U.S. Individual Income Tax Return Forms

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Instructions for Form 4255

Department of the Treasury
Internal Revenue Service

(Rev. December 2024)

Certain Credit Recapture, Excessive Payments, and Penalties
Section references are to the Internal Revenue Code unless
otherwise noted.

attain and maintain the separation and sequestration
requirements in section 48A(e)(1)(G). For more information, see
Notice 2009-24, 2009-16 I.R.B. 817, available at IRS.gov/irb/
2009-16_IRB#NOT-2009-24, as modified by Notice 2011-24,
and amplified by Notice 2012-51, 2012-33 I.R.B. 150, available
at IRS.gov/irb/2012-33_IRB#NOT-2012-51; and Notice 2015-14,
2015-10 I.R.B. 722, available at IRS.gov/irb/
2015-10_IRB#NOT-2015-14; and Notice 2020-88, 2020-53
I.R.B. 1795, available at IRS.gov/irb/
2020-53_IRB#NOT-2020-88.
• You engaged in an applicable transaction, as defined in
section 50(a)(6)(D).
• A net increase in the amount of nonqualified nonrecourse
financing occurred for any property to which section 49(a)(1)
applied. For more details, see Section C—Recapture From
Increase in Nonqualified Nonrecourse Financing, later.

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Future Developments

For the latest information about developments related to Form
4255 and its instructions, such as legislation enacted after they
were published, go to IRS.gov/Form4255.

What’s New

Part I. General and specific instructions are added for new Part I
for reporting of elective payment election (EPE) (both gross EPE
amounts and net EPE amounts), recapture, and excessive
payment (EP) and penalties. See Part I. Summary, later.

General Instructions
Purpose of Form

Use Form 4255 to figure the increase in the amount due for
certain credit recaptures, excessive payments, and penalties.

Credit Recapture Requirements and Special
Rules

Generally, you must refigure the investment credit and may have
to recapture all or part of it if any of the following apply.
• You disposed of investment credit property before the end of 5
full years after the property was placed in service (the recapture
period).
• You changed 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 decreased 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 applies will no longer qualify as
investment credit property when placed in service.
• Before the end of the recapture period, your proportionate
interest was reduced by more than one-third in a partnership, S
corporation, estate, or trust that allocated the cost or other basis
of property to you for which you claimed a credit.
• You returned leased property (on which you claimed a credit)
to the lessor before the end of the recapture period.
• In the case of a project under the Phase II or Phase III
gasification program, failure at any time during the applicable
recovery period (as defined in section 168(c)) to attain and
maintain the separation and sequestration requirements in
section 48B(d)(1)(B). For more information, see Notice 2009-23,
2009-16 I.R.B. 802, available at IRS.gov/irb/
2009-16_IRB#NOT-2009-23, as modified by Notice 2011-24,
2011-14 I.R.B. 603, available at IRS.gov/irb/
2011-14_IRB#NOT-2011-24; and amplified by Notice 2014-81,
2014-53 I.R.B. 1001, available at IRS.gov/irb/
2014-53_IRB#NOT-2014-81.
• In the case of a project under the Phase II or Phase III
qualifying advanced coal project program, failure during the
applicable recovery period (as defined in section 168(c)) to
Oct 24, 2024

Exceptions to recapture. Recapture of the investment credit
doesn’t apply to the following.
• A transfer because of the death of the taxpayer.
• A transfer between spouses or incident to divorce under
section 1041. However, a later disposition by the transferee is
subject to recapture to the same extent as if the transferor had
disposed of the property at the later date.
• A transaction to which section 381(a) applies (relating to
certain acquisitions of the assets of one corporation by another
corporation).
• A mere change in the form of conducting a trade or business
if:
1. The property is retained as investment credit property in
that trade or business, and
2. The taxpayer retains a substantial interest in that trade or
business.
A mere change in the form of conducting a trade or business
includes a corporation that elects to be an S corporation and a
corporation whose S election is revoked or terminated.
For more details on the recapture rules, see section 50(a).
See section 46(g)(4) (as in effect on November 4, 1990)
to figure the recapture tax if you made a withdrawal from
CAUTION a 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.

