Elective Payment of Advanced Manufacturing Investment Credit, 17596-17612 [2024-04605]

Agencies

• Internal Revenue Service
• DEPARTMENT OF THE TREASURY

[Federal Register Volume 89, Number 48 (Monday, March 11, 2024)]
[Rules and Regulations]
[Pages 17596-17612]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-04605]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[TD 9989]
RIN 1545-BQ75


Elective Payment of Advanced Manufacturing Investment Credit

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations and removal of temporary regulations.

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SUMMARY: This document contains final regulations concerning the 
elective payment election of the advanced manufacturing investment 
credit under the Creating Helpful Incentives to Produce Semiconductors 
(CHIPS) Act of 2022. The regulations describe rules for the elective 
payment election, including special rules applicable to partnerships 
and S corporations, repayment of excessive payments, basis reduction 
and recapture, and the IRS pre-filing registration process that 
taxpayers wanting to make the elective payment election are required to 
follow. These final regulations affect taxpayers eligible to make the 
elective payment election of the advanced manufacturing investment tax 
credit in a taxable year. This document also removes temporary 
regulations published on June 21, 2023 in the Federal Register.

DATES: 
    Effective date: These regulations are effective May 10, 2024.
    Applicability dates: For dates of applicability see Sec.  1.48D-
6(h).

FOR FURTHER INFORMATION CONTACT: Concerning these final regulations, 
Lani M. Sinfield of the Office of Associate Chief Counsel (Passthroughs 
and Special Industries) at (202) 317-4137 (not a toll-free number).

SUPPLEMENTARY INFORMATION: 

Background

    Section 48D was added to the Internal Revenue Code (Code) on August 
9, 2022, by section 107(a) of the CHIPS Act of 2022 (CHIPS Act), which 
was enacted as Division A of the CHIPS and Science Act of 2022, Public 
Law 117-167, 136 Stat. 1366, 1393. Section 48D established the advanced 
manufacturing investment credit (section 48D credit) and section 48D(d) 
allows taxpayers (other than partnerships and S corporations) to elect 
to treat the amount of the section 48D credit determined under section 
48D(a) as a payment against their Federal income tax liabilities. 
Section 48D(d) also provides special rules relating to elective 
payments to partnerships and S corporations and directs the Secretary 
of the Treasury or her delegate (Secretary) to provide rules for making 
elections under section 48D and to require information or registration 
necessary for purposes of preventing duplication, fraud, improper 
payments, or excessive payments under section 48D. Section 48D applies 
to qualified property placed in service after December 31, 2022, and, 
for any property the construction of which began prior to January 1, 
2023, only to the extent of the basis thereof attributable to the 
construction, reconstruction, or erection of such qualified property 
after August 9, 2022 (the date of enactment of the CHIPS Act). See 
section 107(f)(1) of the CHIPS Act.
    On March 23, 2023, the Treasury Department and the IRS published in 
the Federal Register (88 FR 17451) a notice of proposed rulemaking 
(REG-120653-22), which contained proposed definitions and rules to 
implement the general provisions relating to the section 48D credit 
under proposed Sec. Sec.  1.48D-1 through 1.48D-6 and the special 10-
year recapture rule under proposed Sec.  1.50-2 (March 2023 proposed 
regulations). Proposed Sec. Sec.  1.48D-1 through 1.48D-5 and Sec.  
1.50-2 addressed who would be an eligible taxpayer, what would qualify 
as qualified property or an advanced manufacturing facility, whether 
the beginning of construction requirement would be met, and what would 
qualify as a significant transaction involving a material expansion of 
semiconductor manufacturing capacity in a foreign country of concern 
for purposes of the special 10-year recapture rule under section 
50(a)(3) of the Code. In addition, Sec.  1.48D-6 of the March 2023 
proposed regulations set forth the general requirements that would 
apply for making an elective payment election under section 48D(d), and 
the specific requirement that an eligible taxpayer, partnership, or S 
corporation would need to comply with the registration procedures in 
proposed Sec.  1.48D-6(c)(2)

[[Page 17597]]

as a condition of, and prior to, any amount being treated as a payment 
under section 48D(d)(1) or (d)(2)(A)(i)(I). However, the March 2023 
proposed regulations under proposed Sec.  1.48D-6(c)(2) reserved on the 
procedures and additional information required for completing the pre-
filing registration process.
    Over 40 comments were received by the Treasury Department and the 
IRS in response to the March 2023 proposed regulations. A public 
hearing on the March 2023 proposed regulations was held on July 26, 
2023. Comments and testimony regarding proposed Sec. Sec.  1.48D-1 
through 1.48D-5 and 1.50-2 will be addressed in a forthcoming Treasury 
decision containing final regulations under those provisions.
    On June 21, 2023, the Treasury Department and the IRS published 
proposed regulations under section 48D(d) (REG-105595-23) in the 
Federal Register (88 FR 40123) revising proposed Sec.  1.48D-6 of the 
March 2023 proposed regulations (June 2023 proposed regulations) to set 
forth the additional information and registration requirements for 
taxpayers planning to make an elective payment election under section 
48D(d) to treat the amount of the section 48D credit as a payment of 
Federal income tax, or in the case of a partnership or S corporation, 
to receive a payment in the amount of such credit. The June 2023 
proposed regulations also described rules for the elective payment 
election, including special rules applicable to partnerships and S 
corporations, repayment of excessive payments, and basis reduction and 
recapture. Also on June 21, 2023, the Treasury Department and the IRS 
published temporary regulations (T.D.9975) (temporary regulations) in 
the Federal Register (88 FR 40086) that implement the prefiling 
registration process described in Sec.  1.48D-6(b) of the June 2023 
proposed regulations. The temporary regulations apply to property 
placed in service on or after December 31, 2022, and during a taxable 
year ending on or after June 21, 2023. Twelve commenters provided 
comments to the Treasury Department and the IRS in response to the June 
2023 proposed regulations, and a public hearing was held on August 24, 
2023.
    This Treasury decision removes the temporary regulations effective 
on May 10, 2024 and adopts Sec.  1.48D-6 of the June 2023 proposed 
regulations with certain modifications after full consideration of all 
the comments and testimony received on Sec.  1.48D-6 of the March 2023 
proposed regulations and June 2023 proposed regulations, as described 
in the Summary of Comments and Explanation of Revisions.

Summary of Comments and Explanation of Revisions

I. Overview

    The final regulations set forth in Sec.  1.48D-6 retain the basic 
approach and structure of the June 2023 proposed regulations with 
certain revisions in response to comments received.
    The Treasury Department and the IRS have refined and clarified 
certain aspects of the June 2023 proposed regulations in these final 
regulations. Specifically, the final regulations modify the limitations 
for making an elective payment election in proposed Sec.  1.48D-
6(c)(2), modify the denial of double benefit rule in proposed Sec.  
1.48D-6(e), and provide an interim rule for determining a partner's 
distributive share of the tax exempt income described in section 
48D(d)(2)(A)(i)(III) and proposed Sec.  1.48D-6(d)(2).

II. Elective Payment Election

    One commenter requested that the final regulations clarify whether 
a taxpayer is considered to have made an elective payment election upon 
completing the pre-filing registration requirement. The commenter noted 
that proposed Sec.  1.48D-6(b)(7)(iv) states in relevant part, that, if 
an eligible taxpayer that is the owner of an advanced manufacturing 
facility previously registered for an elective payment election for a 
section 48D credit determined with respect to that advanced 
manufacturing facility, and if the facility undergoes a change in 
ownership such that the new owner has a different employer 
identification number (EIN) than the owner who obtained the original 
registration, then the original owner of the advanced manufacturing 
facility must amend the original registration to disassociate its EIN 
from the advanced manufacturing facility. The commenter suggested that 
this sentence from proposed Sec.  1.48D-6(b)(7)(iv) creates some 
confusion as to whether the elective payment election is made pursuant 
to the pre-filing registration as opposed to on the taxpayer's original 
tax return as provided in proposed Sec.  1.48D-6(c). The commenter 
further suggested that an example would be helpful to demonstrate a 
taxpayer's ability to make an elective payment election per facility 
not per the taxpayer. The commenter explained that there could be 
instances in which the taxpayer would make an elective payment election 
for one advanced manufacturing facility versus another advanced 
manufacturing facility.
    The Treasury Department and the IRS have determined that a 
modification to the proposed rule is appropriate to clarify that a 
taxpayer makes an elective payment election pursuant to section 
48D(d)(1) in the time and manner required by Sec.  1.48D-6(c) of the 
final regulations. Accordingly, proposed Sec.  1.48D-(6)(b)(7)(iv) is 
revised in the final regulations to provide that the taxpayer registers 
the ``qualified investments in the advanced manufacturing facility or 
the advanced manufacturing facility'' as opposed to registering for 
``an elective payment election for a section 48D credit determined with 
respect to that advanced manufacturing facility.'' Given this 
clarification, the Treasury Department and the IRS have determined that 
an example to demonstrate this point is not needed.

III. Pre-Filing Registration Requirement

A. Qualified Investment

    Proposed Sec.  1.48D-6(b)(5) would require a taxpayer to obtain a 
registration number for each qualified investment in an advanced 
manufacturing facility of an eligible taxpayer with respect to which an 
elective payment election is made. Several commenters requested that 
the final regulations clarify the meaning of the term ``qualified 
investment'' in proposed Sec.  1.48D-6(b)(5). Some commenters requested 
that the final regulations allow a taxpayer to obtain a registration 
number for an advanced manufacturing facility. Other commenters 
requested that the final regulations allow a taxpayer to obtain a 
registration number for a single advanced manufacturing facility 
project that would cover all qualified investments made with respect to 
such advanced manufacturing facility project within the taxable year. 
Another commenter requested that the final regulations allow a taxpayer 
to obtain a registration number for all qualified investments placed in 
service as a part of an advanced manufacturing facility during the 
taxable year, or for any reasonable grouping of investments or assets.
    Section 48D(a) provides that the section 48D credit for any taxable 
year is an amount equal to 25 percent of the qualified investment for 
such taxable year with respect to any advanced manufacturing facility 
of an eligible taxpayer. Section 48D(b) generally provides that the 
qualified investment with respect to any advanced manufacturing 
facility for any taxable

[[Page 17598]]

year is the basis of any qualified property placed in service by the 
taxpayer during such taxable year which is part of an advanced 
manufacturing facility. Consistent with section 48D(a), proposed Sec.  
1.48D-6(b)(5) would require a taxpayer to obtain a registration number 
for each qualified investment in an advanced manufacturing facility as 
a prerequisite to making an elective payment election with respect to 
the section 48D credit determined with respect to such qualified 
investment for the taxable year. Consequently, a taxpayer must obtain a 
registration number for any qualified property placed in service during 
the taxable year. A taxpayer is able to register a single property, 
properties, or an advanced manufacturing facility. However, a taxpayer 
must be the owner of an advanced manufacturing facility to register the 
facility. A taxpayer that places in service qualified property that is 
part of an advanced manufacturing facility must register the qualified 
property if such taxpayer is not the owner of the facility. The 
proposed regulations provide flexibility to taxpayers in determining 
the appropriate properties, or advanced manufacturing facility, for 
which it must obtain a registration number.
    Section 48D(d)(2)(E) provides that the Secretary may require 
additional information or registration as a condition of, and prior to, 
an amount being treated as a payment under section 48D(d)(1) to prevent 
duplication, fraud, improper payments, or excessive payments. A rule 
allowing a taxpayer to register a single advanced manufacturing 
facility project, which could include multiple qualified investments in 
more than one advanced manufacturing facility, would create an 
administrative burden on the IRS because the determination of the 
section 48D credits with respect to the separate facilities could be 
different. Such a rule could thus increase the risk of duplication, 
fraud, improper payments, or excessive payments. For the foregoing 
reasons, these final regulations do not adopt these recommendations. 
The Treasury Department and the IRS recommend that taxpayers consult 
Form 3468, Investment Credit, and Form 3800, General Business Credit, 
and those form's accompanying instructions, as well as the current 
version of Publication 5884, Inflation Reduction Act (IRA) and CHIPS 
Act of 2022 (CHIPS) Pre-Filing Registration Tool User Guide and 
Instructions, for the latest guidance on the pre-filing registration 
process. Proposed Sec.  1.48D-6(b)(7)(ii) would provide that a 
registration number is valid only for the taxable year for which it was 
obtained. Proposed Sec.  1.48D-6(b)(7)(iii) would provide that a 
taxpayer must renew a previously obtained registration in a subsequent 
taxable year. A commenter requested that the final regulations allow a 
taxpayer to obtain one registration number that could be renewed over a 
period of several taxable years for all qualified progress expenditures 
in an advanced manufacturing facility. The Treasury Department and the 
IRS have determined that allowing a taxpayer to obtain one registration 
number that can be used for a period of several years for all qualified 
progress expenditures would increase the risk of duplication, fraud, 
improper payments or excessive payments. Accordingly, the requested 
change is not adopted.

