26 U.S.C. § 39 — Carryback and carryforward of unused credits

(a) In general. (1) 1-year carryback and 20-year carryforward: If your business credit carryforwards to this year, plus this year's current year business credit, exceed the limit set by section 38(c) — calling this excess year the "unused credit year" — then, to the extent the excess is attributable to the current year business credit, it becomes: (A) a business credit carryback to the year right before the unused credit year, and (B) a business credit carryforward to each of the next 20 taxable years. Subject to the limits in subsections (b) and (c), it gets taken into account the way section 38(a) provides. (2) Amount carried to each year: (A) Entire amount carried to first year — the entire unused credit for the unused credit year is carried to the earliest of the 21 taxable years it may reach under paragraph (1). (B) Amount carried to other 20 years — the unused credit is carried to each of the other 20 taxable years to the extent it could not be used under section 38(a) for an earlier year because of the limits in subsections (b) and (c). (3) 5-year carryback for marginal oil and gas well production credit: Despite subsection (d), for the marginal oil and gas well production credit specifically: this section applies to it separately from the rest of the business credit; the carryback period in paragraph (1)(A) becomes 5 taxable years instead of 1; and in paragraph (2), the total window becomes 25 taxable years (with 24, instead of 20, years of pure carryforward). (4) 3-year carryback for applicable credits: Despite subsection (d), for any "applicable credit" as defined in section 6417(b): this section applies to it separately from the rest of the business credit; the carryback period becomes 3 taxable years instead of 1; and the total window becomes 23 taxable years (with 22, instead of 20, years of pure carryforward). (b) Limitation on carrybacks: The amount of unused credit you can take into account under section 38(a)(3) for an earlier taxable year cannot exceed the amount by which that year's section 38(c) limit exceeds the sum of: (1) the amounts already determined under section 38(a)(1) and (2) for that year, plus (2) any amounts already carried back to that year, under this section, from years before the unused credit year. (c) Limitation on carryforwards: The amount of unused credit you can take into account under section 38(a)(1) for a later taxable year cannot exceed the amount by which that year's section 38(c) limit exceeds the sum of the amounts already carried to that year, under this section, from years before the unused credit year. (d) Transitional rule: No part of an unused business credit that is attributable to a credit specified in section 38(b), or any part of it, may be carried back to any taxable year before the first taxable year that credit — or that part of it — first became allowable, regardless of subsection (a).