Investment Credit

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2022

Instructions for Form 3468

Department of the Treasury
Internal Revenue Service

Investment Credit

DRAFT AS OF
January 5, 2023

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

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

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

•

New advanced manufacturing investment credit. The
Creating Helpful Incentives To Produce Semiconductors
(CHIPS) Act of 2022, P.L. 117-167, sec. 107, added a new
business credit equal to 25% of the investment in any facility for
the primary purpose of manufacturing of semiconductors or
semiconductor manufacturing equipment placed in service after
2022. See Advanced Manufacturing Investment Credit, later.
If properly elected, an eligible taxpayer can treat any amount
of the credit for the year as a payment of tax. See Deemed
Payment, later.

Inflation Reduction Act of 2022 (IRA 2022). IRA 2022
included several new credits effective for periods after 2022.
Fiscal year filers may claim these credits for periods in 2023. IRA
2022 authorized the following.
• Established new credits for energy storage technology,
qualified biogas property, and microgrid controllers.
• Established bonus credits for domestic content bonus
credit, energy communities, and low-income communities
for solar and wind facilities.
• Established an election to treat clean hydrogen production
facilities as energy properties.
• Established new rules regarding prevailing wage
requirements and apprenticeship requirements.
See Energy Credit and lines 12a–12hh, later, for more
information.

Purpose of Form

Use Form 3468 to claim the investment credit. The investment
credit consists of the following credits.
• Rehabilitation.
• Energy.
• Qualifying advanced coal project.
• Qualifying gasification project.
• Qualifying advanced energy project.
• Advanced manufacturing investment.
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 for Form 3468.
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, qualifying advanced energy project credit, or
advanced manufacturing investment credit.

Jan 4, 2023

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 that 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).

General Instructions

Investment Credit Property

(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 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.

For details on qualified progress expenditures for the
advanced manufacturing investment credit, see section 48D(b)
(5).

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.

Cat. No. 12277P

Recapture of Credit

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.

!

You may have to refigure the investment credit and recapture all
or a portion of it if:
• You dispose of investment credit property before the end of
5 full years after the property was placed in service
(recapture period);
• You change the use of the property before the end of the
recapture period so that it no longer qualifies as investment
credit property;
• The business use of the property decreases before the end
of the recapture period so that it no longer qualifies (in whole
or in part) as investment credit property;
• Any building to which section 47(d) applies will no longer be
a qualified rehabilitated building when placed in service;
• Any property to which section 48(b), 48A(b)(3), 48B(b)(3),
48C(b)(2), 48D(b)(5), or 48E(e) 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 grant) 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
Section 1603 grant;
• 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; or
• A grant under section 9908 of CHIPS and recapture for
applicable transaction (10-year period).

Any required recapture is reported on Form 4255. For details,
see Form 4255.

DRAFT AS OF
January 5, 2023
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 doesn’t 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 or
advanced energy project property for lines 6a and 6b.
• The information for lines 7 and 10 for the advanced
manufacturing investment credit and the amount of the
deemed payment (if elected).
• The information for lines 11b through 11g for the
rehabilitation credit.
• The basis of energy property for lines 12a, 12b, 12c, 12e,
12h, 12k, 12q, 12t, 12w, 12y, 12z, 12bb,12cc, and 12dd.
• The kilowatt capacity for lines 12f, 12i, 12l, 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.

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

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

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.

b. The taxpayer retains a substantial interest in that trade
or business.
A mere change in the form of conducting a trade or business
includes a corporation that elects to be an S corporation and a
corporation whose S election is revoked or terminated.

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.

For more information, see the Instructions for Form 4255,
Recapture of Investment Credit.

The lessor will provide the lessee with all the information
needed to complete lines 11h and 11i, if applicable.
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Instructions for Form 3468 (2022)

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 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).

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.

DRAFT AS OF
January 5, 2023
Line 5a

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.

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 that 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.

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.

Part II—Qualifying Advanced Coal
Project Credit, Qualifying Gasification
Project Credit, Qualifying Advanced
Energy Project Credit, and Advanced
Manufacturing Investment Credit

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.

Line 5b

Qualifying Advanced Coal Project Credit

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.

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 that, 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) that 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.

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.
Basis. Qualified investment for any tax year is the basis of
eligible property placed in service by the taxpayer during the tax
year that is part of a qualifying advanced coal project. Eligible
property is limited to property that can be depreciated or
amortized and that was constructed, reconstructed, or erected
and completed by the taxpayer; or that is acquired by the
taxpayer if the original use of such property commences with the
taxpayer.

Qualifying Gasification or Advanced Energy
Project Credits
Qualifying gasification project. 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
Instructions for Form 3468 (2022)

-3-

• Only to the extent of the qualified investment (as determined

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

under section 46(c) and (d) as in effect on November 4,
1990) with respect to qualified progress expenditures made
after February 17, 2009.

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,
2011-14 I.R.B. 603, available at IRS.gov/irb/
2011-14_IRS#NOT-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
If you’re claiming the qualified gasification project property
(defined in Qualifying gasification project, earlier), enter the
qualified investment in qualifying gasification project property
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.

DRAFT AS OF
January 5, 2023

Qualifying advanced energy project. 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.
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.

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
IRS.gov/irb/2011-14_IRB#NOT-2011-24.
If you’re claiming the qualifying advanced energy property
(defined in Qualifying advanced energy project, earlier), 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 you’re claiming both the qualifying gasification project
property and the qualifying advanced energy project property,
add the qualified investment property for both and enter that
amount on the dashed entry line before 6a.

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

Advanced Manufacturing Investment Credit

The advanced manufacturing investment credit is equal to 25%
of the qualified investment in any advanced manufacturing
facility for an eligible taxpayer for the tax year.

The credit for 2-wheeled plug-in electric vehicles expired
on December 31, 2021. Unless new legislation is
CAUTION passed, it's no longer eligible for a qualified plug-in
electric drive motor vehicle credit.

Qualified investment. The qualified investment for any
advanced manufacturing facility is the basis of any qualified
property placed in service by the taxpayer during the tax year
and after 2022 that is part of an advanced manufacturing facility.

!

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

Advanced manufacturing facility. Advanced manufacturing
facility means a facility whose primary purpose is the
manufacturing of semiconductors or semiconductor
manufacturing equipment.
Eligible taxpayer. An eligible taxpayer is a taxpayer who isn't a
foreign entity of concern (as defined in section 9901(6) of P. L.
116-283), and hasn't made an applicable transaction (as defined
in section 50(a)) during the tax year.
Qualified property. Qualified property includes any building or
its structural components and include the following.
• Property that is tangible property.
• Property that is allowed depreciation or amortization.
• Property that is constructed, reconstructed, or erected by
the taxpayer or acquired by the taxpayer if the original use of
the property commences with the taxpayer.
-4-

Instructions for Form 3468 (2022)

• Property that is integral to the operation of the advanced

Addition to tax. If any amount treated as a payment is
determined to be an excessive payment, the tax imposed for the
tax year that the determination is made will be increased by the
following.
• The amount of the excessive payment, plus
• 20% of the excessive payment.

manufacturing facility.

