year,
and, subject to the limitations imposed by subsections (b) and (c), shall be taken into account under the provisions of section 38(a) in the manner provided in section 38(a).
(2) Amount carried to each year
(A) Entire amount carried to first year
(B) Amount carried to other 20 years
(3) 5-year carryback for marginal oil and gas well production creditNotwithstanding subsection (d), in the case of the marginal oil and gas well production credit—
(A) this section shall be applied separately from the business credit (other than the marginal oil and gas well production credit),
(B) paragraph (1) shall be applied by substituting “each of the 5 taxable years” for “the taxable year” in subparagraph (A) thereof, and
(C) paragraph (2) shall be applied—
(i) by substituting “25 taxable years” for “21 taxable years” in subparagraph (A) thereof, and
(ii) by substituting “24 taxable years” for “20 taxable years” in subparagraph (B) thereof.
(4) 3-year carryback for applicable creditsNotwithstanding subsection (d), in the case of any applicable credit (as defined in section 6417(b))—
(A) this section shall be applied separately from the business credit (other than the applicable credit),
(B) paragraph (1) shall be applied by substituting “each of the 3 taxable years” for “the taxable year” in subparagraph (A) thereof, and
(C) paragraph (2) shall be applied—
(i) by substituting “23 taxable years” for “21 taxable years” in subparagraph (A) thereof, and
(ii) by substituting “22 taxable years” for “20 taxable years” in subparagraph (B) thereof.
(b) Limitation on carrybacksThe 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
(d) Transitional rule
(Added Pub. L. 98–369, div. A, title IV, § 473, July 18, 1984, 98 Stat. 828; amended Pub. L. 99–514, title II, § 231(d)(3)(C)(i), title XVIII, § 1846, Oct. 22, 1986, 100 Stat. 2179, 2856; Pub. L. 100–647, title I, § 1002(l)(26), Nov. 10, 1988, 102 Stat. 3381; Pub. L. 101–508, title XI, §§ 11511(b)(2), 11611(b)(2), 11801(a)(2), Nov. 5, 1990, 104 Stat. 1388–485, 1388–503, 1388–520; Pub. L. 102–486, title XIX, § 1914(c), Oct. 24, 1992, 106 Stat. 3023; Pub. L. 103–66, title XIII, §§ 13302(a)(2), 13322(d), 13443(b)(2), Aug. 10, 1993, 107 Stat. 555, 563, 569; Pub. L. 104–188, title I, §§ 1205(c), 1703(n)(1), Aug. 20, 1996, 110 Stat. 1775, 1877; Pub. L. 105–34, title VII, § 701(b)(1), title X, § 1083(a), Aug. 5, 1997, 111 Stat. 869, 951; Pub. L. 105–206, title VI, § 6010(n), July 22, 1998, 112 Stat. 816; Pub. L. 106–554, § 1(a)(7) [title I, § 121(b)(2)], Dec. 21, 2000, 114 Stat. 2763, 2763A–610; Pub. L. 107–16, title VI, § 619(c)(1), June 7, 2001, 115 Stat. 110; Pub. L. 108–357, title II, § 245(b)(1), title III, § 341(c), Oct. 22, 2004, 118 Stat. 1447, 1487; Pub. L. 109–135, title IV, § 412(g), Dec. 21, 2005, 119 Stat. 2637; Pub. L. 111–240, title II, § 2012(a), (b), Sept. 27, 2010, 124 Stat. 2554; Pub. L. 115–141, div. U, title IV, § 401(b)(5)(E), (F), Mar. 23, 2018, 132 Stat. 1202; Pub. L. 117–169, title I, § 13801(d), Aug. 16, 2022, 136 Stat. 2012.)
§ 40. Alcohol, etc., used as fuel
(a) General ruleFor purposes of section 38, the alcohol fuels credit determined under this section for the taxable year is an amount equal to the sum of—
(1) the alcohol mixture credit,
(2) the alcohol credit,
(3) in the case of an eligible small ethanol producer, the small ethanol producer credit, plus
(4) the second generation biofuel producer credit.
(b) Definition of alcohol mixture credit, alcohol credit, and small ethanol producer creditFor purposes of this section, and except as provided in subsection (h)—
(1) Alcohol mixture credit
(A) In general
(B) Qualified mixtureThe 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
(2) Alcohol credit
(A) In generalThe 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
(3) Smaller credit for lower proof alcohol
(4) Small ethanol producer credit
(A) In general
(B) Qualified ethanol fuel productionFor 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
(D) Additional distillation excluded
(5) Adding of denaturants not treated as mixture
(6) Second generation biofuel producer credit
(A) In general
(B) Applicable amountFor purposes of subparagraph (A), the applicable amount means $1.01, except that such amount shall, in the case of second generation biofuel which is alcohol, be reduced by the sum of—
(i) the amount of the credit in effect for such alcohol under subsection (b)(1) (without regard to subsection (b)(3)) at the time of the qualified second generation biofuel production, plus
(ii) in the case of ethanol, the amount of the credit in effect under subsection (b)(4) at the time of such production.
(C) Qualified second generation biofuel productionFor purposes of this section, the term “qualified second generation biofuel production” means any second generation biofuel which is produced by the taxpayer, and which during the taxable year—
(i) is sold by the taxpayer to another person—(I) for use by such other person in the production of a qualified second generation biofuel mixture in such other person’s trade or business (other than casual off-farm production),(II) for use by such other person as a fuel in a trade or business, or(III) who sells such second generation biofuel at retail to another person and places such second generation biofuel in the fuel tank of such other person, or
(ii) is used or sold by the taxpayer for any purpose described in clause (i).
The qualified second generation biofuel production of any taxpayer for any taxable year shall not include any alcohol which is purchased by the taxpayer and with respect to which such producer increases the proof of the alcohol by additional distillation.
(D) Qualified second generation biofuel mixtureFor purposes of this paragraph, the term “qualified second generation biofuel mixture” means a mixture of second generation biofuel and gasoline or of second generation biofuel and a special fuel which—
(i) is sold by the person producing such mixture to any person for use as a fuel, or
(ii) is used as a fuel by the person producing such mixture.
(E) Second generation biofuelFor purposes of this paragraph—
(i) In generalThe term “second generation biofuel” means any liquid fuel which—(I) is derived by, or from, qualified feedstocks, and(II) meets the registration requirements for fuels and fuel additives established by the Environmental Protection Agency under section 211 of the Clean Air Act (42 U.S.C. 7545).
(ii) Exclusion of low-proof alcohol
(iii) Exclusion of certain fuelsThe term “second generation biofuel” shall not include any fuel if—(I) more than 4 percent of such fuel (determined by weight) is any combination of water and sediment,(II) the ash span of such fuel is more than 1 percent (determined by weight), or(III) such fuel has an acid number greater than 25.
(F) Qualified feedstockFor purposes of this paragraph, the term “qualified feedstock” means—
(i) any lignocellulosic or hemicellulosic matter that is available on a renewable or recurring basis, and
(ii) any cultivated algae, cyanobacteria, or lemna.
(G) Special rules for algaeIn the case of fuel which is derived by, or from, feedstock described in subparagraph (F)(ii) and which is sold by the taxpayer to another person for refining by such other person into a fuel which meets the requirements of subparagraph (E)(i)(II) and the refined fuel is not excluded under subparagraph (E)(iii)—
(i) such sale shall be treated as described in subparagraph (C)(i),
(ii) such fuel shall be treated as meeting the requirements of subparagraph (E)(i)(II) and as not being excluded under subparagraph (E)(iii) in the hands of such taxpayer, and
(iii) except as provided in this subparagraph, such fuel (and any fuel derived from such fuel) shall not be taken into account under subparagraph (C) with respect to the taxpayer or any other person.
(H) Allocation of second generation biofuel producer credit to patrons of cooperative
(I) Registration requirement
(J) Application of paragraph
(i) In general
(ii) No carryover to certain years after expiration
(c) Coordination with exemption from excise tax
(d) Definitions and special rulesFor purposes of this section—
(1) Alcohol defined
(A) In generalThe 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
(2) Special fuel defined
(3) Mixture or alcohol not used as a fuel, etc.
(A) MixturesIf—
(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) AlcoholIf—
(i) any credit was determined under this section with respect to the retail sale of any alcohol, and
(ii) any person mixes such alcohol or uses such alcohol other than as a fuel,
then there is hereby imposed on such person a tax equal to 60 cents a gallon (45 cents in the case of alcohol with a proof less than 190) for each gallon of such alcohol.
(C) Small ethanol producer creditIf—
(i) any credit was determined under subsection (a)(3), and
(ii) any person does not use such fuel for a purpose described in subsection (b)(4)(B),
then there is hereby imposed on such person a tax equal to 10 cents a gallon for each gallon of such alcohol.
(D) Second generation biofuel producer creditIf—
(i) any credit is allowed under subsection (a)(4), and
(ii) any person does not use such fuel for a purpose described in subsection (b)(6)(C),
then there is hereby imposed on such person a tax equal to the applicable amount (as defined in subsection (b)(6)(B)) for each gallon of such second generation biofuel.
(E) Applicable laws
(4) Volume of alcohol
(5) Pass-thru in the case of estates and trusts
(6) Special rule for second generation biofuel producer credit
(7) Limitation to alcohol with connection to the United States
(e) Termination
(1) In generalThis section shall not apply to any sale or use—
(A) for any period after December 31, 2011, or
(B) for any period before January 1, 2012, during which the rates of tax under section 4081(a)(2)(A) are 4.3 cents per gallon.
(2) No carryovers to certain years after expiration
(3) Exception for second generation biofuel producer credit
(f) Election to have alcohol fuels credit not apply
(1) In general
(2) Time for making election
(3) Manner of making election
(g) Definitions and special rules for eligible small ethanol producer creditFor purposes of this section—
(1) Eligible small ethanol producer
(2) Aggregation rule
(3) Partnership, S corporations, and other pass-thru entities
(4) Allocation
(5) RegulationsThe Secretary may prescribe such regulations as may be necessary—
(A) to prevent the credit provided for in subsection (a)(3) from directly or indirectly benefiting any person with a direct or indirect productive capacity of more than 60,000,000 gallons of alcohol during the taxable year, or
(B) to prevent any person from directly or indirectly benefiting with respect to more than 15,000,000 gallons during the taxable year.
(6) Allocation of small ethanol producer credit to patrons of cooperative
(A) Election to allocate
(i) In general
(ii) Form and effect of election
(B) Treatment of organizations and patrons
(i) Organizations
(ii) Patrons
(iii) Special rules for decrease in credits for taxable yearIf the amount of the credit of the organization determined under such subsection for a taxable year is less than the amount of such credit shown on the return of the organization for such year, an amount equal to the excess of—(I) such reduction, over(II) the amount not apportioned to such patrons under subparagraph (A) for the taxable year,
shall be treated as an increase in tax imposed by this chapter on the organization. Such increase shall not be treated as tax imposed by this chapter for purposes of determining the amount of any credit under this chapter or for purposes of section 55.
(h) Reduced credit for ethanol blenders
(1) In generalIn the case of any alcohol mixture credit or alcohol credit with respect to any sale or use of alcohol which is ethanol during calendar years 2001 through 2011—
(A) subsections (b)(1)(A) and (b)(2)(A) shall be applied by substituting “the blender amount” for “60 cents”,
(B) subsection (b)(3) shall be applied by substituting “the low-proof blender amount” for “45 cents” and “the blender amount” for “60 cents”, and
(C) subparagraphs (A) and (B) of subsection (d)(3) shall be applied by substituting “the blender amount” for “60 cents” and “the low-proof blender amount” for “45 cents”.
(2) Amounts
(3) Reduction delayed until annual production or importation of 7,500,000,000 gallons
(A) In general
(B) Determination
(Added Pub. L. 96–223, title II, § 232(b)(1), Apr. 2, 1980, 94 Stat. 273, § 44E; amended Pub. L. 97–34, title II § 207(c)(3), Aug. 13, 1981, 95 Stat. 225; Pub. L. 97–354, § 5(a)(2), Oct. 19, 1982, 96 Stat. 1692; Pub. L. 97–424, title V, § 511(b)(2), (d)(3), Jan. 6, 1983, 96 Stat. 2170, 2171; renumbered § 40 and amended Pub. L. 98–369, div. A, title IV, §§ 471(c), 474(k), title IX, §§ 912(c), (f), 913(b), July 18, 1984, 98 Stat. 826, 832, 1007, 1008; Pub. L. 100–203, title X, § 10502(d)(1), Dec. 22, 1987, 101 Stat. 1330–444; Pub. L. 101–508, title XI, § 11502(a)–(f), Nov. 5, 1990, 104 Stat. 1388–480 to 1388–482; Pub. L. 104–188, title I, § 1703(j), Aug. 20, 1996, 110 Stat. 1876; Pub. L. 105–178, title IX, § 9003(a)(3), (b)(1), June 9, 1998, 112 Stat. 502; Pub. L. 108–357, title III, §§ 301(c)(1)–(4), 313(a), Oct. 22, 2004, 118 Stat. 1461, 1467; Pub. L. 109–58, title XIII, § 1347(a), (b), Aug. 8, 2005, 119 Stat. 1056; Pub. L. 110–234, title XV, §§ 15321(a)–(b)(2), (3)(B), (c)–(e), 15331(a), 15332(a), May 22, 2008, 122 Stat. 1512–1516; Pub. L. 110–246, § 4(a), title XV, §§ 15321(a)–(b)(2), (3)(B), (c)–(e), 15331(a), 15332(a), June 18, 2008, 122 Stat. 1664, 2274–2278; Pub. L. 110–343, div. B, title II, § 203(a), Oct. 3, 2008, 122 Stat. 3833; Pub. L. 111–152, title I, § 1408(a), Mar. 30, 2010, 124 Stat. 1067; Pub. L. 111–240, title II, § 2121(a), Sept. 27, 2010, 124 Stat. 2567; Pub. L. 111–312, title VII, § 708(a)(1), (2), Dec. 17, 2010, 124 Stat. 3312; Pub. L. 112–240, title IV, § 404(a)(1), (2), (b)(1)–(3)(B), Jan. 2, 2013, 126 Stat. 2338, 2339; Pub. L. 113–295, div. A, title I, § 152(a), Dec. 19, 2014, 128 Stat. 4021; Pub. L. 114–113, div. Q, title I, § 184(a), Dec. 18, 2015, 129 Stat. 3073; Pub. L. 115–123, div. D, title I, § 40406(a), Feb. 9, 2018, 132 Stat. 149; Pub. L. 115–141, div. U, title IV, § 401(a)(9), Mar. 23, 2018, 132 Stat. 1184; Pub. L. 116–94, div. Q, title I, § 122(a), Dec. 20, 2019, 133 Stat. 3231; Pub. L. 116–260, div. EE, title I, § 140(a), Dec. 27, 2020, 134 Stat. 3054; Pub. L. 117–169, title I, § 13202(a), Aug. 16, 2022, 136 Stat. 1932.)
§ 40A. Biodiesel and renewable diesel used as fuel
(a) General ruleFor purposes of section 38, the biodiesel fuels credit determined under this section for the taxable year is an amount equal to the sum of—
(1) the biodiesel mixture credit, plus
(2) the biodiesel credit, plus
(3) in the case of an eligible small agri-biodiesel producer, the small agri-biodiesel producer credit.
(b) Definition of biodiesel mixture credit, biodiesel credit, and small agri-biodiesel producer creditFor purposes of this section—
(1) Biodiesel mixture credit
(A) In general
(B) Qualified biodiesel mixtureThe term “qualified biodiesel mixture” means a mixture of biodiesel and diesel fuel (as defined in section 4083(a)(3)), determined without regard to any use of kerosene, which—
(i) is sold by the taxpayer producing such mixture to any person for use as a fuel, or
(ii) is used as a fuel by the taxpayer producing such mixture.
(C) Sale or use must be in trade or business, etc.Biodiesel used in the production of a qualified biodiesel mixture shall be taken into account—
(i) only if the sale or use described in subparagraph (B) is in a trade or business of the taxpayer, and
(ii) for the taxable year in which such sale or use occurs.
(D) Casual off-farm production not eligible
(2) Biodiesel credit
(A) In generalThe biodiesel credit of any taxpayer for any taxable year is $1.00 for each gallon of biodiesel which is not in a mixture with diesel fuel and which during the taxable year—
(i) is used by the taxpayer as a fuel in a trade or business, or
(ii) is sold by the taxpayer at retail to a person and placed in the fuel tank of such person’s vehicle.
(B) User credit not to apply to biodiesel sold at retail
(3) Certification for biodiesel
(4) Small agri-biodiesel producer credit
(A) In general
(B) Qualified agri-biodiesel productionFor purposes of this paragraph, the term “qualified agri-biodiesel production” means any agri-biodiesel which is produced by an eligible small agri-biodiesel producer, and which during the taxable year—
(i) is sold by such producer to another person—(I) for use by such other person in the production of a qualified biodiesel mixture in such other person’s trade or business (other than casual off-farm production),(II) for use by such other person as a fuel in a trade or business, or(III) who sells such agri-biodiesel at retail to another person and places such agri-biodiesel in the fuel tank of such other person, or
(ii) is used or sold by such producer for any purpose described in clause (i).
(C) Limitation
(c) Coordination with credit against excise tax
(d) Definitions and special rulesFor purposes of this section—
(1) BiodieselThe term “biodiesel” means the monoalkyl esters of long chain fatty acids derived from plant or animal matter which meet—
(A) the registration requirements for fuels and fuel additives established by the Environmental Protection Agency under section 211 of the Clean Air Act (42 U.S.C. 7545), and
(B) the requirements of the American Society of Testing and Materials D6751.
Such term shall not include any liquid with respect to which a credit may be determined under section 40 or 40B.
(2) Agri-biodiesel
(3) Mixture or biodiesel not used as a fuel, etc.
(A) MixturesIf—
(i) any credit was determined under this section with respect to biodiesel used in the production of any qualified biodiesel mixture, and
(ii) any person—(I) separates the biodiesel from the mixture, or(II) without separation, uses the mixture other than as a fuel,
then there is hereby imposed on such person a tax equal to the product of the rate applicable under subsection (b)(1)(A) and the number of gallons of such biodiesel in such mixture.
(B) BiodieselIf—
(i) any credit was determined under this section with respect to the retail sale of any biodiesel, and
(ii) any person mixes such biodiesel or uses such biodiesel other than as a fuel,
then there is hereby imposed on such person a tax equal to the product of the rate applicable under subsection (b)(2)(A) and the number of gallons of such biodiesel.
(C) Producer creditIf—
(i) any credit was determined under subsection (a)(3), and
(ii) any person does not use such fuel for a purpose described in subsection (b)(4)(B),
then there is hereby imposed on such person a tax equal to 10 cents a gallon for each gallon of such agri-biodiesel.
(D) Applicable laws
(4) Pass-thru in the case of estates and trusts
(5) Limitation to biodiesel with connection to the United States
(e) Definitions and special rules for small agri-biodiesel producer creditFor purposes of this section—
(1) Eligible small agri-biodiesel producer
(2) Aggregation rule
(3) Partnership, S corporation, and other pass-thru entities
(4) Allocation
(5) RegulationsThe Secretary may prescribe such regulations as may be necessary—
(A) to prevent the credit provided for in subsection (a)(3) from directly or indirectly benefiting any person with a direct or indirect productive capacity of more than 60,000,000 gallons of agri-biodiesel during the taxable year, or
(B) to prevent any person from directly or indirectly benefiting with respect to more than 15,000,000 gallons during the taxable year.
(6) Allocation of small agri-biodiesel credit to patrons of cooperative
(A) Election to allocate
(i) In general
(ii) Form and effect of election
(B) Treatment of organizations and patrons
(i) Organizations
(ii) Patrons
(iii) Special rules for decrease in credits for taxable yearIf the amount of the credit of the organization determined under such subsection for a taxable year is less than the amount of such credit shown on the return of the organization for such year, an amount equal to the excess of—(I) such reduction, over(II) the amount not apportioned to such patrons under subparagraph (A) for the taxable year,
shall be treated as an increase in tax imposed by this chapter on the organization. Such increase shall not be treated as tax imposed by this chapter for purposes of determining the amount of any credit under this chapter or for purposes of section 55.
(f) Renewable dieselFor purposes of this title—
(1) Treatment in the same manner as biodiesel
(2) Exception
(3) Renewable diesel definedThe term “renewable diesel” means liquid fuel derived from biomass which meets—
(A) the registration requirements for fuels and fuel additives established by the Environmental Protection Agency under section 211 of the Clean Air Act (42 U.S.C. 7545), and
(B) the requirements of the American Society of Testing and Materials D975 or D396, or other equivalent standard approved by the Secretary.
Such term shall not include any liquid with respect to which a credit may be determined under section 40. Such term does not include any fuel derived from coprocessing biomass with a feedstock which is not biomass. For purposes of this paragraph, the term “biomass” has the meaning given such term by section 45K(c)(3).
(g) Termination
(Added Pub. L. 108–357, title III, § 302(a), Oct. 22, 2004, 118 Stat. 1463; amended Pub. L. 109–58, title XIII, §§ 1344(a), 1345(a)–(d), 1346(a), (b)(1), Aug. 8, 2005, 119 Stat. 1052–1055; Pub. L. 109–135, title IV, § 412(h), Dec. 21, 2005, 119 Stat. 2637; Pub. L. 110–234, title XV, § 15321(f), May 22, 2008, 122 Stat. 1514; Pub. L. 110–246, § 4(a), title XV, § 15321(f), June 18, 2008, 122 Stat. 1664, 2276; Pub. L. 110–343, div. B, title II, §§ 202(a), (b)(1), (b)(3)–(f), 203(b), Oct. 3, 2008, 122 Stat. 3832, 3833; Pub. L. 111–312, title VII, § 701(a), Dec. 17, 2010, 124 Stat. 3310; Pub. L. 112–240, title IV, § 405(a), Jan. 2, 2013, 126 Stat. 2340; Pub. L. 113–295, div. A, title I, § 153(a), Dec. 19, 2014, 128 Stat. 4021; Pub. L. 114–113, div. Q, title I, § 185(a)(1), Dec. 18, 2015, 129 Stat. 3073; Pub. L. 115–123, div. D, title I, § 40407(a)(1), Feb. 9, 2018, 132 Stat. 149; Pub. L. 116–94, div. Q, title I, § 121(a)(1), Dec. 20, 2019, 133 Stat. 3230; Pub. L. 117–169, title I, §§ 13201(a), 13203(c), Aug. 16, 2022, 136 Stat. 1931, 1934.)
§ 40B. Sustainable aviation fuel credit
(a) In generalFor purposes of section 38, the sustainable aviation fuel credit determined under this section for the taxable year is, with respect to any sale or use of a qualified mixture which occurs during such taxable year, an amount equal to the product of—
(1) the number of gallons of sustainable aviation fuel in such mixture, multiplied by
(2) the sum of—
(A) $1.25, plus
(B) the applicable supplementary amount with respect to such sustainable aviation fuel.
(b) Applicable supplementary amount
(c) Qualified mixtureFor purposes of this section, the term “qualified mixture” means a mixture of sustainable aviation fuel and kerosene if—
(1) such mixture is produced by the taxpayer in the United States,
(2) such mixture is used by the taxpayer (or sold by the taxpayer for use) in an aircraft,
(3) such sale or use is in the ordinary course of a trade or business of the taxpayer, and
(4) the transfer of such mixture to the fuel tank of such aircraft occurs in the United States.
(d) Sustainable aviation fuel
(1) In generalFor purposes of this section, the term “sustainable aviation fuel” means liquid fuel, the portion of which is not kerosene, which—
(A) meets the requirements of—
(i) ASTM International Standard D7566, or
(ii) the Fischer Tropsch provisions of ASTM International Standard D1655, Annex A1,
(B) is not derived from coprocessing an applicable material (or materials derived from an applicable material) with a feedstock which is not biomass,
(C) is not derived from palm fatty acid distillates or petroleum, and
(D) has been certified in accordance with subsection (e) as having a lifecycle greenhouse gas emissions reduction percentage of at least 50 percent.
(2) DefinitionsIn this subsection—
(A) Applicable materialThe term “applicable material” means—
(i) monoglycerides, diglycerides, and triglycerides,
(ii) free fatty acids, and
(iii) fatty acid esters.
(B) Biomass
(e) Lifecycle greenhouse gas emissions reduction percentageFor purposes of this section, the term “lifecycle greenhouse gas emissions reduction percentage” means, with respect to any sustainable aviation fuel, the percentage reduction in lifecycle greenhouse gas emissions achieved by such fuel as compared with petroleum-based jet fuel, as defined in accordance with—
(1) the most recent Carbon Offsetting and Reduction Scheme for International Aviation which has been adopted by the International Civil Aviation Organization with the agreement of the United States, or
(2) any similar methodology which satisfies the criteria under section 211(o)(1)(H) of the Clean Air Act (42 U.S.C. 7545(o)(1)(H)), as in effect on the date of enactment of this section.
(f) Registration of sustainable aviation fuel producersNo credit shall be allowed under this section with respect to any sustainable aviation fuel unless the producer or importer of such fuel—
(1) is registered with the Secretary under section 4101, and
(2) provides—
(A) certification (in such form and manner as the Secretary shall prescribe) from an unrelated party demonstrating compliance with—
(i) any general requirements, supply chain traceability requirements, and information transmission requirements established under the Carbon Offsetting and Reduction Scheme for International Aviation described in paragraph (1) of subsection (e), or
(ii) in the case of any methodology established under paragraph (2) of such subsection, requirements similar to the requirements described in clause (i), and
(B) such other information with respect to such fuel as the Secretary may require for purposes of carrying out this section.
(g) Coordination with credit against excise tax
(h) Termination
(Added Pub. L. 117–169, title I, § 13203(a), Aug. 16, 2022, 136 Stat. 1932.)
§ 41. Credit for increasing research activities
(a) General ruleFor purposes of section 38, the research credit determined under this section for the taxable year shall be an amount equal to the sum of—
(1) 20 percent of the excess (if any) of—
(A) the qualified research expenses for the taxable year, over
(B) the base amount,
(2) 20 percent of the basic research payments determined under subsection (e)(1)(A), and
(3) 20 percent of the amounts paid or incurred by the taxpayer in carrying on any trade or business of the taxpayer during the taxable year (including as contributions) to an energy research consortium for energy research.
(b) Qualified research expensesFor purposes of this section—
(1) Qualified research expensesThe 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 generalThe 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 servicesThe 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) SuppliesThe 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
(ii) Self-employed individuals and owner-employees
(iii) Exclusion for wages to which work opportunity credit applies
(3) Contract research expenses
(A) In general
(B) Prepaid amounts
(C) Amounts paid to certain research consortia
(i) In general
(ii) Qualified research consortiumThe term “qualified research consortium” means any organization which—(I) is described in section 501(c)(3) or 501(c)(6) and is exempt from tax under section 501(a),(II) is organized and operated primarily to conduct scientific research, and(III) is not a private foundation.
(D) Amounts paid to eligible small businesses, universities, and Federal laboratories
(i) In generalIn the case of amounts paid by the taxpayer to—(I) an eligible small business,(II) an institution of higher education (as defined in section 3304(f)), or(III) an organization which is a Federal laboratory,
for qualified research which is energy research, subparagraph (A) shall be applied by substituting “100 percent” for “65 percent”.
(ii) Eligible small businessFor purposes of this subparagraph, the term “eligible small business” means a small business with respect to which the taxpayer does not own (within the meaning of section 318) 50 percent or more of—(I) in the case of a corporation, the outstanding stock of the corporation (either by vote or value), and(II) in the case of a small business which is not a corporation, the capital and profits interests of the small business.
