The Community Renewal Tax Relief Act of 2000 created the New Markets Credit. Taxpayers use Form 8874 to claim the New Markets Credit for qualified equity investments made in qualified community development entities (CDE) after December 31, 2000. The credit is part of the General Business Credit, Form 3800. For more information, see IRC 45D. Also, see Notice 2006-60, for interim guidance on how an entity meets the requirements to be a qualified active low-income community business when its activities involve certain targeted populations under IRC 45D(e)(2).

Section 102 of the Tax Relief and Health Care Act of 2006, P.L. 109-432, extended the New Markets Credit through 2008, permitting up to $3.5 billion in qualified investments for that calendar year and is effective on December 20, 2006.

Division C, Title III, section 302 of the Emergency Economic Stabilization Act of 2008, P.L. 110-343, extends the new markets credit for 1 year for calendar year 2009 and modifies the alternative simplified credit.

Section 1403, Increase in New Markets Tax Credit, of the American Recovery and Reinvestment Act of 2009, P.L. 111-5, increases the maximum amount of qualified equity investment by $1.5 billion for calendar years 2008 and 2009 to $5 billion. See the General Instructions for Form 8874 for specific information on claiming the credit and recapture of the credit.

On December 17, 2010, President Obama signed into law, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, P.L. 111-312. Section 733 of the act extends the new markets tax credit for 2 years and is effective for taxable years beginning after December 31, 2009 and on or before December 31, 2011. In addition, section 733 sets the maximum amount of qualified equity investments at $3.5 billion for both 2010 and 2011.

A qualified equity investment is generally stock in a corporation or a capital interest in a partnership that is:

A qualified community development:

Qualified CDEs also include specialized small business investment companies and community development financial institutions. See IRC 45D(c)(2) for more information.

A credit generally is allowed on each of seven credit allowance dates. The credit allowance dates are the date the qualified equity investment is made in a CDE and that date on each of the next six years.

The credit is equal to the qualified investment multiplied by:

The New Markets Credit may not be carried back to a tax year ending before 2001.

Section 301 of the American Jobs Creation Act of 2004, P.L. 108-357, created IRC 6426, Credit for Alcohol Fuel and Biodiesel Mixtures. The credit applies to fuels produced, and sold or used, after December 31, 2004 and on or before December 31, 2006. Section 302 of the American Jobs Creation Act of 2004, created IRC 40A, Biodiesel Used as Fuel, which defines the qualifications for the credit.

The credit was extended by Section 1344 of the Energy Policy Act of 2005, P.L. 109-58, to fuels produced and sold or used after December 31, 2006, and on or before December 31, 2008. The Act also added credits for renewable diesel fuel sold or used after December 31, 2005. In addition, the Act added a small agri-biodiesel producer credit for tax years ending after August 8, 2005.

Division B, Title II, section 202(a) of the Emergency Economic Stabilization Act of 2008, P.L. 110-343, extends the credit for fuels produced, and sold or used, for 1 year through December 31, 2009.

Section 701(a) and section 701(b), of The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010, P. L. 111-312, extends the credit for fuels produced, and sold or used, for 2 year through December 31, 2011.

Special Rule for 2010. Under section 701(c) of the Act, per Notice 2011-10, Biodiesel and Alternative Fuels; Claims for 2010; Excise Tax, taxpayers may make a one-time claim for payment of the credits and payments allowable under IRC 6426 and 6427 for biodiesel (including renewable diesel) mixtures, alternative fuels, and alternative fuel mixtures sold or used during calendar year 2010, on Form 8849. See IRM 21.7.8.4.5.4, Form 8849, Schedule 3, Certain Fuel Mixtures and the Alternative Fuel Credit, for more information. Taxpayers may also continue to claim the credit on Form 4136, Credit for Federal Tax Paid on Fuels. The one-time claim rule mentioned above, does not pertain to claims on Form 4136.

The credit is claimed on Form 8864, Biodiesel and Renewable Biodiesel Fuels Credit, and is part of the general business credit. The credit consists of:

Notice 2005-62, was issued to clarify the biodiesel certificate rules and to require copies of certificates to be attached to Form 8864 in certain situations.

The small agri-biodiesel producer credit is allowed for gallons sold in tax years ending after August 8, 2005. Taxpayers who have a credit that occurs in a tax year beginning in 2004, include the credit on line 5 of the 2004 Form 8864, and enter SABPC, and the amount of the credit to the left of the entry on line 5. They must attach a statement showing the information requested on line 7 of the form and file it with their original or amended tax return for the tax year beginning in 2004.

See the General Instructions for Form 8864 for the definition of biodiesel, agri-biodiesel, renewable diesel, biomass, and other related terms.

Lines 1 and 2 are for claiming the credit for 100-percent biodiesel (B100) and agri-biodiesel that are not mixed with diesel fuel. Line 3, Renewable Diesel sold or used after December 31, 2005, also must not be a mixture. The credit is allowed only to the person who:

Lines 4, 5 and 6 are for claiming a biodiesel mixture, agri-biodiesel mixture, and renewable diesel mixture credit. A qualified biodiesel mixture means a mixture of agri-biodiesel, biodiesel other than agri-biodiesel, or renewable diesel that are mixed with diesel fuel, without regard to kerosene. The credit is allowed only to the producer who blends the mixture. The credit is allowed only for the taxable year the mixture was sold or used and the producer must have:

However, no credit is allowed for fuel used in a trade or business that was purchased in a retail sale described above. The credit is $.50 for each gallon of biodiesel other than agri-biodiesel. the credit increases to $1 per gallon for agri-biodiesel, and for renewable diesel sold or used after December 31, 2005.

The credit is $.50 for each gallon of biodiesel included in a biodiesel mixture. The credit increases to $1 per gallon for agri-biodiesel used in a biodiesel mixture, and for renewable diesel included in a renewable diesel mixture that was sold or used after December 31, 2005.

Line 7, qualified agri-biodiesel production means up to 15 million gallons of agri-biodiesel which is produced by an eligible small agri-biodiesel producer, and which during the tax year:

The credit is $.10 per gallon.

