Qualified Progress Expenditures

Qualified progress expenditures are those expenditures made before the property is placed in service and for which the taxpayer has made an election to treat the expenditures as progress expenditures.

Qualified progress expenditures is any property that is:

• Being constructed by or for the taxpayer,

• Has a normal construction period of 2 years or more, and

• Is reasonable to believe that the property will be new investment credit property in the hands of the taxpayer when it is placed in service.

The placed-in-service requirement doesn't apply to qualified progress expenditures.

Qualified progress expenditures for:

• Self-constructed property means the amount that is properly chargeable (during the tax year) to a capital account with respect to that property; or

• Non-self-constructed property means the lesser of (a) the amount paid (during the tax year) to another person for the construction of the property; or (b) the amount that represents the proportion of the overall cost to the taxpayer of the construction by the other person, which is properly attributable to that portion of the construction that is completed during the tax year.

Note: A lessor of progress expenditures property may not elect to treat a lessee (or a person who will be a lessee) as having made qualified progress expenditures.

For more information on qualified progress expenditures, see section 46(d) (as in effect on November 4, 1990) and Regulations section 1.46-5. For details on qualified progress expenditures for the rehabilitation credit, see section 47(d).

For details on qualified progress expenditures for the advanced manufacturing investment credit, see Regulations section 1.48D-2(j)(3).