3468 Instructions for Form 3468

2016

Instructions for Form 3468

Department of the Treasury
Internal Revenue Service

Investment Credit
Section references are to the Internal Revenue Code unless
otherwise noted.

Future Developments
For the latest information about developments related to Form
3468 and its instructions, such as legislation enacted after they
were published, go to www.irs.gov/form3468.

What’s New

The increased rehabilitation credit rate lines for the Gulf
Opportunity Zone and the Midwestern disaster were removed
since those credit rates have expired.
The Protecting Americans from Tax Hikes Act of 2015 has
implemented the phasing out of the investment credit for wind
facilities. The credit for wind facilities is reduced by 20% for
facilities the construction of which begins in 2017.
The investment credit for the following energy properties are
set to expire for periods after 2016:
Solar (except property under section 48(a)(3)(A)(i)),
Geothermal,
Qualified fuel cell,
Qualified microturbine,
Combined heat and power system,
Qualified small wind, and
Geothermal heat pump.

Qualified progress expenditures for:
Self-constructed property means the amount that is properly
chargeable (during the tax year) to a capital account with respect
to that property; or
Non-self-constructed property means the lesser of: (a) the
amount paid (during the tax year) to another person for the
construction of the property, or (b) the amount that represents
the proportion of the overall cost to the taxpayer of the
construction by the other person which is properly attributable to
that portion of the construction which is completed during the tax
year.
For more information on qualified progress expenditures, see
section 46(d) (as in effect on November 4, 1990). For details on
qualified progress expenditures for the rehabilitation credit, see
section 47(d).

At-Risk Limit for Individuals and
Closely Held Corporations

General Instructions
Purpose of Form

Use Form 3468 to claim the investment credit. The investment
credit consists of the rehabilitation, energy, qualifying advanced
coal project, qualifying gasification project, and qualifying
advanced energy project credits. If you file electronically, you
must send in a paper Form 8453, U.S. Individual Income Tax
Transmittal for an IRS e-file Return, if attachments are required
to Form 3468.

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, qualifying gasification
project credit, or qualifying advanced energy project credit.
You can't 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
Certain MACRS business property to the extent it has been
expensed under section 179 of the Internal Revenue Code.
Jan 05, 2017

Qualified Progress Expenditures

Qualified progress expenditures are those expenditures made
before the property is placed in service and for which the
taxpayer has made an election to treat the expenditures as
progress expenditures. Qualified progress expenditure property
is any property that is being constructed by or for the taxpayer
and which (a) has a normal construction period of two years or
more, and (b) it is reasonable to believe that the property will be
new investment credit property in the hands of the taxpayer
when it is placed in service. The placed in service requirement
doesn't apply to qualified progress expenditures.

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 an interest (other than as a creditor) in the
business activity. The cost or basis must be reduced by the
amount of the 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 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;

Cat. No. 12277P

Any property to which section 48(b), 48A(b)(3), 48B(b)(3),
48C(b)(2), or 48D(b)(4) 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;
A net increase in the amount of nonqualified nonrecourse
financing occurs for any property to which section 49(a)(1)
applied;
A grant under section 1603 of the American Recovery and
Reinvestment Tax Act of 2009 was made for section 48 property
for which a credit was allowed for progress expenditures before
the grant was made. Recapture is applicable to those amounts
previously included in the qualified basis for an energy credit,
including progress expenditures, that are also the basis for the
1603 grant; or
A grant under section 9023 of the Patient Protection and
Affordable Care Act was made for investment for which a credit
was determined under section 48D before the grant was made.

Beneficiaries of Estates and Trusts below for information that the
entity must provide when allocating the credit.

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.
The qualified investment in qualifying advanced coal project
property for lines 5a through 5c.
The qualified investment in qualifying gasification project
property for lines 6a and 6b.
The qualified investment in qualifying advanced energy
project property for line 7.
The information for lines 11b through 11f and 11i for the
rehabilitation credit.
The basis of energy property for lines 12a, 12b, 12c, 12f, 12i,
12l, 12o, 12q, 12r, 12s, and 12t.
The kilowatt capacity for lines 12d, 12g, and 12j.
The megawatt capacity or horsepower for line 12m.
Lines 1 through 4, if the lessor has elected to treat the lessee
as having acquired the property.

