The investment tax credit is part of the General Business Credit. The investment credit is calculated on Form 3468 and is composed of the following credits:
Rehabilitation credit. This is for rehabilitation of older real estate and certified historic buildings. Taxpayers are allowed to claim a credit for the expenses incurred with renovating, restoring, or rehabilitating certain older buildings.
Business energy credit. This credit is allowed for the energy improvements made by the taxpayer. All types of property must be used in business and be depreciable. The property must be constructed, reconstructed, or erected by the taxpayer. If acquired by the taxpayer, the original use of the property must begin with the taxpayer. The property must meet performance and quality standards specified in any regulations that exist at the time the property is acquired.
Subject to certain restrictions (including credit caps), a business energy credit is allowed for 30 percent of the cost of the following types of property:
qualified fuel cell property placed in service after December 31, 2005 and before January 1, 2017,
equipment which uses solar energy to generate electricity, to heat or cool (or provide hot water for use in) a structure, or to provide solar process heat, except for property used to generate energy for the purposes of heating a swimming pool, placed in service after December 31, 2005 and before January 1, 2017,
equipment which uses solar energy to illuminate the inside of a structure using fiber-optic distributed sunlight, placed in service after December 31, 2005 and before January 1, 2017, and
qualified small wind energy property acquired and placed in service or the portion of property constructed, reconstructed, or erected after October 3, 2008 and before January 1, 2017.
An energy credit is allowed for 10 percent of the cost of the following types of property:
equipment used to produce, distribute, or use energy derived from a geothermal deposit, but only, in the case of electricity generated by geothermal power, up to (but not including) the electrical transmission stage, placed in service after December 31, 2005,
equipment which uses solar energy to generate electricity, to heat or cool (or provide hot water for use in) a structure, or to provide solar process heat, except for property used to generate energy for the purposes of heating a swimming pool, placed in service after December 31, 2016 (before this date, the property is eligible for the 30% credit),
qualified microturbine property placed in service after December 31, 2005 and before January 1, 2017,
combined heat and power system property acquired and placed in service or the portion of property constructed, reconstructed, or erected after October 3, 2008 and before January 1, 2017, and
equipment which uses the ground or ground water as a thermal energy source to heat a structure or as a thermal energy sink to cool a structure, but only with respect to property acquired and placed in service or the portion of property constructed, reconstructed, or erected after October 3, 2008 and before January 1, 2017.
Qualifying advanced coal project credit. Qualifying projects are certified by the IRS in consultation with the Department of Energy. The credit is 30% of the qualified investment in advanced coal-based generation technology projects, 20% of the qualified investment for the tax year in integrated gasification combined cycle projects, and 15% of the qualified investment for the tax year in projects that use other advanced coal-based generation technologies.
Qualifying gasification project credit. The credit is 20% of the qualified investment for the tax year. The credit amount is increased to 30% when the project includes equipment that separates and sequesters 75% of the total carbon dioxide emissions. An IRS program considers and awards certifications for qualified investment eligible for the credit to qualifying gasification project sponsors. Gasification is any process that converts a solid or liquid product from coal, petroleum residue, biomass, or other materials that are recovered for their energy or feedstock value into a synthesis gas.
For more information, see IRS Publication 334, Tax Guide for Small Business.