US Code

Public Law 119-73 (01/23/2026)

26 U.S.C. § 196

Deduction for certain unused business credits

(a)

Allowance of deduction

If any portion of the qualified business credits determined for any taxable year has not, after the application of section 38(c), been allowed to the taxpayer as a credit under section 38 for any taxable year, an amount equal to the credit not so allowed shall be allowed to the taxpayer as a deduction for the first taxable year following the last taxable year for which such credit could, under section 39, have been allowed as a credit.

(b)

Taxpayer’s dying or ceasing to exist

If a taxpayer dies or ceases to exist before the first taxable year following the last taxable year for which the qualified business credits could, under section 39, have been allowed as a credit, the amount described in subsection (a) (or the proper portion thereof) shall, under regulations prescribed by the Secretary, be allowed to the taxpayer as a deduction for the taxable year in which such death or cessation occurs.

(c)

Qualified business credits

For purposes of this section, the term “qualified business credits” means—
(1)
the investment credit determined under section 46 (but only to the extent attributable to property the basis of which is reduced by section 50(c)),
(2)
the work opportunity credit determined under section 51(a),
(3)
the alcohol fuels credit determined under section 40(a),
(4)
1
1 See References in Text note below.
the research credit determined under section 41(a) (other than such credit determined under section 280C(c)(3))  for taxable years beginning after ,
(5)
the enhanced oil recovery credit determined under section 43(a),
(6)
the empowerment zone employment credit determined under section 1396(a),
(7)
the Indian employment credit determined under section 45A(a),
(8)
the employer Social Security credit determined under section 45B(a),
(9)
the new markets tax credit determined under section 45D(a),
(10)
the small employer pension plan startup cost credit determined under section 45E(a),
(11)
the biodiesel fuels credit determined under section 40A(a),
(12)
the low sulfur diesel fuel production credit determined under section 45H(a),
(13)
the new energy efficient home credit determined under section 45L(a), and
(14)
the small employer health insurance credit determined under section 45R(a).
(d)

Special rule for investment tax credit

Subsection (a) shall be applied by substituting “an amount equal to 50 percent of” for “an amount equal to” in the case of the investment credit determined under section 46 (other than the rehabilitation credit).

Pub. L. 97–248, title II, § 205(a)(2)96 Stat. 428Pub. L. 98–369, div. A, title IV, § 474(r)(8)(A)98 Stat. 840Pub. L. 100–647, title IV, § 4008(b)(2)102 Stat. 3653Pub. L. 101–239, title VII103 Stat. 2325Pub. L. 101–508, title XI104 Stat. 1388–485Pub. L. 103–66, title XIII107 Stat. 555Pub. L. 104–188, title I, § 1201(e)(1)110 Stat. 1772Pub. L. 105–206, title VI, § 6020(a)112 Stat. 823Pub. L. 106–554, § 1(a)(7) [title I, § 121(c)]114 Stat. 2763Pub. L. 107–16, title VI, § 619(c)(2)115 Stat. 110Pub. L. 108–357, title III118 Stat. 1465Pub. L. 109–58, title XIII, § 1332(d)119 Stat. 1026Pub. L. 111–148, title I, § 1421(d)(2)124 Stat. 242Pub. L. 115–141, div. U, title IV, § 401(b)(16)132 Stat. 1202(Added , , ; amended , , ; , , ; , §§ 7110(c)(2), 7814(e)(1), (2)(D), , , 2413, 2414; , §§ 11511(b)(3), 11813(b)(12), , , 1388–554; , §§ 13302(b)(2), 13322(c)(2), , , 563; , , ; , , ; , , , 2763A–610; , , ; , §§ 302(c)(2), 339(e), , , 1484; , , ; , , ; , , .)

Editorial Notes

References in Text

Pub. L. 115–97, title I, § 13206(d)(2)(C)131 Stat. 2113Section 280C(c)(3), referred to in subsec. (c)(4), was redesignated section 280C(c)(2) by , , .

Codification

section 339(e) of Pub. L. 108–357Another amended the table of sections for subpart D of part IV of subchapter A of this chapter.

Amendments

Pub. L. 115–1412018—Subsec. (d). , in heading, struck out “and research credit” after “tax credit” and, in text, substituted “in the case of the investment credit determined under section 46 (other than the rehabilitation credit).” for “in the case of—

“(1) the investment credit determined under section 46 (other than the rehabilitation credit), and

“(2) the research credit determined under section 41(a) for a taxable year beginning before .”

Pub. L. 111–1482010—Subsec. (c)(14). added par. (14).

Pub. L. 109–582005—Subsec. (c)(13). added par. (13).

Pub. L. 108–357, § 302(c)(2)2004—Subsec. (c)(11). , added par. (11).