Exceptions to recapture. Recapture of the investment credit
doesn't apply to any of the following.
1. A transfer due to the death of the taxpayer.
2. 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.
3. A transaction to which section 381(a) applies (relating to
certain acquisitions of the assets of one corporation by another
corporation).
4. A mere change in the form of conducting a trade or
business if:
a. The property is retained as investment credit property in
that trade or business, and
b. The taxpayer retains a substantial interest in that trade or
business.

Part I. Information Regarding the Election To
Treat the Lessee as the Purchaser of Investment
Credit Property

Generally, for purposes of eligibility for and figuring the amount
of the investment credit, a lessor of property may elect to treat
the lessee as having acquired the property. Once the election is
made, the lessee will be entitled to an investment credit for that
property for the tax year in which the property is placed in
service and the lessor will generally not be entitled to such a
credit.
If the leased property is disposed of, or otherwise ceases to
be investment credit property, the property will generally be
subject to the recapture rules for early dispositions.

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.

For information on making the election, see section 48(d) (as
in effect on November 4, 1990) and related regulations. For
limitations, see sections 46(e)(3) and 48(d) (as in effect on
November 4, 1990).

For more information, see the Instructions for Form 4255.
See section 46(g)(4) (as in effect on November 4, 1990),
and related regulations, if you made a withdrawal from a
CAUTION capital construction fund set up under the Merchant
Marine Act of 1936 to pay the principal of any debt incurred in
connection with a vessel on which you claimed investment
credit.

Line 2

!

Enter the lessor's full address. Enter the address of the lessor's
principal office or place of business. Include the suite, room, or
other unit number after the street address. If the post office
doesn't deliver mail to the street address and the lessor has a
P.O. box, show the box number instead.

Any required recapture is reported on Form 4255. For details,
see Form 4255, Recapture of Investment Credit.

Do not use the address of the registered agent for the state in
which the lessor is incorporated. For example, if a business is
incorporated in Delaware or Nevada and the lessor's principal
place of business is located in Little Rock, AR, you should enter
the Little Rock address.

Specific Instructions
Generally, (a) an estate or trust whose entire qualified
rehabilitation expenditures or bases in energy property
CAUTION are allocated to beneficiaries, (b) an S corporation, or (c)
a partnership (other than an electing large partnership) does not
have to complete and attach Form 3468 to its tax return.
However, if the estate or trust, S corporation, or partnership is
the owner of a certified historic structure, the entity must
complete lines 11g and 11h of the form and attach it to its tax
return even if the credit is not being claimed by the entity. See
Shareholders of S Corporations, Partners of Partnerships, and

If the lessor receives its mail in care of a third party (such as
an accountant or attorney), enter on the street address line “C/O”
followed by the third party's name and street address or P.O.
box.

!

Qualifying Advanced Coal Project Credit

A qualifying advanced coal project is a project that:
Uses advanced coal-based generation technology (as
defined in section 48A(f)) to power a new electric generation unit
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Instructions for Form 3468 (2016)

or to refit or repower an existing electric generation unit
(including an existing natural gas-fired combined cycle unit);
Has fuel input which, when completed, will be at least 75%
coal;
Has an electric generation unit or units at the site that will
generate at least 400 megawatts;
Has a majority of the output that is reasonably expected to be
acquired or utilized;
Is to be constructed and operated on a long-term basis when
the taxpayer provides evidence of ownership or control of a site
of sufficient size;
Will be located in the United States; and
Includes equipment that separates and sequesters at least
65% (70% in the case of an application for reallocated credits) of
the project's total carbon dioxide emissions for project
applications described in section 48A(d)(2)(A)(ii).

Line 5c
Enter the qualified investment in advanced coal-based
generation technology property placed in service during the tax
year for projects described in section 48A(d)(3)(B)(iii). Eligible
property is any certified property located in the United States
and which is part of a qualifying advanced coal project (defined
earlier) which has equipment that separates and sequesters at
least 65% of the project's total carbon dioxide emissions. This
percentage increases to 70% if the credits are later reallocated
by the IRS.
The credit will be recaptured if a project fails to attain or
maintain the carbon dioxide separation and sequestration
requirements. For details, see section 48A(i) and Notice
2011-24, 2011-14 I.R.B. 603, available at www.irs.gov/irb/
2011-14_IRB/ar08.html.