Exception. Qualified property doesn't include a building or a
portion of a building used for offices, administrative services, or
other functions unrelated to manufacturing.
Coordination with rehabilitation credit. The qualified
investment with respect to any advanced manufacturing facility
for any tax year shall not include the portion of the basis of any
property that is attributable to qualified rehabilitation
expenditures (as defined in section 47(c)(2)).

The 20% addition to tax will not apply if the taxpayer
demonstrates that the excessive payment resulted from
reasonable cause.

DRAFT AS OF
January 5, 2023

Deemed payment and U.S. possessions. For any
possession of the United States with a mirror code tax system
(as defined in section 24(k)), the deemed payment will not be
treated as part of the income tax laws of the United States for
purposes of determining the income tax law of such possession,
unless such possession elects to have this treated as part of the
income tax laws.

Certain progress expenditure rules made applicable. Rules
similar to the rules of section 46(c)(4) and 46(d) (as in effect on
the day before the date of the enactment of P.L. 101-158) shall
apply for purposes of the advanced manufacturing investment
credit.

Line 7

Basis reduction and recapture. Rules similar to the rules of
sections 50(a) and 50(c) will apply with respect to the amount
treated as a payment made by the taxpayer under section
48D(d)(1), and any payment made pursuant to 48D(d)(2)(A).
See Recapture of Credit, earlier, for more information.

Enter the qualifying investment in advanced manufacturing
investment facility (defined above) placed in service after 2022
for property for which the construction, reconstruction, or
erection began after August 9, 2022.

Application to partnership and S corporation. The following
apply if a partnership or an S corporation elects a deemed
payment in lieu of the advanced manufacturing investment
credit.
• The IRS will apply the payment to the partnership or S
corporation equal to the amount of the credit. For more
information, see Treatment of payments to partnerships and
S corporations below.
• The payment can only be applied once. Double benefit of
the payment will be denied. The payment amount will be
reduced to zero if the payment was previously attained for
the tax year in question and before determining any
partner's distributive share or shareholder's pro rata share of
such credit.
• Any amount of the deemed payment will be treated as tax
exempt income for purposes of sections 705 and 1366.
• A partner's distributive share of the tax exempt income will
be based on the partner's distributive share of the otherwise
applicable credit for each tax year.

Credit From Cooperatives
Line 9
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, qualifying advanced energy project credit, or
advanced manufacturing investment 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.

Deemed Payment

A taxpayer who directly held property described in Advanced
Manufacturing Investment Credit, earlier, can elect to treat the
credit for advanced manufacturing investment as a deemed
payment. The deemed payment will be applied to the tax
imposed for the tax year for which the credit was determined,
equal to the amount of the credit.

Application at partner and shareholder level. In the case
of any property held directly by a partnership or S corporation,
no election by any partner or shareholder will be allowed with
respect to any credit determined under section 48D(a) with
respect to such property.
Treatment of payments to partnerships and S
corporations. The IRS will apply the deemed payment to the
partnership or S corporation equal to the amount of the credit
and it will be treated in the same manner as a tax payment. The
deemed payment can only be applied once and a double benefit
of the payment will be denied.

Requesting the deemed payment. Any election of a deemed
payment in lieu of a credit will be made no later than the due
date of the tax return (including extensions of time to file) for the
tax year for which the election is made. The election can’t be
made earlier than 270 days (May 6, 2023) after the date of
enactment of CHIPS. The deemed payment election is
irrevocable.
Payment application date. The payment will be treated as
made on the later of either the due date of the tax return
(determined without regard to extensions) or the date the return
is filed.

Line 10
Add lines 5d, 6c, 7, and 9. Enter this amount on line 10 and on
Form 3800, Part III, line 1a. However, if you entered an amount
on line 7 for advanced manufacturing investment credit but
instead you wish to treat that amount as a deemed payment per
section 48D(d)(1), on Form 3800, Part III, line 1a, enter line 10
minus the deemed payment. Attach to the return a statement for
each qualifying property. See Additional information, earlier, for
a description of the statement(s) needed. Form 3468, line 10,
and Form 3800, Part III, line 1a, may not match depending on
your election.

Additional information. If you elect to treat the credit for
advanced manufacturing investment as a payment pursuant to
sections 48D(d)(1) or 48D(d)(2)(A), guidance will be provided
after the publication of these instructions for the required
statement(s) that must be attached to your return.
Excessive payment. With respect to the property for the tax
year for which the deemed payment is made, an excess
payment is the following.
• The amount treated as a payment by section 48D(d)(1) or
the amount of payment made by section 48D(d)(2)(A), over
• The amount of the credit that would be allowed per section
48D(a).
Instructions for Form 3468 (2022)

The deemed payment per section 48D(d)(1) will go on one of
the following lines on your return.
-5-

Form

Line Number

990–T

Part 3, line 6g

1041

Schedule G, line 16a

1065

Line 28

1120

Schedule J, line 20d

1120-S

Line 23b

1120-C
1120-F
1120-L
1120-PC

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

DRAFT AS OF
January 5, 2023
Line 30f(1)

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.

Line 5j

Line 28g(1)
Line 15i

2. The expenditures must be incurred in connection with the
rehabilitation of a qualified rehabilitated building.

Part III—Rehabilitation Credit and
Energy Credit

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.

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. See Regulations section 1.47-7.

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 the taxpayer
wasn't aware of that certification requirement at the time the
rehabilitation began.

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 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.

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%” shall be substituted for “35%” in
paragraph (1)(B)(iii)). This exclusion doesn't apply for
line 11d.

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.

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.”

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 generally modified
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.

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.
-6-

Instructions for Form 3468 (2022)

claimed, and you must file an amended return if necessary. See
Regulations section 1.48-12(d)(7)(ii) for details.

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 the 24-month period selected by the taxpayer under section
47(c)(1)(B)(i) (as in effect after December 21, 2017) (or the
60-month period applicable under section 47(c)(1)(B)(ii)), which
begins no 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 period (or the
60-month period) 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.

Energy Credit

The energy credit for the tax year is the energy percentage of the
basis of each energy property placed in service during the tax
year. The energy properties include the following.
• Geothermal energy property.
• Solar energy property to generate electricity, or solar energy
property to illuminate.
• Qualified fuel cell property.
• Qualified microturbine property.
• Combined heat and power system property.
• Qualified small wind energy property.
• Waste energy recovery property.
• Geothermal heat pump system property.
• Energy storage technology property.
• Qualified biogas property.
• Microgrid controllers property.

DRAFT AS OF
January 5, 2023

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.

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;

The lessor will provide the lessee with the NPS project
number to enter on line 11h.

3. Be property either:

To qualify as energy property, property must:

2. Be property for which depreciation (or amortization in lieu of
depreciation) is allowable; and
a. The construction, reconstruction, or erection of which is
completed by the taxpayer; or

Line 11i

b. Acquired by the taxpayer if the original use of such
property commences with the taxpayer.

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.

