
From the U.S. Code Online via GPO Access
[wais.access.gpo.gov]
[Laws in effect as of January 2, 2001]
[Document affected by Public Law 106-554 Section 1(a)(7)[121(c)]]
[Document affected by Public Law 107-16 Section 619(c)(2)]
[CITE: 26USC196]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                        Subtitle A--Income Taxes
 
                  CHAPTER 1--NORMAL TAXES AND SURTAXES
 
               Subchapter B--Computation of Taxable Income
 
      PART VI--ITEMIZED DEDUCTIONS FOR INDIVIDUALS AND CORPORATIONS
 
Sec. 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) the research credit determined under section 41(a) (other 
    than such credit determined under section 280C(c)(3)) for taxable 
    years beginning after December 31, 1988,
        (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), and
        (9) the new markets tax credit determined under section 45D(a).

(d) Special rule for investment tax credit and research credit

    Subsection (a) shall be applied by substituting ``an amount equal to 
50 percent of'' for ``an amount equal to'' 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 January 1, 1990.

(Added Pub. L. 97-248, title II, Sec. 205(a)(2), Sept. 3, 1982, 96 Stat. 
428; amended Pub. L. 98-369, div. A, title IV, Sec. 474(r)(8)(A), July 
18, 1984, 98 Stat. 840; Pub. L. 100-647, title IV, Sec. 4008(b)(2), Nov. 
10, 1988, 102 Stat. 3653; Pub. L. 101-239, title VII, Secs. 7110(c)(2), 
7814(e)(1), (2)(D), Dec. 19, 1989, 103 Stat. 2325, 2413, 2414; Pub. L. 
101-508, title XI, Secs. 11511(b)(3), 11813(b)(12), Nov. 5, 1990, 104 
Stat. 1388-485, 1388-554; Pub. L. 103-66, title XIII, Secs. 13302(b)(2), 
13322(c)(2), Aug. 10, 1993, 107 Stat. 555, 563; Pub. L. 104-188, title 
I, Sec. 1201(e)(1), Aug. 20, 1996, 110 Stat. 1772; Pub. L. 105-206, 
title VI, Sec. 6020(a), July 22, 1998, 112 Stat. 823; Pub. L. 106-554, 
Sec. 1(a)(7) [title I, Sec. 121(c)], Dec. 21, 2000, 114 Stat. 2763, 
2763A-610.)


                               Amendments

    2000--Subsec. (c)(9). Pub. L. 106-554 added par. (9).
    1998--Subsec. (c)(8). Pub. L. 105-206 added par. (8).
    1996--Subsec. (c)(2). Pub. L. 104-188 substituted ``work opportunity 
credit'' for ``targeted jobs credit''.
    1993--Subsec. (c)(6). Pub. L. 103-66, Sec. 13302(b)(2), added par. 
(6).
    Subsec. (c)(7). Pub. L. 103-66, Sec. 13322(c)(2), added par. (7).
    1990--Subsec. (c)(1). Pub. L. 101-508, Sec. 11813(b)(12)(A), 
substituted ``section 46'' for ``section 46(a)'' and ``section 50(c)'' 
for ``section 48(q)''.
    Subsec. (c)(5). Pub. L. 101-508, Sec. 11511(b)(3), added par. (5).
    Subsec. (d)(1). Pub. L. 101-508, Sec. 11813(b)(12)(B), 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''.
    1989--Subsec. (c)(4). Pub. L. 101-239, Sec. 7814(e)(2)(D), inserted 
``(other than such credit determined under section 280C(c)(3))'' after 
``section 41(a)''.
    Subsec. (d). Pub. L. 101-239, Sec. 7814(e)(1), 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.
    Subsec. (d)(2). Pub. L. 101-239, Sec. 7110(c)(2), inserted ``for a 
taxable year beginning before January 1, 1990'' after ``under section 
41(a)''.
    1988--Subsec. (c)(4). Pub. L. 100-647, Sec. 4008(b)(2)(A), added 
par. (4).
    Subsec. (d). Pub. L. 100-647, Sec. 4008(b)(2)(B), 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'.''
    1984--Pub. L. 98-369 amended section generally, substituting 
provisions relating to deduction for certain unused business credits for 
provisions relating to deduction for certain unused investment credits.


                    Effective Date of 2000 Amendment

    Amendment by Pub. L. 106-554 applicable to investments made after 
Dec. 31, 2000, see Sec. 1(a)(7) [title I, Sec. 121(e)] of Pub. L. 106-
554, set out as a note under section 38 of this title.


