Sec. 1.48D-6 Elective payment election.
(a) Elective payment election —
(1) In general. A taxpayer, after successfully completing the pre-filing registration requirements under paragraph (b) of this section, may make an elective payment election with respect to any section 48D credit determined with respect to such taxpayer in accordance with section 48D(d)(1) of the Internal Revenue Code (Code) and this section. A taxpayer, other than a partnership or S corporation, that makes an elective payment election in the manner provided in paragraph (c) of this section will be treated as making a payment against the Federal income taxes imposed by subtitle A of the Code (subtitle A) for the taxable year with respect to which a section 48D credit is determined equal to the amount of the section 48D credit with respect to any qualified property otherwise allowable to the taxpayer (determined without regard to section 38(c) of the Code). The payment described in section 48D(d)(1), and this paragraph (a)(1) will be treated as made on the later of the due date (determined without regard to extensions) of the return of tax imposed by subtitle A for the taxable year or the date on which such return is filed.
(2) Partnerships and S corporations. See paragraph (d) of this section for special rules regarding elective payment elections under section 48D(d) applicable to partnerships and S corporations.
(3) Irrevocable. Any election under section 48D(d)(1) and this section, once made, will be irrevocable and, except as otherwise provided, will apply with respect to any amount of section 48D credit for the taxable year for which the election is made.
(b) Pre-filing registration required.
(1) In general. Pre-filing registration by any taxpayer (including a partnership or an S corporation) in accordance with this paragraph (b) is a condition that must be successfully completed prior to making an elective payment election under section 48D(d)(1) and this section with respect to qualified property placed in service by the taxpayer as part of an advanced manufacturing facility of an eligible taxpayer. An elective payment election will not be effective with respect to the section 48D credit determined with respect to any such qualified property placed in service by any taxpayer unless the taxpayer received a valid registration number for the taxpayer's qualified investment in the advanced manufacturing facility of an eligible taxpayer in accordance with this paragraph (b) and provided the registration number for each qualified investment in each advanced manufacturing facility on its Form 3800, General Business Credit (or its successor), and on any required completed source form(s) with respect to the qualified investment, attached to the tax return in accordance with guidance. For purposes of this section, the term guidance means guidance published in the Federal Register or Internal Revenue Bulletin, as well as administrative guidance such as forms, instructions, publications, or other guidance on the IRS.gov website. See §§601.601 and 601.602 of this chapter. However, completion of the pre-filing registration requirements and receipt of a registration number does not, by itself, mean the taxpayer is eligible to receive a payment with respect to any section 48D credit determined with respect to the qualified property.
(2) Manner of registration. Unless otherwise provided in guidance, a taxpayer must complete the pre-filing registration process electronically through the IRS electronic portal and in accordance with the instructions provided therein.
(3) Members of a consolidated group. A member of a consolidated group is required to complete pre-filing registration as a condition of, and prior to, making an elective payment election. See §1.1502-77 (providing rules regarding the status of the common parent as agent for its members).
(4) Timing of pre-filing registration. A taxpayer must satisfy the pre-filing registration requirements of this paragraph (b) and receive a registration number under paragraph (b)(7) of this section prior to making any elective payment election under this section on the taxpayer's tax return for the taxable year at issue.
(5) Each qualified investment in an advanced manufacturing facility must have its own registration number. A taxpayer must obtain a registration number for each qualified investment in an advanced manufacturing facility of an eligible taxpayer with respect to which an elective payment election is made.