!

Carryover Adjustment on Recapture

For property subject to investment credit recapture, reduce any
remaining carryforwards and carrybacks from the property by the
recapture percentage used for the property on Part II, line 15.

Basis Adjustment on Recapture

For property subject to investment credit, increase the property’s
basis as follows.
• For rehabilitation credit property, qualifying advanced coal
project property, qualifying gasification project property,
qualifying advanced energy project property, or advanced
manufacturing investment property, increase the basis by 100%
of the amount, attributable to each such property, of the
recapture tax, adjustments to carrybacks and carryforwards
under section 39, or adjustments to disallowed passive activity
credits.

Cat. No. 68759M

• For energy property or clean electricity investment property,
increase the basis by 50% of the amount, attributable to each
such property, of the recapture tax, adjustments to carrybacks
and carryforwards under section 39, or adjustments to
disallowed passive activity credits.
If you are a partner or S corporation shareholder, adjust the
basis of your interest in the partnership or stock in the S
corporation to take into account the adjustment made to the
basis of property held by the partnership or S corporation.

Lines 1 and 2. Enter credit information from form(s) listed on
each credit line and Form 3800, General Business Credit, Part III
(Parts V and VI, if applicable).
Line 1h, column (o). Use column (n) to report EP amount for
Form 8936, Part V, that should have been included in the shaded
entry space for column (o). If completing line 1h, column (s),
don't include any amount that would have been reported in
line 1h, column (o).

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For more information, see section 50(c) and Regulations
section 1.469-3(f).

Partnerships, S Corporations, Estates, and
Trusts

A partnership, S corporation, estate, or trust that allocated any or
all of a qualified investment to its partners, shareholders, or
beneficiaries must provide the information they need to refigure
the credit. See Regulations sections 1.46-3(f), 1.47-4(a) and (c),
1.47-5, and 1.47-6.

Partners, Shareholders, and Beneficiaries

If you are a partner, shareholder, or beneficiary and your
Schedule K-1 shows recapture of investment credit claimed in an
earlier year, you will need your copy of the original Form 3468,
Investment Credit, to complete this form.

Excessive Payment

In the case of any elective payment amount that the IRS
determines constitutes an excessive payment, the tax imposed
on such entity by chapter 1, regardless of whether such entity or
you would otherwise be subject to chapter 1 tax, for the tax year
in which such determination is made will be increased by an
amount equal to the sum of the amount of such excessive
payment plus an amount equal to 20% of such excessive
payment. See Regulations section 1.6417-6(a)(1) for details.

Resolving a Failure to Satisfy the Prevailing
Wage Requirements

If you fail to ensure that all laborers and mechanics employed by
you or any contractor or subcontractor in the construction,
alteration, or repair of a qualified facility are paid wages at rates
not less than those set forth in the applicable wage
determination(s), you will be deemed to have met the prevailing
wage requirements with respect to such facility for any year if you
make the correction and penalty payments provided in
Regulations sections 1.45-7(c)(1)(i) and (ii). See Regulations
section 1.45-7(c) for details.

Exceptions to the Apprenticeship Requirements

If you fail to fulfill the apprenticeship requirements in Regulations
section 1.45-8(a) with respect to the construction, alteration, or
repair of any qualified facility prior to the facility being placed in
service, you will be deemed to have complied with the
apprenticeship requirements if you have made a good faith effort
to meet the apprenticeship requirements, as described in
Regulations section 1.45-8(f)(1) (good faith effort exception) or
made the penalty payment provided in Regulations section
1.45-8(f)(2) (apprenticeship cure provision) for any failures to
which the good faith effort exception does not apply. See
Regulations section 1.45-8(f) for details.

