Carryback and Carryforward of Unused Credit
If you cannot use part or all of the credit because of the tax liability limit (line 19 is less than line 8), carry the unused
credit back one tax
year. To carry back an unused credit, file an amended return (Form 1040X, 1120X, or other amended return) for the prior tax
year or an application for
tentative refund (Form 1045, Application for Tentative Refund, or Form 1139, Corporation Application for Tentative Refund).
Generally, if you file an
application for a tentative refund, it must be filed by the end of the tax year following the tax year in which the credit
arose.
Note.
No part of the unused credit for any year attributable to any credit shall be carried back to any tax year before the first
tax year for which that
credit was first allowable. See the Credit Ordering Rule to determine which credits are allowed first.
If you have an unused credit after carrying it back, carry it forward to each of the 20 tax years after the year of the credit.
Any qualified
business credits (as defined in section 196(c)) that are unused after the last tax year of the 20-year carryforward period
(or at the time an
individual taxpayer dies or other taxpayer, such as a corporation or partnership, ceases to exist) may be taken as a deduction
in the earlier of:
For purposes of this special deduction, you can take into account only half of the investment credit (other than the rehabilitation
credit or a
credit to which section 48(q)(3) applies as in effect prior to repeal by the Revenue Reconciliation Act of 1990).
Change in Filing or Marital Status
Your general business credit is limited to your tax liability. Therefore, if you filed a joint return in a carryback or carryforward
year and your
marital status or filing status has changed, you may need to figure your separate tax liability in that carryback or carryforward
year. This would
apply if:
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You filed as single in the credit year, but filed a joint return in the carryback or carryforward year;
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You filed a joint return in the credit year, but filed a joint return with a different spouse in the carryback or carryforward
year; or
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You were married and filed a separate return in the credit year, but filed a joint return with the same or a different spouse
in the
carryback or carryforward year.
Determine your separate tax liability in the carryback or carryforward year as follows.
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Figure your tax for the carryback or carryforward year as though you were married filing a separate return.
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Figure your spouse's tax in that year as though he or she was married filing a separate return.
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Add the amounts in steps 1 and 2.
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Divide the amount in step 1 by the amount in step 3. The result should be rounded to at least three decimal places.
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Multiply the decimal in step 4 by the total tax shown on your joint return for the carryback or carryforward year. The result
is your
separate tax liability and a carryback or carryforward credit is applied against this amount only.
Although your carryback or carryforward of the credit is limited to your separate tax liability, the amount of your refund
resulting from the
carryback or carryforward is further limited to your share of the joint overpayment. This is found by subtracting your separate
tax liability (as
determined above) from your contribution toward the payment.
Unless you have an agreement or clear evidence of each spouse's contribution toward the payment of the joint liability, your
contribution includes
the tax withheld on your wages and your share of the joint estimated tax or tax paid with the return. Your share of these
payments is found by using
the same formula used in determining your separate tax liability. Substitute the joint estimated tax, or tax paid with the
return, for the tax in step
5. If the original return for the carryback year resulted in an overpayment, reduce your contribution by your share of the
refund.
Attach a copy of the computation to your amended return or application for tentative refund.
General business credits reported on Form 3800 are treated as used on a first-in, first-out basis by offsetting the earliest-earned
credits first.
Therefore, the order in which the credits are used in any tax year is:
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Carryforwards to that year, the earliest ones first,
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The general business credit earned in that year, and
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The carryback to that year.
When relevant, the components of the general business credit reported on Form 3800 arising in a single tax year are used in
the following order.
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Investment credit (in the following order— rehabilitation credit, energy credit, qualifying advanced coal project credit,
and
qualifying gasification project credit).
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Work opportunity credit (including any jobs credit carryforward).
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Welfare-to-work credit.
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Credit for increasing research activities.
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Low-income housing credit.
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Enhanced oil recovery credit.
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Disabled access credit.
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Renewable electricity production credit.
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Indian employment credit.
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Credit for employer social security and Medicare taxes paid on certain employee tips.
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Orphan drug credit.
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New markets credit.
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Credit for small employer pension plan startup costs.
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Credit for employer-provided child care facilities and services.
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Qualified railroad track maintenance credit.
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Biodiesel and renewable diesel fuels credit.
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Low sulfur diesel fuel production credit.
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Distilled spirits credit.
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Nonconventional source fuel credit.
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Energy efficient home credit.
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Energy efficient appliance credit.
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Alternative motor vehicle credit.
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Alternative fuel vehicle refueling property credit.
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Credits for employers affected by Hurricane Katrina, Rita, or Wilma.
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Mine rescue team training credit.
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Credit for contributions to selected community development corporations.
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General credits from an electing large partnership.
Although these credits are aggregated on Form 3800, keep a separate record of each credit to ensure that no credits or deductions
are squandered or
duplicated.
