3468 Investment Credit

3468

Investment Credit

Form
(Rev. December 2006)

Department of the Treasury
Internal Revenue Service (99)

OMB No. 1545-0155
©

Attach to your tax return. See instructions.

Attachment
Sequence No.

Name(s) shown on return

52

Identifying number

1

Rehabilitation credit (see instructions for requirements that must be met):
a Check this box if you are electing under section 47(d)(5) to take your qualified rehabilitation
expenditures into account for the tax year in which paid (or, for self-rehabilitated property,
when capitalized). See instructions. Note: This election applies to the current tax year and to
©
all later tax years. You may not revoke this election without IRS consent
b Enter the date on which the 24- or
/
/
/
/
60-month measuring period begins
and ends
c Enter the adjusted basis of the building as of the beginning date above
(or the first day of your holding period, if later)
$
d Enter the amount of the qualified rehabilitation expenditures incurred,
or treated as incurred, during the period on line 1b above
$
Enter the amount of qualified rehabilitation expenditures and multiply by the percentage shown:
$
e Pre-1936 buildings located in the Gulf Opportunity Zone
× 13% (.13)
$
f Other pre-1936 buildings
× 10% (.10)
g Certified historic structures located in the Gulf Opportunity Zone $
× 26% (.26)
$
h Other certified historic structures
× 20% (.20)
For properties identified on lines 1g or 1h, complete lines 1i and 1j
i Enter the assigned NPS project number or the pass-through entity’s
employer identification number (see instructions)
j Enter the date that the NPS approved the Request for Certification of
/
/
Completed Work (see instructions)
k Rehabilitation credit from an electing large partnership (Schedule K-1 (Form 1065-B), box 9)
2 Energy credit:
a Basis of property using geothermal energy placed in service during
2a
$
the tax year (see instructions)
× 10% (.10)
b Basis of property using solar illumination or solar energy placed in service
2b
during the tax year (see instructions) $
× 30% (.30)
Qualified fuel cell property (see instructions):
c Basis of property installed during the tax
2c
year $
× 30% (.30)
d Kilowatt capacity of property in c
2d
©
above
× $1,000
e Enter the lesser of line 2c or 2d
Qualified microturbine property (see instructions):
f Basis of property installed during the tax
2f
year $
× 10% (.10)

1k

2e

g Kilowatt capacity of property in f
2g
©
above
× $200
2h
h Enter the lesser of line 2f or 2g
i Total. Add lines 2a, 2b, 2e, and 2h
3 Qualifying advanced coal project credit (see instructions):
a Basis of qualified investment in integrated gasification combined cycle property
3a
placed in service during the tax year $
× 20% (.20)
b Basis of qualified investment in property other than in a above placed
3b
in service during the tax year © $
× 15% (.15)
c Total. Add lines 3a and 3b
4 Qualifying gasification project credit (see instructions). Basis of qualified investment in property
© $
placed in service during the tax year
× 20% (.20)
5 Credit from cooperatives. Enter the unused investment credit from cooperatives
6 Add lines 1e through 1h, 1k, 2i, 3c, 4, and 5. Report this amount on the applicable line of
Form 3800 (e.g., line 1a of the 2006 Form 3800)
For Paperwork Reduction Act Notice, see instructions.

1e
1f
1g
1h

Cat. No. 12276E

2i

3c
4
5
6
Form

3468

(Rev. 12-2006)

Form 3468 (Rev. 12-2006)

General Instructions
Section references are to the Internal Revenue Code unless
otherwise noted.

What’s New
● The tax liability limit is no longer figured on this form;
instead, it must be figured on Form 3800, General Business
Credit.
● The IRS will revise this December 2006 version of the form
only when necessary. Continue to use this version for tax
years beginning after 2005 until a new revision is issued.
● Additional time is provided for buildings in the Gulf
Opportunity (GO) Zone, Rita GO Zone, and Wilma GO Zone
to meet certain tests in order to be a qualified rehabilitated
building. For the affected areas, see Pub. 4492, Information
for Taxpayers Affected by Hurricanes Katrina, Rita, and
Wilma. For details on the relief provided, see items 2 and 3
on page 3 and Notice 2006-38, 2006-16 I.R.B. 777.

Purpose of Form
Use Form 3468 to claim the investment credit. The
investment credit consists of the rehabilitation, energy,
qualifying advanced coal project, and qualifying gasification
project credits.