Specific Instructions
Part I. Summary

Complete Part II as applicable before completing Part I.
2

Lines 1z and 2z, columns (i) and (j). Attach a statement
indicating the amount for each such shaded entry space, and
complete subsequent columns as if those amounts were
reported in those entry spaces.
Line 3, column (q). Generally, enter the amount from Part I,
line 3, column (q) (which is the amount that can be reduced by
nonrefundable credits) on the appropriate line of your tax return.
For example, if completing Form 1120, U.S. Corporation Income
Tax Return, enter the amount from Part I, line 3, column (q) on
Form 1120, Schedule J, line 1g.
Partnerships and S corporations. Generally, partnerships
and S corporations that allocated all or any of a qualified
investment to partners or shareholders must provide to the
partners and shareholders they need to refigure their credit.
However, certain amounts from Form 4255 get reported directly
on the partnership or S corporation return.
If you are filing Form 1065, report the column (o) amount that
was included in column (q) on line 27, Other taxes.
If you are filing Form 1120-S, report the column (o) amount
that was included in column (q) on line 23c.
Line 3, column (r). Enter the amount from Part I, line 3, column
(r) (which is the amount that cannot be reduced by refundable
credits) on the appropriate line of your tax return. For example, if
completing Form 1120, U.S. Corporation Income Tax Return,
enter the amount from Part I, line 3, column (r) on Form 1120,
Schedule J, line 9a.

Amounts From Prior Year(s) Returns
Column (a). Enter credit claimed in prior year(s) (as adjusted, if
applicable). See the Instructions for Form 3800.
Column (b). Enter gross elective payment election (EPE)
amount included in column (a). See section 6417 for details.
Column (c). Enter gross EPE amount in column (b) applied
against regular tax.
Column (d). Enter net EPE amount. Subtract column (c) from
column (b).
Column (e). Enter non-EPE credit that was applied against
regular tax.
Column (f). Enter carryover. Subtract the sum of columns (b)
and (e) from column (a).

Recapture
Column (g). Enter recapture percentage. See Line 15, later.
Enter “N/A” if more than one recapture event on one line.
Column (h). Enter amount of column (a) recaptured, including
reduction of carryover. See Basis Adjustment on Recapture,
earlier.
Column (i). Enter portion of column (h) reducing credit
carryover in column (f).
Column (j). Enter portion of column (h) recapturing non-EPE
credit applied against regular tax in column (e).
Column (k). Enter portion of column (h) recapturing EPE
applied against regular tax from column (c).
Instructions for Form 4255 (Rev. 12-2024)

Column (l). Enter portion of column (h) recapturing net EPE
credit from column (d).

Excessive Payments (EPs) and Penalties
Column (m). Enter excessive credit transfer or recapture
amount. See sections 6418(g)(2) and 6418(g)(3) for details.
Column (n). Enter the net EPE portion if you owe an EP related
to a gross EPE in column (b).

decrease in nonqualified nonrecourse financing as a negative
number. For more information about section 49, see the
instructions for Section C.
Line 4. Subtract line 3 from line 2.
If line 3 is negative, then the entry on line 4 will be larger

TIP than the entry on line 2.

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Column (o). Enter the portion of the EP not in column (n), plus
any 20% EP you owe, if you owe an EP.
Column (p). Enter prevailing wage and/or apprenticeship
penalty amounts assessed by the IRS. For self-determined
penalties, see Regulations section 1.45-7(c)(1) for prevailing
wage correction and penalty payment, and Regulations section
1.45-8(f)(2) for apprenticeship cure provision.

Total by Type

Column (q). Enter amount that can be reduced by
nonrefundable credits. Add lines 1a through 2z in columns (n)
and (o); lines 2a through 2z in columns (j), (k), and (l); and
section 6418(g)(2) amounts on lines 1a through 2z in column
(m).
Column (r). Enter amount that cannot be reduced by
nonrefundable credits. Add amounts on lines 1a through 1z in
columns (j), (k), and (l); lines 1a through 2z in column (p); and
section 6418(g)(3) amounts on lines 1b, 1g, and 1j in column
(m).
Column (s). Enter net EPE repaid. Add columns (l) and (n).

