Reg-105595-23

Federal Register / Vol. 88, No. 118 / Wednesday, June 21, 2023 / Proposed Rules
We will also place on public display,
at the Dockets Management Staff and at
https://www.regulations.gov, any
amendments to, or comments on, the
petitioner’s environmental assessment
without further announcement in the
Federal Register. If, based on our
review, we find that an environmental
impact statement is not required, and
this petition results in a regulation, we
will publish the notice of availability of
our finding of no significant impact and
the evidence supporting that finding
with the regulation in the Federal
Register in accordance with 21 CFR
25.51(b).
Dated: June 14, 2023.
Lauren K. Roth,
Associate Commissioner for Policy.
[FR Doc. 2023–13120 Filed 6–20–23; 8:45 am]
BILLING CODE 4164–01–P

DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[REG–105595–23]
RIN 1545–BQ75

Elective Payment of Advanced
Manufacturing Investment Credit
Internal Revenue Service (IRS),
Treasury.
ACTION: Notice of proposed rulemaking
and notice of public hearing.
AGENCY:

This document contains
proposed regulations concerning the
elective payment election of the
advanced manufacturing investment
credit under the Creating Helpful
Incentives to Produce Semiconductors
(CHIPS) Act of 2022. The proposed
regulations describe rules for the
elective payment election, including
special rules applicable to partnerships
and S corporations, repayment of
excessive payments, and basis reduction
and recapture. In addition, the proposed
regulations provide rules related to an
IRS pre-filing registration process that
taxpayers wanting to make the elective
payment election would be required to
follow. These proposed regulations
affect taxpayers eligible to make the
elective payment election of the
advanced manufacturing investment tax
credit in a taxable year. This document
also provides notice of a public hearing
on the proposed regulations.
DATES: Written or electronic comments
must be received by August 14, 2023.
The public hearing on these proposed
regulations is scheduled to be held on

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SUMMARY:

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August 24, 2023, at 10 a.m. ET. Requests
to speak and outlines of topics to be
discussed at the public hearing must be
received by August 14, 2023. If no
outlines are received by August 14,
2023, the public hearing will be
cancelled. Requests to attend the public
hearing must be received by 5 p.m. ET
on August 22, 2023. The public hearing
will be made accessible to people with
disabilities. Requests for special
assistance during the hearing must be
received by August 21, 2023.
ADDRESSES: Commenters are strongly
encouraged to submit public comments
electronically. Submit electronic
submissions via the Federal
eRulemaking Portal at https://
www.regulations.gov (indicate IRS and
REG–105595–23) by following the
online instructions for submitting
comments. Once submitted to the
Federal eRulemaking Portal, comments
cannot be edited or withdrawn. The
Department of the Treasury (Treasury
Department) and the IRS will publish
for public availability any comments
submitted electronically and comments
submitted on paper to its public docket.
Send hard copy submissions to:
CC:PA:LPD:PR (REG–105595–23), Room
5203, Internal Revenue Service, P.O.
Box 7604, Ben Franklin Station,
Washington, DC 20044.
FOR FURTHER INFORMATION CONTACT:
Concerning this proposed regulation,
Lani M. Sinfield at (202) 317–5871 (not
a toll-free number); concerning
submissions of comments and or the
public hearing, Vivian Hayes at (202)
317–6901 (not a toll-free number) or by
email to [email protected]
(preferred).
SUPPLEMENTARY INFORMATION:
Background
Section 48D was added to the Internal
Revenue Code (Code) on August 9,
2022, by section 107(a) of the CHIPS Act
of 2022 (CHIPS Act), which was enacted
as Division A of the CHIPS and Science
Act of 2022, Public Law 117–167, 136
Stat. 1366, 1393. Section 48D
established the advanced manufacturing
investment credit (section 48D credit)
and section 48D(d) allows taxpayers
(other than partnerships and S
corporations) to elect to treat the
amount of the section 48D credit
determined under section 48D(a) as a
payment against their Federal income
tax liabilities. Section 48D(d) also
provides special rules relating to
elective payments to partnerships and S
corporations and directs the Secretary of
the Treasury or her delegate (Secretary)
to provide rules for making elections
under section 48D and to require

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information or registration necessary for
purposes of preventing duplication,
fraud, improper payments, or excessive
payments under section 48D. Section
48D applies to qualified property placed
in service after December 31, 2022, and,
for any property the construction of
which began prior to January 1, 2023,
only to the extent of the basis thereof
attributable to the construction,
reconstruction, or erection of such
qualified property after August 9, 2022
(the date of enactment of the CHIPS
Act). See section 107(f)(1) of the CHIPS
Act.
On March 23, 2023, the Treasury
Department and the IRS published in
the Federal Register (88 FR 17451) a
notice of proposed rulemaking (REG–
120653–22), which contains proposed
regulations to implement the general
provisions relating to the section 48D
credit (March 2023 proposed
regulations). The March 2023 proposed
regulations included proposed
definitions of various statutory terms,
including ‘‘eligible taxpayer,’’ ‘‘qualified
property,’’ ‘‘advanced manufacturing
facility,’’ and ‘‘semiconductor.’’ The
March 2023 proposed regulations also
proposed rules under section 48D
regarding the beginning of construction
requirement; proposed rules requiring
pre-filing registration with the IRS in
advance of filing an elective payment
election; and proposed rules
implementing the ‘‘applicable
transaction’’ credit recapture rules
under section 50(a)(3) of the Code. In
addition, the March 2023 proposed
regulations requested comments on
potential issues with respect to the
elective payment election provisions
under section 48D(d) that may require
guidance. This document contains
proposed amendments to the Income
Tax Regulations (26 CFR part 1) to
implement the statutory provisions of
section 48D(d) and revise the rules in
proposed § 1.48D–6 of the March 2023
proposed regulations.
In the Rules and Regulations section
of this issue of the Federal Register, the
Treasury Department and the IRS are
issuing temporary regulations under
§ 1.48D–6T that implement the prefiling registration process described in
proposed § 1.48D–6 of the proposed
regulations. The temporary regulations
require taxpayers that want to elect the
elective payment of the section 48D
credit to register with the IRS through
an IRS electronic portal in advance of
the taxpayer filing the return on which
the election under section 48D is made.

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Federal Register / Vol. 88, No. 118 / Wednesday, June 21, 2023 / Proposed Rules

I. Overview of Elective Payment
Election Under Section 48D
Section 48D(d)(1) allows a taxpayer to
elect to treat the section 48D credit
determined for the taxpayer for a taxable
year as a payment against the tax
imposed by subtitle A of the Code (that
is, treated as a payment of Federal
income tax) equal to the amount of the
credit rather than a credit against the
taxpayer’s Federal income tax liability
for that taxable year (elective payment
election).
II. Section 48D Rules for Partnerships
and S Corporations
Section 48D(d)(2)(A) provides special
rules for partnerships (as defined in
section 761(a)) and for S corporations
(as defined in section 1361(a)(1) of the
Code). Section 48D(d)(2)(A)(i) provides
that, in the case of any credit
determined with respect to any property
held directly by a partnership or S
corporation, any election under section
48D(d)(1) is to be made by such
partnership or S corporation and must
be made in such manner as the
Secretary may provide. If such
partnership or S corporation makes an
election under section 48D(d)(1), (1) the
Secretary will make a payment to such
partnership or S corporation equal to
the amount of such credit, (2) section
48D(d)(3) is applied with respect to the
credit before determining any partner’s
distributive share, or S corporation
shareholder’s pro rata share, of such
credit, (3) any credit amount with
respect to which the election in section
48D(d)(1) is made is treated as tax
exempt income for purposes of sections
705 and 1366 of the Code, and (4) a
partner’s distributive share of such tax
exempt income is based on such
partner’s distributive share of the
otherwise applicable credit for each
taxable year.

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III. Special Rules
Section 48D(d)(2)(B) requires the
elective payment election to be made no
later than the due date (including
extensions of time) of the tax return for
the taxable year for which the election
is made. The elective payment election
is irrevocable once made and applies
with respect to any credit for the taxable
year for which the election is made.
Section 48D(d)(2)(E) provides that, as
a condition of, and prior to, any amount
between treated as a payment by or to
the taxpayer, the Secretary may require
such information or registration as the
Secretary deems necessary or
appropriate for purposes of preventing
duplication, fraud, improper payments,
or excessive payments.

