26 U.S.C. § 280C — Certain expenses for which credits are allowable

(a) If you claim certain employment-related tax credits, you cannot also deduct that same amount as a business expense. You must reduce your wage or salary deduction for the year by the total of the credits determined for that year under sections 45A(a), 45P(a), 45S(a)(1)(A), 51(a), and 1396(a). You must also reduce your deduction for insurance premiums by the part of the paid family and medical leave credit that comes from those premiums, figured under section 45S(a)(1)(B). If your business is a member of a controlled group of corporations, or a trade or business treated as under common control with others, the Secretary applies rules like the ones in section 52(a) and (b) to split this reduction among the group. (b) Credit for qualified clinical testing expenses. (1) You cannot deduct the part of your qualified clinical testing expenses (as defined in section 45C(b)) that equals the credit allowed for the year under section 45C, figured without regard to section 38(c). (2) If you capitalize these expenses instead of deducting them, a similar rule applies. Compare two numbers: (A) the credit allowed under section 45C for the year, without regard to section 38(c), and (B) the amount that would otherwise be deductible for qualified clinical testing expenses, without regard to paragraph (1). If (A) is larger than (B), you must reduce the amount you capitalize for these expenses by that difference. (3) You may instead elect a smaller credit and skip the reductions in (1) and (2). (A) For a year you make this election, paragraphs (1) and (2) do not apply. Your credit under section 45C(a) instead becomes the reduced amount worked out under (B). (B) To find the reduced credit: start with the credit you would otherwise get under section 45C(a). Multiply that amount by the top tax rate for corporations under section 11(b). Subtract the result from the original credit amount — what is left is your reduced credit. (C) You must make this election by the due date for filing your tax return for the year (including extensions), make it on the return itself, and follow whatever manner the Secretary requires. Once made, the election cannot be taken back. (4) If your business is part of a controlled group of corporations, or a trade or business under common control with others, the Secretary applies rules like the ones in section 41(f)(1)(A) and (B) to split this reduction among the group. (c) Credit for increasing research activities. (1) Your domestic research or experimental expenditures (as defined in section 174A(b)) that you would otherwise deduct or capitalize must be reduced by the amount of the credit allowed under section 41(a). (2) You may instead elect a smaller credit and skip that reduction. (A) For a year you make this election, paragraph (1) does not apply. Your credit under section 41(a) instead becomes the reduced amount worked out under (B). (B) To find the reduced credit: start with the credit you would otherwise get under section 41(a). Multiply that amount by the top tax rate for corporations under section 11(b). Subtract the result from the original credit amount — what is left is your reduced credit. (C) You must make this election by the due date for filing your return (including extensions), make it on the return, and follow the manner the Secretary requires. Once made, it cannot be taken back. (3) The controlled-group rule described in subsection (b)(3) also applies to this credit. (d) If you claim the credit for low sulfur diesel fuel production under section 45H(a), your deductions otherwise allowed for the year must be reduced by that credit amount. (e) If you claim the mine rescue team training credit under section 45N(a), you cannot deduct the part of your otherwise-deductible expenses that equals that credit. (f) If you claim the credit for security of agricultural chemicals under section 45O(a), you cannot deduct the part of the expenses used to figure that credit that equals the credit amount. (g) If you claim the premium tax credit under section 36B(a), you cannot deduct the part of your health insurance premiums for a qualified health plan that equals that credit. (h) If you are a small employer claiming the credit for employee health insurance expenses under section 45R(a), you cannot deduct the part of your premiums that equals that credit. This applies to premiums for qualified health plans (as defined in section 1301(a) of the Patient Protection and Affordable Care Act), and to premiums for health insurance coverage in tax years beginning in 2010, 2011, 2012, or 2013.