Column (t). Enter any 20% EP in column (o) plus any amounts
from column (p) related to a column (b) Gross EPE.

Part II. Recapture Calculation
Section A—Properties

Lines A through D. Use lines A through D to describe the
property(ies) for which you must refigure the credit. If you need
to list additional properties, complete and attach additional
Forms 4255 to list all the properties for which you must refigure
the credit.

Section B—Original Credit

Use Section B to refigure the original credit.
Line 1. Enter the rate you used to figure the original credit from
the Form 3468 that you filed. For combined heat and power
system property, enter the effective rate used to figure the
original credit, taking into account the limit under section 48(c)(3)
(B).
Line 2. Enter the credit base (cost or other basis) that you used
to figure the original credit.
If section 49(a)(1) applied to the property and there was a net
increase in nonqualified nonrecourse financing with respect to
the property in previous tax years, enter the credit base you used
to figure the original credit, reduced by the amount of that net
increase. If there was a net decrease in nonqualified
nonrecourse financing with respect to the property in previous
tax years, enter the credit base you used to figure the original
credit, increased by the amount of that net decrease. For more
details, see the instructions for Section C.
Line 3. If section 49(a)(1) didn’t apply to the property, enter -0-.
If section 49(a)(1) applied to the property, enter the net change
in nonqualified nonrecourse financing related to the property
during the tax year. Enter a net increase in nonqualified
nonrecourse financing as a positive number. Enter a net
Instructions for Form 4255 (Rev. 12-2024)

Line 5. Multiply line 1 by line 4. If the credit for the property for
which you must refigure the credit was limited to a dollar amount
(for example, by the kilowatt limit in section 48(c)(1)(B)), don’t
enter more than the amount of the applicable limit on line 5.
Line 6. Enter the total of all credits taken for the property on
Form 3800, General Business Credit, in prior years. But don’t
include the amount of any credit previously recaptured due to an
increase in nonqualified nonrecourse financing.

Section C—Recapture From Increase in
Nonqualified Nonrecourse Financing

Use Section C to figure any increase in tax for the recapture of
an investment tax credit under section 49.
Generally, section 49(a)(1) applies to property:

• Placed in service by individuals or certain closely held

corporations during a tax year in which they were engaged in
activities described in section 465, and
• Used in connection with an activity subject to the at-risk
limitations under section 465.
The credit base of this 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 credit base must be
reduced by the amount of any nonqualified nonrecourse
financing related to the property at the end of the tax year.
If, at the close of a tax year following the year property
described in section 49(a)(1) was placed in service, the
nonqualified nonrecourse financing for the 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.
Line 8. If the original credit had been figured using the
current-year tax base in the year the property was first placed in
service, you may have been able to use other general business
credits instead. Use Worksheet 1 to calculate the amount of
unused general business credits that would have been allowed
under section 38.
When making this calculation, include any general

TIP business credits that could have been carried forward or

carried back to a year affected by the recapture of the
original credit. Don’t include any credits that were previously
recaptured. If you previously used the credit to offset the
recapture of a credit on another property, treat it as a credit
allowed in a previous tax year.

Multiple recapture properties. If you are recapturing
investment credits from multiple properties in Section C,
complete Form 4255, Part II, Section C, line 7, for each property
before using Worksheet 1. Then fill out Worksheet 1, reapplying
any allowable investment credits as if no credit had been allowed
for any of the properties in excess of the refigured credit for that
property on line 5. As you complete the worksheet, separately
identify the amount of unused general business credits that
could have been used instead of the excess credit from each
property. If an unused general business credit could have been
used instead of the excess credit from more than one property
3

Worksheet 1
Use Worksheet 1 to calculate the amount of unused general business credits that would have been allowed instead of the credit from
the recapture property. If you need to account for more than 5 years, complete Steps 4 through 6 for those years on additional copies
of the worksheet. Include the total for all years on Step 7.