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Section 48D(d)(2)(F) provides rules
relating to excessive payments. In the
case of any amount treated as a payment
which is made by the taxpayer under
section 48D(d)(1), or the amount of the
payment made pursuant to section
48D(d)(2)(A), that the Secretary
determines constitutes an excessive
payment, the tax imposed on such
taxpayer by chapter 1 of the Code, for
the taxable year in which such
determination is made must be
increased by an amount equal to the
sum of (1) the amount of any payment
treated as made by or to the taxpayer
which the Secretary determines
constitutes an excessive payment, (2)
plus 20 percent of such excessive
payment. The increase equal to 20
percent of the excessive payment does
not apply if the taxpayer demonstrates
to the satisfaction of the Secretary that
the excessive payment resulted from
reasonable cause.
Section 48D(d)(2)(F)(iii) defines
‘‘excessive payment’’ as, with respect to
property for which an elective payment
election is made for any taxable year, an
amount equal to the excess of (I) the
amount treated as a payment made by
the taxpayer under section 48D(d)(1) or
the amount of the payment made
pursuant to section 48D(d)(2)(A)(i) over
(II) the amount of the credit which,
without application of section 48D(d),
would be otherwise allowable under
section 48D(a) (determined without
regard to section 38(c)) with respect to
such property for such taxable year.
Section 48D(d)(3) provides a denial of
double benefit rule. It states that, in the
case of a taxpayer making an elective
payment election with respect to the
credit determined under section 48D(a),
such credit is reduced to zero and is
deemed to have been allowed to the
taxpayer for such taxable year for any
other purposes under the Code.
Section 48D(d)(5) provides basis
reduction and recapture rules. It states
that rules similar to the rules of section
50(a) and (c) of the Code apply with
respect to amounts treated as a payment
made by a taxpayer under section
48D(d)(1) and any payment made
pursuant to section 48D(d)(2)(A).
Section 48D(d)(6) authorizes the
Secretary to issue regulations or other
guidance determined to be necessary or
appropriate to carry out the elective
payment election provisions of section
48D(d), including (A) regulations or
other guidance providing rules for
determining a partner’s distributive
share of the tax exempt income
described in section 48D(d)(2)(A)(i) and
(B) guidance to ensure that the amount
treated as a payment under section
48D(d)(1) or payment made under

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section 48D(d)(2)(A)(i) is commensurate
with the amount of the section 48D
credit that generally would be otherwise
allowable (determined without regard to
section 38(c) of the Code).
Explanation of Provisions
I. Rules for Making Elective Payment
Elections
A. In General
These proposed regulations revise
§ 1.48D–6(a)(1) and (2) of the March
2023 proposed regulations to clarify that
an elective payment election may only
be made on an original return of tax
filed not later than the due date
(including extensions of time) for the
return for the taxable year for which the
section 48D credit is determined and in
the manner as provided in guidance,
and must include any required
completed source credit form(s) with
respect to the qualified property, a
completed Form 3800, General Business
Credit, and any additional information,
including supporting calculations,
required in instructions to the relevant
forms. An original return would include
a superseding return filed on or before
the due date (including extensions). No
elective payment election would be
permitted to be made or revised on an
amended return or by filing an
administrative adjustment request under
section 6227 of the Code. There also
would be no relief available under
§§ 301.9100–1 through 301.9100–3 of
the Procedure and Administration
Regulations (26 CFR part 301) for an
elective payment election that is not
timely filed.
These proposed regulations would
further provide that a taxpayer makes
the elective payment election with
respect to any section 48D credit
determined with respect to such
taxpayer in accordance with section
48D(d)(1), and the taxpayer must
include a statement with the election
attesting under penalties of perjury that
the taxpayer claiming to be an eligible
taxpayer is not a foreign entity of
concern and has not made an applicable
transaction during the taxable year that
the qualified property is placed in
service, and will not claim a double
benefit (within the meaning of section
48D(d)(3) and § 1.48–6(d)(2)(ii)(B), (C),
and (e)) with respect to any elective
payment election made by the taxpayer.
II. Denial of Double Benefit
These proposed regulations revise
§ 1.48D–6(a)(4) of the March 2023
proposed regulations by explaining the
application of the section 48D(d)(3)
denial of a double benefit rule and
addressing the methodology for

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Federal Register / Vol. 88, No. 118 / Wednesday, June 21, 2023 / Proposed Rules
determining the amount of an elective
payment, reducing the section 48D
credit amount to zero, and treating the
section 48D credit as a credit allowed
for the taxable year for all other
purposes of the Code with respect to
taxpayers other than partnerships or S
corporations. The proposed application
of the denial of a double benefit rule is
redesignated as proposed § 1.48D–6(e).
The methodology with respect to a
payment made to a partnership or S
corporation is provided in proposed
§ 1.48D–6(d)(2)(ii)(B), as described in
part III of this Explanation of Provisions.
A taxpayer (other than a partnership
or S corporation) making an elective
payment election applies section
48D(d)(3) by taking the following steps.
First, the taxpayer would compute the
amount of the tax liability (if any) for
the taxable year, without regard to
general business credits (GBCs), that is
payable on the due date of the tax return
(without regard to extensions), and the
amount of the Federal income tax
liability that may be offset by GBCs
pursuant to the limitation based on the
amount of tax under section 38 (Step 1).
Second, the taxpayer would compute
the allowed amount of the GBCs
carryforwards carried to the taxable year
plus the amount of current year GBCs
(including the section 48D credit)
allowed for the taxable year under
section 38 (that is, in accordance with
all the rules in section 38, including the
ordering rules provided in section
38(d)). Since the election would be
required to be made on an original
return filed before the due date
(including extensions of time) for the
taxable year for which the section 48D
credit is determined, any GBC carryback
would not be considered when
determining the elective payment
amount for the taxable year (Step 2).
Third, the taxpayer would apply the
GBCs allowed for the taxable year as
computed in Step 2, including those
attributable to the section 48D credit as
GBCs, against the tax liability computed
in Step 1. Fourth, the taxpayer would
identify the amount of any excess or
unused current year GBC, as defined
under section 39, attributable to current
year section 48D credit(s) for which the
taxpayer is making an elective payment
election. The amount of such unused
section 48D credits would be treated as
a payment against the tax imposed by
subtitle A for the taxable year with
respect to which such credits are
determined (rather than having them
available for carryback or carryover) (net
elective payment amount) (Step 4).
Fifth, the taxpayer would reduce the
section 48D credit(s) for which an

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elective payment election is made by
the amount (if any) allowed as a general
business credit under section 38 for the
taxable year, as provided in Step 3, and
by the net elective payment amount (if
any) that is treated as a payment against
tax, as provided in Step 4, which results
in the section 48D credit(s) being
reduced to zero.
The proposed regulations would
provide, consistent with section
48D(d)(3), that the full amount of the
section 48D credits for which an
elective payment election is made is
deemed to have been allowed for all
other purposes of the Code, including,
but not limited to, the basis reduction
and recapture rules imposed by section
50 and the calculation of any
underpayment of estimated taxes under
sections 6654 and 6655 of the Code.
The Treasury Department and the IRS
request comments on whether future
guidance should expand or clarify the
methodology that a taxpayer follows to
compute the amount of its elective
payment. Comments are also requested
on additional Code sections under
which it may be necessary to consider
the section 48D credit to have been
deemed to have been allowed for the
taxable year in which an elective
payment election is made.
III. Partnership and S Corporations
A. Overview
Section 48D(d)(2)(A)(i) provides that,
in the case of any credit determined
with respect to any property held
directly by a partnership or S
corporation, any election under section
48D(d)(1) is to be made by such
partnership or S corporation and must
be made in such manner as the
Secretary may provide. If such
partnership or S corporation makes an
election under section 48D(d)(1), the
special rules of section 48D(d)(2)(A)(i)(I)
through (IV) apply. In that regard,
proposed § 1.48D–6(d)(2)(ii) would
provide that (1) the IRS will make a
payment to such partnership or S
corporation equal to the amount of such
credit; (2) before determining any
partner’s distributive share, or
shareholder’s pro rata share, of such
credit, such credit is reduced to zero
and is, for any other purposes under the
Code, deemed to have been allowed
solely to such entity (and not allocated
by such entity, or otherwise allowed, to
any partner or shareholder) for such
taxable year; (3) any amount with
respect to which the election under
section 48D(d)(1) is made is treated as
tax exempt income for purposes of
sections 705 and 1366; and (4) a
partner’s distributive share of such tax

