Deduction for clean-fuel vehicles and certain refueling property.   Section 179A allows a deduction for part of the cost of qualified clean-fuel vehicle property and qualified clean-fuel vehicle refueling property placed in service during the tax year. For more information, see Pub. 535.

Lobbying expenses.   Generally, lobbying expenses are not deductible. These expenses include:

• Amounts paid or incurred in connection with influencing Federal or state legislation (but not local legislation), or
• Amounts paid or incurred in connection with any communication with certain Federal executive branch officials in an attempt to influence the official actions or positions of the officials. See Regulations section 1.162-29 for the definition of influencing legislation.

Dues and other similar amounts paid to certain tax-exempt organizations may not be deductible. See section 162(e)(3). If certain in-house expenditures do not exceed $2,000, they are deductible. For information on contributions to charitable organizations that conduct lobbying activities, see the instructions for Schedule A, line 21. For more information on lobbying expenses, see section 162(e).

Line 32. Total deductions.   Insurance companies that issue specified insurance contracts (as defined in section 848(e)(1)) are generally required to amortize policy acquisition expenses on a straight-line basis over a period of 120 months beginning with the 1st month in the 2nd half of the tax year (section 848(a)). Reduce total deductions on line 32 by the amount required to be capitalized under section 848. Attach a schedule showing all computations. See section 848 and its regulations for special rules, definitions, and exceptions. Also see Schedule G, Form 1120-L, and its instructions for more information.

Line 34b. Deduction on account of the special income and deduction accounts.   Enter the total of the amounts required to be added under sections 832(e)(4) and (6). However, no deduction is permitted unless tax and loss bonds are purchased in an amount equal to the tax benefit of the deduction. See section 832(e).

Note.   The deduction on account of the special income and deduction accounts is limited to taxable income for the tax year (computed without regard to this deduction or to any carryback of a net operating loss).

Line 36b. Net operating loss deduction.   A corporation may use the net operating loss (NOL) incurred in one tax year to reduce its taxable income in another tax year.

Enter on line 36b the total NOL carryovers from other tax years, but do not enter more than the corporation's taxable income (after dividends-received deduction). Attach a schedule showing the computation of the NOL deduction. Also complete item 12 on Schedule I.

The following special rules apply.

• A corporate equity reduction interest loss may not be carried back to a tax year preceding the year of the equity reduction transaction (see section 172(b)(1)(E)).
• If an ownership change occurs, the amount of the taxable income of a loss corporation that may be offset by the pre-change NOL carryovers is limited (see section 382 and the related regulations). A loss corporation must file an information statement with its income tax return for each tax year that certain ownership shifts occur (see Temporary Regulations section 1.382-2T(a)(2)(ii) for details). See Regulations section 1.382-6(b) for details on how to make the closing-of-the-books election.
• If a corporation acquires control of another corporation (or acquires its assets in a reorganization), the amount of pre-acquisition losses that may offset recognized built-in gain may be limited (see section 384).
• An NOL cannot be carried to or from any tax year for which the insurance company is not subject to tax under section 831(a), or to any tax year if (between the tax year from which the loss is being carried and such tax year) there is an intervening tax year for which the insurance company was not subject to tax imposed by section 831(a).

For details on the NOL deduction, see Pub. 542, section 172, section 844, and Form 1139, Corporation Application for Tentative Refund.

Line 37. Taxable income.   If line 37 is zero or less, the corporation may have an NOL that may be carried back or forward as a deduction to other tax years. Generally, a corporation first carries back an NOL 2 tax years (5 tax years for NOLs incurred in tax years ending in 2001 or 2002). However, the corporation may elect to waive the carryback period and instead carry the NOL forward to future tax years. To make the election, see the instructions for Schedule I, item 11, on page 18.

See Form 1139 for details, including other elections that may be available, which must be made no later than 6 months after the due date (excluding extensions) of the corporation's tax return.

Schedule B, Part I - Taxable Investment Income of Electing Small Companies

Note.   (1) Once an election under section 831(b) is made to be taxed only on investment income, it can only be revoked with the consent of the Secretary, and (2) a corporation making this election must include on line 8, gross investment income, any amount subtracted from a protection against loss account.

Income

Line 1a, column (a). Gross interest.   Enter the gross amount of interest income including all tax-exempt interest income.