Steps

First
Year
______

Year
______

Year
______

Year
______

Year
______

Total

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Step 1. Identify the first year that the aggregate amount of credit
allowed for the property was more than the amount on line 5.
Enter the excess as a positive number . . . . . . . . . . . . . . . . . .
______
Step 2. Figure the amount of other general business credits that
could have been used in that year had the amount in Step 1 not
been allowed. Enter the result as a positive number . . . . . . . .
______
Step 3. Subtract any general business credits that were actually
allowed in any previous tax year from the result of Step 2 . . . . .
______
Step 4. For the following year, figure the reduction in general business
credits that would have been allowed for that year if:
1. No amount on line 7 had been allowed as a credit, and
2. Any other credits were used as calculated in Step 2 above . . . . . . . . . .
______ ______ ______ ______
Step 5. Figure the amount of other general business credits that would have
been allowed to offset the reduction figured in Step 4 . . . . . . . . . . . . . . .
______ ______ ______ ______
Step 6. Subtract any general business credits that were actually allowed in
any previous tax year from the result of Step 5 . . . . . . . . . . . . . . . . . . . .
______ ______ ______ ______
Step 7. Repeat Steps 4 through 6 above for each of the following tax years. Then add the amount from Step 3 to the
amount from each iteration of Step 6. Enter the result on line 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(for example, the amount figured in Step 1 or Step 3 for a single
year is attributable to more than one property), apply the unused
credit to the property with the highest original credit rate on
line 1. When completing Step 7, add the amounts from Steps 3
and 6 separately by property and enter the results in the
corresponding property column of line 8.

Disallowed passive activity credits (as defined in section
469(d)(2)) can be used in the calculation of line 8 only to
CAUTION the extent that credits from passive activities are
included in the credits subject to recapture.

!

Unused credits other than “specified credits” (as defined in
section 38(c)(4)(B)) and eligible small business credits (ESBCs)
can be used in the calculation of line 8 taking into account the
limitation under section 38(c)(1)(A).
Line 9. This is the recapture tax as a result of a net increase in
nonqualified nonrecourse financing. Add recapture tax for
properties A through D and include amounts in the total for Part I,
column (h). See Basis Adjustment on Recapture, earlier.

Section D—Recapture From Disposition of
Property or Cessation of Use as Qualified Credit
Property

Use Section D to figure any increase in tax for the recapture of
an investment tax credit under section 50.

Line 10. Enter the date (month/day/year) on which the property
was placed in service, using the first day of the month in which
the property was placed in service. For example, if the property
was placed in service on February 20, 2022, enter 02/01/2022
on line 10. See Regulations section 1.47-1(c) for more
information.
Line 11. Generally, this will be the date you disposed of the
property. For more details, see Regulations section 1.47-1(c).

______

______
______

the separation and sequestration requirements applicable to a
Phase II or III gasification program or a Phase II or III advanced
coal program, enter -0-. In case of an applicable transaction by
an applicable taxpayer before the close of the 10-year period
beginning on the date such taxpayer placed in service
investment credit property that is eligible for the advanced
manufacturing investment credit, enter -0-.
Line 13. If you had never taken the recaptured credit, you may
have been able to use other general business credits instead.
Use Worksheet 2 to calculate the amount of unused general
business credits that would have been allowed under section 38.
When making this calculation, include any general

TIP business credits that could have been carried forward or

carried back to a year affected by the recapture of the
original credit. Don’t include any credits that were previously
recaptured. If you previously used the credit to offset the
recapture of a credit on another property, treat it as a credit
allowed in a previous tax year.