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exempt income is equal to such
partner’s distributive share of its
otherwise allocable basis in the
qualified property as determined under
§ 1.48D–2(h)(2)(i) for such year. The tax
exempt income is taken into account by
the partnership or S corporation at the
same time as the underlying credit
would have been taken into account by
the partnership or S corporation absent
an elective payment election. Such tax
exempt income resulting from such
election is treated as received or
accrued, including for purposes of
sections 705 and 1366 of the Code, as
of the date the qualified property is
placed in service with respect to the
partnership or S corporation. The
proposed regulations provide an
example illustrating this rule. Because it
is the section 48D credits, and not the
tax exempt income, that arise from the
conduct of the trade or business, the
proposed regulations would treat the tax
exempt income resulting from an
elective payment election by a
partnership or an S corporation as
arising from an investment activity and
not from the conduct of a trade or
business within the meaning of section
469(c)(1)(A). As such, the tax exempt
income would not be treated as passive
income to any partners or shareholders
who do not materially participate
within the meaning of section
469(c)(1)(B).
In response to stakeholder comments,
the Treasury Department and the IRS
clarify here that there are no restrictions
imposed under section 48D or the
section 48D regulations on how a
partnership or S corporation that
receives a payment from the IRS
pursuant to an elective payment
election may use the cash payment in its
operations (including when it makes
distributions to its distributions to its
partners or shareholders).
Section 48D(d)(6)(B) requires that the
Secretary issue regulations or other
guidance to ensure that the amount of
a payment under section
48(D)(2)(A)(i)(I) to a partnership or S
corporation is commensurate with the
amount of the credit that would
otherwise be allowable (without regard
to section 38(c)). Therefore, proposed
§ 1.48D–6(d)(6) would provide that, in
determining the section 48D credit
amount that will result in a payment to
a partnership or S corporation, the
partnership or S corporation must
compute the amount of the section 48D
credit allowable (without regard to
section 38(c)) as if an elective payment
election were not made. Because a
partnership or S corporation is not
subject to section 469 (that is, section
469 applies at the partner or shareholder

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Federal Register / Vol. 88, No. 118 / Wednesday, June 21, 2023 / Proposed Rules

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level), the amount of the credit
determined with respect to any
qualified property owned by a
partnership or S corporation is not
subject to limitation by section 469.
However, section 49 generally
impacts the amount of a credit
determined with respect to a qualified
property. Proposed § 1.48D–6(d)(6)(ii)
provides rules for the application of
section 49 to a partnership or S
corporation. The proposed regulations
would provide that any amount of
section 48D credit determined with
respect to the qualified property held
directly by a partnership or S
corporation must be determined by the
partnership or S corporation taking into
account the section 49 at-risk rules at
the partner or shareholder level as of the
close of the taxable year in which the
qualified property is placed in service.
Thus, if the credit base of the qualified
property is limited to a partner or
shareholder by section 49, then the
amount of the section 48D credit
determined by the partnership or S
corporation is also limited. The
proposed regulations would provide
that a partnership or S corporation that
makes an elective payment election
must request from each of its partners or
shareholders, respectively, that is
subject to section 49, the amount of
such partner’s or shareholder’s
nonqualified nonrecourse financing
with respect to the qualified property as
of the close of the taxable year in which
the property is placed in service.
Additionally, the partnership or S
corporation would attach to its tax
return for the taxable year in which the
property is placed in service, the
amount of each partner’s or
shareholder’s section 49 limitation with
respect to the qualified property. The
Treasury Department and the IRS
request comments as to whether (1) any
information or reporting requirements
are needed for partnerships and S
corporations to apply these rules when
determining the amount of the section
48D credit for which an elective
payment election can be made by a
partnership or S corporation or (2) any
additional clarifications are needed
regarding how the at-risk rules apply to
the determination of the section 48D
credit by a taxpayer.
B. BBA Partnership
Many partnerships are subject to the
centralized partnership audit regime
found in subchapter C of chapter 63 of
the Code as amended by the Bipartisan
Budget Act of 2015 (BBA).1 In
1 See section 1101 of the BBA, Public Law 114–
74, 129 Stat. 584, 625–638 (2015), as amended by

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connection with the implementation of
section 48D, the Treasury Department
and the IRS identified several areas of
the BBA regulations that require
updates to administer section 48D in the
case of a partnership subject to the BBA
(BBA partnership). Section 6221 of the
Code provides that any adjustment to a
partnership-related item with respect to
a BBA partnership, and any tax
attributable thereto, is assessed and
collected at the partnership-level except
to the extent provided under the BBA.
The BBA outlines centralized audit
procedures which generally must be
followed before the IRS can adjust a
partnership-related item (as defined in
§ 301.6241–1). Accordingly, the notice
of proposed rulemaking (REG–101607–
23) found in the Proposed Rules of this
issue of the Federal Register, which
primarily relates to proposed rules
under section 6417, would add a new
paragraph (j) to § 301.6241–7 to provide
that an election by a BBA partnership
under section 48D(d) can be adjusted
outside of the BBA audit rules.
Proposed § 1.48D–6(d)(7) would crossreference to proposed § 301.6241–7(j)
for rules applicable to payments made
to BBA partnerships.
IV. Pre-Filing Registration
Requirements and Additional
Information
Proposed § 1.48D–6(b)(1) would
provide the mandatory pre-filing
registration process that, except as
provided in guidance, a taxpayer must
complete as a condition of, and prior to,
any amount being treated as a payment
against the tax imposed under § 1.48D–
6(a)(1), or an amount paid to a
partnership or S corporation pursuant to
§ 1.48D–6(d)(2)(ii)(A). A taxpayer would
be required to use the pre-filing
registration process to register each
qualified investment in an advanced
manufacturing facility. A taxpayer that
does not obtain a registration number or
report the registration number on its
annual tax return with respect to an
advanced manufacturing facility would
be ineligible to receive any elective
payment amount with respect to the
amount of any section 48D credit
determined with respect to that
advanced manufacturing facility.
However, completion of the pre-filing
registration requirements and receipt of
a registration number would not, by
itself, mean that the taxpayer would be
eligible to receive a payment with
respect to the section 48D credits
section 411 of the Protecting Americans from Tax
Hikes Act of 2015, Public Law 114–113, 129 Stat.
2242, 3121 (2015), and sections 201 through 207 of
the Tax Technical Corrections Act of 2018, Public
Law 115–141, 132 Stat. 348, 1171–1183 (2018).

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determined with respect to the
advanced manufacturing facility.
The pre-filing registration
requirements are proposed to be that a
taxpayer:
(1) must complete the registration
process electronically through the IRS
electronic portal and in accordance with
the instructions provided therein,
unless otherwise provided in guidance;
(2) must satisfy the registration
requirements and receive a registration
number prior to making a section
48D(d)(1) elective payment election on
the taxpayer’s tax return for the taxable
year at issue;
(3) is required to obtain a registration
number for each qualified investment in
an advanced manufacturing facility with
respect to which a section 48D credit
will be determined and for which the
taxpayer wishes to make a section
48D(d)(1) elective payment election; and
(4) provide the specific information
required to be provided as part of the
pre-filing registration process. The
provision of such information, which
includes information about the taxpayer
and about the qualified investment in an
advanced manufacturing facility that
would allow the IRS to prevent
duplication, fraud, improper payments,
or excessive payments under section
48D. For example, verifying information
about the taxpayer would allow the IRS
to mitigate the risk of fraud or improper
payments to entities that are not eligible
taxpayers. Information about the
taxpayer’s taxable year would allow the
IRS to ensure that an elective payment
election is timely made on the entity’s
annual tax return. Information about the
advanced manufacturing facility,
including its address and coordinates
(longitude and latitude), supporting
documentation, beginning of
construction date, and placed in service
date would allow the IRS to mitigate the
risk of duplication, fraud, and improper
payments for properties that are not
advanced manufacturing facilities.
Proposed § 1.48D–6(b)(7)(i) provides
that, after a taxpayer completes prefiling registration with respect to each
qualified investment in an advanced
manufacturing facility with respect to
which the taxpayer intends to elect a
section 48D(d) elective payment
election for the taxable year, the IRS
will review the information provided
and will issue a separate registration
number for each qualified investment
for which the taxpayer provided
sufficient verifiable information.
Proposed § 1.48D–6(b)(7)(ii) would
provide that a registration number is
valid only for the taxable year for which
it is obtained. Proposed § 1.48D–
6(c)(7)(iii) would provide that, if an