Line 1b, column (a). Interest exempt under section 103.   Enter the amount of interest on state and local bonds that is exempt from taxation under section 103. See the instructions for Schedule A, line 3b, column (a), for more information.

Lines 1a and 1b, column (b). Amortization of premiums.   Enter on line 1a, column (b), the total amortization of premium on tax-exempt bonds.

Enter on line 1b, column (b), the amortization of bond premium on tax-exempt bonds.

Note.   Insurance companies electing to amortize discount for tax purposes must reduce the amortization of premium by any amortization of discount.

Line 3. Gross rents.   Enter the gross rents received or accrued during the tax year. Deduct rental expenses such as repairs, interest, taxes, and depreciation on the proper lines in the Deductions section.

Line 5. Gross income from a trade or business, other than an insurance business, and from Form 4797.   Enter the gross income from a trade or business, other than an insurance business, carried on by the insurance company or by a partnership of which the insurance company is a partner. Include section 1245 and section 1250 gains (as modified by section 291), and other gains from Form 4797, Sales of Business Property, on investment assets only.

Line 6. Income from leases described in sections 834(b)(1)(B) and 834(b)(1)(C).   Enter gross income from entering into, changing, or ending any lease, mortgage, or other instrument or agreement from which the company earns interest, rents, or royalties.

Line 8. Gross investment income.   If gross investment income includes an amount subtracted from the protection against loss account, write on the dotted line next to line 8, PAL and the amount.

Deductions

Note.   See section 834(d)(1) regarding the limitation of expenses on real estate owned and occupied in part or in whole by a mutual insurance company.

Line 9. Real estate taxes.   Enter taxes paid or accrued on real estate owned by the corporation and deductible under section 164.

Line 10. Other real estate expenses.   Enter all ordinary and necessary real estate expenses, such as fire insurance, heat, light, and labor. Also enter the cost of incidental repairs, such as labor and supplies, that do not add to the property's value or appreciably prolong its life. Do not include any amount paid for new buildings or for permanent improvements or betterments made to increase the value of any property or any amount spent on foreclosed property before the property is held for rent.

Line 11. Depreciation.   Enter depreciation on assets only to the extent that the assets are used to produce gross investment income reported on lines 1 through 7 of Schedule B. For more information, see the instructions for line 22, Schedule A.

Line 12. Depletion.   Enter any allowable depletion on royalty income reported on line 4, Schedule B. See the instructions for line 23, Schedule A, for more information.

Line 13. Trade or business deductions.   Enter the total deductions related to any trade or business income included in gross investment income under section 834(b)(2). Do not include deductions for any insurance business. Do not include losses from sales or exchanges of capital assets or property used in the business, or from the compulsory or involuntary conversion of property used in the trade or business.

Line 14. Interest.   See the instructions for lines 20a and 20b, Schedule A.

Line 17. Investment expenses.   Enter expenses that are properly chargeable as investment expenses. If general expenses are allocated to investment expenses, the total deduction cannot be more than the amount on Schedule B, Part II, line 39. Attach a schedule showing the kind and amount of general expenses. Minor items may be grouped together.

See section 267 for the limitation on deductions for unpaid expenses and interest in transactions between related taxpayers.

Schedule B, Part II - Invested Assets Book Values

Use Schedule B, Part II, to compute the limitation on investment expenses under section 834(c)(2) when any general expenses are in part assigned to, or included in, the investment expenses deducted on Schedule B, Part I, line 17.

Schedule C - Dividends and Special Deductions

Definitions

The acquisition date for investments acquired by direct purchase is the trade date rather than the settlement date. For investments not acquired by direct purchase (such as those acquired through transfers among affiliates, tax-free reorganizations, or the liquidation of a subsidiary, etc.), the actual acquisition date should be used regardless of the holding period determined under section 1223.

A special rule applies in determining the acquisition date of dividends received from affiliates. This rule provides that the portion of any 100% dividend which is related to prorated amounts be treated as received with respect to stock acquired on the later of:

(a) the date the payor acquired the stock or obligation to which the prorated amounts are attributable or

(b) the first day on which the payor and payee were members of the same affiliated group as defined in section 243(b).

Also, if the taxpayer is a member of an affiliated group filing a consolidated return, its determination of dividends received is made as if the group were not filing a consolidated return.