(iii) Small businessFor purposes of this subparagraph—(I) In general(II) Startups, controlled groups, and predecessors
(iv) Federal laboratory
(4) Trade or business requirement disregarded for in-house research expenses of certain startup venturesIn 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 generalThe 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
(3) Fixed-base percentage
(A) In general
(B) Start-up companies
(i) Taxpayers to which subparagraph appliesThe fixed-base percentage shall be determined under this subparagraph if—(I) the first taxable year in which a taxpayer had both gross receipts and qualified research expenses begins after December 31, 1983, or(II) there are fewer than 3 taxable years beginning after December 31, 1983, and before January 1, 1989, in which the taxpayer had both gross receipts and qualified research expenses.
(ii) Fixed-base percentageIn 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, ⅙ 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, ⅓ 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, ⅔ 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, ⅚ 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
(C) Maximum fixed-base percentage
(D) Rounding
(4) Election of alternative simplified credit
(A) In general
(B) Special rule in case of no qualified research expenses in any of 3 preceding taxable years
(i) Taxpayers to which subparagraph applies
(ii) Credit rate
(C) Election
(5) Consistent treatment of expenses required
(A) In general
(B) Prevention of distortions
(6) Gross receipts
(d) Qualified research definedFor purposes of this section—
(1) In generalThe term “qualified research” means research—
(A) with respect to which expenditures may be treated as specified research or experimental expenditures under section 174,
(B) which is undertaken for the purpose of discovering information—
(i) which is technological in nature, and
(ii) the application of which is intended to be useful in the development of a new or improved business component of the taxpayer, and
(C) substantially all of the activities of which constitute elements of a process of experimentation for a purpose described in paragraph (3).
Such term does not include any activity described in paragraph (4).
(2) Tests to be applied separately to each business componentFor purposes of this subsection—
(A) In general
(B) Business component definedThe 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
(3) Purposes for which research may qualify for creditFor purposes of paragraph (1)(C)—
(A) In generalResearch 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
(4) Activities for which credit not allowedThe term “qualified research” shall not include any of the following:
(A) Research after commercial production
(B) Adaptation of existing business components
(C) Duplication of existing 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 softwareExcept 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
(G) Social sciences, etc.
(H) Funded research
(e) Credit allowable with respect to certain payments to qualified organizations for basic researchFor purposes of this section—
(1) In generalIn 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 definedFor purposes of this subsection—
(A) In generalThe 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
(3) Qualified organization base period amountFor 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 amountFor purposes of this subsection—
(A) In generalThe 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
(5) Maintenance-of-effort amountFor purposes of this subsection—
(A) In generalThe 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 contributionsFor 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
(ii) Special rule where base period ends in a calendar year other than 1983 or 1984
(6) Qualified organizationFor purposes of this subsection, the term “qualified organization” means any of the following organizations:
(A) Educational institutionsAny 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 organizationsAny 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 organizationsAny 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 organizationsAny 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 rulesFor purposes of this subsection—
(A) Basic researchThe 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
(C) Exclusion from incremental credit calculationFor 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
(E) Certain corporations not eligibleThe 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 rulesFor purposes of this section—
(1) Aggregation of expenditures
(A) Controlled group of corporationsIn determining the amount of the credit under this section—
(i) all members of the same controlled group of corporations shall be treated as a single taxpayer, and
(ii) the credit (if any) allowable by this section to each such member shall be determined on a proportionate basis to its share of the aggregate of the qualified research expenses, basic research payments, and amounts paid or incurred to energy research consortiums, taken into account by such controlled group for purposes of this section.
(B) Common controlUnder regulations prescribed by the Secretary, in determining the amount of the credit under this section—
(i) all trades or businesses (whether or not incorporated) which are under common control shall be treated as a single taxpayer, and
(ii) the credit (if any) allowable by this section to each such person shall be determined on a proportionate basis to its share of the aggregate of the qualified research expenses, basic research payments, and amounts paid or incurred to energy research consortiums, taken into account by all such persons under common control for purposes of this section.
The regulations prescribed under this subparagraph shall be based on principles similar to the principles which apply in the case of subparagraph (A).
(2) Allocations
(A) Pass-thru in the case of estates and trusts
(B) Allocation in the case of partnerships
(3) Adjustments for certain acquisitions, etc.Under regulations prescribed by the Secretary—
(A) Acquisitions
(i) In general
(ii) Amount determined with respect to qualified research expensesThe amount determined under this clause is—(I) for purposes of applying this section for the taxable year in which such acquisition is made, the acquisition year amount, and(II) for purposes of applying this section for any taxable year after the taxable year in which such acquisition is made, the qualified research expenses paid or incurred by the predecessor with respect to the acquired business during the measurement period.
(iii) Amount determined with respect to gross receipts
(iv) Acquisition year amountFor purposes of clause (ii), the acquisition year amount is the amount equal to the product of—(I) the qualified research expenses paid or incurred by the predecessor with respect to the acquired business during the measurement period, and(II) the number of days in the period beginning on the date of the acquisition and ending on the last day of the taxable year in which the acquisition is made,
divided by the number of days in the acquiring person’s taxable year.
(v) Special rules for coordinating taxable yearsIn the case of an acquiring person and a predecessor whose taxable years do not begin on the same date—(I) each reference to a taxable year in clauses (ii) and (iv) shall refer to the appropriate taxable year of the acquiring person,(II) the qualified research expenses paid or incurred by the predecessor, and the gross receipts of the predecessor, during each taxable year of the predecessor any portion of which is part of the measurement period shall be allocated equally among the days of such taxable year,(III) the amount of such qualified research expenses taken into account under clauses (ii) and (iv) with respect to a taxable year of the acquiring person shall be equal to the total of the expenses attributable under subclause (II) to the days occurring during such taxable year, and(IV) the amount of such gross receipts taken into account under clause (iii) with respect to a taxable year of the acquiring person shall be equal to the total of the gross receipts attributable under subclause (II) to the days occurring during such taxable year.
(vi) Measurement period
(B) DispositionsIf the predecessor furnished to the acquiring person such information as is necessary for the application of subparagraph (A), then, for purposes of applying this section for any taxable year ending after such disposition, the amount of qualified research expenses paid or incurred by, and the gross receipts of, the predecessor during the measurement period (as defined in subparagraph (A)(vi), determined by substituting “predecessor” for “acquiring person” each place it appears) shall be reduced by—
(i) in the case of the taxable year in which such disposition is made, an amount equal to the product of—(I) the qualified research expenses paid or incurred by, or gross receipts of, the predecessor with respect to the acquired business during the measurement period (as so defined and so determined), and(II) the number of days in the period beginning on the date of acquisition (as determined for purposes of subparagraph (A)(iv)(II)) and ending on the last day of the taxable year of the predecessor in which the disposition is made,
divided by the number of days in the taxable year of the predecessor, and
(ii) in the case of any taxable year ending after the taxable year in which such disposition is made, the amount described in clause (i)(I).
(C) Certain reimbursements taken into account in determining fixed-base percentageIf 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
(5) Controlled group of corporationsThe term “controlled group of corporations” has the same meaning given to such term by section 1563(a), except that—
(A) “more than 50 percent” shall be substituted for “at least 80 percent” each place it appears in section 1563(a)(1), and
(B) the determination shall be made without regard to subsections (a)(4) and (e)(3)(C) of section 1563.
(6) Energy research consortium
(A) In generalThe term “energy research consortium” means any organization—
(i) which is—(I) described in section 501(c)(3) and is exempt from tax under section 501(a) and is organized and operated primarily to conduct energy research, or(II) organized and operated primarily to conduct energy research in the public interest (within the meaning of section 501(c)(3)),
(ii) which is not a private foundation,
(iii) to which at least 5 unrelated persons paid or incurred during the calendar year in which the taxable year of the organization begins amounts (including as contributions) to such organization for energy research, and
(iv) to which no single person paid or incurred (including as contributions) during such calendar year an amount equal to more than 50 percent of the total amounts received by such organization during such calendar year for energy research.
(B) Treatment of persons
(C) Foreign research
(D) Denial of double benefit
(E) Energy research
(g) Special rule for pass-thru of creditIn the case of an individual who—
(1) owns an interest in an unincorporated trade or business,
(2) is a partner in a partnership,
(3) is a beneficiary of an estate or trust, or
(4) is a shareholder in an S corporation,
the amount determined under subsection (a) for any taxable year shall not exceed an amount (separately computed with respect to such person’s interest in such trade or business or entity) equal to the amount of tax attributable to that portion of a person’s taxable income which is allocable or apportionable to the person’s interest in such trade or business or entity. If the amount determined under subsection (a) for any taxable year exceeds the limitation of the preceding sentence, such amount may be carried to other taxable years under the rules of section 39; except that the limitation of the preceding sentence shall be taken into account in lieu of the limitation of section 38(c) in applying section 39.
(h) Treatment of credit for qualified small businesses
(1) In general
(2) Payroll tax credit portionFor purposes of this subsection, the payroll tax credit portion of the credit determined under subsection (a) with respect to any qualified small business for any taxable year is the least of—
(A) the amount specified in the election made under this subsection,
(B) the credit determined under subsection (a) for the taxable year (determined before the application of this subsection), or
(C) in the case of a qualified small business other than a partnership or S corporation, the amount of the business credit carryforward under section 39 carried from the taxable year (determined before the application of this subsection to the taxable year).
(3) Qualified small businessFor purposes of this subsection—
(A) In generalThe term “qualified small business” means, with respect to any taxable year—
(i) a corporation or partnership, if—(I) the gross receipts (as determined under the rules of section 448(c)(3), without regard to subparagraph (A) thereof) of such entity for the taxable year is less than $5,000,000, and(II) such entity did not have gross receipts (as so determined) for any taxable year preceding the 5-taxable-year period ending with such taxable year, and
(ii) any person (other than a corporation or partnership) who meets the requirements of subclauses (I) and (II) of clause (i), determined—(I) by substituting “person” for “entity” each place it appears, and(II) by only taking into account the aggregate gross receipts received by such person in carrying on all trades or businesses of such person.
(B) Limitation
(4) Election
(A) In generalAny election under this subsection for any taxable year—
(i) shall specify the amount of the credit to which such election applies,
(ii) shall be made on or before the due date (including extensions) of—(I) in the case of a qualified small business which is a partnership, the return required to be filed under section 6031,(II) in the case of a qualified small business which is an S corporation, the return required to be filed under section 6037, and(III) in the case of any other qualified small business, the return of tax for the taxable year, and
(iii) may be revoked only with the consent of the Secretary.
(B) Limitations
(i) Amount(I) In general(II) Increase
(ii) Number of taxable years
(C) Special rule for partnerships and S corporations
(5) Aggregation rules
(A) In general
(B) Special rulesFor purposes of this subsection and section 3111(f)—
(i) each of the persons treated as a single taxpayer under subparagraph (A) may separately make the election under paragraph (1) for any taxable year, and
(ii) each of the $250,000 amounts under paragraph (4)(B)(i) shall be allocated among all persons treated as a single taxpayer under subparagraph (A) in the same manner as under subparagraph (A)(ii) or (B)(ii) of subsection (f)(1), whichever is applicable.
(6) RegulationsThe Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this subsection, including—
(A) regulations to prevent the avoidance of the purposes of the limitations and aggregation rules under this subsection through the use of successor companies or other means,
(B) regulations to minimize compliance and record-keeping burdens under this subsection, and
(C) regulations for recapturing the benefit of credits determined under section 3111(f) in cases where there is a subsequent adjustment to the payroll tax credit portion of the credit determined under subsection (a), including requiring amended income tax returns in the cases where there is such an adjustment.
(Added Pub. L. 97–34, title II, § 221(a), Aug. 13, 1981, 95 Stat. 241, § 44F; amended Pub. L. 97–354, § 5(a)(3), Oct. 19, 1982, 96 Stat. 1692; Pub. L. 97–448, title I, § 102(h)(2), Jan. 12, 1983, 96 Stat. 2372; renumbered § 30 and amended Pub. L. 98–369, div. A, title IV, §§ 471(c), 474(i)(1), title VI, § 612(e)(1), July 18, 1984, 98 Stat. 826, 831, 912; renumbered § 41 and amended Pub. L. 99–514, title II, § 231(a)(1), (b), (c), (d)(2), (3)(C)(ii), (e), title XVIII, § 1847(b)(1), Oct. 22, 1986, 100 Stat. 2173, 2175, 2178–2180, 2856; Pub. L. 100–647, title I, § 1002(h)(1), title IV, §§ 4007(a), 4008(b)(1), Nov. 10, 1988, 102 Stat. 3370, 3652; Pub. L. 101–239, title VII, §§ 7110(a)(1), (b), (b)[(c)], 7814(e)(2)(C), Dec. 19, 1989, 103 Stat. 2322, 2323, 2325, 2414; Pub. L. 101–508, title XI, §§ 11101(d)(1)(C), 11402(a), Nov. 5, 1990, 104 Stat. 1388–405, 1388–473; Pub. L. 102–227, title I, § 102(a), Dec. 11, 1991, 105 Stat. 1686; Pub. L. 103–66, title XIII, §§ 13111(a)(1), 13112(a), (b), 13201(b)(3)(C), Aug. 10, 1993, 107 Stat. 420, 421, 459; Pub. L. 104–188, title I, §§ 1201(e)(1), (4), 1204(a)–(d), Aug. 20, 1996, 110 Stat. 1772–1774; Pub. L. 105–34, title VI, § 601(a), (b)(1), Aug. 5, 1997, 111 Stat. 861; Pub. L. 105–277, div. J, title I, § 1001(a), Oct. 21, 1998, 112 Stat. 2681–888; Pub. L. 106–170, title V, § 502(a)(1), (b)(1), (c)(1), Dec. 17, 1999, 113 Stat. 1919; Pub. L. 108–311, title III, § 301(a)(1), Oct. 4, 2004, 118 Stat. 1178; Pub. L. 109–58, title XIII, § 1351(a), (b), Aug. 8, 2005, 119 Stat. 1056, 1057; Pub. L. 109–135, title IV, § 402(l), Dec. 21, 2005, 119 Stat. 2615; Pub. L. 109–432, div. A, title I, § 104(a)(1), (b)(1), (c)(1), Dec. 20, 2006, 120 Stat. 2934, 2935; Pub. L. 110–172, §§ 6(c), 11(e)(2), Dec. 29, 2007, 121 Stat. 2479, 2489; Pub. L. 110–343, div. C, title III, § 301(a)(1), (b)–(d), Oct. 3, 2008, 122 Stat. 3865, 3866; Pub. L. 111–312, title VII, § 731(a), Dec. 17, 2010, 124 Stat. 3317; Pub. L. 112–240, title III, § 301(a)(1), (b), (c), Jan. 2, 2013, 126 Stat. 2326, 2328; Pub. L. 113–295, div. A, title I, § 111(a), Dec. 19, 2014, 128 Stat. 4014; Pub. L. 114–113, div. Q, title I, § 121(a)(1), (c)(1), Dec. 18, 2015, 129 Stat. 3049; Pub. L. 115–97, title I, §§ 11002(d)(1)(F), (2), 13206(d)(1), Dec. 22, 2017, 131 Stat. 2060, 2061, 2112; Pub. L. 115–141, div. U, title I, § 101(c), title IV, § 401(b)(6), Mar. 23, 2018, 132 Stat. 1160, 1202; Pub. L. 117–169, title I, § 13902(a), (c), Aug. 16, 2022, 136 Stat. 2013, 2014.)
§ 42. Low-income housing credit
(a) In generalFor purposes of section 38, the amount of the low-income housing credit determined under this section for any taxable year in the credit period shall be an amount equal to—
(1) the applicable percentage of
(2) the qualified basis of each qualified low-income building.
(b) Applicable percentage: 70 percent present value credit for certain new buildings; 30 percent present value credit for certain other buildings
(1) Determination of applicable percentageFor purposes of this section—
(A) In generalThe term “applicable percentage” means, with respect to any building, the appropriate percentage prescribed by the Secretary for the earlier of—
(i) the month in which such building is placed in service, or
(ii) at the election of the taxpayer—(I) the month in which the taxpayer and the housing credit agency enter into an agreement with respect to such building (which is binding on such agency, the taxpayer, and all successors in interest) as to the housing credit dollar amount to be allocated to such building, or(II) in the case of any building to which subsection (h)(4)(B) applies, the month in which the tax-exempt obligations are issued.
A month may be elected under clause (ii) only if the election is made not later than the 5th day after the close of such month. Such an election, once made, shall be irrevocable.
(B) Method of prescribing percentagesThe percentages prescribed by the Secretary for any month shall be percentages which will yield over a 10-year period amounts of credit under subsection (a) which have a present value equal to—
(i) 70 percent of the qualified basis of a new building which is not federally subsidized for the taxable year, and
(ii) 30 percent of the qualified basis of a building not described in clause (i).
(C) Method of discountingThe present value under subparagraph (B) shall be determined—
(i) as of the last day of the 1st year of the 10-year period referred to in subparagraph (B),
(ii) by using a discount rate equal to 72 percent of the average of the annual Federal mid-term rate and the annual Federal long-term rate applicable under section 1274(d)(1) to the month applicable under clause (i) or (ii) of subparagraph (A) and compounded annually, and
(iii) by assuming that the credit allowable under this section for any year is received on the last day of such year.
(2) Minimum credit rate for non-federally subsidized new buildingsIn the case of any new building—
(A) which is placed in service by the taxpayer after the date of the enactment of this paragraph, and
(B) which is not federally subsidized for the taxable year,
the applicable percentage shall not be less than 9 percent.
(3) Minimum credit rate
(4) Cross references
(A) For treatment of certain rehabilitation expenditures as separate new buildings, see subsection (e).
(B) For determination of applicable percentage for increases in qualified basis after the 1st year of the credit period, see subsection (f)(3).
(C) For authority of housing credit agency to limit applicable percentage and qualified basis which may be taken into account under this section with respect to any building, see subsection (h)(7).
(c) Qualified basis; qualified low-income buildingFor purposes of this section—
(1) Qualified basis
(A) DeterminationThe 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
(C) Unit fractionFor 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 fractionFor 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 homelessIn 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 buildingThe term “qualified low-income building” means any building—
(A) which is part of a qualified low-income housing project at all times during the period—
(i) beginning on the 1st day in the compliance period on which such building is part of such a project, and
(ii) ending on the last day of the compliance period with respect to such building, and
(B) to which the amendments made by section 201(a) of the Tax Reform Act of 1986 apply.
(d) Eligible basisFor purposes of this section—
(1) New buildings
(2) Existing buildings
(A) In generalThe 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) RequirementsA building meets the requirements of this subparagraph if—
(i) the building is acquired by purchase (as defined in section 179(d)(2)),
(ii) there is a period of at least 10 years between the date of its acquisition by the taxpayer and the date the building was last placed in service,
(iii) the building was not previously placed in service by the taxpayer or by any person who was a related person with respect to the taxpayer as of the time previously placed in service, and
(iv) except as provided in subsection (f)(5), a credit is allowable under subsection (a) by reason of subsection (e) with respect to the building.
(C) Adjusted basis
(D) Special rules for subparagraph (B)
(i) Special rules for certain transfersFor purposes of determining under subparagraph (B)(ii) when a building was last placed in service, there shall not be taken into account any placement in service—(I) in connection with the acquisition of the building in a transaction in which the basis of the building in the hands of the person acquiring it is determined in whole or in part by reference to the adjusted basis of such building in the hands of the person from whom acquired,(II) by a person whose basis in such building is determined under section 1014(a) (relating to property acquired from a decedent),(III) by any governmental unit or qualified nonprofit organization (as defined in subsection (h)(5)) if the requirements of subparagraph (B)(ii) are met with respect to the placement in service by such unit or organization and all the income from such property is exempt from Federal income taxation,(IV) by any person who acquired such building by foreclosure (or by instrument in lieu of foreclosure) of any purchase-money security interest held by such person if the requirements of subparagraph (B)(ii) are met with respect to the placement in service by such person and such building is resold within 12 months after the date such building is placed in service by such person after such foreclosure, or(V) of a single-family residence by any individual who owned and used such residence for no other purpose than as his principal residence.
(ii) Related person
(3) Eligible basis reduced where disproportionate standards for units
(A) In general
(B) Exception where taxpayer elects to exclude excess costs
(i) In generalSubparagraph (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) ExcessThe 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 basisFor purposes of this subsection—
(A) In general
(B) Basis of property in common areas, etc., included
(C) Inclusion of basis of property used to provide services for certain nontenants
(i) In general
(ii) LimitationThe increase in the adjusted basis of any building which is taken into account by reason of clause (i) shall not exceed the sum of—(I) 25 percent of so much of the eligible basis of the qualified low-income housing project of which it is a part as does not exceed $15,000,000, plus(II) 10 percent of so much of the eligible basis of such project as is not taken into account under subclause (I).
For purposes of the preceding sentence, all community service facilities which are part of the same qualified low-income housing project shall be treated as one facility.
(iii) Community service facility
(D) No reduction for depreciation
(5) Special rules for determining eligible basis
(A) Federal grants not taken into account in determining eligible basis
(B) Increase in credit for buildings in high cost areas
(i) In generalIn 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(II) Limit on MSA’s designated(III) Determination of areas
(iii) Difficult development areas(I) In general(II) Limit on areas designated
(iv) Special rules and definitionsFor purposes of this subparagraph—(I) population shall be determined on the basis of the most recent decennial census for which data are available,(II) area median gross income shall be determined in accordance with subsection (g)(4),(III) the term “metropolitan statistical area” has the same meaning as when used in section 143(k)(2)(B), and(IV) the term “nonmetropolitan area” means any county (or portion thereof) which is not within a metropolitan statistical area.
(v) Buildings designated by State housing credit agency
(6) Credit allowable for certain buildings acquired during 10-year period described in paragraph (2)(B)(ii)
(A) In general
(B) Buildings acquired from insured depository institutions in default
(C) Federally- or State-assisted buildingFor purposes of this paragraph—
(i) Federally-assisted building
(ii) State-assisted building
(7) Acquisition of building before end of prior compliance period
(A) In generalUnder 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 buildingA 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
(2) Rehabilitation expendituresFor purposes of paragraph (1)—
(A) In general
(B) Cost of acquisition, etc., not included
(3) Minimum expenditures to qualify
(A) In generalParagraph (1) shall apply to rehabilitation expenditures with respect to any building only if—
(i) the expenditures are allocable to 1 or more low-income units or substantially benefit such units, and
(ii) the amount of such expenditures during any 24-month period meets the requirements of whichever of the following subclauses requires the greater amount of such expenditures:(I) The requirement of this subclause is met if such amount is not less than 20 percent of the adjusted basis of the building (determined as of the 1st day of such period and without regard to paragraphs (2) and (3) of section 1016(a)).(II) The requirement of this subclause is met if the qualified basis attributable to such amount, when divided by the number of low-income units in the building, is $6,000 or more.
(B) Exception from 10 percent rehabilitation
(C) Date of determination
(D) Inflation adjustmentIn the case of any expenditures which are treated under paragraph (4) as placed in service during any calendar year after 2009, the $6,000 amount in subparagraph (A)(ii)(II) shall be increased by an amount equal to—
(i) such dollar amount, multiplied by
(ii) the cost-of-living adjustment determined under section 1(f)(3) for such calendar year by substituting “calendar year 2008” for “calendar year 2016” in subparagraph (A)(ii) thereof.
Any increase under the preceding sentence which is not a multiple of $100 shall be rounded to the nearest multiple of $100.
(4) Special rulesFor 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
(6) Regulations to apply subsection with respect to group of units in building
(f) Definition and special rules relating to credit period
(1) Credit period definedFor 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 generalThe 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
(3) Determination of applicable percentage with respect to increases in qualified basis after 1st year of credit period
(A) In generalIn 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 ⅔ 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
(4) Dispositions of property
(5) Credit period for existing buildings not to begin before rehabilitation credit allowed
(A) In general
(B) Acquisition credit allowed for certain buildings not allowed a rehabilitation credit
(i) In generalIn 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 describedA building is described in this clause if—(I) a waiver is granted under subsection (d)(6)(B) with respect to the acquisition of the building, and(II) a credit would be allowed for rehabilitation expenditures with respect to such building if subsection (e)(3)(A)(ii)(I) did not apply and if the dollar amount in effect under subsection (e)(3)(A)(ii)(II) were two-thirds of such amount.
(g) Qualified low-income housing projectFor purposes of this section—
(1) In generalThe term “qualified low-income housing project” means any project for residential rental property if the project meets the requirements of subparagraph (A), (B), or (C) whichever is elected by the taxpayer:
(A) 20–50 test
(B) 40–60 test
(C) Average income test
(i) In general
(ii) Special rules relating to income limitationFor purposes of clause (i)—(I) Designation(II) Average test(III) 10-percent increments
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
(B) Gross rentFor 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 unitFor 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
(ii) Rental of next available unit in case of 20–50 or 40–60 test
(iii) Rental of next available unit in case of average income testIn the case of a project with respect to which the taxpayer elects the requirements of subparagraph (C) of paragraph (1), if the income of the occupants of the unit increases above 140 percent of the greater of—(I) 60 percent of area median gross income, or(II) the imputed income limitation designated with respect to the unit under paragraph (1)(C)(ii)(I),
clause (i) shall cease to apply to any such unit if any residential rental unit in the building (of a size comparable to, or smaller than, such unit) is occupied by a new resident whose income exceeds the limitation described in clause (v).
(iv) Deep rent skewed projectsIn the case of a project described in section 142(d)(4)(B), clause (ii) or (iii), whichever is applicable, shall be applied by substituting “170 percent” for “140 percent”, and—(I) in the case of clause (ii), by substituting “any low-income unit in the building is occupied by a new resident whose income exceeds 40 percent of area median gross income” for “any residential rental unit” and all that follows in such clause, and(II) in the case of clause (iii), by substituting “any low-income unit in the building is occupied by a new resident whose income exceeds the lesser of 40 percent of area median gross income or the imputed income limitation designated with respect to such unit under paragraph (1)(C)(ii)(I)” for “any residential rental unit” and all that follows in such clause.
(v) Limitation describedFor purposes of clause (iii), the limitation described in this clause with respect to any unit is—(I) the imputed income limitation designated with respect to such unit under paragraph (1)(C)(ii)(I), in the case of a unit which was taken into account as a low-income unit prior to becoming vacant, and(II) the imputed income limitation which would have to be designated with respect to such unit under such paragraph in order for the project to continue to meet the requirements of paragraph (1)(C)(ii)(II), in the case of any other unit.
(E) Units where Federal rental assistance is reduced as tenant’s income increasesIf 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
(B) Buildings which rely on later buildings for qualification
(i) In general
(ii) Treatment of elected buildings
(iii) Date prior building is treated as placed in service
(C) Special ruleA 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
(4) Certain rules made applicable
(5) Election to treat building after compliance period as not part of a project
(6) Special rule where de minimis equity contributionProperty 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
(8) Waiver of certain de minimis errors and recertificationsOn application by the taxpayer, the Secretary may waive—
(A) any recapture under subsection (j) in the case of any de minimis error in complying with paragraph (1), or
(B) any annual recertification of tenant income for purposes of this subsection, if the entire building is occupied by low-income tenants.
(9) Clarification of general public use requirementA project does not fail to meet the general public use requirement solely because of occupancy restrictions or preferences that favor tenants—
(A) with special needs,
(B) who are members of a specified group under a Federal program or State program or policy that supports housing for such a specified group, or
(C) who are involved in artistic or literary activities.