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elective payment election will be made
with respect to qualified investment in
an advanced manufacturing facility for
a taxable year for which a registration
number under this section has been
obtained for a prior taxable year, the
taxpayer must renew the registration
each subsequent year in accordance
with applicable guidance, including
attesting that all the facts previously
provided are still correct or updating
any facts that are relevant in calculating
the amount of the section 48D credit.
Proposed § 1.48D–6(b)(7)(iv) would
provide that, if facts change with respect
to the qualified investment in an
advanced manufacturing facility for
which a registration number has been
previously obtained, the taxpayer must
amend the registration to reflect these
new facts. The regulations would
provide, for example, that if the facility
previously registered for an elective
payment election undergoes a change of
ownership (incident to a corporate
reorganization or an asset sale) such that
the new owner has a different employer
identification number (EIN) than the
owner who obtained the original
registration, the original owner would
be required to amend the original
registration to disassociate its EIN from
the advanced manufacturing facility and
the new owner must submit an original
registration (or if the new owner
previously registered other advanced
manufacturing facilities, must amend its
original registration) to associate the
new owner’s EIN with the previously
registered advanced manufacturing
facility.
Lastly, proposed § 1.48D–6(b)(7)(v)
would provide that the taxpayer would
be required to include the registration
number of the advanced manufacturing
facility on the taxpayer’s annual return
for the taxable year for an election under
proposed § 1.48D–6(a)(1). The IRS will
treat an elective payment election as
ineffective with respect to any section
48D credit determined with respect to
the advanced manufacturing facility for
which the taxpayer does not include a
valid registration number on the annual
tax return.
The corresponding temporary
regulations under § 1.48D–6T(b)
published in the Rules and Regulations
section of this edition of the Federal
Register, which are identical to those
that would apply under proposed
§ 1.48D–6(b), apply to taxable years
ending on or after June 21, 2023 and
expire on June 12, 2026.
V. Special Rules
These proposed regulations amend
the proposed rules relating to excessive
payment and basis reduction and

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recapture under REG–120653–22 by
adding examples of excessive payment,
clarifying the basis reduction and
recapture notice requirement and
renumbering the affected paragraphs as
§ 1.48D–6(f) and (g), respectively.
A. Excessive Payment
Proposed § 1.48D–6(f)(4) provides an
example of excessive payment,
including the year in which the tax is
imposed and the calculation of the
additional 20 percent tax. The Treasury
Department and the IRS request
comments on whether additional
guidance on excessive payments is
needed.
B. Basis Reduction and Recapture
Proposed § 1.48D–6(g)(1) would
provide that rules similar to the rules of
section 50(a) and (c) apply for purposes
of section 48D. Proposed § 1.48D–
6(g)(2)(i) provides that the adjusted
basis of property generally must be
reduced by the amount of the section
48D credit determined with respect to
property for which the taxpayer has
made an election under section
48D(d)(1). Proposed § 1.48D–6(g)(2)(ii)
would provide a similar basis reduction
rule for partnerships or S corporations
making an election under section
48D(d)(1). Proposed § 1.48D–6(g)(2)(iii)
would clarify the application of the
basis adjustment rule under section
50(c)(5) to take into account adjustments
made under proposed § 1.48D–6(e)(2)(ii)
for partners and S corporation
shareholders of such partnerships or S
corporations.
Proposed § 1.48D–6(g)(3) would
clarify that any reporting of recapture is
made on the taxpayer’s annual return in
the manner prescribed by the IRS in any
guidance. In addition, the excessive
payment rules operate separately from
the recapture rules. The excessive
payment rules apply where the credit
amount reported on the original credit
source form by the taxpayer was
excessive. Recapture of a tax credit
occurs when the original tax credit
reported would have been correct
without the occurrence of a subsequent
recapture event. Thus, recapture events
under section 50(a) do not result in an
excessive payment.
Proposed Applicability Dates
Proposed § 1.48D–6 is proposed to
apply to taxable years ending on or after
the date the Treasury decision adopting
these regulations as final regulations is
published in the Federal Register.
Taxpayers may rely on these proposed
regulations for elective payments of
section 48D credit amounts after
December 31, 2022, in taxable years

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ending before the date the Treasury
decision adopting these regulations as
final regulations is published in the
Federal Register, provided the
taxpayers follow the proposed
regulations in their entirety and in a
consistent manner with respect to all
elections made under section 48D(d).
Special Analyses
I. Paperwork Reduction Act
The Paperwork Reduction Act of 1995
(44 U.S.C. 3501–3520) (‘‘PRA’’)
generally requires that a Federal agency
obtain the approval of the Office of
Management and Budget (OMB) before
collecting information from the public,
whether such collection of information
is mandatory, voluntary, or required to
obtain or retain a benefit. An agency
may not conduct or sponsor, and a
person is not required to respond to, a
collection of information unless the
collection of information displays a
valid control number.
The collections of information in
these proposed regulations contain
reporting and recordkeeping
requirements. The recordkeeping
requirements mentioned within these
proposed regulations are considered
general tax records under § 1.6001–1(e).
These records are required for the IRS
to validate that taxpayers have met the
regulatory requirements and are entitled
to make an elective payment election.
For PRA purposes, general tax records
are already approved by OMB under
1545–0074 for individuals and 1545–
0123 for business entities.
These proposed regulations also
mention reporting requirements related
to making elections as detailed in
§ 1.48D–6. These elections will be made
by eligible taxpayers as part of filing a
return (such as the appropriate Form
1040, Form 1120, Form 1120–S, or Form
1065), including filling out the relevant
source credit form and completing the
Form 3800. These forms are approved
under 1545–0074 for individuals and
1545–0123 for business entities.
These proposed regulations also
describe recapture procedures as
detailed in proposed § 1.48D–6 that are
required by section 48D(d)(5). The
reporting of a recapture event will still
be required to be reported using Form
4255, Recapture of Investment Credit.
This form is approved under 1545–0074
for individuals and 1545–0123 for
business entities. These proposed
regulations are not changing or creating
new collection requirements for
recapture not already approved by
OMB.
These proposed regulations mention
the reporting requirements to complete

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pre-filing registration with the IRS to be
able to make an elective payment
election in proposed § 1.48D–6. For
further information concerning the
registration and where to submit
comments on the collection of
information and the accuracy of the
estimated burden, and suggestions for
reducing this burden, please refer to the
preamble to the corresponding
temporary regulations (T.D. 9975)
published in the Rules and Regulations
section of this issue of the Federal
Register. For burden estimates
associated with the pre-filing
registration requirement as detailed in
proposed § 1.48D–6, see the preamble to
the corresponding temporary
regulations. These proposed regulations
are not changing or creating new
collection requirements beyond the
requirements that are being reviewed
and approved by OMB under the
temporary regulations.

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II. Regulatory Flexibility Act
In accordance with the Regulatory
Flexibility Act (5 U.S.C. chapter 6), it is
hereby certified that these proposed
regulations will not have a significant
economic impact on a substantial
number of small entities. Although
these temporary regulations may affect
small entities, data are not readily
available about the number of small
entities affected. The economic impact
of these proposed regulations is not
likely to be significant. Section 1.48D–
6T(b) implements the statutory
authority granted by section
48D(d)(2)(E) that authorizes the IRS to
require such information or registration
as the Secretary deems necessary for
purposes of preventing duplication,
fraud, improper payments, or excessive
payments. These proposed regulations
will assist small entities wanting to
make the elective payment election
under section 48D(d). Notwithstanding
this certification, the Treasury
Department and the IRS welcome
comments on the impact of these
temporary regulations on small entities.
III. Section 7805(f)
Pursuant to section 7805(f), these
proposed regulations will be submitted
to the Chief Counsel for Advocacy of the
Small Business Administration for
comment on their impact on small
business.
IV. Unfunded Mandates Reform Act
Section 202 of the Unfunded Mandate
Reform Act of 1995 requires that
agencies assess anticipated costs and
benefits and take certain other actions
before issuing a final rule that includes
any Federal mandate that may result in

