3468 Instructions for Form 3468

2020

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 IRS.gov/Form3468.

What’s New
The Taxpayer Certainty and Disaster Relief Tax Act of 2020
(The Act). The Act extended deadlines for certain energy
property and added a new credit for waste energy recovery
property. See Line 12z, later. Construction of waste energy
recovery property must begin before 2024. The Act also
provided special rules for offshore wind facilities. See Line 12cc,
later.
Phasing out of certain investment credits. The credit for
solar illumination and solar energy property is reduced to 26%
for property the construction of which begins in 2020, 2021, or
2022. See Line 12c, later.
The credit for qualified fuel cell property is reduced to 26% for
property the construction of which begins in 2020, 2021, or
2022. See Line 12k, later.
The credit for qualified small wind property is reduced to 26%
for property the construction of which begins in 2020, 2021, or
2022. See Line 12z, later.
Phasing out of investment credit for wind facilities. The
Taxpayer Certainty and Disaster Tax Relief Act of 2020 has
extended and reduced the investment credit by 40% for facilities
the construction of which begins in 2020 or 2021. See
Line 12gg, later.

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);

Jan 26, 2021

• 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.

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 2 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.
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

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);

Cat. No. 12277P

• 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), 48A(b)(3), 48B(b)(3), or
48C(b)(2) 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 1/3 in an S corporation,
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 (Section 1603 grants) 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
also are the basis for the Section 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 (as in effect before its repeal
on March 23, 2018) before the grant was made.

a 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 or passing through qualified
rehabilitation expenditures for a certified historic structure, the
entity must complete lines 11h and 11i 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 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, 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 11g for the rehabilitation
credit.
• The basis of energy property for lines 12a, 12b, 12c, 12d,
12e, 12h, 12k, 12n, 12q, 12t, 12w, 12y, 12z, 12aa, 12bb, 12cc,
12dd, 12ee, 12ff, and 12gg.
• The kilowatt capacity for lines 12f, 12i, 12l, 12o, and 12r.
• The megawatt capacity or horsepower for line 12u.
• Lines 1 through 4 and lines 11h and 11i, 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 generally will not be entitled to such a
credit.
If the leased property is disposed of, or otherwise ceases to
be investment credit property, the property generally will 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.

The lessor will provide the lessee with all the information
needed to complete lines 11h and 11i, if applicable.
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.

Specific Instructions
!

CAUTION

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.

Generally, (a) an estate or trust whose entire qualified
rehabilitation expenditures or bases in energy property
are allocated to beneficiaries, (b) an S corporation, or (c)
-2-

Instructions for Form 3468 (2020)

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.

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 that is part of a qualifying advanced coal
project (defined earlier) not using an integrated gasification
combined cycle.

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
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 that 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 IRS.gov/irb/
2011-14_IRB#NOT-2011-24.

Qualifying Gasification Project Credit

For more information on the new allocation round for section
48A credits, see Notice 2020-88, 2020-53 I.R.B. 1795, available
at IRS.gov/irb/2020-53_IRB#NOT-2020-88.

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. 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.

The total amount of credits that may be allocated under the
qualifying gasification project program may not exceed $600
million.

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.

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 IRS.gov/irb/
2009-16_IRB#NOT-2009-23, which is amplified by Notice
2014-81, 2014-53 I.R.B. 1001, available at IRS.gov/irb/
2014-53_IRB#NOT-2014-81. 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 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.

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.

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.

Integrated gasification combined cycle is an electric
generation unit that 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.
Instructions for Form 3468 (2020)

-3-

Line 6b

Line 8

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

Reserved for future use.

Credit From Cooperatives
Line 9

Qualifying Advanced Energy Project Credit

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.

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 IRS.gov/irb/
2009-37_IRB#NOT-2009-72 and Notice 2013-12, 2013-10
I.R.B. 543, available at IRS.gov/irb/2013-10_IRB#NOT-2013-12.

Rehabilitation Credit

Line 7

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. See Regulations section 1.47-7.

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

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.

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 that 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.

Qualified Rehabilitated Building
To be a qualified rehabilitated building, your building must meet
all five of the following requirements.
1. The building must be 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 10-168, Historic Preservation Certification Application. The
request for certification should be made prior to physical work
beginning on the building. For pre-1936 buildings under the
transition rule, see Transitional rule for amounts paid or incurred
after 2017, later.
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 under the transition rule, (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.

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 construction, 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.