Property will not include any property that is part of a
production credit under section 45 for the tax year or any prior
tax year.
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.
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 reduction. If energy property (acquired before 2009, or
to the extent of its basis attributable to construction,
reconstruction, or erection before 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 2008, and for basis attributable to
construction, reconstruction, or erection after 2008, there is no
basis reduction for property financed by subsidized energy
financing or by tax-exempt private activity bonds.
Credit reduced for tax-exempt bonds. The amount of the
credit with respect to any facility for any tax year will be reduced
by the amount that is the product of the amount so determined
for such year and the lesser of one of the following.
• 15%, or
• A fraction, which the numerator is the sum for the tax year
and all prior tax years, of proceeds of an issue of any
obligations the interest on which is exempt from tax under
section 103 and that is used to provide financing for the
qualified facility over the denominator, which is the
aggregate amount of additions to the capital account for the

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
Instructions for Form 3468 (2022)

-7-

qualified facility for the tax year and all prior tax years as of
the close of the tax year.

Increased credit amount for energy projects. In the case of
any energy project that satisfies the requirements of Project
requirements below, the amount of the credit determined will be
equal to an amount multiplied by 5. For purposes of the previous
statement, the form has already been adjusted to show 30%
instead of 6% for tax year 2022.
Energy project. Energy project means a project consisting of
one or more energy properties that are part of a single project.
Project requirements. A project meets the project
requirements if it is one of the following.
• A project with a maximum net output of less than 1
megawatt of electrical (as measured in alternating current)
or thermal energy.
• A project the construction of which begins before January
30, 2023, with respect to prevailing wage and
apprenticeship requirements.
• A project that satisfies the prevailing wage and
apprenticeship requirements.

Coordination with Department of Treasury grants. In the
case of any property where the Secretary makes a grant under
section 1603 of the American Recovery and Reinvestment Tax
Act of 2009, no credit will be determined under section 48 or
section 45 with respect to the property for the tax year in which
the grant is made or any subsequent tax year.
Recapture. If a credit was determined with respect to a
property for any tax year ending before the grant is made:
• The tax imposed on the taxpayer for the tax year in which
the grant is made will be increased by the credit amount
allowed under section 38,
• The general business carryforwards under section 39 will be
adjusted to recapture the portion of the credit that was not
allowed, and
• The amount of the grant will be determined without regard to
any reduction in the basis of the property by the credit.

DRAFT AS OF
January 5, 2023

Prevailing wage requirements. In general, the taxpayer shall
ensure, with respect to any energy project, that any laborers and
mechanics employed by the taxpayer or any contractor or
subcontractor shall be paid wages at rates not less than the
prevailing rates for construction, alteration, or repair of a similar
character in the locality in which the project is located as most
recently determined by the Secretary of Labor, in accordance
with subchapter IV of chapter 31 of title 40, United States Code.
Laborers, mechanics, contractors, or subcontractors.
Any laborers and mechanics employed by the taxpayer or any
contractor or subcontractor in the construction of such energy
project, and for the 5-year period beginning on the date such
project is originally placed in service, the alteration or repair of
such project, shall be paid prevailing wages.
Subject to recapture, for purposes of any determination in the
construction of such energy credit for the tax year in which the
energy project is placed in service, the taxpayer shall be
deemed to satisfy the requirement for the alteration or repair of
such project, at the time such project is placed in service.
Correction and penalty for failure to satisfy wage
requirements. In the case of any taxpayer that fails to satisfy
the prevailing wage requirements mentioned above, the
taxpayer shall be deemed to have satisfied the requirement with
respect to any laborer or mechanic who was paid at a rate below
the prevailing wage rate, if the following are completed.

Treatment of grants. Any grant will not be included in the
gross income or alternative minimum taxable income of the
taxpayer, but will be taken into account in determining the basis
of the property to which the grant relates, except that the basis of
such property will be reduced under section 50(c) in the same
manner as a credit allowed.
Interconnection property. In general, energy property shall
include amounts paid or incurred by the taxpayer for qualified
interconnection property in connection with the installation of
energy property (as defined in section 48(a)(3)) that:
• Has a maximum net output of not greater than 5 megawatts
(as measured in alternating current), to provide for the
transmission or distribution of the electricity produced or
stored by such property; and
• Are properly chargeable to the capital account of the
taxpayer.
Qualified interconnection property. Qualified
interconnection property is, with respect to an energy project
that isn't a microgrid controller, any tangible property that:
• Is part of an addition, modification, or upgrade to a
transmission or distribution system that is required at or
beyond the point at which the energy project interconnects
to such transmission or distribution system in order to
accommodate such interconnection;
• Is either constructed, reconstructed, or erected by the
taxpayer, or that the cost with respect to the construction,
reconstruction, or erection of such property is paid or
incurred by the taxpayer; and
• The original use, pursuant to an interconnection agreement,
commences with a utility.

1. The taxpayer makes payment to such laborer or mechanic
in an amount equal to the sum of the following.
a. An amount equal to the difference between (i) the
amount of wages paid to such laborer or mechanic
during such period, and (ii) the amount of wages
required to be paid to such laborer or mechanic during
such period, plus

Interconnection agreement. Interconnection agreement
means an agreement with a utility for the purposes of
interconnecting the energy property owned by the taxpayer to
the transmission or distribution system of the utility.
Utility. For the purposes of section 48(a)(8)(D), utility means
the owner or operator of an electrical transmission or distribution
system that is subject to the regulatory authority of any the
following.
• A state or political subdivision thereof.
• Any agency or instrumentality of the United States.
• A public service or public utility commission or other similar
body of any state or political subdivision thereof.
• The governing or ratemaking body of an electric
cooperative.

b. Interest on the amount determined under item (i) at the
underpayment rate established under section 6621(a)
(2) (determined by substituting “6%” for “3%”) for the
period described in item (i), and
2. Makes payment to the Secretary of a penalty in an amount
equal to the product of the following.
a. $5,000, multiplied by
b. The total number of laborers and mechanics who were
paid wages at a rate below the prevailing wage
requirement rate for any period during such year.

Special rule for interconnection property. In the case of
expenses paid or incurred for interconnection property, amounts
otherwise chargeable to capital account with respect to such
expenses will be reduced under rules similar to the rules of
section 50(c).

Deficiency procedures don't apply. Subchapter B of
chapter 63 (relating to deficiency procedures for income, estate,
gift, and certain excise taxes) will not apply with respect to the
assessment or collection of any penalty imposed.
-8-

Instructions for Form 3468 (2022)

Intentional disregard. If the Secretary determines that any
failure described in Correction and penalty for failure to satisfy
wage requirements, earlier, was due to intentional disregard of
the prevailing wage requirements, then the following changes
will occur.
• In number 1 above, "the sum" with “three times the sum,”
and
• In number 2a above, "$5,000" with “$10,000.”

•

construction, alteration, or repair work with respect to such
qualified facility to comply with the established standards
and requirements of the registered apprenticeship program;
or
The registered apprenticeship program fails to respond to
such request within 5 business days after the date on which
such registered apprenticeship program received such
request.

DRAFT AS OF
January 5, 2023

Limitation on period for payment. Pursuant to rules issued
by the Secretary, in the case of a final determination by the
Secretary with respect to any failure by the taxpayer to satisfy
the prevailing wage requirements, the Correction and penalty for
failure to satisfy wage requirements, described above, will not
apply unless the payments are made by the taxpayer on or
before 180 days after the date of such determination.
Recapture. The Secretary shall provide guidance for
recapturing the benefit of any increase in the credit allowed with
respect to any project that doesn't satisfy the prevailing wage
requirements (after Correction and penalty for failure to satisfy
wage requirements is applied) for the 5-year period beginning on
the date the project was originally placed in service, the
alteration or repair (but which doesn’t cease to be investment
credit property within the meaning of section 50(a)). The period
and percentage of such recapture shall be determined under
rules similar to the rules of section 50(a).