B. Information Required To Complete the Pre-Filing Registration Process

    Commenters recommended that the final regulations modify the 
information and documentation requirements in proposed Sec.  1.48D-
6(b). One commenter requested that the final regulations specify the 
``additional information'' that may be required by the IRS electronic 
portal pursuant to proposed Sec.  1.48D-6(b)(6)(ii) to ensure that 
taxpayers have clarity and time to prepare all necessary documentation. 
One commenter requested that the final regulations eliminate all 
``open-ended'' categories that do not specify the types of information 
or documentation as in proposed Sec.  1.48D-6(b)(6)(ii), (vi), (vi)(F), 
and (ix). The commenter also requested limiting the requirement for 
information on the beginning of construction and placed in service date 
in proposed Sec.  1.48D-6(b)(6)(vi)(D). The commenter further requested 
that the final regulations eliminate or significantly limit the 
supporting document requirement in Sec.  1.48D-6(b)(6)(vi)(C).
    The pre-filing registration process has been designed to help 
prevent fraud and duplication, while also allowing for more efficient 
processing and payment upon filing of the return. The information 
requested is also that which a taxpayer claiming a section 48D credit 
should have available. Except for a taxpayer making a qualified 
progress expenditure election pursuant to section 48D(b)(5), a taxpayer 
must first place in service qualified property before the taxpayer may 
register the property with the intention of making an elective payment 
election. Maintaining this proposed requirement ensures that taxpayers 
are not completing pre-filing registration in an earlier year, before a 
credit can be determined. Therefore, these final regulations do not 
adopt these recommendations.
    One commenter recommended that the final regulations include 
information reporting requirements similar to the information reporting 
requirements in Sec.  1.48-4 (election of lessor to treat the lessee as 
having acquired investment credit property). More specifically, the 
commenter suggested that the information requirements should be 
satisfied when a taxpayer attaches a signed statement to its return 
that provides, for each unit of property for which an election is made, 
including a single advanced manufacturing facility, a description of 
the property, the basis of the property, the year when construction of 
the property began, and the placed in service date. The commenter also 
requested that, in the years after the filing of the initial statement, 
a taxpayer should be able to satisfy the information requirements by 
reporting changes to any information in the prior year's filed 
statement such as basis adjustments and any additional property with 
respect to which additional credits are claimed.
    Consistent with section 48D(d)(2)(E), the final regulations provide 
for a pre-filing registration process that allows the IRS to verify 
certain information before the election is made and then to process the 
tax return on which the election is made with minimal delays. 
Similarly, the final regulations provide the time and manner for making 
an elective payment election that is consistent with the existing 
framework for claiming business tax credits; that is, the filing of the 
annual return including the completed source credit form and completed 
Form 3800. As previously noted, the pre-filing registration process has 
been designed to help prevent fraud and duplication, while also 
allowing for more efficient processing and payment upon filing of the 
return. For the foregoing reasons, the final regulations adopt the 
information requirements as proposed.
    A commenter asked whether the IRA and CHIPS pre-filing registration 
portal could handle large files in order to satisfy the information 
requirements under proposed Sec.  1.48D-6(b)(6)(vi)(C). The Treasury 
Department and the IRS did not intend for proposed Sec.  1.48D-
6(b)(6)(vi)(C) to require all supporting documentation to be provided 
during the pre-filing registration process. Rather, the intent was to 
require information sufficient to verify the taxpayer's qualified 
investment and provide examples of information that may be helpful in 
doing so. In response to the comment, these final regulations remove 
the word ``any'' from the

[[Page 17599]]

provision. The documentation to support the existence of a valid 
qualified investment will vary by the property or properties for which 
the credit is being claimed, and a registrant does not need to provide 
all information that may be available. However, to the extent the 
information provided is insufficient for purposes of the pre-filing 
registration process, the IRS may request further information. See 
Publication 5884.
    Another commenter generally recommended that the final regulations 
``could be slightly more specific in guiding taxpayers when determining 
their pre-filing eligibility,'' but did not include any particular 
recommendations for modifications to the proposed regulations. 
Consistent with section 48D(d)(2)(E), proposed Sec.  1.48D-6(b) would 
provide the information and pre-filing registration requirements that 
the Secretary deems necessary and appropriate for purposes of 
preventing duplication, fraud, improper payments or excessive payments 
and which specify pre-filing eligibility. Accordingly, the final 
regulations do not include any modifications to the specifications for 
determining pre-filing eligibility.

C. Timing of the Pre-Filing Registration Process

    Commenters requested that the final regulations clarify the 
timeframe for the IRS to review the registration information provided, 
and notify the taxpayer whether the registration requirements have or 
have not been satisfied. One commenter recommended that the final 
regulations: (1) allow the IRS 90 days to determine whether a taxpayer 
submitted sufficient information required to complete the pre-filing 
registration process, (2) provide a taxpayer with 14 days to correct 
the registration, and (3) allow the IRS 45 days to review the corrected 
information. Because the timeframe and procedures of the pre-filing 
registration process may be modified over time as both the IRS and 
taxpayers gain experience with it, these final regulations do not 
contain any such timeframe or procedure. Instead, the Treasury 
Department and the IRS recommend that taxpayers consult the current 
version of Publication 5884 for the latest guidance on the pre-filing 
registration process. As of February 2024, Publication 5884 states:

    Even though registration is not possible prior to the beginning 
of the tax year in which the credit will be earned, the IRS 
recommends that taxpayers register as soon as reasonably practicable 
during the tax year. The current recommendation is to submit the 
pre-filing registration at least 120 days prior to when the 
organization or entity plans to file its tax return. This should 
allow time for IRS review, and for the taxpayer to respond if the 
IRS requires additional information before issuing the registration 
numbers.

    One commenter requested that the final regulations clarify the 
outcome of a missed registration with respect to a portion of a 
qualified investment. The commenter asked whether a missed registration 
for a portion of a qualified investment will impact a taxpayer's 
ability to make an election for the portion of the qualified investment 
for which registration was properly made and whether a taxpayer may 
claim a section 48D credit for the portion for which the registration 
was not properly made. This is a factual matter that cannot be 
addressed in these final regulations as it depends on the facts and 
circumstances of the qualified investment made by the taxpayer. 
However, as further described in part IV.B of this Summary of Comments 
and Explanation of Revisions, the final regulations provide that a 
taxpayer may take curative action for an ineffective election prior to 
the due date of the election (including extensions) by filing a 
superseding return.
    No comments were received on the remaining proposed rules under 
Sec.  1.48D-6(b). This Treasury decision therefore adopts those 
proposed regulations as final regulations.

IV. Time and Manner of Election

A. Qualified Progress Expenditures

    Commenters requested that the final regulations clarify whether a 
taxpayer can make an elective payment election with respect to a 
section 48D credit determined pursuant to a qualified progress 
expenditure election. Section 48D(b)(5) provides that ``[r]ules similar 
to the rules of subsections (c)(4) and (d) of section 46 (as in effect 
on the day before the date of enactment of the Revenue Reconciliation 
Act of 1990) shall apply for purposes of subsection [48D](a).'' Thus, a 
taxpayer has the ability to make a qualified progress expenditure 
election, as provided in Sec.  1.46-5, to increase its qualified 
investment with respect to an advanced manufacturing facility for the 
taxable year by any qualified expenditures made during such taxable 
year. Section 48D(d)(1) allows a taxpayer to make an elective payment 
election with respect to a section 48D credit determined with respect 
to such taxpayer. Section 48D(d)(2) allows a partnership or S 
corporation to make an elective payment election under section 
48D(d)(1). The statutory text of sections 48D(b)(5) and (d)(1) and (2) 
thus permit a taxpayer (or partnership or S corporation) to make an 
elective payment election with respect to a section 48D credit 
determined pursuant to a qualified progress expenditure election. For 
this reason, the Treasury Department and the IRS have determined that a 
clarification is not necessary in the final regulations. The Treasury 
Department and the IRS recommend that taxpayers consult the current 
version of Publication 5884 for the latest guidance on the pre-filing 
registration with respect to property for which the taxpayer makes a 
qualified progress expenditure election. As of February 2024, 
Publication 5884 states:

    If the registrant intends to elect payment for certain progress 
expenditures under IRC section 48D(b)(5), enter the date of the 
entity's last progress expenditure made during the tax year.

    A commenter stated that a calendar-year taxpayer with qualifying 
progress expenditures made between August 9, 2022, and December 31, 
2022, may not have sufficient time to successfully complete the pre-
filing registration requirements as described in the proposed 
regulations to make a timely elective payment election on an original 
return. The IRA and CHIPS pre-filing registration portal opened on 
December 22, 2023. Thus, a calendar-year taxpayer with qualifying 
progress expenditures made between August 9, 2022, and December 31, 
2022, would have been unable to complete the pre-filing registration 
requirements. In such cases, the taxpayer should anticipate that the 
tax return on which the elective payment election is made may undergo 
heightened scrutiny to mitigate the risk of fraud and duplication that 
pre-filing registration is intended to address before a payment is 
issued.
    One commenter requested that the final regulations or other 
guidance provide guidance on the definitions of ``self-constructed'' 
versus ``non-self-constructed property'' and ``integrated unit'' for 
purposes of determining the construction period under Sec.  1.46-5. 
Whether a property, including qualified property under section 
48D(b)(2) and the section 48D regulations, is progress expenditure 
property is determined based on the facts known at the close of the 
first taxable year to which a progress expenditures election is made. 
Whether property is ``self-constructed'' versus ``non-self-constructed 
property'' or an ``integrated unit'' pursuant to Sec.  1.46-5(k), (l) 
and (e)(3), respectively, is also a factual determination. Additional 
guidance on the definitions of ``self-constructed'' versus ``non-self-

[[Page 17600]]

constructed property'' and ``integrated unit,'' would inject 
significant complexity into the final regulations and likely cause 
additional uncertainty regarding the scope of those terms. Moreover, 
such guidance is beyond the scope of these final regulations. 
Accordingly, the final regulations do not address the modifications 
requested by the commenter.