Basis. 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 a qualifying advanced coal project. Eligible
property is limited to property which can be depreciated or
amortized and which was constructed, reconstructed, or erected
and completed by the taxpayer; or which is acquired by the
taxpayer if the original use of such property commences with the
taxpayer.

Qualifying Gasification Project Credit

A qualifying gasification project is a project that:
Employs gasification technology (as defined in section 48B(c)
(2)),
Is carried out by an eligible entity (as defined in section 48B(c)
(7)), and
Includes a qualified investment of which an amount not to
exceed $650 million is certified under the qualifying gasification
program as eligible for credit.

Basis reduction for certain financing. If 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 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.

The total amount of credits that may be allocated under the
qualifying gasification project program may not exceed $600
million.
For more information on the qualifying gasification project
and the qualifying gasification program, see Notice 2009-23,
2009-16 I.R.B. 802, available at www.irs.gov/irb/2009-16_irb/
ar06.html, which is amplified by Notice 2014-81, 2014-53 I.R.B.
1001, available at www.irs.gov/irb/2014-53_IRB/ar09.html. Also,
see Notice 2011-24.
Basis reduction. If property is financed in whole or in part by
subsidized energy financing or by tax-exempt private activity
bonds, figure the credit by using the basis of such property
reduced under the rules described in Basis reduction for certain
financing, earlier.

Line 5a
Enter the qualified investment in integrated gasification
combined cycle property placed in service during the tax year for
projects described in section 48A(d)(3)(B)(i). 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.

Line 6a
Enter the qualified investment in qualifying gasification project
property (defined above) placed in service during the tax year for
which credits were allocated or reallocated after October 3,
2008, and that includes equipment that separates and
sequesters at least 75% of the project's carbon dioxide
emissions. Qualified investment is the basis of eligible property
placed in service during the tax year that is part of a qualifying
gasification project.

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.

For 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. The
IRS is required to recapture the benefit of any allocated credit if a
project fails to attain or maintain these carbon dioxide separation
and sequestration requirements. See section 48B(f) and Notice
2011-24.

Line 5b
Enter the qualified investment in advanced coal-based
generation technology property placed in service during the tax
year for projects described in section 48A(d)(3)(B)(ii). Eligible
property is any property which is part of a qualifying advanced
coal project (defined earlier) not using an integrated gasification
combined cycle.

Instructions for Form 3468 (2016)

Line 6b
Enter the qualified investment, other than line 6a, in qualifying
gasification project property (defined above) placed in service
during the tax year.

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Qualifying Advanced Energy Project Credit

Credit From Cooperatives
Line 9

To be eligible for the qualifying advanced energy project credit,
some or all of the qualified investment in the qualifying advanced
energy project must be certified by the IRS under section
48C(d). For more information on certification, see Notice
2009-72, 2009-37 I.R.B 325, available at www.irs.gov/irb/
2009-37_IRB/ar06.html.

Patrons, including cooperatives that are patrons in other
cooperatives, enter the unused investment credit from the
qualifying advanced coal project credit, qualifying gasification
project credit, or qualifying advanced energy project credit
allocated from cooperatives. If you are a cooperative, see the
Instructions for Form 3800, Part III, line 1a, for allocating the
investment credit to your patrons.

Line 7
Enter the qualified investment in qualifying advanced energy
project property placed in service during the tax year, that is part
of a qualifying advanced energy project. Qualified investment is
the basis of eligible property placed in service during the tax
year that is part of a qualifying advanced energy project.

Rehabilitation Credit

You are allowed a credit for qualified rehabilitation expenditures
made for any qualified rehabilitated building. You must reduce
your basis by the amount of the credit determined for the tax
year.