(h) Limitation on aggregate credit allowable with respect to projects located in a State
(1) Credit may not exceed credit amount allocated to building
(A) In general
(B) Time for making allocation
(C) Exception where binding commitment
(D) Exception where increase in qualified basis
(i) In general
(ii) LimitationThe 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
(E) Exception where 10 percent of cost incurred
(i) In general
(ii) Qualified building
(F) Allocation of credit on a project basis
(i) In generalIn 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 periodFor 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 yearAny 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
(B) State ceiling initially allocated to State housing credit agencies
(C) State housing credit ceilingThe State housing credit ceiling applicable to any State for any calendar year shall be an amount equal to the sum of—
(i) the unused State housing credit ceiling (if any) of such State for the preceding calendar year,
(ii) the greater of—(I) $1.75 multiplied by the State population, or(II) $2,000,000,
(iii) the amount of State housing credit ceiling returned in the calendar year, plus
(iv) the amount (if any) allocated under subparagraph (D) to such State by the Secretary.
For purposes of clause (i), the unused State housing credit ceiling for any calendar year is the excess (if any) of the sum of the amounts described in clauses (ii) through (iv) over the aggregate housing credit dollar amount allocated for such year. For purposes of clause (iii), the amount of State housing credit ceiling returned in the calendar year equals the housing credit dollar amount previously allocated within the State to any project which fails to meet the 10 percent test under paragraph (1)(E)(ii) on a date after the close of the calendar year in which the allocation was made or which does not become a qualified low-income housing project within the period required by this section or the terms of the allocation or to any project with respect to which an allocation is cancelled by mutual consent of the housing credit agency and the allocation recipient.
(D) Unused housing credit carryovers allocated among certain States
(i) In general
(ii) Unused housing credit carryoverFor purposes of this subparagraph, the unused housing credit carryover of a State for any calendar year is the excess (if any) of—(I) the unused State housing credit ceiling for the year preceding such year, over(II) the aggregate housing credit dollar amount allocated for such year.
(iii) Formula for allocation of unused housing credit carryovers among qualified States
(iv) Qualified StateFor 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 citiesFor purposes of this subsection—
(i) In generalThe 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
(iii) Constitutional home rule city
(F) State may provide for different allocation
(G) Population
(H) Cost-of-living adjustment
(i) In generalIn the case of a calendar year after 2002, the $2,000,000 and $1.75 amounts in subparagraph (C) shall each be increased by an amount equal to—(I) such dollar amount, multiplied by(II) the cost-of-living adjustment determined under section 1(f)(3) for such calendar year by substituting “calendar year 2001” for “calendar year 2016” in subparagraph (A)(ii) thereof.
(ii) Rounding(I) In the case of the $2,000,000 amount, any increase under clause (i) which is not a multiple of $5,000 shall be rounded to the next lowest multiple of $5,000.(II) In the case of the $1.75 amount, any increase under clause (i) which is not a multiple of 5 cents shall be rounded to the next lowest multiple of 5 cents.
(I) Increase in State housing credit ceiling for 2018, 2019, 2020, and 2021
(4) Credit for buildings financed by tax-exempt bonds subject to volume cap not taken into account
(A) In generalParagraph (1) shall not apply to the portion of any credit allowable under subsection (a) which is attributable to eligible basis financed by any obligation the interest on which is exempt from tax under section 103 if—
(i) such obligation is taken into account under section 146, and
(ii) principal payments on such financing are applied within a reasonable period to redeem obligations the proceeds of which were used to provide such financing or such financing is refunded as described in section 146(i)(6).
(B) Special rule where 50 percent or more of building is financed with tax-exempt bonds subject to volume cap
(5) Portion of State ceiling set-aside for certain projects involving qualified nonprofit organizations
(A) In general
(B) Projects involving qualified nonprofit organizations
(C) Qualified nonprofit organizationFor purposes of this paragraph, the term “qualified nonprofit organization” means any organization if—
(i) such organization is described in paragraph (3) or (4) of section 501(c) and is exempt from tax under section 501(a),
(ii) such organization is determined by the State housing credit agency not to be affiliated with or controlled by a for-profit organization, and
(iii) 1 of the exempt purposes of such organization includes the fostering of low-income housing.
(D) Treatment of certain subsidiaries
(i) In general
(ii) Qualified corporation
(E) State may not override set-aside
(6) Buildings eligible for credit only if minimum long-term commitment to low-income housing
(A) In general
(B) Extended low-income housing commitmentFor 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
(ii) Buildings financed by tax-exempt bonds
(D) Extended use periodFor 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 generalThe 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 permittedThe 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 contractFor 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 generalFor purposes of subparagraph (E), the term “adjusted investor equity” means, with respect to any calendar year, the aggregate amount of cash taxpayers invested with respect to the project increased by the amount equal to—(I) such amount, multiplied by(II) the cost-of-living adjustment for such calendar year, determined under section 1(f)(3) by substituting the base calendar year for “calendar year 2016” in subparagraph (A)(ii) thereof.
An amount shall be taken into account as an investment in the project only to the extent there was an obligation to invest such amount as of the beginning of the credit period and to the extent such amount is reflected in the adjusted basis of the project.
(ii) Cost-of-living increases in excess of 5 percent not taken into account
(iii) Base calendar year
(H) Low-income portion
(I) Period for finding buyer
(J) Effect of noncompliance
(K) Projects which consist of more than 1 building
(7) Special rules
(A) Building must be located within jurisdiction of credit agency
(B) Agency allocations in excess of limit
(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
(ii) Determination of percentageFor 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 amountThe 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 ⅔ of”.
(D) Housing credit agency to specify applicable percentage and maximum qualified basis
(8) Other definitionsFor purposes of this subsection—
(A) Housing credit agency
(B) Possessions treated as States
(i) Definitions and special rulesFor purposes of this section—
(1) Compliance period
(2) Determination of whether building is federally subsidized
(A) In general
(B) Election to reduce eligible basis by proceeds of obligations
(C) Special rule for subsidized construction financingSubparagraph (A) shall not apply to any tax-exempt obligation used to provide construction financing for any building if—
(i) such obligation (when issued) identified the building for which the proceeds of such obligation would be used, and
(ii) such obligation is redeemed before such building is placed in service.
(3) Low-income unit
(A) In generalThe 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
(ii) Suitability for occupancy
(iii) Transitional housing for homelessFor purposes of clause (i), a unit shall be considered to be used other than on a transient basis if the unit contains sleeping accommodations and kitchen and bathroom facilities and is located in a building—(I) which is used exclusively to facilitate the transition of homeless individuals (within the meaning of section 103 of the McKinney-Vento Homeless Assistance Act (42 U.S.C. 11302), as in effect on the date of the enactment of this clause) to independent living within 24 months, and(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
(C) Special rule for buildings having 4 or fewer unitsIn 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 unitA unit shall not fail to be treated as a low-income unit merely because it is occupied—
(i) by an individual who is—(I) a student and receiving assistance under title IV of the Social Security Act,(II) a student who was previously under the care and placement responsibility of the State agency responsible for administering a plan under part B or part E of title IV of the Social Security Act, or(III) enrolled in a job training program receiving assistance under the Job Training Partnership Act or under other similar Federal, State, or local laws, or
(ii) entirely by full-time students if such students are—(I) single parents and their children and such parents are not dependents (as defined in section 152, determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B) thereof) of another individual and such children are not dependents (as so defined) of another individual other than a parent of such children, or(II) married and file a joint return.
(E) Owner-occupied buildings having 4 or fewer units eligible for credit where development plan
(i) In general
(ii) Limitation on credit
(iii) Certain unrented units treated as owner-occupied
(4) New building
(5) Existing building
(6) Application to estates and trusts
(7) Impact of tenant’s right of 1st refusal to acquire property
(A) In general
(B) Minimum purchase priceFor purposes of subparagraph (A), the minimum purchase price under this subparagraph is an amount equal to the sum of—
(i) the principal amount of outstanding indebtedness secured by the building (other than indebtedness incurred within the 5-year period ending on the date of the sale to the tenants), and
(ii) all Federal, State, and local taxes attributable to such sale.
Except in the case of Federal income taxes, there shall not be taken into account under clause (ii) any additional tax attributable to the application of clause (ii).
(8) Treatment of rural projects
(9) Coordination with low-income housing grants
(A) Reduction in State housing credit ceiling for low-income housing grants received in 2009
(B) Special rule for basis
(j) Recapture of credit
(1) In generalIf—
(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 amountFor 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 creditFor 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
(B) Only basis for which credit allowed taken into account
(C) No recapture of additional credit allowable by reason of subsection (f)(3)
(D) No credits against tax
(E) No recapture by reason of casualty loss
(F) No recapture where de minimis changes in floor spaceThe 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 generalFor 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
(C) Special rules
(i) Husband and wife treated as 1 partner
(ii) Election irrevocable
(6) No recapture on disposition of building which continues in qualified use
(A) In general
(B) Statute of limitationsIf a building (or an interest therein) is disposed of during any taxable year and there is any reduction in the qualified basis of such building which results in an increase in tax under this subsection for such taxable or any subsequent taxable year, then—
(i) the statutory period for the assessment of any deficiency with respect to such increase in tax shall not expire before the expiration of 3 years from the date the Secretary is notified by the taxpayer (in such manner as the Secretary may prescribe) of such reduction in qualified basis, and
(ii) such deficiency may be assessed before the expiration of such 3-year period notwithstanding the provisions of any other law or rule of law which would otherwise prevent such assessment.
(k) Application of at-risk rulesFor purposes of this section—
(1) In general
(2) Special rules for determining qualified personFor purposes of paragraph (1)—
(A) In generalIf 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 propertyThe requirements of this subparagraph are met with respect to any financing if such financing is secured by the qualified low-income building, except that this subparagraph shall not apply in the case of a federally assisted building described in subsection (d)(6)(C) if—
(i) a security interest in such building is not permitted by a Federal agency holding or insuring the mortgage secured by such building, and
(ii) the proceeds from the financing (if any) are applied to acquire or improve such building.
(C) Portion of building attributable to financing
(D) Repayment of principal and interestThe 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
(4) Failure to fully repay
(A) In generalTo 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 chapter 1 for the 1st taxable year for which such credit was allowable, and
(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
(C) Certain rules to apply
(l) Certifications and other reports to Secretary
(1) Certification with respect to 1st year of credit periodFollowing 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 SecretaryThe 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 agenciesEach 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 generalNotwithstanding any other provision of this section, the housing credit dollar amount with respect to any building shall be zero unless—
(i) such amount was allocated pursuant to a qualified allocation plan of the housing credit agency which is approved by the governmental unit (in accordance with rules similar to the rules of section 147(f)(2) (other than subparagraph (B)(ii) thereof)) of which such agency is a part,
(ii) such agency notifies the chief executive officer (or the equivalent) of the local jurisdiction within which the building is located of such project and provides such individual a reasonable opportunity to comment on the project,
(iii) a comprehensive market study of the housing needs of low-income individuals in the area to be served by the project is conducted before the credit allocation is made and at the developer’s expense by a disinterested party who is approved by such agency, and
(iv) a written explanation is available to the general public for any allocation of a housing credit dollar amount which is not made in accordance with established priorities and selection criteria of the housing credit agency.
(B) Qualified allocation planFor purposes of this paragraph, the term “qualified allocation plan” means any plan—
(i) which sets forth selection criteria to be used to determine housing priorities of the housing credit agency which are appropriate to local conditions,
(ii) which also gives preference in allocating housing credit dollar amounts among selected projects to—(I) projects serving the lowest income tenants,(II) projects obligated to serve qualified tenants for the longest periods, and(III) projects which are located in qualified census tracts (as defined in subsection (d)(5)(B)(ii)) and the development of which contributes to a concerted community revitalization plan, and
(iii) which provides a procedure that the agency (or an agent or other private contractor of such agency) will follow in monitoring for noncompliance with the provisions of this section and in notifying the Internal Revenue Service of such noncompliance which such agency becomes aware of and in monitoring for noncompliance with habitability standards through regular site visits.
(C) Certain selection criteria must be usedThe selection criteria set forth in a qualified allocation plan must include
(i) project location,
(ii) housing needs characteristics,
(iii) project characteristics, including whether the project includes the use of existing housing as part of a community revitalization plan,
(iv) sponsor characteristics,
(v) tenant populations with special housing needs,
(vi) public housing waiting lists,
(vii) tenant populations of individuals with children,
(viii) projects intended for eventual tenant ownership,
(ix) the energy efficiency of the project, and
(x) the historic nature of the project.
(D) Application to bond financed projects
(2) Credit allocated to building not to exceed amount necessary to assure project feasibility
(A) In general
(B) Agency evaluationIn 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 generalA 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
(D) Application to bond financed projects
(n) RegulationsThe 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 Pub. L. 99–514, title II, § 252(a), Oct. 22, 1986, 100 Stat. 2189; amended Pub. L. 99–509, title VIII, § 8072(a), Oct. 21, 1986, 100 Stat. 1964; Pub. L. 100–647, title I, §§ 1002(l)(1)–(25), (32), 1007(g)(3)(B), title IV, §§ 4003(a), (b)(1), (3), 4004(a), Nov. 10, 1988, 102 Stat. 3373–3381, 3435, 3643, 3644; Pub. L. 101–239, title VII, §§ 7108(a)(1), (b)–(e)(2), (f)–(m), (n)(2)–(q), 7811(a), 7831(c), 7841(d)(13)–(15), Dec. 19, 1989, 103 Stat. 2306–2321, 2406, 2426, 2429; Pub. L. 101–508, title XI, §§ 11407(a)(1), (b)(1)–(9), 11701(a)(1)–(3)(A), (4), (5)(A), (6)–(10), 11812(b)(3), 11813(b)(3), Nov. 5, 1990, 104 Stat. 1388–474, 1388–475, 1388–505 to 1388–507, 1388–535, 1388–551; Pub. L. 102–227, title I, § 107(a), Dec. 11, 1991, 105 Stat. 1687; Pub. L. 103–66, title XIII, § 13142(a)(1), (b)(1)–(5), Aug. 10, 1993, 107 Stat. 437–439; Pub. L. 104–188, title I, § 1704(t)(53), (64), Aug. 20, 1996, 110 Stat. 1890; Pub. L. 105–206, title VI, § 6004(g)(5), July 22, 1998, 112 Stat. 796; Pub. L. 106–400, § 2, Oct. 30, 2000, 114 Stat. 1675; Pub. L. 106–554, § 1(a)(7) [title I, §§ 131(a)–(c), 132–136], Dec. 21, 2000, 114 Stat. 2763, 2763A–610 to 2763A–613; Pub. L. 107–147, title IV, § 417(2), (3), Mar. 9, 2002, 116 Stat. 56; Pub. L. 108–311, title II, § 207(8), title IV, § 408(a)(3), Oct. 4, 2004, 118 Stat. 1177, 1191; Pub. L. 110–142, § 6(a), Dec. 20, 2007, 121 Stat. 1806; Pub. L. 110–289, div. C, title I, §§ 3001–3002(b), 3003(a)–(g), 3004(a)–(g), 3007(b), July 30, 2008, 122 Stat. 2878–2884, 2886; Pub. L. 111–5, div. B, title I, § 1404, Feb. 17, 2009, 123 Stat. 352; Pub. L. 112–240, title III, § 302(a), Jan. 2, 2013, 126 Stat. 2328; Pub. L. 113–295, div. A, title I, § 112(a), title II, §§ 212(a), 221(a)(7), Dec. 19, 2014, 128 Stat. 4014, 4033, 4038; Pub. L. 114–113, div. Q, title I, § 131(a), (b), Dec. 18, 2015, 129 Stat. 3055; Pub. L. 115–97, title I, § 11002(d)(1)(G), (3), Dec. 22, 2017, 131 Stat. 2060, 2061; Pub. L. 115–141, div. T, §§ 102(a), 103(a), (b), div. U, title IV, § 401(a)(10)–(13), Mar. 23, 2018, 132 Stat. 1157, 1184, 1185; Pub. L. 116–260, div. EE, title II, § 201(a), Dec. 27, 2020, 134 Stat. 3056.)
§ 43. Enhanced oil recovery credit
(a) General rule
(b) Phase-out of credit as crude oil prices increase
(1) In generalThe 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
(3) Inflation adjustment
(A) In generalIn 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
(c) Qualified enhanced oil recovery costsFor purposes of this section—
(1) In generalThe term “qualified enhanced oil recovery costs” means any of the following:
(A) Any amount paid or incurred during the taxable year for tangible property—
(i) which is an integral part of a qualified enhanced oil recovery project, and
(ii) with respect to which depreciation (or amortization in lieu of depreciation) is allowable under this chapter.
(B) Any intangible drilling and development costs—
(i) which are paid or incurred in connection with a qualified enhanced oil recovery project, and
(ii) with respect to which the taxpayer may make an election under section 263(c) for the taxable year.
(C) Any qualified tertiary injectant expenses (as defined in section 193(b)) which are paid or incurred in connection with a qualified enhanced oil recovery project and for which a deduction is allowable for the taxable year.
(D) Any amount which is paid or incurred during the taxable year to construct a gas treatment plant which—
(i) is located in the area of the United States (within the meaning of section 638(1)) lying north of 64 degrees North latitude,
(ii) prepares Alaska natural gas for transportation through a pipeline with a capacity of at least 2,000,000,000,000 Btu of natural gas per day, and
(iii) produces carbon dioxide which is injected into hydrocarbon-bearing geological formations.
(2) Qualified enhanced oil recovery projectFor purposes of this subsection—
(A) In generalThe 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
(3) At-risk limitation
(4) Special rule for certain gas displacement projects
(5) Alaska natural gasFor purposes of paragraph (1)(D)—
(A) In generalThe term “Alaska natural gas” means natural gas entering the Alaska natural gas pipeline (as defined in section 168(i)(16) (determined without regard to subparagraph (B) thereof)) which is produced from a well—
(i) located in the area of the State of Alaska lying north of 64 degrees North latitude, determined by excluding the area of the Alaska National Wildlife Refuge (including the continental shelf thereof within the meaning of section 638(1)), and
(ii) pursuant to the applicable State and Federal pollution prevention, control, and permit requirements from such area (including the continental shelf thereof within the meaning of section 638(1)).
(B) Natural gas
(d) Other rules
(1) Disallowance of deduction
(2) Basis adjustments
(e) Election to have credit not apply
(1) In general
(2) Time for making election
(3) Manner of making election
(Added Pub. L. 101–508, title XI, § 11511(a), Nov. 5, 1990, 104 Stat. 1388–483; amended Pub. L. 106–554, § 1(a)(7) [title III, § 317(a)], Dec. 21, 2000, 114 Stat. 2763, 2763A–645; Pub. L. 108–357, title VII, § 707(a), (b), Oct. 22, 2004, 118 Stat. 1550; Pub. L. 109–58, title XIII, § 1322(a)(3)(B), Aug. 8, 2005, 119 Stat. 1011; Pub. L. 109–135, title IV, § 412(i), Dec. 21, 2005, 119 Stat. 2637.)
§ 44. Expenditures to provide access to disabled individuals
(a) General rule
(b) Eligible small businessFor 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 expendituresFor purposes of this section—
(1) In general
(2) Certain expenditures includedThe 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
(4) Expenses in connection with new construction are not eligible
(5) Expenditures must meet standards
(d) Definition of disability; special rulesFor purposes of this section—
(1) Disability
(2) Controlled groups
(A) In general
(B) Dollar limitation
(3) Partnerships and S corporations
(4) Short years
(5) Gross receipts
(6) Treatment of predecessors
(7) Denial of double benefitIn 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
(Added Pub. L. 101–508, title XI, § 11611(a), Nov. 5, 1990, 104 Stat. 1388–501.)
[§ 44A. Renumbered § 21]
[§ 44B. Repealed. Pub. L. 98–369, div. A, title IV, § 474(m)(1), July 18, 1984, 98 Stat. 833]
[§ 44C. Renumbered § 23]
[§ 44D. Renumbered § 29]
[§ 44E. Renumbered § 40]
[§ 44F. Renumbered § 30]
[§ 44G. Renumbered § 41]
[§ 44H. Renumbered § 45C]
§ 45. Electricity produced from certain renewable resources, etc.
(a) General ruleFor purposes of section 38, the renewable electricity production credit for any taxable year is an amount equal to the product of—
(1) 0.3 cents, multiplied by
(2) the kilowatt hours of electricity—
(A) produced by the taxpayer—
(i) from qualified energy resources, and
(ii) at a qualified facility during the 10-year period beginning on the date the facility was originally placed in service, and
(B) sold by the taxpayer to an unrelated person during the taxable year.
(b) Limitations and adjustments
(1) Phaseout of creditThe 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
(3) Credit reduced for tax-exempt bondsThe amount of the credit determined under subsection (a) with respect to any facility for any taxable year (determined after the application of paragraphs (1) and (2)) shall be reduced by the amount which is the product of the amount so determined for such year and the lesser of 15 percent or a fraction—
(A) the numerator of which is the sum, for the taxable year and all prior taxable years, of proceeds of an issue of any obligations the interest on which is exempt from tax under section 103 and which is used to provide financing for the qualified facility, and
(B) the denominator of which is the aggregate amount of additions to the capital account for the qualified facility for the taxable year and all prior taxable years.
The amounts under the preceding sentence for any taxable year shall be determined as of the close of the taxable year.
(4) Credit rate and period for electricity produced and sold from certain facilities
(A) Credit rate
(B) Credit period
(i) In general
(ii) Certain open-loop biomass facilities
(iii) Termination
(5) Phaseout of credit for wind facilitiesIn the case of any facility using wind to produce electricity which is placed in service before January 1, 2022, the amount of the credit determined under subsection (a) (determined after the application of paragraphs (1), (2), and (3) and without regard to this paragraph) shall be reduced by—
(A) in the case of any facility the construction of which begins after December 31, 2016, and before January 1, 2018, 20 percent,
(B) in the case of any facility the construction of which begins after December 31, 2017, and before January 1, 2019, 40 percent,
(C) in the case of any facility the construction of which begins after December 31, 2018, and before January 1, 2020, 60 percent, and
(D) in the case of any facility the construction of which begins after December 31, 2019, and before January 1, 2022, 40 percent.
(6) Increased credit amount for qualified facilities
(A) In general
(B) Qualified facility requirementsA qualified facility meets the requirements of this subparagraph if it is one of the following:
(i) A facility with a maximum net output of less than 1 megawatt (as measured in alternating current).
(ii) A facility the construction of which begins prior to the date that is 60 days after the Secretary publishes guidance with respect to the requirements of paragraphs (7)(A) and (8).
(iii) A facility which satisfies the requirements of paragraphs (7)(A) and (8).
(7) Prevailing wage requirements
(A) In generalThe requirements described in this subparagraph with respect to any qualified facility are that the taxpayer shall ensure that any laborers and mechanics employed by the taxpayer or any contractor or subcontractor in—
(i) the construction of such facility, and
(ii) with respect to any taxable year, for any portion of such taxable year which is within the period described in subsection (a)(2)(A)(ii), the alteration or repair of such facility,
shall be paid wages at rates not less than the prevailing rates for construction, alteration, or repair of a similar character in the locality in which such facility is located as most recently determined by the Secretary of Labor, in accordance with subchapter IV of chapter 31 of title 40, United States Code. For purposes of determining an increased credit amount under paragraph (6)(A) for a taxable year, the requirement under clause (ii) is applied to such taxable year in which the alteration or repair of the qualified facility occurs.
(B) Correction and penalty related to failure to satisfy wage requirements
(i) In generalIn the case of any taxpayer which fails to satisfy the requirement under subparagraph (A) with respect to the construction of any qualified facility or with respect to the alteration or repair of a facility in any year during the period described in subparagraph (A)(ii), such taxpayer shall be deemed to have satisfied such requirement under such subparagraph with respect to such facility for any year if, with respect to any laborer or mechanic who was paid wages at a rate below the rate described in such subparagraph for any period during such year, such taxpayer—(I) makes payment to such laborer or mechanic in an amount equal to the sum of—(aa) an amount equal to the difference between—(AA) the amount of wages paid to such laborer or mechanic during such period, and(BB) the amount of wages required to be paid to such laborer or mechanic pursuant to such subparagraph during such period, plus(bb) interest on the amount determined under item (aa) at the underpayment rate established under section 6621 (determined by substituting “6 percentage points” for “3 percentage points” in subsection (a)(2) of such section) for the period described in such item, and(II) makes payment to the Secretary of a penalty in an amount equal to the product of—(aa) $5,000, multiplied by(bb) the total number of laborers and mechanics who were paid wages at a rate below the rate described in subparagraph (A) for any period during such year.
(ii) Deficiency procedures not to apply
(iii) Intentional disregardIf the Secretary determines that any failure described in clause (i) is due to intentional disregard of the requirements under subparagraph (A), such clause shall be applied—(I) in subclause (I), by substituting “three times the sum” for “the sum”, and(II) in subclause (II), by substituting “$10,000” for “5,000 1
1 So in original. Probably should be “$5,000”.
” in item (aa) thereof.(iv) Limitation on period for payment
(8) Apprenticeship requirementsThe requirements described in this paragraph with respect to the construction of any qualified facility are as follows:
(A) Labor hours
(i) Percentage of total labor hours
(ii) Applicable percentageFor purposes of clause (i), the applicable percentage shall be—(I) in the case of a qualified facility the construction of which begins before January 1, 2023, 10 percent,(II) in the case of a qualified facility the construction of which begins after December 31, 2022, and before January 1, 2024, 12.5 percent, and(III) in the case of a qualified facility the construction of which begins after December 31, 2023, 15 percent.
(B) Apprentice to journeyworker ratio
(C) Participation
(D) Exception
(i) In generalA taxpayer shall not be treated as failing to satisfy the requirements of this paragraph if such taxpayer—(I) satisfies the requirements described in clause (ii), or(II) subject to clause (iii), in the case of any failure by the taxpayer to satisfy the requirement under subparagraphs (A) and (C) with respect to the construction, alteration, or repair work on any qualified facility to which subclause (I) does not apply, makes payment to the Secretary of a penalty in an amount equal to the product of—(aa) $50, multiplied by(bb) the total labor hours for which the requirement described in such subparagraph was not satisfied with respect to the construction, alteration, or repair work on such qualified facility.
(ii) Good faith effortFor purposes of clause (i), a taxpayer shall be deemed to have satisfied the requirements under this paragraph with respect to a qualified facility if such taxpayer has requested qualified apprentices from a registered apprenticeship program, as defined in section 3131(e)(3)(B), and—(I) such request has been denied, provided that such denial is not the result of a refusal by the taxpayer or any contractors or subcontractors engaged in the performance of construction, alteration, or repair work with respect to such qualified facility to comply with the established standards and requirements of the registered apprenticeship program, or(II) the registered apprenticeship program fails to respond to such request within 5 business days after the date on which such registered apprenticeship program received such request.
(iii) Intentional disregard
(E) DefinitionsFor purposes of this paragraph—
(i) Labor hoursThe term “labor hours”—(I) means the total number of hours devoted to the performance of construction, alteration, or repair work by any individual employed by the taxpayer or by any contractor or subcontractor, and(II) excludes any hours worked by—(aa) foremen,(bb) superintendents,(cc) owners, or(dd) persons employed in a bona fide executive, administrative, or professional capacity (within the meaning of those terms in part 541 of title 29, Code of Federal Regulations).
(ii) Qualified apprentice
(9) Domestic span bonus credit amount
(A) In general
(B) Requirement
(i) In general
(ii) Steel and iron
(iii) Manufactured product
(C) Adjusted percentage
(i) In general
(ii) Offshore wind facility
(10) Phaseout for elective payment
(A) In generalIn the case of a taxpayer making an election under section 6417 with respect to a credit under this section, the amount of such credit shall be replaced with—
(i) the value of such credit (determined without regard to this paragraph), multiplied by
(ii) the applicable percentage.
(B) 100 percent applicable percentage for certain qualified facilitiesIn the case of any qualified facility—
(i) which satisfies the requirements under paragraph (9)(B), or
(ii) with a maximum net output of less than 1 megawatt (as measured in alternating current),
the applicable percentage shall be 100 percent.