(6) Information required to complete the pre-filing registration process. Unless modified in future guidance, a taxpayer must provide the following information to the IRS to complete the pre-filing registration process:
(i) The taxpayer's general information, including its name, address, taxpayer identification number, and type of legal entity;
(ii) Any additional information required by the IRS electronic portal;
(iii) The taxpayer's taxable year, as determined under section 441 of the Code;
(iv) The type of annual return(s) normally filed by the taxpayer with the IRS;
(v) A list of each qualified investment in an advanced manufacturing facility that the taxpayer intends to use to determine a section 48D credit for which the taxpayer intends to make an elective payment election;
(vi) For each qualified investment in an advanced manufacturing facility listed in paragraph (b)(6)(v) of this section, any further information required by the IRS electronic portal, such as:
(A) The type of qualified investment in the advanced manufacturing facility;
(B) Physical location (that is, address and coordinates (longitude and latitude) of the advanced manufacturing facility);
(C) Supporting documentation relating to the construction, reconstruction or acquisition of the advanced manufacturing facility (such as, State and local government permits to operate the advanced manufacturing facility, certifications, and evidence of ownership that ties to the land deed, lease, or other documented right to use and access any land upon which the advanced manufacturing facility is constructed or housed);
(D) The beginning of construction date and the placed in service date of any qualified property that is part of the advanced manufacturing facility, or the date of the last progress expenditure made during the taxable year;
(E) The source of funds the taxpayer used to acquire the qualified property with respect to which the qualified investment was made; and
(F) Any other information that the taxpayer or entity believes will help the IRS evaluate the registration request;
(vii) The name of a contact person for the taxpayer. The contact person is the person whom the IRS may contact if there is an issue with the registration. The contact person must either:
(A) Possess legal authority to bind the taxpayer; or
(B) Must provide a properly executed power of attorney on Form 2848, Power of Attorney and Declaration of Representative;
(viii) A penalties of perjury statement, effective for all information submitted as a complete application, and signed by a person with personal knowledge of the relevant facts that is authorized to bind the registrant; and
(ix) Any other information the IRS deems necessary for purposes of preventing duplication, fraud, improper payments, or excessive payments under this section that is provided in guidance.
(7) Registration number.
(i) In general. The IRS will review the information provided and will issue a separate registration number for each qualified investment in an advanced manufacturing facility of an eligible taxpayer for which the taxpayer making the registration provided sufficient verifiable information.
(ii) Registration number is only valid for one year. A registration number is valid only with respect to the taxpayer that obtained the registration number under this section and only for the taxable year for which it is obtained.
(iii) Renewing registration numbers. If an elective payment election will be made with respect to any section 48D credit determined with respect to a qualified investment in an advanced manufacturing facility for a taxable year after a registration number under this section has been obtained, the taxpayer must renew the registration for that subsequent year in accordance with applicable guidance, including attesting that all the facts previously provided are still correct or updating any facts.
(iv) Amendment of previously submitted registration information if a change occurs before the registration number is used. As provided in instructions to the pre-filing registration portal, if specified changes occur with respect to a qualified investment in an advanced manufacturing facility for which a registration number has been previously obtained, a taxpayer must amend the registration (or may need to submit a new registration) to reflect these new facts. For example, if an eligible taxpayer that is the owner of an advanced manufacturing facility previously registered qualified investments in the advanced manufacturing facility or the advanced manufacturing facility, and the advanced manufacturing facility undergoes a change of ownership (incident to a corporate reorganization or an asset sale) such that the new owner has a different employer identification number (EIN) than the owner who obtained the original registration, the original owner of the advanced manufacturing facility must amend the original registration to disassociate its EIN from the advanced manufacturing facility and the new owner must submit separately an original registration (or if the new owner previously registered other qualified investments or advanced manufacturing facilities, must amend its original registration) to associate the new owner's EIN with the previously registered advanced manufacturing facility.
(v) Registration number is required to be reported on the return for the taxable year of the elective payment election. The taxpayer must include the registration number of the qualified investment in the advanced manufacturing facility on the taxpayer's return as provided in this paragraph (b) for the taxable year. The IRS will treat an elective payment election as ineffective with respect to a section 48D credit determined with respect to a qualified investment in an advanced manufacturing facility for which the taxpayer does not include a valid registration number that was assigned to that particular taxpayer during the pre-registration process on the annual return.