Qualifying advanced energy project means a project that
re-equips, expands, or establishes a manufacturing facility for
the production of:
Property designed to be used to produce energy from the sun,
wind, geothermal deposits (within the meaning of section 613(e)
(2)), or other renewable resources;
Fuel cells, microturbines, or an energy storage system for use
with electric or hybrid-electric motor vehicles;
Electric grids to support the transmission of intermittent
sources of renewable energy, including storage of the energy;
Property designed to capture and sequester carbon dioxide
emissions;
Property designed to refine or blend renewable fuels or to
produce energy conservation technologies (including
energy-conserving lighting technologies and smart grid
technologies);
New qualified plug-in electric drive motor vehicles (as defined
in section 30D), or components which are designed specifically
for use with those vehicles, including electric motors, generators,
and power control units; and
Other advanced energy property designed to reduce
greenhouse gas emissions.

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.

Qualified Rehabilitated Building
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 four) 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.”
3. Depreciation must be allowable with respect to the
building. Depreciation isn't allowable if the building is
permanently retired from service. If the building is damaged, it
isn't 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.
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 or internal walls, and (b) at least
75% of the existing internal structural framework of the building
must be retained in place.

A qualifying advanced energy project doesn't include any
portion of a project for the production of any property that is used
in the refining or blending of any transportation fuel (other than
renewable fuels).
Eligible property. Eligible property is property that is
necessary for the production of property described in section
48C(c)(1)(A)(i), for which depreciation or amortization is
available and is tangible personal property or other tangible
property (not including a building or its structural components),
but only if the property is used as an integral part of the
qualifying advanced energy project.
Transitional rule. Enter only the basis:
Attributable to constructed, reconstruction, or erection by the
taxpayer after February 17, 2009;
Of property acquired and placed in service after February 17,
2009; and
Only to the extent of the qualified investment (as determined
under section 46(c) and (d) as in effect on November 4, 1990)
with respect to qualified progress expenditures made after
February 17, 2009.

Line 8
When using this line to figure amounts on other tax forms or
worksheets, this line should be considered to be zero.

Qualified Rehabilitation Expenditures
To be qualified rehabilitation expenditures, your expenditures
must meet all six of the following requirements.
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Instructions for Form 3468 (2016)

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.

1. The expenditures must be for (a) nonresidential real
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 can't 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 doesn't apply to a building in a
registered historic district if (a) the building isn't a certified
historic structure, (b) the Secretary of the Interior certifies that
the building isn't 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 wasn't aware of that
certification requirement at the time the rehabilitation began.
6. The expenditures can't include any costs allocable to the
part of the property that is (or may reasonably be expected to
be) tax-exempt use property (as defined in section 168(h) except
that “50 percent” shall be substituted for “35 percent” in
paragraph (1)(B)(iii)). This exclusion doesn't apply for line 11d.

If you fail to receive final certification of completed work prior
to the date that is 30 months after the date that you filed the tax
return on which the credit was claimed, you must submit a
written statement to the IRS stating that fact before the last day
of the 30th month. You will be asked to consent to an agreement
under section 6501(c)(4) extending the period of assessment for
any tax relating to the time for which the credit was claimed.
Mail to:
Internal Revenue Service
Technical Services
31 Hopkins Plaza, Room 1108
Baltimore, MD 21201
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 the
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.

Energy Credit

To qualify as energy property, property must:
1. 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;
2. Be property for which depreciation (or amortization in lieu
of depreciation) is allowable; and
3. Be property either:
a. The construction, reconstruction, or erection of which is
completed by the taxpayer; or
b. Acquired by the taxpayer if the original use of such
property must begin with the taxpayer.

Line 11
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 11a. 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.

Energy property doesn't include any property acquired before
February 14, 2008, or to the extent of basis attributable to
construction, reconstruction, or erection before February 14,
2008, that is public utility property, as defined by section 46(f)(5)
(as in effect on November 4, 1990), and related regulations.

Line 11g
If you are claiming a credit for a certified historic structure on
line 11f, enter the assigned NPS project number on line 11g. If
the qualified rehabilitation expenditures are from an S
corporation, partnership, estate, or trust, enter on line 11g the
employer identification number of the pass-through entity
instead of the assigned NPS project number, and skip line 11h
and the instructions below.

