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Internal Revenue Code, § 39. Carryback And Carryforward Of Unused Credits

I.R.C. § 39(a) In General
I.R.C. § 39(a)(1) 1-Year Carryback And 20-Year Carryforward
If the sum of the business credit carryforwards to the taxable year plus the amount of the current year business credit for the taxable year exceeds the amount of the limitation imposed by subsection (c) of section 38 for such taxable year (hereinafter in this section referred to as the “unused credit year”), such excess (to the extent attributable to the amount of the current year business credit) shall be—
I.R.C. § 39(a)(1)(A)
a business credit carryback to the taxable year preceding the unused credit year, and
I.R.C. § 39(a)(1)(B)
a business credit carryforward to each of the 20 taxable years following the unused credit year, and, subject to the limitations imposed by subsections (b) and (c), shall be taken into account under the provisions of section 38(a) in the manner provided in section 38(a).
I.R.C. § 39(a)(2) Amount Carried To Each Year
I.R.C. § 39(a)(2)(A) Entire Amount Carried To First Year
The entire amount of the unused credit for an unused credit year shall be carried to the earliest of the 21 taxable years to which (by reason of paragraph (1)) such credit may be carried.
I.R.C. § 39(a)(2)(B) Amount Carried To Other 20 Years
The amount of the unused credit for the unused credit year shall be carried to each of the other 20 taxable years to the extent that such unused credit may not be taken into account under section 38(a) for a prior taxable year because of the limitations of subsections (b) and (c).
I.R.C. § 39(a)(3) 5-Year Carryback For Marginal Oil And Gas Well Production Credit
Notwithstanding subsection (d), in the case of the marginal oil and gas well production credit—
I.R.C. § 39(a)(3)(A)
this section shall be applied separately from the business credit (other than the marginal oil and gas well production credit),
I.R.C. § 39(a)(3)(B)
paragraph (1) shall be applied by substituting “each of the 5 taxable years” for “the taxable year” in subparagraph (A) thereof, and
I.R.C. § 39(a)(3)(C)
paragraph (2) shall be applied—
I.R.C. § 39(a)(3)(C)(i)
by substituting “25 taxable years” for “21 taxable years” in subparagraph (A) thereof, and
I.R.C. § 39(a)(3)(C)(ii)
by substituting “24 taxable years” for “20 taxable years” in subparagraph (B) thereof.
I.R.C. § 39(b) Limitation On Carrybacks
The amount of the unused credit which may be taken into account under section 38(a)(3) for any preceding taxable year shall not exceed the amount by which the limitation imposed by section 38(c) for such taxable year exceeds the sum of—
I.R.C. § 39(b)(1)
the amounts determined under paragraphs (1) and (2) of section 38(a) for such taxable year, plus
I.R.C. § 39(b)(2)
the amounts which (by reason of this section) are carried back to such taxable year and are attributable to taxable years preceding the unused credit year.
I.R.C. § 39(c) Limitation On Carryforwards
The amount of the unused credit which may be taken into account under section 38(a)(1) for any succeeding taxable year shall not exceed the amount by which the limitation imposed by section 38(c) for such taxable year exceeds the sum of the amounts which, by reason of this section, are carried to such taxable year and are attributable to taxable years preceding the unused credit year.
I.R.C. § 39(d) Transitional Rule
No portion of the unused business credit for any taxable year which is attributable to a credit specified in section 38(b) or any portion thereof may be carried back to any taxable year before the first taxable year for which such specified credit or such portion is allowable (without regard to subsection (a)).