B. Manner of Making the Election

    A commenter requested that the final regulations clarify whether a 
taxpayer is ``released from the requirements of an elective payment 
election'' if the taxpayer completes pre-filing registration but 
chooses not to make the elective payment election. Proposed Sec.  
1.48D-6(c)(1) would provide, in part, that any elective payment 
election under section 48D(d)(1) must be made on the taxpayer's 
original return of tax (including a superseding return) filed not later 
than the due date (including extensions of time) for the taxable year 
for which the section 48D credit is determined. Proposed Sec.  1.48D-
6(b) would provide the requirements for pre-filing registration. 
Neither section 48D nor the proposed regulations would mandate that a 
taxpayer is required to make an elective payment election if the 
taxpayer successfully completed the pre-filing registration 
requirements set forth in proposed Sec.  1.48D-6(b). As noted in Part 
II of this Summary of Comments and Explanation of Revisions, the final 
regulations modify proposed Sec.  1.48D-(6)(b)(7)(iv) by clarifying 
that the taxpayer previously registered the ``advanced manufacturing 
facility'' as opposed to previously registering for ``an elective 
payment election for a section 48D credit determined with respect to 
that advanced manufacturing facility.'' For the foregoing reasons, the 
Treasury Department and the IRS have determined that no further 
clarification is necessary in the final regulations as requested by the 
commenter.
    One commenter requested that the final regulations clarify that any 
additional information and supporting calculations required by any 
source credit form and Form 3800 may be submitted electronically and 
will be reviewed by the appropriate persons. Proposed Sec.  1.48D-
6(c)(1) would provide a manner for making an elective payment election 
that is consistent with the existing framework for claiming business 
tax credits; that is, the filing of the annual return including the 
completed source credit form and completed Form 3800 which may 
submitted electronically. The proposed regulations would provide for a 
pre-filing registration process that would allow the IRS to verify 
certain information before the election is made and then process the 
tax return on which the election is made with minimal delays. 
Additional guidance on this subject is beyond the scope of these final 
regulations.
    Consistent with proposed Sec.  1.48D-6(c)(1)(iv)(A), the final 
regulations require a taxpayer to include a statement on the taxpayer's 
original return (including a superseding return) attesting under the 
penalties of perjury that the taxpayer has not made an applicable 
transaction as defined in proposed Sec.  1.50-2(b)(3) during the 
taxable year that the qualified property is placed in service. One 
commenter recommended that the statement whether the taxpayer has made 
an applicable transaction should be requested either at pre-filing 
registration or on the tax return. The commenter explained that 
including this requirement would allow the IRS and taxpayers to be 
proactive in preventing any unnecessary claiming of the section 48D 
credit or the taxpayer making an incorrect elective payment election. 
Section 48D(a) provides that the section 48D credit for any taxable 
year is determined with respect to any advanced manufacturing facility 
of an eligible taxpayer. Section 48D(c) defines an eligible taxpayer, 
in part, as any taxpayer which has not made an applicable transaction 
(as defined in section 50(a)) during the taxable year. Requiring the 
statement on the taxpayer's return as opposed to during pre-filing 
registration is consistent with the requirements of sections 48D(a) and 
(c) and allows taxpayers sufficient time for such a determination while 
deterring erroneous elective payment elections.
    One commenter requested clarification on superseding returns. 
Neither the Code nor regulations define a superseding return, but 
administrative IRS guidance provides that a superseding return is a 
return filed subsequent to the originally-filed return but before the 
due date for filing the return (including extensions). For example, if 
a taxpayer subject to an automatic extension files an original return 
on the due date and also files a subsequent return within the automatic 
extension period, the subsequent return would generally be considered a 
superseding return. If a return for a particular taxable year is 
originally filed after the due date (excluding extensions) but during 
the automatic extension period, then such return would be considered an 
original return. Unlike a superseding return, an amended return is a 
return filed subsequent to the originally filed or superseding return 
and filed after the due date for filing the return (including 
extensions).
    The commenter stated that the reference to a superseding return 
seems to be an acknowledgment that some taxpayers will use a 
provisional tax return filed on the due date (before extensions) to 
hasten the election process. This commenter asked whether, if a 
taxpayer files a provisional return on March 15, 2024, and files a 
superseding return on September 15, 2024, the taxpayer would be treated 
as making payment against tax under section 48D(d)(2)(C) on March 15, 
2024. The Treasury Department and the IRS note that the designation 
``provisional'' return has no basis in the Code or regulations and 
accordingly, such returns are not treated differently by the IRS upon 
filing. Taxpayers are reminded that a tax return is signed under 
penalties of perjury that the return is true, correct, and complete. If 
an original return is filed on March 15, 2024, and contains a valid 
elective payment election, the taxpayer is treated as making a payment 
against tax on that day. A superseding return could increase or reduce 
the amount of the net elective payment election. If the amount is 
increased, the additional elective payment is treated as paid on the 
date the superseding return was filed. Taxpayers should be aware that 
filing a superseding return could result in a delay by the IRS in 
processing the additional elective payment amount. If the net elective 
payment amount is reduced because of the superseding return, the 
taxpayer could be subject to interest and, if the taxpayer fails to pay 
the difference with the superseding return, penalties.
    The Treasury Department and the IRS have determined that 
clarification is needed to address situations in which a taxpayer 
intended to make an elective payment election but made a reporting 
error with respect to an element of a valid election (for example, 
miscalculating the amount of the credit on the original return or 
making a typographical error in the process of inputting a registration 
number), and to allow the taxpayer to correct any errors that would 
result in a disallowance of the election or to correct an excessive 
payment before an excessive payment determination is made by the IRS. 
Consistently, it is appropriate to allow taxpayers to correct errors 
that would result in a larger payment than indicated on the original 
return as long as such larger amount is accurate. As a result, these 
final regulations remove the words ``or revised'' in proposed Sec.  
1.48D-6(c)(2) and now state ``[n]o elective payment election may be 
made

[[Page 17601]]

for the first time on an amended return, withdrawn on an amended 
return, or made or withdrawn by filing an administrative adjustment 
request under section 6227 of the Code, although a numerical error with 
respect to a properly claimed elective payment election may be 
corrected on an amended return or by filing an administrative 
adjustment request under section 6227 if necessary.'' This provision 
cannot be used to revoke an election or to make an election for the 
first time on an amended return. In addition, the taxpayer's original 
return, which must be signed under penalties of perjury, must contain 
all of the information, including a registration number, required by 
these final regulations. To properly correct an error on an amended 
return or in an administrative adjustment request, a taxpayer must have 
made an error in the information included on the original return such 
that there is a substantive item to correct; a taxpayer cannot correct 
an item that is left blank or an item that is described as being 
``available upon request.''
    These final regulations also modify the proposed regulations to 
permit an extension of time under Sec.  301.9100-2(b) to allow for an 
automatic six-month extension of time from the due date of the return 
(excluding extensions) to make the election prescribed in section 
48D(d). The elective payment election is a statutory election in that 
its due date is prescribed by statute. As such, the section 9100 relief 
procedures apply only insofar as the late election is being filed 
pursuant to Sec.  301.9100-2(b), which requires that the taxpayer 
timely filed its return for the year the election should have been 
made. Relief under this provision will apply only to taxpayers that 
have not received an extension of time to file a return after the 
original due date (excluding extensions). Taxpayers eligible for this 
relief must take corrective action under Sec.  301.9100-2(c) and follow 
the procedural requirements of Sec.  301.9100-2(d).
    No comments were received on the remaining proposed rules regarding 
the manner and time of making an elective payment election under Sec.  
1.48D-6(c). This Treasury decision therefore adopts those proposed 
regulations as final regulations.

C. Timing of Payment

    Multiple commenters advocated that elective payment amounts be 
permitted to be used against estimated tax payments or that the 
Treasury Department and the IRS allow for quarterly elections and 
payments even though the elective payment is not deemed effective until 
the later of the due date or filing date of the tax return. Another 
commenter opined that the IRS could use its authority under section 
48D(d)(6) to allow taxpayers to make and receive quarterly elections 
and payments, align quarterly elections with quarterly returns, and 
replicate the quarterly excise tax reporting mechanism similar to rules 
under sections 6426 and 6427, allowing taxpayers to claim payments 
every quarter.
    The distinction between estimated tax installments (which are the 
obligation of the taxpayer to calculate) versus an end of year 
estimated tax penalty (that may result if the taxpayer's calculations 
are not correct and/or if the taxpayer's annual tax liability is not 
paid on the due date for the return, including a ``payment'' that is 
made through an elective payment election) appeared to confuse several 
commenters. For example, one commenter stated that proposed Sec.  
1.48D-6(e)(2) could be interpreted to permit a taxpayer to calculate 
their estimated tax installments and any underpayment by considering 
properly determined refundable credits in making quarterly estimated 
tax payments, even though the elective payment amount is not deemed to 
be paid until the later of the due date or filing date of the tax 
return.
    Commenters asked that section 48D credits be considered to have 
been estimated tax payments, resulting in no tax liability at the end 
of the year or, at a minimum, that the final regulations waive 
estimated tax penalties related to an elective payment election. In 
other words, commenters requested clarification that the elective 
payment election may be applied as a reduction to any quarterly 
estimated tax payments (without penalty) and to offset any taxes that 
are reported on the taxpayer's income tax return for any taxable year 
in which those elections are in effect.
    These final regulations do not adopt these recommendations. Section 
48D(d)(2)(C) contemplates a single payment and clearly states the 
timing of when the payment is treated as made, which at the earliest, 
is the return due date (determined without regard to extensions). In 
that sense, payments made under section 48D are no different than other 
kinds of payments a taxpayer may make as part of filing a timely return 
(excluding extensions) or making a payment with a timely filed 
application for extension. Taxpayers can adequately determine whether 
their quarterly estimated payments are sufficient based on their 
projected income and by considering any expected and properly 
determined credit. For the same reasons, the section 48D credit may not 
be included to calculate estimated tax for Form 4466, which, under 
section 6425(a)(1) of the Code must be filed after the close of a 
corporation's taxable year, on or before the 15th day of the fourth 
month following the close of such taxable year, and prior to the filing 
of the corporation's return for such taxable year. Comments requesting 
examples showing how the full amount of the section 48D credit reduces 
tax under section 6655 are outside the scope of these final 
regulations. For the sake of clarity, however, the final regulations 
modify the examples under Sec.  1.48D-6(e)(4) to better reflect the 
conclusion that a taxpayer that files its return after the due date for 
filing (excluding extensions) may also be subject to a penalty under 
section 6651(a)(2) for the failure to timely pay tax, even if it did 
not owe tax after applying the net elective payment amount against its 
net tax liability.
    One commenter stated that in the absence of quarterly elections and 
payments, the final regulations should provide a mechanism for a 
corporate partner to reduce quarterly estimated taxes for credits 
generated through partnerships; otherwise, the commenter thought it 
would be penalizing taxpayers that operate their businesses through 
partnerships. The Treasury Department and the IRS note that the 
treatment of partners in a partnership (or shareholders of an S 
corporation) that makes an elective payment election is different from 
the treatment of a taxpayer that directly makes an elective payment 
election. This is a result of the special rules in section 48D(d)(2)(A) 
that require an elective payment election for section 48D credits 
determined with respect to any property held directly by a partnership 
to be made by the partnership. An elective payment election made by a 
partnership is not reduced by the Federal tax liabilities of its 
partners. Instead, it is only reduced by any partnership level Federal 
tax liability. If partners were allowed to reduce their quarterly 
estimated taxes for section 48D credits determined with respect to 
property held by a partnership to which the partnership makes an 
elective payment election, then the amount of the elective payment made 
to the partnership should be reduced by the partners' corresponding 
quarterly estimated tax liabilities. Otherwise, the partners would 
receive a windfall because the same section 48D credit would be used to 
both reduce the partners' estimated tax payments and

[[Page 17602]]

generate an elective payment to the partnership. Section 48D(d)(2)(A) 
does not allow for such a mechanism. Instead, section 48D(d)(2)(A) 
provides that if a partnership makes an elective payment election, any 
elective payment amount is treated as tax exempt income for purposes of 
section 705 and a partner's distributive share of such tax exempt 
income is equal to such partner's distributive share of the section 48D 
credit otherwise available for each taxable year. As the elective 
payment election results in a section 48D credit being treated as tax 
exempt income rather than a credit, it is inappropriate to adopt a rule 
allowing the partners to treat the same amount as a credit for 
estimated tax purposes. Thus, the final regulations do not adopt the 
commenter's recommendation of a rule allowing corporate (or any other) 
partners to reduce quarterly estimated taxes for section 48D credits 
determined with respect to property held through a partnership that 
makes an elective payment election.
    Commenters asked that the final regulations specify a timeframe 
within which a taxpayer will receive an elective payment amount. 
Commenters also requested that the IRS should be required to process 
the elective payment within 45 days from the date the election is 
filed, similar to the quick refund process under Form 4466, Corporation 
Application for Quick Refund of Overpayment of Estimated Tax. The 
Treasury Department and the IRS decline to specify a particular time 
within which an elective payment election will be processed. Several 
factors, including the volume of returns on which elective payment 
elections are made, and whether any particular return contains complete 
and accurate information, will affect processing time. However, as 
stated in this preamble, the pre-filing registration is intended to 
allow the IRS to verify certain information about a taxpayer in a 
timely manner while mitigating the risk of fraud or improper payments 
and then process the annual tax return with minimal delays.
    A commenter requested that the final regulations clarify whether 
refunds greater than $5 million will require review by the Joint 
Committee on Taxation. The commenter noted that the review is not 
necessary because an elective payment is not a refund of tax based on 
any position taken on the tax return. This comment is outside the scope 
of these final regulations.