(c) Time and manner of election —
(1) In general. Any elective payment election under section 48D(d)(1) and this section with respect to any section 48D credit determined with respect to a taxpayer's qualified investment must —
(i) Be made on the taxpayer's original return of tax (including a superseding return) filed not later than the due date (including extensions of time) for the taxable year for which the section 48D credit is determined and the election is made in the manner prescribed by the IRS in guidance;
(ii) Include any required completed source credit form(s), a completed Form 3800, and any additional information required in instructions, including supporting calculations;
(iii) Provide on the completed Form 3800 and on any required source credit form(s) a valid registration number for the qualified investment that is placed in service as part of an advanced manufacturing facility of an eligible taxpayer;
(iv) Include a statement attesting under the penalties of perjury that —
(A) The taxpayer claiming to be an eligible taxpayer is not a foreign entity of concern within the meaning of regulations under section 48D and has not made an applicable transaction as defined under regulations under section 50 during the taxable year that the qualified property is placed in service; and
(B) The taxpayer will not claim a double benefit (within the meaning of section 48D(d)(3) and paragraphs (d)(2)(ii)(B) and (C) and (e) of this section) with respect to any elective payment election made by the taxpayer; and
(v) Be made not later than the due date (including extensions of time) for the taxable year for which the election is made, but in no event earlier than May 8, 2023.
(2) Limitations. No elective payment election may be made for the first time on an amended return, withdrawn on an amended return, or made or withdrawn by filing an administrative adjustment request under section 6227 of the Code, although a numerical error with respect to a properly claimed elective payment election may be corrected on an amended return or by filing an administrative adjustment request under section 6227 if necessary. There is no relief available under §301.9100-1 or §301.9100-3 of this chapter for an elective payment election that is not timely filed; however, relief under §301.9100-2(b) may apply.
(d) Special rules for partnerships and S corporations —
(1) In general. If a partnership or S corporation directly holds any property for which an advanced manufacturing investment credit is determined, any election under this section must be made by the partnership or S corporation. No election under section 48D(d) and this section by any partner or shareholder is allowed.
(2) Election —
(i) Time and manner of election. An elective payment election by a partnership or S corporation is made at the same time and in the same manner, and subject to the pre-filing registration and other requirements for the election to be effective, as provided in paragraphs (b) and (c) of this section.
(ii) Effect of election. If a partnership or S corporation makes an elective payment election with respect to a section 48D credit, the following rules will apply:
(A) The Internal Revenue Service will make a payment to such partnership or S corporation equal to the amount of such credit, determined in accordance with paragraph (d)(6) of this section (unless the partnership or S corporation owes a Federal tax liability, in which case the payment may be reduced by such tax liability);
(B) Before determining any partner's distributive share, or S corporation shareholder's pro rata share, of such credit, such credit is reduced to zero and is, for any other purposes under the Code, deemed to have been allowed solely to such entity (and not allocated or otherwise allowed to its partners or shareholders) for such taxable year; and
(C) Any partner's or S corporation shareholder's share of any qualified investment in an advanced manufacturing facility for which an elective payment election has been made for the taxable year, is reduced to zero for such taxable year.
(iii) Coordination with sections 705 and 1366. Any amount with respect to which the election is made is treated as tax exempt income for purposes of sections 705 and 1366 of the Code.
(iv) Partner's distributive share —
(A) In general. Except as provided in paragraphs (d)(2)(iv)(B) and (C) of this section, a partner's distributive share of such tax exempt income is equal to such partner's distributive share of its otherwise allocable basis in qualified property under regulations under section 48D that apply for purposes of allocating a partner's share of its basis in qualified property placed in service by the partnership for such taxable year.
(B) Interim rule. If a partnership meets the requirements of paragraph (d)(2)(iv)(C) of this section, a partner's distributive share of the tax exempt income resulting from a section 48D(d) elective payment election made by the partnership with respect to property held directly by the partnership, may be determined in accordance with the basic principles for partnership income allocations as described in §1.704-1(b)(1)(i) instead of in accordance with the partner's distributive share of the otherwise applicable section 48D credits as determined under §§1.704-1(b)(4)(ii) and 1.46-3(f).
(C) Partnership requirements. A partnership meets the requirements of this paragraph (d)(2)(iv)(C) if its partnership agreement is a written binding contract that was entered into after December 31, 2021, and before June 22, 2023, and it was formed for the purpose of owning and operating an advanced manufacturing facility or qualified property.
(v) S corporation shareholder's pro-rata share. An S corporation shareholder's pro rata share (as determined under section 1377(a) of the Code) of such tax exempt income is taken into account by the S corporation shareholder in the taxable year (as determined under sections 444 and 1378(b) of the Code) in which the section 48D credit is determined and is based on the shareholder's otherwise apportioned basis in qualified property under regulations under section 48D that apply for purposes of allocating an S corporation shareholder's pro-rata share of basis in qualified property placed in service by the S corporation for the taxable year.