Pub. L. 108–357, § 339(e)Subsec. (c)(12). , added par. (12).

Pub. L. 107–162001—Subsec. (c)(10). added par. (10).

Pub. L. 106–5542000—Subsec. (c)(9). added par. (9).

Pub. L. 105–2061998—Subsec. (c)(8). added par. (8).

Pub. L. 104–1881996—Subsec. (c)(2). substituted “work opportunity credit” for “targeted jobs credit”.

Pub. L. 103–66, § 13302(b)(2)1993—Subsec. (c)(6). , added par. (6).

Pub. L. 103–66, § 13322(c)(2)Subsec. (c)(7). , added par. (7).

Pub. L. 101–508, § 11813(b)(12)(A)1990—Subsec. (c)(1). , substituted “section 46” for “section 46(a)” and “section 50(c)” for “section 48(q)”.

Pub. L. 101–508, § 11511(b)(3)Subsec. (c)(5). , added par. (5).

Pub. L. 101–508, § 11813(b)(12)(B)Subsec. (d)(1). , substituted “section 46” for “section 46(a)” and “other than the rehabilitation credit” for “other than a credit to which section 48(q)(3) applies”.

Pub. L. 101–239, § 7814(e)(2)(D)1989—Subsec. (c)(4). , inserted “(other than such credit determined under section 280C(c)(3))” after “section 41(a)”.

Pub. L. 101–239, § 7814(e)(1)Subsec. (d). , substituted “substituting ‘an amount equal to 50 percent of’ for ‘an amount equal to’ in the case of” for “substituting an amount equal to 50 percent of for an amount equal to in the case of” in introductory provisions.

Pub. L. 101–239, § 7110(c)(2)Subsec. (d)(2). , inserted “for a taxable year beginning before ” after “under section 41(a)”.

Pub. L. 100–647, § 4008(b)(2)(A)1988—Subsec. (c)(4). , added par. (4).

Pub. L. 100–647, § 4008(b)(2)(B)Subsec. (d). , inserted “and research credit” after “tax credit” in heading and amended text generally. Prior to amendment, text read as follows: “In the case of the investment credit determined under section 46(a) (other than a credit to which section 48(q)(3) applies), subsection (a) shall be applied by substituting ‘an amount equal to 50 percent of’ for ‘an amount equal to’.”

Pub. L. 98–3691984— amended section generally, substituting provisions relating to deduction for certain unused business credits for provisions relating to deduction for certain unused investment credits.

Statutory Notes and Related Subsidiaries

Effective Date of 2010 Amendment

Pub. L. 111–148section 1421(f)(1) of Pub. L. 111–148section 38 of this titleAmendment by applicable to amounts paid or incurred in taxable years beginning after , see , set out as a note under .

Effective Date of 2005 Amendment

Pub. L. 109–58section 1332(f) of Pub. L. 109–58section 38 of this titleAmendment by applicable to qualified new energy efficient homes acquired after , in taxable years ending after such date, see , set out as a note under .

Effective Date of 2004 Amendment

section 302(c)(2) of Pub. L. 108–357section 302(d) of Pub. L. 108–357section 38 of this titleAmendment by applicable to fuel produced, and sold or used, after , in taxable years ending after such date, see , set out as a note under .

section 339(e) of Pub. L. 108–357section 339(f) of Pub. L. 108–357section 38 of this titleAmendment by applicable to expenses paid or incurred after , in taxable years ending after such date, see , set out as a note under .

Effective Date of 2001 Amendment

Pub. L. 107–16section 619(d) of Pub. L. 107–16section 38 of this titleAmendment by applicable to costs paid or incurred in taxable years beginning after , with respect to qualified employer plans first effective after such date, see , set out as a note under .

Effective Date of 2000 Amendment

Pub. L. 106–554Pub. L. 106–554section 38 of this titleAmendment by applicable to investments made after , see § 1(a)(7) [title I, § 121(e)] of , set out as a note under .

Effective Date of 1998 Amendment

Pub. L. 105–206, title VI, § 6020(b)112 Stat. 823

section 13443(d) of Pub. L. 103–66section 38 of this title“The amendment made by this section [amending this section] shall take effect as if included in the amendments made by section 13443 of the Revenue Reconciliation Act of 1993 [see , set out as an Effective Date of 1993 Amendment note under ].”
, , , provided that:

Effective Date of 1996 Amendment

Pub. L. 104–188section 1201(g) of Pub. L. 104–188section 38 of this titleAmendment by applicable to individuals who begin work for the employer after , see , set out as a note under .

Effective Date of 1993 Amendment

section 13322(c)(2) of Pub. L. 103–66section 13322(f) of Pub. L. 103–66section 38 of this titleAmendment by applicable to wages paid or incurred after , see , set out as a note under .