V. Special Rules for Partnerships and S Corporations

    Commenters requested that the final regulations allow a partnership 
to determine a partner's distributive share of the section 48D credit 
without regard to Sec.  1.46-3(f). For the reasons explained in this 
Part V of the Summary of Comments and Explanation of Revisions, the 
Treasury Department and the IRS decline to adopt this request in the 
final regulations. The Treasury Department and the IRS have determined, 
however, that an interim rule allowing partnerships that meet certain 
requirements to determine a partner's distributive share of the tax 
exempt income resulting from an elective payment election in accordance 
with the basic principles governing partnership income allocations 
under the section 704(b) regulations, instead of in accordance with the 
principles under the section 704(b) regulations and Sec.  1.46-3(f) for 
allocations of investment tax credits, is appropriate for purposes of 
section 48D.
    Section 48D is among the investment credits listed under section 
46. See section 46(6). The investment credit under section 46 is a 
business credit under section 38(b)(1). Thus, property with respect to 
which a section 48D credit is determined is section 38 property. 
Section 1.704-1(b)(4)(ii), which requires allocations with respect to 
the investment credit provided by section 38(b)(1) to be made in 
accordance with the partners' interests in the partnership, provides 
that allocations of cost or qualified investment made in accordance 
with Sec.  1.46-3(f) are deemed to be made in accordance with the 
partners' interests in the partnership. Pursuant to Sec.  1.46-3(f)(1), 
in the case of a partnership that owns section 38 property, each 
partner is treated as the taxpayer with respect to the partner's share 
of the basis of partnership section 38 property. Section 1.46-
3(f)(2)(i) provides that a partner's share of basis of any section 38 
property is determined in accordance with the ratio in which the 
partners share general profits. Pursuant to Sec.  1.46-3(f)(2)(ii), if 
all related items of income, gain, loss, and deduction with respect to 
any item of partnership section 38 property are specially allocated in 
the same manner and if such special allocation is recognized under 
section 704(a) and (b) and Sec.  1.704-1(b) (that is, the allocation 
must have substantial economic effect), then each partner's share of 
the basis of such item of section 38 property is determined by 
reference to the special allocation effective for the date on which the 
property is placed in service, rather than in accordance with the ratio 
in which the partners share general profits. Thus, Sec.  1.46-3(f), as 
currently in effect, already permits special allocations of a partner's 
share of the basis of an item of section 38 property independent of the 
ratio in which the partners divide the general profits of the 
partnership if all requirements under Sec.  1.46-3(f)(2)(ii) are met. 
Accordingly, the final regulations do not incorporate the commenter's 
request to allow a partnership to allocate a partner's distributive 
share of the section 48D credit without regard to Sec.  1.46-3(f).
    Section 48D(d)(2)(A)(i)(IV) provides that a partner's distributive 
share of the tax exempt income resulting from a partnership receiving 
an elective payment is based on such partner's distributive share of 
the otherwise applicable credit (section 48D credit) for each taxable 
year. Consistent with section 48D(d)(2)(A)(i)(IV), proposed Sec.  
1.48D-6(d)(2)(iv) would provide that a partner's distributive share of 
such tax exempt income is equal to such partner's distributive share of 
its otherwise allocable basis in qualified property under proposed 
Sec.  1.48D-2(h)(2)(i) (referring to Sec.  1.46-3(f)) for such taxable 
year. Notwithstanding section 48D(d)(2)(A)(i)(IV), section 48D(d)(6) 
expressly authorizes the Secretary to issue regulations or other 
guidance as may be necessary or appropriate to carry out the purposes 
of section 48D(d), including regulations or other guidance providing 
rules for determining a partner's distributive share of the tax exempt 
income described in section 48D(d)(2)(A)(i)(III). The Treasury 
Department and the IRS have determined that a general rule in the final 
regulations that would allow a partnership to determine a partner's 
distributive share of the tax exempt income described in section 
48D(d)(2)(A)(i)(III) without regard to section 48D(d)(2)(A)(i)(IV) is 
inconsistent with the language in section 48D(d)(2)(A)(i)(IV) and the 
structure and the purpose of the statute.
    The Treasury Department and the IRS are aware that taxpayers may 
have entered into written binding partnership agreements for the joint 
ownership and operation of an advanced manufacturing facility or 
qualified property in anticipation of the enactment of the CHIPS Act on 
August 9, 2022. Other taxpayers may have entered into such written 
binding partnership agreements on or after August 9, 2022, and before 
publication of the proposed regulations under section 48D(d) in the 
Federal Register on June 21, 2023. The Treasury Department and the IRS 
are also aware that such taxpayers may have made

[[Page 17603]]

erroneous assumptions in their partnership agreements concerning the 
allocation of the tax exempt income described in section 
48D(d)(2)(A)(i)(III), and, more specifically, that such tax exempt 
income could be allocated otherwise than as provided in section 
48D(d)(2)(A)(i)(IV). These binding partnership agreements may have the 
effect of diminishing or negating the benefit of elective pay under 
section 48D(d) for taxpayers that are engaging in activities 
incentivized by the CHIPS Act through partnerships if a partner's 
distributive share under section 704(b) of the tax exempt income must 
be determined in accordance with its distributive share of the 
otherwise applicable section 48D credit.
    For this reason, the Treasury Department and the IRS have 
determined that an interim rule allowing a partner's distributive share 
of the tax exempt income described in section 48D(d)(2)(A)(i)(III) to 
be determined in accordance with the basic principles for partnership 
income allocations as described in Sec.  1.704-1(b)(1)(i), as opposed 
to pursuant to the rules for credits provided in Sec. Sec.  1.704-
1(b)(4)(ii) and 1.46-3(f), is consistent with the structure and purpose 
of the CHIPS Act to incentivize the manufacture of semiconductors and 
semiconductor manufacturing equipment within the United States. 
Accordingly, the final regulations provide that if a written binding 
partnership agreement was entered into after December 31, 2021, and 
before June 22, 2023, and if the partnership was formed for the purpose 
of owning and operating an advanced manufacturing facility or qualified 
property, a partner's distributive share of the tax exempt income 
described in section 48D(d)(2)(A)(i)(III) may be determined in 
accordance with the basic principles for partnership income allocations 
as described in Sec.  1.704-1(b)(1)(i), instead of in accordance with 
the manner in which the otherwise applicable section 48D credits would 
have been allocated under Sec. Sec.  1.704-1(b)(4)(ii) and 1.46-3(f).
    In determining the amount of the section 48D credit that will 
result in a payment to the partnership or S corporation under section 
48D(d)(2)(A)(i)(I) and in Sec.  1.48D-6(d)(2)(ii)(A), the Treasury 
Department and the IRS have clarified under Sec.  1.48D-6(d)(6)(i) 
that, in addition to section 469 of the Code, a partnership or S 
corporation is not subject to section 38(b) and (c) because those 
sections apply at the partner or S shareholder level.
    No comments were received with respect to the remaining special 
rules for a partnership or S corporation making an elective payment 
election, including the timing of tax exempt income under proposed 
Sec.  1.48D-6(d)(2)(vi), the character of tax exempt income under 
proposed Sec.  1.48D-6(d)(5), the methodology for determining the 
amount of section 48D credit including the application of sections 49, 
50, and 469 under proposed Sec.  1.48D-6(d)(6), and rules applicable to 
payments made to partnerships subject to the centralized partnership 
audit regime found in subchapter C of chapter 63 of the Code under 
proposed Sec.  1.48D-6(d)(7). The Treasury Department and the IRS adopt 
the proposed regulations without further modification, but their 
designations have been revised to better accommodate the interim rule.

VI. Denial of Double Benefit Rule

    Commenters requested further guidance regarding the method for 
computing the elective payment amount. One commenter requested 
additional examples with other general business credits (GBCs) to 
demonstrate the effect of the ordering rule in determining the elective 
payment amount. Several commenters requested that the final regulations 
not include the section 38 ordering rule in proposed Sec.  1.48D-
6(e)(2). These commenters stated that section 48D requires, with 
respect to an elective payment election, that the taxpayer is treated 
as making a payment against tax equal to the amount of the section 48D 
credit, and the treatment of the section 48D credit as a payment 
thereby exempts it from the ordering rule. They also claimed that the 
inclusion of the ordering rule limits the elective payment amount of 
the section 48D credit determined for the taxable year subject to 
elective pay while also limiting the amount of other GBCs that may be 
claimed.
    The Treasury Department and the IRS agree with commenters that the 
GBC ordering rules can result in a lowered elective payment amount; 
thus, these final regulations include changes to address that result. 
Section 48D(d)(1) provides that the taxpayer making an elective payment 
election will be treated as making a payment against tax equal to the 
amount of the credit, and section 48D(d)(2)(C) references such payment, 
as noted by the commenters. It is section 48D(d)(3) that creates a 
bifurcated treatment for purposes of the Code by reducing the credit to 
zero, but for any other purposes under the Code, deeming the credit to 
have been allowed to the taxpayer for such taxable year.
    In reviewing these provisions, the Treasury Department and the IRS 
have determined that section 38 is the section of the Code with respect 
to which the credit should be reduced to zero as provided under section 
48D(d)(3), other than as explained in this paragraph. As section 38 is 
the operative provision under which the section 48D credit would be 
taken into account and allowed to reduce tax liability, it is 
reasonable to read the no double benefit rule in section 48D(d)(3) to 
reduce the section 48D credit to zero for purposes of section 38. This 
prevents a direct double benefit that could be achieved from claiming 
the credit. However, preventing such a double benefit does not require 
reducing the section 48D credit to zero for purposes of section 38 to 
the extent a credit is needed to reduce tax liability up to the section 
38(c) limitation. In addition, reducing a section 48D credit to zero in 
such situations would unnecessarily disadvantage a taxpayer filing on 
extension by preventing them from claiming the section 48D credit as a 
current year GBC. This is because, to the extent applied as a credit, 
the section 48D credit will reduce tax liability as of the due date of 
the return, while the elective payment amount is not treated as being 
made until the later of the due date of the return or the date of 
filing. See section 48D(d)(2)(C). Treating the entire credit as zero in 
the case of a taxpayer filing on extension could result in more tax due 
on the due date of the return and, if not paid, would result in the 
taxpayer owing interest and could result in penalties assessed against 
the taxpayer.
    The proposed rules accounted for this situation and helped mitigate 
any potential estimated tax penalties if amounts owed were not paid by 
the due date. No commenters objected to this aspect of the proposed 
rule. Thus, the Treasury Department and the IRS conclude that these 
final regulations should treat the section 48D credit as a credit for 
section 38 in the limited situation that the credit is needed to reduce 
tax liability up to the section 38(c) limitation. It is also noted 
that, for a taxpayer that is filing and making an election by the due 
date of their return, there should be no difference in outcome between 
treating the credit as reduced to $0 for section 38, or as a credit 
that reduces tax liability up to the section 38(c) limitation and a 
payment beyond the section 38(c) limitation.
    Based on these conclusions, the Treasury Department and the IRS 
have made revisions to the rules and examples in proposed Sec.  1.48D-
6(e), including adding two new examples.

[[Page 17604]]

Under these final regulations, there is still a description of steps 
for a taxpayer to complete, but there is a change in the ordering of 
the steps and in how to calculate the net elective payment amount. The 
net elective payment amount, consistent with the proposed regulations, 
is the amount of the credit that is treated as a payment against the 
tax imposed by subtitle A. In the final regulations, the net elective 
payment amount is equal to the lesser of (1) the section 48D credit or 
(2) the total GBC (including the section 48D credit) over the total GBC 
allowed against tax liability (determined with regard to section 
38(c)). Under these final regulations, a taxpayer will calculate the 
net elective payment amount prior to applying the ordering rules of 
section 38(d). These revisions allow for a taxpayer that has other GBCs 
to lower tax liability to the section 38(c) limitation using those GBCs 
without impact from the section 48D credit. But, the revisions also 
require a taxpayer to use the section 48D credit as a current year GBC 
to the extent that it is necessary to reduce tax liability up to the 
limitation under section 38(c). In all other situations, the section 
48D credit will be zero for purposes of section 38 and the credit will 
be considered a payment of tax on the later of the due date of the 
return or filing (as prescribed by section 48D(d)(2)(C)).
    In sum, these revisions to proposed Sec.  1.48D-6(e) and the 
examples ensure two outcomes. First, consistent with commenters' 
recommendations, the final regulations ensure that taxpayers making an 
elective payment election will not have to delay using other GBCs 
because of the section 48D credit. Second, consistent with the proposed 
rule, these final regulations allow a taxpayer to benefit from a 
reduction in tax liability as of the due date of the return by treating 
the section 48D credit as a credit for purposes of section 38, up to 
the section 38(c) limitation.
    A commenter requested that the final regulations clarify why the 
taxpayer in Example 2 under proposed Sec.  1.48D-6(e)(4)(ii) may owe an 
estimated tax penalty if the section 48D credit for which an elective 
payment is made is deemed to have been allowed for purposes of 
calculating any underpayment of estimated taxes under section 6655 of 
the Code. The Treasury Department and the IRS note that the final 
regulations revise and include new examples in Sec.  1.48D-6(e). The 
revised and new examples in Sec.  1.48D-6(e) of these final regulations 
clarify that it is this timing rule under section 48D(d)(2)(C), and not 
the rules in proposed Sec.  1.48D-6(e)(2) and (3) (regarding ordering 
and use of the section 48D credit) that creates the issue related to 
penalties for underpayment of estimated taxes. For example, if a 
taxpayer with a tax liability was solely relying on the elective 
payment amount to cover the tax liability, such taxpayer would be 
treated as making a payment related to the section 48D credit but could 
still incur an estimated tax penalty because section 48D(d)(2)(C) 
explicitly states that the payment of tax occurs on the date on which 
such return is filed.
    Although no commenters specifically raised the application of 
potential penalties under section 6651 in the context of proposed Sec.  
1.48D-6(e) (denial of double benefit rule), the final regulations 
modify Sec.  1.48D-6(e)(3) to clarify that a taxpayer may also be 
subject to a penalty under section 6651(a)(2) of the Code relating to 
the taxpayer's failure to timely pay tax if a return is filed after the 
original due date.
    The Treasury Department and the IRS requested comments on 
additional Code sections under which it may be necessary to consider 
the section 48D credit to have been deemed allowed for the taxable year 
in which an elective payment election is made. In response, several 
commenters urged that the final regulations treat the entire elective 
payment amount as a payment against tax for purposes of determining 
base erosion minimum tax (known as the base erosion anti-abuse tax or 
BEAT) under section 59A and corporate alternative minimum tax (CAMT) 
credit under section 53(c) instead of as an investment tax credit. In 
contrast with the analysis earlier for section 38, the Treasury 
Department and the IRS conclude that treatment of the section 48D 
credit for purposes of BEAT and CAMT falls within the portion of 
section 48D(d)(3) that provides, for any other purposes under the Code, 
the credit will be deemed to have been allowed to such taxpayer for 
such taxable year. In contrast to section 38, BEAT and CAMT are not 
provisions pursuant to which the section 48D credit would be directly 
claimed, and treatment of the elective payment amount as suggested by 
the commenters would conflict with the language in section 48D(d)(3). 
Further, since section 48D(d)(3) provides that the section 48D credit 
is treated as a credit for other purposes of the Code, the section 48D 
credit is not analogous to other credits that are considered pre-
payments of tax and for which the BEAT and CAMT regulations have an 
exception. See, for example, Sec.  1.59A-5(b)(3)(i)(C) of the Income 
Tax Regulations, which provides that regular tax liability is not 
reduced for ``[a]ny credits allowed under sections 33, 37, and 53'' of 
the Code. Section 33 credits are related to withholding of tax at the 
source with respect to payments to foreign corporations and nonresident 
aliens. Section 37 is a credit for the overpayment of taxes. Section 53 
relates to a credit for alternative minimum tax paid in a prior year. 
Thus, the final regulations adopt the rule as proposed.

