Claiming The Property Investment Credit with Form 3468
The federal government rewards certain types of investments with a tax credit, and if you or your business engaged in specified projects, you might be entitled to collect that reward – in the form of a tax credit, of course.
This Investment Credit can be used by eligible property owners (and in some cases, by those who lease the property from the owner) to claim five different credits for:
- Rehabilitation – This credit is available for projects that restore, preserve or upgrade certain older buildings and/or historic buildings.
- Energy – This credit can be claimed for properties used in solar, wind or geothermal energy; alternative energy; recycling; production of shale oil or certain types of natural gas; and other designated energy activities.
- Qualifying advanced coal project
- Qualifying gasification project
- Qualifying advanced energy project
Each of these credits relates to a specific type of project with its own IRS definition and set of rules. You can learn about the definitions that qualify each type of project for the credit as well as how to claim each one based on the type of tax return you are filing in the Instructions for Form 3468.
The instructions for the form also provide a full explanation of the various situations where you may not claim the credit and those in which a credit you have previously claimed must be recaptured.
Form 3468 has three sections, but most taxpayers do not need to complete all three:
- You must complete Part I to claim the credit if you lease the property from someone else and want to be treated as the property owner for the purposes of claiming the investment credit.
- You must complete Part II if you are claiming any of these project credits:
- Qualifying Advanced Coal Project Credit
- Qualifying Gasification Project Credit
- Qualifying Advanced Energy Credit
- You must complete Part III if you are claiming either the Rehabilitation Credit or the Energy Credit.
A comprehensive discussion about projects that qualify for the Advanced Coal Credit and the Advanced Gasification Credit can be found in IRS Audit Technique Guide for Sections 48A and 48B - Advanced Coal and Gasification Project Credits. For an in-depth discussion of the Qualifying Advanced Energy Project Credit, please see Internal Revenue Bulletin 2009-37 and IRS Notice 2013-12. You may also wish to review the U.S. Department of Energy’s FAQ for the advanced energy project credit.