Effective Date of 1990 Amendment

section 11511(b)(3) of Pub. L. 101–508section 11511(d)(1) of Pub. L. 101–508section 43 of this titleAmendment by applicable to costs paid or incurred in taxable years beginning after , see , set out as an Effective Date note under .

section 11813(b)(12) of Pub. L. 101–508section 49(e) of this titlesection 46(d) of this titlesection 46(b)(2)(C) of this titlesection 11813(c) of Pub. L. 101–508section 45K of this titleAmendment by applicable to property placed in service after , but not applicable to any transition property (as defined in ), any property with respect to which qualified progress expenditures were previously taken into account under , and any property described in , as such sections were in effect on , see , set out as a note under .

Effective Date of 1989 Amendment

section 7110(c)(2) of Pub. L. 101–239section 7110(e) of Pub. L. 101–239section 41 of this titleAmendment by applicable to taxable years beginning after , see , set out as a note under .

Pub. L. 101–239Pub. L. 100–647section 7817 of Pub. L. 101–239section 1 of this titleAmendment by section 7814(e)(1), (2)(D) of effective, except as otherwise provided, as if included in the provision of the Technical and Miscellaneous Revenue Act of 1988, , to which such amendment relates, see , set out as a note under .

Effective Date of 1988 Amendment

Pub. L. 100–647section 4008(d) of Pub. L. 100–647section 41 of this titleAmendment by applicable to taxable years beginning after , see , set out as a note under .

Effective Date of 1984 Amendment

Pub. L. 98–369section 475(a) of Pub. L. 98–369section 21 of this titleAmendment by applicable to taxable years beginning after , and to carrybacks from such years, see , set out as a note under .

Effective Date

Pub. L. 97–248, title II, § 205(c)(1)96 Stat. 430Pub. L. 99–514, § 2100 Stat. 2095

“(A)

General rule .—

Except as otherwise provided in this paragraph, the amendments made by subsection (a) [enacting this section and amending sections 48, 312, and 1016 of this title] shall apply to periods after , under rules similar to the rules of section 48(m) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954].
“(B)

Exception .—

The amendments made by subsection (a) shall not apply to any property which—
“(i)
is constructed, reconstructed, erected, or acquired pursuant to a contract which was entered into after , and was, on , and at all times thereafter, binding on the taxpayer,
“(ii)
is placed in service after , and before ,
“(iii)
with respect to which an election under section 168(f)(8)(A) of such Code is not in effect at any time, and
“(iv)
l is not described in section 167()(3)(A) of such Code.
“(C)

Special rule for integrated manufacturing facilities.—

“(i)

In general .—

In the case of any integrated manufacturing facility, the requirements of clause (i) of subparagraph (B) shall be treated as met if—
“(I)
the on-site construction of the facility began before , and
“(II)
during the period beginning after , and ending on , the taxpayer constructed (or entered into binding contracts for the construction of) more than 20 percent of the cost of such facility.
“(ii)

Integrated manufacturing facility .—

For purposes of clause (i), the term ‘integrated manufacturing facility’ means 1 or more facilities—
“(I)
located on a single site,
“(II)
for the manufacture of 1 or more manufactured products from raw materials by the application of 2 or more integrated manufacturing processes.
“(D)

Special rule for historic structures .—

In the case of any certified historic structure (as defined in section 48(g)(3) of the Internal Revenue Code of 1986), clause (i) of subparagraph (B) shall be applied by substituting ‘’ for ‘.’
“(E)

Certain projects with respect to historic structures .—

In the case of any certified historic structure (as so defined), the requirements of clause (i) of subparagraph (B) shall be treated as met with respect to such property—
“(i)
if the rehabilitation begins after , and before , or
“(ii)
if—
“(I)
before , a public offering with respect to interests in such property was registered with the Securities and Exchange Commission,
“(II)
section 1437f of Title 42 before such date an application with respect to such property was filed under section 8 of the United States Housing Act of 1937 [, The Public Health and Welfare], and
“(III)
such property is placed in service before .”
, , , as amended by , , , provided that:

Savings Provision

Pub. L. 115–141section 401(e) of Pub. L. 115–141section 23 of this titleFor provisions that nothing in amendment by be construed to affect treatment of certain transactions occurring, property acquired, or items of income, loss, deduction, or credit taken into account prior to , for purposes of determining liability for tax for periods ending after , see , set out as a note under .

section 11813(b)(12) of Pub. L. 101–508section 11821(b) of Pub. L. 101–508section 45K of this titleFor provisions that nothing in amendment by be construed to affect treatment of certain transactions occurring, property acquired, or items of income, loss, deduction, or credit taken into account prior to , for purposes of determining liability for tax for periods ending after , see , set out as a note under .