IRS Form 3468 – In the ever-evolving landscape of tax incentives, IRS Form 3468 stands out as a key tool for businesses and organizations looking to offset costs through investment credits. Whether you’re investing in renewable energy projects, rehabilitating historic buildings, or advancing manufacturing technologies, this form allows eligible taxpayers to claim valuable credits that can significantly reduce tax liability. With recent legislative updates impacting eligibility and rates, understanding Form 3468 is crucial for 2025 tax filings in 2026. This guide covers everything you need to know, from eligibility to filing steps, drawing from official IRS resources.
What Is IRS Form 3468?
IRS Form 3468, titled “Investment Credit,” is used to claim a variety of tax credits under Internal Revenue Code sections such as 47, 48, 48A, 48B, 48C, 48D, and 48E. These credits encourage investments in areas like energy efficiency, clean technology, and infrastructure rehabilitation. The form must be attached to your tax return, such as Form 1120 for corporations or Form 1065 for partnerships, and it often pairs with Form 3800 (General Business Credit) to report the total credit amount.
The investment credit is nonrefundable but can be carried forward or back in certain cases, helping taxpayers manage their tax burdens over time. For tax-exempt organizations with unrelated business taxable income (UBTI), Form 3468 can be filed alongside Form 990-T. A separate Form 3468 is required for each qualified facility or property, ensuring precise reporting.
You can download the latest version of Form 3468 from the IRS website: https://www.irs.gov/pub/irs-pdf/f3468.pdf.
Types of Investment Credits Available on Form 3468
Form 3468 covers several specific credits, each with its own part on the form. Here’s a breakdown:
| Credit Type | IRC Section | Description | Credit Rate (Base) |
|---|---|---|---|
| Rehabilitation Credit | 47 | For expenditures on qualified rehabilitated buildings, including certified historic structures. | 20% (phased over 5 years for historic); 4% for non-historic. |
| Qualifying Advanced Coal Project Credit | 48A | For advanced coal-based generation technologies with high efficiency and CO2 sequestration. | 15-30% depending on project type. |
| Qualifying Gasification Project Credit | 48B | For gasification technology projects producing fuels from coal or biomass with CO2 capture. | Up to 30%. |
| Qualifying Advanced Energy Project Credit | 48C | For re-equipping or expanding facilities to produce renewable energy property or carbon capture equipment. | 6-30% based on prevailing wage and apprenticeship (PWA) compliance. |
| Advanced Manufacturing Investment Credit | 48D | For facilities producing semiconductors or related equipment. | 25% (35% for property placed in service after 2025). |
| Clean Electricity Investment Credit | 48E | For post-2024 facilities with zero greenhouse gas emissions, including storage. | 6-30% plus bonuses. |
| Energy Credit | 48 | For various energy properties like solar, wind, geothermal, fuel cells, and clean hydrogen. | 6-30% depending on property and bonuses. |
These credits often include bonuses for meeting criteria like domestic content (up to 10%), energy communities (up to 10%), low-income communities (10-20%), and PWA requirements, which can multiply the base rate by five.
For example, the Energy Credit under section 48 applies to properties like solar energy equipment, geothermal heat pumps, and energy storage technology, provided construction began before 2025 in many cases.
Eligibility Requirements for Form 3468
To claim credits on Form 3468, you must meet specific IRS criteria. Generally, the property or facility must be depreciable, placed in service during the tax year, and used primarily in the U.S. Here’s a closer look:
General Eligibility
- Taxpayer Types: Corporations, partnerships, LLCs, estates, trusts, and tax-exempt organizations with UBTI are eligible. Lessees can claim credits if they elect to treat the property as acquired.
- Qualified Investments: The basis must be attributable to qualified progress expenditures or depreciable costs. Reductions apply for subsidized financing, tax-exempt bonds, or nonqualified nonrecourse financing.
- Original Use: The property’s original use must commence with the taxpayer, and it can’t be used mainly for lodging (with exceptions).
- Pre-Filing Registration: Required for elective payments or transfers under sections 48C, 48D, 48E, and 48. Obtain a registration number from the IRS.
Specific Credit Eligibility
- Rehabilitation Credit: Applies to buildings at least 39 years old or certified historic structures with substantial rehabilitation (expenditures exceeding the greater of $5,000 or adjusted basis).