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expenditures in any one year by a State,
local, or Tribal government, in the
aggregate, or by the private sector, of
$100 million in 1995 dollars (updated
annually for inflation). These proposed
regulations do not include any Federal
mandate that may result in expenditures
by State, local, or Tribal governments, or
by the private sector in excess of that
threshold.
V. Executive Order 13132: Federalism
Executive Order 13132 (Federalism)
prohibits an agency from publishing any
rule that has federalism implications if
the rule either imposes substantial,
direct compliance costs on State and
local governments, and is not required
by statute, or preempts State law, unless
the agency meets the consultation and
funding requirements of section 6 of the
Executive order. These proposed
regulations do not have federalism
implications and do not impose
substantial, direct compliance costs on
State and local governments or preempt
State law within the meaning of the
Executive order.
VII. Regulatory Planning and Review
Pursuant to the Memorandum of
Agreement, Review of Treasury
Regulations under Executive Order
12866 (June 9, 2023), tax regulatory
actions issued by the IRS are not subject
to the requirements of section 6 of
Executive Order 12866, as amended.
Therefore, a regulatory impact
assessment is not required.
Comments and Public Hearing
Before these proposed amendments to
the regulations are adopted as final
regulations, consideration will be given
to comments that are submitted timely
to the IRS as prescribed in this preamble
under the ADDRESSES section. The
Treasury Department and the IRS
request comments on all aspects of the
proposed regulations. All comments
will be made available at
www.regulations.gov or upon request.
Once submitted to the Federal
eRulemaking Portal, comments cannot
be edited or withdrawn.
Announcement 2023–16, 2023–20
I.R.B. 854 (May 15, 2023), provides that
public hearings will be conducted in
person, although the IRS will continue
to provide a telephonic option for
individuals who wish to attend or
testify at a hearing by telephone. Any
telephonic hearing will be made
accessible to people with disabilities.
A public hearing has been scheduled
for August 24, 2023, beginning at 10
a.m. ET, in the Auditorium at the
Internal Revenue Building, 1111
Constitution Avenue NW, Washington,

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DC, unless no outlines are received by
August 14, 2023. Due to building
security procedures, visitors must enter
at the Constitution Avenue entrance. In
addition, all visitors must present photo
identification to enter the building.
Because of access restrictions, visitors
will not be admitted beyond the
immediate entrance area more than 30
minutes before the hearing starts.
The rules of 26 CFR 601.601(a)(3)
apply to the hearing. Persons who wish
to comment by telephone at the hearing
must submit written or electronic
comments and an outline of the topics
to be discussed as well as the time to be
devoted to each topic by August 14,
2023, as prescribed in the preamble
under the ADDRESSES section. If no
outline of the topics to be discussed at
the hearing is received by August 14,
2023, the public hearing will be
cancelled. If the public hearing is
cancelled, a notice of cancellation of the
public hearing will be published in the
Federal Register.
A period of ten minutes will be
allocated to each person for making
comments. After the deadline for
receiving outlines has passed, the IRS
will prepare an agenda containing the
schedule of speakers. Copies of the
agenda will be made available: (1) at the
hearing, (2) at https://
www.regulations.gov, search IRS and
REG–105595–23, or (3) by emailing a
request to [email protected].
Please put ‘‘REG–105595–23 Agenda
Request’’ in the subject line of the email.
Individuals who want to testify in
person at the public hearing must send
an email to [email protected] to
have your name added to the building
access list. The subject line of the email
must contain the regulation number
REG–105595–23 and the language
TESTIFY In Person. For example, the
subject line may say: Request to
TESTIFY In Person at Hearing for REG–
105595–23.
Individuals who want to testify by
telephone at the public hearing must
send an email to [email protected]
to receive the telephone number and
access code for the hearing. The subject
line of the email must contain the
regulation number REG–105595–23 and
the language TESTIFY Telephonically.
For example, the subject line may say:
Request to TESTIFY Telephonically at
Hearing for REG–105595–23.
Individuals who want to attend the
public hearing in person without
testifying must also send an email to
[email protected] to have your
name added to the building access list.
The subject line of the email must
contain the regulation number REG–
105595–23 and the language ATTEND

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Federal Register / Vol. 88, No. 118 / Wednesday, June 21, 2023 / Proposed Rules
In Person. For example, the subject line
may say: Request to ATTEND Hearing In
Person for REG–105595–23. Requests to
attend the public hearing must be
received by 5 p.m. EST on August 22,
2023.
Individuals who want to attend the
public hearing by telephone without
testifying must also send an email to
[email protected] to receive the
telephone number and access code for
the hearing. The subject line of the
email must contain the regulation
number REG–105595–23 and the
language ATTEND Hearing
Telephonically. For example, the
subject line may say: Request to
ATTEND Hearing Telephonically for
REG–105595–23. Requests to attend the
public hearing must be received by 5
p.m. EST on August 22, 2023.
Hearings will be made accessible to
people with disabilities. To request
special assistance during a hearing
please contact the Publications and
Regulations Branch of the Office of
Associate Chief Counsel (Procedure and
Administration) by sending an email to
[email protected] (preferred) or by
telephone at (202) 317–6901 (not a tollfree number) at least August 21, 2023.
Statement of Availability of IRS
Documents
Guidance cited in this preamble is
published in the Internal Revenue
Bulletin and is available from the
Superintendent of Documents, U.S.
Government Publishing Office,
Washington, DC 20402, or by visiting
the IRS website at https://www.irs.gov.
Drafting Information
The principal author of this proposed
regulation is Lani M. Sinfield, Office of
the Associate Chief Counsel
(Passthroughs and Special Industries),
IRS. However, other personnel from the
Treasury Department and the IRS
participated in their development.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and
recordkeeping requirements.
Proposed Amendments to the
Regulations

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Accordingly, the Treasury Department
and the IRS propose to amend 26 CFR
part 1 as follows:
PART 1—INCOME TAXES
Paragraph. 1. The authority citation
for part 1 is amended by adding an entry
for § 1.48D–6 in numerical order to read
in part as follows:

■

Authority: 26 U.S.C. 7805 * * *

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Section 1.48D–6 also issued under 26
U.S.C. 48D(d)(6).

*

*
*
*
*
Par. 2. Section 1.48D–6, as proposed
to be added by 88 FR 17451, March 23,
2023, is revised to read as follows:

■

§ 1.48D–6

Elective payment election.

(a) Elective payment election—(1) In
general. A taxpayer, after successfully
completing the pre-filing registration
requirements under paragraph (b) of this
section, may make an elective payment
election with respect to any section 48D
credit determined with respect to such
taxpayer in accordance with section
48D(d)(1) of the Internal Revenue Code
(Code) and this section. A taxpayer,
other than a partnership or S
corporation, that makes an elective
payment election in the manner
provided in paragraph (c) of this section
will be treated as making a payment
against the Federal income taxes
imposed by subtitle A of the Code
(subtitle A) for the taxable year with
respect to which a section 48D credit is
determined equal to the amount of the
section 48D credit with respect to any
qualified property otherwise allowable
to the taxpayer (determined without
regard to section 38(c) of the Code). The
payment described in section 48D(d)(1)
and this paragraph (a)(1) will be treated
as made on the later of the due date
(determined without regard to
extensions) of the return of tax imposed
by subtitle A for the taxable year or the
date on which such return is filed.
(2) Partnerships and S corporations.
See paragraph (d) of this section for
special rules regarding elective payment
elections under section 48D(d)
applicable to partnerships and S
corporations.
(3) Irrevocable. Any election under
section 48D(d)(1) and this section, once
made, will be irrevocable and, except as
otherwise provided, will apply with
respect to any amount of section 48D
credit for the taxable year for which the
election is made.
(b) Pre-filing registration required—(1)
In general. Pre-filing registration by any
taxpayer (including a partnership or an
S corporation) in accordance with this
paragraph (b) is a condition that must be
successfully completed prior to making
an elective payment election under
section 48D(d)(1) and this section with
respect to qualified property placed in
service by the taxpayer as part of an
advanced manufacturing facility of an
eligible taxpayer. An elective payment
election will not be effective with
respect to the section 48D credit
determined with respect to any such
qualified property placed in service by
any taxpayer unless the taxpayer

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received a valid registration number for
the taxpayer’s qualified investment in
the advanced manufacturing facility of
an eligible taxpayer in accordance with
this paragraph (b) and provided the
registration number for each qualified
investment in each advanced
manufacturing facility on its Form 3800,
General Business Credit, attached to the
tax return in accordance with guidance.
For purposes of this section, the term
guidance means guidance published in
the Federal Register or Internal Revenue
Bulletin, as well as administrative
guidance such as forms, instructions,
publications, or other guidance on the
IRS.gov website. See §§ 601.601 and
601.602 of this chapter. However,
completion of the pre-filing registration
requirements and receipt of a
registration number does not, by itself,
mean the taxpayer is eligible to receive
a payment with respect to any section
48D credit determined with respect to
the qualified property.
(2) Manner of registration. Unless
otherwise provided in guidance, a
taxpayer must complete the pre-filing
registration process electronically
through the IRS electronic portal and in
accordance with the instructions
provided therein.
(3) Members of a consolidated group.
A member of a consolidated group is
required to complete pre-filing
registration as a condition of, and prior
to, making an elective payment election.
See § 1.1502–77 (providing rules
regarding the status of the common
parent as agent for its members).
(4) Timing of pre-filing registration. A
taxpayer must satisfy the pre-filing
registration requirements of this
paragraph (b) and receive a registration
number under paragraph (b)(6) of this
section prior to making any elective
payment election under this section on
the taxpayer’s tax return for the taxable
year at issue.
(5) Each qualified investment in an
advanced manufacturing facility must
have its own registration number. A
taxpayer must obtain a registration
number for each qualified investment in
an advanced manufacturing facility of
an eligible taxpayer with respect to
which an elective payment election is
made.
(6) Information required to complete
the pre-filing registration process.
Unless modified in future guidance, a
taxpayer must provide the following
information to the IRS to complete the
pre-filing registration process:
(i) The taxpayer’s general information,
including its name, address, taxpayer
identification number, and type of legal
entity;

