§ 50. Other special rules
(a)
Recapture in case of dispositions, etc.
Under regulations prescribed by the Secretary—
(1)
Early disposition, etc.
(A)
General rule
If, during any taxable year, investment credit property is disposed of, or otherwise ceases to be investment credit property with respect to the taxpayer, before the close of the recapture period, then the tax under this chapter for such taxable year shall be increased by the recapture percentage of the aggregate decrease in the credits allowed under section
38 for all prior taxable years which would have resulted solely from reducing to zero any credit determined under this subpart with respect to such property.
(B)
Recapture percentage
For purposes of subparagraph (A), the recapture percentage shall be determined in accordance with the following table:
| If the property ceases to beinvestment credit property within— | The recapture percentage is: |
|---|---|
| (i) One full year after placed in service | 100 |
| (ii) One full year after the close of the period described in clause (i) | 80 |
| (iii) One full year after the close of the period described in clause (ii) | 60 |
| (iv) One full year after the close of the period described in clause (iii) | 40 |
| (v) One full year after the close of the period described in clause (iv) | 20 |
(2)
Property ceases to qualify for progress expenditures
(A)
In general
If during any taxable year any building to which section
47
(d) applied ceases (by reason of sale or other disposition, cancellation or abandonment of contract, or otherwise) to be, with respect to the taxpayer, property which, when placed in service, will be a qualified rehabilitated building, then the tax under this chapter for such taxable year shall be increased by an amount equal to the aggregate decrease in the credits allowed under section
38 for all prior taxable years which would have resulted solely from reducing to zero the credit determined under this subpart with respect to such building.
(B)
Certain excess credit recaptured
Any amount which would have been applied as a reduction under paragraph (2) of section
47
(b) but for the fact that a reduction under such paragraph cannot reduce the amount taken into account under section
47
(b)(1) below zero shall be treated as an amount required to be recaptured under subparagraph (A) for the taxable year during which the building is placed in service.
(C)
Certain sales and leasebacks
Under regulations prescribed by the Secretary, a sale by, and leaseback to, a taxpayer who, when the property is placed in service, will be a lessee to whom the rules referred to in subsection (d)(5) apply shall not be treated as a cessation described in subparagraph (A) to the extent that the amount which will be passed through to the lessee under such rules with respect to such property is not less than the qualified rehabilitation expenditures properly taken into account by the lessee under section
47
(d) with respect to such property.
(D)
Coordination with paragraph (1)
If, after property is placed in service, there is a disposition or other cessation described in paragraph (1), then paragraph (1) shall be applied as if any credit which was allowable by reason of section
47
(d) and which has not been required to be recaptured before such disposition, cessation, or change in use were allowable for the taxable year the property was placed in service.
(3)
Carrybacks and carryovers adjusted
In the case of any cessation described in paragraph (1) or (2), the carrybacks and carryovers under section
39 shall be adjusted by reason of such cessation.
(4)
Subsection not to apply in certain cases
Paragraphs (1) and (2) shall not apply to—
For purposes of this subsection, property shall not be treated as ceasing to be investment credit property with respect to the taxpayer by reason of a mere change in the form of conducting the trade or business so long as the property is retained in such trade or business as investment credit property and the taxpayer retains a substantial interest in such trade or business.
(5)
Definitions and special rules
(A)
Investment credit property
For purposes of this subsection, the term “investment credit property” means any property eligible for a credit determined under this subpart.
(B)
Transfer between spouses or incident to divorce
In the case of any transfer described in subsection (a) of section
1041—
(b)
Certain property not eligible
No credit shall be determined under this subpart with respect to—
(1)
Property used outside United States
(2)
Property used for lodging
No credit shall be determined under this subpart with respect to any property which is used predominantly to furnish lodging or in connection with the furnishing of lodging. The preceding sentence shall not apply to—
(A)
nonlodging commercial facilities which are available to persons not using the lodging facilities on the same basis as they are available to persons using the lodging facilities.[1]
(B)
property used by a hotel or motel in connection with the trade or business of furnishing lodging where the predominant portion of the accommodations is used by transients;
(3)
Property used by certain tax-exempt organization
No credit shall be determined under this subpart with respect to any property used by an organization (other than a cooperative described in section
521) which is exempt from the tax imposed by this chapter unless such property is used predominantly in an unrelated trade or business the income of which is subject to tax under section
511. If the property is debt-financed property (as defined in section
514
(b)), the amount taken into account for purposes of determining the amount of the credit under this subpart with respect to such property shall be that percentage of the amount (which but for this paragraph would be so taken into account) which is the same percentage as is used under section
514
(a), for the year the property is placed in service, in computing the amount of gross income to be taken into account during such taxable year with respect to such property. If any qualified rehabilitated building is used by the tax-exempt organization pursuant to a lease, this paragraph shall not apply for purposes of determining the amount of the rehabilitation credit.
(4)
Property used by governmental units or foreign persons or entities
(A)
In general
No credit shall be determined under this subpart with respect to any property used—
(C)
Exception for qualified rehabilitated buildings leased to governments, etc.
If any qualified rehabilitated building is leased to a governmental unit (or a foreign person or entity) this paragraph shall not apply for purposes of determining the rehabilitation credit with respect to such building.
(c)
Basis adjustment to investment credit property
(1)
In general
For purposes of this subtitle, if a credit is determined under this subpart with respect to any property, the basis of such property shall be reduced by the amount of the credit so determined.
(2)
Certain dispositions
If during any taxable year there is a recapture amount determined with respect to any property the basis of which was reduced under paragraph (1), the basis of such property (immediately before the event resulting in such recapture) shall be increased by an amount equal to such recapture amount. For purposes of the preceding sentence, the term “recapture amount” means any increase in tax (or adjustment in carrybacks or carryovers) determined under subsection (a).
(d)
Certain rules made applicable
For purposes of this subpart, rules similar to the rules of the following provisions (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990) shall apply:
[1] So in original. The period probably should be a semicolon.