Internal Revenue Code:Sec. 50. Other special rules
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Location in Internal Revenue Code
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter A - Determination of Tax Liability
PART IV - CREDITS AGAINST TAX
Subpart E - Rules for Computing Investment Credit
Statute
Sec. 50. Other special rules
(a) Recapture in case of dispositions, etc.
Under regulations prescribed by the Secretary -
(1) Early disposition, etc.
(A) General rule
If, during any taxable year, investment credit property is
disposed of, or otherwise ceases to be investment credit
property with respect to the taxpayer, before the close of the
recapture period, then the tax under this chapter for such
taxable year shall be increased by the recapture percentage of
the aggregate decrease in the credits allowed under section 38
for all prior taxable years which would have resulted solely
from reducing to zero any credit determined under this subpart
with respect to such property.
(B) Recapture percentage
For purposes of subparagraph (A), the recapture percentage
shall be determined in accordance with the following table:
---------------------------------------------------------------------
If the property ceases to be The recapture percentage is:
investment credit property within
-
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(i) One full year after placed in 100
service
(ii) One full year after the 80
close of the period described in
clause (i)
(iii) One full year after the 60
close of the period described in
clause (ii)
(iv) One full year after the 40
close of the period described in
clause (iii)
(v) One full year after the close 20
of the period described in
clause (iv)
-------------------------------
(2) Property ceases to qualify for progress expenditures
(A) In general
If during any taxable year any building to which section
47(d) applied ceases (by reason of sale or other disposition,
cancellation or abandonment of contract, or otherwise) to be,
with respect to the taxpayer, property which, when placed in
service, will be a qualified rehabilitated building, then the
tax under this chapter for such taxable year shall be increased
by an amount equal to the aggregate decrease in the credits
allowed under section 38 for all prior taxable years which
would have resulted solely from reducing to zero the credit
determined under this subpart with respect to such building.
(B) Certain excess credit recaptured
Any amount which would have been applied as a reduction under
paragraph (2) of section 47(b) but for the fact that a
reduction under such paragraph cannot reduce the amount taken
into account under section 47(b)(1) below zero shall be treated
as an amount required to be recaptured under subparagraph (A)
for the taxable year during which the building is placed in
service.
(C) Certain sales and leasebacks
Under regulations prescribed by the Secretary, a sale by, and
leaseback to, a taxpayer who, when the property is placed in
service, will be a lessee to whom the rules referred to in
subsection (d)(5) apply shall not be treated as a cessation
described in subparagraph (A) to the extent that the amount
which will be passed through to the lessee under such rules
with respect to such property is not less than the qualified
rehabilitation expenditures properly taken into account by the
lessee under section 47(d) with respect to such property.
(D) Coordination with paragraph (1)
If, after property is placed in service, there is a
disposition or other cessation described in paragraph (1), then
paragraph (1) shall be applied as if any credit which was
allowable by reason of section 47(d) and which has not been
required to be recaptured before such disposition, cessation,
or change in use were allowable for the taxable year the
property was placed in service.
(E) Special rules
Rules similar to the rules of this paragraph shall apply in
cases where qualified progress expenditures were taken into
account under the rules referred to in section 48(b).
(3) Carrybacks and carryovers adjusted
In the case of any cessation described in paragraph (1) or (2),
the carrybacks and carryovers under section 39 shall be adjusted
by reason of such cessation.
(4) Subsection not to apply in certain cases
Paragraphs (1) and (2) shall not apply to -
(A) a transfer by reason of death, or
(B) a transaction to which section 381(a) applies.
For purposes of this subsection, property shall not be treated as
ceasing to be investment credit property with respect to the
taxpayer by reason of a mere change in the form of conducting the
trade or business so long as the property is retained in such
trade or business as investment credit property and the taxpayer
retains a substantial interest in such trade or business.
(5) Definitions and special rules
(A) Investment credit property
For purposes of this subsection, the term ''investment credit
property'' means any property eligible for a credit determined
under this subpart.
(B) Transfer between spouses or incident to divorce
In the case of any transfer described in subsection (a) of
section 1041 -
(i) the foregoing provisions of this subsection shall not
apply, and
(ii) the same tax treatment under this subsection with
respect to the transferred property shall apply to the
transferee as would have applied to the transferor.
(C) Special rule
Any increase in tax under paragraph (1) or (2) shall not be
treated as tax imposed by this chapter for purposes of
determining the amount of any credit allowable under this
chapter.