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(ii) Any additional information
required by the IRS electronic portal;
(iii) The taxpayer’s taxable year, as
determined under section 441 of the
Code;
(iv) The type of annual return(s)
normally filed by the taxpayer with the
IRS;
(v) A list of each qualified investment
in an advanced manufacturing facility
that the taxpayer intends to use to
determine a section 48D credit for
which the taxpayer intends to make an
elective payment election;
(vi) For each qualified investment in
an advanced manufacturing facility
listed in paragraph (b)(6)(v) of this
section, any further information
required by the IRS electronic portal,
such as:
(A) The type of qualified investment
in the advanced manufacturing facility;
(B) Physical location (that is, address
and coordinates (longitude and latitude)
of the advanced manufacturing facility);
(C) Any supporting documentation
relating to the construction,
reconstruction or acquisition of the
advanced manufacturing facility (such
as, State and local government permits
to operate the advanced manufacturing
facility, certifications, and evidence of
ownership that ties to the land deed,
lease, or other documented right to use
and access any land upon which the
advanced manufacturing facility is
constructed or housed);
(D) The beginning of construction
date and the placed in service date of
any qualified property that is part of the
advanced manufacturing facility;
(E) The source of funds the taxpayer
used to acquire the qualified property
with respect to which the qualified
investment was made; and
(F) Any other information that the
taxpayer or entity believes will help the
IRS evaluate the registration request;
(vii) The name of a contact person for
the taxpayer. The contact person is the
person whom the IRS may contact if
there is an issue with the registration.
The contact person must either:
(A) Possess legal authority to bind the
taxpayer; or
(B) Must provide a properly executed
power of attorney on Form 2848, Power
of Attorney and Declaration of
Representative;
(viii) A penalties of perjury statement,
effective for all information submitted
as a complete application, and signed by
a person with personal knowledge of the
relevant facts that is authorized to bind
the registrant; and
(ix) Any other information the IRS
deems necessary for purposes of
preventing duplication, fraud, improper
payments, or excessive payments under

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this section that is provided in
guidance.
(7) Registration number—(i) In
general. The IRS will review the
information provided and will issue a
separate registration number for each
qualified investment in an advanced
manufacturing facility of an eligible
taxpayer for which the taxpayer making
the registration provided sufficient
verifiable information.
(ii) Registration number is only valid
for one year. A registration number is
valid only with respect to the taxpayer
that obtained the registration number
under this section and only for the
taxable year for which it is obtained.
(iii) Renewing registration numbers. If
an elective payment election will be
made with respect to any section 48D
credit determined with respect to a
qualified investment in an advanced
manufacturing facility for a taxable year
after a registration number under this
section has been obtained, the taxpayer
must renew the registration for that
subsequent year in accordance with
applicable guidance, including attesting
that all the facts previously provided are
still correct or updating any facts.
(iv) Amendment of previously
submitted registration information if a
change occurs before the registration
number is used. As provided in
instructions to the pre-filing registration
portal, if specified changes occur with
respect to a qualified investment in an
advanced manufacturing facility for
which a registration number has been
previously obtained, a taxpayer must
amend the registration (or may need to
submit a new registration) to reflect
these new facts. For example, if an
eligible taxpayer that is the owner of an
advanced manufacturing facility
previously registered for an elective
payment election for a section 48D
credit determined with respect to that
advanced manufacturing facility and the
advanced manufacturing facility
undergoes a change of ownership
(incident to a corporate reorganization
or an asset sale) such that the new
owner has a different employer
identification number (EIN) than the
owner who obtained the original
registration, the original owner of the
advanced manufacturing facility must
amend the original registration to
disassociate its EIN from the advanced
manufacturing facility and the new
owner must submit separately an
original registration (or if the new owner
previously registered other qualified
investments or advanced manufacturing
facilities, must amend its original
registration) to associate the new
owner’s EIN with the previously

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registered advanced manufacturing
facility.
(v) Registration number is required to
be reported on the return for the taxable
year of the elective payment election.
The taxpayer must include the
registration number of the qualified
investment in the advanced
manufacturing facility on the taxpayer’s
return as provided in this paragraph (b)
for the taxable year. The IRS will treat
an elective payment election as
ineffective with respect to a section 48D
credit determined with respect to a
qualified investment in an advanced
manufacturing facility for which the
taxpayer does not include a valid
registration number on the annual
return.
(c) Time and manner of election—(1)
In general. Any elective payment
election under section 48D(d)(1) and
this section with respect to any section
48D credit determined with respect to a
taxpayer’s qualified investment must—
(i) Be made on the taxpayer’s original
return of tax (including a superseding
return) filed not later than the due date
(including extensions of time) for the
taxable year for which the section 48D
credit is determined and the election is
made in the manner prescribed by the
IRS in guidance;
(ii) Include any required completed
source credit form(s), a completed Form
3800, and any additional information
required in instructions, including
supporting calculations;
(iii) Provide on the completed Form
3800 a valid registration number for the
qualified investment that is placed in
service as part of an advanced
manufacturing facility of an eligible
taxpayer;
(iv) Include a statement attesting
under the penalties of perjury that—
(A) The taxpayer claiming to be an
eligible taxpayer is not a foreign entity
of concern within the meaning of
§ 1.48D–2(f)(2) and has not made an
applicable transaction as defined in
§ 1.50–2(b)(3) during the taxable year
that the qualified property is placed in
service; and
(B) The taxpayer will not claim a
double benefit (within the meaning of
section 48D(d)(3) and paragraphs
(d)(2)(ii)(B) and (C) and (e) of this
section) with respect to any elective
payment election made by the taxpayer;
and
(v) Be made not later than the due
date (including extensions of time) for
the taxable year for which the election
is made, but in no event earlier than
May 8, 2023.
(2) Limitations. No elective payment
election may be made or revised on an
amended return or by filing an

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administrative adjustment request under
section 6227 of the Code. There is no
relief available under §§ 301.9100–1
through 301.9100–3 of this chapter for
an elective payment election that is not
timely filed in accordance with
paragraph (c)(1) of this section.
(d) Special rules for partnerships and
S corporations—(1) In general. If a
partnership or S corporation directly
holds any property for which an
advanced manufacturing investment
credit is determined, any election under
this section must be made by the
partnership or S corporation. No
election under section 48D(d) and this
section by any partner or shareholder is
allowed.
(2) Election—(i) Time and manner of
election. An elective payment election
by a partnership or S corporation is
made at the same time and in the same
manner, and subject to the pre-filing
registration and other requirements for
the election to be effective, as provided
in paragraphs (b) and (c) of this section.
(ii) Effect of election. If a partnership
or S corporation makes an elective
payment election with respect to a
section 48D credit, the following rules
will apply:
(A) The Internal Revenue Service will
make a payment to such partnership or
S corporation equal to the amount of
such credit, determined in accordance
with paragraph (d)(6) of this section
(unless the partnership or S corporation
owes a Federal tax liability, in which
case the payment may be reduced by
such tax liability);
(B) Before determining any partner’s
distributive share, or S corporation
shareholder’s pro rata share, of such
credit, such credit is reduced to zero
and is, for any other purposes under the
Code, deemed to have been allowed
solely to such entity (and not allocated
or otherwise allowed to its partners or
shareholders) for such taxable year; and
(C) Any partner’s or S corporation
shareholder’s share of any qualified
investment in an advanced
manufacturing facility for which an
elective payment election has been
made for the taxable year, is reduced to
zero for such taxable year.
(iii) Coordination with sections 705
and 1366. Any amount with respect to
which the election is made is treated as
tax exempt income for purposes of
sections 705 and 1366 of the Code.
(iv) Partner’s distributive share. A
partner’s distributive share of such tax
exempt income is equal to such
partner’s distributive share of its
otherwise allocable basis in qualified
property under § 1.48D–2(h)(2)(i) for
such taxable year.