Intentional disregard. If the Secretary determines that any
failure described in good faith effort is due to intentional
disregard to satisfy the requirements for the percentage of total
labor hours and participation, earlier, Exception 2 shall be
applied by substituting “$500” for “$50” in 2a, earlier.
Labor hours. Labor hours means the total number of hours
devoted to the performance of construction, alteration, or repair
work by any individual employed by the taxpayer or by any
contractor or subcontractor; however, it excludes any hours
worked by foremen, superintendents, owners, or persons
employed in a bona fide executive, administrative, or
professional capacity (within the meaning of those terms in part
541 of title 29, Code of Federal Regulations).
Qualified apprentice. A qualified apprentice is an individual
who is employed by the taxpayer or by any contractor or
subcontractor and who is participating in a registered
apprenticeship program, as defined in section 3131(e)(3)(B).

Apprenticeship requirements. Regarding the construction of
any qualified facility, apprenticeship requirements are as follows.
• Taxpayers shall ensure that the applicable percentage of
the total labor hours of the construction, alteration, or repair
work (including such work performed by any contractor or
subcontractor), subject to apprentice to journeyworker ratio,
be performed by qualified apprentices. For construction that
begins before 2023, the ratio is 10%; and for construction
that begins in 2023, the ratio is 12.5%.
• Apprenticeship requirements for
apprentice-to-journeyworker ratios shall be subject to any
applicable requirements for apprentice-to-journeyworker
ratios of the Department of Labor or the applicable state
apprenticeship agency.
• With regard to participation, each taxpayer, contractor, or
subcontractor who employs four or more individuals to
perform construction, alteration, or repair work shall employ
one or more qualified apprentices to perform such work.

Line 12a
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 basis of any property placed in service during the
tax year that uses geothermal energy and the construction that
begins before 2025.

Line 12b
Solar energy. Solar energy property is property that has the
following.
1. Equipment that uses solar energy to illuminate the inside of
a structure using fiber-optic distributed sunlight.

Exception. A taxpayer will not be treated as failing to satisfy
the requirements described above, if the taxpayer:

2. Equipment that uses, if placed in service after 2022,
electrochromic glass, which uses electricity to change its
light transmittance properties in order to heat or cool a
structure.

1. Satisfies a good faith effort; or
2. In the case of any failure by the taxpayer to satisfy the
percentage of total labor hours and participation above, with
respect to the construction, alteration, or repair work on any
qualified facility where construction began in 2023, makes
payment to the Secretary of a penalty in an amount equal to
the product of:

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

a. $50, multiplied by

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

b. The total labor hours for which the requirement
described in such subparagraph was not satisfied with
respect to the construction, alteration, or repair work on
such qualified facility.

The energy property shall include amounts paid or incurred
by the taxpayer for qualified interconnection property in
connection with the installation of energy property that has a
maximum net output of not greater than 5 megawatts (as
measured in alternating current), to provide for transmission or
distribution of the electricity produced or stored by such
property, and that are properly chargeable to the capital account
of the taxpayer.

Good faith effort. For purposes of the exception above, a
taxpayer will be deemed to have satisfied the requirements
under this paragraph with respect to a qualified facility if the
taxpayer has requested qualified apprentices from a registered
apprenticeship program, as defined in section 3131(e)(3)(B),
and either of the following apply.
• The request has been denied, provided that such denial is
not the result of a refusal by the taxpayer or any contractors
or subcontractors engaged in the performance of
Instructions for Form 3468 (2022)

Enter the basis, attributable to periods after 2005 and the
construction of which began before 2020 or between 2021
-9-

through 2025, 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.

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

Line 12c

Line 12q

Enter the basis of property using solar illumination,
electrochromic glass, or solar energy placed in service during
the tax year and the construction of which began in 2020 or
2021.

Qualified microturbine property. Qualified microturbine
property is a stationary microturbine power plant that 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.
Stationary microturbine power plant. Stationary
microturbine power plant means an integrated system
comprised of a gas turbine engine, a combustor, a recuperator
or regenerator, a generator or alternator, and associated
balance of plant components that converts a fuel into electricity
and thermal energy. It also includes all secondary components
located between the existing infrastructure for fuel delivery and
the existing infrastructure for power distribution, including
equipment and controls for meeting relevant power standards,
such as voltage, frequency, and power factors.

DRAFT AS OF
January 5, 2023

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

Line 12e

Qualified fuel cell property. Qualified fuel cell property is a
fuel cell power plant that generates at least 0.5 kilowatts (1
kilowatt in the case of fuel cell plant with a linear generator
assembly) of electricity using an electrochemical process and
has electricity-only generation efficiency greater than 30%. See
section 48(c)(1) for further details.
Fuel cell power plant. Fuel cell power plant means an
integrated system comprised of a fuel cell stack assembly and
associated balance of plant components that converts a fuel into
electricity using electrochemical means.
Linear generator assembly. Linear generator assembly
doesn’t include any assembly that contains rotating parts.

Enter the basis, attributable to periods after 2005, of any
qualified microturbine property placed in service during the tax
year, if the property was acquired after 2005, or to the extent of
basis attributable to construction, reconstruction, or erection by
the taxpayer after 2005.

Line 12t

Enter the basis, attributable to periods after 2005 and before
October 4, 2008, of any qualified fuel cell property placed in
service during the tax year, if the property was acquired after
2005 and before October 4, 2008, or to the extent of basis
attributable to construction, reconstruction, or erection by the
taxpayer after 2005 and before October 4, 2008.

Combined heat and power system property. 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 12f
Enter the applicable number of kilowatts of capacity attributable
to the basis on line 12e. This entry must be a whole number.

Line 12h

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

Enter the basis, attributable to periods after October 3, 2008,
and the construction of which began before 2020 or after 2021,
of any qualified fuel cell property placed in service during the tax
year.

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.

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

Limitation. In the case of combined heat and power system
property with an electrical capacity in excess of the applicable
capacity placed in service during the tax year, the credit for that
year shall be equal to the amount that bears the same ratio to
the credit, as the applicable capacity bears to the capacity of
such property.
Applicable capacity. Applicable capacity means the
following:
• 15 megawatts;
• A mechanical energy capacity of more than 20,000
horsepower; or
• An equivalent combination of electrical and mechanical
energy capacities.

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 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

Maximum capacity. Combined heat and power system
property shall not include any property comprising a system if:
• The system has a capacity in excess of 50 megawatts,

Enter the basis of property using qualified fuel cell energy placed
in service during the tax year and the construction of which
began in 2020 or 2021. See When construction begins, later.
-10-

Instructions for Form 3468 (2022)

• A mechanical energy capacity in excess of 67,000
•

basis is attributable to construction, reconstruction, or erection
by the taxpayer. See When construction begins, later.

horsepower, or
An equivalent combination of electrical and mechanical
energy capacities.

Line 12z

Energy efficiency percentage. The energy efficiency
percentage of a combined heat and power system property is
the fraction—where the numerator 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 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.