Investment Credit Property
Investment credit property is any depreciable or amortizable
property that qualifies for the rehabilitation credit, energy
credit, qualifying advanced coal project credit, or qualifying
gasification project credit.
You cannot claim a credit for property that is:
● Used mainly outside the United States (except for property
described in section 168(g)(4));
● Used by a governmental unit or foreign person or entity
(except for a qualified rehabilitated building leased to that
unit, person, or entity; and property used under a lease with
a term of less than 6 months);
● Used by a tax-exempt organization (other than a section
521 farmers’ cooperative) unless the property is used mainly
in an unrelated trade or business or is a qualified
rehabilitated building leased by the organization;
● Used for lodging or in the furnishing of lodging (see section
50(b)(2) for exceptions); or
● That is energy property used in a facility that qualifies for a
credit under section 45.

Election for Certain Leased Property
If you lease property to someone else, you may elect to treat
all or part of your investment in new property as if it were
made by the person who is leasing it from you. Lessors and
lessees should see section 48(d) (as in effect on November 4,
1990) and related regulations for rules on making this
election. For limitations, see sections 46(e)(3) and 48(d) (as in
effect on November 4, 1990).

At-Risk Limit for Individuals and Closely Held
Corporations
The cost or basis of property for investment credit purposes
may be limited if you borrowed against the property and are
protected against loss, or if you borrowed money from a
person who is related or who has other than a creditor
interest in the business activity. The cost or basis must be
reduced by the amount of this “nonqualified nonrecourse”
financing related to the property as of the close of the tax
year in which the property is placed in service. If, at the close

Page

2

of a tax year following the year property was placed in
service, the nonqualified nonrecourse financing for any
property has increased or decreased, then the credit base for
the property changes accordingly. The changes may result in
an increased credit or a recapture of the credit in the year of
the change. See sections 49 and 465 for details.

Recapture of Credit
You may have to refigure the investment credit and recapture all
or a portion of it if:
● You dispose of investment credit property before the end
of 5 full years after the property was placed in service
(recapture period);
● You change the use of the property before the end of the
recapture period so that it no longer qualifies as investment
credit property;
● The business use of the property decreases before the end
of the recapture period so that it no longer qualifies (in whole
or in part) as investment credit property;
● Any building to which section 47(d) applies will no longer
be a qualified rehabilitated building when placed in service;
● Any property to which section 48(b) applies will no longer
qualify as investment credit property when placed in service;
● Before the end of the recapture period, your proportionate
interest is reduced by more than one-third in an S
corporation, partnership (other than an electing large
partnership), estate, or trust that allocated the cost or basis
of property to you for which you claimed a credit;
● You return leased property (on which you claimed a credit)
to the lessor before the end of the recapture period; or
● A net increase in the amount of nonqualified nonrecourse
financing occurs for any property to which section 49(a)(1)
applied.
Exceptions to recapture. Recapture of the investment credit
does not apply to any of the following.
● A transfer due to the death of the taxpayer.
● A transfer between spouses or incident to divorce under
section 1041. However, a later disposition by the transferee
is subject to recapture to the same extent as if the transferor
had disposed of the property at the later date.
● A transaction to which section 381(a) applies (relating to
certain acquisitions of the assets of one corporation by
another corporation).
● A mere change in the form of conducting a trade or
business if:
1. The property is retained as investment credit property in
that trade or business, and
2. The taxpayer retains a substantial interest in that trade
or business.
A mere change in the form of conducting a trade or
business includes a corporation that elects to be an S
corporation and a corporation whose S election is revoked or
terminated.
See section 46(g)(4) (as in effect on November 4,
1990) if you made a withdrawal from a capital
construction fund set up under the Merchant
CAUTION Marine Act of 1936 to pay the principal of any debt
incurred in connection with a vessel on which you claimed
investment credit.
For details, see Form 4255, Recapture of Investment
Credit.

Form 3468 (Rev. 12-2006)

Specific Instructions
Note. Do not attach this form to your tax return if you are (a)
an estate or trust whose entire qualified rehabilitation
expenditures or bases in energy property are allocated to the
beneficiaries, (b) an S corporation, or (c) a partnership (other
than an electing large partnership). However, you must
complete lines 1i and 1j of this form and attach it if you are
the owner of a certified historic structure.

Shareholders of S Corporations, Partners
of Partnerships, and Beneficiaries of
Estates and Trusts
If you are a shareholder, partner (other than a partner in an
electing large partnership), or beneficiary of the designated
pass-through entity, the entity will provide to you the
information necessary to complete the following:
● Lines 1b through 1h for the rehabilitation credit.
● The basis of energy property for lines 2a and 2b.
● The basis for energy property for lines 2c and 2f and the
kilowatt capacity for lines 2d and 2g, respectively.
● The basis of the qualifying investment in advanced coal
project property for lines 3a and 3b.
● The basis of the qualifying investment in a gasification project
property for line 4.