Prorated amounts   means tax-exempt interest and dividends for which a deduction is allowable under section 243, 244, or 245 (other than 100% dividends).

100% dividend   means any dividend if the percentage used for purposes of determining the deduction allowable under section 243, 244, or 245(b) is 100%. A special rule applies to certain dividends received by a foreign corporation.

Lines 1 through 23

For purposes of the 20% ownership test on lines 1 through 7, the percentage of stock owned by the corporation is based on voting power and value of the stock. Preferred stock described in section 1504(a)(4) is not taken into account. Corporations filing a consolidated return should see Regulations sections 1.1502-13, 1.1502-26, and 1.1502-27 before completing Schedule C.

Lines 1 through 9, column (a).   Enter in column (a) of the appropriate line those dividends that are subject to the provisions of section 832(b)(5)(B).This will include:

1. All dividends (other than 100% dividends) received on stock acquired after August 7, 1986, and
2. 100% dividends received on stock acquired after August 7, 1986, to the extent that such dividends are attributable to prorated amounts (see definition above).

In the case of an insurance company that files a consolidated return, the determination with respect to any dividend paid by a member to another member of the affiliated group is made as if no consolidated return was filed. See section 832(g).

Line 1.   Enter dividends (except those received on debt-financed stock acquired after July 18, 1984-see section 246A) that:

• Are received from less-than-20%-owned domestic corporations subject to income tax and
• Qualify for the 70% deduction under section 243(a)(1).

  Also, include on line 1:

• Taxable distributions from an IC-DISC or former DISC that are designated as eligible for the 70% deduction and certain dividends of Federal Home Loan Banks. See section 246(a)(2).
• Dividends (except those received on debt-financed stock acquired after July 18, 1984) from a regulated investment company (RIC). The amount of dividends eligible for the dividends-received deduction under section 243 is limited by section 854(b). The corporation should receive a notice from the RIC specifying the amount of dividends that qualify for the deduction.

Report so-called dividends or earnings received from mutual savings banks, etc., as interest. Do not treat them as dividends.

Line 2.   Enter on line 2:

• Dividends (except those received on debt-financed stock acquired after July 18, 1984) that are received from 20%-or-more-owned domestic corporations subject to income tax and that are subject to the 80% deduction under section 243(c) and
• Taxable distributions from an IC-DISC or former DISC that are considered eligible for the 80% deduction.

Line 3.   Enter dividends that are:

• Received on debt-financed stock acquired after July 18, 1984, from domestic and foreign corporations subject to income tax that would otherwise be subject to the dividends-received deduction under section 243(a)(1), 243(c), or 245(a). Generally, debt-financed stock is stock that the corporation acquired by incurring a debt (e.g., it borrowed money to buy the stock).
• Received from a RIC on debt-financed stock. The amount of dividends eligible for the dividends-received deduction is limited by section 854(b). The corporation should receive a notice from the RIC specifying the amount of dividends that qualify for the deduction.

Line 4.   Enter dividends received on the preferred stock of a less-than-20%-owned public utility that is subject to income tax and is allowed the deduction provided in section 247 for dividends paid.

Line 5.   Enter dividends received on preferred stock of a 20%-or-more-owned public utility that is subject to income tax and is allowed the deduction provided in section 247 for dividends paid.

Line 6.   Enter the U.S.-source portion of dividends that:

• Are received from less-than-20%-owned foreign corporations and
• Qualify for the 70% deduction under section 245(a). To qualify for the 70% deduction, the corporation must own at least 10% of the foreign corporation by vote and value.

Also include dividends received from a less-than-20%-owned foreign sales corporation (FSC) that:

• Are attributable to income treated as effectively connected with the conduct of a trade or business within the United States (excluding foreign trade income) and
• Qualify for the 70% deduction provided in section 245(c)(1)(B).

Line 7.   Enter the U.S.-source portion of dividends that are received from 20%-or-more-owned foreign corporations and that qualify for the 80% deduction under section 245(a). Also include dividends received from a 20%-or-more-owned FSC that:

• Are attributable to income treated as effectively connected with the conduct of a trade or business within the United States (excluding foreign trade income) and
• Qualify for the 80% deduction provided in section 245(c)(1)(B).

Line 8.   Enter dividends received from wholly owned foreign subsidiaries that are eligible for the 100% deduction provided in section 245(b).

