Department of the Treasury

Internal Revenue Service

Instructions for Form 3468

Paperwork Reduction Act Notice.—We 3. Energy percentage for certain for 1992, (2) a carryback or a
ask for the information on this form to long-term energy projects (as defined in carryforward of any of these credits, or
carry out the Internal Revenue laws of section 46(b)(2)( C) as in effect on (3) an investment credit from a passive
the United States. You are required to November 4, 1990). activity, you must also file Form 3800,
give us the information. We need it to which is used instead of Part II of Form
ensure that you are complying with 3468 to figure the tax liability limitation.
these laws and to allow us to figure and General Instructions C corporations that are required to file
collect the right amount of tax. Form 4626, Alternative Minimum Tax—
The time needed to complete and file Purpose of Form Corporations, may also use Schedule A
this form will vary depending on Use Form 3468 to claim a rehabilitation, of Form 3800 to determine if they are
individual circumstances. The estimated energy, or reforestation credit. Also, use entitled to an additional general business
average time is: Form 3468 to claim a regular investment credit for any regular investment credit
Recordkeeping 12 hr., 26 min. credit for certain transition property. carryforward to 1992 for property placed
If you are a partner in a partnership, in service before January 1, 1991, under
Learning about the beneficiary of an estate or trust, section 38(c)(2) before amendment by
law or the form 3 hr., 28 min. shareholder in an S corporation, or the Revenue Reconciliation Act of 1990.
Preparing and sending lessee, use Form 3468 to figure the
the form to the IRS 3 hr., 50 min. credit based on your share of the How To Figure the Credit
If you have comments concerning the investment that was allocated to you by Complete the appropriate lines for the
accuracy of these time estimates or the partnership, estate, trust, various parts that make up the
suggestions for making this form more S corporation, or lessor. investment credit.
simple, we would be happy to hear from Caution: You may have to refigure the
you. You can write to both the IRS and credit and recapture all or a portion of it
the Office of Management and Budget if:
Investment Credit Property
at the addresses listed in the ● You dispose of the property before the You may claim an investment credit for
instructions of the tax return with which end of the property class life or life property placed in service only if it
this form is filed. years, qualifies as one of the properties listed
above under Item To Note. Enter only
● You change the use of the property, the business part if property is for both
Item To Note ● The business use of the property business and personal use.
Except as noted below, the “regular decreases so that it no longer qualifies Exceptions.—You cannot claim an
percentage” investment credit expired (in whole or in part) as investment credit investment credit for property that is:
for property placed in service after property,
1. Used mainly outside the United
December 31, 1990. Generally, the 1992 ● You reduce your proportionate interest States,
investment credit consists of: in a partnership or other “pass-through”
1. The rehabilitation credit (see the entity that allocated the cost or basis of 2. Used by governmental units and
Specific Instructions for line 1), property to you for which you claimed a foreign persons and entities,
2. The energy credit, which is now credit, or 3. Used by a tax-exempt organization
permanent (see the Specific ● You retur ned leased property (on (other than a section 521 farmers’
Instructions for lines 2a and 2b), and which you claimed a credit) to the lessor cooperative) unless the property is used
before the end of the recapture per iod mainly in an unrelated trade or business,
3. The reforestation credit (see the or
Specific Instructions for line 3). or useful life.
For more information, see Form 4255, 4. Used for lodging or for furnishing
Note: Because of transitional and certain the lodging (see section 50(b)(2) for
computation rules, you may be able to Recapture of Investment Credit.
exceptions).
claim a current year investment credit for
the following section 38 property (as Who Must File Form 3800, Election for certain leased property.—
defined in section 48(a) as in effect on If you lease property to someone else,
General Business Credit you may elect to treat all or part of your
November 4, 1990, before amendment
by the Revenue Reconciliation Act of The general business credit consists of investment in new property as if it were
1990): several credits including the investment made by the person who is leasing it
credit (Form 3468), jobs credit (Form from you. Lessors and lessees should
1. Regular percentage for transition see section 48(d), as in effect on
5884), credit for alcohol used as fuel
property (as defined in section 49(e) as November 4, 1990, and related
(Form 6478), credit for increasing
in effect on November 4, 1990); regulations for rules on making this
research activities (Form 6765),
2. Regular percentage for progress low-income housing credit (Form 8586), election. For limitations, see sections
expenditure property that is transition enhanced oil recovery credit (Form 46(e)(3) and 48(d), as in effect on
property when placed in service (see 8830), disabled access credit (Form November 4, 1990.
section 46(d) as in effect on November 8826), and renewable electricity
4, 1990); and production credit (Form 8835). If you
have (1) more than one of these credits
Cat. No. 12277P
At-Risk Limitation for a percentage of the amounts otherwise substitute “60-month period” for
determined. Figure this percentage by “24-month period.”