                    Effective Date of 1998 Amendment

    Pub. L. 105-206, title VI, Sec. 6020(b), July 22, 1998, 112 Stat. 
823, provided that: ``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 section 
13443(d) of Pub. L. 103-66, set out as an Effective Date of 1993 
Amendment note under section 38 of this title].''


                    Effective Date of 1996 Amendment

    Amendment by Pub. L. 104-188 applicable to individuals who begin 
work for the employer after Sept. 30, 1996, see section 1201(g) of Pub. 
L. 104-188, set out as a note under section 38 of this title.


                    Effective Date of 1993 Amendment

    Amendment by section 13322(c)(2) of Pub. L. 103-66 applicable to 
wages paid or incurred after Dec. 31, 1993, see section 13322(f) of Pub. 
L. 103-66, set out as a note under section 38 of this title.


                    Effective Date of 1990 Amendment

    Amendment by section 11511(b)(3) of Pub. L. 101-508 applicable to 
costs paid or incurred in taxable years beginning after Dec. 31, 1990, 
see section 11511(d)(1) of Pub. L. 101-508, set out as an Effective Date 
note under section 43 of this title.
    Amendment by section 11813(b)(12) of Pub. L. 101-508 applicable to 
property placed in service after Dec. 31, 1990, but not applicable to 
any transition property (as defined in section 49(e) of this title), any 
property with respect to which qualified progress expenditures were 
previously taken into account under section 46(d) of this title, and any 
property described in section 46(b)(2)(C) of this title, as such 
sections were in effect on Nov. 4, 1990, see section 11813(c) of Pub. L. 
101-508, set out as a note under section 29 of this title.


                    Effective Date of 1989 Amendment

    Amendment by section 7110(c)(2) of Pub. L. 101-239 applicable to 
taxable years beginning after Dec. 31, 1989, see section 7110(e) of Pub. 
L. 101-239, set out as a note under section 41 of this title.
    Amendment by section 7814(e)(1), (2)(D) of Pub. L. 101-239 
effective, except as otherwise provided, as if included in the provision 
of the Technical and Miscellaneous Revenue Act of 1988, Pub. L. 100-647, 
to which such amendment relates, see section 7817 of Pub. L. 101-239, 
set out as a note under section 1 of this title.


                    Effective Date of 1988 Amendment

    Amendment by Pub. L. 100-647 applicable to taxable years beginning 
after Dec. 31, 1988, see section 4008(d) of Pub. L. 100-647, set out as 
a note under section 41 of this title.


                    Effective Date of 1984 Amendment

    Amendment by Pub. L. 98-369 applicable to taxable years beginning 
after Dec. 31, 1983, and to carrybacks from such years, see section 
475(a) of Pub. L. 98-369, set out as a note under section 21 of this 
title.


                             Effective Date

    Section 205(c)(1) of Pub. L. 97-248, as amended by Pub. L. 99-514, 
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
    ``(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 December 31, 1982, 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 August 13, 1981, 
    and was, on July 1, 1982, and at all times thereafter, binding on 
    the taxpayer,
        ``(ii) is placed in service after December 31, 1982, and before 
    January 1, 1986,
        ``(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) is not described in section 167(l)(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 
        July 1, 1982, and
            ``(II) during the period beginning after August 13, 1981, 
        and ending on July 1, 1982, 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 `December 31, 1980' for `August 13, 1981.'
    ``(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 December 31, 1980, and 
    before July 1, 1982, or
        ``(ii) if--
            ``(I) before July 1, 1982, a public offering with respect to 
        interests in such property was registered with the Securities 
        and Exchange Commission,
            ``(II) before such date an application with respect to such 
        property was filed under section 8 of the United States Housing 
        Act of 1937 [section 1437f of Title 42, The Public Health and 
        Welfare], and
            ``(III) such property is placed in service before July 1, 
        1984.''


                            Savings Provision

    For provisions that nothing in amendment by section 11813(b)(12) of 
Pub. L. 101-508 be construed to affect treatment of certain transactions 
occurring, property acquired, or items of income, loss, deduction, or 
credit taken into account prior to Nov. 5, 1990, for purposes of 
determining liability for tax for periods ending after Nov. 5, 1990, see 
section 11821(b) of Pub. L. 101-508, set out as a note under section 29 
of this title.