(C) Phased domestic span requirementSubject to subparagraph (D), in the case of any qualified facility which is not described in subparagraph (B), the applicable percentage shall be—
(i) if construction of such facility began before January 1, 2024, 100 percent, and
(ii) if construction of such facility began in calendar year 2024, 90 percent.
(D) Exception
(i) In generalFor purposes of this paragraph, the Secretary shall provide exceptions to the requirements under this paragraph if—(I) the inclusion of steel, iron, or manufactured products which are produced in the United States increases the overall costs of construction of qualified facilities by more than 25 percent, or(II) relevant steel, iron, or manufactured products are not produced in the United States in sufficient and reasonably available quantities or of a satisfactory quality.
(ii) Applicable percentage
(11) Special rule for qualified facility located in energy community
(A) In general
(B) Energy communityFor purposes of this paragraph, the term “energy community” means—
(i) a brownfield site (as defined in subparagraphs (A), (B), and (D)(ii)(III) of section 101(39) of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (42 U.S.C. 9601(39))),
(ii) a metropolitan statistical area or non-metropolitan statistical area which—(I) has (or, at any time during the period beginning after December 31, 2009, had) 0.17 percent or greater direct employment or 25 percent or greater local tax revenues related to the extraction, processing, transport, or storage of coal, oil, or natural gas (as determined by the Secretary), and(II) has an unemployment rate at or above the national average unemployment rate for the previous year (as determined by the Secretary), or
(iii) a census tract—(I) in which—(aa) after December 31, 1999, a coal mine has closed, or(bb) after December 31, 2009, a coal-fired electric generating unit has been retired, or(II) which is directly adjoining to any census tract described in subclause (I).
(12) Regulations and guidance
(c) ResourcesFor purposes of this section:
(1) In generalThe term “qualified energy resources” means—
(A) wind,
(B) closed-loop biomass,
(C) open-loop biomass,
(D) geothermal energy,
(E) solar energy,
(F) small irrigation power,
(G) municipal solid waste,
(H) qualified hydropower production, and
(I) marine and hydrokinetic renewable energy.
(2) Closed-loop biomass
(3) Open-loop biomass
(A) In generalThe term “open-loop biomass” means—
(i) any agricultural livestock waste nutrients, or
(ii) any solid, nonhazardous, cellulosic waste material or any lignin material which is derived from—(I) any of the following forest-related resources: mill and harvesting residues, precommercial thinnings, slash, and brush,(II) solid wood waste materials, including waste pallets, crates, dunnage, manufacturing and construction wood wastes (other than pressure-treated, chemically-treated, or painted wood wastes), and landscape or right-of-way tree trimmings, but not including municipal solid waste, gas derived from the biodegradation of solid waste, or paper which is commonly recycled, or(III) agriculture sources, including orchard tree crops, vineyard, grain, legumes, sugar, and other crop by-products or residues.
Such term shall not include closed-loop biomass or biomass burned in conjunction with fossil fuel (cofiring) beyond such fossil fuel required for startup and flame stabilization.
(B) Agricultural livestock waste nutrients
(i) In general
(ii) Agricultural livestock
(4) Geothermal energy
(5) Small irrigation powerThe term “small irrigation power” means power—
(A) generated without any dam or impoundment of water through an irrigation system canal or ditch, and
(B) the nameplate capacity rating of which is not less than 150 kilowatts but is less than 5 megawatts.
(6) Municipal solid waste
(7) Refined coal
(A) In generalThe term “refined coal” means a fuel—
(i) which—(I) is a liquid, gaseous, or solid fuel produced from coal (including lignite) or high carbon fly ash, including such fuel used as a feedstock,(II) is sold by the taxpayer with the reasonable expectation that it will be used for the purpose of producing steam, and(III) is certified by the taxpayer as resulting (when used in the production of steam) in a qualified emission reduction, or
(ii) which is steel industry fuel.
(B) Qualified emission reduction
(C) Steel industry fuel
(i) In generalThe term “steel industry fuel” means a fuel which—(I) is produced through a process of liquifying coal waste sludge and distributing it on coal, and(II) is used as a feedstock for the manufacture of coke.
(ii) Coal waste sludge
(8) Qualified hydropower production
(A) In generalThe term “qualified hydropower production” means—
(i) in the case of any hydroelectric dam which was placed in service on or before the date of the enactment of this paragraph, the incremental hydropower production for the taxable year, and
(ii) in the case of any nonhydroelectric dam described in subparagraph (C), the hydropower production from the facility for the taxable year.
(B) Determination of incremental hydropower production
(i) In general
(ii) Operational changes disregarded
(C) Nonhydroelectric damFor purposes of subparagraph (A), a facility is described in this subparagraph if—
(i) the hydroelectric project installed on the nonhydroelectric dam is licensed by the Federal Energy Regulatory Commission and meets all other applicable environmental, licensing, and regulatory requirements,
(ii) the nonhydroelectric dam was placed in service before the date of the enactment of this paragraph and operated for flood control, navigation, or water supply purposes and did not produce hydroelectric power on the date of the enactment of this paragraph, and
(iii) the hydroelectric project is operated so that the water surface elevation at any given location and time that would have occurred in the absence of the hydroelectric project is maintained, subject to any license requirements imposed under applicable law that change the water surface elevation for the purpose of improving environmental quality of the affected waterway.
The Secretary, in consultation with the Federal Energy Regulatory Commission, shall certify if a hydroelectric project licensed at a nonhydroelectric dam meets the criteria in clause (iii). Nothing in this section shall affect the standards under which the Federal Energy Regulatory Commission issues licenses for and regulates hydropower projects under part I of the Federal Power Act.
(9) Indian coal
(A) In generalThe term “Indian coal” means coal which is produced from coal reserves which, on June 14, 2005—
(i) were owned by an Indian tribe, or
(ii) were held in trust by the United States for the benefit of an Indian tribe or its members.
(B) Indian tribe
(10) Marine and hydrokinetic renewable energy
(A) In generalThe term “marine and hydrokinetic renewable energy” means energy derived from—
(i) waves, tides, and currents in oceans, estuaries, and tidal areas,
(ii) free flowing water in rivers, lakes, and streams,
(iii) free flowing water in an irrigation system, canal, or other man-made channel, including projects that utilize nonmechanical structures to accelerate the flow of water for electric power production purposes,
(iv) differentials in ocean temperature (ocean thermal energy conversion), or
(v) pressurized water used in a pipeline (or similar man-made water conveyance) which is operated—(I) for the distribution of water for agricultural, municipal, or industrial consumption, and(II) not primarily for the generation of electricity.
(B) Exceptions
(d) Qualified facilitiesFor purposes of this section:
(1) Wind facility
(2) Closed-loop biomass facility
(A) In generalIn the case of a facility using closed-loop biomass to produce electricity, the term “qualified facility” means any facility—
(i) owned by the taxpayer which is originally placed in service after December 31, 1992, and the construction of which begins before January 1, 2025, or
(ii) owned by the taxpayer which before January 1, 2025, is originally placed in service and modified to use closed-loop biomass to co-fire with coal, with other biomass, or with both, but only if the modification is approved under the Biomass Power for Rural Development Programs or is part of a pilot project of the Commodity Credit Corporation as described in 65 Fed. Reg. 63052.
For purposes of clause (ii), a facility shall be treated as modified before January 1, 2025, if the construction of such modification begins before such date.
(B) Expansion of facility
(C) Special rulesIn the case of a qualified facility described in subparagraph (A)(ii)—
(i) the 10-year period referred to in subsection (a) shall be treated as beginning no earlier than the date of the enactment of this clause, and
(ii) if the owner of such facility is not the producer of the electricity, the person eligible for the credit allowable under subsection (a) shall be the lessee or the operator of such facility.
(3) Open-loop biomass facilities
(A) In generalIn the case of a facility using open-loop biomass to produce electricity, the term “qualified facility” means any facility owned by the taxpayer which—
(i) in the case of a facility using agricultural livestock waste nutrients—(I) is originally placed in service after the date of the enactment of this subclause and the construction of which begins before January 1, 2025, and(II) the nameplate capacity rating of which is not less than 150 kilowatts, and
(ii) in the case of any other facility, the construction of which begins before January 1, 2025.
(B) Expansion of facility
(C) Credit eligibility
(4) Geothermal or solar energy facility
(5) Small irrigation power facility
(6) Landfill gas facilities
(7) Trash facilities
(8) Refined coal production facilityIn the case of a facility that produces refined coal, the term “refined coal production facility” means—
(A) with respect to a facility producing steel industry fuel, any facility (or any modification to a facility) which is placed in service before January 1, 2010, and
(B) with respect to any other facility producing refined coal, any facility placed in service after the date of the enactment of the American Jobs Creation Act of 2004 and before January 1, 2012.
(9) Qualified hydropower facility
(A) In generalIn the case of a facility producing qualified hydroelectric production described in subsection (c)(8), the term “qualified facility” means—
(i) in the case of any facility producing incremental hydropower production, such facility but only to the extent of its incremental hydropower production attributable to efficiency improvements or additions to capacity described in subsection (c)(8)(B) placed in service after the date of the enactment of this paragraph and before January 1, 2025, and
(ii) any other facility placed in service after the date of the enactment of this paragraph and the construction of which begins before January 1, 2025.
(B) Credit period
(C) Special rule
(10) Indian coal production facility
(11) Marine and hydrokinetic renewable energy facilitiesIn the case of a facility producing electricity from marine and hydrokinetic renewable energy, the term “qualified facility” means any facility owned by the taxpayer—
(A) which has a nameplate capacity rating of at least 25 kilowatts, and
(B) which is originally placed in service on or after the date of the enactment of this paragraph and the construction of which begins before January 1, 2025.
(e) Definitions and special rulesFor purposes of this section—
(1) Only production in the United States taken into accountSales 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
(B) Inflation adjustment factor
(C) Reference price
(3) Production attributable to the taxpayer
(4) Related persons
(5) Pass-thru in the case of estates and trusts
[(6) Repealed. Pub. L. 109–58, title XIII, § 1301(f)(3), Aug. 8, 2005, 119 Stat. 990]
(7) Credit not to apply to electricity sold to utilities under certain contracts
(A) In generalThe credit determined under subsection (a) shall not apply to electricity—
(i) produced at a qualified facility described in subsection (d)(1) which is originally placed in service after June 30, 1999, and
(ii) sold to a utility pursuant to a contract originally entered into before January 1, 1987 (whether or not amended or restated after that date).
(B) ExceptionSubparagraph (A) shall not apply if—
(i) the prices for energy and capacity from such facility are established pursuant to an amendment to the contract referred to in subparagraph (A)(ii),
(ii) such amendment provides that the prices set forth in the contract which exceed avoided cost prices determined at the time of delivery shall apply only to annual quantities of electricity (prorated for partial years) which do not exceed the greater of—(I) the average annual quantity of electricity sold to the utility under the contract during calendar years 1994, 1995, 1996, 1997, and 1998, or(II) the estimate of the annual electricity production set forth in the contract, or, if there is no such estimate, the greatest annual quantity of electricity sold to the utility under the contract in any of the calendar years 1996, 1997, or 1998, and
(iii) such amendment provides that energy and capacity in excess of the limitation in clause (ii) may be—(I) sold to the utility only at prices that do not exceed avoided cost prices determined at the time of delivery, or(II) sold to a third party subject to a mutually agreed upon advance notice to the utility.
For purposes of this subparagraph, avoided cost prices shall be determined as provided for in 18 CFR 292.304(d)(1) or any successor regulation.
(8) Refined coal production facilities
(A) Determination of credit amountIn the case of a producer of refined coal, the credit determined under this section (without regard to this paragraph) for any taxable year shall be increased by an amount equal to $4.375 per ton of qualified refined coal—
(i) produced by the taxpayer at a refined coal production facility during the 10-year period beginning on the date the facility was originally placed in service, and
(ii) sold by the taxpayer—(I) to an unrelated person, and(II) during such 10-year period and such taxable year.
(B) Phaseout of creditThe amount of the increase determined under subparagraph (A) shall be reduced by an amount which bears the same ratio to the amount of the increase (determined without regard to this subparagraph) as—
(i) the amount by which the reference price of fuel used as a feedstock (within the meaning of subsection (c)(7)(A)) for the calendar year in which the sale occurs exceeds an amount equal to 1.7 multiplied by the reference price for such fuel in 2002, bears to
(ii) $8.75.
(C) Application of rules
(D) Special rule for steel industry fuel
(i) In generalIn the case of a taxpayer who produces steel industry fuel—(I) this paragraph shall be applied separately with respect to steel industry fuel and other refined coal, and(II) in applying this paragraph to steel industry fuel, the modifications in clause (ii) shall apply.
(ii) Modifications(I) Credit amount(II) Credit period(III) No phaseout
(iii) Modifications
(iv) Barrel-of-oil equivalent
(9) Coordination with credit for producing fuel from a nonconventional source
(A) In general
(B) Refined coal facilities
(i) In general
(ii) Exception for steel industry coal
(10) Indian coal production facilities
(A) Determination of credit amountIn the case of a producer of Indian coal, the credit determined under this section (without regard to this paragraph) for any taxable year shall be increased by an amount equal to the applicable dollar amount per ton of Indian coal—
(i) produced by the taxpayer at an Indian coal production facility during the 16-year period beginning on January 1, 2006, and
(ii) sold by the taxpayer—(I) to an unrelated person (either directly by the taxpayer or after sale or transfer to one or more related persons), and(II) during such 16-year period and such taxable year.
(B) Applicable dollar amount
(i) In generalThe term “applicable dollar amount” for any taxable year beginning in a calendar year means—(I) $1.50 in the case of calendar years 2006 through 2009, and(II) $2.00 in the case of calendar years beginning after 2009.
(ii) Inflation adjustment
(C) Application of rules
(11) Allocation of credit to patrons of agricultural cooperative
(A) Election to allocate
(i) In general
(ii) Form and effect of election
(B) Treatment of organizations and patronsThe amount of the credit apportioned to any patrons under subparagraph (A)—
(i) shall not be included in the amount determined under subsection (a) with respect to the organization for the taxable year, and
(ii) shall be included in the amount determined under subsection (a) for the first taxable year of each patron ending on or after the last day of the payment period (as defined in section 1382(d)) for the taxable year of the organization or, if earlier, for the taxable year of each patron ending on or after the date on which the patron receives notice from the cooperative of the apportionment.
(C) Special rules for decrease in credits for taxable yearIf the amount of the credit of a cooperative organization determined under subsection (a) for a taxable year is less than the amount of such credit shown on the return of the cooperative organization for such year, an amount equal to the excess of—
(i) such reduction, over
(ii) the amount not apportioned to such patrons under subparagraph (A) for the taxable year,
shall be treated as an increase in tax imposed by this chapter on the organization. Such increase shall not be treated as tax imposed by this chapter for purposes of determining the amount of any credit under this chapter.
(D) Eligible cooperative defined
(12) Coordination with energy credit for qualified biogas property
(13) Special rule for electricity used at a qualified clean hydrogen production facilityElectricity produced by the taxpayer shall be treated as sold by such taxpayer to an unrelated person during the taxable year if—
(A) such electricity is used during such taxable year by the taxpayer or a person related to the taxpayer at a qualified clean hydrogen production facility (as defined in section 45V(c)(3)) to produce qualified clean hydrogen (as defined in section 45V(c)(2)), and
(B) such use and production is verified (in such form or manner as the Secretary may prescribe) by an unrelated third party.
(Added Pub. L. 102–486, title XIX, § 1914(a), Oct. 24, 1992, 106 Stat. 3020; amended Pub. L. 106–170, title V, § 507(a)–(c), Dec. 17, 1999, 113 Stat. 1922; Pub. L. 106–554, § 1(a)(7) [title III, § 319(1)], Dec. 21, 2000, 114 Stat. 2763, 2763A–646; Pub. L. 107–147, title VI, § 603(a), Mar. 9, 2002, 116 Stat. 59; Pub. L. 108–311, title III, § 313(a), Oct. 4, 2004, 118 Stat. 1181; Pub. L. 108–357, title VII, § 710(a)–(d), (f), Oct. 22, 2004, 118 Stat. 1552–1557; Pub. L. 109–58, title XIII, §§ 1301(a)–(f)(4), 1302(a), 1322(a)(3)(C), Aug. 8, 2005, 119 Stat. 986–990, 1011; Pub. L. 109–135, title IV, §§ 402(b), 403(t), 412(j), Dec. 21, 2005, 119 Stat. 2610, 2628, 2637; Pub. L. 109–432, div. A, title II, § 201, Dec. 20, 2006, 120 Stat. 2944; Pub. L. 110–172, §§ 7(b), 9(a), Dec. 29, 2007, 121 Stat. 2482, 2484; Pub. L. 110–343, div. B, title I, §§ 101(a)–(e), 102(a)–(e), 106(c)(3)(B), 108(a)–(d)(1), Oct. 3, 2008, 122 Stat. 3808–3810, 3815, 3819–3821; Pub. L. 111–5, div. B, title I, § 1101(a), (b), Feb. 17, 2009, 123 Stat. 319; Pub. L. 111–312, title VII, § 702(a), Dec. 17, 2010, 124 Stat. 3311; Pub. L. 112–240, title IV, §§ 406(a), 407(a), Jan. 2, 2013, 126 Stat. 2340; Pub. L. 113–295, div. A, title I, §§ 154(a), 155(a), title II, § 210(g)(1), Dec. 19, 2014, 128 Stat. 4021, 4032; Pub. L. 114–113, div. P, title III, § 301(a), div. Q, title I, §§ 186(a)–(c), (d)(2), 187(a), Dec. 18, 2015, 129 Stat. 3038, 3073, 3074; Pub. L. 115–123, div. D, title I, §§ 40408(a), 40409(a), Feb. 9, 2018, 132 Stat. 149, 150; Pub. L. 115–141, div. U, title IV, § 401(a)(14)–(16), Mar. 23, 2018, 132 Stat. 1185; Pub. L. 116–94, div. Q, title I, §§ 127(a), (c)(1), (2)(A), 128(a), Dec. 20, 2019, 133 Stat. 3231, 3232; Pub. L. 116–260, div. EE, title I, §§ 131(a), (c)(1), 145(a), Dec. 27, 2020, 134 Stat. 3052, 3054; Pub. L. 117–169, title I, §§ 13101(a)–(c), (e)(1), (2)(A), (f)–(j), 13102(f)(4), 13204(b)(1), Aug. 16, 2022, 136 Stat. 1906–1913, 1916, 1939.)
§ 45A. Indian employment credit
(a) Amount of creditFor 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 costsFor purposes of this section—
(1) Qualified wages
(A) In general
(B) Coordination with work opportunity credit
(2) Qualified employee health insurance costs
(A) In general
(B) Exception for amounts paid under salary reduction arrangements
(3) Limitation
(c) Qualified employeeFor purposes of this section—
(1) In generalExcept 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
(3) Inflation adjustment
(4) Employment must be trade or business employment
(5) Certain employees not eligibleThe 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 (25 U.S.C. 2703), or are performed in a building housing such gaming activity.
(6) Indian tribe defined
(7) Indian reservation defined
(d) Early termination of employment by employer
(1) In generalIf 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
(3) Subsection not to apply in certain cases
(A) In generalParagraph (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 businessFor 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 ruleAny 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 rulesFor purposes of this section—
(1) Wages
(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
(4) Coordination with nonrevenue laws
(5) Special rule for short taxable years
(f) Termination
(Added Pub. L. 103–66, title XIII, § 13322(b), Aug. 10, 1993, 107 Stat. 559; amended Pub. L. 104–188, title I, § 1201(e)(1), Aug. 20, 1996, 110 Stat. 1772; Pub. L. 105–206, title VI, § 6023(1), July 22, 1998, 112 Stat. 824; Pub. L. 107–147, title VI, § 613(a), Mar. 9, 2002, 116 Stat. 61; Pub. L. 108–311, title III, § 315, title IV, § 404(b)(1), Oct. 4, 2004, 118 Stat. 1181, 1188; Pub. L. 109–432, div. A, title I, § 111(a), Dec. 20, 2006, 120 Stat. 2940; Pub. L. 110–343, div. C, title III, § 314(a), Oct. 3, 2008, 122 Stat. 3872; Pub. L. 111–312, title VII, § 732(a), Dec. 17, 2010, 124 Stat. 3317; Pub. L. 112–240, title III, § 304(a), Jan. 2, 2013, 126 Stat. 2329; Pub. L. 113–295, div. A, title I, § 114(a), title II, § 216(a), Dec. 19, 2014, 128 Stat. 4014, 4034; Pub. L. 114–113, div. Q, title I, § 161(a), Dec. 18, 2015, 129 Stat. 3066; Pub. L. 115–123, div. D, title I, § 40301(a), Feb. 9, 2018, 132 Stat. 145; Pub. L. 116–94, div. Q, title I, § 111(a), Dec. 20, 2019, 133 Stat. 3228; Pub. L. 116–260, div. EE, title I, § 135(a), Dec. 27, 2020, 134 Stat. 3053.)
§ 45B. Credit for portion of employer social security taxes paid with respect to employee cash tips
(a) General rule
(b) Excess employer social security tax
For purposes of this section—
(1) In general
The term “excess employer social security tax” means any tax paid by an employer under section 3111 with respect to tips received by an employee during any month, to the extent such tips—
(A) are deemed to have been paid by the employer to the employee pursuant to section 3121(q) (without regard to whether such tips are reported under section 6053), and
(B) exceed the amount by which the wages (excluding tips) paid by the employer to the employee during such month are less than the total amount which would be payable (with respect to such employment) at the minimum wage rate applicable to such individual under section 6(a)(1) of the Fair Labor Standards Act of 1938 (as in effect on January 1, 2007, and determined without regard to section 3(m) of such Act).
(2) Only tips received for food or beverages taken into account
(c) Denial of double benefit
(d) Election not to claim credit
(Added Pub. L. 103–66, title XIII, § 13443(a), Aug. 10, 1993, 107 Stat. 568; amended Pub. L. 104–188, title I, § 1112(a)(1), (b)(1), Aug. 20, 1996, 110 Stat. 1759; Pub. L. 110–28, title VIII, § 8213(a), May 25, 2007, 121 Stat. 193.)
§ 45C. Clinical testing expenses for certain drugs for rare diseases or conditions
(a) General rule
(b) Qualified clinical testing expensesFor purposes of this section—
(1) Qualified clinical testing expenses
(A) In general
(B) ModificationsFor 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.
(2) Clinical testing
(A) In generalThe term “clinical testing” means any human clinical testing—
(i) which is carried out under an exemption for a drug being tested for a rare disease or condition under section 505(i) of the Federal Food, Drug, and Cosmetic Act (or regulations issued under such section),
(ii) which occurs—(I) after the date such drug is designated under section 526 of such Act, and(II) before the date on which an application with respect to such drug is approved under section 505(b) of such Act or, if the drug is a biological product, before the date on which a license for such drug is issued under section 351 of the Public Health Service Act, and
(iii) which is conducted by or on behalf of the taxpayer to whom the designation under such section 526 applies.
(B) Testing must be related to use for rare disease or condition
(c) Coordination with credit for increasing research expenditures
(1) In general
(2) Expenses included in determining base period research expenses
(d) Definition and special rules
(1) Rare disease or conditionFor purposes of this section, the term “rare disease or condition” means any disease or condition which—
(A) affects less than 200,000 persons in the United States, or
(B) affects more than 200,000 persons in the United States but for which there is no reasonable expectation that the cost of developing and making available in the United States a drug for such disease or condition will be recovered from sales in the United States of such drug.
Determinations under the preceding sentence with respect to any drug shall be made on the basis of the facts and circumstances as of the date such drug is designated under section 526 of the Federal Food, Drug, and Cosmetic Act.
(2) Special limitations on foreign testingNo credit shall be allowed under this section with respect to any clinical testing conducted outside the United States unless—
(A) such testing is conducted outside the United States because there is an insufficient testing population in the United States, and
(B) such testing is conducted by a United States person or by any other person who is not related to the taxpayer to whom the designation under section 526 of the Federal Food, Drug, and Cosmetic Act applies.
(3) Certain rules made applicable
(4) Election
(Added Pub. L. 97–414, § 4(a), Jan. 4, 1983, 96 Stat. 2053, § 44H; renumbered § 28 and amended Pub. L. 98–369, div. A, title IV, §§ 471(c), 474(g), title VI, § 612(e)(1), July 18, 1984, 98 Stat. 826, 831, 912; Pub. L. 99–514, title II, §§ 231(d)(3)(A), 232, title VII, § 701(c)(2), title XII, § 1275(c)(4), title XVIII, § 1879(b)(1), (2), Oct. 22, 1986, 100 Stat. 2178, 2180, 2340, 2599, 2905; Pub. L. 100–647, title I, § 1018(q)(1), title IV, § 4008(c)(1), Nov. 10, 1988, 102 Stat. 3585, 3653; Pub. L. 101–239, title VII, § 7110(a)(3), Dec. 19, 1989, 103 Stat. 2323; Pub. L. 101–508, title XI, §§ 11402(b)(2), 11411, Nov. 5, 1990, 104 Stat. 1388–473, 1388–479; Pub. L. 102–227, title I, §§ 102(b), 111(a), Dec. 11, 1991, 105 Stat. 1686, 1688; Pub. L. 103–66, title XIII, § 13111(a)(2), (b), Aug. 10, 1993, 107 Stat. 420; renumbered § 45C and amended Pub. L. 104–188, title I, §§ 1204(e), 1205(a)(1), (b), (d)(1), (2), Aug. 20, 1996, 110 Stat. 1775, 1776; Pub. L. 105–34, title VI, §§ 601(b)(2), 604(a), Aug. 5, 1997, 111 Stat. 862, 863; Pub. L. 105–115, title I, § 125(b)(2)(O), Nov. 21, 1997, 111 Stat. 2326; Pub. L. 105–277, div. J, title I, § 1001(b), Oct. 21, 1998, 112 Stat. 2681–888; Pub. L. 106–170, title V, § 502(a)(2), Dec. 17, 1999, 113 Stat. 1919; Pub. L. 108–311, title III, § 301(a)(2), Oct. 4, 2004, 118 Stat. 1178; Pub. L. 109–432, div. A, title I, § 104(a)(2), Dec. 20, 2006, 120 Stat. 2934; Pub. L. 110–343, div. C, title III, § 301(a)(2), Oct. 3, 2008, 122 Stat. 3865; Pub. L. 111–312, title VII, § 731(b), Dec. 17, 2010, 124 Stat. 3317; Pub. L. 112–240, title III, § 301(a)(2), Jan. 2, 2013, 126 Stat. 2326; Pub. L. 113–295, div. A, title I, § 111(b), Dec. 19, 2014, 128 Stat. 4014; Pub. L. 114–113, div. Q, title I, § 121(a)(2), Dec. 18, 2015, 129 Stat. 3049; Pub. L. 115–97, title I, § 13401(a), Dec. 22, 2017, 131 Stat. 2133; Pub. L. 115–141, div. U, title IV, § 401(a)(17), (d)(1)(D)(iii), Mar. 23, 2018, 132 Stat. 1185, 1206.)
§ 45D. New markets tax credit
(a) Allowance of credit
(1) In general
(2) Applicable percentage
For purposes of paragraph (1), the applicable percentage is—
(A) 5 percent with respect to the first 3 credit allowance dates, and
(B) 6 percent with respect to the remainder of the credit allowance dates.
(3) Credit allowance date
For purposes of paragraph (1), the term “credit allowance date” means, with respect to any qualified equity investment—
(A) the date on which such investment is initially made, and
(B) each of the 6 anniversary dates of such date thereafter.