(b) Certain property not eligible
No credit shall be determined under this subpart with respect to
-
(1) Property used outside United States
(A) In general
Except as provided in subparagraph (B), no credit shall be
determined under this subpart with respect to any property
which is used predominantly outside the United States.
(B) Exceptions
Subparagraph (A) shall not apply to any property described in
section 168(g)(4).
(2) Property used for lodging
No credit shall be determined under this subpart with respect
to any property which is used predominantly to furnish lodging or
in connection with the furnishing of lodging. The preceding
sentence shall not apply to -
(A) nonlodging commercial facilities which are available to
persons not using the lodging facilities on the same basis as
they are available to persons using the lodging facilities.
(FOOTNOTE 1)
(FOOTNOTE 1) So in original. The period probably should be a
semicolon.
(B) property used by a hotel or motel in connection with the
trade or business of furnishing lodging where the predominant
portion of the accommodations is used by transients;
(C) a certified historic structure to the extent of that
portion of the basis which is attributable to qualified
rehabilitation expenditures; and
(D) any energy property.
(3) Property used by certain tax-exempt organization
No credit shall be determined under this subpart with respect
to any property used by an organization (other than a cooperative
described in section 521) which is exempt from the tax imposed by
this chapter unless such property is used predominantly in an
unrelated trade or business the income of which is subject to tax
under section 511. If the property is debt-financed property (as
defined in section 514(b)), the amount taken into account for
purposes of determining the amount of the credit under this
subpart with respect to such property shall be that percentage of
the amount (which but for this paragraph would be so taken into
account) which is the same percentage as is used under section
514(a), for the year the property is placed in service, in
computing the amount of gross income to be taken into account
during such taxable year with respect to such property. If any
qualified rehabilitated building is used by the tax-exempt
organization pursuant to a lease, this paragraph shall not apply
for purposes of determining the amount of the rehabilitation
credit.
(4) Property used by governmental units or foreign persons or
entities
(A) In general
No credit shall be determined under this subpart with respect
to any property used -
(i) by the United States, any State or political
subdivision thereof, any possession of the United States, or
any agency or instrumentality of any of the foregoing, or
(ii) by any foreign person or entity (as defined in section
168(h)(2)(C)), but only with respect to property to which
section 168(h)(2)(A)(iii) applies (determined after the
application of section 168(h)(2)(B)).
(B) Exception for short-term leases
This paragraph and paragraph (3) shall not apply to any
property by reason of use under a lease with a term of less
than 6 months (determined under section 168(i)(3)).
(C) Exception for qualified rehabilitated buildings leased to
governments, etc.
If any qualified rehabilitated building is leased to a
governmental unit (or a foreign person or entity) this
paragraph shall not apply for purposes of determining the
rehabilitation credit with respect to such building.
(D) Special rules for partnerships, etc.
For purposes of this paragraph and paragraph (3), rules
similar to the rules of paragraphs (5) and (6) of section
168(h) shall apply.
(E) Cross reference
For special rules for the application of this paragraph and
paragraph (3), see section 168(h).
(c) Basis adjustment to investment credit property
(1) In general
For purposes of this subtitle, if a credit is determined under
this subpart with respect to any property, the basis of such
property shall be reduced by the amount of the credit so
determined.
(2) Certain dispositions
If during any taxable year there is a recapture amount
determined with respect to any property the basis of which was
reduced under paragraph (1), the basis of such property
(immediately before the event resulting in such recapture) shall
be increased by an amount equal to such recapture amount. For
purposes of the preceding sentence, the term ''recapture amount''
means any increase in tax (or adjustment in carrybacks or
carryovers) determined under subsection (a).
(3) Special rule
In the case of any energy credit -
(A) only 50 percent of such credit shall be taken into
account under paragraph (1), and
(B) only 50 percent of any recapture amount attributable to
such credit shall be taken into account under paragraph (2).
(4) Recapture of reductions
(A) In general
For purposes of sections 1245 and 1250, any reduction under
this subsection shall be treated as a deduction allowed for
depreciation.
(B) Special rule for section 1250
For purposes of section 1250(b), the determination of what
would have been the depreciation adjustments under the straight
line method shall be made as if there had been no reduction
under this section.
(5) Adjustment in basis of interest in partnership or S
corporation
The adjusted basis of -
(A) a partner's interest in a partnership, and
(B) stock in an S corporation,
shall be appropriately adjusted to take into account adjustments
made under this subsection in the basis of property held by the
partnership or S corporation (as the case may be).
(d) Certain rules made applicable
For purposes of this subpart, rules similar to the rules of the
following provisions (as in effect on the day before the date of
the enactment of the Revenue Reconciliation Act of 1990) shall
apply:
(1) Section 46(e) (relating to limitations with respect to
certain persons).