-4-

Instructions for Form 3468 (2020)

period, or the 60-month period, referred to in subparagraph (b)
ends.
If you have more than one property that qualifies for the
rehabilitation credit, attach a schedule showing the type of
property (pre-1936 building or certified historic structure), NPS
number, date of final certification, and the partnership employer
identification number (EIN), if applicable. Also, indicate if the
transitional rule applies.

Qualified Rehabilitation Expenditures
To be qualified rehabilitation expenditures, your expenditures
must meet all six of the following requirements.
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 12.5 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.

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

Line 11i
Enter the date of the final certification of completed work
received from the Secretary of the Interior on line 11i. 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 10-168, 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.

Line 11
For credit purposes, the expenditures generally are 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.

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:

Transitional rule for amounts paid or incurred after 2017.
The 10% credit for pre-1936 buildings no longer applies and the
20% credit for a certified historic structure is modified generally
to allow 100% of qualified rehabilitation expenditures ratably
over a 5-year period for amounts paid or incurred after 2017. For
qualified rehabilitation expenditures paid or incurred during the
transitional period stated below, the taxpayer can claim the 10%
credit for pre-1936 buildings and the 20% credit for a certified
historic structure (under section 47(a), as in effect before
December 22, 2017). The transitional rule applies to amounts
paid or incurred as follows.
In the case of qualified rehabilitation expenditures with
respect to any building (a) owned or leased by the taxpayer
during the entirety of the period after 2017, and (b) with respect
to which the 24-month period selected by the taxpayer under
clause (i) of section 47(c)(1)(B) (as in effect after December 21,
2017), or the 60-month period applicable under clause (ii) of
such section, begins not later than 180 days after December 22,
2017, the transitional rule applies to expenditures paid or
incurred after the end of the tax year in which the 24-month
Instructions for Form 3468 (2020)

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;
-5-

For the definition of solar illumination or solar energy
property, see the instructions to line 12b, earlier.

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 commences with the taxpayer.

Line 12d
Line 12d is obsolete. See line 12c.

Line 12e

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.

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 kilowatts of electricity using an
electrochemical process and has electricity-only generation
efficiency greater than 30%. See section 48(c)(1) for further
details.

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.

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.

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.

Line 12f
Enter the applicable number of kilowatts of capacity attributable
to the basis on line 12e.

Line 12h
Enter the basis, attributable to periods after October 3, 2008,
and the construction of which began before 2020, of any
qualified fuel cell property placed in service during the tax year.

Line 12a
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.

For a definition of qualified fuel cell property, see Line 12e,
earlier. Also, see When construction begins, later.
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.

Line 12b
Enter the basis, attributable to periods after December 31, 2005,
and the construction of which began before January 1, 2020, 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:
a. Generate electricity,
b. Heat or cool (or provide hot water for use in) a structure,
or
c. Provide solar process heat (but not to heat a swimming
pool).

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

Line 12k
Enter the basis of property using qualified fuel cell energy placed
in service during the tax year and the construction of which
begins in 2020, 2021, or 2022. See When construction begins,
later.

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

Basis is attributable to periods after December 31, 2005, and
construction began before 2020, if the property was acquired by
the taxpayer or the basis is attributable to construction,
reconstruction, or erection by the taxpayer. See When
construction begins, later.

Lines 12n, 12o, and 12p
Lines 12n, 12o, and 12p are obsolete. See line 12k.

Line 12q

Line 12c

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 that generates less than 2,000

Enter the basis of property using solar illumination or solar
energy placed in service during the tax year and the construction
of which begins in 2020, 2021, or 2022.
-6-

Instructions for Form 3468 (2020)

available at IRS.gov/irb/2015-05_IRB#NOT-2015-4, as modified
by Notice 2015-51, 2015-31 I.R.B. 133, available at IRS.gov/irb/
2015-31_IRB#NOT-2015-51, for performance and quality
standards that small wind energy property must meet to qualify
for the energy credit.

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.
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 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 12t
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
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 12x
Enter the smaller of the basis you entered on line 12w or $4,000.

Line 12y
Enter the basis, attributable to periods after December 31, 2008,
and the construction of which began before 2020, 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 instructions for line 12w, earlier.
Basis is attributable to periods after December 31, 2008, and
construction began before 2020, if the property was acquired by
the taxpayer or the basis is attributable to construction,
reconstruction, or erection by the taxpayer. See When
construction begins, later.

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

Line 12z

Note. Taxpayers cannot take a credit for both combined heat
and power system property and waste energy recovery property
for the same property. Taxpayers must elect not to treat such
property as combined heat and power system property for
section 48 purposes.