Lines 1a Through 1k. Rehabilitation
Credit
You are allowed a credit for qualified rehabilitation
expenditures made for any qualified rehabilitated building.
You must reduce your depreciable basis by the amount of
the credit.
If the adjusted basis of the building is determined in whole or
in part by reference to the adjusted basis of a person other than
the taxpayer, see Regulations section 1.48-12(b)(2)(viii) for
additional information that must be attached.
To be a qualified rehabilitated building, your building must
meet all five of the following requirements.
1. The building must have been placed in service (see
requirement 4) prior to 1936 unless it is a certified historic
structure. A certified historic structure is any building (a)
listed in the National Register of Historic Places, or (b)
located in a registered historic district (as defined in section
47(c)(3)(B)) and certified by the Secretary of the Interior as
being of historic significance to the district. Certification
requests are made through your State Historic Preservation
Officer on National Park Service (NPS) Form 10-168a,
Historic Preservation Certification Application. The request for
certification should be made prior to physical work beginning
on the building.
2. The building must be substantially rehabilitated. A
building is considered substantially rehabilitated if your
qualified rehabilitation expenditures during a self-selected
24-month period that ends with or within your tax year are
more than the greater of $5,000 or your adjusted basis in the
building and its structural components. Figure adjusted basis
on the first day of the 24-month period or the first day of
your holding period, whichever is later. If you are
rehabilitating the building in phases under a written
architectural plan and specifications that were completed
before the rehabilitation began, substitute “60-month period”
for “24-month period.”
If the building is in one of the designated counties or
parishes in the GO Zone, Rita GO Zone, or Wilma GO Zone,
the “24-month period” and “60-month period” is extended by
12 months. However, the rehabilitation must have begun, but
not been completed, and the building placed in service prior
to the following dates.

Page

States

3

Date

GO Zone

Florida

August 24, 2005

GO Zone

Louisiana, Mississippi,
and Alabama

August 29, 2005

Rita GO Zone

Louisiana and Texas

September 23, 2005

Wilma GO Zone

Florida

October 23, 2005

3. Depreciation must be allowable with respect to the
building. Depreciation is not allowable if the building is
permanently retired from service. If the building is damaged,
it is not considered permanently retired from service where
the taxpayer repairs and restores the building and returns it
to actual service within a reasonable period of time.
For a building damaged in the GO Zone, Rita GO Zone, or
Wilma GO Zone, that reasonable period is deemed to be up
to 36 months, subject to the following qualifications.
● The building must have been placed in service prior to the
date as given in the table above.
● The relevant 36-month period for that building starts on the
same date as given in the table above.
● Beginning no later than August 15, 2006, the taxpayer must
be engaged in the repair or restoration of building, defined as:
a. Ongoing physical repairs,
b. Written contracts in place for the repair or restoration to
be completed within the designated 36-month period, or
c. Active negotiation of contracts for the repair or
restoration to be completed within the designated 36-month
period, but only if the contracts are finalized prior to January
1, 2007.
4. The building must have been placed in service before
the beginning of rehabilitation. This requirement is met if the
building was placed in service by any person at any time
before the rehabilitation began.
5. For a building other than a certified historic structure (a)
at least 75% of the external walls must be retained with 50%
or more kept in place as external walls, and (b) at least 75%
of the existing internal structural framework of the building
must be retained in place.
To be qualified rehabilitation expenditures, your
expenditures must meet all six of the following requirements.
1. The expenditures must be for (a) nonresidential rental
property, (b) residential rental property (but only if a certified
historic structure—see Regulations section 1.48-1(h)), or (c)
real property that has a class life of more than 12 years.
2. The expenditures must be incurred in connection with
the rehabilitation of a qualified rehabilitated building.
3. The expenditures must be capitalized and depreciated
using the straight line method.
4. The expenditures cannot include the costs of acquiring or
enlarging any building.
5. If the expenditures are in connection with the
rehabilitation of a certified historic structure or a building in a
registered historic district, the rehabilitation must be certified
by the Secretary of the Interior as being consistent with the
historic character of the property or district in which the
property is located. This requirement does not apply to a
building in a registered historic district if (a) the building is not
a certified historic structure, (b) the Secretary of the Interior
certifies that the building is not of historic significance to the
district, and (c) if the certification in (b) occurs after the
rehabilitation began, the taxpayer certifies in good faith that he
or she was not aware of that certification requirement at the
time the rehabilitation began.