(vi) Timing of tax exempt income. Such tax exempt income resulting from such election is treated as received or accrued, including for purposes of sections 705 and 1366of the Code, as of the date the qualified property is placed in service with respect to the partnership or S corporation.
(3) Disregarded entity ownership. In the case of a qualified property held directly by an entity disregarded as separate from a partnership or S corporation for Federal income tax purposes, such qualified property will be treated as held directly by the partnership or S corporation for purposes of making an elective payment election.
(4) Electing partnerships in tiered structures —
(i) In general. If a partnership (upper-tier partnership) is a direct or indirect partner of a partnership that makes an elective payment election (lower-tier partnership) and directly or indirectly receives an allocation of tax exempt income resulting from the elective payment election made by the lower-tier partnership, the upper-tier partnership must determine its partners' distributive shares of such tax exempt income in proportion to each partner's distributive share of its otherwise allocable basis in qualified property under regulations under section 48D that apply for purposes of allocating a partner's share of its basis in qualified property placed in service by a partnership for such taxable year [.]
(ii) Electing partnerships in tiered structures; interim rule. If a lower-tier partnership determined its partners' distributive shares of the tax exempt income described in paragraph (d)(2)(iii) of this section using the interim rule described in paragraph (d)(2)(iv)(B) of this section, an upper-tier partnership that is a direct or indirect partner in such lower-tier partnership may determine its partners' distributive shares of the tax exempt income in accordance with the basic principles for partnership income allocations as described in §1.704-1(b)(1)(i).
(5) Character of tax exempt income. Tax exempt income resulting from an elective payment election by an S corporation or a partnership is treated as arising from an investment activity and not from the conduct of a trade or business within the meaning of section 469(c)(1)(A). As such, the tax exempt income is not treated as passive income to any partners or shareholders who do not materially participate within the meaning of section 469(c)(1)(B).
(6) Determination of amount of the section 48D credit —
(i) In general. In determining the amount of the section 48D credit that will result in a payment under paragraph (d)(2)(ii)(A) of this section, the partnership or S corporation must compute the amount of the credit allowable (without regard to section 38(c)) as if an elective payment election were not made. Because a partnership or S corporation is not subject to sections 38(b) and (c) and 469 (that is, those sections apply at the partner or shareholder level), the amount of the credit determined by a partnership or S corporation is not subject to limitation by those sections. Because the section 48D credit is an investment credit under section 46, sections 49 and 50 apply to limit the amount of the credit.
(ii) Application of section 49 at-risk rules to determination of section 48D credit for partnerships and S corporations. Any amount of section 48D credit determined with respect to qualified property held directly by a partnership or S corporation must be determined by the partnership or S corporation taking into account the section 49 at-risk rules at the partner or shareholder level as of the close of the taxable year in which the qualified property is placed in service. Thus, if the credit base of a qualified property is limited to a partner or S corporation shareholder by section 49, then the amount of the section 48D credit determined by the partnership or S corporation is also limited. A partnership or S corporation that directly holds qualified property must request from each of its partners or shareholders, respectively, that is subject to section 49, the amount of such partner's or shareholder's nonqualified nonrecourse financing with respect to the qualified property as of the close of the taxable year in which the property is placed in service. Additionally, the partnership or S corporation must attach to its tax return for the taxable year in which the qualified property is placed in service, the amount of each partner's or shareholder's section 49 limitation with respect to any qualified property. Changes to at-risk amounts under section 49 for partners or S corporation shareholders after the close of the taxable year in which the qualified property is placed in service do not impact the section 48D credit determined by the partnership or S corporation, but do impact the partner(s) or S corporation shareholder(s) as provided in paragraph (d)(6)(iii) of this section.