(b) Qualified equity investment
For purposes of this section—
(1) In general
The term “qualified equity investment” means any equity investment in a qualified community development entity if—
(A) such investment is acquired by the taxpayer at its original issue (directly or through an underwriter) solely in exchange for cash,
(B) substantially all of such cash is used by the qualified community development entity to make qualified low-income community investments, and
(C) such investment is designated for purposes of this section by the qualified community development entity.
Such term shall not include any equity investment issued by a qualified community development entity more than 5 years after the date that such entity receives an allocation under subsection (f). Any allocation not used within such 5-year period may be reallocated by the Secretary under subsection (f).
(2) Limitation
(3) Safe harbor for determining use of cash
(4) Treatment of subsequent purchasers
(5) Redemptions
(6) Equity investment
The term “equity investment” means—
(A) any stock (other than nonqualified preferred stock as defined in section 351(g)(2)) in an entity which is a corporation, and
(B) any capital interest in an entity which is a partnership.
(c) Qualified community development entity
For purposes of this section—
(1) In general
The term “qualified community development entity” means any domestic corporation or partnership if—
(A) the primary mission of the entity is serving, or providing investment capital for, low-income communities or low-income persons,
(B) the entity maintains accountability to residents of low-income communities through their representation on any governing board of the entity or on any advisory board to the entity, and
(C) the entity is certified by the Secretary for purposes of this section as being a qualified community development entity.
(2) Special rules for certain organizations
The requirements of paragraph (1) shall be treated as met by—
(A) any specialized small business investment company (as defined in section 1044(c)(3)),
(B) any community development financial institution (as defined in section 103 of the Community Development Banking and Financial Institutions Act of 1994 (12 U.S.C. 4702)).
(d) Qualified low-income community investments
For purposes of this section—
(1) In general
The term “qualified low-income community investment” means—
(A) any capital or equity investment in, or loan to, any qualified active low-income community business,
(B) the purchase from another qualified community development entity of any loan made by such entity which is a qualified low-income community investment,
(C) financial counseling and other services specified in regulations prescribed by the Secretary to businesses located in, and residents of, low-income communities, and
(D) any equity investment in, or loan to, any qualified community development entity.
(2) Qualified active low-income community business
(A) In general
For purposes of paragraph (1), the term “qualified active low-income community business” means, with respect to any taxable year, any corporation (including a nonprofit corporation) or partnership if for such year—
(i) at least 50 percent of the total gross income of such entity is derived from the active conduct of a qualified business within any low-income community,
(ii) a substantial portion of the use of the tangible property of such entity (whether owned or leased) is within any low-income community,
(iii) a substantial portion of the services performed for such entity by its employees are performed in any low-income community,
(iv) less than 5 percent of the average of the aggregate unadjusted bases of the property of such entity is attributable to collectibles (as defined in section 408(m)(2)) other than collectibles that are held primarily for sale to customers in the ordinary course of such business, and
(v) less than 5 percent of the average of the aggregate unadjusted bases of the property of such entity is attributable to nonqualified financial property (as defined in section 1397C(e)).
(B) Proprietorship
(C) Portions of business may be qualified active low-income community business
(3) Qualified business
For purposes of this subsection, the term “qualified business” has the meaning given to such term by section 1397C(d); except that—
(A) in lieu of applying paragraph (2)(B) thereof, the rental to others of real property located in any low-income community shall be treated as a qualified business if there are substantial improvements located on such property, and
(B) paragraph (3) thereof shall not apply.
(e) Low-income community
For purposes of this section—
(1) In general
The term “low-income community” means any population census tract if—
(A) the poverty rate for such tract is at least 20 percent, or
(B)
(i) in the case of a tract not located within a metropolitan area, the median family income for such tract does not exceed 80 percent of statewide median family income, or
(ii) in the case of a tract located within a metropolitan area, the median family income for such tract does not exceed 80 percent of the greater of statewide median family income or the metropolitan area median family income.
Subparagraph (B) shall be applied using possessionwide median family income in the case of census tracts located within a possession of the United States.
(2) Targeted populations
(3) Areas not within census tracts
(4) Tracts with low population
A population census tract with a population of less than 2,000 shall be treated as a low-income community for purposes of this section if such tract—
(A) is within an empowerment zone the designation of which is in effect under section 1391, and
(B) is contiguous to 1 or more low-income communities (determined without regard to this paragraph).
(5) Modification of income requirement for census tracts within high migration rural counties
(A) In general
(B) High migration rural county
(f) National limitation on amount of investments designated
(1) In general
There is a new markets tax credit limitation for each calendar year. Such limitation is—
(A) $1,000,000,000 for 2001,
(B) $1,500,000,000 for 2002 and 2003,
(C) $2,000,000,000 for 2004 and 2005,
(D) $3,500,000,000 for 2006 and 2007,
(E) $5,000,000,000 for 2008,
(F) $5,000,000,000 for 2009,
(G) $3,500,000,000 for each of calendar years 2010 through 2019, and
(H) $5,000,000,000 for for 2
2 So in original.
each of calendar years 2020 through 2025.(2) Allocation of limitation
The limitation under paragraph (1) shall be allocated by the Secretary among qualified community development entities selected by the Secretary. In making allocations under the preceding sentence, the Secretary shall give priority to any entity—
(A) with a record of having successfully provided capital or technical assistance to disadvantaged businesses or communities, or
(B) which intends to satisfy the requirement under subsection (b)(1)(B) by making qualified low-income community investments in 1 or more businesses in which persons unrelated to such entity (within the meaning of section 267(b) or 707(b)(1)) hold the majority equity interest.
(3) Carryover of unused limitation
(g) Recapture of credit in certain cases
(1) In general
(2) Credit recapture amount
For purposes of paragraph (1), the credit recapture amount is an amount equal to the sum of—
(A) the aggregate decrease in the credits allowed to the taxpayer under section 38 for all prior taxable years which would have resulted if no credit had been determined under this section with respect to such investment, plus
(B) interest at the underpayment rate established under section 6621 on the amount determined under subparagraph (A) for each prior taxable year for the period beginning on the due date for filing the return for the prior taxable year involved.
No deduction shall be allowed under this chapter for interest described in subparagraph (B).
(3) Recapture event
For purposes of paragraph (1), there is a recapture event with respect to an equity investment in a qualified community development entity if—
(A) such entity ceases to be a qualified community development entity,
(B) the proceeds of the investment cease to be used as required of subsection (b)(1)(B), or
(C) such investment is redeemed by such entity.
(4) Special rules
(A) Tax benefit rule
(B) No credits against tax
(h) Basis reduction
(i) Regulations
The Secretary shall prescribe such regulations as may be appropriate to carry out this section, including regulations—
(1) which limit the credit for investments which are directly or indirectly subsidized by other Federal tax benefits (including the credit under section 42 and the exclusion from gross income under section 103),
(2) which prevent the abuse of the purposes of this section,
(3) which provide rules for determining whether the requirement of subsection (b)(1)(B) is treated as met,
(4) which impose appropriate reporting requirements,
(5) which apply the provisions of this section to newly formed entities, and
(6) which ensure that non-metropolitan counties receive a proportional allocation of qualified equity investments.
(Added Pub. L. 106–554, § 1(a)(7) [title I, § 121(a)], Dec. 21, 2000, 114 Stat. 2763, 2763A–605; amended Pub. L. 108–357, title II, §§ 221(a), (b), 223(a), Oct. 22, 2004, 118 Stat. 1431, 1432; Pub. L. 109–432, div. A, title I, § 102(a), (b), Dec. 20, 2006, 120 Stat. 2934; Pub. L. 110–343, div. C, title III, § 302, Oct. 3, 2008, 122 Stat. 3866; Pub. L. 111–5, div. B, title I, § 1403(a), Feb. 17, 2009, 123 Stat. 352; Pub. L. 111–312, title VII, § 733(a), (b), Dec. 17, 2010, 124 Stat. 3317, 3318; Pub. L. 112–240, title III, § 305(a), (b), Jan. 2, 2013, 126 Stat. 2329; Pub. L. 113–295, div. A, title I, § 115(a), (b), Dec. 19, 2014, 128 Stat. 4014; Pub. L. 114–113, div. Q, title I, § 141(a), (b), Dec. 18, 2015, 129 Stat. 3056; Pub. L. 115–141, div. U, title IV, § 401(a)(18), (d)(4)(B)(iii), Mar. 23, 2018, 132 Stat. 1185, 1209; Pub. L. 116–94, div. Q, title I, § 141(a), (b), Dec. 20, 2019, 133 Stat. 3234; Pub. L. 116–260, div. EE, title I, § 112(a), (b), Dec. 27, 2020, 134 Stat. 3050.)
§ 45E. Small employer pension plan startup costs
(a) General rule
(b) Dollar limitationThe amount of the credit determined under this section for any taxable year shall not exceed—
(1) for the first credit year and each of the 2 taxable years immediately following the first credit year, the greater of—
(A) $500, or
(B) the lesser of—
(i) $250 for each employee of the eligible employer who is not a highly compensated employee (as defined in section 414(q)) and who is eligible to participate in the eligible employer plan maintained by the eligible employer, or
(ii) $5,000, and
(2) zero for any other taxable year.
(c) Eligible employerFor purposes of this section—
(1) In general
(2) Requirement for new qualified employer plans
(d) Other definitionsFor purposes of this section—
(1) Qualified startup costs
(A) In generalThe term “qualified startup costs” means any ordinary and necessary expenses of an eligible employer which are paid or incurred in connection with—
(i) the establishment or administration of an eligible employer plan, or
(ii) the retirement-related education of employees with respect to such plan.
(B) Plan must have at least 1 participant
(2) Eligible employer plan
(3) First credit yearThe term “first credit year” means—
(A) the taxable year which includes the date that the eligible employer plan to which such costs relate becomes effective with respect to the eligible employer, or
(B) at the election of the eligible employer, the taxable year preceding the taxable year referred to in subparagraph (A).
(e) Special rulesFor purposes of this section—
(1) Aggregation rules
(2) Disallowance of deductionNo deduction shall be allowed—
(A) for that portion of the qualified startup costs paid or incurred for the taxable year which is equal to so much of the portion of the credit determined under subsection (a) as is properly allocable to such costs, and
(B) for that portion of the employer contributions by the employer for the taxable year which is equal to so much of the credit increase determined under subsection (f) as is properly allocable to such contributions.
(3) Election not to claim credit
(4) Increased credit for certain small employers
(f) Additional credit for employer contributions by certain eligible employers
(1) In general
(2) Limitations
(A) Dollar limitation
(B) Credit phase-inIn the case of any eligible employer which had for the preceding taxable year more than 50 employees, the amount determined under paragraph (1) (without regard to this subparagraph) shall be reduced by an amount equal to the product of—
(i) the amount otherwise so determined under paragraph (1), multiplied by
(ii) a percentage equal to 2 percentage points for each employee of the employer for the preceding taxable year in excess of 50 employees.
(C) Wage limitation
(i) In general
(ii) Wages
(iii) Inflation adjustmentIn the case of any taxable year beginning in a calendar year after 2023, the $100,000 amount under clause (i) shall be increased by an amount equal to—(I) such dollar amount, multiplied by(II) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting “calendar year 2007” for “calendar year 2016” in subparagraph (A)(ii) thereof.
If any amount as adjusted under this clause is not a multiple of $5,000, such amount shall be rounded to the next lowest multiple of $5,000.
(3) Applicable percentage
(4) Determination of eligible employer; number of employees
(Added Pub. L. 107–16, title VI, § 619(a), June 7, 2001, 115 Stat. 108; amended Pub. L. 107–147, title IV, § 411(n)(1), Mar. 9, 2002, 116 Stat. 48;
§ 45F. Employer-provided child care credit
(a) In generalFor purposes of section 38, the employer-provided child care credit determined under this section for the taxable year is an amount equal to the sum of—
(1) 25 percent of the qualified child care expenditures, and
(2) 10 percent of the qualified child care resource and referral expenditures,
of the taxpayer for such taxable year.
(b) Dollar limitation
(c) DefinitionsFor purposes of this section—
(1) Qualified child care expenditure
(A) In generalThe term “qualified child care expenditure” means any amount paid or incurred—
(i) to acquire, construct, rehabilitate, or expand property—(I) which is to be used as part of a qualified child care facility of the taxpayer,(II) with respect to which a deduction for depreciation (or amortization in lieu of depreciation) is allowable, and(III) which does not constitute part of the principal residence (within the meaning of section 121) of the taxpayer or any employee of the taxpayer,
(ii) for the operating costs of a qualified child care facility of the taxpayer, including costs related to the training of employees, to scholarship programs, and to the providing of increased compensation to employees with higher levels of child care training, or
(iii) under a contract with a qualified child care facility to provide child care services to employees of the taxpayer.
(B) Fair market value
(2) Qualified child care facility
(A) In generalThe term “qualified child care facility” means a facility—
(i) the principal use of which is to provide child care assistance, and
(ii) which meets the requirements of all applicable laws and regulations of the State or local government in which it is located, including the licensing of the facility as a child care facility.
Clause (i) shall not apply to a facility which is the principal residence (within the meaning of section 121) of the operator of the facility.
(B) Special rules with respect to a taxpayerA facility shall not be treated as a qualified child care facility with respect to a taxpayer unless—
(i) enrollment in the facility is open to employees of the taxpayer during the taxable year,
(ii) if the facility is the principal trade or business of the taxpayer, at least 30 percent of the enrollees of such facility are dependents of employees of the taxpayer, and
(iii) the use of such facility (or the eligibility to use such facility) does not discriminate in favor of employees of the taxpayer who are highly compensated employees (within the meaning of section 414(q)).
(3) Qualified child care resource and referral expenditure
(A) In general
(B) Nondiscrimination
(d) Recapture of acquisition and construction credit
(1) In generalIf, as of the close of any taxable year, there is a recapture event with respect to any qualified child care facility of the taxpayer, then the tax of the taxpayer under this chapter for such taxable year shall be increased by an amount equal to the product of—
(A) the applicable recapture percentage, and
(B) the aggregate decrease in the credits allowed under section 38 for all prior taxable years which would have resulted if the qualified child care expenditures of the taxpayer described in subsection (c)(1)(A) with respect to such facility had been zero.
(2) Applicable recapture percentage
(A) In general
(B) Years
(3) Recapture event definedFor purposes of this subsection, the term “recapture event” means—
(A) Cessation of operation
(B) Change in ownership
(i) In general
(ii) Agreement to assume recapture liability
(4) Special rules
(A) Tax benefit rule
(B) No credits against tax
(C) No recapture by reason of casualty loss
(e) Special rulesFor purposes of this section—
(1) Aggregation rules
(2) Pass-thru in the case of estates and trusts
(3) Allocation in the case of partnerships
(f) No double benefit
(1) Reduction in basisFor purposes of this subtitle—
(A) In general
(B) Certain dispositions
(2) Other deductions and credits
(Added Pub. L. 107–16, title II, § 205(a), June 7, 2001, 115 Stat. 50; amended Pub. L. 107–147, title IV, § 411(d)(1), Mar. 9, 2002, 116 Stat. 46.)
§ 45G. Railroad track maintenance credit
(a) General rule
(b) Limitation
(1) In generalThe credit allowed under subsection (a) for any taxable year shall not exceed the product of—
(A) $3,500, multiplied by
(B) the sum of—
(i) the number of miles of railroad track owned or leased by the eligible taxpayer as of the close of the taxable year, and
(ii) the number of miles of railroad track assigned for purposes of this subsection to the eligible taxpayer by a Class II or Class III railroad which owns or leases such railroad track as of the close of the taxable year.
(2) AssignmentsWith respect to any assignment of a mile of railroad track under paragraph (1)(B)(ii)—
(A) such assignment may be made only once per taxable year of the Class II or Class III railroad and shall be treated as made as of the close of such taxable year,
(B) such mile may not be taken into account under this section by such railroad for such taxable year, and
(C) such assignment shall be taken into account for the taxable year of the assignee which includes the date that such assignment is treated as effective.
(c) Eligible taxpayerFor purposes of this section, the term “eligible taxpayer” means—
(1) any Class II or Class III railroad, and
(2) any person who transports property using the rail facilities of a Class II or Class III railroad or who furnishes railroad-related property or services to a Class II or Class III railroad, but only with respect to miles of railroad track assigned to such person by such Class II or Class III railroad for purposes of subsection (b).
(d) Qualified railroad track maintenance expenditures
(e) Other definitions and special rules
(1) Class II or Class III railroad
(2) Controlled groups
(3) Basis adjustment
(Added Pub. L. 108–357, title II, § 245(a), Oct. 22, 2004, 118 Stat. 1447; amended Pub. L. 109–135, title IV, § 403(f), Dec. 21, 2005, 119 Stat. 2623; Pub. L. 109–432, div. A, title IV, § 423(a), Dec. 20, 2006, 120 Stat. 2973; Pub. L. 110–343, div. C, title III, § 316(a), Oct. 3, 2008, 122 Stat. 3872; Pub. L. 111–312, title VII, § 734(a), Dec. 17, 2010, 124 Stat. 3318; Pub. L. 112–240, title III, § 306(a), Jan. 2, 2013, 126 Stat. 2329; Pub. L. 113–295, div. A, title I, § 116(a), Dec. 19, 2014, 128 Stat. 4014; Pub. L. 114–113, div. Q, title I, § 162(a), (b), Dec. 18, 2015, 129 Stat. 3066; Pub. L. 115–123, div. D, title I, § 40302(a), Feb. 9, 2018, 132 Stat. 145; Pub. L. 116–94, div. Q, title I, § 112(a), Dec. 20, 2019, 133 Stat. 3228; Pub. L. 116–260, div. EE, title I, § 105(a), (b), Dec. 27, 2020, 134 Stat. 3041.)
§ 45H. Credit for production of low sulfur diesel fuel
(a) In general
(b) Maximum credit
(1) In general
The aggregate credit determined under subsection (a) for any taxable year with respect to any facility shall not exceed—
(A) 25 percent of the qualified costs incurred by the small business refiner with respect to such facility, reduced by
(B) the aggregate credits determined under this section for all prior taxable years with respect to such facility.
(2) Reduced percentage
(c) Definitions and special rule
For purposes of this section—
(1) Small business refiner
The term “small business refiner” means, with respect to any taxable year, a refiner of crude oil—
(A) with respect to which not more than 1,500 individuals are engaged in the refinery operations of the business on any day during such taxable year, and
(B) the average daily domestic refinery run or average retained production of which for all facilities of the taxpayer for the 1-year period ending on December 31, 2002, did not exceed 205,000 barrels.
(2) Qualified costs
(3) Applicable EPA regulations
(4) Applicable period
(5) Low sulfur diesel fuel
(d) Special rule for determination of refinery runs
(e) Certification
(1) Required
(2) Contents of application
(3) Review period
(4) Statute of limitations
With respect to the credit allowed under this section—
(A) the statutory period for the assessment of any deficiency attributable to such credit shall not expire before the end of the 3-year period ending on the date that the review period described in paragraph (3) ends with respect to the taxpayer, and
(B) such deficiency may be assessed before the expiration of such 3-year period notwithstanding the provisions of any other law or rule of law which would otherwise prevent such assessment.
(f) Cooperative organizations
(1) Apportionment of credit
(A) In general
(B) Form and effect of election
(2) Treatment of organizations and patrons
(A) Organizations
(B) Patrons
(3) Special rule
If the amount of a credit which has been apportioned to any patron under this subsection is decreased for any reason—
(A) such amount shall not increase the tax imposed on such patron, and
(B) the tax imposed by this chapter on such organization shall be increased by such amount.
The increase under subparagraph (B) shall not be treated as tax imposed by this chapter for purposes of determining the amount of any credit under this chapter or for purposes of section 55.
(g) Election to not take credit
(Added Pub. L. 108–357, title III, § 339(a), Oct. 22, 2004, 118 Stat. 1481; amended Pub. L. 110–172, § 7(a)(1)(A), (2)(A), (3)(A), (B), Dec. 29, 2007, 121 Stat. 2481, 2482; Pub. L. 115–141, div. U, title IV, § 401(a)(19), Mar. 23, 2018, 132 Stat. 1185.)
§ 45I. Credit for producing oil and gas from marginal wells
(a) General ruleFor purposes of section 38, the marginal well production credit for any taxable year is an amount equal to the product of—
(1) the credit amount, and
(2) the qualified crude oil production and the qualified natural gas production which is attributable to the taxpayer.
(b) Credit amountFor purposes of this section—
(1) In generalThe credit amount is—
(A) $3 per barrel of qualified crude oil production, and
(B) 50 cents per 1,000 cubic feet of qualified natural gas production.
(2) Reduction as oil and gas prices increase
(A) In generalThe $3 and 50 cents amounts under paragraph (1) shall each be reduced (but not below zero) by an amount which bears the same ratio to such amount (determined without regard to this paragraph) as—
(i) the excess (if any) of the applicable reference price over $15 ($1.67 for qualified natural gas production), bears to
(ii) $3 ($0.33 for qualified natural gas production).
The applicable reference price for a taxable year is the reference price of the calendar year preceding the calendar year in which the taxable year begins.
(B) Inflation adjustment
(C) Reference priceFor purposes of this paragraph, the term “reference price” means, with respect to any calendar year—
(i) in the case of qualified crude oil production, the reference price determined under section 45K(d)(2)(C), and
(ii) in the case of qualified natural gas production, the Secretary’s estimate of the annual average wellhead price per 1,000 cubic feet for all domestic natural gas.
(c) Qualified crude oil and natural gas productionFor purposes of this section—
(1) In general
(2) Limitation on amount of production which may qualify
(A) In general
(B) Proportionate reductions
(i) Short taxable years
(ii) Wells not in production entire year
(3) Definitions
(A) Qualified marginal wellThe term “qualified marginal well” means a domestic well—
(i) the production from which during the taxable year is treated as marginal production under section 613A(c)(6), or
(ii) which, during the taxable year—(I) has average daily production of not more than 25 barrel-of-oil equivalents (as so defined), and(II) produces water at a rate not less than 95 percent of total well effluent.
(B) Crude oil, etc.
(d) Other rules
(1) Production attributable to the taxpayer
(2) Operating interest required
(3) Production from nonconventional sources excluded
(Added Pub. L. 108–357, title III, § 341(a), Oct. 22, 2004, 118 Stat. 1485; amended Pub. L. 109–58, title XIII, § 1322(a)(3)(B), (D), Aug. 8, 2005, 119 Stat. 1011; Pub. L. 109–135, title IV, § 412(k), Dec. 21, 2005, 119 Stat. 2637.)
§ 45J. Credit for production from advanced nuclear power facilities
(a) General ruleFor purposes of section 38, the advanced nuclear power facility production credit of any taxpayer for any taxable year is equal to the product of—
(1) 1.8 cents, multiplied by
(2) the kilowatt hours of electricity—
(A) produced by the taxpayer at an advanced nuclear power facility during the 8-year period beginning on the date the facility was originally placed in service, and
(B) sold by the taxpayer to an unrelated person during the taxable year.
(b) National limitation
(1) In generalThe amount of credit which would (but for this subsection and subsection (c)) be allowed with respect to any facility for any taxable year shall not exceed the amount which bears the same ratio to such amount of credit as—
(A) the national megawatt capacity limitation allocated to the facility, bears to
(B) the total megawatt nameplate capacity of such facility.
(2) Amount of national limitation
(3) Allocation of limitation
(4) Regulations
(5) Allocation of unutilized limitation
(A) In generalAny unutilized national megawatt capacity limitation shall be allocated by the Secretary under paragraph (3) as rapidly as is practicable after December 31, 2020—
(i) first to facilities placed in service on or before such date to the extent that such facilities did not receive an allocation equal to their full nameplate capacity, and
(ii) then to facilities placed in service after such date in the order in which such facilities are placed in service.
(B) Unutilized national megawatt capacity limitationThe term “unutilized national megawatt capacity limitation” means the excess (if any) of—
(i) 6,000 megawatts, over
(ii) the aggregate amount of national megawatt capacity limitation allocated by the Secretary before January 1, 2021, reduced by any amount of such limitation which was allocated to a facility which was not placed in service before such date.
(C) Coordination with other provisionsIn the case of any unutilized national megawatt capacity limitation allocated by the Secretary pursuant to this paragraph—
(i) such allocation shall be treated for purposes of this section in the same manner as an allocation of national megawatt capacity limitation, and
(ii) subsection (d)(1)(B) shall not apply to any facility which receives such allocation.
(c) Other limitations
(1) Annual limitationThe amount of the credit allowable under subsection (a) (after the application of subsection (b)) for any taxable year with respect to any facility shall not exceed an amount which bears the same ratio to $125,000,000 as—
(A) the national megawatt capacity limitation allocated under subsection (b) to the facility, bears to
(B) 1,000.
(2) Phaseout of credit
(A) In generalThe amount of the credit determined under subsection (a) shall be reduced by an amount which bears the same ratio to the amount of the credit (determined without regard to this paragraph) as—
(i) the amount by which the reference price (as defined in section 45(e)(2)(C)) for the calendar year in which the sale occurs exceeds 8 cents, bears to
(ii) 3 cents.
(B) Phaseout adjustment based on inflation
(d) Advanced nuclear power facilityFor purposes of this section—
(1) In generalThe term “advanced nuclear power facility” means any advanced nuclear facility—
(A) which is owned by the taxpayer and which uses nuclear energy to produce electricity, and
(B) which is placed in service after the date of the enactment of this paragraph and before January 1, 2021.
(2) Advanced nuclear facility
(e) Transfer of credit by certain public entities
(1) In generalIf, with respect to a credit under subsection (a) for any taxable year—
(A) a qualified public entity would be the taxpayer (but for this paragraph), and
(B) such entity elects the application of this paragraph for such taxable year with respect to all (or any portion specified in such election) of such credit,
the eligible project partner specified in such election, and not the qualified public entity, shall be treated as the taxpayer for purposes of this title with respect to such credit (or such portion thereof).
(2) DefinitionsFor purposes of this subsection—
(A) Qualified public entityThe term “qualified public entity” means—
(i) a Federal, State, or local government entity, or any political subdivision, agency, or instrumentality thereof,
(ii) a mutual or cooperative electric company described in section 501(c)(12) or 1381(a)(2), or
(iii) a not-for-profit electric utility which had or has received a loan or loan guarantee under the Rural Electrification Act of 1936.
(B) Eligible project partnerThe term “eligible project partner” means any person who—
(i) is responsible for, or participates in, the design or construction of the advanced nuclear power facility to which the credit under subsection (a) relates,
(ii) participates in the provision of the nuclear steam supply system to such facility,
(iii) participates in the provision of nuclear fuel to such facility,
(iv) is a financial institution providing financing for the construction or operation of such facility, or
(v) has an ownership interest in such facility.
(3) Special rules
(A) Application to partnershipsIn the case of a credit under subsection (a) which is determined at the partnership level—
(i) for purposes of paragraph (1)(A), a qualified public entity shall be treated as the taxpayer with respect to such entity’s distributive share of such credit, and
(ii) the term “eligible project partner” shall include any partner of the partnership.
(B) Taxable year in which credit taken into account
(C) Treatment of transfer under private use rules
(f) Other rules to apply
(Added Pub. L. 109–58, title XIII, § 1306(a), Aug. 8, 2005, 119 Stat. 997; amended Pub. L. 109–135, title IV, § 402(d), Dec. 21, 2005, 119 Stat. 2610; Pub. L. 110–172, § 6(a), Dec. 29, 2007, 121 Stat. 2479; Pub. L. 115–123, div. D, title I, § 40501(a), (b)(1), Feb. 9, 2018, 132 Stat. 153.)