Multiple recapture properties. If you are recapturing
investment credits from multiple properties in Section D,
complete Form 4255, Section B, line 6, for each property before
using Worksheet 2. Then fill out Worksheet 2, reapplying any
allowable investment credits as if no credit had been allowed for
any of the properties. As you complete the worksheet, separately
identify the amount of unused general business credits that
could have been used instead of the recaptured credit from each
property. If an unused general business credit could have been
used instead of a recaptured credit from more than one property
(for example, the amount figured in Step 1 or Step 3 for a single
year is attributable to more than one property), apply the unused
credit first to the property with the highest recapture percentage
on line 15. When completing Step 7, add the amounts from
Steps 3 and 6 separately by property and enter the results in the
corresponding property column of line 13.

Line 12. Do not enter partial years. If the property was held less
than 12 months, enter -0-. In case of failure to attain or maintain
4

Instructions for Form 4255 (Rev. 12-2024)

Worksheet 2
Use Worksheet 2 to calculate the amount of unused general business credits that would have been allowed under section 38 had
there been no credit from the recapture property. If you need to account for more than 5 years, complete Steps 4 through 6 for those
years on additional copies of the worksheet. Include the total for all years on Step 7.
First
Year
______

Steps

Year
______

Year
______

Year
______

Year
______

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Step 1. Identify the first year that an amount from line 6 was
allowed as a credit. Enter that amount as a positive number . . .
______
Step 2. Figure the amount of other general business credits that
could have been used in that year had the amount in Step 1 not
been allowed. Enter the result as a positive number . . . . . . . .
______
Step 3. Subtract any general business credits that were actually
allowed in any previous tax year from the result of Step 2 . . . . .
______
Step 4. For the following year, figure the reduction in general business
credits that would have been allowed for that year if:
1. No amount on line 6 had been allowed as a credit, and
2. Any other credits were used as calculated in Step 2 above . . . . . . . . . .
______ ______ ______ ______
Step 5. Figure the amount of other general business credits that would have
been allowed to offset the reduction figured in Step 4 . . . . . . . . . . . . . . .
______ ______ ______ ______
Step 6. Subtract any general business credits that were actually allowed in
any previous tax year from the result of Step 5 . . . . . . . . . . . . . . . . . . . .
______ ______ ______ ______
Step 7. Repeat Steps 4 through 6 above for each of the following tax years. Then add the amount from Step 3 to the
amount from each iteration of Step 6. Enter the result on line 13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Disallowed passive activity credits (as defined in section
469(d)(2)) can be used in the calculation of line 13 only
CAUTION to the extent that credits from passive activities are
included in the credits subject to recapture.

!

Total

Unused credits other than “specified credits” (as defined in
section 38(c)(4)(B)) and eligible small business credits (ESBCs)
can be used in the calculation of line 13 taking into account the
limitation under section 38(c)(1)(A).
Line 14. Subtract line 13 from line 6 to calculate the aggregate
decrease in general business credits that would have been
allowed under section 38 had there been no credit from this
property.
Line 15. Enter the recapture percentage from the following
table. Enter 100 for certain expansions in connection with
advanced manufacturing facilities. See section 50(a)(3)(A).
IF the number of full years on
line 12 of Form 4255 is . . .

THEN the recapture percentage
is . . .

0
1
2
3
4
5 or more

100
80
60
40
20
0

Line 16. Multiply the amount on line 14 by the percentage on
line 15 to calculate the recapture tax due to disposition or
cessation of use as an investment credit property. Include
amount on the applicable line(s) in Part I, column (h). For
example, enter section 47 rehabilitation credit recapture in Part I,
line 1z, column (h). For basis increase, see Line 9, earlier.
Line 17. If applicable, enter the IRS-issued registration number
for your facility with an EPE or transfer election.