VII. Special Rules

A. Excessive Payments

    Proposed Sec.  1.48D-6(f) would define the term ``excessive 
payment'' consistent with section 48D(d)(2)(F)(iii) and provide an 
example of an excessive payment, including the year in which the tax is 
imposed and the calculation of the additional 20 percent tax. The 
Treasury Department and the IRS requested comments on whether 
additional guidance on excessive payments is needed.
    Commenters requested clarification of the proposed excessive 
payment rules related to their application, the reasonable cause 
standard, and appeals rights and deficiency procedures that apply to 
excessive payments. One commenter asked if the excessive payment 
addition to tax applies if the taxpayer does not make an elective 
payment election. Several commenters recommended adopting the 
reasonable cause standard under section 6664(c) for which the 
determination is based on the facts and circumstances and providing 
exceptions for reliance on professional advice and isolated 
computational or transcriptional error. One commenter specifically 
requested that the final regulations provide examples of reasonable 
cause relating to the beginning of construction issues.
    The Treasury Department and the IRS recognize that taxpayers desire 
certainty when operating under tax rules for the first time. The 
Treasury Department and the IRS anticipate that existing standards of 
reasonable cause will inform the determination by the IRS of whether 
reasonable cause has been demonstrated for this purpose, and these 
final regulations do not create special rules for the elective payment 
election context. And, as noted by the commenters, existing standards 
of reasonable cause would be fact specific and including additional 
examples would inject significant complexity into the final regulations 
and likely cause additional uncertainty due to the inherently factual 
nature of the inquiry.

[[Page 17605]]

B. Basis Reduction and Recapture

    Proposed Sec.  1.48D-6(g)(2) would provide rules for adjusting 
basis with respect to property for which an election is made under 
section 48D(d)(1). Proposed Sec.  1.48D-6(g)(3) would provide that any 
reporting of recapture is made on the taxpayer's annual return in the 
manner prescribed by the IRS in any guidance. No comments were received 
in response to proposed Sec.  1.48D-6(g). Therefore, this Treasury 
decision adopts the proposed rules as final regulations.

Effect on Other Documents

    The temporary regulations are removed May 10, 2024.

Special Analyses

I. Regulatory Planning and Review

    Pursuant to the Memorandum of Agreement, Review of Treasury 
Regulations under Executive Order 12866 (June 9, 2023), tax regulatory 
actions issued by the IRS are not subject to the requirements of 
section 6 of Executive Order 12866, as amended. Therefore, a regulatory 
impact assessment is not required.

II. Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) (PRA) 
generally requires that a Federal agency obtain the approval of the 
Office of Management and Budget (OMB) before collecting information 
from the public, whether such collection of information is mandatory, 
voluntary, or required to obtain or retain a benefit. An agency may not 
conduct or sponsor, and a person is not required to respond to, a 
collection of information unless the collection of information displays 
a valid control number.
    The collections of information in these final regulations contain 
reporting and recordkeeping requirements. The recordkeeping 
requirements mentioned within these final regulations are considered 
general tax records under Sec.  1.6001-1(e). These records are required 
for the IRS to validate that taxpayers have met the regulatory 
requirements and are entitled to make an elective payment election. For 
PRA purposes, general tax records are already approved by OMB under 
1545-0074 for individuals and 1545-0123 for business entities.
    These final regulations also mention reporting requirements related 
to making elections and calculating the section 48D credit amount as 
detailed in Sec.  1.48D-6. These elections will be made by eligible 
taxpayers as part of filing a return (such as the appropriate Form 
1040, Form 1120, Form 1120-S, or Form 1065); and credit calculations 
will be made on Form 3800 and supporting forms. These forms are 
approved under 1545-0074 for individuals and 1545-0123 for business 
entities.
    These final regulations also describe recapture procedures as 
detailed in Sec.  1.48D-6 that are required by section 48D(d)(5). The 
reporting of a recapture event will still be required to be reported 
using Form 4255, Recapture of Investment Credit. This form is approved 
under 1545-0074 for individuals and 1545-0123 for business entities. 
These final regulations are not changing or creating new collection 
requirements for recapture not already approved by OMB.
    These final regulations mention the reporting requirements to 
complete pre-filing registration with the IRS to be able to make an 
elective payment election in Sec.  1.48D-6. The pre-filing registration 
portal and its associated burden has been reviewed and approved by OMB 
under 1545-2310 for all filers. These final regulations are not 
changing or creating new collection requirements for the prefiling 
registration that are already approved by OMB.

III. Regulatory Flexibility Act

    In accordance with the Regulatory Flexibility Act (5 U.S.C. chapter 
6), it is hereby certified that these final regulations will not have a 
significant economic impact on a substantial number of small entities. 
Although these final regulations may affect small entities, data are 
not readily available about the number of small entities affected. 
Regardless, the economic impact of these final regulations on small 
entities is not likely to be significant.
    The Deputy Chief Counsel for Advocacy, Small Business 
Administration, recommended that the Treasury Department and the IRS 
provide a statement of the factual basis for the certification that the 
proposed rule will not have a significant economic impact on a 
substantial number of small entities including, at a minimum, a 
description of the affected entities, and provide the economic impact 
that the rules would have on small entities including estimates of the 
costs of reading and understanding the rules and any reporting and 
recordkeeping requirements. The Deputy Chief Counsel for Advocacy 
recommended including an analysis of the semiconductor industry 
associated with the North American Industry Classification System 
(NAICS) codes 334413 (Semiconductor and Related Device Manufacturing) 
and 333242 (Semiconductor Machinery Manufacturing).
    The Treasury Department and the IRS agree that industries 
associated with semiconductor manufacturing are likely to be impacted 
by these rules but note that not all industries classified with NAICS 
codes 334413 and 333424 would be eligible for the section 48D credit. 
The March 2023 proposed regulations would provide proposed definitions 
for ``semiconductor manufacturing'' and ``semiconductor equipment 
manufacturing'' that may be different from classifications for NAICS 
code purposes.
    For these reasons, the Treasury Department and the IRS believe that 
that it would not be appropriate to limit determining the number of 
impacted taxpayers based on existing data of entities associated with 
NAICS codes 334413 and 333424. As described in the Paperwork Reduction 
Act section to the temporary regulations, the Treasury Department and 
IRS expect 50 taxpayers to be impacted by the reporting requirements 
contained in the temporary regulations. The Treasury Department and the 
IRS determined this figure based on the number of entities expected to 
build or expand semiconductor manufacturing facilities and 
semiconductor manufacturing equipment facilities. The Treasury 
Department and the IRS believe this methodology more accurately 
reflects the number of taxpayers impacted by these final rules because 
it is based on the number of known projects.
    The Treasury Department and the IRS do not have sufficient data to 
determine the number of small entities included in the estimate that 
are expected to be impacted by these final regulations. The Treasury 
Department and IRS are aware of ongoing and proposed projects involving 
large corporations that are unlikely to meet the definition of a small 
business, as that term is defined by the Small Business Administration. 
Nonetheless, the Treasury Department and the IRS recognize that small 
businesses may be impacted by these final rules but believe the 
economic impact is not likely to be significant.
    Section 48D is an investment credit for taxpayers that make 
qualified investments in advanced manufacturing facilities the primary 
purpose of which is manufacturing semiconductors and semiconductor 
manufacturing equipment. Section 48D(d) allows such taxpayers to make 
an elective payment election to treat the section 48D credit as a 
refundable payment against the income tax in lieu of claiming the 
credit. A partnership of S corporation may elect to receive a payment 
equal to

[[Page 17606]]

the amount of the credit. Section 48D(d)(2)(E) authorizes the IRS to 
require such information or registration as the Secretary deems 
necessary for purposes of preventing duplication, fraud, improper 
payments, or excessive payments, as a condition of, and prior to, any 
amount being treated as a payment made or received by the taxpayer, as 
may be the case.
    These final regulations describe the rules for making the elective 
payment election, the special rules applicable to partnerships and S 
corporations, the repayment of excessive payments, and basis reduction 
and recapture. These final regulations provide the manner for making an 
elective payment election which includes the filing of the annual 
return including the completed source credit form and completed Form 
3800. These final regulations also provide that taxpayers wanting to 
make the elective payment election must complete the pre-filing 
registration process and provide the rules relating to the pre-filing 
registration process. The pre-filing registration process would allow 
the IRS to verify certain information before the election is made and 
then process the tax return on which the election is made with minimal 
delays.
    The economic impact associated with these final regulations include 
administrative costs related to reading and understanding the rules and 
reporting and recordkeeping requirements. The costs related to reading 
and understanding the rules is not quantifiable. However, the cost is 
not likely to be significant because projects seeking to qualify for 
the section 48D credit will involve complex legal and commercial 
transactions, and the cost of understanding these final rules would be 
implicit in such transactions. The reporting and recordkeeping 
requirements associated with the elective payment election is not 
likely to be significant because they are consistent with the existing 
framework for claiming business tax credits absent of an election. The 
reporting requirements and recordkeeping requirements associated with 
the pre-filing registration process is not likely to be significant 
because the information requested at pre-filing registration is that 
which a taxpayer claiming a section 48D credit should have available, 
and taxpayers claiming a section 48D credit are likely to have the 
resources available given the complexity of their projects. The 
estimated burden of complying with the recordkeeping and reporting 
requirements are further described in the Paperwork Reduction Act 
section of the preamble.
    For these reasons, the Treasury Department and the IRS certify that 
the final regulations will not have a significant economic impact on a 
substantial number of small entities.

IV. Section 7805(f)

    The Chief Counsel for the Office of Advocacy submitted comments on 
the proposed regulations, which are discussed in this part III of this 
Special Analysis section.

V. Unfunded Mandates Reform Act

    Section 202 of the Unfunded Mandate Reform Act of 1995 requires 
that agencies assess anticipated costs and benefits and take certain 
other actions before issuing a final rule that includes any Federal 
mandate that may result in expenditures in any one year by a State, 
local, or Tribal government, in the aggregate, or by the private 
sector, of $100 million in 1995 dollars (updated annually for 
inflation). These final regulations do not include any Federal mandate 
that may result in expenditures by State, local, or Tribal governments, 
or by the private sector in excess of that threshold.

VI. Executive Order 13132: Federalism

    Executive Order 13132 (Federalism) prohibits an agency from 
publishing any rule that has federalism implications if the rule either 
imposes substantial, direct compliance costs on State and local 
governments, and is not required by statute, or preempts State law, 
unless the agency meets the consultation and funding requirements of 
section 6 of the Executive order. These final regulations do not have 
federalism implications and do not impose substantial, direct 
compliance costs on State and local governments or preempt State law 
within the meaning of the Executive order.

VII. Congressional Review Act

    Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.), 
the Office of Information and Regulatory Affairs designated this rule 
as a major rule as defined by 5 U.S.C. 804(2).

Statement of Availability of IRS Documents

    Guidance cited in this preamble is published in the Internal 
Revenue Bulletin and is available from the Superintendent of Documents, 
U.S. Government Publishing Office, Washington, DC 20402, or by visiting 
the IRS website at https://www.irs.gov.

Drafting Information

    The principal author of this regulation is Lani M. Sinfield, Office 
of the Associate Chief Counsel (Passthroughs and Special Industries), 
IRS. However, other personnel from the Treasury Department and the IRS 
participated in its development.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Amendments to the Regulations

    Accordingly, the Treasury Department and the IRS amend 26 CFR part 
1 as follows:

PART 1--INCOME TAXES

0
Paragraph 1. The authority citation for part 1 is amended by adding an 
entry for Sec.  1.48D-6 in numerical order to read in part as follows:

    Authority:  26 U.S.C. 7805 * * *
* * * * *
    Section 1.48D-6 also issued under 26 U.S.C. 48D(d)(6).
* * * * *

0
Par. 2. Sections 1.48D-0 through 1.48D-6 are added to read as follows:

Sec.
* * * * *
1.48D-0. Table of contents.
1.48D-1--1.48D-5 [Reserved]
1.48D-6 Elective payment election.
* * * * *


Sec.  1.48D-0.  Table of contents.