(iii) Changes in at-risk amounts under section 49 at partner or shareholder level. A partner or shareholder in a partnership or S corporation, respectively, must apply the rules under section 49 at the partner or shareholder level if there is a change in nonqualified nonrecourse financing with respect to the partner or shareholder after the close of the taxable year in which the qualified property is placed in service and the section 48D credit is determined. If there is an increase in nonqualified nonrecourse financing to a partner, any adjustment under the rules of section 49(b) is calculated based on the partner's share of the basis (or cost) of the qualified property to which the section 48D credit was determined in accordance with regulations under section 48D that apply for purposes of allocating a partner's share of its basis in qualified property placed in service by the partnership. If there is an increase in nonqualified nonrecourse financing to a shareholder, any adjustment under the rules of section 49(b) is calculated based on the shareholder's pro rata share of the basis (or cost) of the qualified property to which the section 48D credit was determined in accordance with regulations under section 48D that apply for purposes of allocating an S corporation shareholder's pro-rata share of basis in qualified property placed in service by the S corporation. If there is a decrease in nonqualified nonrecourse financing, any increase in the credit base is taken into account by the partner or shareholder as provided under section 49, and any resulting credit is not eligible for an elective payment election under section 48D(d).
(7) Partnerships subject to subchapter C of chapter 63 of the Code. See §301.6241-7(j) of this chapter for rules applicable to payments made to partnerships subject to subchapter C of chapter 63 of the Code for a partnership taxable year.
(8) Example. P is a calendar-year partnership consisting of partners A and B, each 50 percent owners. P constructs Facility A, an advanced manufacturing facility, at V. P completes the pre-filing registration with respect to Facility A at V for 2024 in accordance with paragraph (b) of this section. In 2024, P places in service qualified property that is part of Facility A at V. P timely files its 2024 Form 1065 and properly makes the elective payment election in accordance with paragraph (c) of this section. On its Form 1065, P properly determines that the amount of section 48D credit with respect to the qualified property placed in service at Facility A for 2024 is $100,000. The IRS processes P's return and makes a $100,000 payment to P. Before determining A's and B's distributive shares, P reduces the section 48D credit to zero. However, for other purposes of the Code, the $100,000 section 48D credit is deemed to have been allowed to P for 2024. P does not qualify for the interim rule described in paragraph (d)(2)(iv)(B) of this section. The $100,000 is treated as tax exempt income for purposes of section 705, and A's and B's distributive shares of such tax exempt income is based on each partner's otherwise allocable basis in qualified property under regulations under section 48D that apply for purposes of allocating a partner's share of its basis in qualified property placed in service by the partnership for the 2024 taxable year ($50,000 each). A's and B's basis in their partnership interests and capital accounts will be appropriately adjusted to take into account basis adjustments made to the qualified property under section 50(c)(5) and §1.704-1(b)(2)(iv)(j). See paragraph (g)(2) of this section. The tax exempt income received or accrued by P as a result of the elective payment election is treated as received or accrued, including for purposes of section 705, as of date P placed in service the qualified property in 2024.
(e) Denial of double benefit —
(1) In general. In the case of a taxpayer making an election under section 48D(d) and this section with respect to any section 48D credit determined under section 48D(a) and regulations under section 48D that apply for purposes of determining the section 48D credit, such credit is reduced to zero and is, for any other purposes under the Code, deemed to have been allowed to the taxpayer for such taxable year. Paragraphs (e)(2) and (3) of this section explain the application of the section 48D(d)(3) denial of a double benefit rule to a taxpayer (other than a partnership or S corporation). The application of section 48D(d)(3) to a partnership or S corporation is provided in paragraphs (d)(2)(ii)(B) and (C) of this section.
(2) Application of the denial of double benefit rule. A taxpayer (other than a partnership or S corporation) making an elective payment election applies section 48D(d)(3) by taking the following steps:
(i) Compute the amount of the Federal income tax liability (if any) for the taxable year, without regard to the general business credit under section 38 of the Code (GBC), that is payable on the due date of the tax return (without regard to extensions), and the amount of the Federal income tax liability that may be offset by GBCs pursuant to the limitation based on the amount of tax under section 38.
(ii) Compute the allowed amount of the GBC carryforwards carried to the taxable year under section 38(a)(1) plus the amount of the current year GBCs (including the current section 48D credit) for the taxable year under section 38(a)(2) and (b). Because the election is made on an original return for the taxable year for which the section 48D credit is determined, any business credit carrybacks are not considered when determining the elective payment amount for the taxable year.
