Rehabilitation Credit (I.R.C. 47)

February 17, 2015

General Matters:

I.R.C. § 38(a) generally allows as a credit against tax in a given taxable year the sum of the business credit carryforwards carried to that taxable year (I.R.C. § 38(a)(1)), the current year business credit (I.R.C. § 38(a)(2)), and the business credit carrybacks carried to that year (I.R.C. § 38(a)(3)).  I.R.C. § 38(b)(1) provides that the business credit includes the investment credit determined under I.R.C. § 46, which in turn provides that the investment credit includes the rehabilitation credit under I.R.C. § 47.

The rehabilitation credit for any given taxable year is the sum of (a) 10 percent of the qualified rehabilitation expenditure for any qualified rehabilitated building other than a certified historic building, and (b) 20 percent of the qualified rehabilitation expenditure for any certified historic building.

A qualified rehabilitation expenditure is taken into account generally once the qualified rehabilitated building is placed in service.


Chief Counsel Advice 201507020 (January 8, 2015):  IRS provided correct computation of increase in tax imposed by IRC Sec(s). 50(a)(1) where taxpayer carried over its unused IRC Sec(s). 47(a) credit with respect to qualified rehabilitated building/certified historic structure but subsequently disposed of that property more than 2, but less than 3, years after it was placed in service.