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(v) S corporation shareholder’s prorata share. An S corporation
shareholder’s pro rata share (as
determined under section 1377(a) of the
Code) of such tax exempt income is
taken into account by the S corporation
shareholder in the taxable year (as
determined under sections 444 and
1378(b) of the Code) in which the
section 48D credit is determined and is
based on the shareholder’s otherwise
apportioned basis in qualified property
under § 1.48D–2(h)(2)(ii) for the taxable
year.
(vi) Timing of tax exempt income.
Such tax exempt income resulting from
such election is treated as received or
accrued, including for purposes of
sections 705 and 1366 of the Code, as
of the date the qualified property is
placed in service with respect to the
partnership or S corporation.
(3) Disregarded entity ownership. In
the case of a qualified property held
directly by an entity disregarded as
separate from a partnership or S
corporation for Federal income tax
purposes, such qualified property will
be treated as held directly by the
partnership or S corporation for
purposes of making an elective payment
election.
(4) Electing partnerships in tiered
structures. If a partnership (upper-tier
partnership) is a direct or indirect
partner of a partnership that makes an
elective payment election and directly
or indirectly receives an allocation of
tax exempt income resulting from the
elective payment election made by the
partnership, the upper-tier partnership
must determine its partners’ distributive
shares of such tax exempt income in
proportion to each partner’s distributive
share of its otherwise allocable basis in
qualified property under § 1.48D–
2(h)(2)(i) for such taxable year.
(5) Character of tax exempt income.
Tax exempt income resulting from an
elective payment election by an S
corporation or a partnership is treated as
arising from an investment activity and
not from the conduct of a trade or
business within the meaning of section
469(c)(1)(A). As such, the tax exempt
income is not treated as passive income
to any partners or shareholders who do
not materially participate within the
meaning of section 469(c)(1)(B).
(6) Determination of amount of the
section 48D credit—(i) In general. In
determining the amount of the section
48D credit that will result in a payment
under paragraph (d)(2)(ii)(A) of this
section, the partnership or S corporation
must compute the amount of the credit
allowable (without regard to section
38(c)) as if an elective payment election
were not made. Because a partnership or

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S corporation is not subject to section
469 (that is, section 469 applies at the
partner or shareholder level), the
amount of the credit determined by a
partnership or S corporation is not
subject to limitation by section 469.
Because the section 48D credit is an
investment credit under section 46,
sections 49 and 50 apply to limit the
amount of the credit.
(ii) Application of section 49 at-risk
rules to determination of section 48D
credit for partnerships and S
corporations. Any amount of section
48D credit determined with respect to
qualified property held directly by a
partnership or S corporation must be
determined by the partnership or S
corporation taking into account the
section 49 at-risk rules at the partner or
shareholder level as of the close of the
taxable year in which the qualified
property is placed in service. Thus, if
the credit base of a qualified property is
limited to a partner or S corporation
shareholder by section 49, then the
amount of the section 48D credit
determined by the partnership or S
corporation is also limited. A
partnership or S corporation that
directly holds qualified property must
request from each of its partners or
shareholders, respectively, that is
subject to section 49, the amount of
such partner’s or shareholder’s
nonqualified nonrecourse financing
with respect to the qualified property as
of the close of the taxable year in which
the property is placed in service.
Additionally, the partnership or S
corporation must attach to its tax return
for the taxable year in which the
qualified property is placed in service,
the amount of each partner’s or
shareholder’s section 49 limitation with
respect to any qualified property.
Changes to at-risk amounts under
section 49 for partners or S corporation
shareholders after the close of the
taxable year in which the qualified
property is placed in service do not
impact the section 48D credit
determined by the partnership or S
corporation, but do impact the
partner(s) or S corporation
shareholder(s) as provided in paragraph
(d)(6)(iii) of this section.
(iii) Changes in at-risk amounts under
section 49 at partner or shareholder
level. A partner or shareholder in a
partnership or S corporation,
respectively, must apply the rules under
section 49 at the partner or shareholder
level if there is a change in nonqualified
nonrecourse financing with respect to
the partner or shareholder after the close
of the taxable year in which the
qualified property is placed in service
and the section 48D credit is

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determined. If there is an increase in
nonqualified nonrecourse financing to a
partner, any adjustment under the rules
of section 49(b) is calculated based on
the partner’s share of the basis (or cost)
of the qualified property to which the
section 48D credit was determined in
accordance with § 1.48D–2(h)(2)(i). If
there is an increase in nonqualified
nonrecourse financing to a shareholder,
any adjustment under the rules of
section 49(b) is calculated based on the
shareholder’s pro rata share of the basis
(or cost) of the qualified property to
which the section 48D was determined
in accordance with § 1.48D–2(h)(2)(ii). If
there is a decrease in nonqualified
nonrecourse financing, any increase in
the credit base is taken into account by
the partner or shareholder as provided
under section 49, and any resulting
credit is not eligible for an elective
payment election under section 48D(d).
(7) Partnerships subject to subchapter
C of chapter 63 of the Code. See
§ 301.6241–7(j) of this chapter for rules
applicable to payments made to
partnerships subject to subchapter C of
chapter 63 of the Code for a partnership
taxable year.
(8) Example. The following example
illustrates the rules of this paragraph
(d).
(i) Example. P is a calendar-year
partnership consisting of partners A and
B, each 50% owners. P constructs
Facility A, an advanced manufacturing
facility, at V. P completes the pre-filing
registration with respect to Facility A at
V for 2024 in accordance with
paragraph (b) of this section. In 2024, P
places in service qualified property
which is part of Facility A at V. P timely
files its 2024 Form 1065 and properly
makes the elective payment election in
accordance with paragraph (c) of this
section. On its Form 1065, P properly
determines that the amount of section
48D credit with respect to the qualified
property placed in service at Facility A
for 2024 is $100,000. The IRS processes
P’s return and makes a $100,000
payment to P. Before determining A’s
and B’s distributive shares, P reduces
the section 48D credit to zero. However,
for other purposes of the Code, the
$100,000 section 48D credit is deemed
to have been allowed to P for 2024. The
$100,000 is treated as tax exempt
income for purposes of section 705, and
A’s and B’s distributive shares of such
tax exempt income is based on each
partner’s otherwise allocable basis in
qualified property under § 1.48D–
2(h)(2)(i) for the 2024 taxable year
($50,000 each). A’s and B’s basis in their
partnership interests and capital
accounts will be appropriately adjusted
to take into account basis adjustments

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made to the qualified property under
section 50(c)(5) and § 1.704–
1(b)(2)(iv)(j). See paragraph (g)(2) of this
section. The tax exempt income
received or accrued by P as a result of
the elective payment election is treated
as received or accrued, including for
purposes of section 705, as of date P
placed in service the qualified property
in 2024.
(ii) [Reserved]
(e) Denial of double benefit—(1) In
general. In the case of a taxpayer making
an election under section 48D(d) and
this section with respect to any section
48D credit determined under section
48D(a) and § 1.48D–1, such credit is
reduced to zero and is, for any other
purposes under the Code, deemed to
have been allowed to the taxpayer for
such taxable year. Paragraphs (e)(2) and
(3) of this section explain the
application of the section 48D(d)(3)
denial of a double benefit rule to a
taxpayer (other than a partnership or S
corporation). The application of section
48D(d)(3) to a partnership or S
corporation is provided in paragraphs
(d)(2)(ii)(B) and (C) of this section.
(2) Application of the denial of double
benefit rule. A taxpayer (other than a
partnership or S corporation) making an
elective payment election applies
section 48D(d)(3) by taking the
following steps:
(i) Compute the amount of the Federal
income tax liability (if any) for the
taxable year, without regard to the
general business credit under section 38
(GBC), that is payable on the due date
of the tax return (without regard to
extensions), and the amount of the
Federal income tax liability that may be
offset by GBCs pursuant to the
limitation based on the amount of tax
under section 38.
(ii) Compute the amount of the GBCs
carryforwards carried to the taxable year
plus the amount of the current year
GBCs (including the current section 48D
credit) allowed for the taxable year
under section 38. Because the election
must made on an original return of tax
for the taxable year for which the
section 48D credit is determined, any
business credit carrybacks are not
considered when determining the
elective payment amount for the taxable
year.
(iii) Apply the GBCs allowed for the
taxable year as computed under
paragraph (e)(2)(ii) of this section,
including those attributable to the
section 48D credit as GBC, against the
tax liability computed in paragraph
(e)(2)(i) of this section.
(iv) Identify the amount of any excess
or unused current year GBC, as defined
under section 39, attributable to current