Any unused portion of this credit remaining, after the tax is reduced to zero, can be carried back 1 year to reduce taxes for that year. (However, it cannot be carried back to a tax year ending before 2005.) It can then be carried forward 20 years.

Only one credit may be taken with respect to any amount of any type of biodiesel or renewable diesel. If any amount is claimed (or will be claimed) with respect to any amount of biodiesel or renewable diesel on Form 720, Quarterly Federal Excise Tax Return, Form 8849, Claim for Refund of Excise Taxes, or Form 4136, Credit for Federal Tax Paid on Fuels, then a claim cannot be made on Form 8864 for that amount of biodiesel or renewable diesel.

Action Required:

Section 339 of the American Jobs Creation Act of 2004, P.L. 108-357, created IRC 45H, Credit for Production of Low Sulfur Diesel Fuel. The Credit is claimed on Form 8896, Low Sulfur Diesel Fuel Production Credit (LSDFPC), and is part of the general business credit. Low sulfur diesel is defined as diesel fuel with a sulfur content of 15 parts per million or less.

The LSDFPC generally is 5 cents for every gallon of low sulfur diesel fuel produced at a qualified small business refinery during the taxable year. The credit is part of the general business credit.

The effective date of this amendment applies to expenses paid or incurred after December 31, 2002. Therefore, claims may be received for tax periods ending 200301 and subsequent. Taxpayers are instructed not to file Form 8896 if they have a credit allowance date prior to their tax year beginning in 2004. Instead, they are to include the credit on line 2 of Form 3800 for the prior year tax. They must enter "LSDFPC" and the amount of the credit on the dotted line to the left of the entry space for line 2 and attach a statement showing the information requested on lines 1 through 8 of this form (as applicable), and file it with their original or amended return for the tax year.

For each facility, qualified costs are costs paid or incurred to comply with the Highway Diesel Fuel Sulfur Control Requirements of the Environmental Protection Agency (EPA) during the period beginning January 1, 2003, and ending on the earlier of:

The LSDFPC cannot exceed an amount equal to 25-percent of the qualified capital costs incurred by the small business refiner with respect to such facility, reduced by, the aggregate LSDFPC for all prior years for such facility. See the General Instructions for Form 8896 for a reduced percentage. The LSDFPC cannot be carried back to a tax year before 2003.

The small business refiner must obtain certification from the IRS (which will consult with the Environmental Protection Agency (EPA) that the taxpayer's qualified costs will result in compliance with applicable EPA regulations. See Rev. Proc. 2007-69, for details and for the due date of the certification.

For TY 2006 and subsequent, the credit can only be claimed as a general business credit and must be carried to Form 3800, General Business Credit. The allowable credit is then figured on Form 3800.

For TY 2005 and prior, Form 8847, Low Sulfur Diesel Fuel Production Credit must be submitted. The credit may need to be carried to Form 3800, General Business Credit, if two or more credits are claimed.

Rev. Proc. 2007-69, Credit for Production of Low Sulfur Diesel Fuel, explains the procedures for small business refiners to obtain a certification from the Internal Revenue Service. Also, see the General Instructions for Form 8896 for more specific information.

Action required:

Section 245 of the American Jobs Creation Act of 2004, P.L. 108-357, created IRC 45G, Railroad Track Maintenance Credit. This section applies to qualified railroad track maintenance expenditures paid or incurred by an eligible taxpayer for taxable years beginning after December 31, 2004, and before January 1, 2010 (See paragraph (2) directly below). The credit is claimed on by an eligible taxpayer Form 8900 and is part of the general business credit.

Division C, Title III, section 316(a) of the Emergency Economic Stabilization Act of 2008, P.L. 110-343, extended the qualified railroad track maintenance credit for 2 years for expenditures paid or incurred on or after January 1, 2008 and on or before January 1, 2010.

On December 17, 2010, President Obama signed into law, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, P.L. 111-312. Section 734 of the act extends the qualified railroad track maintenance credit for 2 years for expenditures paid or incurred during taxable years beginning after December 31, 2009 and on or before December 31, 2011.

An eligible taxpayer includes Class II and Class III railroads as these terms are defined by the Surface Transportation Board.

Eligible taxpayers also include persons (including Class I railroad) who:

Qualified railroad track maintenance expenditures include expenditures for maintaining railroad track (including roadbed, bridges, and related track structures) owned or leased as of January 1, 2005, by a Class II or Class III railroad. Section 423 of the Tax Relief and Health Care Act of 2006 modifies the definition of qualified railroad track expenditures so that the term means "gross expenditures" (whether or not otherwise chargeable to capital account). See the General Instructions for Form 8900 for additional information regarding maintenance expenditures.

For TY 2005 and prior, Form 8900, Qualified Railroad Track Maintenance Credit must be submitted. The credit may need to be carried to Form 3800, General Business Credit, if two or more credits are claimed.

For TY 2006 and subsequent, the credit can only be claimed as a general business credit and must be carried to Form 3800, General Business Credit. The allowable credit is then figured on Form 3800.

Any unused credit may be carried back one year and carried forward for up to 20 years.

The credit allowed for any taxable year cannot exceed the product of $3,500 multiplied by the sum of:

Action required:

Section 11126 of the Safe Accountable, Flexible, and Efficient Transportation Equity Act of 2005, P.L. 109-59, created the Distilled Spirits Credit.

Generally, the credit is computed by multiplying the number of cases of bottled distilled spirits purchased or stored during the tax year by the average tax-financing cost per case for the most recent calendar year ending before the beginning of the tax year.

The amount of the distilled spirits credit for any taxable year is the amount equal to the product of the number of cases of distilled spirits purchased or stored during the tax year by the average tax financing cost per case:

The credit is claimed on Form 8906. The credit is part of the general business credit and is effective for tax years beginning after September 30, 2005. Section 114 of the Tax Relief and Health Care Act of 2006 temporarily suspends the limitation on the amount of excise taxes on rum paid over to Puerto Rico and the Virgin Islands. See the General Instructions for Form 8906 for more specific information and an example on how to compute the credit.

Division C, Title III, section 308 of the Emergency Economic Stabilization Act of 2008, P.L. 110-343, extends the pre-2008 cover over amount of $13.25 per proof gallon for 2 years (to distilled spirits brought into the United States on or before December 31, 2009). After December 31, 2009, the cover over goes back to $10.50 per proof.