§ 45K. Credit for producing fuel from a nonconventional source
(a) Allowance of creditFor purposes of section 38, the nonconventional source production credit determined under this section for the taxable year is an amount equal to—
(1) $3, multiplied by
(2) the barrel-of-oil equivalent of qualified fuels—
(A) sold by the taxpayer to an unrelated person during the taxable year, and
(B) the production of which is attributable to the taxpayer.
(b) Limitations and adjustments
(1) Phaseout of creditThe 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
(3) Credit reduced for grants, tax-exempt bonds, and subsidized energy financing
(A) In generalThe 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
(4) Credit reduced for energy creditThe 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 creditThe amount allowable as a credit under subsection (a) with respect to any project for any taxable year (determined after application of paragraphs (1), (2), (3), and (4)) shall be reduced by the excess (if any) of—
(A) the aggregate amount allowed under section 38 for the taxable year and any prior taxable year by reason of any enhanced oil recovery credit determined under section 43 with respect to such project, over
(B) the aggregate amount recaptured with respect to the amount described in subparagraph (A) under this paragraph for any prior taxable year.
(c) Definition of qualified fuelsFor purposes of this section—
(1) In generalThe 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
(B) Special rules for gas from tight formationsThe 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) BiomassThe 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 rulesFor purposes of this section—
(1) Only production within the United States taken into accountSales 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
(B) Inflation adjustment factor
(C) Reference price
(3) Production attributable to the taxpayer
(4) Gas from geopressured brine, Devonian shale, coal seams, or a tight formation
(5) Barrel-of-oil equivalent
(6) Barrel defined
(7) Related persons
(8) Pass-thru in the case of estates and trusts
(e) Application of sectionThis section shall apply with respect to qualified fuels—
(1) which are—
(A) produced from a well drilled after December 31, 1979, and before January 1, 1993, or
(B) produced in a facility placed in service after December 31, 1979, and before January 1, 1993, and
(2) which are sold before January 1, 2003.
(f) Extension for certain facilities
(1) In generalIn the case of a facility for producing qualified fuels described in subparagraph (B)(ii) or (C) of subsection (c)(1)—
(A) for purposes of subsection (e)(1)(B), such facility shall be treated as being placed in service before January 1, 1993, if such facility is placed in service before July 1, 1998, pursuant to a binding written contract in effect before January 1, 1997, and
(B) if such facility is originally placed in service after December 31, 1992, paragraph (2) of subsection (e) shall be applied with respect to such facility by substituting “January 1, 2008” for “January 1, 2003”.
(2) Special rule
(g) Extension for facilities producing coke or coke gasNotwithstanding subsection (e)—
(1) In generalIn the case of a facility for producing coke or coke gas (other than from petroleum based products) which was placed in service before January 1, 1993, or after June 30, 1998, and before January 1, 2010, this section shall apply with respect to coke and coke gas produced in such facility and sold during the period—
(A) beginning on the later of January 1, 2006, or the date that such facility is placed in service, and
(B) ending on the date which is 4 years after the date such period began.
(2) Special rulesIn determining the amount of credit allowable under this section solely by reason of this subsection—
(A) Daily limit
(B) Extension period to commence with unadjusted credit amount
(C) Denial of double benefit
(D) Nonapplication of phaseout
(E) Coordination with section 45
(Added Pub. L. 96–223, title II, § 231(a), Apr. 2, 1980, 94 Stat. 268, § 44D; amended Pub. L. 97–34, title VI § 611(a), Aug. 13, 1981, 95 Stat. 339; Pub. L. 97–354, § 5(a)(1), Oct. 19, 1982, 96 Stat. 1692; Pub. L. 97–448, title II, § 202(a), Jan. 12, 1983, 96 Stat. 2396; renumbered § 29 and amended Pub. L. 98–369, div. A, title IV, §§ 471(c), 474(h), title VI, § 612(e)(1), title VII, § 722(d)(1), (2), July 18, 1984, 98 Stat. 826, 831, 912, 973; Pub. L. 99–514, title VII, § 701(c)(3), title XVIII, § 1879(c)(1), Oct. 22, 1986, 100 Stat. 2340, 2906; Pub. L. 100–647, title VI, § 6302, Nov. 10, 1988, 102 Stat. 3755; Pub. L. 101–508, title XI, §§ 11501(a), (b)(1), (c)(1), 11813(b)(1), 11816, Nov. 5, 1990, 104 Stat. 1388–479, 1388–550, 1388–558; Pub. L. 102–486, title XIX, § 1918, Oct. 24, 1992, 106 Stat. 3025; Pub. L. 104–188, title I, §§ 1205(d)(3), 1207(a), Aug. 20, 1996, 110 Stat. 1776; renumbered § 45K and amended Pub. L. 109–58, title XIII, §§ 1321(a), 1322(a)(1), (3)(E), (F), (b), Aug. 8, 2005, 119 Stat. 1010–1012; Pub. L. 109–135, title IV, §§ 402(g), 412(l), Dec. 21, 2005, 119 Stat. 2611, 2637; Pub. L. 109–432, div. A, title II, § 211(a), (b), Dec. 20, 2006, 120 Stat. 2947, 2948; Pub. L. 110–343, div. B, title I, § 108(d)(2), Oct. 3, 2008, 122 Stat. 3821; Pub. L. 113–295, div. A, title II, § 210(a), Dec. 19, 2014, 128 Stat. 4031.)
§ 45L. New energy efficient home credit
(a) Allowance of credit
(1) In generalFor purposes of section 38, in the case of an eligible contractor, the new energy efficient home credit for the taxable year is the applicable amount for each qualified new energy efficient home which is—
(A) constructed by the eligible contractor, and
(B) acquired by a person from such eligible contractor for use as a residence during the taxable year.
(2) Applicable amountFor purposes of paragraph (1), the applicable amount is an amount equal to—
(A) in the case of a dwelling unit which is eligible to participate in the Energy Star Residential New Construction Program or the Energy Star Manufactured New Homes program—
(i) which meets the requirements of subsection (c)(1)(A) (and which does not meet the requirements of subsection (c)(1)(B)), $2,500, and
(ii) which meets the requirements of subsection (c)(1)(B), $5,000, and
(B) in the case of a dwelling unit which is part of a building eligible to participate in the Energy Star Multifamily New Construction Program—
(i) which meets the requirements of subsection (c)(1)(A) (and which does not meet the requirements of subsection (c)(1)(B)), $500, and
(ii) which meets the requirements of subsection (c)(1)(B), $1,000.
(b) DefinitionsFor purposes of this section—
(1) Eligible contractorThe term “eligible contractor” means—
(A) the person who constructed the qualified new energy efficient home, or
(B) in the case of a qualified new energy efficient home which is a manufactured home, the manufactured home producer of such home.
(2) Qualified new energy efficient homeThe term “qualified new energy efficient home” means a dwelling unit—
(A) located in the United States,
(B) the construction of which is substantially completed after the date of the enactment of this section, and
(C) which meets the energy saving requirements of subsection (c).
(3) Construction
(4) Acquire
(c) Energy saving requirements
(1) In general
(A) In general
(B) Zero energy ready home program
(2) Single-family home requirementsA dwelling unit meets the requirements of this paragraph if—
(A) such dwelling unit meets—
(i)(I) in the case of a dwelling unit acquired before January 1, 2025, the Energy Star Single-Family New Homes National Program Requirements 3.1, or(II) in the case of a dwelling unit acquired after December 31, 2024, the Energy Star Single-Family New Homes National Program Requirements 3.2, and
(ii) the most recent Energy Star Single-Family New Homes Program Requirements applicable to the location of such dwelling unit (as in effect on the latter of January 1, 2023, or January 1 of two calendar years prior to the date the dwelling unit was acquired), or
(B) such dwelling unit meets the most recent Energy Star Manufactured Home National program requirements as in effect on the latter of January 1, 2023, or January 1 of two calendar years prior to the date such dwelling unit is acquired.
(3) Multi-family home requirementsA dwelling unit meets the requirements of this paragraph if—
(A) such dwelling unit meets the most recent Energy Star Multifamily New Construction National Program Requirements (as in effect on either January 1, 2023, or January 1 of three calendar years prior to the date the dwelling was acquired, whichever is later), and
(B) such dwelling unit meets the most recent Energy Star Multifamily New Construction Regional Program Requirements applicable to the location of such dwelling unit (as in effect on either January 1, 2023, or January 1 of three calendar years prior to the date the dwelling was acquired, whichever is later).
(d) Certification
(1) Method of certification
(2) Form
(e) Basis adjustment
(f) Coordination with investment credit
(g) Prevailing wage requirement
(1) In generalIn the case of a qualifying residence described in subsection (a)(2)(B) meeting the prevailing wage requirements of paragraph (2)(A), the credit amount allowed with respect to such residence shall be—
(A) $2,500 in the case of a residence which meets the requirements of subparagraph (A) of subsection (c)(1) (and which does not meet the requirements of subparagraph (B) of such subsection), and
(B) $5,000 in the case of a residence which meets the requirements of subsection (c)(1)(B).
(2) Prevailing wage requirements
(A) In general
(B) Correction and penalty related to failure to satisfy wage requirements
(3) Regulations and guidance
(h) Termination
(Added Pub. L. 109–58, title XIII, § 1332(a), Aug. 8, 2005, 119 Stat. 1024; amended Pub. L. 109–432, div. A, title II, § 205, Dec. 20, 2006, 120 Stat. 2945; Pub. L. 110–172, § 11(a)(7), Dec. 29, 2007, 121 Stat. 2485; Pub. L. 110–343, div. B, title III, § 304, Oct. 3, 2008, 122 Stat. 3845; Pub. L. 111–312, title VII, § 703(a), Dec. 17, 2010, 124 Stat. 3311; Pub. L. 112–240, title IV, § 408(a), (b), Jan. 2, 2013, 126 Stat. 2342; Pub. L. 113–295, div. A, title I, § 156(a), Dec. 19, 2014, 128 Stat. 4021; Pub. L. 114–113, div. Q, title I, § 188(a), Dec. 18, 2015, 129 Stat. 3074; Pub. L. 115–123, div. D, title I, § 40410(a), Feb. 9, 2018, 132 Stat. 150; Pub. L. 116–94, div. Q, title I, § 129(a), Dec. 20, 2019, 133 Stat. 3232; Pub. L. 116–260, div. EE, title I, § 146(a), Dec. 27, 2020, 134 Stat. 3055; Pub. L. 117–169, title I, § 13304(a)–(e), Aug. 16, 2022, 136 Stat. 1952–1954.)
[§ 45M. Repealed. Pub. L. 115–141, div. U, title IV, § 401(d)(2)(A), Mar. 23, 2018, 132 Stat. 1208]
§ 45N. Mine rescue team training credit
(a) Amount of credit
For purposes of section 38, the mine rescue team training credit determined under this section with respect to each qualified mine rescue team employee of an eligible employer for any taxable year is an amount equal to the lesser of—
(1) 20 percent of the amount paid or incurred by the taxpayer during the taxable year with respect to the training program costs of such qualified mine rescue team employee (including wages of such employee while attending such program), or
(2) $10,000.
(b) Qualified mine rescue team employee
For purposes of this section, the term “qualified mine rescue team employee” means with respect to any taxable year any full-time employee of the taxpayer who is—
(1) a miner eligible for more than 6 months of such taxable year to serve as a mine rescue team member as a result of completing, at a minimum, an initial 20-hour course of instruction as prescribed by the Mine Safety and Health Administration’s Office of Educational Policy and Development, or
(2) a miner eligible for more than 6 months of such taxable year to serve as a mine rescue team member by virtue of receiving at least 40 hours of refresher training in such instruction.
(c) Eligible employer
(d) Wages
(e) Termination
(Added Pub. L. 109–432, div. A, title IV, § 405(a), Dec. 20, 2006, 120 Stat. 2957; amended Pub. L. 110–343, div. C, title III, § 310, Oct. 3, 2008, 122 Stat. 3869; Pub. L. 111–312, title VII, § 735(a), Dec. 17, 2010, 124 Stat. 3318; Pub. L. 112–240, title III, § 307(a), Jan. 2, 2013, 126 Stat. 2329; Pub. L. 113–295, div. A, title I, § 117(a), Dec. 19, 2014, 128 Stat. 4015; Pub. L. 114–113, div. Q, title I, § 163(a), Dec. 18, 2015, 129 Stat. 3066; Pub. L. 115–123, div. D, title I, § 40303(a), Feb. 9, 2018, 132 Stat. 146; Pub. L. 116–94, div. Q, title I, § 113(a), Dec. 20, 2019, 133 Stat. 3229; Pub. L. 116–260, div. EE, title I, § 136(a), Dec. 27, 2020, 134 Stat. 3053.)
§ 45O. Agricultural chemicals security credit
(a) In general
(b) Facility limitationThe amount of the credit determined under subsection (a) with respect to any facility for any taxable year shall not exceed—
(1) $100,000, reduced by
(2) the aggregate amount of credits determined under subsection (a) with respect to such facility for the 5 prior taxable years.
(c) Annual limitation
(d) Qualified chemical security expenditureFor purposes of this section, the term “qualified chemical security expenditure” means, with respect to any eligible agricultural business for any taxable year, any amount paid or incurred by such business during such taxable year for—
(1) employee security training and background checks,
(2) limitation and prevention of access to controls of specified agricultural chemicals stored at the facility,
(3) tagging, locking tank valves, and chemical additives to prevent the theft of specified agricultural chemicals or to render such chemicals unfit for illegal use,
(4) protection of the perimeter of specified agricultural chemicals,
(5) installation of security lighting, cameras, recording equipment, and intrusion detection sensors,
(6) implementation of measures to increase computer or computer network security,
(7) conducting a security vulnerability assessment,
(8) implementing a site security plan, and
(9) such other measures for the protection of specified agricultural chemicals as the Secretary may identify in regulation.
Amounts described in the preceding sentence shall be taken into account only to the extent that such amounts are paid or incurred for the purpose of protecting specified agricultural chemicals.
(e) Eligible agricultural businessFor purposes of this section, the term “eligible agricultural business” means any person in the trade or business of—
(1) selling agricultural products, including specified agricultural chemicals, at retail predominantly to farmers and ranchers, or
(2) manufacturing, formulating, distributing, or aerially applying specified agricultural chemicals.
(f) Specified agricultural chemicalFor purposes of this section, the term “specified agricultural chemical” means—
(1) any fertilizer commonly used in agricultural operations which is listed under—
(A) section 302(a)(2) of the Emergency Planning and Community Right-to-Know Act of 1986,
(B) section 101 of part 172 of title 49, Code of Federal Regulations, or
(C) part 126, 127, or 154 of title 33, Code of Federal Regulations, and
(2) any pesticide (as defined in section 2(u) of the Federal Insecticide, Fungicide, and Rodenticide Act), including all active and inert ingredients thereof, which is customarily used on crops grown for food, feed, or fiber.
(g) Controlled groups
(h) RegulationsThe Secretary may prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section, including regulations which—
(1) provide for the proper treatment of amounts which are paid or incurred for purpose of protecting any specified agricultural chemical and for other purposes, and
(2) provide for the treatment of related properties as one facility for purposes of subsection (b).
(i) Termination
(Added Pub. L. 110–234, title XV, § 15343(a), May 22, 2008, 122 Stat. 1518, and Pub. L. 110–246, § 4(a), title XV, § 15343(a), June 18, 2008, 122 Stat. 1664, 2280.)
§ 45P. Employer wage credit for employees who are active duty members of the uniformed services
(a) General rule
(b) Definitions
For purposes of this section—
(1) Eligible differential wage payments
(2) Qualified employee
(3) Controlled groups
(c) Coordination with other credits
(d) Disallowance for failure to comply with employment or reemployment rights of members of the reserve components of the Armed Forces of the United States
No credit shall be allowed under subsection (a) to a taxpayer for—
(1) any taxable year, beginning after the date of the enactment of this section, in which the taxpayer is under a final order, judgment, or other process issued or required by a district court of the United States under section 4323 of title 38 of the United States Code with respect to a violation of chapter 43 of such title, and
(2) the 2 succeeding taxable years.
(e) Certain rules to apply
(Added Pub. L. 110–245, title I, § 111(a), June 17, 2008, 122 Stat. 1634; amended Pub. L. 111–312, title VII, § 736(a), Dec. 17, 2010, 124 Stat. 3318; Pub. L. 112–240, title III, § 308(a), Jan. 2, 2013, 126 Stat. 2329; Pub. L. 113–295, div. A, title I, § 118(a), Dec. 19, 2014, 128 Stat. 4015; Pub. L. 114–113, div. Q, title I, § 122(a), (b), Dec. 18, 2015, 129 Stat. 3052.)
§ 45Q. Credit for carbon oxide sequestration
(a) General ruleFor purposes of section 38, the carbon oxide sequestration credit for any taxable year is an amount equal to the sum of—
(1) $20 per metric ton of qualified carbon oxide which is—
(A) captured by the taxpayer using carbon capture equipment which is originally placed in service at a qualified facility before the date of the enactment of the Bipartisan Budget Act of 2018, and
(B) disposed of by the taxpayer in secure geological storage and not used by the taxpayer as described in paragraph (2)(B),
(2) $10 per metric ton of qualified carbon oxide which is—
(A) captured by the taxpayer using carbon capture equipment which is originally placed in service at a qualified facility before the date of the enactment of the Bipartisan Budget Act of 2018, and
(B)
(i) used by the taxpayer as a tertiary injectant in a qualified enhanced oil or natural gas recovery project and disposed of by the taxpayer in secure geological storage, or
(ii) utilized by the taxpayer in a manner described in subsection (f)(5),
(3) the applicable dollar amount (as determined under subsection (b)(1)) per metric ton of qualified carbon oxide which is—
(A) captured by the taxpayer using carbon capture equipment which is originally placed in service at a qualified facility on or after the date of the enactment of the Bipartisan Budget Act of 2018, during the 12-year period beginning on the date the equipment was originally placed in service, and
(B) disposed of by the taxpayer in secure geological storage and not used by the taxpayer as described in paragraph (4)(B), and
(4) the applicable dollar amount (as determined under subsection (b)(1)) per metric ton of qualified carbon oxide which is—
(A) captured by the taxpayer using carbon capture equipment which is originally placed in service at a qualified facility on or after the date of the enactment of the Bipartisan Budget Act of 2018, during the 12-year period beginning on the date the equipment was originally placed in service, and
(B)
(i) used by the taxpayer as a tertiary injectant in a qualified enhanced oil or natural gas recovery project and disposed of by the taxpayer in secure geological storage, or
(ii) utilized by the taxpayer in a manner described in subsection (f)(5).
(b) Applicable dollar amount; additional equipment; election
(1) Applicable dollar amount
(A) In generalExcept as provided in subparagraph (B) or (C), the applicable dollar amount shall be an amount equal to—
(i) for any taxable year beginning in a calendar year after 2016 and before 2027—(I) for purposes of paragraph (3) of subsection (a), $17, and(II) for purposes of paragraph (4) of such subsection, $12, and
(ii) for any taxable year beginning in a calendar year after 2026—(I) for purposes of paragraph (3) of subsection (a), an amount equal to the product of $17 and the inflation adjustment factor for such calendar year determined under section 43(b)(3)(B) for such calendar year, determined by substituting “2025” for “1990”, and(II) for purposes of paragraph (4) of such subsection, an amount equal to the product of $12 and the inflation adjustment factor for such calendar year determined under section 43(b)(3)(B) for such calendar year, determined by substituting “2025” for “1990”.
(B) Special rule for direct air capture facilitiesIn the case of any qualified facility described in subsection (d)(2)(A) which is placed in service after December 31, 2022, the applicable dollar amount shall be an amount equal to the applicable dollar amount otherwise determined with respect to such qualified facility under subparagraph (A), except that such subparagraph shall be applied—
(i) by substituting “$36” for “$17” each place it appears, and
(ii) by substituting “$26” for “$12” each place it appears.
(C) Applicable dollar amount for additional carbon capture equipmentIn the case of any qualified facility which is placed in service before January 1, 2023, if any additional carbon capture equipment is installed at such facility and such equipment is placed in service after December 31, 2022, the applicable dollar amount shall be an amount equal to the applicable dollar amount otherwise determined under this paragraph, except that subparagraph (B) shall be applied—
(i) by substituting “before January 1, 2023” for “after December 31, 2022”, and
(ii) by substituting “the additional carbon capture equipment installed at such qualified facility” for “such qualified facility”.
(D) Rounding
(2) Installation of additional carbon capture equipment on existing qualified facilityIn the case of a qualified facility placed in service before the date of the enactment of the Bipartisan Budget Act of 2018, for which additional carbon capture equipment is placed in service on or after the date of the enactment of such Act, the amount of qualified carbon oxide which is captured by the taxpayer shall be equal to—
(A) for purposes of paragraphs (1)(A) and (2)(A) of subsection (a), the lesser of—
(i) the total amount of qualified carbon oxide captured at such facility for the taxable year, or
(ii) the total amount of the carbon dioxide capture capacity of the carbon capture equipment in service at such facility on the day before the date of the enactment of the Bipartisan Budget Act of 2018, and
(B) for purposes of paragraphs (3)(A) and (4)(A) of such subsection, an amount (not less than zero) equal to the excess of—
(i) the amount described in clause (i) of subparagraph (A), over
(ii) the amount described in clause (ii) of such subparagraph.
(3) Election
(c) Qualified carbon oxideFor purposes of this section—
(1) In generalThe term “qualified carbon oxide” means—
(A) any carbon dioxide which—
(i) is captured from an industrial source by carbon capture equipment which is originally placed in service before the date of the enactment of the Bipartisan Budget Act of 2018,
(ii) would otherwise be released into the atmosphere as industrial emission of greenhouse gas or lead to such release, and
(iii) is measured at the source of capture and verified at the point of disposal, injection, or utilization,
(B) any carbon dioxide or other carbon oxide which—
(i) is captured from an industrial source by carbon capture equipment which is originally placed in service on or after the date of the enactment of the Bipartisan Budget Act of 2018,
(ii) would otherwise be released into the atmosphere as industrial emission of greenhouse gas or lead to such release, and
(iii) is measured at the source of capture and verified at the point of disposal, injection, or utilization, or
(C) in the case of a direct air capture facility, any carbon dioxide which—
(i) is captured directly from the ambient air, and
(ii) is measured at the source of capture and verified at the point of disposal, injection, or utilization.
(2) Recycled carbon oxide
(d) Qualified facilityFor purposes of this section, the term “qualified facility” means any industrial facility or direct air capture facility—
(1) the construction of which begins before January 1, 2033, and either—
(A) construction of carbon capture equipment begins before such date, or
(B) the original planning and design for such facility includes installation of carbon capture equipment, and
(2) which—
(A) in the case of a direct air capture facility, captures not less than 1,000 metric tons of qualified carbon oxide during the taxable year,
(B) in the case of an electricity generating facility—
(i) captures not less than 18,750 metric tons of qualified carbon oxide during the taxable year, and
(ii) with respect to any carbon capture equipment for the applicable electric generating unit at such facility, has a capture design capacity of not less than 75 percent of the baseline carbon oxide production of such unit, or
(C) in the case of any other facility, captures not less than 12,500 metric tons of qualified carbon oxide during the taxable year.
(e) DefinitionsFor purposes of this section—
(1) Applicable electric generating unit
(2) Baseline carbon oxide production
(A) In generalThe term “baseline carbon oxide production” means either of the following:
(i) In the case of an applicable electric generating unit which was originally placed in service more than 1 year prior to the date on which construction of the carbon capture equipment begins, the average annual carbon oxide production, by mass, from such unit during—(I) in the case of an applicable electric generating unit which was originally placed in service more than 1 year prior to the date on which construction of the carbon capture equipment begins and on or after the date which is 3 years prior to the date on which construction of such equipment begins, the period beginning on the date such unit was placed in service and ending on the date on which construction of such equipment began, and(II) in the case of an applicable electric generating unit which was originally placed in service more than 3 years prior to the date on which construction of the carbon capture equipment begins, the 3 years with the highest annual carbon oxide production during the 12-year period preceding the date on which construction of such equipment began.
(ii) In the case of an applicable electric generating unit which—(I) as of the date on which construction of the carbon capture equipment begins, is not yet placed in service, or(II) was placed in service during the 1-year period prior to the date on which construction of the carbon capture equipment begins,
the designed annual carbon oxide production, by mass, as determined based on an assumed capacity factor of 60 percent.
(B) Capacity factor
(3) Direct air capture facility
(A) In general
(B) ExceptionThe term “direct air capture facility” shall not include any facility which captures carbon dioxide—
(i) which is deliberately released from naturally occurring subsurface springs, or
(ii) using natural photosynthesis.
(4) Qualified enhanced oil or natural gas recovery project
(5) Tertiary injectant
(f) Special rules
(1) Only qualified carbon oxide captured and disposed of or used within the united states taken into accountThe credit under this section shall apply only with respect to qualified carbon oxide the capture and disposal, use, or utilization of which is within—
(A) the United States (within the meaning of section 638(1)), or
(B) a possession of the United States (within the meaning of section 638(2)).
(2) Secure geological storage
(3) Credit attributable to taxpayer
(A) In generalExcept as provided in subparagraph (B) or in any regulations prescribed by the Secretary, any credit under this section shall be attributable to—
(i) in the case of qualified carbon oxide captured using carbon capture equipment which is originally placed in service at a qualified facility before the date of the enactment of the Bipartisan Budget Act of 2018, the person that captures and physically or contractually ensures the disposal, utilization, or use as a tertiary injectant of such qualified carbon oxide, and
(ii) in the case of qualified carbon oxide captured using carbon capture equipment which is originally placed in service at a qualified facility on or after the date of the enactment of the Bipartisan Budget Act of 2018, the person that owns the carbon capture equipment and physically or contractually ensures the capture and disposal, utilization, or use as a tertiary injectant of such qualified carbon oxide.
(B) ElectionIf the person described in subparagraph (A) makes an election under this subparagraph in such time and manner as the Secretary may prescribe by regulations, the credit under this section—
(i) shall be allowable to the person that disposes of the qualified carbon oxide, utilizes the qualified carbon oxide, or uses the qualified carbon oxide as a tertiary injectant, and
(ii) shall not be allowable to the person described in subparagraph (A).
(4) Recapture
(5) Utilization of qualified carbon oxide
(A) In generalFor purposes of this section, utilization of qualified carbon oxide means—
(i) the fixation of such qualified carbon oxide through photosynthesis or chemosynthesis, such as through the growing of algae or bacteria,
(ii) the chemical conversion of such qualified carbon oxide to a material or chemical compound in which such qualified carbon oxide is securely stored, or
(iii) the use of such qualified carbon oxide for any other purpose for which a commercial market exists (with the exception of use as a tertiary injectant in a qualified enhanced oil or natural gas recovery project), as determined by the Secretary.
(B) Measurement
(i) In generalFor purposes of determining the amount of qualified carbon oxide utilized by the taxpayer under paragraph (2)(B)(ii) or (4)(B)(ii) of subsection (a), such amount shall be equal to the metric tons of qualified carbon oxide which the taxpayer demonstrates, based upon an analysis of lifecycle greenhouse gas emissions and subject to such requirements as the Secretary, in consultation with the Secretary of Energy and the Administrator of the Environmental Protection Agency, determines appropriate, were—(I) captured and permanently isolated from the atmosphere, or(II) displaced from being emitted into the atmosphere,
through use of a process described in subparagraph (A).
(ii) Lifecycle greenhouse gas emissions
(6) Election for applicable facilities
(A) In general
(B) Applicable facilityFor purposes of this paragraph, the term “applicable facility” means a qualified facility—
(i) which was placed in service before the date of the enactment of the Bipartisan Budget Act of 2018, and
(ii) for which no taxpayer claimed a credit under this section in regards to such facility for any taxable year ending before the date of the enactment of such Act.