(2) Section 46(f) (relating to limitation in case of certain
regulated companies).
(3) Section 46(h) (relating to special rules for cooperatives).
(4) Paragraphs (2) and (3) of section 48(b) (relating to
special rule for sale-leasebacks).
(5) Section 48(d) (relating to certain leased property).
(6) Section 48(f) (relating to estates and trusts).
(7) Section 48(r) (relating to certain 501(d) organizations).
Paragraphs (1)(A), (2)(A), and (4) of the section 46(e) referred to
in paragraph (1) of this subsection shall not apply to any taxable
year beginning after December 31, 1995.
Sources
(Added Pub. L. 101-508, title XI, Sec. 11813(a), Nov. 5, 1990, 104
Stat. 1388-546; amended Pub. L. 104-188, title I, Sec. 1616(b)(1),
1702(h)(11), 1704(t)(29), Aug. 20, 1996, 110 Stat. 1856, 1874,
1889; Pub. L. 105-206, title VI, Sec. 6004(g)(7), July 22, 1998,
112 Stat. 796.)
References in Text
REFERENCES IN TEXT
The date of the enactment of the Revenue Reconciliation Act of
1990, referred to in subsec. (d), is the date of enactment of Pub.
L. 101-508, which was approved Nov. 5, 1990.
Miscellaneous
PRIOR PROVISIONS
A prior section 50, Pub. L. 92-178, title I, Sec. 101(a), Dec.
10, 1971, 85 Stat. 498, related to restoration of credit for
investment in certain depreciable property, prior to repeal by Pub.
L. 95-600, title III, Sec. 312(c)(1), Nov. 6, 1978, 92 Stat. 2826,
applicable to taxable years ending after Dec. 31, 1978.
AMENDMENTS
2004 - Pub. L. 108-357, Sec. 322(d). Section 50(c)(3)
is amended by striking ``or reforestation credit''.
1998 - Subsec. (a)(5)(C). Pub. L. 105-206 substituted ''this
chapter'' for ''subpart A, B, D, or G''.
1996 - Subsec. (a)(2)(C). Pub. L. 104-188, Sec. 1704(t)(29),
substituted ''subsection (d)(5)'' for ''subsection (c)(4)''.
Subsec. (a)(2)(E). Pub. L. 104-188, Sec. 1702(h)(11), substituted
''48(a)(5)'' for ''48(a)(5)(A)''.
Subsec. (d). Pub. L. 104-188, Sec. 1616(b)(1), inserted closing
provisions.
EFFECTIVE DATE OF 1998 AMENDMENT
Amendment by Pub. L. 105-206 effective, except as otherwise
provided, as if included in the provisions of the Taxpayer Relief
Act of 1997, Pub. L. 105-34, to which such amendment relates, see
section 6024 of Pub. L. 105-206, set out as a note under section 1
of this title.
EFFECTIVE DATE OF 1996 AMENDMENT
Amendment by section 1616(b)(1) of Pub. L. 104-188 applicable to
taxable years beginning after Dec. 31, 1995, see section 1616(c) of
Pub. L. 104-188, set out as a note under section 593 of this title.
Amendment by section 1702(h)(11) of Pub. L. 104-188 effective,
except as otherwise expressly provided, as if included in the
provision of the Revenue Reconciliation Act of 1990, Pub. L.
101-508, title XI, to which such amendment relates, see section
1702(i) of Pub. L. 104-188, set out as a note under section 38 of
this title.
EFFECTIVE DATE
Section applicable to property placed in service after Dec. 31,
1990, but not applicable to any transition property (as defined in
section 49(e) of this title), any property with respect to which
qualified progress expenditures were previously taken into account
under section 46(d) of this title, and any property described in
section 46(b)(2)(C) of this title, as such sections were in effect
on Nov. 4, 1990, see section 11813(c) of Pub. L. 101-508, set out
as an Effective Date of 1990 Amendment note under section 29 of
this title.
SAVINGS PROVISION
For provisions that nothing in this section be construed to
affect treatment of certain transactions occurring, property
acquired, or items of income, loss, deduction, or credit taken into
account prior to Nov. 5, 1990, for purposes of determining
liability for tax for periods ending after Nov. 5, 1990, see
section 11821(b) of Pub. L. 101-508, set out as a note under
section 29 of this title.
References
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 29, 30, 47, 49, 55, 179,
179A, 196, 312, 774, 1371, 1503 of this title.