DRAFT AS OF
January 5, 2023

Enter the basis of property using qualified small wind energy
property placed in service during the tax year and the
construction of which began in 2020 or 2021. See When
construction begins, later.

Line 12bb

Waste energy recovery property. 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).

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, 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. For property placed in service
after 2022, multiply the basis by 30% (0.30) instead of 10%
(0.10).

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

Line 12w

Enter the basis of waste energy recovery property placed in
service during the tax year and multiply the basis of property that
uses waste energy recovery property by 30%.

Qualified small wind energy property. 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, 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.

Line 12cc
Geothermal heat pump systems. Geothermal heat pump
systems constitute equipment that 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).
Enter the basis, attributable to periods after October 3, 2008,
of any geothermal heat pump system placed in service during
the tax year, 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. If any property was placed in service during 2022, multiply
the basis of the property that uses geothermal heat pump
systems by 10%. If any property was placed in service after
2022, multiply the basis of property that uses geothermal heat
pump systems by 30%.

Enter the basis, attributable to periods after October 3, 2008,
and before 2009, of any qualified small wind energy property
placed in service during the tax year, if the property was
acquired after October 3, 2008, and before 2009, or to the extent
of basis attributable to construction, reconstruction, or erection
by the taxpayer after October 3, 2008, and before 2009.

Line 12x

Line 12dd

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

Qualified investment credit facility property. 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.

Line 12y
For the definition of qualified small wind energy property, see the
instructions for Line 12w, earlier.
Enter the basis, attributable to periods after 2008 and the
construction of which began before 2020 or after 2021, of any
qualified small wind energy property placed in service during the
tax year, if the property was acquired by the taxpayer or the
Instructions for Form 3468 (2022)

See section 48(a)(5) for details.
-11-

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
Form 3468 that includes the following information.

Note. The transitional rules of section 48(m) (as in effect on
November 4, 1990) apply to offshore wind facilities for periods
after 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 qualified
offshore wind facilities.
Qualified investment credit facility. 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 2025. See When
construction begins below;
• No credit has been allowed under section 45 for that facility
(see Note below);
• An irrevocable election was made to treat the facility as
energy property; and
• Is a qualified offshore wind facility. 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.

1. Your name, address, taxpayer identification number, and
telephone number.

DRAFT AS OF
January 5, 2023

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.

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.
Qualified offshore wind facility. For purposes of section
48(a)(5), qualified offshore wind facility means a qualified facility
(within the meaning of section 45(d)(1)) that is located in the
inland navigable waters of the United States or in the coastal
waters of the United States.

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 that
state the following: “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.”

When construction begins. Two methods can be used to
establish that construction of a qualified facility has begun.

Enter the basis of any qualified investment credit facility
property, placed in service during the tax year, the construction
of which began after 2016 and before 2025.

1. Physical Work Test is satisfied when physical work of a
significant nature begins and other requirements provided
in section 4 of IRS.gov/irb/2018-28_IRB#NOT-2018-59 are
met.

Line 12hh—Other Energy Credits and Special
Adjustments

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 IRS.gov/irb/
2018-28_IRB#NOT-2018-59.

Energy storage technology. Energy storage technology is:
• Property (other than property primarily used in the
transportation of goods or individuals and not for the
production of electricity) that receives, stores, and delivers
energy for conversion to electricity (or, in the case of
hydrogen that stores energy), and has a nameplate capacity
of not less than 5 kilowatt hours; and
• Thermal energy storage property.

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
after 2018, as determined under the Physical Work Test or the
Five Percent Safe Harbor, 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 2021-05,
2021-3 I.R.B. 479 for more information on the beginning of
construction requirements applied to offshore and federal lands
projects.
Additional information. 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

Modifications of certain property. In the case of any
energy storage technology property that was either placed in
service before August 16, 2022, or is modified in a manner that
the property (after such modification) has an increase in
nameplate capacity of not less than 5 kilowatt hours, then the
property will be treated as energy storage technology, except for
the basis of any existing property prior to the modification. The
energy storage technology will not include any property if the
modification begins after 2024.
Note. If the property has a capacity of less than 5 kilowatt hours
and is modified in a manner that the property (after such
modification) has a nameplate capacity of not less than 5
kilowatt hours, then no modification would be needed.

-12-

Instructions for Form 3468 (2022)

Thermal energy storage property. Thermal energy storage
property is property comprising a system that:
• Is directly connected to a heating, ventilation, or air
conditioning system;
• Removes heat from, or adds heat to, a storage medium for
subsequent use; and
• Provides energy for the heating or cooling of the interior of a
residential or commercial building.

Domestic content bonus credit amount. In the case of any
energy project that satisfies the requirement below, the energy
percentage shall be increased by the applicable credit rate
increase.
Applicable credit rate increase. The applicable credit rate
increase shall be the one of the following.
1. 2%, in the case of an energy project that doesn't satisfy the
requirements below.

DRAFT AS OF
January 5, 2023

Thermal energy storage property doesn’t include:

• A swimming pool,
• Combined heat and power system property, or
• A building or its structural components.

2. 10%, in the case of an energy project that does satisfy the
requirements below.

Requirement. The requirement is satisfied with respect to
any qualified facility, if the taxpayer certifies to the Secretary (at
such time and in such form and manner as the Secretary may
prescribe) that any steel, iron, or manufactured product that is a
component of the facility (upon completion of construction) was
produced in the United States.
In the case of steel or iron, 40% of all steel or iron
manufacturing processes must take place in the United States,
except metallurgical processes involving refinement of steel
additives. The steel and iron requirements apply to all
construction materials made primarily of steel or iron and used in
infrastructure projects such as transit or maintenance facilities,
rail lines, and bridges. These items include, but are not limited
to, structural steel or iron, steel or iron beams and columns, or
running rail and contact rail. These requirements don't apply to
steel or iron used as components or subcomponents of other
manufactured products or rolling stock, or to bimetallic power rail
incorporating steel or iron components.
In the case of manufactured products that are components of
a qualified facility, upon completion of construction the
manufactured products will be deemed to have been produced
in the United States if at least 40% of steel and iron (20% in the
case of an offshore wind facility) of the total costs of all the
manufactured products of the facility are attributable to
manufactured products (including components) that are mined,
produced, or manufactured in the United States.

Enter the basis on Line 12hh Worksheet, line 1, attributable to
periods after 2022, of any energy storage technology property
placed in service during the tax year, to the extent of basis
attributable to construction, reconstruction, or erection by the
taxpayer after August 16, 2022, and before 2024. Attach to your
return a statement with the description of how you calculated the
credit. See Additional information, later, for more information.
Qualified biogas property. Qualified biogas property means
property comprising a system that:
1. Converts biomass (as defined in section 45K(c)(3), as in
effect on August 16, 2022), into a gas that:
a. Consists of not less than 52% methane by volume, or
b. Is concentrated by such system into a gas that consists
of not less than 52% methane, and
2. Captures such gas for sale or productive use, and not for
disposal via combustion.
Qualified biogas property includes any property that is part of
a system that cleans or conditions gas, described above.
Enter the basis on Line 12hh Worksheet, line 2, attributable to
periods after 2022, of any qualified biogas energy property
placed in service during the tax year, to the extent of basis
attributable to construction, reconstruction, or erection by the
taxpayer after August 16, 2022, and before 2024. Attach to your
return a statement with the description of how you calculated the
credit. See Additional information, later, for more information.