You must reduce the basis of energy property by 50% of the
energy credit determined.
You must reduce the basis of energy property used for
figuring the credit by any amount attributable to qualified
rehabilitation expenditures.
Energy property that qualifies for a grant under section 1603
of the American Recovery and Reinvestment Tax Act of 2009
isn't eligible for the energy credit for the tax year that the grant is
made or any subsequent tax year.

Line 11h
Enter the date of the final certification of completed work
received from the Secretary of the Interior on line 11h. If the final
certification hasn't 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
Instructions for Form 3468 (2016)

Basis reduction. If energy property (acquired before January
1, 2009, or to the extent of its basis attributable to construction,
reconstruction, or erection before January 1, 2009) is financed in
whole or in part by subsidized energy financing or by tax-exempt
private activity bonds, reduce the basis of such property under
the rules described in Basis reduction for certain financing,
earlier. For property acquired after December 31, 2008, and for
basis attributable to construction, reconstruction, or erection
after December 31, 2008, there is no basis reduction for property
financed by subsidized energy financing or by tax-exempt
private activity bonds.
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Line 12a

Line 12d

Enter the basis of any property placed in service during the tax
year that uses geothermal energy. 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.

Enter the applicable number of kilowatts of capacity attributable
to the basis on line 12c.
Transitional Rule. The increase in the kilowatt limit from
$1,000 to $3,000 per kilowatt applies only to:
property (other than property for which you have elected to
treat expenditures as qualified progress expenditures) the
construction, reconstruction, or erection of which is completed
by the taxpayer after October 3, 2008, but only to the extent of
the basis thereof attributable to the construction, reconstruction,
or erection during such period;
property (other than property for which you have elected to
treat expenditures as qualified progress expenditures) acquired
and placed in service after October 3, 2008; and
property for which you have elected to treat expenditures as
qualified progress expenditures but only to the extent of the
qualified investment with respect to qualified progress
expenditures made after October 3, 2008.

Also enter the basis, attributable to periods before January 1,
2006, of property placed in service during the tax year that uses
solar energy to:
1. Generate electricity,
2. Heat or cool (or provide hot water for use in) a structure,
or
3. Provide solar process heat (but not to heat a swimming
pool).
Basis is attributable to periods before January 1, 2006, if the
property was acquired before January 1, 2006, or to the extent of
basis attributable to construction, reconstruction, or erection by
the taxpayer before January 1, 2006.

Line 12f
Enter the basis, attributable to periods after October 3, 2008, of
any qualified fuel cell property placed in service during the tax
year.

Line 12b

For a definition of qualified fuel cell property, see Line 12c
above.

Enter the basis, attributable to periods after December 31, 2005,
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.

!

!

CAUTION

This does not include any property for any period after
2016.

Basis is attributable to periods after October 3, 2008, if the
property was acquired after October 3, 2008, or to the extent of
basis attributable to construction, reconstruction, or erection by
the taxpayer after October 3, 2008.

CAUTION

or

2. Equipment that uses solar energy to:
a. Generate electricity,
b. Heat or cool (or provide hot water for use in) a structure,

Line 12g
Enter the applicable number of kilowatts of capacity attributable
to the basis on line 12f. This entry must be a whole number.

c. Provide solar process heat (but not to heat a swimming
pool).

Transitional Rule. For transitional rules, see Line 12d.

Basis is attributable to periods after December 31, 2005, if
the property was acquired after December 31, 2005, or to the
extent of basis attributable to construction, reconstruction, or
erection by the taxpayer after December 31, 2005.

Line 12i
Enter the basis, attributable to periods after December 31, 2005,
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% at International Standard Organization conditions.
See section 48(c)(2) for further details.

Line 12c
Enter the basis, attributable to periods after December 31, 2005,
and before October 4, 2008, 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%. See section 48(c)(1) for further
details.

Qualified microturbine property does not include any
property for any period after 2016.

CAUTION

Basis is attributable to periods after December 31, 2005, if
the property was acquired after December 31, 2005, or to the
extent of basis attributable to construction, reconstruction, or
erection by the taxpayer after December 31, 2005.

Basis is attributable to periods after December 31, 2005, and
before October 4, 2008, if the property was acquired after
December 31, 2005, and before October 4, 2008, or to the
extent of basis attributable to construction, reconstruction, or
erection by the taxpayer after December 31, 2005, and before
October 4, 2008.

