26 U.S.C. § 50
Under regulations prescribed by the Secretary-
If, during any taxable year, investment credit property is disposed of, or otherwise ceases to be investment credit property with respect to the taxpayer, before the close of the recapture period, then the tax under this chapter for such taxable year shall be increased by the recapture percentage of the aggregate decrease in the credits allowed under section 38 for all prior taxable years which would have resulted solely from reducing to zero any credit determined under this subpart with respect to such property.
For purposes of subparagraph (A), the recapture percentage shall be determined in accordance with the following table:
| If the property ceases to be investment credit property within- | The recapture percentage is: |
| (i) One full year after placed in service | 100 |
| (ii) One full year after the close of the period described in clause (i) | 80 |
| (iii) One full year after the close of the period described in clause (ii) | 60 |
| (iv) One full year after the close of the period described in clause (iii) | 40 |
| (v) One full year after the close of the period described in clause (iv) | 20 |
If during any taxable year any building to which section 47(d) applied ceases (by reason of sale or other disposition, cancellation or abandonment of contract, or otherwise) to be, with respect to the taxpayer, property which, when placed in service, will be a qualified rehabilitated building, then the tax under this chapter for such taxable year shall be increased by an amount equal to the aggregate decrease in the credits allowed under section 38 for all prior taxable years which would have resulted solely from reducing to zero the credit determined under this subpart with respect to such building.
Any amount which would have been applied as a reduction under paragraph (2) of section 47(b) but for the fact that a reduction under such paragraph cannot reduce the amount taken into account under section 47(b)(1) below zero shall be treated as an amount required to be recaptured under subparagraph (A) for the taxable year during which the building is placed in service.
Under regulations prescribed by the Secretary, a sale by, and leaseback to, a taxpayer who, when the property is placed in service, will be a lessee to whom the rules referred to in subsection (d)(5) apply shall not be treated as a cessation described in subparagraph (A) to the extent that the amount which will be passed through to the lessee under such rules with respect to such property is not less than the qualified rehabilitation expenditures properly taken into account by the lessee under section 47(d) with respect to such property.
If, after property is placed in service, there is a disposition or other cessation described in paragraph (1), then paragraph (1) shall be applied as if any credit which was allowable by reason of section 47(d) and which has not been required to be recaptured before such disposition, cessation, or change in use were allowable for the taxable year the property was placed in service.
Rules similar to the rules of this paragraph shall apply in cases where qualified progress expenditures were taken into account under the rules referred to in section 48(b), 48A(b)(3), 48B(b)(3), 48C(b)(2), or 48D(b)(5).
If there is a an applicable transaction by an applicable taxpayer before the close of the 10-year period beginning on the date such taxpayer placed in service investment credit property which is eligible for the advanced manufacturing investment credit under section 48D(a), then the tax under this chapter for the taxable year in which such transaction occurs shall be increased by 100 percent of the aggregate decrease in the credits allowed under section 38 for all prior taxable years which would have resulted solely from reducing to zero any credit determined under section 46 which is attributable to the advanced manufacturing investment credit under section 48D(a) with respect to such property.
Subparagraph (A) shall not apply if the applicable taxpayer demonstrates to the satisfaction of the Secretary that the applicable transaction has been ceased or abandoned within 45 days of a determination and notice by the Secretary.
The Secretary shall issue such regulations or other guidance as the Secretary determines necessary or appropriate to carry out the purposes of this paragraph, including regulations or other guidance which provide for requirements for recordkeeping or information reporting for purposes of administering the requirements of this paragraph.
In the case of any cessation described in paragraph (1) or (2), or any applicable transaction to which paragraph (3)(A) applies, the carrybacks and carryovers under section 39 shall be adjusted by reason of such cessation or applicable transaction.
Paragraphs (1) and (2) shall not apply to-
For purposes of this subsection, property shall not be treated as ceasing to be investment credit property with respect to the taxpayer by reason of a mere change in the form of conducting the trade or business so long as the property is retained in such trade or business as investment credit property and the taxpayer retains a substantial interest in such trade or business.
For purposes of this subsection, the term "investment credit property" means any property eligible for a credit determined under this subpart.
In the case of any transfer described in subsection (a) of section 1041-
Any increase in tax under paragraph (1), (2), or (3) shall not be treated as tax imposed by this chapter for purposes of determining the amount of any credit allowable under this chapter.
For purposes of this subsection-
The term "applicable transaction" means, with respect to any applicable taxpayer, any significant transaction (as determined by the Secretary, in coordination with the Secretary of Commerce and the Secretary of Defense) involving the material expansion of semiconductor manufacturing capacity of such applicable taxpayer in the People's Republic of China or a foreign country of concern (as defined in section 9901(7) of the William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021).