In general, the deduction under section 245(b) applies to dividends paid out of the earnings and profits of a foreign corporation for a tax year during which:

• All of its outstanding stock is owned (directly or indirectly) by the domestic corporation receiving the dividends and
• All of its gross income from all sources is effectively connected with the conduct of a trade or business within the United States.

Line 9.   Enter only those dividends that qualify under section 243(b) for the 100% dividends-received deduction described in section 243(a)(3). Corporations taking this deduction are subject to the provisions of section 1561.

The 100% deduction does not apply to affiliated group members that are joining in the filing of a consolidated return.

Line 10, column (b).   Enter foreign dividends not reportable on lines 6, 7, and 8. Include on line 10 the corporation's share of the ordinary earnings of a qualified electing fund from Form 8621, line 1c. Exclude distributions of amounts constructively taxed in the current year or in prior years under subpart F (sections 951 through 964).

Line 11, column (b).   Include income constructively received from controlled foreign corporations under subpart F. This amount should equal the total subpart F income reported on Schedule I of Form 5471.

Line 12, column (b).   Include gross-up for taxes deemed paid under sections 902 and 960.

Line 13, column (b).   Include the following:

1.   Dividends (other than capital gain distributions reported on Schedule D (Form 1120) and exempt-interest dividends) that are received from RICs and that are not subject to the 70% deduction.

2.   Dividends from tax-exempt organizations.

3.   Dividends (other than capital gain dividends) received from a real estate investment trust (REIT) that, for the tax year of the trust in which the dividends are paid, qualifies under sections 856 through 860.

4.   Dividends not eligible for a dividends-received deduction because of the holding period of the stock or an obligation to make corresponding payments with respect to similar stock.

Two situations in which the dividends-received deduction will not be allowed on any share of stock are:

• If the corporation held it less than 46 days during the 90-day period beginning 45 days before the stock became ex-dividend with respect to the dividend (see section 246(c)(1)(A)) or
• To the extent the corporation is under an obligation to make related payments for substantially similar or related property.

5.   Any other taxable dividend income not properly reported above (including distributions under section 936(h)(4)).

Line 17.   Dividends received on debt-financed stock acquired after July 18, 1984, are not entitled to the full 70% or 80% dividends-received deduction. The 70% or 80% deduction is reduced by a percentage that is related to the amount of debt incurred to acquire the stock. See section 246A. Also, see section 245(a) before making this computation for an additional limitation which applies to dividends received from foreign corporations. Attach a schedule showing how the amount on line 17 was figured.

Line 23 Limitations on Dividends-Received Deduction

Generally, line 23, column (b), may not exceed the amount from the worksheet below. However, in a year in which an NOL occurs, this limitation does not apply even if the loss is created by the dividends-received deduction. See sections 172(d) and 246(b).

Worksheet for Schedule C, line 23 (keep for your records)

1.	Enter the amount from Schedule A, line 37 or Schedule B, line 21, whichever applies, without: the NOL deduction (section 172); dividend-received deduction (sections 243(a)(1), 244(a), 245(a) or (b), and 247); any adjustment under section 1059; and any capital loss carryback to the tax year under section 1212(a)(1)
2.	Enter the sum of the amounts from line 22, column (b), (without regard to wholly owned foreign subsidiary dividends) and line 9, column (b)
3.	Subtract line 2 from line 1
4.	Multiply line 3 by 80%
5.	Add lines 16, 19, 21, and 22 (without regard to FSC dividends), column (b) and the portion of the deduction on line 17, column (b) that is attributable to dividends received from 20% -or-more-owned corporations
6.	Enter the smaller of line 4 or line 5. If line 5 is greater than line 4, stop here; enter the amount from line 6 on line 23, column (b) (without regard to FSC dividends). Do not complete the rest of this worksheet
7.	Enter the total amount of dividends received from 20%-or-more-owned corporations that are included on lines 2, 3, 5, 7, and 8 (without regard to FSC dividends), column (b)
8.	Subtract line 7 from line 3
9.	Multiply line 8 by 70%
10.	Subtract line 5 from line 23, column (b) (without regard to FSC dividends)
11.	Enter the smaller of line 9 or line 10
12.	Dividends-received deduction after limitation (section 246(b)). Add lines 6 and 11. Enter the result here and on line 23, column (b) (without regard to FSC dividends)

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