Enter the basis of qualified small wind energy property and
waste energy recovery property placed in service during the tax
year and the construction of which begins in 2020, 2021, or 2022
for qualified small wind property; 2021 or 2022 for waste energy
recovery property. See When construction begins, later.

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.

For the definition of qualified small wind energy property, see
the instructions for line 12w, earlier.
Qualified waste energy recovery property means property
that generates electricity solely from heat from buildings or
equipment if the primary purpose of such building or equipment
is not the generation of electricity. The term “waste energy
recovery property” shall not include any property that has a
capacity in excess of 50 megawatts. For details, see section
48(c)(5).

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).

Note. Taxpayers cannot take a credit for both combined heat
and power system property and waste energy recovery property
for the same property. Taxpayers must elect not to treat such
property as combined heat and power system property for
section 48 purposes.

Line 12w

Note. The transitional rules of section 48(m) (as in effect on
November 4, 1990) apply to waste energy recovery property for
periods after December 31, 2020.

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.

Line 12aa

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 that 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,
Instructions for Form 3468 (2020)

Line 12aa is obsolete. See line 12z.

Line 12bb
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
that uses the ground or ground water as a thermal energy source
-7-

determined under the earlier of the Physical Work Test or the
Five Percent Safe Harbor, after December 31, 2018,
construction will be deemed to have begun on the date the
taxpayer first satisfies one of the two methods. The requirements
to begin construction may be modified in certain limited
circumstances involving significant national security concerns.
See Notice 2019-43, 2019-31 I.R.B. 487, available at
IRS.gov/irb/2019-31_IRB#NOT-2019-43, for details. Also, see
Notice 2020-41, 2020-25 I.R.B. 954, available at IRS.gov/irb/
2020-25_IRB#NOT-2020-41, on tax relief for delays caused by
COVID-19. Additionally, see Notice 2021-5 for more information
on beginning of construction requirements applied to offshore
and federal lands projects.

to heat a structure or as a thermal energy sink to cool a
structure. For details, see section 48(a)(3)(A)(vii).
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.

Line 12cc
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.

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 also
must attach a statement to 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 Section
1603 grant for new investment in the 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.”

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 began before January 1, 2022. See When
construction begins below;
• No credit has been allowed under section 45 for that facility
(see Note below); and
• An irrevocable election was made to treat the facility as
energy property.
• Is a qualified offshore wind facility the construction of which
begins before January 1, 2026. See Notice 2021-5, 2021-03
I.R.B. 479, available at IRS.gov/irb/2021-03_IRB#NOT-2021-5,
for more information on beginning of construction requirements
applied to offshore and federal land projects.
Note. The transitional rules of section 48(m) (as in effect on
November 4, 1990) apply to offshore wind facilities for periods
after December 31, 2016. Under the transitional rules of section
48(m) (as in effect on November 4, 1990), the phaseout of the
section 48 credit provided for other types of qualified investment
credit facilities at section 48(a)(5)(E), does not apply to offshore
wind facilities.
Note. If a taxpayer retrofits an energy property that previously
received a credit under section 45 by satisfying the 80/20 Rule
provided in section 7.05 of Notice 2018-59, 2018-28 I.R.B. 196,
available at IRS.gov/irb/2018-28_IRB#NOT-2018-59, the
taxpayer may claim an investment tax credit based on its
investment. However, if the energy property is within the
recapture period for the section 45 credit, the taxpayer may have
to recapture all or part of such section 45 credit accordingly.

Line 12dd
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.

When construction begins. Two methods can be used to
establish that construction of a qualified facility has begun.
1. Physical Work Test is satisfied when physical work of a
significant nature begins and other requirements provided in
section 4 of Notice 2018-59 are met.
2. Five Percent Safe Harbor is satisfied when a taxpayer
pays or incurs (within the meaning of Regulations section
1.461-1(a)(1) and (2)) five percent or more of the total cost of the
energy property and meets other requirements provided in
section 5 of Notice 2018-59.

Line 12ee
Enter the basis of qualified wind facility property under section
45(d)(1) the construction of which began in 2018 and was
placed in service during the tax year.

Line 12ff
Enter the basis of qualified wind facility property under section
45(d)(1) the construction of which began in 2019 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 energy property the construction of which begins, as
-8-

Instructions for Form 3468 (2020)

Line 12gg

Line 13

Enter the basis of qualified wind facility property under section
45(d)(1) the construction of which begins in 2020 or 2021 and
was placed in service during the tax year.

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, Part
III, 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 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

18 hr., 39 min.

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

6 hr., 21 min.

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

10 hr., 55 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.

Instructions for Form 3468 (2020)

-9-