Such term shall not include a transaction which primarily involves the expansion of manufacturing capacity for legacy semiconductors (as defined in section 9902(a)(6) of the William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021).
For purposes of this subsection, the term "applicable taxpayer" means any taxpayer who has been allowed a credit under section 48D(a) for any prior taxable year.
No credit shall be determined under this subpart with respect to-
Except as provided in subparagraph (B), no credit shall be determined under this subpart with respect to any property which is used predominantly outside the United States.
Subparagraph (A) shall not apply to any property described in section 168(g)(4).
No credit shall be determined under this subpart with respect to any property which is used predominantly to furnish lodging or in connection with the furnishing of lodging. The preceding sentence shall not apply to-
No credit shall be determined under this subpart with respect to any property used by an organization (other than a cooperative described in section 521) which is exempt from the tax imposed by this chapter unless such property is used predominantly in an unrelated trade or business the income of which is subject to tax under section 511. If the property is debt-financed property (as defined in section 514(b)), the amount taken into account for purposes of determining the amount of the credit under this subpart with respect to such property shall be that percentage of the amount (which but for this paragraph would be so taken into account) which is the same percentage as is used under section 514(a), for the year the property is placed in service, in computing the amount of gross income to be taken into account during such taxable year with respect to such property. If any qualified rehabilitated building is used by the tax-exempt organization pursuant to a lease, this paragraph shall not apply for purposes of determining the amount of the rehabilitation credit.
No credit shall be determined under this subpart with respect to any property used-
This paragraph and paragraph (3) shall not apply to any property by reason of use under a lease with a term of less than 6 months (determined under section 168(i)(3)).
If any qualified rehabilitated building is leased to a governmental unit (or a foreign person or entity) this paragraph shall not apply for purposes of determining the rehabilitation credit with respect to such building.
For purposes of this paragraph and paragraph (3), rules similar to the rules of paragraphs (5) and (6) of section 168(h) shall apply.
For special rules for the application of this paragraph and paragraph (3), see section 168(h).
For purposes of this subtitle, if a credit is determined under this subpart with respect to any property, the basis of such property shall be reduced by the amount of the credit so determined.
If during any taxable year there is a recapture amount determined with respect to any property the basis of which was reduced under paragraph (1), the basis of such property (immediately before the event resulting in such recapture) shall be increased by an amount equal to such recapture amount. For purposes of the preceding sentence, the term "recapture amount" means any increase in tax (or adjustment in carrybacks or carryovers) determined under subsection (a).
In the case of any energy credit-
For purposes of sections 1245 and 1250, any reduction under this subsection shall be treated as a deduction allowed for depreciation.
For purposes of section 1250(b), the determination of what would have been the depreciation adjustments under the straight line method shall be made as if there had been no reduction under this section.
The adjusted basis of-
shall be appropriately adjusted to take into account adjustments made under this subsection in the basis of property held by the partnership or S corporation (as the case may be).
For purposes of this subpart, rules similar to the rules of the following provisions (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990) shall apply:
Paragraphs (1)(A), (2)(A), and (4) of the section 46(e) referred to in paragraph (1) of this subsection shall not apply to any taxable year beginning after December 31, 1995. In the case of a real estate investment trust making an election under section 6418, paragraphs (1)(B) and (2)(B) of the section 46(e) referred to in paragraph (1) of this subsection shall not apply to any investment credit property of such real estate investment trust to which such election applies.
26 U.S.C. § 50
Amendment of Section Pub. L. 117-169, §13702(b)(3), (4), (c), Aug. 16, 2022, 136 Stat. 1997, provided that, applicable to property placed in service after Dec. 31, 2024, this section is amended:(1) in subsection (a)(2)(E), by striking "or 48D(b)(5)" and inserting "48D(b)(5), or 48E(e)"; and (2) in subsection (c)(3), by inserting "or clean electricity investment credit" after "In the case of any energy credit". See 2022 Amendment notes below.
EDITORIAL NOTES
REFERENCES IN TEXTSection 9901(7) of the William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021, referred to in subsec. (a)(6)(D)(i), is section 9901(7) of Pub. L. 116-283, which is classified to section 4651(7) of Title 15, Commerce and Trade.Section 9902(a)(6) of the William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021, referred to in subsec. (a)(6)(D)(ii), is section 9902(a)(6) of Pub. L. 116-283, which is classified to section 4652(a)(6) of Title 15, Commerce and Trade.The date of the enactment of the Revenue Reconciliation Act of 1990, referred to in subsec. (d), is the date of enactment of Pub. L. 101-508, which was approved Nov. 5, 1990.