(iii) Calculate the net elective payment amount for the section 48D credit, which equals the lesser of the section 48D credit for which an elective payment election is made or the excess (if any, otherwise the excess is zero) of the total GBC credits described in paragraph (e)(2)(ii) of this section over the amount of the Federal income tax liability that may be offset by GBCs pursuant to the limitation based on amount of tax under section 38 computed in paragraph (e)(2)(i) of this section. Treat the net elective payment amount of the section 48D credit for which an elective payment election is made as a payment against the tax imposed by subtitle A for the taxable year with respect to which such credit is determined.
(iv) Excluding the net elective payment amount determined under paragraph (e)(2)(iii) of this section, but including any portion of the section 48D credit that is not part of the net elective payment amount, compute the allowed amount of GBC carryforwards carried to the taxable year plus the amount of current year GBCs allowed for the taxable year under section 38 (including, for clarity purposes, the ordering rules in section 38(d)). Apply these GBCs against the tax liability computed in paragraph (e)(2)(i) of this section.
(v) Reduce the section 48D credit for which an elective payment election is made by the net elective payment amount, as provided in paragraph (e)(2)(iii) of this section, and by the amount (if any) allowed as a GBC under section 38 for the taxable year, as provided in paragraph (e)(2)(iv) of this section, which results in the section 48D credit being reduced to zero.
(3) Use of the section 48D credit for other purposes. The full amount of the section 48D credit for which an elective payment election is made is deemed to have been allowed for all other purposes of the Code, including, but not limited to, the basis reduction and recapture rules imposed by section 50 and the calculation of tax, calculation of the amount of any underpayment of estimated tax under sections 6654 and 6655 of the Code, and the addition to tax for the failure to pay under section 6651(a)(2) of the Code (if any).
(4) Examples. The following examples illustrate the rules of this paragraph (e).
(i) Example 1. Z Corp is a calendar-year C corporation. Z Corp places in service qualified property that is part of an advanced manufacturing facility in June of 2024. Z Corp completes the pre-filing registration in accordance with this section and receives a registration number for the qualified property. Z Corp timely files (with extension) its 2024 Form 1120 on October 15, 2025, properly making the elective payment election with respect to the section 48D credit earned with respect to the qualified property in accordance with this section. On its return, Z Corp properly determines that it has $500,000 of tax imposed by subtitle A of the Code (see paragraph (e)(2)(i) of this section). For simplicity, assume the maximum amount of GBCs that can be claimed for the taxable year is $375,000. Z Corp properly determines that the amount of the section 48D credit determined with respect to the qualified property (its GBC for the taxable year) is $100,000 (see paragraph (e)(2)(ii) of this section). Under paragraph (e)(2)(iii) of this section, the net elective payment amount is $0, so the section 48D credit is considered a credit that reduces Z Corp's tax liability to $400,000 under paragraph (e)(2)(iv) of this section. Z Corp pays its $400,000 tax liability on October 15, 2025. Under paragraph (e)(2)(v) of this section, the $100,000 of section 48D credit is reduced by the $100,000 of section 48D credit claimed as GBCs for the taxable year, which results in the section 48D credit being reduced to zero. However, the $100,000 of the current year section 48D credit is deemed to have been allowed to Z Corp for 2024 for all other purposes of the Code (paragraph (e)(3) of this section). Because Z Corp paid its tax liability after the original due date for the filing of its Form 1120, Z Corp will owe a failure to pay penalty under section 6651(a)(2) and interest. Z Corp may also owe a penalty for failure to pay estimated income tax under section 6655.
