Instructions for IRS Form 3468

by Michael Dreiser ; Updated July 27, 2017
These credits are often ultimately claimed on Form 1040.

Items you will need

  • Form 3468, Investment Credit
  • Form 3800, General Business Credit

Internal Revenue Service (IRS) Form 3468, Investment Credit, is used to report various energy efficient property that is eligible for tax credits under the Internal Revenue Code of the United States. These investment credits are business credits, meaning they cannot be claimed for properties utilized for residential lodging purposes. Despite this, the credits claimed by pass-through business entities are often ultimately deductible on Form 1040, U.S. Individual Income Tax Return. The energy efficient credits claimed under Form 3468 include a rehabilitation credit, energy credit, qualifying advanced coal project credit, qualifying gasification project credit and qualifying advanced energy project credit.

Claiming a Credit via Form 3468

Step 1

Complete Part I of Form 3468 if you have acquired the eligible property, such as a manufacturing facility, in accordance with a formal IRS election allowing the lessee to treat the investment in the eligible property as if it was made by the lessee, not the lessor. This section of the form consists of general identifying information regarding the property and lessor. If you have not acquired the eligible property in accordance with such an election, skip this step.

Step 2

Complete Part II of Form 3468 if you have a qualifying advanced coal project, qualifying gasification project, or qualifying advanced energy project, such as fuel cell installation on a fleet of commercial vehicles. This part of the form will compute the credit for these projects based upon the amount and type of your investment. The credit is computed in Part II, Line 9. If you do not have a qualifying advanced coal project, qualifying gasification project, or qualifying advanced energy project, skip this step.

Step 3

Complete Part III of Form 3468 if you have a qualifying rehabilitation credit project, such as a substantial reconstruction of a certified historic structure, or energy credit project. This part of the form will compute the credit for these projects based upon the amount of investment and energy efficiency characteristics. The credit is computed in Part III, Line 19. If you do not have a qualifying rehabilitation credit project or energy credit project, skip this step.

Step 4

Transfer the amount from Part II, Line 9 of Form 3468 to Form 3800, Line 1a and the amount from Part III, Line 19 to Form 3800, Line 29a.

Step 5

Total all current year business tax credits on Form 3800, Line 32.

Step 6

Deduct the amount on Line 32 of Form 3800 on your federal individual income tax return, corporation tax return or estate and trust tax return, as applicable.

Step 7

Attach a copy of Form 3800 and Form 3468 to your federal individual income tax return, corporation tax return or estate and trust tax return.

Warnings

  • The credits under Form 3468 must generally be recaptured, or paid back, if the underlying project property generating the credit is disposed or transferred within 5 years of putting the property into service.

    References to individual form line numbers relate to the 2009 version of the forms. It is possible that the line items may change when future form versions are released.

About the Author

Michael Dreiser started writing professionally in 2010. He is a certified public accountant with experience working for a large New York City accountancy and expertise in areas ranging from private equity taxation to investment management. He holds a Master of Business Administration in international finance from l’École Nationale des Ponts et Chaussées in Paris.

Photo Credits

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