Instructions for Form 4255 (Rev. 12-2024)

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Example 1. Investment credit recapture. In January of
2022, you earned an energy credit of $100,000 on property A.
You used $20,000 of the credit to offset tax in 2022 and used
$16,000 as a carryforward to offset tax in 2023. You had $64,000
remaining carryforward for property A at the end of 2023. You
have no other tax credits for other properties for any other years.
You disposed of the property in June of 2024. Your recapture
percentage is 60%. Because you have no other credits for
properties for other years, you enter -0- on line 13. You enter
$36,000 on line 6 (the credit from property A used in 2022 and
2023). Your total increase in tax for 2024 is $21,600 (60% of
$36,000). Your remaining credit carryforward for property A is
also reduced by the recapture percentage of 60%. Your
remaining carryforward is $25,600 (40% of $64,000). You
increase your basis for property A by $60,000 ($21,600 +
$38,400).
Example 2. Investment credit recapture. The facts are the
same as in Example 1, except that you also earned an energy
credit on property B in 2022 of $12,000, which you didn’t use to
offset your tax. As before, you disposed of property A in June of
2024. You enter $36,000 on line 6 (the credit from property A
used in 2022 and 2023). However, you could have used your
$12,000 of unused credit from property B for 2022 against your
2022 tax had no credit been available from property A.
Therefore, you enter $12,000 on line 13 and $24,000 ($36,000 $12,000) on line 14. Your total increase in tax for 2024 is $14,400
(60% of $24,000). Your remaining credit carryforward for
property A is also reduced by the recapture percentage of 60%.
Your remaining carryforward is $25,600 (40% of $64,000). You
increase your basis for property A by $52,800 ($14,400 +
$38,400).
Example 3. Investment credit recapture. In January of
2022, you earned an energy credit of $100,000 from property A.
You used all of the credit to offset $100,000 of tax in 2022. In
2023, you earned an energy credit of $75,000 from property B
and used none of the credit to offset tax. In June of 2024,
property A ceased to be investment credit property and you must
refigure the credit from property A. Your recapture percentage is
5

60%. You enter $100,000 on line 6. However, you could have
carried the energy credit of $75,000 from property B back to
2022 had no credit been available from property A. Therefore,
you enter $75,000 on line 13 and $25,000 ($100,000 - $75,000)
on line 14. Your total increase in tax for 2024 is $15,000 (60% of
$25,000). You increase your basis in property A by $15,000.
Example 4. Investment credit recapture. In July of 2022,
you earned an energy credit of $100,000 from property A. You
used $1,000 of the credit to offset tax in 2022 and used $99,000
as a carryforward to offset tax in 2023. In 2024, you earned an
energy credit of $75,000 from property B and used none of the
credit to offset tax.
On February 1, 2024, property A ceased to be investment
credit property and you must refigure the credit from property A.
Your recapture percentage is 80%. You enter $100,000 on line 6.
No carryback or carryforward credits are available for 2022 to
offset the $1,000 credit used for property A. However, you could
have carried the energy credit of $75,000 from property B back
to 2023 had no credit been available from property A that year.
Therefore, you enter $75,000 on line 13 and $25,000 ($100,000 $75,000) on line 14. Your total increase in tax for 2024 is $20,000
(80% of $25,000). You increase your basis in property A by
$20,000.

credits allowed under section 38 for all prior tax years that would
have resulted solely from reducing to zero any credit determined
under subpart E of part IV of subchapter A of chapter 1 with
respect to such property. Because P ceased to be investment
credit property within 2 full years after P was placed in service,
section 50(a)(1)(B) provides that the recapture percentage is
80%. G must properly report the recapture event in 2025, paying
an $80,000 tax. Because G is a government entity, G reports the
recapture event on a Form 990-T or any Form provided in further
guidance, along with supplemental forms such as Form 4255,
Certain Credit Recapture, EPs, and Penalties. G's basis in P is
increased by $40,000.

