Instructions For Form 3468 - 2016


Department of the Treasury
Internal Revenue Service
Instructions for Form 3468
Investment Credit
Qualified Progress Expenditures
Section references are to the Internal Revenue Code unless
otherwise noted.
Qualified progress expenditures are those expenditures made
before the property is placed in service and for which the
Future Developments
taxpayer has made an election to treat the expenditures as
progress expenditures. Qualified progress expenditure property
For the latest information about developments related to Form
is any property that is being constructed by or for the taxpayer
3468 and its instructions, such as legislation enacted after they
and which (a) has a normal construction period of two years or
were published, go to
more, and (b) it is reasonable to believe that the property will be
What’s New
new investment credit property in the hands of the taxpayer
when it is placed in service. The placed in service requirement
The increased rehabilitation credit rate lines for the Gulf
doesn't apply to qualified progress expenditures.
Opportunity Zone and the Midwestern disaster were removed
Qualified progress expenditures for:
since those credit rates have expired.
Self-constructed property means the amount that is properly
The Protecting Americans from Tax Hikes Act of 2015 has
chargeable (during the tax year) to a capital account with respect
implemented the phasing out of the investment credit for wind
to that property; or
facilities. The credit for wind facilities is reduced by 20% for
Non-self-constructed property means the lesser of: (a) the
facilities the construction of which begins in 2017.
amount paid (during the tax year) to another person for the
construction of the property, or (b) the amount that represents
The investment credit for the following energy properties are
the proportion of the overall cost to the taxpayer of the
set to expire for periods after 2016:
construction by the other person which is properly attributable to
Solar (except property under section 48(a)(3)(A)(i)),
that portion of the construction which is completed during the tax
Qualified fuel cell,
Qualified microturbine,
For more information on qualified progress expenditures, see
Combined heat and power system,
section 46(d) (as in effect on November 4, 1990). For details on
Qualified small wind, and
qualified progress expenditures for the rehabilitation credit, see
Geothermal heat pump.
section 47(d).
At-Risk Limit for Individuals and
General Instructions
Closely Held Corporations
Purpose of Form
The cost or basis of property for investment credit purposes may
be limited if you borrowed against the property and are protected
Use Form 3468 to claim the investment credit. The investment
against loss, or if you borrowed money from a person who is
credit consists of the rehabilitation, energy, qualifying advanced
related or who has an interest (other than as a creditor) in the
coal project, qualifying gasification project, and qualifying
business activity. The cost or basis must be reduced by the
advanced energy project credits. If you file electronically, you
amount of the nonqualified nonrecourse financing related to the
must send in a paper Form 8453, U.S. Individual Income Tax
property as of the close of the tax year in which the property is
Transmittal for an IRS e-file Return, if attachments are required
placed in service. If, at the close of a tax year following the year
to Form 3468.
property was placed in service, the nonqualified nonrecourse
Investment Credit Property
financing for any property has increased or decreased, then the
credit base for the property changes accordingly. The changes
Investment credit property is any depreciable or amortizable
may result in an increased credit or a recapture of the credit in
property that qualifies for the rehabilitation credit, energy credit,
the year of the change. See sections 49 and 465 for details.
qualifying advanced coal project credit, qualifying gasification
project credit, or qualifying advanced energy project credit.
Recapture of Credit
You can't claim a credit for property that is:
You may have to refigure the investment credit and recapture all
Used mainly outside the United States (except for property
or a portion of it if:
described in section 168(g)(4));
You dispose of investment credit property before the end of 5
Used by a governmental unit or foreign person or entity
full years after the property was placed in service (recapture
(except for a qualified rehabilitated building leased to that unit,
person, or entity; and property used under a lease with a term of
You change the use of the property before the end of the
less than 6 months);
recapture period so that it no longer qualifies as investment
Used by a tax-exempt organization (other than a section 521
credit property;
farmers' cooperative) unless the property is used mainly in an
The business use of the property decreases before the end of
unrelated trade or business or is a qualified rehabilitated building
the recapture period so that it no longer qualifies (in whole or in
leased by the organization;
part) as investment credit property;
Used for lodging or in the furnishing of lodging (see section
Any building to which section 47(d) applies will no longer be a
50(b)(2) for exceptions); or
qualified rehabilitated building when placed in service;
Certain MACRS business property to the extent it has been
expensed under section 179 of the Internal Revenue Code.
Jan 05, 2017
Cat. No. 12277P


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