On December 17, 2010, President Obama signed into law, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, P.L. 111-312. Section 755 of the act extends the pre-2008 cover over amount of $13.25 per proof gallon for 2 years (to distilled spirits brought into the United States on or before December 31, 2011). After December 31, 2011, the cover over goes back to $10.50 per proof.

The average tax-financing cost per case on Line 2 is as follows:

Action required:

Section 341 of the American Jobs Creation Act of 2004, P.L. 108-357, created IRC 45I, Credit for Producing Oil and Gas from Marginal Wells. This section applies to production in taxable years beginning after December 31, 2004. The credit is claimed on Form 8904.

The marginal well production credit for any taxable year is an amount equal to the product of:

The credit amount is $3 per barrel of qualified crude oil production, and $.50 per 1,000 cubic feet of qualified natural gas production.

The $3 and $.50 credit is reduced (but not below zero) as oil and gas prices increase.

The credit is reduced to zero when the price for a barrel of oil or the price per cubic foot of natural gas reaches certain limits. More information will be issued after the form and instructions have been developed.

Form 8834 is used to claim the credit for qualified electric vehicles placed in service during the tax year. The credit is part of the general business credit. The credit was scheduled to be reduced for vehicles placed in service during 2004, 2005 and 2006, and completely phased out in 2007. However, section 318 of the Working Families Tax Relief Act of 2004, P.L. 108-311, restored the full credit for 2004 and 2005. The credit is reduced by 75-percent (to $1,000) in 2006 and completely phased out in 2007.

The credit for each qualified electric vehicle is generally:

A qualified electric vehicle is any motor vehicle that is:

Gasoline/electric hybrid vehicles that are not powered primarily by an electric motor are not qualified electric vehicles. These hybrid vehicles include:

However, part of the cost of the vehicle listed in (4) above may qualify for the deduction for clean-fuel vehicles. See Publication 535, Business Expenses, for more details.

The electric vehicle credit is subject to recapture if, within 3 years after the date the taxpayer places the vehicle in service, it ceases to qualify for the electric vehicle credit. See the General Instructions for Form 8834 and Publication 535 , Business Expenses, for more detailed information.

If the taxpayer cannot use part of the credit because of tax liability limit, the unused portion is lost. The excess credit cannot be carried back or forward.

Action Required:

Section 1341 of the Energy Policy Act of 2005, P.L. 109-58, provides for a credit for each new alternative motor vehicle placed in service by the taxpayer during the taxable year. However, the credit begins to phase out (or is reduced) during the second calendar quarter after the quarter in which the company sells its 60,000th hybrid or lean technology vehicle. The four types of vehicles that qualify are:

A qualifying fuel cell vehicle is a motor vehicle that is propelled by power derived from one or more cells which convert chemical energy directly into electricity by combining oxygen with hydrogen fuel which is stored on board the vehicle and may or may not require reformation prior to use.

The amount of credit for a fuel cell vehicle is determined by a base credit amount that depends upon the weight class of the vehicle and, in the case of automobiles or light trucks, an additional credit amount that depends upon the rated fuel economy of the vehicle compared to a base fuel economy. The base fuel economy is the 2002 model year city fuel economy ratings for various weight classes. The credit is available to the vehicle owner, including the lessor of a vehicle subject to a lease.

The base credit amount for a new qualified fuel cell motor vehicle is:

The credit for a qualified fuel cell vehicle weighing less than 8,500 pounds and placed in service after December 31, 2009 is reduced to $4,000.

The table below shows the additional credits for passenger automobiles and light trucks based on their fuel economy:

Notice 2008-33 provides procedures for a vehicle manufacturer (or, in the case of a foreign vehicle manufacturer, its domestic distributor) to certify to the Internal Revenue Service both:

A qualifying advanced lean burn technology motor vehicle is a vehicle placed in service on or before December 31, 2010 and is a passenger automobile or light truck with an internal combustion engine which:

The amount of credit is the sum of two components:

The table below shows the Fuel Economy Credit available to a qualifying advanced lean burn technology motor vehicle which achieves a fuel economy (on a gasoline gallon equivalent basis) exceeds that of a base fuel economy:

A qualifying hybrid motor vehicle is a motor vehicle that draws propulsion energy from on-board sources of stored energy which includes both an internal combustion engine or heat engine using combustible fuel and a rechargeable energy source system (e.g., batteries). A qualifying hybrid motor vehicle weighing less than 8,500 pounds must be placed in service on or before December 31, 2010 (December 31, 2009 for vehicles weighing more than 8,500 pounds).

The amount of credit for the purchase of a qualifying hybrid motor vehicle varies with the rated fuel economy of the vehicle compared to a 2002 model year. A qualifying hybrid automobile or light truck which has a gross vehicle weight rating of not more than 8,500 pounds, must have a maximum available power from the rechargeable energy storage system of at least 4 percent. In the case of an automobile or light truck, the amount of credit is the sum of two components:

The table below shows the Fuel Economy Credit available to a qualifying hybrid passenger automobile or light truck whose fuel economy (on a gasoline gallon equivalent basis) exceeds that of a base fuel economy:

The table below shows the conservation credit

A credit is also available for certain new qualified heavy hybrid vehicles with a gross vehicle weight rating in excess of 8,500 pounds. A qualifying heavy hybrid motor vehicle also draws propulsion energy from on-board sources of stored energy which are both an internal combustion or heat engine using consumable fuel, and a rechargeable energy storage system. See Notice 2007-46, 2007-23 I.R.B., for more specific information.

The amount of credit is determined by the estimated increase in fuel economy and the incremental cost of the hybrid vehicle compared to a comparable vehicle powered solely by a gasoline or diesel internal combustion engine that is comparable in weight, size, and use of the vehicle.

A qualified alternative fuel motor vehicle is a vehicle that uses alternative fuels such as compressed natural gas, liquefied natural gas, liquefied petroleum gas, hydrogen, and any liquid fuel that is at least 85-percent methanol. They operate only on qualifying alternative fuels and are incapable of operating on gasoline or diesel (except in the extent gasoline or diesel fuel is part of a qualified mixed fuel, described below).

