26 U.S.C. § 111 — Recovery of tax benefit items

(a) Deductions: if you deducted an amount in a past tax year and later "recover" that same amount, you don't have to count it as income now — but only for the part of it that didn't actually lower your taxes back then. (b) Credits: (1) in general, if you got a tax credit for an amount in an earlier year, and this year there's a downward price adjustment (or similar adjustment) affecting that amount, your tax this year goes up by the amount of the credit tied to that adjustment; (2) exception where credit didn't reduce tax — this add-back doesn't apply to the extent the original credit didn't actually reduce your taxes; (3) exception for investment tax credit and foreign tax credit — this subsection doesn't apply to the investment credit under section 46 or to the foreign tax credit. (c) Treatment of carryovers: if recovering the amount, or the adjustment, increases a carryover that hasn't expired yet, that increase counts as reducing your tax for this purpose. (d) Special rules for accumulated earnings tax and personal holding company tax: when applying subsection (a) to figure the accumulated earnings tax (section 531) or the personal holding company tax (section 541): (1) an amount excluded under (a) for other purposes of this subtitle is still excluded here, whether or not it actually reduced the section 531 or 541 tax in the earlier year; and (2) if an amount wasn't deductible for other purposes in the earlier year but was deductible under section 531 or 541, then it can still be excluded now — but only if it didn't actually reduce the section 531 or 541 tax back then.