TREASURY/IRS
AND OMB USE
ONLY DRAFT
October 24, 2024

Example 5. Transfer of eligible credits and recapture to a
transferor partnership. A and B each contributed $150,000 of
cash to AB partnership for the purpose of investing in energy
property. The partnership agreement provides that A and B
share equally in all items of income, gain, loss, deduction, and
credit of AB partnership. AB partnership invests $300,000 in an
energy property in accordance with section 48 and places the
energy property in service on January 1, 2024. As of the end of
2024, AB partnership has $90,000 of eligible credits under
section 48 for the energy property. Before the due date for AB
partnership's 2024 tax return (with extension), AB partnership
transfers the $90,000 of eligible credits to an unrelated
transferee taxpayer X for $80,000.
In 2025, A reduces its proportionate interest in the general
profits of AB partnership by 50%, causing a recapture event to A
under Regulations section 1.47-6(a)(2). The energy property is
not disposed of by the transferor partnership and continues to be
energy property with respect to such transferor partnership. AB
partnership should not provide notice of recapture to transferee
taxpayer X as a result of the recapture event under Regulations
section 1.47-6(a)(2) for A's sale and transferee taxpayer X is not
liable for any recapture amount. A, however, is subject to
recapture as provided in Regulations section 1.47-6(a)(2) and
based on its share of the basis (or cost) of the energy property to
which the eligible credits were determined under Regulations
section 1.46-3(f)(2).
Example 6. Basis reduction and recapture for EPE. In
December 2023, G, a government entity, places in service P,
which is energy property eligible for the energy credit determined
under section 48 (section 48 credit). G properly completes the
pre-filing registration in accordance with Regulations section
1.6417-5 as an applicable entity to make an election under
section 6417 for 2023. G timely files its 2023 Form 990-T in
2024, properly making the EPE in accordance with Regulations
section 1.6417-2 for a section 48 energy credit determined with
respect to P. On its Form 990-T, G properly determines that the
amount of section 48 credit determined with respect to P is
$100,000 and that its net elective payment amount is $100,000.
The IRS sends G a $100,000 refund. Pursuant to section 50(c),
G reduces its basis in P by $50,000.
In July 2025, P ceases to be investment credit property with
respect to G. Because this occurs before the close of the
recapture period set forth in section 50, section 50(a)(1)(A)
provides that the tax under chapter 1 for 2025 is increased by
the recapture percentage of the aggregate decrease in the
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Example 7. Prevailing wage requirement penalty.
Taxpayer A starts construction of a qualified facility on February
3, 2023. The facility is placed in service on October 10, 2023,
and Taxpayer A claims the increased credit amount under
section 45(b)(6)(B)(iii) on its 2023 tax return. Laborer X was
employed in the construction, alteration, or repair of the facility in
calendar year 2023 for 20 weeks and was paid on a weekly
basis. Laborer X was paid wages below the prevailing wage rate
for all pay periods in calendar year 2023. All other laborers and
mechanics were paid wages at the prevailing wage rate. The
aggregate difference between the amount of wages Laborer X
was paid and the amount required to be paid under Regulations
section 1.45-7(a) is $400 (that is, Laborer X worked 20 weeks
during the year and was underpaid by $20 in each of those
weeks). The amount of the correction payment Taxpayer A must
make to Laborer X is equal to $400 plus interest from the date of
each underpayment at the rate as determined under section
6621 but substituting “6 percentage points” for “3 percentage
points” in section 6621(a)(2). The total number of laborers
underpaid for any period in 2023 was one, so the total amount of
the penalty payment that Taxpayer A must pay to the IRS to
retain the increased credit amount is $5,000.
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 returns. The estimated
burden for all other taxpayers who file this form is shown below.
Recordkeeping . . . . . . . . . . . . . . . .

6 hr., 27 min.

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

1 hr., 35 min.

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

1 hr., 46 min.

If you have comments concerning the accuracy of these time
estimates or suggestions for making this form simpler, we would

Instructions for Form 4255 (Rev. 12-2024)

be happy to hear from you. See the instructions for the tax return
with which this form is filed.

TREASURY/IRS
AND OMB USE
ONLY DRAFT
October 24, 2024

Instructions for Form 4255 (Rev. 12-2024)

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