Certain mixed fuel vehicles, that is vehicles that use a combination of an alternative fuel and petroleum-based fuels, are eligible for a reduced credit. If the vehicle operates on a mixed fuel that is at least 75-percent alternative fuel, the vehicle is eligible for 70-percent of the credit. If the vehicle operates on a mixed fuel that is at least 90-percent alternative fuel, the vehicle is eligible for 90-percent of the credit.

The credit for the purchase of a new alternative fuel vehicle is 50-percent of the incremental cost of the vehicle, plus an additional 30-percent if the vehicle meets certain emissions standards, but not more than between $4,000 and $32,000 depending upon the weight of the vehicle. The table below shows the maximum permitted incremental cost for the purpose of calculating the credit by the applicable weight class:

These provisions apply to vehicles placed in service after December 31, 2005. See the table below for the ending date that the vehicle must be placed in service by:

See the Instructions for Form 8910 for more specific information. See IR-2006-012 and Notice 2006-9 for guidance for the process manufacturers can use to certify the amount of credit the purchaser of a hybrid or lean burn vehicle can claim. Taxpayers who purchase these vehicles can rely on the manufacturer’s certification when they claim the credit. See the October 1, 2009 revisions of this IRM for the notices and news releases issued in 2007. Also, see the following notices and news releases for more information:

Beginning with tax year 2011, taxpayers are required to report the 17 character alpha-numeric Vehicle Identification Number (VIN) for each vehicle that qualifies for the credit.

Action required:

Section 1342 of the Energy Policy Act of 2005, P.L. 109-58, provides for a 30-percent credit for the cost of installing all clean-fuel vehicle refueling property to be used in a trade or a business of the taxpayer, or installed at the principal residence of the taxpayer for property placed in service after December 31, 2005 and before January 1, 2010 (January 1, 2015 for hydrogen fuel property). Form 8911 is used to claim the credit.

Division B, Title II, section 207 of the Emergency Economic Stabilization Act of 2008, P.L. 110-343, extends the alternative fuel vehicle refueling property credit for one year for property placed in service on or before December 31, 2010.

Clean fuels are any fuels with at least 85-percent of the volume consisting of ethanol, natural gas, compressed natural gas, liquefied natural gas, liquefied petroleum gas, hydrogen, any mixture of diesel fuel, biodiesel, and kerosene containing at least 20-percent biodiesel or electricity.

For retail clean-fuel vehicle refueling property subject to an allowance for depreciation (business/investment use), the credit for all property placed in service at each location is generally the smaller of 50-percent (30-percent for hydrogen refueling property) of the qualified alternative fuel vehicle refueling property's cost or $50,000 ($200,000 for hydrogen refueling property) placed in service by the taxpayer after December 31, 2008.

For retail clean-fuel vehicle refueling property not subject to an allowance for depreciation placed in service at the taxpayer's main home (personal use property) the credit is generally the smaller of 50-percent (30-percent for hydrogen refueling property) of the property's cost or $2,000 ($1,000 for hydrogen refueling property).

Division B, section 1123, Temporary Increase in Credit for Alternative Fuel Vehicle Refueling Property, of the American Recovery and Reinvestment Act of 2009, P.L. 111-5, increases the percentage of the cost of any qualified alternative fuel vehicle refueling property not related to hydrogen that can be claimed as a credit for qualified property placed in service by the taxpayer during the taxable year, and is effective for taxable years beginning after December 31, 2008 and before January 1, 2011. The percentage is increased from 30-percent to 50-percent.

In addition, the provision also increases the maximum amount of credit that can be claimed. The maximum credit has been increased from $30,000 to $50,000 for business/investment use alternative fuel vehicle refueling property, and from $1,000 to $2,000 for other alternative fuel vehicle refueling property. The maximum credit for qualified alternative fuel vehicle refueling property related to hydrogen is increased from $30,000 to $200,000. The credit is claimed on Form 8911, Alternative Fuel Vehicle Refueling Property Credit.

On December 17, 2010, President Obama signed into law, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, P.L. 111-312. Section 711 of the act extends the alternative fuels vehicle refueling property credit for 1 year for qualified property placed in service during the taxable year, and is effective for taxable years beginning on or after December 31, 2010 and on or before December 31, 2011.

See the General Instructions for Form 8911 for more information and Notice 2007-43 for interim guidance relating to the computation of the credit and the treatment for purposes of the credit, of converted and dual-use refueling property.

Action required:

Section 1306 of the Energy Policy Act of 2005, P.L. 109-58, added IRC 45J, which allows for an income tax credit for the production and sale to an unrelated person of electricity from an advanced nuclear power facility. Generally, the credit is equal to 1.8 cents per kilowatt-hour of electricity produced and sold for the eight-year period starting when the facility is placed in service. The taxpayer must also receive an allocation of the national megawatt capacity limitation.

An advanced nuclear power facility is any nuclear facility that uses nuclear energy to produce electricity, the reactor design for which was approved after 1993 by the Nuclear Regulatory Commission and which is placed in service after August 8, 2005 and before January 1, 2021.

The 1.8 cents credit amount is reduced, but not below zero under a formula set forth in IRC 45J(c)(2).

A form number has not been assigned. See Notice 2006-40 for interim guidance on the method that will be used to allocate the national megawatt capacity limitation that limits the allowable credit, and the rules and requirements. More information will be disseminated after the form and the instructions to the form are issued.

Action required:

The subsection has been moved to IRM 21.7.4.4.8.3.1.2.

Section 1336 of the Energy Policy Act of 2005, P.L. 109-58, provides for a 30-percent credit for the purchase of qualified fuel cell power plants for businesses and a credit for qualified microturbine property.

A qualified fuel cell power plant is an integrated system composed of fuel cell stack assembly and associated balance of plant components that:

Qualified microturbine property means a stationary microturbine power plant which:

The credit is non-refundable. In the case of qualified fuel cell placed in service during the taxable year, the credit cannot exceed an amount equal to $500 for each 0.5 kilowatt of capacity of such property.