(Added by Pub. L. 98-369, div. A, title IV, Sec. 473, July 18, 1984, 98 Stat. 828, and amended Pub. L. 99-514, title II, Sec. 231(d)(3)(C)(i), title XVIII, Sec. 1846, Oct. 22, 1986, 100 Stat. 2179, 2856; Pub. L. 100-647, title I, Sec. 1002(l)(26), Nov. 10, 1988, 102 Stat. 3381; Pub. L. 101-508, title XI, Sec. 11511(b)(2), 11611(b)(2), 11801(a)(2), Nov. 5, 1990, 104 Stat. 1388-485, 1388-503, 1388-520; Pub. L. 102-486, title XIX, Sec. 1914(c), Oct. 24, 1992, 106 Stat. 2776; Pub. L. 103-66, title XIII, Sec. 13302, 13322, 13443, Aug. 10, 1993, 107 Stat. 312; Pub. L. 104-188, title I, Sec. 1205(c), 1703(n)(1), Aug. 20, 1996, 110 Stat. 1755; Pub. L. 105-34, title VII, X, Sec. 701(b)(1), 1083(a), Aug. 5, 1997, 111 Stat 788; Pub. L. 105-206, title VI, Sec. 6010(n), July 22, 1998, 112 Stat. 685; Pub. L. 106-554, Sec. 121, Dec. 21, 2000, 114 Stat. 2763; Pub. L. 107-16, title VI, Sec. 619(c)(1), June 7, 2001, 115 Stat. 38; Pub. L. 108-357, title II, III, Sec. 245(b)(1), Sec. 341(c), Oct. 22, 2004, 118 Stat. 1418; Pub. L. 109-135, title IV, Sec. 412(g), Dec. 21, 2005, 119 Stat. 2577; Pub. L. 111-240, title II, Sec. 2012, Sept. 27, 2010, 124 Stat. 2504; Pub. L. 115-141, Div. U, title IV, Sec. 401(b)(5)(E), (5)(F), Mar. 23, 2018, 132 Stat. 348.)
BACKGROUND NOTES
AMENDMENTS
2018--Subsec. (a). Pub. L. 115-141, Div. U, Sec. 401(b)(5)(E), amended subsec. (a) by striking par. (4). Before being struck, par. (4) read as follows:
“(4) 5-year Carryback For Eligible Small Business Credits—
“(A) In General.— Notwithstanding subsection (d), in the case of eligible small business credits determined in the first taxable year of the taxpayer beginning in 2010—
“(i) paragraph (1) shall be applied by substituting ‘each of the 5 taxable years’ for ‘the taxable year’ in subparagraph (A) thereof, and
“(ii) paragraph (2) shall be applied—
“(I) by substituting ‘25 taxable years’ for ‘21 taxable years’ in subparagraph (A) thereof, and
(II) by substituting ‘24 taxable years’ for ‘20 taxable years’ in subparagraph (B) thereof.
(B) Eligible Small Business Credits—For purpose of this subsection, the term ‘eligible small business credits’ has the meaning given such term by section 38(c)(5)(B).
Subsec. (a)(3)(A). Pub. L. 115-141, Div. U, Sec. 401(b)(5)(F), amended subpar. (A) by striking “or the eligible business credits”.
2010--Subsec. (a)(3)(A). Pub. L. 111-240, Sec. 2012(b), amended subpar. (A) by inserting “or the eligible small business credits” after “credit)”.
Subsec. (a)(4). Pub. L. 111-240, Sec. 2012(a), amended subsec. (a) by adding par. (4).
2005--Subsec. (a)(1)(A). Pub. L. 109-135, Sec. 412(g)(1), amended subpar. (A) by substituting “the taxable year” for “each of the 1 taxable years”.
Subsec. (a)(3)(B). Pub. L. 109-135, Sec. 412(g)(2), amended subpar. (B). Before amendment it read as follows:
“(B) paragraph (1) shall be applied by substituting ‘5 taxable years’ for ‘1 taxable years’ in subparagraph (A) thereof, and”.
2004--Subsec. (c)(3). Pub. L. 108-357, Sec. 341(c), added par. (3)
Subsec. (d). Pub. L. 108-357, Sec. 245(b)(1), amended subsec. (d). Before amendment it read as follows:
“(d) Transitional rules
“(1) NO CARRYBACK OF ENHANCED OIL RECOVERY CREDIT BEFORE 1991.
“No portion of the unused business credit for any taxable year which is attributable to the credit determined under section 43(a) (relating to enhanced oil recovery credit) may be carried to a taxable year beginning before January 1, 1991.