    This section lists the table of contents for Sec. Sec.  1.48D-1 
through 1.48D-6.

Sec.  1.48D-1--1.48D-5 [Reserved]
Sec.  1.48D-6 Elective payment election.

    (a) Elective payment election.
    (1) In general.
    (2) Partnerships and S corporations.
    (3) Irrevocable.
    (b) Pre-filing registration required.
    (1) In general.
    (2) Manner of registration.
    (3) Members of a consolidated group.
    (4) Timing of pre-filing registration.
    (5) Each qualified investment in an advanced manufacturing 
facility must have its own registration number.
    (6) Information required to complete the pre-filing registration 
process.
    (7) Registration number.
    (i) In general.
    (ii) Registration number is only valid for one year.
    (iii) Renewing registration numbers.
    (iv) Amendment of previously submitted registration information 
if a change occurs before the registration number is used.
    (v) Registration number is required to be reported on the return 
for the taxable year of the elective payment election.
    (c) Time and manner of election.
    (1) In general.
    (2) Limitations.
    (d) Special rules for partnerships and S corporations.
    (1) In general.

[[Page 17607]]

    (2) Election.
    (i) Time and manner of election.
    (ii) Effect of election.
    (iii) Coordination with sections 705 and 1366.
    (iv) Partner's distributive share.
    (A) In general.
    (B) Interim rule.
    (C) Partnership requirements.
    (v) S corporation shareholder's pro-rata share.
    (vi) Timing of tax exempt income.
    (3) Disregarded entity ownership.
    (4) Electing partnerships in tiered structures.
    (i) In general.
    (ii) Electing partnerships in tiered structures; interim rule.
    (5) Character of tax exempt income.
    (6) Determination of amount of the section 48D credit.
    (i) In general.
    (ii) Application of section 49 at-risk rules to determination of 
section 48D credit for partnerships and S corporations.
    (iii) Changes in at-risk amounts under section 49 at partner or 
shareholder level.
    (7) Partnerships subject to subchapter C of chapter 63 of the 
Code.
    (8) Example.
    (e) Denial of double benefit.
    (1) In general.
    (2) Application of the denial of double benefit rule.
    (3) Use of the section 48D credit for other purposes.
    (4) Examples.
    (i) Example 1.
    (ii) Example 2.
    (iii) Example 3.
    (iv) Example 4.
    (f) Excessive payment.
    (1) In general.
    (2) Reasonable cause.
    (3) Excessive payment defined.
    (4) Example.
    (g) Basis reduction and recapture.
    (1) In general.
    (2) Basis adjustment.
    (i) In general.
    (ii) Basis adjustment by partnership or S corporation.
    (iii) Basis adjustment of partners and S corporation 
shareholders.
    (3) Recapture reporting.
    (h) Applicability dates.
    (1) In general.
    (2) Prior taxable years.


Sec.  1.48D-1--1.48D-5  [Reserved]


Sec.  1.48D-6  Elective payment election.

    (a) Elective payment election--(1) In general. A taxpayer, after 
successfully completing the pre-filing registration requirements under 
paragraph (b) of this section, may make an elective payment election 
with respect to any section 48D credit determined with respect to such 
taxpayer in accordance with section 48D(d)(1) of the Internal Revenue 
Code (Code) and this section. A taxpayer, other than a partnership or S 
corporation, that makes an elective payment election in the manner 
provided in paragraph (c) of this section will be treated as making a 
payment against the Federal income taxes imposed by subtitle A of the 
Code (subtitle A) for the taxable year with respect to which a section 
48D credit is determined equal to the amount of the section 48D credit 
with respect to any qualified property otherwise allowable to the 
taxpayer (determined without regard to section 38(c) of the Code). The 
payment described in section 48D(d)(1), and this paragraph (a)(1) will 
be treated as made on the later of the due date (determined without 
regard to extensions) of the return of tax imposed by subtitle A for 
the taxable year or the date on which such return is filed.
    (2) Partnerships and S corporations. See paragraph (d) of this 
section for special rules regarding elective payment elections under 
section 48D(d) applicable to partnerships and S corporations.
    (3) Irrevocable. Any election under section 48D(d)(1) and this 
section, once made, will be irrevocable and, except as otherwise 
provided, will apply with respect to any amount of section 48D credit 
for the taxable year for which the election is made.
    (b) Pre-filing registration required--(1) In general. Pre-filing 
registration by any taxpayer (including a partnership or an S 
corporation) in accordance with this paragraph (b) is a condition that 
must be successfully completed prior to making an elective payment 
election under section 48D(d)(1) and this section with respect to 
qualified property placed in service by the taxpayer as part of an 
advanced manufacturing facility of an eligible taxpayer. An elective 
payment election will not be effective with respect to the section 48D 
credit determined with respect to any such qualified property placed in 
service by any taxpayer unless the taxpayer received a valid 
registration number for the taxpayer's qualified investment in the 
advanced manufacturing facility of an eligible taxpayer in accordance 
with this paragraph (b) and provided the registration number for each 
qualified investment in each advanced manufacturing facility on its 
Form 3800, General Business Credit (or its successor), and on any 
required completed source form(s) with respect to the qualified 
investment, attached to the tax return in accordance with guidance. For 
purposes of this section, the term guidance means guidance published in 
the Federal Register or Internal Revenue Bulletin, as well as 
administrative guidance such as forms, instructions, publications, or 
other guidance on the IRS.gov website. See Sec. Sec.  601.601 and 
601.602 of this chapter. However, completion of the pre-filing 
registration requirements and receipt of a registration number does 
not, by itself, mean the taxpayer is eligible to receive a payment with 
respect to any section 48D credit determined with respect to the 
qualified property.
    (2) Manner of registration. Unless otherwise provided in guidance, 
a taxpayer must complete the pre-filing registration process 
electronically through the IRS electronic portal and in accordance with 
the instructions provided therein.
    (3) Members of a consolidated group. A member of a consolidated 
group is required to complete pre-filing registration as a condition 
of, and prior to, making an elective payment election. See Sec.  
1.1502-77 (providing rules regarding the status of the common parent as 
agent for its members).
    (4) Timing of pre-filing registration. A taxpayer must satisfy the 
pre-filing registration requirements of this paragraph (b) and receive 
a registration number under paragraph (b)(7) of this section prior to 
making any elective payment election under this section on the 
taxpayer's tax return for the taxable year at issue.
    (5) Each qualified investment in an advanced manufacturing facility 
must have its own registration number. A taxpayer must obtain a 
registration number for each qualified investment in an advanced 
manufacturing facility of an eligible taxpayer with respect to which an 
elective payment election is made.
    (6) Information required to complete the pre-filing registration 
process. Unless modified in future guidance, a taxpayer must provide 
the following information to the IRS to complete the pre-filing 
registration process:
    (i) The taxpayer's general information, including its name, 
address, taxpayer identification number, and type of legal entity;
    (ii) Any additional information required by the IRS electronic 
portal;
    (iii) The taxpayer's taxable year, as determined under section 441 
of the Code;
    (iv) The type of annual return(s) normally filed by the taxpayer 
with the IRS;
    (v) A list of each qualified investment in an advanced 
manufacturing facility that the taxpayer intends to use to determine a 
section 48D credit for which the taxpayer intends to make an elective 
payment election;
    (vi) For each qualified investment in an advanced manufacturing 
facility listed in paragraph (b)(6)(v) of this section, any further 
information

[[Page 17608]]

required by the IRS electronic portal, such as:
    (A) The type of qualified investment in the advanced manufacturing 
facility;
    (B) Physical location (that is, address and coordinates (longitude 
and latitude) of the advanced manufacturing facility);
    (C) Supporting documentation relating to the construction, 
reconstruction or acquisition of the advanced manufacturing facility 
(such as, State and local government permits to operate the advanced 
manufacturing facility, certifications, and evidence of ownership that 
ties to the land deed, lease, or other documented right to use and 
access any land upon which the advanced manufacturing facility is 
constructed or housed);
    (D) The beginning of construction date and the placed in service 
date of any qualified property that is part of the advanced 
manufacturing facility, or the date of the last progress expenditure 
made during the taxable year;
    (E) The source of funds the taxpayer used to acquire the qualified 
property with respect to which the qualified investment was made; and
    (F) Any other information that the taxpayer or entity believes will 
help the IRS evaluate the registration request;
    (vii) The name of a contact person for the taxpayer. The contact 
person is the person whom the IRS may contact if there is an issue with 
the registration. The contact person must either:
    (A) Possess legal authority to bind the taxpayer; or
    (B) Must provide a properly executed power of attorney on Form 
2848, Power of Attorney and Declaration of Representative;
    (viii) A penalties of perjury statement, effective for all 
information submitted as a complete application, and signed by a person 
with personal knowledge of the relevant facts that is authorized to 
bind the registrant; and
    (ix) Any other information the IRS deems necessary for purposes of 
preventing duplication, fraud, improper payments, or excessive payments 
under this section that is provided in guidance.
    (7) Registration number--(i) In general. The IRS will review the 
information provided and will issue a separate registration number for 
each qualified investment in an advanced manufacturing facility of an 
eligible taxpayer for which the taxpayer making the registration 
provided sufficient verifiable information.
    (ii) Registration number is only valid for one year. A registration 
number is valid only with respect to the taxpayer that obtained the 
registration number under this section and only for the taxable year 
for which it is obtained.
    (iii) Renewing registration numbers. If an elective payment 
election will be made with respect to any section 48D credit determined 
with respect to a qualified investment in an advanced manufacturing 
facility for a taxable year after a registration number under this 
section has been obtained, the taxpayer must renew the registration for 
that subsequent year in accordance with applicable guidance, including 
attesting that all the facts previously provided are still correct or 
updating any facts.
    (iv) Amendment of previously submitted registration information if 
a change occurs before the registration number is used. As provided in 
instructions to the pre-filing registration portal, if specified 
changes occur with respect to a qualified investment in an advanced 
manufacturing facility for which a registration number has been 
previously obtained, a taxpayer must amend the registration (or may 
need to submit a new registration) to reflect these new facts. For 
example, if an eligible taxpayer that is the owner of an advanced 
manufacturing facility previously registered qualified investments in 
the advanced manufacturing facility or the advanced manufacturing 
facility, and the advanced manufacturing facility undergoes a change of 
ownership (incident to a corporate reorganization or an asset sale) 
such that the new owner has a different employer identification number 
(EIN) than the owner who obtained the original registration, the 
original owner of the advanced manufacturing facility must amend the 
original registration to disassociate its EIN from the advanced 
manufacturing facility and the new owner must submit separately an 
original registration (or if the new owner previously registered other 
qualified investments or advanced manufacturing facilities, must amend 
its original registration) to associate the new owner's EIN with the 
previously registered advanced manufacturing facility.
    (v) Registration number is required to be reported on the return 
for the taxable year of the elective payment election. The taxpayer 
must include the registration number of the qualified investment in the 
advanced manufacturing facility on the taxpayer's return as provided in 
this paragraph (b) for the taxable year. The IRS will treat an elective 
payment election as ineffective with respect to a section 48D credit 
determined with respect to a qualified investment in an advanced 
manufacturing facility for which the taxpayer does not include a valid 
registration number that was assigned to that particular taxpayer 
during the pre-registration process on the annual return.
    (c) Time and manner of election--(1) In general. Any elective 
payment election under section 48D(d)(1) and this section with respect 
to any section 48D credit determined with respect to a taxpayer's 
qualified investment must--
    (i) Be made on the taxpayer's original return of tax (including a 
superseding return) filed not later than the due date (including 
extensions of time) for the taxable year for which the section 48D 
credit is determined and the election is made in the manner prescribed 
by the IRS in guidance;
    (ii) Include any required completed source credit form(s), a 
completed Form 3800, and any additional information required in 
instructions, including supporting calculations;
    (iii) Provide on the completed Form 3800 and on any required source 
credit form(s) a valid registration number for the qualified investment 
that is placed in service as part of an advanced manufacturing facility 
of an eligible taxpayer;
    (iv) Include a statement attesting under the penalties of perjury 
that--
    (A) The taxpayer claiming to be an eligible taxpayer is not a 
foreign entity of concern within the meaning of Sec.  1.48D-2(f)(2) and 
has not made an applicable transaction as defined in Sec.  1.50-2(b)(3) 
during the taxable year that the qualified property is placed in 
service; and
    (B) The taxpayer will not claim a double benefit (within the 
meaning of section 48D(d)(3) and paragraphs (d)(2)(ii)(B) and (C) and 
(e) of this section) with respect to any elective payment election made 
by the taxpayer; and
    (v) Be made not later than the due date (including extensions of 
time) for the taxable year for which the election is made, but in no 
event earlier than May 8, 2023.
    (2) Limitations. No elective payment election may be made for the 
first time on an amended return, withdrawn on an amended return, or 
made or withdrawn by filing an administrative adjustment request under 
section 6227 of the Code, although a numerical error with respect to a 
properly claimed elective payment election may be corrected on an 
amended return or by filing an administrative adjustment request under 
section 6227 if necessary. There is no relief available under Sec.  
301.9100-1 or Sec.  301.9100-3 of this chapter for an elective payment 
election that is not

