Publication 334 (2005), Tax Guide for Small Business

4. General Business Credits

Table of Contents

Introduction

Your general business credit for the year consists of your carryforward of business credits from prior years plus the total of your current year business credits. In addition, your general business credit for the current year may be increased later by the carryback of business credits from later years. You subtract this credit directly from your tax.

Useful Items - You may want to see:

Publication

954 Tax Incentives for Distressed Communities

Form (and Instructions)

3800
General Business Credit
6251
Alternative Minimum Tax—Individuals

See chapter 12 for information about getting publications and forms.

Business Credits

All of the following credits are part of the general business credit. The form you use to figure each credit is shown in parentheses. Be sure you also read How To Claim the Credit, later, because you may also have to fill out Form 3800 in certain situations.

Alternative fuel vehicle refueling property credit (Form 8911). This credit applies to the cost of any qualified fuel vehicle refueling property placed in service after December 31, 2005, for tax years ending after that date. For more information, see Form 8911.

Alternative motor vehicle credit (Form 8910). This credit consists of the following four credits for new vehicles placed in service after December 31, 2005, for tax years ending after that date. For more information, see Form 8910.

Qualified fuel cell motor vehicle credit.
Advanced lean burn technology motor vehicle credit.
Qualified hybrid motor vehicle credit.
Qualified alternative fuel motor vehicle credit.

Biodiesel and renewable diesel fuels credit (Form 8864) This credit applies to certain fuel sold or used in your business. For more information, see Form 8864.

Credit for alcohol used as a fuel (Form 6478). This credit applies to alcohol sold or used as a fuel. Alcohol, for purposes of this credit, includes ethanol and methanol. It does not include alcohol produced from petroleum, natural gas, coal, or peat. For more information, see Form 6478.

Credit for contributions to selected community development corporations (Form 8847). This credit applies to certain contributions made to a selected community development corporation before June 30, 1999. For more information, see Form 8847.

Credit for employee social security and Medicare taxes paid on certain employee tips (Form 8846). The credit is generally equal to your (employer's) portion of social security and Medicare taxes paid on tips received by employees of your food and beverage establishment where tipping is customary. The credit applies regardless of whether the food is consumed on or off your business premises. However, you cannot get credit for your part of social security and Medicare taxes on those tips that are used to meet the federal minimum wage rate that applies to the employee under the Fair Labor Standards Act. For more information, see Form 8846.

Credit for employer-provided childcare facilities and services (Form 8882). This credit applies to the qualified expenses you paid for employee childcare and qualified expenses you paid for childcare resource and referral services. The credit is 25% of qualified expenses you paid for employee childcare and 10% of qualified expenses you paid for childcare resource and referral services. This credit is limited to $150,000 each year. For more information, see Form 8882.

Credit for increasing research activities (Form 6765). The research credit is designed to encourage businesses to increase the amounts they spend on research and experimental activities, including energy research. The credit is generally 20% of the amount by which your research expenses for the year are more than your base amount. For more information, see Form 6765.

Credit for small employer pension startup costs (Form 8881). This credit applies to pension plan startup costs. If you begin a new qualified defined benefit or defined contribution plan (including a 401(k) plan), SIMPLE plan, or simplified employee pension, you can receive a tax credit of 50% of the first $1,000 of qualified startup costs. For more information, see Publication 560, Retirement Plans for Small Business (SEP, Simple, and Qualified Plans).

Disabled access credit (Form 8826). The disabled access credit is a nonrefundable tax credit for an eligible small business that pays or incurs expenses to provide access to persons who have disabilities. You must pay or incur the expenses to enable your business to comply with the Americans with Disabilities Act of 1990. For more information, see Form 8826.

Distilled spirits credit (Form 8906). This credit is available to distillers and importers of distilled spirits and eligible wholesalers of distilled spirits for tax years beginning after September 30, 2005. For more information, see Form 8906.

Empowerment zone and renewal community employment credit (Form 8844). You may qualify for this credit if you have employees and are engaged in a business in an empowerment zone or renewal community for which the credit is available. For more information, see Form 8844 and Publication 954.

Energy efficient appliance credit (Form 8909). This credit is available for each type of qualified energy efficient appliance produced by the taxpayer after December 31, 2005, in a tax year ending on or after December 31, 2006. For more information, see Form 8909.