Form 3468 (Rev. 12-2006)

Page

6. The expenditures cannot include any costs allocable to
the part of the property that is (or may reasonably expect to
be) tax-exempt use property (as defined in section 168(h)).
For credit purposes, the expenditures are generally taken
into account for the tax year in which the qualified
rehabilitated building is placed in service. However, with
certain exceptions, you may elect to take the expenditures
into account for the tax year in which they were paid (or, for a
self-rehabilitated building, when capitalized) if (a) the normal
rehabilitation period for the building is at least 2 years, and (b)
it is reasonable to expect that the building will be a qualified
rehabilitated building when placed in service. For details, see
section 47(d). To make this election, check the box on line
1a.
The credit, as a percent of expenditures paid or incurred
during the tax year for any qualified rehabilitated building,
depends on the type of structure and its location.
Line

%

If the structure is. . .

Located. . .

1e

13

Other than a certified
historic structure

In the GO Zone

1f

10

Other than a certified
historic structure

Elsewhere than in the GO
Zone

1g
26 Certified historic structure In the GO Zone
1h
20 Certified historic structure Elsewhere than in the GO Zone
For the definition of the GO Zone, see section 1400M and Pub. 4492.

If you are claiming a credit for a certified historic structure
on line 1g or 1h, enter the assigned NPS project number on
line 1i. If the qualified rehabilitation expenditures are from an
S corporation, partnership, estate, or trust, enter on line 1i
the employer identification number of the pass-through entity
instead of the assigned NPS project number, and skip line 1j
and the instructions below.
Enter the date of the final certification of completed work
received from the Secretary of the Interior on line 1j. If the
final certification has not been received by the time the tax
return is filed for a year in which the credit is claimed, attach
a copy of the first page of NPS Form 10-168a, Historic
Preservation Certification Application (Part 2—Description of
Rehabilitation), with an indication that it was received by the
Department of the Interior or the State Historic Preservation
Officer, together with proof that the building is a certified
historic structure (or that such status has been requested).
After the final certification of completed work has been
received, file Form 3468 with the first income tax return filed
after receipt of the certification and enter the assigned NPS
project number and the date of the final certification of
completed work on the appropriate lines on the form. Also
attach an explanation, and indicate the amount of credit
claimed in prior years.
You must retain a copy of the final certification of
completed work as long as its contents may be needed for
the administration of any provision of the Internal Revenue
Code.
If the final certification is denied by the Department of
Interior, the credit is disallowed for any tax year in which it
was claimed, and you must file an amended return if
necessary. See Regulations section 1.48-12(d)(7)(ii) for
details.

Lines 2a Through 2i. Energy Credit
If energy property is financed in whole or in part by
subsidized energy financing or by tax-exempt private activity
bonds, the amount that you can claim as basis is the basis
that would otherwise be allowed multiplied by a fraction that

4

is 1 reduced by a second fraction, the numerator of which is
that portion of the basis allocable to such financing or
proceeds, and the denominator of which is the basis of the
property. For example, if the basis of the property is
$100,000 and the portion allocable to such financing or
proceeds is $20,000, the fraction of the basis that you may
claim the credit on is 4⁄ 5 (that is, 1 minus $20,000/$100,000).
Subsidized energy financing means financing provided under
a federal, state, or local program, a principal purpose of
which is to provide subsidized financing for projects
designed to conserve or produce energy.
To qualify, energy property must be constructed,
reconstructed, or erected by the taxpayer. If acquired by the
taxpayer, the original use of such property must begin with
the taxpayer. The property must meet the performance and
quality standards, if any, that have been prescribed by
regulations and are in effect at the time the property is
acquired. Energy property does not include any property that
is public utility property as defined by section 46(f)(5) (as in
effect on November 4, 1990).
You must reduce the depreciable basis by 50% of the
energy credit determined.
You also must reduce the basis of energy property by any
amount attributable to qualified rehabilitation expenditures.

Line 2a
Enter the basis of any property using geothermal energy
placed in service during the tax year. Geothermal energy
property is equipment that uses geothermal energy to
produce, distribute, or use energy derived from a geothermal
deposit (within the meaning of section 613(e)(2)). For
electricity produced by geothermal power, equipment
qualifies only up to, but not including, the electrical
transmission stage.

