How to File Investment Credit Form 3468

Form 3468, Investment Credit, is a tax form used by businesses and other entities to claim various investment credits. These credits incentivize specific business investments. The form consolidates several distinct credits, which are then combined as part of the general business credit, allowing taxpayers to calculate their total investment credit on one form.

The primary function of Form 3468 is to provide a standardized method for calculating these credits based on the cost of qualifying property or projects. It is a component of the broader general business credit, and taxpayers use this form to report their eligible investments and figure the amount of credit they can claim for a given tax year.

Qualifying Investments for the Credit

The energy credit is available for investments in specific renewable energy properties. This includes:

• Equipment that uses solar energy to generate electricity, to heat or cool a structure, or to provide solar process heat
• Geothermal energy property
• Qualified fuel cell property
• Combined heat and power system property
• Qualified biogas property
• Microgrid controllers
• Clean hydrogen production facilities

The rehabilitation credit applies to the costs of renovating or restoring certain older buildings. To qualify, the expenditures must be for a qualified rehabilitated building, which includes pre-1936 buildings or certified historic structures. The credit encourages the preservation and reuse of older commercial buildings and certified historic structures.

The qualifying advanced energy project credit is aimed at investments in projects that re-equip, expand, or establish a manufacturing facility for the production of specified advanced energy property. This can include property designed to produce energy from renewable sources or manage energy use. The Department of Energy must certify that the project meets certain requirements to be eligible.

The advanced manufacturing investment credit is for the manufacturing of semiconductors and semiconductor manufacturing equipment. This credit is for a qualified investment in an advanced manufacturing facility whose primary purpose is the manufacturing of semiconductors or semiconductor manufacturing equipment.

Beginning in 2025, the clean electricity investment credit is available for investments in qualifying facilities that generate clean electricity. This credit applies to facilities placed in service after December 31, 2024, that have an anticipated zero greenhouse gas emissions rate.

Information and Documentation Required

Taxpayers must gather specific information for each investment. A detailed description of the property and its physical location is a fundamental requirement. The date the property was placed in service is also required, as it determines the tax year for which the credit can be claimed.

The cost or other basis of the property is a central part of the calculation. Taxpayers need detailed records, such as invoices and proof of payment, to substantiate the basis of the qualifying property. For rehabilitated buildings, this includes a detailed accounting of all qualified rehabilitation expenditures. If the credit is passed through from a partnership or S corporation, the taxpayer will need the Schedule K-1 from that entity.

For certain credits, specific certifications are required. Claiming the rehabilitation credit for a certified historic structure requires certification from the National Park Service. The qualifying advanced energy project credit requires a certification from the Department of Energy.

A new procedural step is the mandatory pre-filing registration for taxpayers who plan to make an elective payment or transfer of certain investment credits. These taxpayers must complete this registration through the IRS online portal and receive a valid registration number for each investment before filing their tax return. This registration number must be included on Form 3468.

Calculating the Credit on Form 3468

The calculation of the investment credit is spread across multiple sections of Form 3468, with each part dedicated to a specific type of credit. A taxpayer must complete a separate Form 3468 for each property or facility. For each investment, the taxpayer fills out Part I with general information and then completes the specific part of the form that applies to that credit. For example, the energy credit is calculated in Part VI, while the rehabilitation credit is calculated in Part VII.

The process within each part begins by entering the basis of the qualified property on the appropriate line. The form then directs the taxpayer to multiply that amount by the applicable credit percentage. These percentages vary depending on the type of investment and when it was placed in service. Some credits have a base rate that can be increased if certain wage and apprenticeship requirements are met.

The result of this multiplication is the tentative credit for that specific investment. If a taxpayer is claiming multiple types of investment credits, they will perform this calculation for each one on a separate Form 3468. The individual credit amounts are then added together to arrive at the total investment credit for the tax year.

Recapture of the Investment Credit

The investment credit comes with a recapture provision, which means that if the property for which the credit was claimed is disposed of or ceases to be qualifying property before a certain period has passed, a portion of the credit may need to be paid back. The recapture period for most investment credit property is five full years from the date the property was placed in service.

The recapture is triggered by various events, including selling the property, converting it to personal use, or it being damaged or stolen. The amount of the credit that must be recaptured is calculated based on how long the property was held. The recapture amount is 20% of the original credit for each full year short of the five-year holding period. For example, if a property is disposed of after three and a half years, two full years remain in the recapture period, so 40% of the credit would be recaptured.

The calculation of the recapture amount is done on Form 4255, Recapture of Investment Credit. The recaptured amount is then added to the taxpayer’s tax liability for the year in which the recapture event occurred.

Filing Form 3468 and Claiming the Credit

Form 3468 itself is not filed as a standalone return; it must be attached to the taxpayer’s main income tax return for the year. This could be a Form 1040 for individuals, Form 1120 for corporations, or Form 1065 for partnerships.

The total investment credit calculated on Form 3468 is transferred to Form 3800, General Business Credit. Form 3800 is used to consolidate various business credits, including the investment credit, and to calculate the overall limitation on how much general business credit can be taken in a given year. The allowable general business credit from Form 3800 is then entered on the appropriate line of the taxpayer’s primary tax return to reduce their tax liability.

The completed Form 3468, along with Form 3800, becomes part of the taxpayer’s annual tax filing. It is important to keep a copy of the completed Form 3468 and all supporting documentation with the taxpayer’s tax records.