“(2) NO CARRYBACK OF SECTION 44 CREDIT BEFORE ENACTMENT.
“No portion of the unused business credit for any taxable year which is attributable to the disabled access credit determined under section 44 may be carried to a taxable year ending before the date of the enactment of section 44.
“(3) NO CARRYBACK OF RENEWABLE ELECTRICITY PRODUCTION CREDIT BEFORE EFFECTIVE DATE.
“No portion of the unused business credit for any taxable year which is attributable to the credit determined under section 45 (relating to electricity produced from certain renewable resources) may be carried back to any taxable year ending before January 1, 1993 (before January 1, 1994, to the extent such credit is attributable to wind as a qualified energy resource).
(4) Empowerment zone employment credit. --
“No portion of the unused business credit which is attributable to the credit determined under section 1396 (relating to empowerment zone employment credit) may be carried to any taxable year ending before January 1, 1994.
“(5) No carryback of section 45A credit before enactment. --
“No portion of the unused business credit for any taxable year which is attributable to the Indian employment credit determined under section 45A may be carried to a taxable year ending before the date of the enactment of section 45A.
“(6) No carryback of section 45B credit before enactment. --
“No portion of the unused business credit for any taxable year which is attributable to the employer social security credit determined under section 45B may be carried back to a taxable year ending before the date of the enactment of section 45B.
“(7) No carryback of section 45C credit before July 1, 1996
“No portion of the unused business credit for any taxable year which is attributable to the orphan drug credit determined under section 45C may be carried back to a taxable year ending before July 1, 1996.
“(8) No carryback of DC zone credits before effective date.--
“No portion of the unused business credit for any taxable year which is attributable to the credits allowable under subchapter U by reason of section 1400 may be carried back to a taxable year ending before the date of the enactment of section 1400 [enacted: Aug. 5, 1997].
“(9) No carryback of new markets tax credit before January 1, 2001.--
“No portion of the unused business credit for any taxable year which is attributable to the credit under section 45D may be carried back to a taxable year ending before January 1, 2001.
“(10) NO CARRYBACK OF SMALL EMPLOYER PENSION PLAN STARTUP COST CREDIT BEFORE JANUARY 1, 2002.--
“No portion of the unused business credit for any taxable year which is attributable to the small employer pension plan startup cost credit determined under section 45E may be carried back to a taxable year beginning before January 1, 2002.”
2001--Subsec. (d)(1). Pub. L. 107-16, Sec. 619(c)(1), added par. (10).
2000--Subsec. (d)(9). Pub. L. 106-554, Sec. 121(b)(2), added par. (9).
1997--Subsec. (a)(1). Pub. L. 105-34, Sec. 1083(a)(1), substituted “1” for “3” each place it appeared and substituted “20" for “15” each place it appeared.
Subsec. (a)(2). Pub. L. 105-34, Sec. 1083(a)(2), as amended by Pub. L. 105-206, Sec. 6010(n), substituted “21” for “18” each place it appeared and substituted “20” for “17” each place it appeared.
Subsec. (d)(8). Pub. L. 105-34, Sec. 701(b)(1), added par. (8).
1996--Subsec. (d). Pub. L. 104-188, Sec. 1703(n)(1), struck “45” in heading and inserting “45A”; and struck “45” in the heading of paragraph (6) and inserted “45B”.
Subsec. (d)(7). Pub. L. 104-188, Sec. 1205(c), added par. (7).
1993--Subsec. (d)(4). Pub. L. 103-66, Section 13302(a)(2) amended subsection (d) by adding at the end a new paragraph (4).
Subsec. (d)(5). Pub. L. 103-66, Section 13322(d) amended subsection (d) by adding at the end thereof a new paragraph (5).
Subsec. (d)(6). Pub. L. 103-66, Section 13443(b)(2) amended subsection (d) by adding at the end a new paragraph (6).
1992--Subsec. (d). Pub. L. 102-486, Section 1914(c) amended subsection (d) by redesignating the paragraph added by section 11511(b)(2) of the Revenue Reconciliation Act of 1990 as paragraph (1), by redesignating the paragraph added by section 11611(b)(2) of such Act as paragraph (2), and by adding a new paragraph (3).