Individuals and Closely Held dividing taxable income for the year by Enter on the applicable entry space
Corporations taxable income computed without regard under lines 1a and 1b the qualified
The cost or basis of property for to the corporation’s deduction for rehabilitation expenditures for
investment credit purposes may be dividends paid. rehabilitation property. This is property
limited if you borrowed against the See Regulations section 1.46-4 for that is not covered by the transition
property and are protected against loss, other details. rules. To qualify for the credit, the
or if you borrowed money from a person building must have been originally
who is related or who has other than a Part I—Current Year placed in service before 1936 or must
creditor interest in the business activity. be a certified historic structure. See
The cost or basis must be reduced by
Investment Credit section 47(c) for details.
the amount of this “nonqualified Line 1—Rehabilitation credit.—You are Enter on the applicable entry space
nonrecourse financing” related to the allowed a credit for certain capital costs under lines 1c, 1d, and 1e the qualified
property as of the close of the tax year incurred for additions or improvements rehabilitation expenditures for transition
in which it is placed in service. If, at the to qualified existing buildings and for rehabilitation property and certain
close of a tax year following the year rehabilitation of certified historic projects. See section 251(d) of the Tax
property was placed in service, the structures. The expenditures must be Reform Act of 1986 for details.
nonqualified nonrecourse financing for added to the basis of the building, If you are claiming a credit for a
any property has increased or depreciated by the straight-line method, certified historic structure on line 1b or
decreased, then the credit base for the and incurred in connection with the 1e, you must attach a copy of your
property changes accordingly. The rehabilitation of a qualified rehabilitated request for final National Park Service
changes may result in an increased building. (NPS) certification (NPS Form 10-168c).
credit or a recapture of the credit in the Decrease the depreciable basis by the Enter the building number assigned by
year of the change. See sections 49 and amount of the credit. the NPS in the space provided. If the
465 for details. For filers placing property in service in qualified rehabilitation expenditures are
1992, the qualified rehabilitation from a partnership, S corporation,
Specific Instructions expenditures must be for: estate, or trust, enter the identifying
1. Nonresidential real property, number of the flow-through entity in the
Partnerships, space provided.
2. Residential rental property (certified
historic structures only—see Regulations Line 2a—Energy credit.—Enter the
S Corporations, Estates, and basis of energy property placed in
section 1.48-1(h)), or
Trusts 3. Real property that has a class life of
service during the tax year. Energy
To figure the cost or basis of property to property is equipment that uses solar
more than 121⁄2 years.
pass through to the individual partners, energy to generate electricity, to heat or
Your building must also meet the cool (or provide hot water for use in) a
shareholders, or beneficiaries, complete following requirements:
only the following lines: structure, or to provide solar process
1. The building must be substantially heat. Energy property is also equipment
● The qualified rehabilitation rehabilitated. used to produce or use energy derived
expenditures shown on lines 1a through from a geothermal deposit (within the
1e of Part I, 2. The building must have been
placed in service before the beginning of meaning of section 613(e)(2)). For
● The basis of energy property placed in rehabilitation. This requirement is met if electricity produced by geothermal
service shown on line 2a and the basis the building was placed in service by power, include equipment up to, but not
and credit rate of any transitional energy any person at any time before the including, the electrical transmission
property shown on the attachment to rehabilitation begins. stage.
line 2b, To qualify, the property must be
3. At least 75% of the external walls
● The amortizable basis of qualified must be retained with 50% or more kept constructed, reconstructed, or erected
timber property shown on line 3, and in place as external walls. Also, at least by the taxpayer. If acquired by the
● The qualified investment for 75% of the existing internal structural taxpayer, the original use of such
transitional regular investment credit framework of the building must be property must commence with the
property shown on line 4. retained in place. This does not apply to taxpayer. The property must be subject
Attach the completed form to the certified historic structures. to depreciation (or amortization in lieu of
partnership, S corporation, estate, or A building is considered to be depreciation). The property must meet
trust income tax return to show the total “substantially rehabilitated” if your the performance and quality standards,
cost or basis (or unused credit from a rehabilitation expenses during a if any, that have been prescribed by
cooperative) that is passed through. 24-month period that you select and regulations and are in effect at the time
that ends with or within your tax year the property is acquired.
