26 U.S.C. § 196 — Deduction for certain unused business credits

submitted 44 years ago by Pub. L. 97-248 to r/title-26-INTERNAL-REVENUE-CODE · 392 words · no verdicts yet

in plain englishAI-generated · not legal advice

If a business tax credit could not be used within its normal time limit, the taxpayer may deduct the unused amount instead. This deduction applies the year after the credit expires. If the taxpayer dies or the business ends first, the deduction applies that year instead. Only specific listed credits qualify.

(a) Allowance of deduction: If part of a taxpayer's "qualified business credits" for a tax year could not be used as a credit — even after applying section 38(c) — the taxpayer can instead deduct that unused amount. This deduction applies in the first tax year after the last tax year the credit could have been used under section 39. (b) Taxpayer's dying or ceasing to exist: If the taxpayer dies or stops existing before that first tax year arrives, the deduction described in subsection (a) (or the correct portion of it) instead applies in the tax year the death or ending happens, under rules the Secretary prescribes. (c) Qualified business credits: For this section, "qualified business credits" means: (1) the investment credit under section 46 (only the part tied to property whose basis was reduced under section 50(c)); (2) the work opportunity credit under section 51(a); (3) the alcohol fuels credit under section 40(a); (4) the research credit under section 41(a) (not counting the part determined under section 280C(c)(3)), for tax years beginning after December 31, 1988; (5) the enhanced oil recovery credit under section 43(a); (6) the empowerment zone employment credit under section 1396(a); (7) the Indian employment credit under section 45A(a); (8) the employer Social Security credit under section 45B(a); (9) the new markets tax credit under section 45D(a); (10) the small employer pension plan startup cost credit under section 45E(a); (11) the biodiesel fuels credit under section 40A(a); (12) the low sulfur diesel fuel production credit under section 45H(a); (13) the new energy efficient home credit under section 45L(a); and (14) the small employer health insurance credit under section 45R(a). (d) Special rule for investment tax credit: For the investment credit under section 46 (other than the rehabilitation credit), subsection (a) applies by using 50 percent of the unused credit amount, instead of the full amount.

the actual law source: uscode.house.gov ↗public domain

(a) Allowance of deduction

If any portion of the qualified business credits determined for any taxable year has not, after the application of section 38(c), been allowed to the taxpayer as a credit under section 38 for any taxable year, an amount equal to the credit not so allowed shall be allowed to the taxpayer as a deduction for the first taxable year following the last taxable year for which such credit could, under section 39, have been allowed as a credit.

(b) Taxpayer’s dying or ceasing to exist

If a taxpayer dies or ceases to exist before the first taxable year following the last taxable year for which the qualified business credits could, under section 39, have been allowed as a credit, the amount described in subsection (a) (or the proper portion thereof) shall, under regulations prescribed by the Secretary, be allowed to the taxpayer as a deduction for the taxable year in which such death or cessation occurs.

For purposes of this section, the term “qualified business credits” means—

(1)

the investment credit determined under section 46 (but only to the extent attributable to property the basis of which is reduced by section 50(c)),

(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) (other than such credit determined under section 280C(c)(3)) 1 for taxable years beginning after December 31, 1988,

(5)

the enhanced oil recovery credit determined under section 43(a),

(6)

the empowerment zone employment credit determined under section 1396(a),

(7)

the Indian employment credit determined under section 45A(a),

(8)

the employer Social Security credit determined under section 45B(a),

(9)

the new markets tax credit determined under section 45D(a),

(10)

the small employer pension plan startup cost credit determined under section 45E(a),

(11)

the biodiesel fuels credit determined under section 40A(a),

(12)

the low sulfur diesel fuel production credit determined under section 45H(a),

(13)

the new energy efficient home credit determined under section 45L(a), and

(14)

the small employer health insurance credit determined under section 45R(a).

(d) Special rule for investment tax credit

Subsection (a) shall be applied by substituting “an amount equal to 50 percent of” for “an amount equal to” in the case of the investment credit determined under section 46 (other than the rehabilitation credit).

Source credit: (Added Pub. L. 97–248, title II, § 205(a)(2), Sept. 3, 1982, 96 Stat. 428; amended Pub. L. 98–369, div. A, title IV, § 474(r)(8)(A), July 18, 1984, 98 Stat. 840; Pub. L. 100–647, title IV, § 4008(b)(2), Nov. 10, 1988, 102 Stat. 3653; Pub. L. 101–239, title VII, §§ 7110(c)(2), 7814(e)(1), (2)(D), Dec. 19, 1989, 103 Stat. 2325, 2413, 2414; Pub. L. 101–508, title XI, §§ 11511(b)(3), 11813(b)(12), Nov. 5, 1990, 104 Stat. 1388–485, 1388–554; Pub. L. 103–66, title XIII, §§ 13302(b)(2), 13322(c)(2), Aug. 10, 1993, 107 Stat. 555, 563; Pub. L. 104–188, title I, § 1201(e)(1), Aug. 20, 1996, 110 Stat. 1772; Pub. L. 105–206, title VI, § 6020(a), July 22, 1998, 112 Stat. 823; Pub. L. 106–554, § 1(a)(7) [title I, § 121(c)], Dec. 21, 2000, 114 Stat. 2763, 2763A–610; Pub. L. 107–16, title VI, § 619(c)(2), June 7, 2001, 115 Stat. 110; Pub. L. 108–357, title III, §§ 302(c)(2), 339(e), Oct. 22, 2004, 118 Stat. 1465, 1484; Pub. L. 109–58, title XIII, § 1332(d), Aug. 8, 2005, 119 Stat. 1026; Pub. L. 111–148, title I, § 1421(d)(2), Mar. 23, 2010, 124 Stat. 242; Pub. L. 115–141, div. U, title IV, § 401(b)(16), Mar. 23, 2018, 132 Stat. 1202.)

history & why it existsrecord from the source credit

1982Enacted · Pub. L. 97-248 · 96 Stat. 428
1984Amended · Pub. L. 98-369 · 98 Stat. 840
1988Amended · Pub. L. 100-647 · 102 Stat. 3653
1989Amended · Pub. L. 101-239 · 103 Stat. 2325, 2413, 2414
1990Amended · Pub. L. 101-508 · 104 Stat. 1388
1993Amended · Pub. L. 103-66 · 107 Stat. 555, 563
1996Amended · Pub. L. 104-188 · 110 Stat. 1772
1998Amended · Pub. L. 105-206 · 112 Stat. 823
2000Amended · Pub. L. 106-554 · 114 Stat. 2763, 2763
2001Amended · Pub. L. 107-16 · 115 Stat. 110
2004Amended · Pub. L. 108-357 · 118 Stat. 1465, 1484
2005Amended · Pub. L. 109-58 · 119 Stat. 1026
2010Amended · Pub. L. 111-148 · 124 Stat. 242
2018Amended · Pub. L. 115-141 · 132 Stat. 1202

A history note hasn’t been published yet. The record shows enactment by Pub. L. 97-248 on 1982-09-03.

all 0 arguments · sorted by: best

no arguments yet — make the first case