PRIOR PROVISIONSA prior section 50, Pub. L. 92-178, title I, §101(a), Dec. 10, 1971, 85 Stat. 498, related to restoration of credit for investment in certain depreciable property, prior to repeal by Pub. L. 95-600, title III, §312(c)(1), Nov. 6, 1978, 92 Stat. 2826, applicable to taxable years ending after Dec. 31, 1978.
AMENDMENTS2022-Subsec. (a)(2)(E). Pub. L. 117-169, §13702(b)(3), substituted "48D(b)(5), or 48E(e)" for "or 48D(b)(5)". Pub. L. 117-167, §107(d)(3), substituted "48C(b)(2), or 48D(b)(5)" for "or 48C(b)(2)".Subsec. (a)(3). Pub. L. 117-167, §107(b)(1), added par. (3). Former par. (3) redesignated (4).Subsec. (a)(4). Pub. L. 117-167, §107(b)(3)(A) (ii), inserted "or applicable transaction" before period at end. Pub. L. 117-167, §107(b)(3)(A)(i), which directed the insertion of ", or any applicable transaction to which paragraph (3)(A) applies" after "paragraphs (1) and (2)", was executed by making the insertion after "paragraph (1) or (2)" to reflect the probable intent of Congress. Pub. L. 117-167, §107(b)(1), redesignated par. (3) as (4). Former par. (4) redesignated (5).Subsec. (a)(5), (6). Pub. L. 117-167, §107(b)(1), redesignated pars. (4) and (5) as (5) and (6), respectively.Subsec. (a)(6)(C). Pub. L. 117-167, §107(b)(3)(B), substituted "paragraph (1), (2), or (3)" for "paragraph (1) or (2)".Subsec. (a)(6)(D), (E). Pub. L. 117-167, §107(b)(2), added subpars. (D) and (E).Subsec. (c)(3). Pub. L. 117-169, §13702(b)(4), inserted "or clean electricity investment credit" after "In the case of any energy credit" in introductory provisions.Subsec. (c)(3)(C). Pub. L. 117-169, §13102(i), added subpar. (C).Subsec. (d). Pub. L. 117-169, §13801(c), inserted "In the case of a real estate investment trust making an election under section 6418, paragraphs (1)(B) and (2)(B) of the section 46(e) referred to in paragraph (1) of this subsection shall not apply to any investment credit property of such real estate investment trust to which such election applies." at end of concluding provisions. Subsec. (d)(2). Pub. L. 117-169, §13102(f)(5), inserted "At the election of a taxpayer, this paragraph shall not apply to any energy storage technology (as defined in section 48(c)(6)), provided-" after "companies)." and added subpars. (A) to (C).2018-Subsec. (a)(2)(E). Pub. L. 115-141, §401(d)(3)(B) (ii), substituted "or 48C(b)(2)" for "48C(b)(2), or 48D(b)(4)".Subsec. (b)(2)(A). Pub. L. 115-141, §401(a) (25), substituted semicolon for period at end. 2014-Subsec. (a)(2)(E). Pub. L. 113-295 inserted ", 48A(b)(3), 48B(b)(3), 48C(b)(2), or 48D(b)(4)" after "in section 48(b)".2005-Subsec. (a)(2)(E). Pub. L. 109-135 substituted "section 48(b)" for "section 48(a)(5)". 2004-Subsec. (c)(3). Pub. L. 108-357 struck out "or reforestation credit" after "energy credit" in introductory provisions.1998-Subsec. (a)(5)(C). Pub. L. 105-206 substituted "this chapter" for "subpart A, B, D, or G". 1996-Subsec. (a)(2)(C). Pub. L. 104-188, §1704(t) (29), substituted "subsection (d)(5)" for "subsection (c)(4)".Subsec. (a)(2)(E). Pub. L. 104-188, §1702(h) (11), substituted "48(a)(5)" for "48(a)(5)(A)". Subsec. (d). Pub. L. 104-188, §1616(b)(1), inserted closing provisions.