Special Limitations for Lines are more than: Energy property does not include any
property that is public utility property as
1 and 4 of Part I and Line 12 1. $5,000 or
defined by section 46(f)(5) as in effect on
of Part II 2. Your adjusted basis in the building November 4, 1990.
and its structural components, if this
The qualified investment on lines 1 and amount is more than $5,000. If energy property is financed in whole
4 and the tax liability on line 12 are or in part by subsidized energy financing
Figure your adjusted basis on the first or by tax-exempt private activity bonds,
limited as follows:
day of the 24-month period or the first the amount that you can claim as basis
● For mutual savings institutions, the day of your holding period, whichever is
line 1, 4, and 12 amounts are limited to is a fraction that is 1 reduced by the
later. fraction, the numerator of which is that
50% of the amounts otherwise
If you are rehabilitating the building in portion of the basis allocable to such
determined.
phases under a written architectural plan financing or proceeds, and the
● For regulated investment companies and specifications that were completed denominator of which is the basis of the
and real estate investment trusts, the before the rehabilitation began, property. For example, if the basis of the
line 1, 4, and 12 amounts are limited to
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property is $100,000 and the portion Regulations sections 1.194-2 and 4d. For individuals, the credit is included
allocable to such financing or proceeds 1.48-1(p). You must reduce the in the total for line 45 of Form 1040
is $20,000, the fraction of the basis that amortizable basis by 50% of the (report only the portion of line 45 that is
you may claim the credit on is 4/5 reforestation credit determined. the nonconventional source fuel credit).
(i.e., 1 minus $20,000/$100,000). Line 4—Regular investment credit for Other filers enter the credit from the
Subsidized energy financing means transition property.—Enter the qualified appropriate line of their returns.
financing provided under a Federal, investment of any property that qualified Line 10—Tentative minimum tax.—
state, or local program, a principal for “regular” investment credit as Enter the tentative minimum tax (TMT)
purpose of which is to provide transition property (as defined in section that was figured on the appropriate
subsidized financing for projects 49(e) as in effect on November 4, 1990). alternative minimum tax (AMT) form or
designed to conserve or produce energy. You must reduce the regular 10% credit schedule. Although you may not owe
You must reduce the basis by 50% of for transition property by 35%, thus AMT, you must still compute the TMT to
the energy credit determined. making the credit for this type of figure your credit.
Line 2b—Transition energy property.— property 6.5%. You must reduce the Line 12.—If a husband and wife file
If you have energy property that is basis in the property by the amount of separate returns, each must use
transition property defined in section the credit. $12,500 instead of $25,000. But if one
49(e) as in effect on November 4, 1990, Line 5—Credit from cooperatives.— of them has no investment credit (or no
attach a statement showing your Section 1381(a) cooperative carryforwards or carrybacks to the
computation of the allowable credit. organizations may claim the investment current year), then the other may use the
Reduce any credit by 35% as required credit. If the cooperative cannot use any entire $25,000.
by section 49(c) as in effect on of the credit because of the tax liability A member of a controlled group must
November 4, 1990. limitation, the unused credit must be enter only its apportioned share of the
Line 3—Reforestation credit.—Enter allocated to the patrons of the $25,000.
the portion of the amortizable basis of cooperative. The recapture provisions of
A mutual savings institution, a
any qualified timber property that was section 50 apply as if the cooperative
regulated investment company, or a real
acquired during the tax year and is had kept the credit and not allocated it.
estate investment trust should see
taken into account under section 194. Patrons should enter their unused
Special Limitations for Lines 1 and 4
Only direct costs for planting and regular investment credit and their
of Part I and Line 12 of Part II, on
seeding can be amortized. These include unused energy credit from cooperatives.
page 2.
costs for site preparation, seed, For estates and trusts, the $25,000
seedlings, labor, tools, and depreciation Part II—Tax Liability limitation is reduced by the same
on equipment such as tractors, trucks, Limitation proportionate share of income that was
and tree planters used in planting or allocated to the beneficiaries.
seeding. Depreciation is a direct cost If item (1), (2), or (3) listed in Who Must
only for the period of time the File Form 3800, General Business Note: If you cannot use all of the credit
equipment is used in these activities. Credit, apply, do not complete Part II. because of the tax liability limitation (line
Instead complete Form 3800. 6 is greater than line 13), carry the
You cannot claim more than $10,000 excess back 3 years and then forward 15
(or $5,000 in the case of a married Line 8f—Credit for fuel from a
nonconventional source.—Corporations years. See the separate Instructions for
person filing a separate return) of Form 3800 for details.
amortizable basis acquired during the enter the nonconventional source fuel
tax year. For more information, see credit from Form 1120, Schedule J, line

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