The credit applies to property placed-in-service after April 11, 2005, and before January 1, 2008. The credit is non-refundable. The credit is claimed on Form 3468, Investment Credit.

Division A, section 207 of the Tax Relief and Health Care Act of 2006, P.L. 109-432, extends the credit to property that is placed in service after December 31, 2007 and prior to January 1, 2009.

Division B, Title III, section 103(d) of the Emergency Economic Stabilization Act of 2008, P.L. 110-343, increased the credit limit for fuel cell property from $500 to $1.500 per kWh. Section 103(a)(2) extended the credit for fuel cell property for eight years through December 31, 2016, and section 103(a)(3) extended the credit for microturbine property, for eight years through December 31, 2016.

Action required:

Division A, section 405 of the Tax Relief and Health Care Act of 2006, P.L. 109-432, created tax credit, Mine Rescue Team Training Credit, Form 8923. Taxpayers may claim a credit for each qualified mine rescue team employee equal to the lesser of:

Employers which employ individuals as miners in underground mines in the United States are eligible. A qualified mine rescue team employee is any full-time employee of the taxpayer who is a miner eligible for more than six months of a taxable year to serve a mine rescue team member by either:

The provision is effective for taxable years beginning after December 31, 2005, and before January 1, 2009. Division C, Title III, section 310 of the Emergency Economic Stabilization Act of 2008, P.L. 110-343, extends the mine rescue team training credit for 1 year for taxable years beginning on January 1, 2009, and on or before December 31, 2009. Section 735 of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, P.L. 111-312, extends the mine rescue team training credit for 2 years and is effective for taxable years beginning after December 31, 2009 and on or before December 31, 2011.

Action required:

See the General Instructions for Form 8923 for more information.

Section 1332 of the Energy Policy Act of 2005, P.L. 109-58, created new IRC 45L, New Energy Efficient Home Credit. Eligible contractors use Form 8908 to claim the credit for each qualified energy efficient home sold or leased during the taxable year. The energy efficient home credit is part of the general business credit and cannot be carried back to any tax year ending before 2006.

An eligible contractor is:

A qualified new energy efficient home is:

Section 703, Empowerment Zone Tax Incentives, of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, P.L. 111-312, extends for 2 years the energy efficient home credit to any qualified new energy efficient home acquired on or before December 1, 2011.

The home is required to be certified and meet certain energy savings requirements. Construction includes substantial reconstruction and rehabilitation.

The amount of the credit is based on the energy savings requirements that are met. Generally, the credit is $2,000 for units that meet the 50-percent energy efficient standard and $1,000 for units that meet the 30-percent energy efficient standard. See the Instructions for Form 8908 for the energy savings requirements to compute the credit and for the certification requirements.

Action required:

Section 15343, of the Food, Conservation, and Energy Act of 2008 , P.L. 110-246, created IRC 45(O), Agriculture Chemicals Security Credit. The credit is part of the IRC 38 general business credit. The credit is claimed on Form 8931.

The credit is 30-percent for qualified chemical security expenditures for the taxable year of an eligible agriculture business as defined in IRC 45(O)(e). The Credit for any taxable year cannot exceed $100,000 per facility, reduced by the aggregate amount of the credit allowed for the facility in the 5 prior taxable years ($100,000 facility limitation). The amount of the credit for any taxpayer for any taxable year cannot exceed $2,000,000.

Section 45(O)(d) lists the qualified chemical security expenditures paid or incurred that qualify for the credit. The qualified chemicals security expenditures must be paid or incurred to protect specified agriculture chemicals as defined in IRC 45(O)(f).

Section 45(O) applies to amounts paid or incurred after May 22, 2008 and does not apply to any amount paid or incurred after December 31, 2012.

Action required:

Section 1334 of the Energy Policy Act of 2005, P.L. 109-58, created IRC 45M, Energy Efficient Appliance Credit. Manufacturers of qualified energy efficient appliances (dishwashers, clothes washers, and refrigerators) produced in calendar year 2006 and 2007 claim the credit on Form 8909. The energy efficient appliance credit is part of the general business credit and cannot be carried back to any tax year ending before 2006.

The number of each type of energy efficient appliance (other than refrigerators) eligible for the credit for a taxable year include only those that exceed the average amount of production from the 3 prior calendar years for each category of appliance. In the case of refrigerators, the number of each type of refrigerator eligible for the credit includes those that exceed 110-percent of the average amount of production from the 3 prior calendar years for each type of refrigerator.

The credit for energy efficient appliances produced in 2006 and 2007 is equal to the sum of the credit amounts figured separately for each type of qualified energy efficient appliances produced within the tax year.

Manufacturers may not claim credits in excess of $75 million for all taxable years. In addition, the credit allowed in a taxable year for all appliances may not exceed two percent of the average annual gross receipts of the taxpayer for the three taxable years proceeding the taxable year in which the credit is determined. The credit is part of the general business credit. For 2006 and 2007, the maximum credit allowed for Type A refrigerators is $20,000,000.

Division B, Title III, section 305 of the Emergency Economic Stabilization Act of 2008, P.L. 110-343, modified the requirements for appliances produced after 2007 and extended the credit through calendar year 2008, 2009, and 2010. For 2008 and 2009, the $75,000,000 limit does not apply to Type D clothes washers and Type D refrigerators. See the Instructions for Form 8909, for the specific appliances that qualify for the credit, the increased limit on the amount manufacturers can claim mentioned in paragraph (4) directly above, the various types of appliances in the table directly below, and other specific information. For energy efficient appliances produced in 2008, the credit is limited to the amount below per appliance.

The credit amounts above remain the same for TY 2009 except that there is no Type A credit for both clothes dryers and refrigerators.

On December 17, 2010, President Obama signed into law, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, P.L. 111-312. Section 709 of the act extends the energy efficient appliance credit for one year. Follow the chart below to determine the credit for each dishwasher manufactured in 2011 that meet the following requirements:

The credit for clothes washers manufactured in 2011 is:

The credit for refrigerators manufactured in 2011 is:

Action required:

Division B, Title I, section 115 of the Emergency Economic Stabilization Act of 2008, P.L. 110-343, created IRC 45Q for credit for carbon dioxide that is captured at a qualified facility and disposed of in secure geological storage or used as a tertiary injectant in a qualified enhanced oil or natural gas recovery project.