Line 2b
Enter the basis of any property using solar energy placed in
service during the tax year. There are two types of property.
1. Equipment that uses solar energy to illuminate the inside
of a structure using fiber-optic distributed sunlight.
2. Equipment that uses solar energy to:
● Generate electricity,
● Heat or cool (or provide hot water for use in) a structure, or
● Provide solar process heat (but not to heat a swimming
pool).

Line 2c
Enter the basis of any qualified fuel cell property placed in
service during the tax year. Qualified fuel cell property is a
fuel cell power plant that generates at least 0.5 kilowatt of
electricity using an electrochemical process and has
electricity-only generation efficiency greater than 30 percent.
See section 48(c)(1) for further details.

Line 2f
Enter the basis of any qualified microturbine property placed
in service during the tax year. Qualified microturbine property
is a stationary microturbine power plant which generates less
than 2,000 kilowatts and has an electricity-only generation
efficiency of not less than 26 percent at International
Standard Organization conditions. See section 48(c)(2) for
further details.

Lines 3a Through 3c and Line 4
The basis of property may have to be reduced for certain
financing received under rules similar to section 48(a)(4) and
described in the first paragraph under Lines 2a through 2i.
Energy Credit.

Form 3468 (Rev. 12-2006)

Qualified investment for any tax year is the basis of eligible
property placed in service by the taxpayer during the tax
year which is part of the qualifying project. Eligible property
is limited to property for which depreciation or amortization is
available and the construction, reconstruction, or erection of
which is completed by the taxpayer, or which is acquired by
the taxpayer if the original use of such property commences
with the taxpayer.

Line 3a
Enter the basis of any qualifying investment in integrated
gasification combined cycle property placed in service during
the tax year. Eligible property is any property which is part of
a qualifying advanced coal project using an integrated
gasification combined cycle and is necessary for the
gasification of coal, including any coal handling and gas
separation equipment.
A qualifying advanced coal project is a project:
● Using advanced coal-based generation technology (as
defined in section 48A(f)), and
● Part of a certified advanced coal project program (as
defined in sections 48A(d)(2) and 48A(e)).
Integrated gasification combined cycle is an electric
generation unit which produces electricity by converting coal
to synthesis gas, which in turn is used to fuel a
combined-cycle plant to produce electricity from both a
combustion turbine (including a combustion turbine/fuel cell
hybrid) and a steam turbine.

Line 3b
Enter the basis of any qualifying investment, other than in
line 3a, in an advanced coal project property service during
the tax year. Eligible property is any property which is part of
a qualifying advanced coal project (defined above) not using
an integrated gasification combined cycle.

Line 4
Enter the basis of the qualified investment in qualifying
gasification project property placed in service during the tax
year. For the purposes of this credit, eligible property
includes any property that is part of a qualifying gasification
project and necessary for the gasification technology of such
project. A qualifying gasification project is any project that:
● Employs gasification technology (as defined in section
48B(c)(2)),

Page

5

● Is carried out by an eligible entity (as defined in section
48B(c)(7), and
● The portion of the qualified investment does not exceed
$650,000,000 and is certified under section 48B(d).
A qualifying gasification project credit is not allowed for
any qualified investment for which a qualifying advanced coal
project credit is allowed.

Line 5. Credit From Section 1381(a) Cooperatives
Patrons, including cooperatives that are patrons in other
cooperatives, enter the unused investment credit allocated
from cooperatives. If you are a cooperative, see the
instructions for Form 3800, line 1a, for allocating the
investment credit to your patrons.
Paperwork Reduction Act Notice. We ask for the
information on this form to carry out the Internal Revenue
laws of the United States. You are required to give us the
information. We need it to ensure that you are complying
with these laws and to allow us to figure and collect the right
amount of tax.
You are not required to provide the information requested
on a form that is subject to the Paperwork Reduction Act
unless the form displays a valid OMB control number. Books
or records relating to a form or its instructions must be
retained as long as their contents may become material in
the administration of any Internal Revenue law. Generally, tax
returns and return information are confidential, as required by
section 6103.
The time needed to complete and file this form will vary
depending on individual circumstances. The estimated
burden for individual taxpayers filing this form is approved
under OMB control number 1545-0074 and is included in the
estimates shown in the instructions for their individual
income tax return. The estimated burden for all other
taxpayers who file this form is shown below:
Recordkeeping

13 hr., 9 min.

Learning about the
law or the form

3 hr., 34 min.

Preparing and sending
the form to the IRS

3 hr., 57 min.

If you have comments concerning the accuracy of these
time estimates or suggestions for making this form simpler,
we would be happy to hear from you. See the instructions for
the tax return with which this form is filed.