Enter the domestic content bonus credit amount on the
Line 12hh Worksheet, line 4. Attach to your return a statement
with the description of how you calculated the credit. See
Additional information, later, for more information.

Microgrid controller. Microgrid controller means equipment
that is:
• Part of a qualified microgrid, and
• Designed and used to monitor and control the energy
resources and loads on such microgrid.

Increase in credit rate for energy communities. In the case
of any energy project that is placed in service within an energy
community (defined below), the energy percentage shall be
increased by the applicable credit rate increase.
Applicable credit rate increase. The applicable credit rate
increase shall be equal to one of the following.

Qualified microgrid. Qualified microgrid is an electrical
system that:
1. Includes equipment that is capable of generating not less
than 4 kilowatts and not greater than 20 megawatts of
electricity;

1. 2%, in the case of any energy project that doesn't satisfy the
requirements of section 48(a)(9)(B).
2. 10%, in the case of any energy project that does satisfy the
requirements of section 48(a)(9)(B).

2. Is capable of operating:
a. In connection with the electrical grid and as a single
controllable entity with respect to such grid,

Energy community. Energy community means the following.
1. A brownfield site (as defined in subparagraphs (A), (B), and
(D)(ii)(III) of section 101(39) of the Comprehensive
Environmental Response, Compensation, and Liability Act
of 1980 (42 U.S.C. 9601(39))).

b. Independently (and disconnected) from such grid, and
3. Is not part of a bulk-power system (as defined in section
215 of the Federal Power Act (16 U.S.C. 824o)).

2. A metropolitan statistical area or non-metropolitan statistical
area that:

Enter the basis on Line 12hh Worksheet, line 3, attributable to
periods after 2022, of any qualified microgrid controller property
placed in service during the tax year, to the extent of basis
attributable to construction, reconstruction, or erection by the
taxpayer after August 16, 2022, and before 2024. Attach to your
return a statement with the description of how you calculated the
credit. See Additional information, later, for more information.
Instructions for Form 3468 (2022)

a. Has (or, at any time during the period beginning after
2009, had) 17% or greater direct employment or 25% or
greater local tax revenues related to the extraction,
processing, transport, or storage of coal, oil, or natural
gas (as determined by the Secretary); and
-13-

• The financial benefits of the electricity produced by such

b. Has an unemployment rate at or above the national
average unemployment rate for the previous year (as
determined by the Secretary), or

facility are allocated equitably among the occupants of the
dwelling units of such building.

Qualified low-income economic benefit project. A facility
will be treated as part of a qualified low-income economic benefit
project if at least 50% of the financial benefits of the electricity
produced by the facility are provided to households with income
of one the following.
• Less than 200% of the poverty line (as defined in section
36B(d)(3)(A)) applicable to a family of the size involved.
• Less than 80% of area median gross income (as determined
under section 142(d)(2)(B)).

3. A census tract, or is directly adjoining to any census tract in
which:
a. After 1999, a coal mine has closed, or
b. After 2009, a coal-fired electric generating unit has been
retired.

DRAFT AS OF
January 5, 2023

Enter the increase in credit rate for energy communities on
Line 12hh Worksheet, line 5. Attach to your return a statement
with the description of how you calculated the credit. See
Additional information, later, for more information.

Financial benefit. For purposes of a residential building
project and an economic benefit project, defined above,
electricity acquired at a below-market rate will not fail to be taken
into account as a financial benefit.
Eligible property. Eligible property means energy property
that is part of the following facilities.
• Wind facility property described in section 45(d)(1) for which
an election was made to treat qualified facilities as energy
property.
• Solar energy property to generate electricity described in
section 48(a)(3)(A)(i).
• Qualified small wind energy property described in section
48(a)(3)(A)(vi).
• Including energy storage technology described in section
48(a)(3)(A)(ix)) installed in connection with the above facility
properties.

Low-income communities for solar and wind facilities. In
the case of any qualified solar and wind facility with respect to
which the Secretary makes an allocation of environmental justice
solar and wind capacity limitation, defined later, the energy
percentage, with respect to any eligible property that is part of
such facility will be increased by one of the following.
• 10%, in the case of a facility located in a low-income
community (as defined in section 45D(e)) or on Indian land
(as defined in section 2601(2) of the Energy Policy Act of
1992 (25 U.S.C. 3501(2))).
• 20%, in the case of a facility that is part of a qualified
low-income residential building project or a qualified
low-income economic benefit project.
The increase in the credit will not exceed the amount that
bears the same ratio to the amount of the increase of the
following.
• The environmental justice solar and wind capacity limitation
allocated to such facility, bears to
• The total megawatt nameplate capacity of such facility, as
measured in direct current.

Allocations. In general, no later than 180 days (February 12,
2023) after the date of enactment of IRA 2022, the Secretary will
establish a program to allocate amounts of environmental justice
solar and wind capacity limitation to qualified solar and wind
facilities. The Secretary will provide procedures to allow for an
efficient allocation process, including, when determined
appropriate, consideration of multiple projects in a single
application if such projects will be placed in service by a single
taxpayer.
Limitation. The amount of environmental justice solar and
wind capacity limitation allocated by the Secretary during any
calendar year will not exceed the annual capacity limitation with
respect to such year.
Annual capacity limitation. Annual capacity limitation
means 1.8 gigawatts of direct current capacity for each of
calendar years 2023 and 2024, and zero thereafter.
Carryover of unused limitation. If the annual capacity
limitation for any calendar year exceeds the aggregate amount
allocated for such year, the limitation for the succeeding
calendar year will be increased by the amount of the excess. No
amount may be carried under the preceding sentence to any
calendar year after 2024 except as provided in section 48E(h)(4)
(D)(ii).
Placed in service deadline. In general, solar and wind
facilities placed in service in connection with low-income
communities won't apply if the property is placed in service 4
years after the allocation date with respect to the part of the
property that is associated with the facility.
Application of carryover. Any amount of environmental
justice solar and wind capacity limitation that expires per the
Placed in service deadline, described above, during any
calendar year will be taken into account as an excess in
Carryover of unused limitation, described above (or as an
increase in such excess), for such calendar year.
Recapture. The Secretary shall provide guidance for
recapturing the benefit of any increase in credit allowed for
low-income communities for solar and wind facilities if any
property ceases to be eligible property for such increase (but
which doesn't cease to be investment credit property within the
meaning of section 50(a)). The period and percentage of such

Qualified solar and wind facility. Qualified solar and wind
facility with respect to low-income communities means any
facility that generates electricity solely from property described in
the following.
• Wind facility property defined in section 45(d)(1).
• Solar energy property to generate electricity defined in
section 48(a)(3)(i).
• Qualified small wind energy property defined in section
48(a)(3)(vi).
The property has to meet the following.

• A maximum net output of less than 5 megawatts (as
measured in alternating current).

• Is located in a low-income community (as defined in section
45D(e)) or on Indian land (as defined in section 2601(2) of
the Energy Policy Act of 1992 (25 U.S.C. 3501(2))), or is
part of a qualified low-income residential building project or
a qualified low-income economic benefit project.