!

Qualified fuel cell property does not include any property
for any period after 2016.

Line 12l
Enter the basis, attributable to periods after October 3, 2008, of
any qualified combined heat and power system property placed
in service during the tax year. Combined heat and power system
property is property that uses the same energy source for the
simultaneous or sequential generation of electrical power,
mechanical shaft power, or both; in combination with the

Qualified fuel cell property does not include any property
for any period after 2016.

CAUTION

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Instructions for Form 3468 (2016)

generation of steam or other forms of useful thermal energy
(including heating and cooling applications); the energy
efficiency percentage of which exceeds 60%; and it produces:
At least 20% of its total useful energy in the form of thermal
energy that isn't used to produce electrical or mechanical power
(or a combination thereof), and
At least 20% of its total useful energy in the form of electrical
or mechanical power (or a combination thereof).

Line 12q
Enter the basis, attributable to periods after December 31, 2008,
of any qualified small wind energy property placed in service
during the tax year.
For the definition of qualified small wind energy property, see
the instruction to line 12o above.
Basis is attributable to periods after December 31, 2008, if
the property was acquired after December 31, 2008, or to the
extent of basis attributable to construction, reconstruction, or
erection by the taxpayer after December 31, 2008.

For details, see section 48(c)(3).

!

Combined heat and power system property does not
include any property placed in service after 2016.

CAUTION

Line 12r

Basis is attributable to periods after October 3, 2008, if the
property was acquired after October 3, 2008, or to the extent of
basis attributable to construction, reconstruction, or erection by
the taxpayer after October 3, 2008.

Enter the basis, attributable to periods after October 3, 2008, of
any geothermal heat pump system placed in service during the
tax year. Geothermal heat pump systems constitute 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. For details, see section 48(a)(3)(A)(vii).

Energy efficiency percentage. The energy efficiency
percentage of a combined heat and power system property is
the fraction—the numerator of which is the total useful electrical,
thermal, and mechanical power produced by the system at
normal operating rates, and expected to be consumed in its
normal application, and the denominator of which is the lower
heating value of the fuel sources for the system. The energy
efficiency percentage is determined on a Btu basis.
Combined heat and power system property doesn't include
property used to transport the energy source to the facility or to
distribute energy produced by the facility.

!

CAUTION

Basis is attributable to periods after October 3, 2008, if the
property was acquired after October 3, 2008, or to the extent of
basis attributable to construction, reconstruction, or erection by
the taxpayer after October 3, 2008.

Biomass systems. Systems designed to use biomass for at
least 90% of the energy source are eligible for a credit that is
reduced in proportion to the degree to which the system fails to
meet the efficiency standard. For more information, see section
48(c)(3)(D).

Line 12s
Enter the basis of any qualified investment credit facility
property, other than wind facility property under section 45(d)(1)
the construction of which began after 2016, placed in service
during the tax year. Qualified investment credit facility property is
property that:
Is tangible personal property or other tangible property (not
including a building or its structural components), but only if the
property is used as an integral part of the qualified investment
credit facility;
Is constructed, reconstructed, erected, or acquired by the
taxpayer;
Depreciation or amortization is allowable; and
The original use begins with the taxpayer.
See section 48(a)(5) for details.

Line 12o
Enter the basis, attributable to periods after October 3, 2008,
and before January 1, 2009, of any qualified small wind energy
property placed in service during the tax year.
Qualified small wind energy property means property that
uses a qualifying small wind turbine to generate electricity. For
this purpose, a qualifying small wind turbine means a wind
turbine which has a nameplate capacity of not more than 100
kilowatts. For details, see section 48(c)(4). In addition, for small
wind energy property acquired or placed in service (in the case
of property constructed, reconstructed, or erected) after
February 2, 2015, see Notice 2015-4, 2015-5 I.R.B. 407,
available at www.irs.gov/irb/2015-5_IRB/ar09.html, as modified
by Notice 2015-51, 2015-31 I.R.B. 133, available at www.irs.gov/
irb/2015-31_IRB/ar09.html, for performance and quality
standards that small wind energy property must meet to qualify
for the energy credit.