1990--Subsec. (d)(1) to (4). Pub. L. 101-508, Sec. 11801(a)(2), struck out par. (1) which related to carryforwards from an unused credit year which did not expire before first taxable year beginning after Dec. 31, 1983, par. (2) which related to carrybacks in determining amount allowable as credit including net tax liability, par. (3) which related to similar rules for research credit under section 30, and par. (4) which provided for no carryback of low-income housing credit before 1987.
Subsec. (d)(5). Pub. L. 101-508, Sec. 11611(b)(2), added par. (5) relating to carryback of section 44 credit.
Pub. L. 101-508, Sec. 11511(b)(2), added par. (5) relating to carryback of enhanced oil recovery credit.
1988--Subsec. (d)(4). Pub. L. 100-647, Sec. 1002(1)(26), added par. (4).
1986--Subsec. (d)(1)(A). Pub. L. 99-514, Sec. 1846(1), inserted
‘(as in effect before the enactment of the Tax Reform Act of 1984)’.
Subsec. (d)(2)(B). Pub. L. 99-514, Sec. 1846(2), substituted ‘as defined in section 26(b)’ for ‘as so defined in section 25(b)’.
Subsec. (d)(3). Pub. L. 99-514, Sec. 231(d)(3)(C)(i), added par. (3).
EFFECTIVE DATE OF 2018 AMENDMENTS
Amendments by Pub. L. 115-141, Div. U, Sec. 401(b)(5)(E), (5)(F), effective March 23, 2018.
EFFECTIVE DATE OF 2010 AMENDMENTS
Amendments by Section 2012 of Pub. L. 111-240 effective for credits determined in taxable years beginning after December 31, 2009.
EFFECTIVE DATE OF 2005 AMENDMENTS
Amendments by Section 412(g) of Pub. L. 109-135 is applicable on the date of the enactment of this Act [Enacted: Dec. 21, 2005].
EFFECTIVE DATE OF 2004 AMENDMENTS
Amendment by Section 245(b)(1) of Pub. L. 108-357 is applicable to taxable years ending after December 31, 2003.
Amendment by Section 341(c) of Pub. L. 108-357 is applicable to production in taxable years beginning after December 31, 2004.
EFFECTIVE DATE OF 2001 AMENDMENTS
Section 619(d) of Pub. L. 107-16, as amended by Pub. L. 107-147, Sec. 411(n)(2), provided that: “The amendments mae by this section shall apply to costs paid or incurred in taxable years beginning after December 31, 2001 with respect to qualified employer plans first effective after such date.”
Section 901 (Sunset of Provisions of Act) of Pub. L. 107-16, as amended by Pub. L. 107-358, provided that:
“(a) IN GENERAL.--All provisions of, and amendments made by, this Act shall not apply--
“(1) to taxable, plan, or limitation years beginning after December 31, 2010, or
“(2) in the case of title V, to estates of decedents dying, gifts made, or generation skipping transfers, after December 31, 2010.
“(b) APPLICATION OF CERTAIN LAWS.--The Internal Revenue Code of 1986 and the Employee Retirement Income Security Act of 1974 shall be applied and administered to years, estates, gifts, and transfers described in subsection (a) as if the provisions and amendments described in subsection (a) had never been enacted.
“(c) EXCEPTION.-Subsection (a) shall not apply to section 803 (relating to no federal income tax on restitution received by victims of the Nazi regime or their heirs or estates).”
PENSIONS AND INDIVIDUAL RETIREMENT ARRANGEMENT PROVISIONS OF ECONOMIC GROWTH AND TAX RELIEF RECONCILIATION ACT OF 2001 MADE PERMANENT
Section 811 of Pub. L. 109-280 provided that:
“Title IX of the Economic Growth and Tax Relief Reconciliation Act of 2001 [Pub. L. 107-16] shall not apply to the provisions of, and amendments made by, subtitles A through F [Sections 601-666] of title VI of such Act (relating to pension and individual retirement arrangement provisions).”