(7) Inflation adjustmentIn the case of any taxable year beginning in a calendar year after 2009, there shall be substituted for each dollar amount contained in paragraphs (1) and (2) of subsection (a) an amount equal to the product of—
(A) such dollar amount, multiplied by
(B) the inflation adjustment factor for such calendar year determined under section 43(b)(3)(B) for such calendar year, determined by substituting “2008” for “1990”.
(8) Credit reduced for tax-exempt bonds
(9) ElectionFor purposes of paragraphs (3) and (4) of subsection (a), a person described in paragraph (3)(A)(ii) may elect, at such time and in such manner as the Secretary may prescribe, to have the 12–year period begin on the first day of the first taxable year in which a credit under this section is claimed with respect to carbon capture equipment which is originally placed in service at a qualified facility on or after the date of the enactment of the Bipartisan Budget Act of 2018 (after application of paragraph (6), where applicable) if—
(A) no taxpayer claimed a credit under this section with respect to such carbon capture equipment for any prior taxable year,
(B) the qualified facility at which such carbon capture equipment is placed in service is located in an area affected by a federally-declared disaster (as defined by section 165(i)(5)(A)) after the carbon capture equipment is originally placed in service, and
(C) such federally-declared disaster results in a cessation of the operation of the qualified facility or the carbon capture equipment after such equipment is originally placed in service.
(g) Application of section for certain carbon capture equipmentIn the case of any carbon capture equipment placed in service before the date of the enactment of the Bipartisan Budget Act of 2018, the credit under this section shall apply with respect to qualified carbon oxide captured using such equipment before the earlier of January 1, 2023, and the end of the calendar year in which the Secretary, in consultation with the Administrator of the Environmental Protection Agency, certifies that, during the period beginning after October 3, 2008, a total of 75,000,000 metric tons of qualified carbon oxide have been taken into account in accordance with—
(1) subsection (a) of this section, as in effect on the day before the date of the enactment of the Bipartisan Budget Act of 2018, and
(2) paragraphs (1) and (2) of subsection (a) of this section.
(h) Increased credit amount for qualified facilities and carbon capture equipment
(1) In general
(2) RequirementsThe requirements described in this paragraph are that—
(A) with respect to any qualified facility the construction of which begins on or after the date that is 60 days after the Secretary publishes guidance with respect to the requirements of paragraphs (3)(A) and (4), as well as any carbon capture equipment placed in service at such facility—
(i) subject to subparagraph (B) of paragraph (3), the taxpayer satisfies the requirements under subparagraph (A) of such paragraph with respect to such facility and equipment, and
(ii) the taxpayer satisfies the requirements under paragraph (4) with respect to the construction of such facility and equipment,
(B) with respect to any carbon capture equipment the construction of which begins on or after the date that is 60 days after the Secretary publishes guidance with respect to the requirements of paragraphs (3)(A) and (4), and which is installed at a qualified facility the construction of which began prior to such date—
(i) subject to subparagraph (B) of paragraph (3), the taxpayer satisfies the requirements under subparagraph (A) of such paragraph with respect to such equipment, and
(ii) the taxpayer satisfies the requirements under paragraph (4) with respect to the construction of such equipment, or
(C) the construction of carbon capture equipment begins prior to the date that is 60 days after the Secretary publishes guidance with respect to the requirements of paragraphs (3)(A) and (4), and such equipment is installed at a qualified facility the construction of which begins prior to such date.
(3) Prevailing wage requirements
(A) In generalThe requirements described in this subparagraph with respect to any qualified facility and any carbon capture equipment placed in service at such facility are that the taxpayer shall ensure that any laborers and mechanics employed by the taxpayer or any contractor or subcontractor in—
(i) the construction of such facility or equipment, and
(ii) with respect to any taxable year, for any portion of such taxable year which is within the period described in paragraph (3)(A) or (4)(A) of subsection (a), the alteration or repair of such facility or such equipment,
shall be paid wages at rates not less than the prevailing rates for construction, alteration, or repair of a similar character in the locality in which such facility and equipment are located as most recently determined by the Secretary of Labor, in accordance with subchapter IV of chapter 31 of title 40, United States Code. For purposes of determining an increased credit amount under paragraph (1) for a taxable year, the requirement under clause (ii) of this subparagraph is applied to such taxable year in which the alteration or repair of qualified facility occurs.
(B) Correction and penalty related to failure to satisfy wage requirements
(4) Apprenticeship requirements
(5) Regulations and guidance
(i) RegulationsThe Secretary may prescribe such regulations and other guidance as may be necessary or appropriate to carry out this section, including regulations or other guidance to—
(1) ensure proper allocation under subsection (a) for qualified carbon oxide captured by a taxpayer during the taxable year ending after the date of the enactment of the Bipartisan Budget Act of 2018,
(2) determine whether a facility satisfies the requirements under subsection (d)(1) during such taxable year, and
(3) for purposes of subsection (d)(2)(B)(ii), adjust the baseline carbon oxide production with respect to any applicable electric generating unit at any electricity generating facility if, after the date on which the carbon capture equipment is placed in service, modifications which are chargeable to capital account are made to such unit which result in a significant increase or decrease in carbon oxide production.
(Added Pub. L. 110–343, div. B, title I, § 115(a), Oct. 3, 2008, 122 Stat. 3829; amended Pub. L. 111–5, div. B, title I, § 1131(a), (b), Feb. 17, 2009, 123 Stat. 325; Pub. L. 113–295, div. A, title II, § 209(j)(1), Dec. 19, 2014, 128 Stat. 4030; Pub. L. 115–123, div. D, title II, § 41119(a), Feb. 9, 2018, 132 Stat. 162; Pub. L. 116–260, div. EE, title I, § 121, Dec. 27, 2020, 134 Stat. 3051; Pub. L. 117–58, div. H, title IV, § 80402(e), Nov. 15, 2021, 135 Stat. 1334; Pub. L. 117–169, title I, § 13104(a)(1), (2)(A), (b)–(h), Aug. 16, 2022, 136 Stat. 1924–1928.)
§ 45R. Employee health insurance expenses of small employers
(a) General rule
(b) Health insurance credit amount
Subject to subsection (c), the amount determined under this subsection with respect to any eligible small employer is equal to 50 percent (35 percent in the case of a tax-exempt eligible small employer) of the lesser of—
(1) the aggregate amount of nonelective contributions the employer made on behalf of its employees during the taxable year under the arrangement described in subsection (d)(4) for premiums for qualified health plans offered by the employer to its employees through an Exchange, or
(2) the aggregate amount of nonelective contributions which the employer would have made during the taxable year under the arrangement if each employee taken into account under paragraph (1) had enrolled in a qualified health plan which had a premium equal to the average premium (as determined by the Secretary of Health and Human Services) for the small group market in the rating area in which the employee enrolls for coverage.
(c) Phaseout of credit amount based on number of employees and average wages
The amount of the credit determined under subsection (b) without regard to this subsection shall be reduced (but not below zero) by the sum of the following amounts:
(1) Such amount multiplied by a fraction the numerator of which is the total number of full-time equivalent employees of the employer in excess of 10 and the denominator of which is 15.
(2) Such amount multiplied by a fraction the numerator of which is the average annual wages of the employer in excess of the dollar amount in effect under subsection (d)(3)(B) and the denominator of which is such dollar amount.
(d) Eligible small employer
For purposes of this section—
(1) In general
The term “eligible small employer” means, with respect to any taxable year, an employer—
(A) which has no more than 25 full-time equivalent employees for the taxable year,
(B) the average annual wages of which do not exceed an amount equal to twice the dollar amount in effect under paragraph (3)(B) for the taxable year, and
(C) which has in effect an arrangement described in paragraph (4).
(2) Full-time equivalent employees
(A) In general
The term “full-time equivalent employees” means a number of employees equal to the number determined by dividing—
(i) the total number of hours of service for which wages were paid by the employer to employees during the taxable year, by
(ii) 2,080.
Such number shall be rounded to the next lowest whole number if not otherwise a whole number.
(B) Excess hours not counted
(C) Hours of service
(3) Average annual wages
(A) In general
The average annual wages of an eligible small employer for any taxable year is the amount determined by dividing—
(i) the aggregate amount of wages which were paid by the employer to employees during the taxable year, by
(ii) the number of full-time equivalent employees of the employee determined under paragraph (2) for the taxable year.
Such amount shall be rounded to the next lowest multiple of $1,000 if not otherwise such a multiple.
(B) Dollar amount
For purposes of paragraph (1)(B) and subsection (c)(2)—
(i) 2010, 2011, 2012, and 2013
(ii) Subsequent years
(4) Contribution arrangement
(5) Seasonal worker hours and wages not counted
For purposes of this subsection—
(A) In general
(B) Definition of seasonal worker
(e) Other rules and definitions
For purposes of this section—
(1) Employee
(A) Certain employees excluded
The term “employee” shall not include—
(i) an employee within the meaning of section 401(c)(1),
(ii) any 2-percent shareholder (as defined in section 1372(b)) of an eligible small business which is an S corporation,
(iii) any 5-percent owner (as defined in section 416(i)(1)(B)(i)) of an eligible small business, or
(iv) any individual who bears any of the relationships described in subparagraphs (A) through (G) of section 152(d)(2) to, or is a dependent described in section 152(d)(2)(H) of, an individual described in clause (i), (ii), or (iii).
(B) Leased employees
(2) Credit period
(3) Nonelective contribution
(4) Wages
(5) Aggregation and other rules made applicable
(A) Aggregation rules
(B) Other rules
(f) Credit made available to tax-exempt eligible small employers
(1) In general
In the case of a tax-exempt eligible small employer, there shall be treated as a credit allowable under subpart C (and not allowable under this subpart) the lesser of—
(A) the amount of the credit determined under this section with respect to such employer, or
(B) the amount of the payroll taxes of the employer during the calendar year in which the taxable year begins.
(2) Tax-exempt eligible small employer
(3) Payroll taxes
For purposes of this subsection—
(A) In general
The term “payroll taxes” means—
(i) amounts required to be withheld from the employees of the tax-exempt eligible small employer under section 3401(a),
(ii) amounts required to be withheld from such employees under section 3101(b), and
(iii) amounts of the taxes imposed on the tax-exempt eligible small employer under section 3111(b).
(B) Special rule
(g) Application of section for calendar years 2010, 2011, 2012, and 2013
In the case of any taxable year beginning in 2010, 2011, 2012, or 2013, the following modifications to this section shall apply in determining the amount of the credit under subsection (a):
(1) No credit period required
(2) Amount of credit
The amount of the credit determined under subsection (b) shall be determined—
(A) by substituting “35 percent (25 percent in the case of a tax-exempt eligible small employer)” for “50 percent (35 percent in the case of a tax-exempt eligible small employer)”,
(B) by reference to an eligible small employer’s nonelective contributions for premiums paid for health insurance coverage (within the meaning of section 9832(b)(1)) of an employee, and
(C) by substituting for the average premium determined under subsection (b)(2) the amount the Secretary of Health and Human Services determines is the average premium for the small group market in the State in which the employer is offering health insurance coverage (or for such area within the State as is specified by the Secretary).
(3) Contribution arrangement
(h) Insurance definitions
(i) Regulations
(Added and amended Pub. L. 111–148, title I, § 1421(a), title X, § 10105(e)(1), (2), Mar. 23, 2010, 124 Stat. 237, 906; Pub. L. 115–97, title I, § 11002(d)(1)(H), Dec. 22, 2017, 131 Stat. 2060.)
§ 45S. Employer credit for paid family and medical leave
(a) Establishment of credit
(1) In general
(2) Applicable percentage
(b) Limitation
(1) In general
(2) Non-hourly wage rate
(3) Maximum amount of leave subject to credit
(c) Eligible employerFor purposes of this section—
(1) In generalThe term “eligible employer” means any employer who has in place a written policy that meets the following requirements:
(A) The policy provides—
(i) in the case of a qualifying employee who is not a part-time employee (as defined in section 4980E(d)(4)(B)), not less than 2 weeks of annual paid family and medical leave, and
(ii) in the case of a qualifying employee who is a part-time employee, an amount of annual paid family and medical leave that is not less than an amount which bears the same ratio to the amount of annual paid family and medical leave that is provided to a qualifying employee described in clause (i) as—(I) the number of hours the employee is expected to work during any week, bears to(II) the number of hours an equivalent qualifying employee described in clause (i) is expected to work during the week.
(B) The policy requires that the rate of payment under the program is not less than 50 percent of the wages normally paid to such employee for services performed for the employer.
(2) Special rule for certain employers
(A) In generalAn added employer shall not be treated as an eligible employer unless such employer provides paid family and medical leave in compliance with a written policy which ensures that the employer—
(i) will not interfere with, restrain, or deny the exercise of or the attempt to exercise, any right provided under the policy, and
(ii) will not discharge or in any other manner discriminate against any individual for opposing any practice prohibited by the policy.
(B) Added employer; added employeeFor purposes of this paragraph—
(i) Added employee
(ii) Added employer
(3) Aggregation rule
(4) Treatment of benefits mandated or paid for by state or local governments
(5) No inference
(d) Qualifying employeesFor purposes of this section, the term “qualifying employee” means any employee (as defined in section 3(e) of the Fair Labor Standards Act of 1938, as amended) who—
(1) has been employed by the employer for 1 year or more, and
(2) for the preceding year, had compensation not in excess of an amount equal to 60 percent of the amount applicable for such year under clause (i) of section 414(q)(1)(B).
(e) Family and medical leave
(1) In general
(2) Exclusion
(3) Definitions
(f) Determinations made by Secretary of Treasury
(g) Wages
(h) Election to have credit not apply
(1) In general
(2) Other rules
(i) Termination
(Added Pub. L. 115–97, title I, § 13403(a)(1), Dec. 22, 2017, 131 Stat. 2135; amended Pub. L. 116–94, div. Q, title I, § 142(a), Dec. 20, 2019, 133 Stat. 3234; Pub. L. 116–260, div. EE, title I, § 119(a), Dec. 27, 2020, 134 Stat. 3051.)
§ 45T. Auto-enrollment option for retirement savings options provided by small employers
(a) In general
For purposes of section 38, in the case of an eligible employer, the retirement auto-enrollment credit determined under this section for any taxable year is an amount equal to—
(1) $500 for any taxable year occurring during the credit period, and
(2) zero for any other taxable year.
(b) Credit period
For purposes of subsection (a)—
(1) In general
(2) Maintenance of arrangement
(c) Eligible employer
(Added Pub. L. 116–94, div. O, title I, § 105(a), Dec. 20, 2019, 133 Stat. 3148.)
§ 45U. Zero-emission nuclear power production credit
(a) Amount of creditFor purposes of section 38, the zero-emission nuclear power production credit for any taxable year is an amount equal to the amount by which—
(1) the product of—
(A) 0.3 cents, multiplied by
(B) the kilowatt hours of electricity—
(i) produced by the taxpayer at a qualified nuclear power facility, and
(ii) sold by the taxpayer to an unrelated person during the taxable year, exceeds
(2) the reduction amount for such taxable year.
(b) Definitions
(1) Qualified nuclear power facilityFor purposes of this section, the term “qualified nuclear power facility” means any nuclear facility—
(A) which is owned by the taxpayer and which uses nuclear energy to produce electricity,
(B) which is not an advanced nuclear power facility as defined in subsection (d)(1) of section 45J, and
(C) which is placed in service before the date of the enactment of this section.
(2) Reduction amount
(A) In generalFor purposes of this section, the term “reduction amount” means, with respect to any qualified nuclear power facility for any taxable year, the amount equal to the lesser of—
(i) the amount determined under subsection (a)(1), or
(ii) the amount equal to 16 percent of the excess of—(I) subject to subparagraph (B), the gross receipts from any electricity produced by such facility (including any electricity services or products provided in conjunction with the electricity produced by such facility) and sold to an unrelated person during such taxable year, over(II) the amount equal to the product of—(aa) 2.5 cents, multiplied by(bb) the amount determined under subsection (a)(1)(B).
(B) Treatment of certain receipts
(i) In general
(ii) Zero-emission credit program
(iii) Exclusion
(3) Electricity
(c) Other rules
(1) Inflation adjustment
(2) Special rules
(d) Wage requirements
(1) Increased credit amount for qualified nuclear power facilities
(2) Prevailing wage requirements
(A) In general
(B) Correction and penalty related to failure to satisfy wage requirements
(3) Regulations and guidance
(e) Termination
(Added and amended Pub. L. 117–169, title I, §§ 13105, 13204(b)(2), Aug. 16, 2022, 136 Stat. 1929, 1940.)
§ 45V. Credit for production of clean hydrogen
(a) Amount of creditFor purposes of section 38, the clean hydrogen production credit for any taxable year is an amount equal to the product of—
(1) the kilograms of qualified clean hydrogen produced by the taxpayer during such taxable year at a qualified clean hydrogen production facility during the 10-year period beginning on the date such facility was originally placed in service, multiplied by
(2) the applicable amount (as determined under subsection (b)) with respect to such hydrogen.
(b) Applicable amount
(1) In general
(2) Applicable percentageFor purposes of paragraph (1), the applicable percentage shall be determined as follows:
(A) In the case of any qualified clean hydrogen which is produced through a process that results in a lifecycle greenhouse gas emissions rate of—
(i) not greater than 4 kilograms of CO2e per kilogram of hydrogen, and
(ii) not less than 2.5 kilograms of CO2e per kilogram of hydrogen,
the applicable percentage shall be 20 percent.
(B) In the case of any qualified clean hydrogen which is produced through a process that results in a lifecycle greenhouse gas emissions rate of—
(i) less than 2.5 kilograms of CO2e per kilogram of hydrogen, and
(ii) not less than 1.5 kilograms of CO2e per kilogram of hydrogen,
the applicable percentage shall be 25 percent.
(C) In the case of any qualified clean hydrogen which is produced through a process that results in a lifecycle greenhouse gas emissions rate of—
(i) less than 1.5 kilograms of CO2e per kilogram of hydrogen, and
(ii) not less than 0.45 kilograms of CO2e per kilogram of hydrogen,
the applicable percentage shall be 33.4 percent.
(D) In the case of any qualified clean hydrogen which is produced through a process that results in a lifecycle greenhouse gas emissions rate of less than 0.45 kilograms of CO2e per kilogram of hydrogen, the applicable percentage shall be 100 percent.
(3) Inflation adjustment
(c) DefinitionsFor purposes of this section—
(1) Lifecycle greenhouse gas emissions
(A) In general
(B) GREET model
(2) Qualified clean hydrogen
(A) In general
(B) Additional requirementsSuch term shall not include any hydrogen unless—
(i) such hydrogen is produced—(I) in the United States (as defined in section 638(1)) or a possession of the United States (as defined in section 638(2)),(II) in the ordinary course of a trade or business of the taxpayer, and(III) for sale or use, and
(ii) the production and sale or use of such hydrogen is verified by an unrelated party.
(C) Provisional emissions rate
(3) Qualified clean hydrogen production facilityThe term “qualified clean hydrogen production facility” means a facility—
(A) owned by the taxpayer,
(B) which produces qualified clean hydrogen, and
(C) the construction of which begins before January 1, 2033.
(d) Special rules
(1) Treatment of facilities owned by more than 1 taxpayer
(2) Coordination with credit for carbon oxide sequestration
(3) Credit reduced for tax-exempt bonds
(4) Modification of existing facilitiesFor purposes of subsection (a)(1), in the case of any facility which—
(A) was originally placed in service before January 1, 2023, and, prior to the modification described in subparagraph (B), did not produce qualified clean hydrogen, and
(B) after the date such facility was originally placed in service—
(i) is modified to produce qualified clean hydrogen, and
(ii) amounts paid or incurred with respect to such modification are properly chargeable to capital account of the taxpayer,
such facility shall be deemed to have been originally placed in service as of the date that the property required to complete the modification described in subparagraph (B) is placed in service.
(e) Increased credit amount for qualified clean hydrogen production facilities
(1) In general
(2) RequirementsA facility meets the requirements of this paragraph if it is one of the following:
(A) A facility—
(i) the construction of which begins prior to the date that is 60 days after the Secretary publishes guidance with respect to the requirements of paragraphs (3)(A) and (4), and
(ii) which meets the requirements of paragraph (3)(A) with respect to alteration or repair of such facility which occurs after such date.
(B) A facility which satisfies the requirements of paragraphs (3)(A) and (4).
(3) Prevailing wage requirements
(A) In generalThe requirements described in this subparagraph with respect to any qualified clean hydrogen production facility are that the taxpayer shall ensure that any laborers and mechanics employed by the taxpayer or any contractor or subcontractor in—
(i) the construction of such facility, and
(ii) with respect to any taxable year, for any portion of such taxable year which is within the period described in subsection (a)(2), the alteration or repair of such facility,
shall be paid wages at rates not less than the prevailing rates for construction, alteration, or repair of a similar character in the locality in which such facility is located as most recently determined by the Secretary of Labor, in accordance with subchapter IV of chapter 31 of title 40, United States Code. For purposes of determining an increased credit amount under paragraph (1) for a taxable year, the requirement under clause (ii) of this subparagraph is applied to such taxable year in which the alteration or repair of qualified facility occurs.
(B) Correction and penalty related to failure to satisfy wage requirements
(4) Apprenticeship requirements
(5) Regulations and guidance
(f) Regulations
(Added and amended Pub. L. 117–169, title I, § 13204(a)(1)–(3), Aug. 16, 2022, 136 Stat. 1936, 1938, 1939.)
§ 45W. Credit for qualified commercial clean vehicles
(a) In general
(b) Per vehicle amount
(1) In generalSubject to paragraph (4), the amount determined under this subsection with respect to any qualified commercial clean vehicle shall be equal to the lesser of—
(A) 15 percent of the basis of such vehicle (30 percent in the case of a vehicle not powered by a gasoline or diesel internal combustion engine), or
(B) the incremental cost of such vehicle.
(2) Incremental cost
(3) Comparable vehicle
(4) LimitationThe amount determined under this subsection with respect to any qualified commercial clean vehicle shall not exceed—
(A) in the case of a vehicle which has a gross vehicle weight rating of less than 14,000 pounds, $7,500, and
(B) in the case of a vehicle not described in subparagraph (A), $40,000.
(c) Qualified commercial clean vehicleFor purposes of this section, the term “qualified commercial clean vehicle” means any vehicle which—
(1) meets the requirements of section 30D(d)(1)(C) and is acquired for use or lease by the taxpayer and not for resale,
(2) either—
(A) meets the requirements of subparagraph (D) of section 30D(d)(1) and is manufactured primarily for use on public streets, roads, and highways (not including a vehicle operated exclusively on a rail or rails), or
(B) is mobile machinery, as defined in section 4053(8) (including vehicles that are not designed to perform a function of transporting a load over the public highways),
(3) either—
(A) is propelled to a significant extent by an electric motor which draws electricity from a battery which has a capacity of not less than 15 kilowatt hours (or, in the case of a vehicle which has a gross vehicle weight rating of less than 14,000 pounds, 7 kilowatt hours) and is capable of being recharged from an external source of electricity, or
(B) is a motor vehicle which satisfies the requirements under subparagraphs (A) and (B) of section 30B(b)(3), and
(4) is of a character subject to the allowance for depreciation.
(d) Special rules
(1) In general
(2) Vehicles placed in service by tax-exempt entities
(3) No double benefit
(e) VIN number requirement
(f) Regulations and guidance
(g) Termination
(Added Pub. L. 117–169, title I, § 13403(a), Aug. 16, 2022, 136 Stat. 1964.)
§ 45X. Advanced manufacturing production credit
(a) In general
(1) Allowance of creditFor purposes of section 38, the advanced manufacturing production credit for any taxable year is an amount equal to the sum of the credit amounts determined under subsection (b) with respect to each eligible component which is—
(A) produced by the taxpayer, and
(B) during the taxable year, sold by such taxpayer to an unrelated person.
(2) Production and sale must be in trade or business
(3) Unrelated person
(A) In general
(B) Election
(i) In general
(ii) Requirement
(b) Credit amount
(1) In generalSubject to paragraph (3), the amount determined under this subsection with respect to any eligible component, including any eligible component it incorporates, shall be equal to—
(A) in the case of a thin film photovoltaic cell or a crystalline photovoltaic cell, an amount equal to the product of—
(i) 4 cents, multiplied by
(ii) the capacity of such cell (expressed on a per direct current watt basis),
(B) in the case of a photovoltaic wafer, $12 per square meter,
(C) in the case of solar grade polysilicon, $3 per kilogram,
(D) in the case of a polymeric backsheet, 40 cents per square meter,
(E) in the case of a solar module, an amount equal to the product of—
(i) 7 cents, multiplied by
(ii) the capacity of such module (expressed on a per direct current watt basis),
(F) in the case of a wind energy component—
(i) if such component is a related offshore wind vessel, an amount equal to 10 percent of the sales price of such vessel, and
(ii) if such component is not described in clause (i), an amount equal to the product of—(I) the applicable amount with respect to such component (as determined under paragraph (2)(A)), multiplied by(II) the total rated capacity (expressed on a per watt basis) of the completed wind turbine for which such component is designed,
(G) in the case of a torque tube, 87 cents per kilogram,
(H) in the case of a structural fastener, $2.28 per kilogram,
(I) in the case of an inverter, an amount equal to the product of—
(i) the applicable amount with respect to such inverter (as determined under paragraph (2)(B)), multiplied by
(ii) the capacity of such inverter (expressed on a per alternating current watt basis),
(J) in the case of electrode active materials, an amount equal to 10 percent of the costs incurred by the taxpayer with respect to production of such materials,
(K) in the case of a battery cell, an amount equal to the product of—
(i) $35, multiplied by
(ii) subject to paragraph (4), the capacity of such battery cell (expressed on a kilowatt-hour basis),
(L) in the case of a battery module, an amount equal to the product of—
(i) $10 (or, in the case of a battery module which does not use battery cells, $45), multiplied by
(ii) subject to paragraph (4), the capacity of such battery module (expressed on a kilowatt-hour basis), and
(M) in the case of any applicable critical mineral, an amount equal to 10 percent of the costs incurred by the taxpayer with respect to production of such mineral.
(2) Applicable amounts
(A) Wind energy componentsFor purposes of paragraph (1)(F)(ii), the applicable amount with respect to any wind energy component shall be—
(i) in the case of a blade, 2 cents,
(ii) in the case of a nacelle, 5 cents,
(iii) in the case of a tower, 3 cents, and
(iv) in the case of an offshore wind foundation—(I) which uses a fixed platform, 2 cents, or(II) which uses a floating platform, 4 cents.
(B) InvertersFor purposes of paragraph (1)(I), the applicable amount with respect to any inverter shall be—
(i) in the case of a central inverter, 0.25 cents,
(ii) in the case of a utility inverter, 1.5 cents,
(iii) in the case of a commercial inverter, 2 cents,
(iv) in the case of a residential inverter, 6.5 cents, and
(v) in the case of a microinverter or a distributed wind inverter, 11 cents.
(3) Phase out
(A) In generalSubject to subparagraph (C), in the case of any eligible component sold after December 31, 2029, the amount determined under this subsection with respect to such component shall be equal to the product of—
(i) the amount determined under paragraph (1) with respect to such component, as determined without regard to this paragraph, multiplied by
(ii) the phase out percentage under subparagraph (B).
(B) Phase out percentageThe phase out percentage under this subparagraph is equal to—
(i) in the case of an eligible component sold during calendar year 2030, 75 percent,
(ii) in the case of an eligible component sold during calendar year 2031, 50 percent,
(iii) in the case of an eligible component sold during calendar year 2032, 25 percent,
(iv) in the case of an eligible component sold after December 31, 2032, 0 percent.