[[Page 17609]]

timely filed; however, relief under Sec.  301.9100-2(b) may apply.
    (d) Special rules for partnerships and S corporations--(1) In 
general. If a partnership or S corporation directly holds any property 
for which an advanced manufacturing investment credit is determined, 
any election under this section must be made by the partnership or S 
corporation. No election under section 48D(d) and this section by any 
partner or shareholder is allowed.
    (2) Election--(i) Time and manner of election. An elective payment 
election by a partnership or S corporation is made at the same time and 
in the same manner, and subject to the pre-filing registration and 
other requirements for the election to be effective, as provided in 
paragraphs (b) and (c) of this section.
    (ii) Effect of election. If a partnership or S corporation makes an 
elective payment election with respect to a section 48D credit, the 
following rules will apply:
    (A) The Internal Revenue Service will make a payment to such 
partnership or S corporation equal to the amount of such credit, 
determined in accordance with paragraph (d)(6) of this section (unless 
the partnership or S corporation owes a Federal tax liability, in which 
case the payment may be reduced by such tax liability);
    (B) Before determining any partner's distributive share, or S 
corporation shareholder's pro rata share, of such credit, such credit 
is reduced to zero and is, for any other purposes under the Code, 
deemed to have been allowed solely to such entity (and not allocated or 
otherwise allowed to its partners or shareholders) for such taxable 
year; and
    (C) Any partner's or S corporation shareholder's share of any 
qualified investment in an advanced manufacturing facility for which an 
elective payment election has been made for the taxable year, is 
reduced to zero for such taxable year.
    (iii) Coordination with sections 705 and 1366. Any amount with 
respect to which the election is made is treated as tax exempt income 
for purposes of sections 705 and 1366 of the Code.
    (iv) Partner's distributive share--(A) In general. Except as 
provided in paragraphs (d)(2)(iv)(B) and (C) of this section, a 
partner's distributive share of such tax exempt income is equal to such 
partner's distributive share of its otherwise allocable basis in 
qualified property under regulations under section 48D that apply for 
purposes of allocating a partner's share of its basis in qualified 
property placed in service by the partnership for such taxable year.
    (B) Interim rule. If a partnership meets the requirements of 
paragraph (d)(2)(iv)(C) of this section, a partner's distributive share 
of the tax exempt income resulting from a section 48D(d) elective 
payment election made by the partnership with respect to property held 
directly by the partnership, may be determined in accordance with the 
basic principles for partnership income allocations as described in 
Sec.  1.704-1(b)(1)(i) instead of in accordance with the partner's 
distributive share of the otherwise applicable section 48D credits as 
determined under Sec. Sec.  1.704-1(b)(4)(ii) and 1.46-3(f).
    (C) Partnership requirements. A partnership meets the requirements 
of this paragraph (d)(2)(iv)(C) if its partnership agreement is a 
written binding contract that was entered into after December 31, 2021, 
and before June 22, 2023, and it was formed for the purpose of owning 
and operating an advanced manufacturing facility or qualified property.
    (v) S corporation shareholder's pro-rata share. An S corporation 
shareholder's pro rata share (as determined under section 1377(a) of 
the Code) of such tax exempt income is taken into account by the S 
corporation shareholder in the taxable year (as determined under 
sections 444 and 1378(b) of the Code) in which the section 48D credit 
is determined and is based on the shareholder's otherwise apportioned 
basis in qualified property under regulations under section 48D that 
apply for purposes of allocating an S corporation shareholder's pro-
rata share of basis in qualified property placed in service by the S 
corporation for the taxable year.
    (vi) Timing of tax exempt income. Such tax exempt income resulting 
from such election is treated as received or accrued, including for 
purposes of sections 705 and 1366 of the Code, as of the date the 
qualified property is placed in service with respect to the partnership 
or S corporation.
    (3) Disregarded entity ownership. In the case of a qualified 
property held directly by an entity disregarded as separate from a 
partnership or S corporation for Federal income tax purposes, such 
qualified property will be treated as held directly by the partnership 
or S corporation for purposes of making an elective payment election.
    (4) Electing partnerships in tiered structures--(i) In general. If 
a partnership (upper-tier partnership) is a direct or indirect partner 
of a partnership that makes an elective payment election (lower-tier 
partnership) and directly or indirectly receives an allocation of tax 
exempt income resulting from the elective payment election made by the 
lower-tier partnership, the upper-tier partnership must determine its 
partners' distributive shares of such tax exempt income in proportion 
to each partner's distributive share of its otherwise allocable basis 
in qualified property under regulations under section 48D that apply 
for purposes of allocating a partner's share of its basis in qualified 
property placed in service by a partnership for such taxable year.
    (ii) Electing partnerships in tiered structures; interim rule. If a 
lower-tier partnership determined its partners' distributive shares of 
the tax exempt income described in paragraph (d)(2)(iii) of this 
section using the interim rule described in paragraph (d)(2)(iv)(B) of 
this section, an upper-tier partnership that is a direct or indirect 
partner in such lower-tier partnership may determine its partners' 
distributive shares of the tax exempt income in accordance with the 
basic principles for partnership income allocations as described in 
Sec.  1.704-1(b)(1)(i).
    (5) Character of tax exempt income. Tax exempt income resulting 
from an elective payment election by an S corporation or a partnership 
is treated as arising from an investment activity and not from the 
conduct of a trade or business within the meaning of section 
469(c)(1)(A). As such, the tax exempt income is not treated as passive 
income to any partners or shareholders who do not materially 
participate within the meaning of section 469(c)(1)(B).
    (6) Determination of amount of the section 48D credit--(i) In 
general. In determining the amount of the section 48D credit that will 
result in a payment under paragraph (d)(2)(ii)(A) of this section, the 
partnership or S corporation must compute the amount of the credit 
allowable (without regard to section 38(c)) as if an elective payment 
election were not made. Because a partnership or S corporation is not 
subject to sections 38(b) and (c) and 469 (that is, those sections 
apply at the partner or shareholder level), the amount of the credit 
determined by a partnership or S corporation is not subject to 
limitation by those sections. Because the section 48D credit is an 
investment credit under section 46, sections 49 and 50 apply to limit 
the amount of the credit.
    (ii) Application of section 49 at-risk rules to determination of 
section 48D credit for partnerships and S corporations. Any amount of 
section 48D credit determined with respect to qualified property held 
directly by a partnership or S corporation must be determined by the 
partnership or S

[[Page 17610]]

corporation taking into account the section 49 at-risk rules at the 
partner or shareholder level as of the close of the taxable year in 
which the qualified property is placed in service. Thus, if the credit 
base of a qualified property is limited to a partner or S corporation 
shareholder by section 49, then the amount of the section 48D credit 
determined by the partnership or S corporation is also limited. A 
partnership or S corporation that directly holds qualified property 
must request from each of its partners or shareholders, respectively, 
that is subject to section 49, the amount of such partner's or 
shareholder's nonqualified nonrecourse financing with respect to the 
qualified property as of the close of the taxable year in which the 
property is placed in service. Additionally, the partnership or S 
corporation must attach to its tax return for the taxable year in which 
the qualified property is placed in service, the amount of each 
partner's or shareholder's section 49 limitation with respect to any 
qualified property. Changes to at-risk amounts under section 49 for 
partners or S corporation shareholders after the close of the taxable 
year in which the qualified property is placed in service do not impact 
the section 48D credit determined by the partnership or S corporation, 
but do impact the partner(s) or S corporation shareholder(s) as 
provided in paragraph (d)(6)(iii) of this section.
    (iii) Changes in at-risk amounts under section 49 at partner or 
shareholder level. A partner or shareholder in a partnership or S 
corporation, respectively, must apply the rules under section 49 at the 
partner or shareholder level if there is a change in nonqualified 
nonrecourse financing with respect to the partner or shareholder after 
the close of the taxable year in which the qualified property is placed 
in service and the section 48D credit is determined. If there is an 
increase in nonqualified nonrecourse financing to a partner, any 
adjustment under the rules of section 49(b) is calculated based on the 
partner's share of the basis (or cost) of the qualified property to 
which the section 48D credit was determined in accordance with 
regulations under section 48D that apply for purposes of allocating a 
partner's share of its basis in qualified property placed in service by 
the partnership. If there is an increase in nonqualified nonrecourse 
financing to a shareholder, any adjustment under the rules of section 
49(b) is calculated based on the shareholder's pro rata share of the 
basis (or cost) of the qualified property to which the section 48D 
credit was determined in accordance with regulations under section 48D 
that apply for purposes of allocating an S corporation shareholder's 
pro-rata share of basis in qualified property placed in service by the 
S corporation. If there is a decrease in nonqualified nonrecourse 
financing, any increase in the credit base is taken into account by the 
partner or shareholder as provided under section 49, and any resulting 
credit is not eligible for an elective payment election under section 
48D(d).
    (7) Partnerships subject to subchapter C of chapter 63 of the Code. 
See Sec.  301.6241-7(j) of this chapter for rules applicable to 
payments made to partnerships subject to subchapter C of chapter 63 of 
the Code for a partnership taxable year.
    (8) Example. P is a calendar-year partnership consisting of 
partners A and B, each 50 percent owners. P constructs Facility A, an 
advanced manufacturing facility, at V. P completes the pre-filing 
registration with respect to Facility A at V for 2024 in accordance 
with paragraph (b) of this section. In 2024, P places in service 
qualified property that is part of Facility A at V. P timely files its 
2024 Form 1065 and properly makes the elective payment election in 
accordance with paragraph (c) of this section. On its Form 1065, P 
properly determines that the amount of section 48D credit with respect 
to the qualified property placed in service at Facility A for 2024 is 
$100,000. The IRS processes P's return and makes a $100,000 payment to 
P. Before determining A's and B's distributive shares, P reduces the 
section 48D credit to zero. However, for other purposes of the Code, 
the $100,000 section 48D credit is deemed to have been allowed to P for 
2024. P does not qualify for the interim rule described in paragraph 
(d)(2)(iv)(B) of this section. The $100,000 is treated as tax exempt 
income for purposes of section 705, and A's and B's distributive shares 
of such tax exempt income is based on each partner's otherwise 
allocable basis in qualified property under regulations under section 
48D that apply for purposes of allocating a partner's share of its 
basis in qualified property placed in service by the partnership for 
the 2024 taxable year ($50,000 each). A's and B's basis in their 
partnership interests and capital accounts will be appropriately 
adjusted to take into account basis adjustments made to the qualified 
property under section 50(c)(5) and Sec.  1.704-1(b)(2)(iv)(j). See 
paragraph (g)(2) of this section. The tax exempt income received or 
accrued by P as a result of the elective payment election is treated as 
received or accrued, including for purposes of section 705, as of date 
P placed in service the qualified property in 2024.
    (e) Denial of double benefit--(1) In general. In the case of a 
taxpayer making an election under section 48D(d) and this section with 
respect to any section 48D credit determined under section 48D(a) and 
regulations under section 48D that apply for purposes of determining 
the section 48D credit, such credit is reduced to zero and is, for any 
other purposes under the Code, deemed to have been allowed to the 
taxpayer for such taxable year. Paragraphs (e)(2) and (3) of this 
section explain the application of the section 48D(d)(3) denial of a 
double benefit rule to a taxpayer (other than a partnership or S 
corporation). The application of section 48D(d)(3) to a partnership or 
S corporation is provided in paragraphs (d)(2)(ii)(B) and (C) of this 
section.
    (2) Application of the denial of double benefit rule. A taxpayer 
(other than a partnership or S corporation) making an elective payment 
election applies section 48D(d)(3) by taking the following steps:
    (i) Compute the amount of the Federal income tax liability (if any) 
for the taxable year, without regard to the general business credit 
under section 38 of the Code (GBC), that is payable on the due date of 
the tax return (without regard to extensions), and the amount of the 
Federal income tax liability that may be offset by GBCs pursuant to the 
limitation based on the amount of tax under section 38.
    (ii) Compute the allowed amount of the GBC carryforwards carried to 
the taxable year under section 38(a)(1) plus the amount of the current 
year GBCs (including the current section 48D credit) for the taxable 
year under section 38(a)(2) and (b). Because the election is made on an 
original return for the taxable year for which the section 48D credit 
is determined, any business credit carrybacks are not considered when 
determining the elective payment amount for the taxable year.
    (iii) Calculate the net elective payment amount for the section 48D 
credit, which equals the lesser of the section 48D credit for which an 
elective payment election is made or the excess (if any, otherwise the 
excess is zero) of the total GBC credits described in paragraph 
(e)(2)(ii) of this section over the amount of the Federal income tax 
liability that may be offset by GBCs pursuant to the limitation based 
on amount of tax under section 38 computed in paragraph (e)(2)(i) of 
this section. Treat the net elective payment