The credit is claimed on Form 8933. Taxpayers other than partnerships or S Corporations whose only source of this credit is from those pass-through entities are not required to file Form 8933. Instead, they report the credit directly on the Form 3800, General Business Credit.

Qualified Carbon Dioxide is carbon dioxide captured from an industrial source which:

Qualified carbon dioxide includes the initial deposit of captured carbon dioxide used as a tertiary injectant. However, it does not include carbon dioxide that is re-captured, recycled, and re-injected as part of the enhanced oil and natural gas recovery process.

A qualified facility is any industrial facility which is owned by the taxpayer, at which carbon capture equipment is placed in service, and which captures not less than 500,000 metric tons of carbon dioxide during the taxable year.

Only carbon dioxide captured and disposed of in the United States or a possession of the United States (within the meaning of IRC 638(2)), qualifies for the credit.

The Secretary, in consultation with the Administrator of the Environmental Protection Agency, shall establish regulations for determining adequate security measures for the geological storage of carbon dioxide so that the carbon dioxide does not escape into the atmosphere. The Secretary, in consultation with the Administrator of the Environmental Protection Agency, shall certify that 75,000,000 metric tons of qualified carbon dioxide have been captured and disposed of or used as a tertiary injectant.

Generally, the credit for carbon dioxide captured at a qualified facility is $20 per metric ton if disposed of in secure geological storage or $10 per metric ton if used as a tertiary injectant in a qualified enhanced oil or natural gas recovery project. The amounts are adjusted for inflation each taxable year beginning in a calendar year after 2009. The credit applies to carbon dioxide captured after the date of enactment (October 3, 2008).

Section 1131, Application of Monitoring Requirements to Carbon Dioxide Used as a Tertiary Injectant, of the American Recovery and Reinvestment Act of 2009, P.L. 111-5, amends IRC 45Q(a)(2). As a result, the carbon dioxide sequestration credit for any taxable year is an amount equal to the sum of:

The provision requires that carbon dioxide used as a tertiary injectant must be sequestered by the taxpayer in secure geological storage to qualify for the credit. It also clarified that unminable coal seams, oil and gas reservoirs and deep saline formations qualify as a secure geological storage. See the General Instructions for Form 8933 for definitions and more specific instructions.

Notice 2009-83, 2009-44 I.R.B., provides guidance on determining eligibility for the carbon dioxide sequestration credit under IRC 45Q and the amount of the credit, as well as rules regarding adequate security measures for secure geological storage of CO2. The notice also sets forth a separate reporting requirement for taxpayers claiming the IRC 45Q credit.

Notice 2011-25, 2011-14 I.R.B., modifies Notice 2009-83 by removing section 4.07 of the Notice. Section 4.07 of Notice 2009-83 provided that for purposes of IRC 45Q, qualified carbon dioxide (CO2) does not include CO2 that is captured and sequestered in a project as required under an agreement entered into in connection with the qualifying advanced coal project program of IRC 48A or the qualifying gasification project program of IRC 48B. Accordingly, qualified CO2, as defined under IRC 45Q(b)(1), does not exclude CO2 that is required to be captured and sequestered under the IRC 48A program or the IRC 48B program.

Per Notice 2010-75, 2010-48 I.R.B., the inflation adjustment factor for calendar year 2010 is 1.0118 and the amount of the credit is $20.24 and $10.12 respectively.

Per Notice 2011-50, t2011-27 I.R.B., the inflation adjustment factor for calendar year 2011 is 1.0187. The 45Q credit for calendar year 2011 is $20.37 per metric ton of qualified CO2 under IRC 45Q(a)(1) and $10.19 per metric ton of qualified CO2 under IRC 45Q(a)(2).

Action required:

Section 1141, Credit for New Qualified Plug-in Electric Drive Motor Vehicle, of the American Recovery and Reinvestment Act of 2009, P.L. 111-5, amends IRC 30D, New Qualified Plug-in Electric Drive Motor Vehicles. The bill modifies the tax credit for qualified plug-in electric drive motor vehicles acquired after December 31, 2009. The credit is part of the General Business Credit and is claimed on Form 8936, Qualified Plug-in Electric Drive Motor Vehicle Credit. Beginning with tax year 2011, taxpayers are required to report the 17 character alpha-numeric Vehicle Identification Number (VIN) for each vehicle that qualifies for the credit.

The base amount of the credit is $2,500. If the qualified vehicle draws propulsion from a battery with at least 5 kilowatt hours of capacity, the credit is increased by $417, plus another $417 for each kilowatt hour of battery capacity in excess of 5 kilowatt hours up to $5,000. Taxpayers may claim the full amount of the allowable credit for a manufacturer’s vehicles up to the end of the first calendar quarter in which the manufacturer records its 200,000th sale of a qualified plug-in electric drive motor vehicle.

The credit for a manufacturer’s qualified plug-in electric drive motor vehicles begins to reduce/phase-out after 200,000 of the manufacturer’s vehicles are sold for use in the United States. During the phase-out period, only the applicable percentage of the credit otherwise allowable will be allowed for the manufacturer’s vehicles. The phase-out period begins with the second calendar quarter following the calendar quarter which includes the date on which the number of a manufacturer’s new qualified plug-in electric drive motor vehicles, sold for use in the United States, after December 31, 2009, reaches at least 200,000. The applicable percentage is:

A new "qualified plug-in electric drive motor vehicle" is a motor vehicle which:

A "motor vehicle" is any vehicle which is manufactured primarily for use on public streets, roads and highways, has at least 4 wheels, and is not operated exclusively on a rail or rails. See the General Instructions for Form 8936 for more specific information

Notice 2009-89, 2009-48 I.R.B., sets forth a process that allows manufacturers to certify to the Internal Revenue Service that a particular vehicle meets the requirements of IRC 30D. Taxpayers purchasing such vehicles can rely on the domestic manufacturer’s (or, in the case of a foreign manufacturer, its domestic distributor’s) certification that both a particular make, model, and model year of vehicle qualifies as a plug-in electric drive motor vehicle under IRC 30D, and the amount of the credit allowable with respect to the vehicle. Notice 2009-54, 2009-26 I.R.B., and Notice 2009-58, 2009-30 I.R.B. amplified.