- Energy and Clean Electricity Credits: Facilities must meet emission standards (e.g., ≤0 g CO2e/kWh for clean electricity) and performance requirements. No prior claims under production credits like section 45.
- Advanced Projects: Need IRS/DOE certification, U.S. location, and compliance with CO2 sequestration thresholds.
- Bonuses: To qualify for increased rates, projects must satisfy PWA (prevailing wages and 10-15% apprentice hours), domestic content (40-50% U.S.-produced materials), or location in energy communities (e.g., brownfields or areas with high fossil fuel unemployment).
Ineligible items include property financed by foreign entities of concern (post-2025) or projects starting construction after certain dates (e.g., no credits for wind/solar after 2027 if construction begins after July 4, 2026).
How to File IRS Form 3468: Step-by-Step Guide?
Filing Form 3468 requires careful documentation. Follow these steps:
- Gather Documentation: Collect details on facility location, basis amounts, certifications (e.g., DOE letters for emissions), and statements for bonuses (PWA confirmation, domestic content certification).
- Complete Part I: Enter facility information, including registration number, emissions rates (if applicable), address, and bonus checkboxes.
- Fill Relevant Parts (II-VII): Compute credits based on basis and applicable percentages. For multiple properties, attach schedules.
- Apply Reductions and Bonuses: Adjust for tax-exempt bonds (up to 15% reduction) and add bonuses.
- Attach to Return: File with your main tax form (e.g., Form 1120). If e-filing with attachments, use Form 8453. Report totals on Form 3800.
- Handle Special Cases: For cooperatives, report unused credits. For elective payments under section 6417 or transfers under 6418, include pre-filing proof.
- File Timely: Submit by your tax return due date, including extensions.
If you’re a tax-exempt entity, enable Form 3468 in your filing software and link it to Form 3800 and 990-T.
Recent Changes to Form 3468 for 2025 and 2026
Legislative updates have reshaped Form 3468. Key changes include:
- One Big Beautiful Bill Act (P.L. 119-21): Restricts material assistance from prohibited foreign entities, adds prohibitions on foreign entity involvement, and terminates credits for wind or solar facilities placed in service after 2027 if construction begins after July 4, 2026.
- Advanced Manufacturing Credit: Increases to 35% for property placed in service after 2025.
- Elective Payment Phaseout: For projects beginning in 2024, credits are multiplied by 90% unless exceptions apply (e.g., increased costs or non-availability).
- Safe Harbor Updates: The 5% expenditure safe harbor is eliminated for most commercial-scale projects; use the Physical Work Test instead.
- Residential Credits Expiration: The residential solar tax credit (section 25D) expired December 31, 2025, shifting focus to commercial incentives.
- Energy Community Bonus Expansion: Effective post-July 4, 2025, includes metropolitan statistical areas (MSAs) with high fossil fuel ties.
- Form Updates: New Form 7220 for PWA verification; separate forms per facility; clarifications on qualified interconnection property.
These changes stem from the Inflation Reduction Act modifications and the 2025 budget bill, emphasizing clean energy while imposing new restrictions.
Tips for Maximizing Your Investment Credit
To get the most from Form 3468:
- Consult Professionals: Work with tax advisors to ensure PWA compliance and bonus eligibility.
- Document Thoroughly: Keep records of construction dates, costs, and certifications to avoid recapture (e.g., if property is disposed within 5 years).
- Consider Adders: Stack bonuses like domestic content and energy communities to boost rates up to 70%.
- Monitor Deadlines: For solar and wind, start construction before phaseout dates.
- Carryover Options: Unused credits can be carried back 1 year or forward 20 years.
Frequently Asked Questions About Form 3468
- Who files Form 3468? Any eligible taxpayer investing in qualified projects.
- What if I lease property? You can elect to claim the credit in Part I.
- Are there penalties for non-compliance? Yes, including recapture via Form 4255.
- How do I get the registration number? Through IRS pre-filing registration for elective options.
Conclusion
IRS Form 3468 offers substantial incentives for strategic investments, but navigating its complexities requires attention to eligibility, documentation, and recent changes. By leveraging these credits, businesses can support sustainability while lowering taxes. For personalized advice, consult a tax professional or visit IRS.gov for the latest updates. Start your filing process today to capitalize on these opportunities in 2026.