(ii) Example 2. Assume the same facts as in paragraph (e)(4)(i) of this section (Example 1), except that Z Corp has $80,000 of tax imposed by subtitle A (paragraph (e)(2)(i) of this section) and calculates its limitation of GBC under section 38(c) (simplified) is $60,000 (paragraph (e)(2)(i) of this section), and Z Corp timely files its Form 1120 on April 15 instead of October 15. Under paragraph (e)(2)(iii) of this section, the net elective payment amount is $40,000 (lesser of $100,000 section 48D credit or $100,000 of total GBC credits described in paragraph (e)(2)(ii) of this section minus $60,000 of section 38(c) limitation). Under paragraph (e)(2)(iv) of this section, Z Corp uses $60,000 of its $100,000 of section 48D credit against its tax liability. Z Corp reduces the section 48D credit by the $40,000 net elective payment amount determined in paragraph (e)(2)(iii) of this section and by the $60,000 section 48D credit claimed against tax in paragraph (e)(2)(iv) of this section, resulting in the credit being reduced to zero (paragraph (e)(2)(v) of this section). When the IRS processes Z Corp's 2024 Form 1120, the net elective payment amount results in a $20,000 refund to Z Corp (after applying $20,000 of the $40,000 net elective payment amount to cover Z Corp's tax shown on the return). However, for other purposes of the Code, the $100,000 section 48D credit is deemed to have been allowed to Z Corp for 2024 (paragraph (e)(3) of this section). Even though Z Corp did not owe tax after applying the net elective payment amount against its net tax liability, Z Corp may be subject to the section 6655 penalty for failure to pay estimated income tax. The net elective payment is not an estimated tax installment, rather, it is treated as a payment made at the filing of the return.
(iii) Example 3. X Corp is a calendar-year C corporation. X Corp places in service qualified property that is part of an advanced manufacturing facility in June of 2025. X Corp completes the pre-filing registration in accordance with this section and receives a registration number for the qualified property. In 2026, X Corp timely files its 2025 return (without extension), calculating its federal income tax before GBCs of $125,000 and that its limitation of GBC under section 38(c) (simplified) is $100,000 (paragraph (e)(2)(i) of this section). X Corp attaches Form 3468 to claim a current section 48D credit of $50,000. X Corp also attaches Form 5884 to claim a current work opportunity tax credit (WOTC) of $50,000. X Corp also has business credit carryforwards of $25,000, which together with the 48D credit and WOTC results in a total of $125,000 of GBC for the taxable year (paragraph (e)(2)(ii) of this section). Under paragraph (e)(2)(iii) of this section, the net elective payment amount is $25,000. Under paragraph (e)(2)(iv) of this section, including using the ordering rules in section 38(d), X Corp is allowed $25,000 of the carryforwards, $25,000 of section 48D credit (as its section 46 investment credit) plus $50,000 of WOTC against net income tax, as defined under section 38(c)(1)(B). The $25,000 of unused section 48D credit is the net elective payment amount that results in a $25,000 payment against tax by X Corp (paragraph (e)(2)(iii) of this section). On its return, X Corp shows net tax liability of $25,000 ($125,000 - $100,000 allowed GBC) and the net elective payment of $25,000 which X Corp applied to net tax liability, resulting in zero tax owed on the return. Under paragraph (e)(2)(v) of this section, X Corp's section 48D credit is reduced by the $25,000 of the net elective payment amount, as well as by the $25,000 of section 48D credit claimed as a GBC for the taxable year, resulting in the $50,000 of section 48D credit being reduced to zero. However, for all other purposes of the Code, the $50,000 of section 48D credit is deemed to have been allowed to X Corp for 2025 (paragraph (e)(3) of this section). Even though X Corp did not owe tax after applying the net elective payment amount against its net tax liability, X Corp may be subject to the section 6655 penalty for failure to pay estimated income tax. The net elective payment is not an estimated tax installment, rather, it is treated as a payment made at the filing of the return.
(iv) Example 4. Assume the same facts as in paragraph (e)(4)(iii) of this section (Example 3), except X Corp filed the return on a timely filed extension after the due date of the return (without extensions). Even though X Corp did not owe tax after applying the net elective payment amount against its net tax liability, X Corp may be subject to the section 6651(a)(2) penalty for failure to pay tax.
(f) Excessive payment —
(1) In general. Except as provided in paragraph (f)(2) of this section, in the case of any amount treated as a payment which is made by the taxpayer under section 48D(d)(1) and paragraph (a) of this section, or any payment made pursuant to section 48D(d)(2)(A)(i)(I) and paragraph (d) of this section, with respect to any property, which amount the Commissioner determines constitutes an excessive payment as defined in paragraph (f)(3) of this section, the tax imposed on such taxpayer by chapter 1 of the Code for the taxable year in which such determination is made is increased by an amount equal to the sum of —
(i) The amount of such excessive payment; plus
(ii) An amount equal to 20 percent of such excessive payment.