Action required:

Section 102, Business Credit for Retention of Certain Newly Hired Individuals in 2010, of P.L. 111-147, the Hiring Incentives to Restore Employment Act, was signed into law by the President on March 18, 2010. Under the provision, the general business credit is increased by the lesser of; $1,000, or 6.2-percent of the wages (as defined in IRC 3401(a)) paid by the taxpayer for each retained worker that satisfies a minimum employment period and is effective for tax years ending after this date.

The term “retained worker” means any "qualified individual" (see paragraph 3 below) as defined in paragraph (d)(3) of IRC 3111 or paragraph (c)(3) of IRC 3221.

Under IRC 3111(d)(3) and IRC 3221(c)(3) the term "qualified Individual" means any individual who:

Under section 102(c) of P.L. 111-147, no portion of the unused business credit under IRC 38 for any taxable year which is attributable to the increase in the current year business credit under Act section 102 may be carried to a taxable year beginning before the DOE. No increase in the credit determined under IRC 38(b) against United States income taxes for any taxable year shall be taken into account with respect to any person:

The credit is claimed on Form 5884-B, New Hire Retention Credit, December 2010 Revision. Partnerships and S corporations, report the credit amount on Schedule K; all others, report the credit amount on the applicable line of Form 3800, General Business Credit (e.g., line 1aa of the 2011 Form 3800).

See the FAQ on the IRS Web site @ www.irs.gov, questions and answers involving the credit as well as information regarding who is a "qualified individual." Also, see the General Instructions for Form 5884-B for more specific information.

IRC 6426 allows for a $.50 credit per gallon of biomass produced and used or sold as fuel. In order to claim the credit the taxpayer must be registered through the Excise Tax 637 program as an AM (Activity letters used on Form 637, Application for Registration) registrant. The paper industry has used the by-product of the paper making process to run their machinery for many years. This by-product is called black liquor and has qualified for the biomass credit.

Chief Counsel has determined that when diesel fuel is added to black liquor it may qualify under IRC 40 for a $1.01 per gallon credit for producing a cellulosic biofuel (CB). In order to qualify for the cellulosic biofuel credit the taxpayer must be registered through the Excise Tax 637 program as a CB registrant.

The Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-152) amended the definition of cellulosic biofuel, effective for fuels sold or used after December 31, 2009. Under the amendment, the cellulosic biofuel producer credit ceases to be available for fuels containing significant water, sediment, or ash content, such as black liquor. Thus, no credit is allowable under IRC 40(b)(6) for black liquor sold or used after December 31, 2009.

Taxpayers who have received a credit or payment under IRC 6426(e) and IRC 6427(e) (the $.50 excise tax credit) are not allowed to take the $1.01 income tax credit for the same gallon of fuel. Filing a claim for the $.50 excise tax credit acts as an election not to take the $1.01 income tax credit. This election, however, can be reversed by repaying the $.50 excise tax credit to the IRS before applying for the $1.01 income tax credit under IRC 40(b)(6).

In August 2010, the Excise Tax 637 program sent letters of registration as CB registrants to entities who meet the requirements. With the Form 637 CB registration, taxpayers may apply for an IRC 40(b)(6) nonrefundable income tax credit for each gallon of qualified cellulosic biofuel that the taxpayer produced in the United States and either sold or used in their trade or business, after December 31, 2008.

Once taxpayers received their Form 637 CB registration, they were instructed to:

The claimant must file for the cellulosic biofuel non-refundable credit on their income tax return, Form 1120, Form 990T, or Form 1040, as a general business credit reported on Form 3800 and Form 6478, Credit for Alcohol Used as Fuel. Taxpayers may begin claiming the credits on their 2009 income tax returns soon after receiving their letter of registration. They may also file amended 2009 returns. The non refundable IRC 40(b) (6) can be carried forward for three years but can only be claimed on the 2009 income tax return.

To allow for the proper processing of the income tax return, Centralized Excise employees must first adjust the credit allowed in 2009 for the "Black Liquor" claims and apply the returned payment that was refunded in 2009. This also includes a reversal of credit and a credit transfer that apply to Form 1120, Form 4136. See IRM 21.7.8.4.5.4.3 for more information on the repayment.

Accounts Management will route all 2009 amended Form 990-T, Form 1040, Form 1041, Form 1065, Form 1120, Form 1120-C or Form 1120S, returns to Examination as CAT-A that are reporting a credit on Line 29(c) of Form 3800 and which also reports a credit on line 7(c) and/or line 9 or a 2008 Form 6478, or with a credit reported on line 5(c) and/or line 7 of a 2009 Form 6478. Also route to Examination if the amended return indicates Cellulosic Biofuel Fuels Credit or Black Liquor. Route any original return received in AM to Submission Processing and indicate that it is a CBR return. It is imperative that this action be taken as soon as the issue is identified.

Examination will perform the needed research to determine if the refund has been repaid and will make a determination to allow, partially disallow, or disallow the claim. If the claim is allowed or partially allowed, input TC 290 $.00 with credit reference number 431 for the amount specified and send the necessary response. If the claim is disallowed, input TC 290 $.00 blocking series 98/99 and send the appropriate correspondex letter (i.e. 105C) as instructed by Examination.

Section 1421, Credit for Employee Health Insurance Expenses of Small Business, of the Patient Protection and Affordable Care Act, P. L. No. 111-148, enacted March 23, 2010, added IRC 45R to the Internal Revenue Code. IRC 45R, Employee Health Insurance Expenses of Small Business, offers a tax credit to certain eligible small employers that provide health insurance coverage to their employees.

The credit is designed to encourage small employers to offer health insurance coverage to their employees for the first time or to maintain coverage they already have. The credit is effective for taxable years beginning in 2010. Both taxable employers and employers that are organizations described in IRC 501(c) that are exempt from tax under IRC 501(a) (tax-exempt employers) may be eligible for the IRC 45R credit.