Qualified low-income residential building project. A
facility shall be treated as part of a qualified low-income
residential building project if the following apply.
• The facility is installed on a residential rental building that
participates in a covered housing program (as defined in
section 41411(a) of the Violence Against Women Act of
1994 (34 U.S.C. 12491(a)(3))).
• A housing assistance program administered by the
Department of Agriculture under title V of the Housing Act of
1949.
• A housing program administered by a tribally designated
housing entity (as defined in section 4(22) of the Native
American Housing Assistance and Self-Determination Act of
1996 (25 U.S.C. 4103(22))).
• Other affordable housing programs as the Secretary may
provide.
-14-

Instructions for Form 3468 (2022)

determined for purposes of this section, a taxpayer producing
such hydrogen may file a petition with the Secretary for
determination of the lifecycle greenhouse gas emissions rate
with respect to such hydrogen.
Regulations. The Secretary shall issue guidance to carry out
the purposes of this section, including guidance to recapture any
credit allowed that exceeds the amount of the credit that would
have been allowed if the expected production were consistent
with the actual verified production (or all of the credit so allowed
in the absence of such verification).

recapture shall be determined under rules similar to the rules of
section 50(a). To the extent provided by the Secretary, such
recapture may not apply with respect to any property if, within 12
months after the date the taxpayer becomes aware (or
reasonably should have become aware) of such property
ceasing to be property eligible for such increase, the eligibility of
such property for such increase is restored. The preceding
sentence shall not apply more than once with respect to any
facility.
Enter the amount of low-income communities for solar and
wind facilities on Line 12hh Worksheet, line 6. Attach to your
return a statement with the description of how you calculated the
credit. See Additional information, later, for more information.

DRAFT AS OF
January 5, 2023

Enter the amount of clean hydrogen production facilities that
will be treated as energy property on Line 12hh Worksheet,
line 7. Attach to your return a statement with the description of
how you calculated the credit. See Additional information below
for more information.

Election to treat clean hydrogen production facilities as
energy property. In the case of any qualified property (as
defined in section 48(a)(5)(D)) that is part of a specified clean
hydrogen production facility, such property will be treated as
energy property for purposes of this section, and the energy
percentage with respect to such property is as follows.
• 1.2%, in the case of a facility that is designed and
reasonably expected to produce qualified clean hydrogen,
described in section 45V(b)(2)(A).
• 1.5%, in the case of a facility that is designed and
reasonably expected to produce qualified clean hydrogen
that is described in section 45V(b)(2)(B).
• 2%, in the case of a facility that is designed and reasonably
expected to produce qualified clean hydrogen that is
described in section 45V(b)(2)(C).
• 6%, in the case of a facility that is designed and reasonably
expected to produce qualified clean hydrogen that is
described in section 45V(b)(2)(D).

Additional information. You 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 property, 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.

Denial of production credit. No credit will be allowed under
section 45V or section 45Q for any tax year with respect to any
specified clean hydrogen production facility or any carbon
capture equipment included at such facility.
Specified clean hydrogen production facility. Specified
clean hydrogen production facility means any qualified clean
hydrogen production facility to include the following.
• Owned by the taxpayer.
• Produces qualified clean hydrogen.
• The construction of which began before 2033.
• Is placed in service after 2022.
• No credit has been allowed under section 45V or 45Q.
• The taxpayer makes an irrevocable election.
• An unrelated third party has verified (in such form or manner
as the Secretary may prescribe) that such facility produces
hydrogen through a process that results in lifecycle
greenhouse gas emissions that are consistent with the
hydrogen that the facility was designed and expected to
produce in the Election to treat clean hydrogen production
facilities as energy property, described earlier.

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 that
state the following: “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.”

Deemed Payment for the Energy Credit
An applicable entity who directly held property described in
Energy Credit and lines 12a–12hh, earlier, can elect to treat the
energy credit as a payment. The payment will be applied to the
tax imposed for the tax year for which the credit was determined,
equal to the amount of the credit.

Qualified clean hydrogen. Qualified clean hydrogen means
hydrogen that is produced through a process that results in a
lifecycle greenhouse gas emissions rate of not greater than 4
kilograms of CO2e per kilogram of hydrogen.
Additional requirements for qualified clean hydrogen.
Qualified clean hydrogen also requires the following.
• Hydrogen is produced in the United States (as defined in
section 638(1)) or a possession of the United States (as
defined in section 638(2)).
• Hydrogen is produced in the ordinary course of a trade or
business of the taxpayer.
• Hydrogen is produced for sale or use.
• The production and sale or use of such hydrogen is verified
by an unrelated party.

Applicable entity. Applicable entity means the following.
• Any organization exempt from the tax imposed,
• Any state or political subdivision thereof,
• The Tennessee Valley Authority,
• An Indian tribal government (as defined in section 30D(g)
(9)),
• Any Alaska Native Corporation (as defined in section 3 of
the Alaska Native Claims Settlement Act (43 U.S.C.
1602(m)), or
• Any corporation operating on a cooperative basis that is
engaged in furnishing electric energy to persons in rural
areas.

Provisional emissions rate. In the case of any hydrogen for
which a lifecycle greenhouse gas emissions rate has not been
Instructions for Form 3468 (2022)

-15-

Application. In the case of any applicable entity that makes the
election, any applicable credit will be determined by treating any
property as used in a trade or business of the applicable entity
and without regard to the following.
• Property used by certain tax-exempt organizations.
• Property used by the United States, any state or political
subdivision thereof, any possession of the United States, or
agency or instrumentality of any of the foregoing.

respect to any credit determined under section 48 with respect
to such property.

Election. Any election of a deemed payment in lieu of a credit
will be made no later than the due date of the tax return
(including extensions of time to file) for the tax year for which the
election is made. The election can't be made earlier than 180
days (February 12, 2023) after the date of enactment of IRA
2022. The deemed payment election is irrevocable.

Deemed payment and U.S. possessions. For any
possession of the United States with a mirror code tax system
(as defined in section 24(k)), the deemed payment will not be
treated as part of the income tax laws of the United States for
purposes of determining the income tax law of such possession,
unless such possession elects to have this treated as part of the
income tax laws.

Treatment of payments to partnerships and S corporations. The IRS will apply the payment to the partnership or S
corporation equal to the amount of the credit and it will be
treated in the same manner as a tax payment. The payment can
only be applied once and a double benefit of the payment will be
denied.

DRAFT AS OF
January 5, 2023

Payment application date. The payment will be treated as
made on the later of either the due date of the tax return
(determined without regard to extensions) or the date the return
is filed.

Basis reduction and recapture. Rules similar to the rules of
section 50 (except section 50(c)(2)(A)) will apply with respect to
the amount treated as a payment made by the taxpayer.
Phaseout for deemed payment. In the case of a taxpayer
making an election under section 6417 with respect to an energy
credit, the amount of the credit will be replaced with the
following.
• The value of such credit, multiplied by
• The applicable percentage.