[[Page 17611]]

amount of the section 48D credit for which an elective payment election 
is made as a payment against the tax imposed by subtitle A for the 
taxable year with respect to which such credit is determined.
    (iv) Excluding the net elective payment amount determined under 
paragraph (e)(2)(iii) of this section, but including any portion of the 
section 48D credit that is not part of the net elective payment amount, 
compute the allowed amount of GBC carryforwards carried to the taxable 
year plus the amount of current year GBCs allowed for the taxable year 
under section 38 (including, for clarity purposes, the ordering rules 
in section 38(d)). Apply these GBCs against the tax liability computed 
in paragraph (e)(2)(i) of this section.
    (v) Reduce the section 48D credit for which an elective payment 
election is made by the net elective payment amount, as provided in 
paragraph (e)(2)(iii) of this section, and by the amount (if any) 
allowed as a GBC under section 38 for the taxable year, as provided in 
paragraph (e)(2)(iv) of this section, which results in the section 48D 
credit being reduced to zero.
    (3) Use of the section 48D credit for other purposes. The full 
amount of the section 48D credit for which an elective payment election 
is made is deemed to have been allowed for all other purposes of the 
Code, including, but not limited to, the basis reduction and recapture 
rules imposed by section 50 and the calculation of tax, calculation of 
the amount of any underpayment of estimated tax under sections 6654 and 
6655 of the Code, and the addition to tax for the failure to pay under 
section 6651(a)(2) of the Code (if any).
    (4) Examples. The following examples illustrate the rules of this 
paragraph (e).
    (i) Example 1. Z Corp is a calendar-year C corporation. Z Corp 
places in service qualified property that is part of an advanced 
manufacturing facility in June of 2024. Z Corp completes the pre-filing 
registration in accordance with this section and receives a 
registration number for the qualified property. Z Corp timely files 
(with extension) its 2024 Form 1120 on October 15, 2025, properly 
making the elective payment election with respect to the section 48D 
credit earned with respect to the qualified property in accordance with 
this section. On its return, Z Corp properly determines that it has 
$500,000 of tax imposed by subtitle A of the Code (see paragraph 
(e)(2)(i) of this section). For simplicity, assume the maximum amount 
of GBCs that can be claimed for the taxable year is $375,000. Z Corp 
properly determines that the amount of the section 48D credit 
determined with respect to the qualified property (its GBC for the 
taxable year) is $100,000 (see paragraph (e)(2)(ii) of this section). 
Under paragraph (e)(2)(iii) of this section, the net elective payment 
amount is $0, so the section 48D credit is considered a credit that 
reduces Z Corp's tax liability to $400,000 under paragraph (e)(2)(iv) 
of this section. Z Corp pays its $400,000 tax liability on October 15, 
2025. Under paragraph (e)(2)(v) of this section, the $100,000 of 
section 48D credit is reduced by the $100,000 of section 48D credit 
claimed as GBCs for the taxable year, which results in the section 48D 
credit being reduced to zero. However, the $100,000 of the current year 
section 48D credit is deemed to have been allowed to Z Corp for 2024 
for all other purposes of the Code (paragraph (e)(3) of this section). 
Because Z Corp paid its tax liability after the original due date for 
the filing of its Form 1120, Z Corp will owe a failure to pay penalty 
under section 6651(a)(2) and interest. Z Corp may also owe a penalty 
for failure to pay estimated income tax under section 6655.
    (ii) Example 2. Assume the same facts as in paragraph (e)(4)(i) of 
this section (Example 1), except that Z Corp has $80,000 of tax imposed 
by subtitle A (paragraph (e)(2)(i) of this section) and calculates its 
limitation of GBC under section 38(c) (simplified) is $60,000 
(paragraph (e)(2)(i) of this section), and Z Corp timely files its Form 
1120 on April 15 instead of October 15. Under paragraph (e)(2)(iii) of 
this section, the net elective payment amount is $40,000 (lesser of 
$100,000 section 48D credit or $100,000 of total GBC credits described 
in paragraph (e)(2)(ii) of this section minus $60,000 of section 38(c) 
limitation). Under paragraph (e)(2)(iv) of this section, Z Corp uses 
$60,000 of its $100,000 of section 48D credit against its tax 
liability. Z Corp reduces the section 48D credit by the $40,000 net 
elective payment amount determined in paragraph (e)(2)(iii) of this 
section and by the $60,000 section 48D credit claimed against tax in 
paragraph (e)(2)(iv) of this section, resulting in the credit being 
reduced to zero (paragraph (e)(2)(v) of this section). When the IRS 
processes Z Corp's 2024 Form 1120, the net elective payment amount 
results in a $20,000 refund to Z Corp (after applying $20,000 of the 
$40,000 net elective payment amount to cover Z Corp's tax shown on the 
return). However, for other purposes of the Code, the $100,000 section 
48D credit is deemed to have been allowed to Z Corp for 2024 (paragraph 
(e)(3) of this section). Even though Z Corp did not owe tax after 
applying the net elective payment amount against its net tax liability, 
Z Corp may be subject to the section 6655 penalty for failure to pay 
estimated income tax. The net elective payment is not an estimated tax 
installment, rather, it is treated as a payment made at the filing of 
the return.
    (iii) Example 3. X Corp is a calendar-year C corporation. X Corp 
places in service qualified property that is part of an advanced 
manufacturing facility in June of 2025. X Corp completes the pre-filing 
registration in accordance with this section and receives a 
registration number for the qualified property. In 2026, X Corp timely 
files its 2025 return (without extension), calculating its federal 
income tax before GBCs of $125,000 and that its limitation of GBC under 
section 38(c) (simplified) is $100,000 (paragraph (e)(2)(i) of this 
section). X Corp attaches Form 3468 to claim a current section 48D 
credit of $50,000. X Corp also attaches Form 5884 to claim a current 
work opportunity tax credit (WOTC) of $50,000. X Corp also has business 
credit carryforwards of $25,000, which together with the 48D credit and 
WOTC results in a total of $125,000 of GBC for the taxable year 
(paragraph (e)(2)(ii) of this section). Under paragraph (e)(2)(iii) of 
this section, the net elective payment amount is $25,000. Under 
paragraph (e)(2)(iv) of this section, including using the ordering 
rules in section 38(d), X Corp is allowed $25,000 of the carryforwards, 
$25,000 of section 48D credit (as its section 46 investment credit) 
plus $50,000 of WOTC against net income tax, as defined under section 
38(c)(1)(B). The $25,000 of unused section 48D credit is the net 
elective payment amount that results in a $25,000 payment against tax 
by X Corp (paragraph (e)(2)(iii) of this section). On its return, X 
Corp shows net tax liability of $25,000 ($125,000-$100,000 allowed GBC) 
and the net elective payment of $25,000 which X Corp applied to net tax 
liability, resulting in zero tax owed on the return. Under paragraph 
(e)(2)(v) of this section, X Corp's section 48D credit is reduced by 
the $25,000 of the net elective payment amount, as well as by the 
$25,000 of section 48D credit claimed as a GBC for the taxable year, 
resulting in the $50,000 of section 48D credit being reduced to zero. 
However, for all other purposes of the Code, the $50,000 of section 48D 
credit is deemed to have been allowed to X Corp for 2025 (paragraph 
(e)(3) of this section). Even though X Corp did not owe tax after 
applying the net elective payment amount against its net tax liability, 
X

[[Page 17612]]

Corp may be subject to the section 6655 penalty for failure to pay 
estimated income tax. The net elective payment is not an estimated tax 
installment, rather, it is treated as a payment made at the filing of 
the return.
    (iv) Example 4. Assume the same facts as in paragraph (e)(4)(iii) 
of this section (Example 3), except X Corp filed the return on a timely 
filed extension after the due date of the return (without extensions). 
Even though X Corp did not owe tax after applying the net elective 
payment amount against its net tax liability, X Corp may be subject to 
the section 6651(a)(2) penalty for failure to pay tax.
    (f) Excessive payment--(1) In general. Except as provided in 
paragraph (f)(2) of this section, in the case of any amount treated as 
a payment which is made by the taxpayer under section 48D(d)(1) and 
paragraph (a) of this section, or any payment made pursuant to section 
48D(d)(2)(A)(i)(I) and paragraph (d) of this section, with respect to 
any property, which amount the Commissioner determines constitutes an 
excessive payment as defined in paragraph (f)(3) of this section, the 
tax imposed on such taxpayer by chapter 1 of the Code for the taxable 
year in which such determination is made is increased by an amount 
equal to the sum of--
    (i) The amount of such excessive payment; plus
    (ii) An amount equal to 20 percent of such excessive payment.
    (2) Reasonable cause. Paragraph (f)(1)(ii) of this section will not 
apply if the taxpayer demonstrates to the satisfaction of the 
Commissioner that the excessive payment resulted from reasonable cause.
    (3) Excessive payment defined. For purposes of section 48D(d) and 
this paragraph (f), the term excessive payment means, with respect to 
any property for which an election is made under section 48D(d) and 
this section for any taxable year, an amount equal to the excess of--
    (i) The amount treated as a payment which is made by the taxpayer 
pursuant to section 48D(d)(1) and paragraph (a) of this section, or any 
payment made by the Commissioner pursuant to section 48D(d)(2)(A)(i)(l) 
and paragraph (d) of this section, with respect to such property for 
such taxable year; over
    (ii) The amount of the section 48D credit which, without 
application of section 48D(d) and this section, would be otherwise 
allowable (determined without regard to section 38(c)) under section 
48D(a) and the section 48D regulations with respect to such property 
for such taxable year.
    (4) Example. A Corp is a calendar-year C corporation. A Corp places 
in service qualified property that is part of Facility A, an advanced 
manufacturing facility in 2023. A Corp properly completes the pre-
filing registration in accordance with paragraph (b) of this section 
and receives a registration number for the advanced manufacturing 
facility. A Corp timely files its 2023 Form 1120, properly providing 
the registration number for Facility A on Form 3800 and the relevant 
source credit form and otherwise complying with paragraph (c) of this 
section. On its return, A Corp calculates that the amount of the 
section 48D credit with respect to the qualified property is $100,000 
and that the net elective payment amount is $100,000. A Corp receives a 
refund in the amount of $100,000. In 2025, the IRS determines that the 
amount of the section 48D credit properly allowable to A Corp in 2023 
with respect to Facility A (as determined pursuant to Sec.  1.48D-1(b) 
and without regard to the limitation based on tax in section 38(c)) was 
$60,000. A Corp is not able to show reasonable cause for the 
difference. The excessive payment amount is $40,000 ($100,000 treated 
as a payment-$60,000 allowable amount). In 2025, the tax imposed under 
chapter 1 on A Corp is increased in the amount of $48,000 ($40,000 + 
(20% * $40,000 = $8,000)).
    (g) Basis reduction and recapture--(1) In general. The rules in 
section 50(a) and (c) of the Code apply with respect to elective 
payments under paragraphs (a) and (d) of this section.
    (2) Basis adjustment--(i) In general. If a section 48D credit is 
determined with respect to property for which a taxpayer makes an 
election under section 48D(d)(1), then the adjusted basis of the 
property must be reduced by the amount of the section 48D credit 
determined for which the taxpayer made an election under section 
48D(d)(1).
    (ii) Basis adjustment by partnership or S corporation. If an 
advanced manufacturing investment credit is determined with respect to 
property for which a partnership or S corporation makes an election 
under section 48D(d)(1), then the adjusted basis of the property must 
be reduced by the amount of the advanced manufacturing investment 
credit determined with respect to the property held by the partnership 
or S corporation, for which the IRS made a payment to the partnership 
or S corporation pursuant to section 48D(d)(2)(A)(i)(I).
    (iii) Basis adjustment of partners and S corporation shareholders. 
The adjusted basis of a partner's interest in a partnership, and stock 
in an S corporation, must be appropriately adjusted pursuant to section 
50(c)(5) to take into account adjustments made under paragraph 
(g)(2)(ii) of this section in the basis of property held by the 
partnership or S corporation, as the case may be.
    (3) Recapture reporting. Any reporting of recapture is made on the 
taxpayer's annual return in the manner prescribed by the IRS in any 
guidance.
    (h) Applicability dates--(1) In general. Except as provided in 
paragraph (h)(2) of this section, this section applies to taxable years 
ending on or after March 11, 2024.
    (2) Prior taxable years. For taxable years ending before March 11, 
2024 taxpayers may choose to apply the rules of this section to 
property that is placed in service after December 31, 2022, provided 
the taxpayers apply the rules in their entirety and in a consistent 
manner.


Sec.  1.48D-6T  [Removed]

0
Par. 3. Section 1.48D-6T is removed.

Douglas W. O'Donnell,
Deputy Commissioner for Services and Enforcement.
    Approved: February 27,2024.
Aviva Aron-Dine,
Acting Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2024-04605 Filed 3-5-24; 8:45 am]
BILLING CODE 4830-01-P