!

A qualified investment credit facility is a facility that:
Is a qualified facility under section 45(d)(1), (2), (3), (4), (6),
(7), (9), or (11) that is placed in service after 2008 and the
construction of which begins before January 1, 2017 (before
January 1, 2020, for a qualified facility under section 45(d)(1)).
See When construction begins below;
No credit has been allowed under section 45 for that facility;
and
An irrevocable election was made to treat the facility as
energy property.

Qualified small wind energy property does not include
any property for any period after 2016.

When construction begins. Two methods can be used to
establish that construction of a qualified facility has begun.
1. Physical Work Method starts physical work of a
significant nature. For details, see section 4 of Notice 2013-29,
2013-20 I.R.B. 1085, available at www.irs.gov/irb/2013-20_IRB/
ar09.htm, as clarified and modified by section 3 of Notice
2014-46, 2014-36 I.R.B. 520, available at www.irs.gov/irb/
2014-36_IRB/ar09.html, as clarified by section 5 of Notice
2016-31, 2016-23 I.R.B. 1025, available at www.irs.gov/irb/
2016-23_IRB/ar07.html.

CAUTION

Basis is attributable to periods after October 3, 2008, and
before January 1, 2009, if the property was acquired after
October 3, 2008, and before January 1, 2009, or to the extent of
basis attributable to construction, reconstruction, or erection by
the taxpayer after October 3, 2008, and before January 1, 2009.

Line 12p
Enter the smaller of the basis you entered on line 12o or $4,000.
Instructions for Form 3468 (2016)

Geothermal heat pump systems property does not
include any property for any period after 2016.

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2. Safe Harbor Method meets the requirements provided
in section 5 of Notice 2013-29, as modified by section 5 of
Notice 2014-46 and section 6 of Notice 2016-31.

Line 12t
Enter the basis of qualified wind facility property under section
45(d)(1) the construction of which began in 2017 and was
placed in service during the tax year.

Although both methods can be used, only one method is
needed to establish that construction of a qualified facility has
begun. For more information, see Notice 2013-29, including its
successors up to Notice 2016-31.

Line 13
Patrons, including cooperatives that are patrons in other
cooperatives, enter the unused investment credit from the
rehabilitation credit or energy 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.

The election to treat a qualified facility as energy property is
made by claiming the energy credit with respect to qualified
investment credit facility property by completing Form 3468 and
attaching it to your timely filed income tax return (including
extensions) for the tax year that the property is placed in service.
You must make a separate election for each qualified facility that
is to be treated as a qualified investment credit facility. You must
also attach a statement to the Form 3468 that includes the
following information.
1. Your name, address, taxpayer identification number, and
telephone number.
2. For each qualified investment credit facility include the
following.
a. A detailed technical description of the facility, including
generating capacity.
b. A detailed technical description of the energy property
placed in service during the tax year as an integral part of the
facility, including a statement that the property is an integral part
of such facility.
c. The date that the energy property was placed in service.
d. An accounting of your basis in the energy property.
e. A depreciation schedule reflecting your remaining basis in
the energy property after the energy credit is claimed.
3. A statement that you haven't and won’t claim a grant
under section 1603 of the American Recovery and Reinvestment
Tax Act of 2009 for property for which you are claiming the
energy credit.
4. A declaration, applicable to the statement and any
accompanying documents, signed by you, or signed by a person
currently authorized to bind you in such matters, in the following
form: “Under penalties of perjury, I declare that I have examined
this statement, including accompanying documents, and to the
best of my knowledge and belief, the facts presented in support
of this statement are true, correct, and complete.”

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 and business taxpayers filing this form is approved
under OMB control number 1545-0074 and 1545-0123 and is
included in the estimates shown in the instructions for their
individual and business income tax return. The estimated burden
for all other taxpayers who file this form is shown below:
Recordkeeping . . . . . . . . . . . . . . . . . . . . . . . .

17 hr., 13 min.

Learning about the law or the form . . . . . . . . . .

6 hr., 21 min.

Preparing and sending the form to the IRS . . . . .

10 hr., 31 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.

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Instructions for Form 3468 (2016)