Energy efficient home credit (Form 8908). This credit is available for eligible contractors of certain homes sold for use as a residence after December 31, 2005. For more information, see Form 8908.

Enhanced oil recovery credit (Form 8830). This credit applies to your qualified enhanced oil recovery costs. For more information, see Form 8830.

Hurricane Katrina employee retention credit (Form 5884-A). This credit provides certain employers with an incentive to continue to pay certain wages after August 28, 2005, and before January 1, 2006. For more information, see Form 5884-A.

Indian employment credit (Form 8845). This credit applies to the part of the qualified wages and health insurance costs (up to $20,000 per employee) you paid or incurred during a tax year that is more than the sum of the comparable costs you (or your predecessor) paid or incurred during calendar year 1993. The employee must be an enrolled member, or the spouse of an enrolled member, of an Indian tribe. The employee must perform substantially all of his or her services within an Indian reservation while living on or near the reservation. For more information, see Form 8845 and Publication 954.

Investment credit (Form 3468). The investment credit is the total of the following credits. For more information, see Form 3468.

Rehabilitation credit.
Energy credit for periods ending before January 1, 2006.
Energy credit for periods ending after December 31, 2005.
Qualifying advanced coal project credit for periods ending after August 8, 2005.
Qualifying gasification project credit for periods ending after August 8, 2005.

Low sulfur diesel fuel production credit (Form 8896). This credit applies to expenses paid or incurred after December 31, 2002, in tax years ending after such date. For more information, see Form 8896.

Low-income housing credit (Form 8586). This credit generally applies to qualified low-income housing buildings placed in service after 1986. For more information, see Form 8586.

New markets credit (Form 8874). This credit is for qualified equity investments made in qualified community development entities. For more information, see Form 8874.

Nonconventional source fuel credit (Form 8907). For tax years ending after December 31, 2005, this credit will be treated as a general business credit. For more information, see Form 8907.

Orphan drug credit (Form 8820). The orphan drug credit applies to qualified expenses incurred in testing certain drugs, known as “orphan drugs for rare diseases and conditions.” For more information, see Form 8820.

Qualified railroad track maintenance credit (Form 8900). Certain regional and switching railroads may be able to claim a credit for expenses made to upgrade their railroad tracks (including roadbed, bridges, and related track structures). For more information, see Form 8900.

Renewable electricity, refined coal, and Indian coal production credit (Form 8835). For more information on the renewable electricity, refined coal, and Indian coal production credit, see Form 8835.

Welfare-to-work credit (Form 8861). The welfare-to-work credit provides businesses with an incentive to hire long-term family assistance recipients. For more information, see Form 8861 and Publication 954.

Work opportunity credit (Form 5884). The work opportunity credit provides businesses with an incentive to hire individuals from targeted groups that have a particularly high unemployment rate or other special employment needs. For more information, see Form 5884 and Publication 954.

How To Claim the Credit

To claim a general business credit, you will first have to get the forms you need to claim your current year business credits.

In addition to the credit form, you may also need to file Form 3800. See the next discussion to decide whether you need to file Form 3800.

Who must file Form 3800?

You must file Form 3800 if any of the following apply.

You have more than one of the credits listed above (other than the credit for alcohol used as a fuel (Form 6478), the empowerment zone and renewal community employment credit (Form 8844), or the renewable electricity, refined coal, and Indian coal production credit (Form 8835, Section B)).
Any of these credits (other than the low-income housing credit) is from a passive activity. For information about passive activity credits, see Form 8582-CR.
You have a carryback or carryforward of any of these credits.

The general business credit includes the credits listed under General Business Credits, the empowerment zone and renewal community employment credit (Form 8844), the alcohol fuel credit (Form 6478), and the portion of the renewable electricity, refined coal, and Indian coal production credit figured in Section B of Form 8835.

Forms 8844, 6478, and 8835 have special tax liability limits and are not reported on Form 3800. Any carryback, carryforward, and passive activity limitation of these credits is computed separately on the forms on which they are claimed.

Alternative minimum tax (AMT). Although you may not owe AMT, you must still figure your tentative minimum tax on Form 6251 if you claim a general business credit. After you fill in Form 6251, attach it to your tax return.