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year section 48D credit for which the
taxpayer is making an elective payment
election. Treat the amount of such
unused section 48D credit as a payment
against the tax imposed by subtitle A for
the taxable year with respect to which
such credit is determined (rather than
having them available for carryback or
carryover) (net elective payment
amount).
(v) Reduce the section 48D credit for
which an elective payment election is
made by the amount (if any) allowed as
a general business credit under section
38 for the taxable year, as provided in
paragraph (e)(2)(iii) of this section, and
by the net elective payment amount (if
any) that is treated as a payment against
tax, as provided in paragraph (e)(2)(iv)
of this section, which results in the
section 48D credit being reduced to
zero.
(3) Use of the section 48D credit for
other purposes. The full amount of the
section 48D credit for which an elective
payment election is made is deemed to
have been allowed for all other purposes
of the Code, including, but not limited
to, the basis reduction and recapture
rules imposed by section 50, and the
calculation of any underpayment of
estimated taxes under sections 6654 and
6655 of the Code.
(4) Examples. The following examples
illustrate the rules of this paragraph (e).
(i) Example 1. Z Corp is a calendaryear C corporation. Z Corp places in
service qualified property which is part
of an advanced manufacturing facility in
June of 2024. Z Corp completes the prefiling registration in accordance with
this section and receives a registration
number for the qualified property. Z
Corp timely files its 2024 Form 1120 on
April 15, 2025, properly making the
elective payment election with respect
to the section 48D credit in accordance
with this section. On its return, Z Corp
properly determines that it has $500,000
of tax imposed by subtitle A of the Code
(see paragraph (e)(2)(i) of this section).
For simplicity, assume the maximum
amount of GBCs that can be claimed for
the taxable year is $375,000. Z Corp
properly determines that the amount of
the section 48D credit determined with
respect to the qualified property (its
GBC for the taxable year) is $100,000
(see paragraph (e)(2)(ii) of this section.
Under paragraph (e)(2)(iii) of this
section, the section 48D credit reduces
Z Corp’s tax liability to $400,000. Z
Corp pays its $400,000 tax liability on
April 15, 2025. Because there is no
unused section 48D credit, paragraph
(e)(2)(iv) of this section does not apply.
Under paragraph (e)(2)(v) of this section,
the $100,000 of section 48D credit is
reduced by the $100,000 of section 48D

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credit claimed as GBCs for the taxable
year, which results in the section 48D
credit being reduced to zero. However,
the $100,000 of section 48D credit is
deemed to have been allowed to Z Corp
for 2024 for all other purposes of the
Code under paragraph (e) of this section.
(ii) Example 2. Assume the same facts
as in paragraph (e)(4)(i) of this section
(Example 1), except that Z Corp has
$80,000 of tax imposed by subtitle A
(paragraph (e)(2)(i) of this section). Z
Corp’s GBC credit is still $100,000
(paragraph (e)(2)(ii) of this section). For
simplicity, assume the maximum
amount of GBCs that can be claimed for
the taxable year under section 38(c) is
$60,000. Z Corp uses $60,000 of its
section 48D credit against its tax
liability under paragraph (e)(2)(iii) of
this section. Z Corp’s net elective
payment amount is $40,000 determined
under paragraph (e)(2)(iv) of this
section. Z Corp reduces the elective
payment amount by the $60,000
claimed against tax in paragraph
(e)(2)(iii) of this section and by the
$40,000 net elective payment amount
determined in paragraph (e)(2)(iv) of
this section, resulting in the applicable
credit being reduced to zero (paragraph
(e)(2)(v) of this section). When the IRS
processes Z Corp’s 2024 Form 1120, the
net elective payment amount results in
a $40,000 refund to Z Corp. However,
for other purposes of the Code, the
$100,000 section 48D credit is deemed
to have been allowed to Z Corp for 2024
(paragraph (e) of this section). Even
though Z Corp did not owe tax after
applying the net elective payment
amount against its net tax liability, Z
Corp may be subject to the section 6655
penalty for failure to pay estimated
income tax. The net elective payment is
not an estimated tax installment, rather
it is treated as a payment made at the
filing of the return.
(f) Excessive payment—(1) In general.
Except as provided in paragraph (f)(2) of
this section, in the case of any amount
treated as a payment which is made by
the taxpayer under section 48D(d)(1)
and paragraph (a) of this section, or any
payment made pursuant to section
48D(d)(2)(A)(i)(II) and paragraph (d) of
this section, with respect to any
property, which amount the
Commissioner determines constitutes an
excessive payment as defined in
paragraph (f)(3) of this section, the tax
imposed on such taxpayer by chapter 1
of the Code for the taxable year in which
such determination is made is increased
by an amount equal to the sum of—
(i) The amount of such excessive
payment; plus
(ii) An amount equal to 20 percent of
such excessive payment.

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(2) Reasonable cause. Paragraph
(f)(1)(ii) of this section will not apply if
the taxpayer demonstrates to the
satisfaction of the Commissioner that
the excessive payment resulted from
reasonable cause.
(3) Excessive payment defined. For
purposes of section 48D(d) and this
paragraph (f), the term excessive
payment means, with respect to any
property for which an election is made
under section 48D(d) and this section
for any taxable year, an amount equal to
the excess of—
(i) The amount treated as a payment
which is made by the taxpayer pursuant
to section 48D(d)(1) and paragraph (a) of
this section, or any payment made by
the Commissioner pursuant to section
48D(d)(2)(A)(I)(i) and paragraph (d) of
this section, with respect to such
property for such taxable year; over
(ii) The amount of the section 48D
credit which, without application of
section 48D(d) and this section, would
be otherwise allowable (determined
without regard to section 38(c)) under
section 48D(a) and the section 48D
regulations with respect to such
property for such taxable year.
(4) Examples. The following example
illustrates the principles of this
paragraph (f).
(i) Example. A Corp is a calendar-year
C corporation. A Corp places in service
qualified property which is part of
Facility A, an advanced manufacturing
facility in 2023. A Corp properly
completes the pre-filing registration in
accordance with paragraph (b) of this
section and receives a registration
number for the advanced manufacturing
facility. A Corp timely files its 2023
Form 1120, properly providing the
registration number for Facility A and
otherwise complying with paragraph (c)
of this section. On its return, Corp A
calculates that the amount of the section
48D credit with respect to the qualified
property is $100,000 and that the net
elective payment amount is $100,000.
Corp A receives a refund in the amount
of $100,000. In 2025, the IRS determines
that the amount of the section 48D
credit properly allowable to Corp A in
2023 with respect to Facility A (as
determined pursuant to § 1.48D–1(b)
and without regard to the limitation
based on tax in section 38(c)) was
$60,000. Corp A is not able to show
reasonable cause for the difference. The
excessive payment amount is $40,000
($100,000 treated as a
payment¥$60,000 allowable amount).
In 2025, the tax imposed under chapter
1 on Corp A is increased in the amount
of $48,000 ($40,000 + (20% * $40,000 =
$8,000).
(ii) [Reserved]

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(g) Basis reduction and recapture—(1)
In general. The rules in section 50(a)
and (c) of the Code apply with respect
to elective payments under paragraphs
(a) and (d) of this section.
(2) Basis adjustment—(i) In general. If
a section 48D credit is determined with
respect to property for which a taxpayer
makes an election under section
48D(d)(1), then the adjusted basis of the
property shall be reduced by the amount
of the section 48D credit determined for
which the taxpayer made an election
under section 48D(d)(1).
(ii) Basis adjustment by partnership or
S corporation. If an advanced
manufacturing investment credit is
determined with respect to property for
which a partnership or S corporation
makes an election under section
48D(d)(1), then the adjusted basis of the
property shall be reduced by the amount
of the advanced manufacturing
investment credit determined with
respect to the property held by the
partnership or S corporation, for which
the IRS made a payment to the
partnership or S corporation pursuant to
section 48D(d)(2)(A)(i)(I).
(iii) Basis adjustment of partners and
S corporation shareholders. The
adjusted basis of a partner’s interest in
a partnership, and stock in an S
corporation, shall be appropriately
adjusted pursuant to section 50(c)(5) to
take into account adjustments made
under paragraph (g)(2)(ii) of this section
in the basis of property held by the
partnership or S corporation, as the case
may be.
(3) Recapture reporting. Any reporting
of recapture is made on the taxpayer’s
annual return in the manner prescribed
by the IRS in any guidance.
(h) Applicability date. This section
applies to property that is placed in
service after December 31, 2022, and
during a taxable year ending on or after
[DATE OF PUBLICATION OF FINAL
RULE].
Douglas W. O’Donnell,
Deputy Commissioner for Services and
Enforcement.
[FR Doc. 2023–12800 Filed 6–14–23; 11:15 am]
BILLING CODE 4830–01–P

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