STATUTORY NOTES AND RELATED SUBSIDIARIES
EFFECTIVE DATE OF 2022 AMENDMENT Amendment by section 13102(f)(5), (i) of Pub. L. 117-169 applicable to property placed in service after Dec. 31, 2022, see section 13102(q)(2) of Pub. L. 117-169, set out in a note under section 45 of this title. Amendment by section 13702(b)(3), (4) of Pub. L. 117-169 applicable to property placed in service after Dec. 31, 2024, see section 13702(c) of Pub. L. 117-169, set out as an Effective Date note under section 48E of this title.Amendment by section 13801(c) of Pub. L. 117-169 applicable to taxable years beginning after Dec. 31, 2022, see section 13801(g) of Pub. L. 117-169, set out as an Effective Date note under section 6417 of this title.Amendment by Pub. L. 117-167 applicable to property placed in service after Dec. 31, 2022, and, for any property the construction of which begins prior to Jan. 1, 2023, only to the extent of the basis thereof attributable to the construction, reconstruction, or erection after Aug. 9, 2022, see section 107(f) of Pub. L. 117-167, set out as a note under section 905 of Title 2, The Congress.
EFFECTIVE DATE OF 2004 AMENDMENT Amendment by Pub. L. 108-357 applicable with respect to expenditures paid or incurred after Oct. 22, 2004, see section 322(e) of Pub. L. 108-357, set out as a note under section 46 of this title.
EFFECTIVE DATE OF 1998 AMENDMENT Amendment by Pub. L. 105-206 effective, except as otherwise provided, as if included in the provisions of the Taxpayer Relief Act of 1997, Pub. L. 105-34, to which such amendment relates, see section 6024 of Pub. L. 105-206, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1996 AMENDMENT Amendment by section 1616(b)(1) of Pub. L. 104-188 applicable to taxable years beginning after Dec. 31, 1995, see section 1616(c) of Pub. L. 104-188, set out as a note under section 593 of this title. Amendment by section 1702(h)(11) of Pub. L. 104-188 effective, except as otherwise expressly provided, as if included in the provision of the Revenue Reconciliation Act of 1990, Pub. L. 101-508, title XI, to which such amendment relates, see section 1702(i) of Pub. L. 104-188, set out as a note under section 38 of this title.
EFFECTIVE DATESection applicable to property placed in service after Dec. 31, 1990, but not applicable to any transition property (as defined in section 49(e) of this title), any property with respect to which qualified progress expenditures were previously taken into account under section 46(d) of this title, and any property described in section 46(b)(2)(C) of this title, as such sections were in effect on Nov. 4, 1990, see section 11813(c) of Pub. L. 101-508, set out as an Effective Date of 1990 Amendment note under section 45K of this title.
SAVINGS PROVISIONFor provisions that amendment made by section 401(d)(3)(B)(ii) of Pub. L. 115-141 not apply to expenditures made in taxable years beginning before Jan. 1, 2011, in the case of the repeal of section 48D(e)(1) of this title, see section 401(d)(3)(C) of Pub. L. 115-141, set out as a note under section 49 of this title. For provisions that nothing in amendment by section 401(d)(3)(B)(ii) of Pub. L. 115-141 be construed to affect treatment of certain transactions occurring, property acquired, or items of income, loss, deduction, or credit taken into account prior to Mar. 23, 2018, for purposes of determining liability for tax for periods ending after Mar. 23, 2018, see section 401(e) of Pub. L. 115-141, set out as a note under section 23 of this title. For provisions that nothing in this section be construed to affect treatment of certain transactions occurring, property acquired, or items of income, loss, deduction, or credit taken into account prior to Nov. 5, 1990, for purposes of determining liability for tax for periods ending after Nov. 5, 1990, see section 11821(b) of Pub. L. 101-508, set out as a note under section 45K of this title.
- Secretary
- The term "Secretary" means the Secretary of the Treasury or his delegate.
- State
- The term "State" shall be construed to include the District of Columbia, where such construction is necessary to carry out provisions of this title.
- corporation
- The term "corporation" includes associations, joint-stock companies, and insurance companies.
- fiscal year
- The term "fiscal year" means an accounting period of 12 months ending on the last day of any month other than December.
- person
- The term "person" shall be construed to mean and include an individual, a trust, estate, partnership, association, company or corporation.
- stock
- The term "stock" includes shares in an association, joint-stock company, or insurance company.
- taxable year
- The term "taxable year" means the calendar year, or the fiscal year ending during such calendar year, upon the basis of which the taxable income is computed under subtitle A. "Taxable year" means, in the case of a return made for a fractional part of a year under the provisions of subtitle A or under regulations prescribed by the Secretary, the period for which such return is made.
- taxpayer
- The term "taxpayer" means any person subject to any internal revenue tax.
- trade or business
- The term "trade or business" includes the performance of the functions of a public office.
- transaction
- The term "transaction" includes a series of transactions.