(2) Reasonable cause. Paragraph (f)(1)(ii) of this section will not apply if the taxpayer demonstrates to the satisfaction of the Commissioner that the excessive payment resulted from reasonable cause.
(3) Excessive payment defined. For purposes of section 48D(d) and this paragraph (f), the term excessive payment means, with respect to any property for which an election is made under section 48D(d) and this section for any taxable year, an amount equal to the excess of —
(i) The amount treated as a payment which is made by the taxpayer pursuant to section 48D(d)(1) and paragraph (a) of this section, or any payment made by the Commissioner pursuant to section 48D(d)(2)(A)(i)(I) and paragraph (d) of this section, with respect to such property for such taxable year; over
(ii) The amount of the section 48D credit which, without application of section 48D(d) and this section, would be otherwise allowable (determined without regard to section 38(c)) under section 48D(a) and the section 48D regulations with respect to such property for such taxable year.
(4) Example. A Corp is a calendar-year C corporation. A Corp places in service qualified property that is part of Facility A, an advanced manufacturing facility in 2023. A Corp properly completes the pre-filing registration in accordance with paragraph (b) of this section and receives a registration number for the advanced manufacturing facility. A Corp timely files its 2023 Form 1120, properly providing the registration number for Facility A on Form 3800 and the relevant source credit form and otherwise complying with paragraph (c) of this section. On its return, A Corp calculates that the amount of the section 48D credit with respect to the qualified property is $100,000 and that the net elective payment amount is $100,000. A Corp receives a refund in the amount of $100,000. In 2025, the IRS determines that the amount of the section 48D credit properly allowable to A Corp in 2023 with respect to Facility A (as determined under regulations under section 48D that apply for purposes of determining the amount of the section 48D credit and without regard to the limitation based on tax in section 38(c)) was $60,000. A Corp is not able to show reasonable cause for the difference. The excessive payment amount is $40,000 ($100,000 treated as a payment - $60,000 allowable amount). In 2025, the tax imposed under chapter 1 on A Corp is increased in the amount of $48,000 ($40,000+ (20% * $40,000 = $8,000)).
(g) Basis reduction and recapture —
(1) In general. The rules in section 50(a) and (c) of the Code apply with respect to elective payments under paragraphs (a) and (d) of this section.
(2) Basis adjustment —
(i) In general. If a section 48D credit is determined with respect to property for which a taxpayer makes an election under section 48D(d)(1), then the adjusted basis of the property must be reduced by the amount of the section 48D credit determined for which the taxpayer made an election under section 48D(d)(1).
(ii) Basis adjustment by partnership or S corporation. If an advanced manufacturing investment credit is determined with respect to property for which a partnership or S corporation makes an election under section 48D(d)(1), then the adjusted basis of the property must be reduced by the amount of the advanced manufacturing investment credit determined with respect to the property held by the partnership or S corporation, for which the IRS made a payment to the partnership or S corporation pursuant to section 48D(d)(2)(A)(i)(I).
(iii) Basis adjustment of partners and S corporation shareholders. The adjusted basis of a partner's interest in a partnership, and stock in an S corporation, must be appropriately adjusted pursuant to section 50(c)(5) to take into account adjustments made under paragraph (g)(2)(ii) of this section in the basis of property held by the partnership or S corporation, as the case may be.
(3) Recapture reporting. Any reporting of recapture is made on the taxpayer's annual return in the manner prescribed by the IRS in any guidance.
(h) Applicability dates —
(1) In general. Except as provided in paragraph (h)(2) of this section, this section applies to taxable years ending on or after March 11, 2024.
(2) Prior taxable years. For taxable years ending before March 11, 2024, taxpayers may choose to apply the rules of this section to property that is placed in service after December 31, 2022, provided the taxpayers apply the rules in their entirety and in a consistent manner.
[Added by T.D. 9989, 89 FR 17596-17612, Mar. 11, 2024; corrected at 89 FR xxxx, Apr. 22, 2024.]