(C) Exception
(4) Limitation on capacity of battery cells and battery modules
(A) In general
(B) Capacity-to-power ratio
(c) DefinitionsFor purposes of this section—
(1) Eligible component
(A) In generalThe term “eligible component” means—
(i) any solar energy component,
(ii) any wind energy component,
(iii) any inverter described in subparagraphs (B) through (G) of paragraph (2),
(iv) any qualifying battery component, and
(v) any applicable critical mineral.
(B) Application with other credits
(2) Inverters
(A) In general
(B) Central inverter
(C) Commercial inverterThe term “commercial inverter” means an inverter which—
(i) is suitable for commercial or utility-scale applications,
(ii) has a rated output of 208, 480, 600, or 800 volt three-phase power, and
(iii) has a capacity which is not less than 20 kilowatts and not greater than 125 kilowatts (expressed on a per alternating current watt basis).
(D) Distributed wind inverter
(i) In generalThe term “distributed wind inverter” means an inverter which—(I) is used in a residential or non-residential system which utilizes 1 or more certified distributed wind energy systems, and(II) has a rated output of not greater than 150 kilowatts.
(ii) Certified distributed wind energy system
(E) MicroinverterThe term “microinverter” means an inverter which—
(i) is suitable to connect with one solar module,
(ii) has a rated output of—(I) 120 or 240 volt single-phase power, or(II) 208 or 480 volt three-phase power, and
(iii) has a capacity which is not greater than 650 watts (expressed on a per alternating current watt basis).
(F) Residential inverterThe term “residential inverter” means an inverter which—
(i) is suitable for a residence,
(ii) has a rated output of 120 or 240 volt single-phase power, and
(iii) has a capacity which is not greater than 20 kilowatts (expressed on a per alternating current watt basis).
(G) Utility inverterThe term “utility inverter” means an inverter which—
(i) is suitable for commercial or utility-scale systems,
(ii) has a rated output of not less than 600 volt three-phase power, and
(iii) has a capacity which is greater than 125 kilowatts and not greater than 1000 kilowatts (expressed on a per alternating current watt basis) 1
1 So in original. Probably should be followed by a period.
(3) Solar energy component
(A) In generalThe term “solar energy component” means any of the following:
(i) Solar modules.
(ii) Photovoltaic cells.
(iii) Photovoltaic wafers.
(iv) Solar grade polysilicon.
(v) Torque tubes or structural fasteners.
(vi) Polymeric backsheets.
(B) Associated definitions
(i) Photovoltaic cell
(ii) Photovoltaic waferThe term “photovoltaic wafer” means a thin slice, sheet, or layer of semiconductor material of at least 240 square centimeters—(I) produced by a single manufacturer either—(aa) directly from molten or evaporated solar grade polysilicon or deposition of solar grade thin film semiconductor photon absorber layer, or(bb) through formation of an ingot from molten polysilicon and subsequent slicing, and(II) which comprises the substrate or absorber layer of one or more photovoltaic cells.
(iii) Polymeric backsheet
(iv) Solar grade polysiliconThe term “solar grade polysilicon” means silicon which is—(I) suitable for use in photovoltaic manufacturing, and(II) purified to a minimum purity of 99.999999 percent silicon by mass.
(v) Solar moduleThe term “solar module” means the connection and lamination of photovoltaic cells into an environmentally protected final assembly which is—(I) suitable to generate electricity when exposed to sunlight, and(II) ready for installation without an additional manufacturing process.
(vi) Solar tracker
(vii) Solar tracker components(I) Torque tubeThe term “torque tube” means a structural steel support element (including longitudinal purlins) which—(aa) is part of a solar tracker,(bb) is of any cross-sectional shape,(cc) may be assembled from individually manufactured segments,(dd) spans longitudinally between foundation posts,(ee) supports solar panels and is connected to a mounting attachment for solar panels (with or without separate module interface rails), and(ff) is rotated by means of a drive system.(II) Structural fastenerThe term “structural fastener” means a component which is used—(aa) to connect the mechanical and drive system components of a solar tracker to the foundation of such solar tracker,(bb) to connect torque tubes to drive assemblies, or(cc) to connect segments of torque tubes to one another.
(4) Wind energy component
(A) In generalThe term “wind energy component” means any of the following:
(i) Blades.
(ii) Nacelles.
(iii) Towers.
(iv) Offshore wind foundations.
(v) Related offshore wind vessels.
(B) Associated definitions
(i) Blade
(ii) Offshore wind foundationThe term “offshore wind foundation” means the component (including transition piece) which secures an offshore wind tower and any above-water turbine components to the seafloor using—(I) fixed platforms, such as offshore wind monopiles, jackets, or gravity-based foundations, or(II) floating platforms and associated mooring systems.
(iii) Nacelle
(iv) Related offshore wind vessel
(v) Tower
(5) Qualifying battery component
(A) In generalThe term “qualifying battery component” means any of the following:
(i) Electrode active materials.
(ii) Battery cells.
(iii) Battery modules.
(B) Associated definitions
(i) Electrode active material
(ii) Battery cellThe term “battery cell” means an electrochemical cell—(I) comprised of 1 or more positive electrodes and 1 or more negative electrodes,(II) with an energy density of not less than 100 watt-hours per liter, and(III) capable of storing at least 12 watt-hours of energy.
(iii) Battery moduleThe term “battery module” means a module—(I)(aa) in the case of a module using battery cells, with 2 or more battery cells which are configured electrically, in series or parallel, to create voltage or current, as appropriate, to a specified end use, or(bb) with no battery cells, and(II) with an aggregate capacity of not less than 7 kilowatt-hours (or, in the case of a module for a hydrogen fuel cell vehicle, not less than 1 kilowatt-hour).
(6) Applicable critical mineralsThe term “applicable critical mineral” means any of the following:
(A) AlumispanAlumispan which is—
(i) converted from bauxite to a minimum purity of 99 percent alumina by mass, or
(ii) purified to a minimum purity of 99.9 percent alumispan by mass.
(B) AntimonyAntimony which is—
(i) converted to antimony trisulfide concentrate with a minimum purity of 90 percent antimony trisulfide by mass, or
(ii) purified to a minimum purity of 99.65 percent antimony by mass.
(C) Barite
(D) BerylliumBeryllium which is—
(i) converted to copper-beryllium master alloy, or
(ii) purified to a minimum purity of 99 percent beryllium by mass.
(E) CeriumCerium which is—
(i) converted to cerium oxide which is purified to a minimum purity of 99.9 percent cerium oxide by mass, or
(ii) purified to a minimum purity of 99 percent cerium by mass.
(F) CesiumCesium which is—
(i) converted to cesium formate or cesium carbonate, or
(ii) purified to a minimum purity of 99 percent cesium by mass.
(G) ChromiumChromium which is—
(i) converted to ferrochromium consisting of not less than 60 percent chromium by mass, or
(ii) purified to a minimum purity of 99 percent chromium by mass.
(H) CobaltCobalt which is—
(i) converted to cobalt sulfate, or
(ii) purified to a minimum purity of 99.6 percent cobalt by mass.
(I) DysprosiumDysprosium which is—
(i) converted to not less than 99 percent pure dysprosium iron alloy by mass, or
(ii) purified to a minimum purity of 99 percent dysprosium by mass.
(J) EuropiumEuropium which is—
(i) converted to europium oxide which is purified to a minimum purity of 99.9 percent europium oxide by mass, or
(ii) purified to a minimum purity of 99 percent by mass.
(K) FluorsparFluorspar which is—
(i) converted to fluorspar which is purified to a minimum purity of 97 percent calcium fluoride by mass, or
(ii) purified to a minimum purity of 99 percent fluorspar by mass.
(L) GadoliniumGadolinium which is—
(i) converted to gadolinium oxide which is purified to a minimum purity of 99.9 percent gadolinium oxide by mass, or
(ii) purified to a minimum purity of 99 percent gadolinium by mass.
(M) GermaniumGermanium which is—
(i) converted to germanium tetrachloride, or
(ii) purified to a minimum purity of 99.99 percent germanium by mass.
(N) Graphite
(O) IndiumIndium which is—
(i) converted to—(I) indium tin oxide, or(II) indium oxide which is purified to a minimum purity of 99.9 percent indium oxide by mass, or
(ii) purified to a minimum purity of 99 percent indium by mass.
(P) LithiumLithium which is—
(i) converted to lithium carbonate or lithium hydroxide, or
(ii) purified to a minimum purity of 99.9 percent lithium by mass.
(Q) ManganeseManganese which is—
(i) converted to manganese sulphate, or
(ii) purified to a minimum purity of 99.7 percent manganese by mass.
(R) NeodymiumNeodymium which is—
(i) converted to neodymium-praseodymium oxide which is purified to a minimum purity of 99 percent neodymium-praseodymium oxide by mass,
(ii) converted to neodymium oxide which is purified to a minimum purity of 99.5 percent neodymium oxide by mass 2
2 So in original. Probably should be followed by “, or”.
(iii) purified to a minimum purity of 99.9 percent neodymium by mass.
(S) NickelNickel which is—
(i) converted to nickel sulphate, or
(ii) purified to a minimum purity of 99 percent nickel by mass.
(T) NiobiumNiobium which is—
(i) converted to ferronibium, or
(ii) purified to a minimum purity of 99 percent niobium by mass.
(U) TelluriumTellurium which is—
(i) converted to cadmium telluride, or
(ii) purified to a minimum purity of 99 percent tellurium by mass.
(V) TinTin which is purified to low alpha emitting tin which—
(i) has a purity of greater than 99.99 percent by mass, and
(ii) possesses an alpha emission rate of not greater than 0.01 counts per hour per centimeter square.
(W) Tungsten
(X) Vanadium
(Y) YttriumYttrium which is—
(i) converted to yttrium oxide which is purified to a minimum purity of 99.999 percent yttrium oxide by mass, or
(ii) purified to a minimum purity of 99.9 percent yttrium by mass.
(Z) Other mineralsAny of the following minerals, provided that such mineral is purified to a minimum purity of 99 percent by mass:
(i) Arsenic.
(ii) Bismuth.
(iii) Erbium.
(iv) Gallium.
(v) Hafnium.
(vi) Holmium.
(vii) Iridium.
(viii) Lanthaspan.
(ix) Lutetium.
(x) Magnesium.
(xi) Palladium.
(xii) Platispan.
(xiii) Praseodymium.
(xiv) Rhodium.
(xv) Rubidium.
(xvi) Ruthenium.
(xvii) Samarium.
(xviii) Scandium.
(xix) Tantalum.
(xx) Terbium.
(xxi) Thulium.
(xxii) Titanium.
(xxiii) Ytterbium.
(xxiv) Zinc.
(xxv) Zirconium.
(d) Special rulesIn this section—
(1) Related persons
(2) Only production in the United States taken into accountSales shall be taken into account under this section only with respect to eligible components the production of which is within—
(A) the United States (within the meaning of section 638(1)), or
(B) a possession of the United States (within the meaning of section 638(2)).
(3) Pass-thru in the case of estates and trusts
(4) Sale of integrated components
(Added Pub. L. 117–169, title I, § 13502(a), Aug. 16, 2022, 136 Stat. 1971.)
§ 45Y. Clean electricity production credit
(a) Amount of credit
(1) In generalFor purposes of section 38, the clean electricity production credit for any taxable year is an amount equal to the product of—
(A) the kilowatt hours of electricity—
(i) produced by the taxpayer at a qualified facility, and
(ii)(I) sold by the taxpayer to an unrelated person during the taxable year, or(II) in the case of a qualified facility which is equipped with a metering device which is owned and operated by an unrelated person, sold, consumed, or stored by the taxpayer during the taxable year, multiplied by
(B) the applicable amount with respect to such qualified facility.
(2) Applicable amount
(A) Base amount
(B) Alternative amountSubject to subsection (g)(7), in the case of any qualified facility—
(i) with a maximum net output of less than 1 megawatt (as measured in alternating current),
(ii) the construction of which begins prior to the date that is 60 days after the Secretary publishes guidance with respect to the requirements of paragraphs (9) and (10) of subsection (g), or
(iii) which—(I) satisfies the requirements under paragraph (9) of subsection (g), and(II) with respect to the construction of such facility, satisfies the requirements under paragraph (10) of subsection (g),
the applicable amount shall be 1.5 cents.
(b) Qualified facility
(1) In general
(A) DefinitionSubject to subparagraphs (B), (C), and (D), the term “qualified facility” means a facility owned by the taxpayer—
(i) which is used for the generation of electricity,
(ii) which is placed in service after December 31, 2024, and
(iii) for which the greenhouse gas emissions rate (as determined under paragraph (2)) is not greater than zero.
(B) 10-year production credit
(C) Expansion of facility; incremental productionThe term “qualified facility” shall include either of the following in connection with a facility described in subparagraph (A) (without regard to clause (ii) of such subparagraph) which was placed in service before January 1, 2025, but only to the extent of the increased amount of electricity produced at the facility by reason of the following:
(i) A new unit which is placed in service after December 31, 2024.
(ii) Any additions of capacity which are placed in service after December 31, 2024.
(D) Coordination with other credits
(2) Greenhouse gas emissions rate
(A) In general
(B) Fuel combustion and gasification
(C) Establishment of emissions rates for facilities
(i) Publishing emissions rates
(ii) Provisional emissions rate
(D) Carbon capture and sequestration equipmentFor purposes of this subsection, the amount of greenhouse gases emitted into the atmosphere by a facility in the production of electricity shall not include any qualified carbon dioxide that is captured by the taxpayer and—
(i) pursuant to any regulations established under paragraph (2) of section 45Q(f), disposed of by the taxpayer in secure geological storage, or
(ii) utilized by the taxpayer in a manner described in paragraph (5) of such section.
(c) Inflation adjustment
(1) In general
(2) Annual computation
(3) Inflation adjustment factor
(d) Credit phase-out
(1) In generalThe amount of the clean electricity production credit under subsection (a) for any qualified facility the construction of which begins during a calendar year described in paragraph (2) shall be equal to the product of—
(A) the amount of the credit determined under subsection (a) without regard to this subsection, multiplied by
(B) the phase-out percentage under paragraph (2).
(2) Phase-out percentageThe phase-out percentage under this paragraph is equal to—
(A) for a facility the construction of which begins during the first calendar year following the applicable year, 100 percent,
(B) for a facility the construction of which begins during the second calendar year following the applicable year, 75 percent,
(C) for a facility the construction of which begins during the third calendar year following the applicable year, 50 percent, and
(D) for a facility the construction of which begins during any calendar year subsequent to the calendar year described in subparagraph (C), 0 percent.
(3) Applicable yearFor purposes of this subsection, the term “applicable year” means the later of—
(A) the calendar year in which the Secretary determines that the annual greenhouse gas emissions from the production of electricity in the United States are equal to or less than 25 percent of the annual greenhouse gas emissions from the production of electricity in the United States for calendar year 2022, or
(B) 2032.
(e) DefinitionsFor purposes of this section:
(1) CO2e per KWh
(2) Greenhouse gas
(3) Qualified carbon dioxideThe term “qualified carbon dioxide” means carbon dioxide captured from an industrial source which—
(A) would otherwise be released into the atmosphere as industrial emission of greenhouse gas,
(B) is measured at the source of capture and verified at the point of disposal or utilization, and
(C) is captured and disposed or utilized within the United States (within the meaning of section 638(1)) or a possession of the United States (within the meaning of section 638(2)).
(f) Guidance
(g) Special rules
(1) Only production in the United States taken into accountConsumption, sales, or storage shall be taken into account under this section only with respect to electricity the production of which is within—
(A) the United States (within the meaning of section 638(1)), or
(B) a possession of the United States (within the meaning of section 638(2)).
(2) Combined heat and power system property
(A) In generalFor purposes of subsection (a)—
(i) the kilowatt hours of electricity produced by a taxpayer at a qualified facility shall include any production in the form of useful thermal energy by any combined heat and power system property within such facility, and
(ii) the amount of greenhouse gases emitted into the atmosphere by such facility in the production of such useful thermal energy shall be included for purposes of determining the greenhouse gas emissions rate for such facility.
(B) Combined heat and power system property
(C) Conversion from BTU to KWh
(i) In generalFor purposes of subparagraph (A)(i), the amount of kilowatt hours of electricity produced in the form of useful thermal energy shall be equal to the quotient of—(I) the total useful thermal energy produced by the combined heat and power system property within the qualified facility, divided by(II) the heat rate for such facility.
(ii) Heat rate
(3)
(4) Related persons
(5) Pass-thru in the case of estates and trusts
(6) Allocation of credit to patrons of agricultural cooperative
(A) Election to allocate
(i) In general
(ii) Form and effect of election
(B) Treatment of organizations and patronsThe amount of the credit apportioned to any patrons under subparagraph (A)—
(i) shall not be included in the amount determined under subsection (a) with respect to the organization for the taxable year, and
(ii) shall be included in the amount determined under subsection (a) for the first taxable year of each patron ending on or after the last day of the payment period (as defined in section 1382(d)) for the taxable year of the organization or, if earlier, for the taxable year of each patron ending on or after the date on which the patron receives notice from the cooperative of the apportionment.
(C) Special rules for decrease in credits for taxable yearIf the amount of the credit of a cooperative organization determined under subsection (a) for a taxable year is less than the amount of such credit shown on the return of the cooperative organization for such year, an amount equal to the excess of—
(i) such reduction, over
(ii) the amount not apportioned to such patrons under subparagraph (A) for the taxable year,
shall be treated as an increase in tax imposed by this chapter on the organization. Such increase shall not be treated as tax imposed by this chapter for purposes of determining the amount of any credit under this chapter.
(D) Eligible cooperative defined
(7) Increase in credit in energy communities
(8) Credit reduced for tax-exempt bonds
(9) Wage requirements
(10) Apprenticeship requirements
(11) Domestic span bonus credit amount
(A) In general
(B) Requirement
(i) In general
(ii) Steel and iron
(iii) Manufactured product
(C) Adjusted percentage
(i) In generalSubject to subclause (ii), for purposes of subparagraph (B)(iii), the adjusted percentage shall be—(I) in the case of a facility the construction of which begins before January 1, 2025, 40 percent,(II) in the case of a facility the construction of which begins after December 31, 2024, and before January 1, 2026, 45 percent,(III) in the case of a facility the construction of which begins after December 31, 2025, and before January 1, 2027, 50 percent, and(IV) in the case of a facility the construction of which begins after December 31, 2026, 55 percent.
(ii) Offshore wind facilityFor purposes of subparagraph (B)(iii), in the case of a qualified facility which is an offshore wind facility, the adjusted percentage shall be—(I) in the case of a facility the construction of which begins before January 1, 2025, 20 percent,(II) in the case of a facility the construction of which begins after December 31, 2024, and before January 1, 2026, 27.5 percent,(III) in the case of a facility the construction of which begins after December 31, 2025, and before January 1, 2027, 35 percent,(IV) in the case of a facility the construction of which begins after December 31, 2026, and before January 1, 2028, 45 percent, and(V) in the case of a facility the construction of which begins after December 31, 2027, 55 percent.
(12) Phaseout for elective payment
(A) In generalIn the case of a taxpayer making an election under section 6417 with respect to a credit under this section, the amount of such credit shall be replaced with—
(i) the value of such credit (determined without regard to this paragraph), multiplied by
(ii) the applicable percentage.
(B) 100 percent applicable percentage for certain qualified facilitiesIn the case of any qualified facility—
(i) which satisfies the requirements under paragraph (11)(B), or
(ii) with a maximum net output of less than 1 megawatt (as measured in alternating current),
the applicable percentage shall be 100 percent.
(C) Phased domestic span requirementSubject to subparagraph (D), in the case of any qualified facility which is not described in subparagraph (B), the applicable percentage shall be—
(i) if construction of such facility began before January 1, 2024, 100 percent,
(ii) if construction of such facility began in calendar year 2024, 90 percent,
(iii) if construction of such facility began in calendar year 2025, 85 percent, and
(iv) if construction of such facility began after December 31, 2025, 0 percent.
(D) Exception
(i) In generalFor purposes of this paragraph, the Secretary shall provide exceptions to the requirements under this paragraph if—(I) the inclusion of steel, iron, or manufactured products which are produced in the United States increases the overall costs of construction of qualified facilities by more than 25 percent, or(II) relevant steel, iron, or manufactured products are not produced in the United States in sufficient and reasonably available quantities or of a satisfactory quality.
(ii) Applicable percentage
(Added Pub. L. 117–169, title I, § 13701(a), Aug. 16, 2022, 136 Stat. 1982.)
§ 45Z. Clean fuel production credit
(a) Amount of credit
(1) In generalFor purposes of section 38, the clean fuel production credit for any taxable year is an amount equal to the product of—
(A) the applicable amount per gallon (or gallon equivalent) with respect to any transportation fuel which is—
(i) produced by the taxpayer at a qualified facility, and
(ii) sold by the taxpayer in a manner described in paragraph (4) during the taxable year, and
(B) the emissions factor for such fuel (as determined under subsection (b)).
(2) Applicable amount
(A) Base amount
(B) Alternative amount
(3) Special rate for sustainable aviation fuel
(A) In generalIn the case of a transportation fuel which is sustainable aviation fuel, paragraph (2) shall be applied—
(i) in the case of fuel produced at a qualified facility described in paragraph (2)(A), by substituting “35 cents” for “20 cents”, and
(ii) in the case of fuel produced at a qualified facility described in paragraph (2)(B), by substituting “$1.75” for “$1.00”.
(B) Sustainable aviation fuelFor purposes of this subparagraph (A),1
1 So in original.
the term “sustainable aviation fuel” means liquid fuel, the portion of which is not kerosene, which is sold for use in an aircraft and which—(i) meets the requirements of—(I) ASTM International Standard D7566, or(II) the Fischer Tropsch provisions of ASTM International Standard D1655, Annex A1, and
(ii) is not derived from palm fatty acid distillates or petroleum.
(4) SaleFor purposes of paragraph (1), the transportation fuel is sold in a manner described in this paragraph if such fuel is sold by the taxpayer to an unrelated person—
(A) for use by such person in the production of a fuel mixture,
(B) for use by such person in a trade or business, or
(C) who sells such fuel at retail to another person and places such fuel in the fuel tank of such other person.
(5) Rounding
(b) Emissions factors
(1) Emissions factor
(A) Calculation
(i) In generalThe emissions factor of a transportation fuel shall be an amount equal to the quotient of—(I) an amount equal to—(aa) 50 kilograms of CO2e per mmBTU, minus(bb) the emissions rate for such fuel, divided by(II) 50 kilograms of CO2e per mmBTU.
(B) Establishment of emissions rate
(i) In general
(ii) Non-aviation fuel
(iii) Aviation fuelIn the case of any transportation fuel which is a sustainable aviation fuel, the lifecycle greenhouse gas emissions of such fuel shall be determined in accordance with—(I) the most recent Carbon Offsetting and Reduction Scheme for International Aviation which has been adopted by the International Civil Aviation Organization with the agreement of the United States, or(II) any similar methodology which satisfies the criteria under section 211(o)(1)(H) of the Clean Air Act (42 U.S.C. 7545(o)(1)(H)), as in effect on the date of enactment of this section.
(C) Rounding of emissions rate
(i) In general
(ii) Exception
(D) Provisional emissions rate
(2) Rounding
(c) Inflation adjustment
(1) In general
(2) Inflation adjustment factor
(d) DefinitionsIn this section:
(1) mmBTU
(2) CO2e
(3) Greenhouse gas
(4) Qualified facilityThe term “qualified facility”—
(A) means a facility used for the production of transportation fuels, and
(B) does not include any facility for which one of the following credits is allowed under section 38 for the taxable year:
(i) The credit for production of clean hydrogen under section 45V.
(ii) The credit determined under section 46 to the extent that such credit is attributable to the energy credit determined under section 48 with respect to any specified clean hydrogen production facility for which an election is made under subsection (a)(15) of such section.
(iii) The credit for carbon oxide sequestration under section 45Q.
(5) Transportation fuel
(A) In generalThe term “transportation fuel” means a fuel which—
(i) is suitable for use as a fuel in a highway vehicle or aircraft,
(ii) has an emissions rate which is not greater than 50 kilograms of CO2e per mmBTU, and
(iii) is not derived from coprocessing an applicable material (or materials derived from an applicable material) with a feedstock which is not biomass.
(B) DefinitionsIn this paragraph—
(i) Applicable materialThe term “applicable material” means—(I) monoglycerides, diglycerides, and triglycerides,(II) free fatty acids, and(III) fatty acid esters.
(ii) Biomass
(e) Guidance
(f) Special rules
(1) Only registered production in the United States taken into account
(A) In generalNo clean fuel production credit shall be determined under subsection (a) with respect to any transportation fuel unless—
(i) the taxpayer—(I) is registered as a producer of clean fuel under section 4101 at the time of production, and(II) in the case of any transportation fuel which is a sustainable aviation fuel, provides—(aa) certification (in such form and manner as the Secretary shall prescribe) from an unrelated party demonstrating compliance with—(AA) any general requirements, supply chain traceability requirements, and information transmission requirements established under the Carbon Offsetting and Reduction Scheme for International Aviation described in subclause (I) of subsection (b)(1)(B)(iii), or(BB) in the case of any methodology described in subclause (II) of such subsection, requirements similar to the requirements described in subitem (AA), and(bb) such other information with respect to such fuel as the Secretary may require for purposes of carrying out this section, and
(ii) such fuel is produced in the United States.
(B) United States
(2) Production attributable to the taxpayer
(3) Related persons
(4) Pass-thru in the case of estates and trusts
(5) Allocation of credit to patrons of agricultural cooperative
(6) Prevailing wage requirements
(A) In general
(B) Special rule for facilities placed in service before January 1, 2025For purposes of subparagraph (A), in the case of any qualified facility placed in service before January 1, 2025—
(i) clause (i) of section 45(b)(7)(A) shall not apply, and
(ii) clause (ii) of such section shall be applied by substituting “with respect to any taxable year beginning after December 31, 2024, for which the credit is allowed under this section” for “with respect to any taxable year, for any portion of such taxable year which is within the period described in subsection (a)(2)(A)(ii)”.
(7) Apprenticeship requirements
(g) Termination
(Added Pub. L. 117–169, title I, § 13704(a), Aug. 16, 2022, 136 Stat. 1997.)
§ 45AA. Military spouse retirement plan eligibility credit for small employers
(a) In generalFor purposes of section 38, in the case of any eligible small employer, the military spouse retirement plan eligibility credit determined under this section for any taxable year is an amount equal to the sum of—
(1) $200 with respect to each military spouse who is an employee of such employer and who participates in an eligible defined contribution plan of such employer at any time during such taxable year, plus
(2) so much of the contributions made by such employer (other than an elective deferral (as defined in section 402(g)(3)) 1
1 So in original. Probably should be followed by another closing parenthesis.
to all such plans with respect to such employee during such taxable year as do not exceed $300.(b) Limitation
(c) Eligible small employer
(d) Military spouseFor purposes of this section—
(1) In general
(2) Exclusion of highly compensated employees
(e) Eligible defined contribution planFor purposes of this section, the term “eligible defined contribution plan” means, with respect to any eligible small employer, any defined contribution plan (as defined in section 414(i)) of such employer if, under the terms of such plan—
(1) military spouses employed by such employer are eligible to participate in such plan not later than the date which is 2 months after the date on which such individual begins employment with such employer, and
(2) military spouses who are eligible to participate in such plan—
(A) are immediately eligible to receive an amount of employer contributions under such plan which is not less the amount of such contributions that a similarly situated participant who is not a military spouse would be eligible to receive under such plan after 2 years of service, and
(B) immediately have a nonforfeitable right to the employee’s accrued benefit derived from employer contributions under such plan.
(f) Aggregation rule
(Added Pub. L. 117–328, div. T, title I, § 112(a), Dec. 29, 2022, 136 Stat. 5294.)