In order to qualify as an eligible small employer the employer must have:

For taxable years beginning in 2010 through 2013, the health insurance credit amount for any eligible small employer is equal to 35-percent (25-percent in the case of a tax-exempt eligible small employer) of the lesser of:

The IRC 45R credit is claimed on an eligible small employer’s annual income tax return and offsets an employer’s actual tax liability for the year. For an eligible small employer that is not a tax-exempt employer, the credit is a general business credit and, thus, any unused credit amount can be carried back one year and carried forward 20 years. However, the credit cannot be carried back to a year before the effective date of the credit. Therefore, any unused credit amounts for taxable years beginning in 2010, can only be carried forward. For a tax exempt eligible small employer, the credit is a refundable credit.

Notice 2010-44, 2010-22 I.R.B., also available on the IRS Web site, provides detailed guidelines on IRC 45R as in effect for taxable years beginning before January 1, 2014, and also includes transition relief for taxable years beginning in 2010 with respect to the requirements for a qualifying arrangement under IRC 45R. It also has more than a dozen examples to help small employers determine whether they qualify for the credit and estimate the amount of the credit. Also, see Notice 2010-82, 2010-51 I.R.B., which expands the guidance provided in Notice 2010-44 and provides guidance on additional issues relating to the small employer tax credit.

The credit phases out gradually (but not below zero) for eligible small employers if the number of FTEs exceeds 10 or if the average annual wages exceed $25,000. For an employer with both more than 10 FTEs and average annual wages exceeding $25,000, the total reduction is the sum of the two reductions. This may reduce the credit to zero for some employers with fewer than 25 FTEs and average annual wages of less than $50,000. See Notice 2010-44 2010-22 I.R.B., for specific information on figuring the phase-out credit.

See the Instructions for Form 8941 for more specific information. In addition, more information on the credit, including tax tips, guides and answers to frequently asked questions, can be found on the IRS Web site @ www.irs.gov.

Action required:

Form 2439, Notice to Shareholder of Undistributed Long-Term Capital Gains, claiming credits on IRA trusts, must be claimed by the custodian or trustee on Form 990-T. Revenue Procedure 90-18 allows custodians of multiple IRA trusts to file a composite Form 990-T to report the income (gain) and to claim the credit. See IRM 3.11.12.7, Exempt Organization Returns - Form 990-T, for additional information on composite Forms 990-T.

Action required:

Loose Forms 2439, Copies A and B are filed by the nominee if they are not the actual owner of the shares for which the form is issued. The nominee prepares Form 2439 for each involved shareholder. The shareholder's Copy A is attached to the nominee’s Copy B.

Action required:

Determine if Form 3115 is timely filed. In general, Forms 3115 filed under automatic change procedures must be filed with the taxpayer's timely filed original tax return (including extensions) for year of change on Form 3115. However:

Research IDRS

See section 6.16 of the Appendix of Rev. Proc. 2008-52, 2008-36 I.R.B., that allows certain taxpayers to change their method of accounting under the automatic consent procedures to comply with the final regulations for the additional first-year depreciation deduction under IRC 168(k) and IRC 1400L(b).

The change in method of accounting under section 6.16 of the APPENDIX of Rev. Proc. 2008-52 must be made for either the taxpayer's:

Forward to the applicable Field Director or the examining agent if the examining agent's name is on the Form 3115. Notify taxpayer their request has been forwarded to the Field Director or examining agent.

Taxpayers may use the December 2003 revision of Form 3115 if the form is filed before June 1, 2010. See Announcement 2010-32, 2010-19 I.R.B., for more information. Otherwise, close the case. Use Letter 131C, Information Insufficient or Incomplete for Processing Inquiry, to return the outdated original form to the taxpayer. Include a blank Form 3115. Instruct the taxpayer to attach the old form and a copy of the letter to the back of the new form if it is resubmitted.

Forward Forms 3115 described in IRM 21.7.4.4.15.1(5)(c) and any remittance for the user fee to:

Internal Revenue Service
Attention: CC:PA:LPD:DRU
PO Box 7604
Benjamin Franklin Station
Washington, DC 20044

Advise taxpayer their application and user fee check was forwarded to National Office.

Taxpayers may make an election to use the mark to market method of accounting under IRC 475 (e) and (f). A taxpayer that makes a section 475(e) or (f) election but fails to change its method of accounting to comply with that election, is using an impermissible method. See section 4 of Rev. Proc. 99-17, 1997-7 I.R.B.

If a mark-to-market election is made, all gains and losses from trading are reported as ordinary gains and losses in Part II of Form 4797. Sales from securities held for investment should be reported on Schedule D.

A new taxpayer makes the election by placing in its books and records no later than 2 months and 15 days after the first day of the election year, a statement that satisfies the requirements in section 5.04 of Rev. Proc. 99-17. The statement must describe the election being made, the first taxable year for which the election is effective, and, in the case of an election under IRC 475(f), the trade or business for which the election is made. To notify the Service that the election was made, the new taxpayer must attach a copy of the statement to its original federal income tax return for the election year.

Taxpayers other than new taxpayers, also make an election by attaching a statement that satisfies the requirements in section 5.04 of Rev. Proc. 99-17. The statement must be filed no later than the due date (without regard to extensions) of the original federal income tax return for the taxable year immediately preceding the election year and must be attached either to that return or, if applicable, to a request for an extension of time to file that return. The statement must describe the election being made, the first taxable year for which the election is effective, and, in the case of an election under IRC 475(f), the trade or business for which the election is made.

Attach all loose correspondence and Form 4797 regarding mark to marker election under IRC 475 (e) and (f) to the tax return which it relates, unless the account has an open TC 420 or is open on AIMS. Then forward accordingly.

The Service has provided procedures in Rev. Proc. 2003-50, 2003-29 I.R.B., for claiming the additional 30-percent first-year depreciation deduction. If a taxpayer has timely filed their federal tax return for a tax year that included September 11, 2001, and did not claim the additional first-year depreciation deduction on that return but wants to do so, the taxpayer may claim the additional first-year depreciation deduction as long as they did not make an election NOT to deduct the additional first-year depreciation deduction. If, for some reason, the statute is still open and an amended return is received for TY 2000 or TY 2001 involving the additional first-year depreciation, see the archived TY 2007 IRM 21.7.4 for procedures.