EFFECTIVE DATE OF 2000 AMENDMENTS
Amendment by section 121(b)(2) of Pub. L. 106-554 effective for investments made after December 31, 2000.
EFFECTIVE DATE OF 1997 AMENDMENTS
Amendments by section 1803(a) of Pub. L. 105-34 effective for credits arising in taxable years beginning after December 31, 1997.
Amendment by section 701(b)(1) of Pub. L. 105-34 effective on the date of enactment [enacted: Aug. 5, 1997].
EFFECTIVE DATE OF 1996 AMENDMENTS
Section 1703(o) of Pub. L. 104-188, provided that: “Any amendment made by this section shall take effect as if included in the provision of the Revenue Reconciliation Act of 1993 to which such amendment relates.”
Section 1205(e) of Pub. L. 104-188, provided that: “Any amendments made by this section shall apply to amounts paid or incurred in taxable years ending after June 30, 1996.”
EFFECTIVE DATE OF 1993 AMENDMENTS
Amendment by section 13302 of Pub. L. 103-66 effective as of the date of enactment [enacted: Aug. 10, 1993].
Amendment by section 13322 of Pub. L. 103-66 applicable to wages paid or incurred after Dec. 31, 1993.
Amendment by section 13443 of Pub. L. 103-66 applicable with respect to taxes paid after Dec. 31, 1993, with respect to services performed before, on, or after such date [as amended by Pub. L. 104-188, Sec. 1112(a)(2)].
EFFECTIVE DATE OF 1992 AMENDMENTS
Amendment by section 1914(c) of Pub. L. 102-486 applicable to taxable years ending after December 31, 1992.
EFFECTIVE DATE OF 1990 AMENDMENTS
Amendment by section 11511(b)(2) of Pub. L. 101-508 applicable to costs paid or incurred in taxable years beginning after Dec. 31, 1990, see section 11511(d)(1) of Pub. L. 101-508, set out as an Effective Date note under section 43 of this title.
Amendment by section 11611(b)(2) of Pub. L. 101-508 applicable to expenditures paid or incurred after Nov. 5, 1990, see section 11611(e)(1) of Pub. L. 101-508, set out as a note under section 38 of this title.
EFFECTIVE DATE OF 1988 AMENDMENTS
Amendment by Pub. L. 100-647 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99-514, to which such amendment relates, see section 1019(a) of Pub. L. 100-647, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1986 AMENDMENTS
Amendment by section 231(d)(3)(C)(i) of Pub. L. 99-514 applicable to taxable years beginning after Dec. 31, 1985, see section 231(g) of Pub. L. 99-514, set out as a note under section 41 of this title.
Amendment by section 1846 of Pub. L. 99-514 effective, except as otherwise provided, as if included in the provisions of the Tax Reform Act of 1984, Pub. L. 98-369, div. A, to which such amendment relates, see section 1881 of Pub. L. 99-514, set out as a note under section 48 of this title.
EFFECTIVE DATE
Section applicable to taxable years beginning after Dec. 31, 1983, and to carrybacks from such years, see section 475(a) of Pub. L. 98-369, set out as an Effective Date of 1984 Amendment note under section 21 of this title.
SAVINGS PROVISION
For provisions that nothing in amendment by section 11801(a)(2) of Pub. L. 101-508 be construed to affect treatment of certain transactions occurring, property acquired, or items of income, loss, deduction, or credit taken into account prior to Nov. 5, 1990, for purposes of determining liability for tax for periods ending after Nov. 5, 1990, see section 11821(b) of Pub. L. 101-508, set out as a note under section 29 of this title.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI (Sec. 1101-1147 and 1171-1177) or title XVIII (Sec. 1800-1899A) of Pub. L. 99-514 require an amendment to any plan, such plan amendment shall not be required to be made before the first plan year beginning on or after Jan. 1, 1989, see section 1140 of Pub. L. 99-514, as amended, set out as a note under section 401 of this title.
PRIOR PROVISIONS
A prior section 39 was renumbered section 34 of this title.
Another prior section 39 was renumbered section 35 of this title.