Additional information. If you elect to treat the credit for
energy credit as a payment pursuant to section 48, guidance will
be provided after the publication of these instructions for the
required statement(s) that must be attached to your return.
Excessive payment. With respect to the property for the tax
year for which the deemed payment is made, an excess
payment is the following.
• The amount treated as a payment made by the applicable
entity or the amount of payment made by section 6417(c),
over
• The amount of the credit that would be allowed per section
48.

100% applicable percentage for certain qualified
facilities. In the case of any qualified facility that satisfies the
requirements in section 45(b)(9)(B), or with a maximum net
output of less than 1 megawatt (as measured in alternating
current), the applicable percentage shall be 100%.
Phased domestic content requirement. In the case of any
qualified facility that isn't described in 100% applicable
percentage for certain qualified facilities above, the applicable
percentage will be 100% if construction of such facility began
before January 1, 2024. This percentage is subject to exceptions
below.
Exception. In general, the Secretary will provide exceptions
to the requirements and the applicable percentage will be 100%
if the following apply.
• The inclusion of steel, iron, or manufactured products that
are produced in the United States increases the overall
costs of construction of qualified facilities by more than 25%,
or
• Relevant steel, iron, or manufactured products are not
produced in the United States in sufficient and reasonably
available quantities or of a satisfactory quality.

Addition to tax. If any amount treated as a payment is
determined to be an excessive payment, the tax imposed for the
tax year that the determination is made will be increased by the
following.
• The amount of the excessive payment, plus
• 20% of the excessive payment.
The 20% addition to tax will not apply if the taxpayer
demonstrates that the excessive payment resulted from
reasonable cause.
Denial of double benefit. In the case of an applicable entity
making an election with respect to an applicable credit, such
credit will be reduced to zero and will, for any other purposes, be
deemed to have been allowed to such entity for such tax year.
Application to partnership and S corporation. The following
apply if a partnership or an S corporation elects a deemed
payment in lieu of the energy credit.
• The IRS will apply the payment to the partnership or S
corporation equal to the amount of the credit. For more
information, see Treatment of payments to partnerships and
S corporations, later.
• The payment can only be applied once. Double benefit of
the payment will be denied. The payment amount will be
reduced to zero if the payment was previously attained for
the tax year in question and before determining any
partner's distributive share or shareholder's pro rata share of
such credit.
• Any amount of the deemed payment will be treated as tax
exempt income for purposes of sections 705 and 1366.
• A partner's distributive share of the tax exempt income will
be based on the partner's distributive share of the otherwise
applicable credit for each tax year.

If you entered any amount on lines 12a–12hh for the energy
credit but instead you wish to treat that amount as a deemed
payment per section 6417, on Line 12hh Worksheet, line 8, enter
the amount of deemed payment. Use the table below to enter
the deemed payment on your return. Attach to your return a
statement with a description of how you calculated the payment.
See Additional information, earlier, for a description of the
statement(s) needed.

Application at partner and shareholder level. In the case of
any property held directly by a partnership or S corporation, no
election by any partner or shareholder will be allowed with
-16-

Instructions for Form 3468 (2022)

Form

Line Number

990-T

Part 3, line 6g

1041

Schedule G, line 16a

1065

Line 28

1120

Schedule J, line 20d

1120-S

Line 23b

1120-C
1120-F
1120-L
1120-PC

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, Part
III, line 1a, for allocating the investment credit to your patrons.

DRAFT AS OF
January 5, 2023
Line 30f(1)
Line 5j

Line 28g(1)
Line 15i

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 (2022)

-17-

Line 12hh Worksheet
1.

Energy storage technology property

2.

Qualified biogas property

3.

Microgrid controller

4.

Domestic content bonus credit
4a. Doesn't meet requirements in section 45(b)(9)(B). List the line numbers from the Form
3468 used for this calculation.

7.

8.

9.

1.

...............................................

× 30% (0.30)

2.

...................................................

× 30% (0.30)

3.

DRAFT AS OF
January 5, 2023
4a.

Add the basis in property for the lines listed above. Enter the total amount here . . . . . . .
Meets requirements in section 45(b)(9)(B). List the line numbers from the Form 3468 used
for this calculation.

× 10% (0.10)

4b.

× 2% (0.02)

5a.

Add the basis in property for the lines listed above. Enter the total amount here . . . . . . .
Low-income communities for solar and wind facilities
6a. Facility located in a low-income community per section 45D(e). List the line numbers from
the Form 3468 used for this calculation.

× 10% (0.10)

5b.

6b.

Add the basis in property for the lines listed above. Enter the total amount here . . . . . . .
Facility located in a low-income community on Indian land per section 2601(2) of the
Energy Policy Act of 1992 (25 U.S.C. 3501(2)). List the line numbers from the Form 3468
used for this calculation.

× 10% (0.10)

6a.

6c.

Add the basis in property for the lines listed above. Enter the total amount here . . . . . . .
Qualified low-income residential building project facility. List the line numbers from the
Form 3468 used for this calculation.

× 10% (0.10)

6b.

6d.

Add the basis in property for the lines listed above. Enter the total amount here . . . . . . .
Qualified low-income economic benefit project. List the line numbers from the Form 3468
used for this calculation.

× 20% (0.20)

6c.

Add the basis in property for the lines listed above. Enter the total amount here . . . . . . .
Clean hydrogen production facilities as energy property
7a. Facility that is designed and reasonably expected to produce qualified clean hydrogen per
section 45V(b)(2)(A). List the line numbers from the Form 3468 used for this calculation.

× 20% (0.20)

6d.

Add the basis in property for the lines listed above. Enter the total amount here . . . . . . .
Energy communities
5a. Doesn't meet requirements in section 48(a)(9)(B). List the line numbers from the Form
3468 used for this calculation.

5b.

6.

× 30% (0.30)

× 2% (0.02)

4b.

5.

........................................

Add the basis in property for the lines listed above. Enter the total amount here . . . . . . .
Meets requirements in section 48(a)(9)(B). List the line numbers from the Form 3468 used
for this calculation.

7b.

Add the basis in property for the lines listed above. Enter the total amount here . . . . . . .
Facility that is designed and reasonably expected to produce qualified clean hydrogen per
section 45V(b)(2)(B). List the line numbers from the Form 3468 used for this calculation.

× 1.2% (0.012) 7a.

7c.

Add the basis in property for the lines listed above. Enter the total amount here . . . . . . .
Facility that is designed and reasonably expected to produce qualified clean hydrogen per
section 45V(b)(2)(C). List the line numbers from the Form 3468 used for this calculation.

× 1.5% (0.015) 7b.

7d.

Add the basis in property for the lines listed above. Enter the total amount here . . . . . . .
Facility that is designed and reasonably expected to produce qualified clean hydrogen per
section 45V(b)(2)(D). List the line numbers from the Form 3468 used for this calculation.

× 2% (0.02)

7c.

Add the basis in property for the lines listed above. Enter the total amount here

× 6% (0.06)

7d.

.......

Deemed payment for energy credits
List the line numbers from the Form 3468 used for this calculation.
Add the basis in property for the lines listed above that you want to elect as a deemed payment.
Enter the total amount here . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

.......................

8.

Total. Combine lines 1 through 8. Enter this amount on Form 3468, line 12hh . . . . . . . . . . . . .

.......................

9.

-18-

(

)

Instructions for Form 3468 (2022)