Recapture of Credit

You may have to refigure the investment credit and recapture all or a portion of it if any of the following apply.

• You dispose of investment credit property before the end of 5 full years after the property was placed in service (recapture period).

• You change the use of the property before the end of the recapture period so that it no longer qualifies as investment credit property.

• The business use of the property decreases before the end of the recapture period so that it no longer qualifies (in whole or in part) as investment credit property.

2 Instructions for Form 3468 (2025)

• Any building to which section 47(d) applies will no longer be a qualified rehabilitated building when placed in service.

• Any property to which progress expenditures under section 48(b), 48A(b)(3), 48B(b)(3), 48C(b)(2), 48D(b) (5), or 48E applies will no longer qualify as investment credit property when placed in service.

• Before the end of the recapture period, your proportionate interest is reduced by more than ¹ /3 in an S corporation, partnership, estate, or trust that allocated the cost or basis of property to you for which you claimed a credit.

• Any facility, property, project, or energy storage technology under sections 48E or 48 that you claimed the increased credit amount for satisfying the PWA requirements and you fail to satisfy the prevailing wage requirements with respect to alteration or repair during the 5-year period beginning on the date the facility, property, project, or energy storage technology is placed in service. See Regulations sections 1.48E-3(e) and 1.48-13(c)(4).

• You return leased property (on which you claimed a credit) to the lessor before the end of the recapture period.

• A net increase in the amount of nonqualified nonrecourse financing occurs for any property to which section 49(a)(1) applied.

• You engage in an applicable transaction (involving the material expansion of semiconductor manufacturing capacity), as defined in section 50(a)(7)(D). See Regulations section 1.50-2 for more information.

• Emissions tier recapture event, where you fail to obtain an annual verification report by the deadline for filing your federal income tax return (including extensions) for any tax year in which an annual verification report is required under Regulations section 1.48-15(e)(1).

• Emissions tier recapture event, where the specified clean hydrogen production facility actually produced hydrogen through a process (or processes) that results in a lifecycle greenhouse gas (GHG) emissions rate that can only support a lower energy percentage than the energy percentage used to calculate the amount of the section 48 credit for such facility for the year in which the facility is placed in service.

• Emissions tier recapture event, where the specified clean hydrogen production facility actually produced hydrogen through a process (or processes) that results in a lifecycle GHG emissions rate of greater than 4 kilograms of CO2e per kilogram of hydrogen. See Regulations section 1.48-15(f).

• Any qualified solar or wind facility property that ceases to be property eligible for the low-income communities bonus credit under section 48(e). See Regulations section 1.48(e)-1(n) for more information.

• Any qualified facility for which you claimed a section 48E credit that has a greenhouse gas emissions rate (as determined under Regulations section 1.45Y-5) of greater than 10 grams of CO2e per kWh during the 5-year period beginning on the date such qualified facility is originally placed in service (5-year recapture period). See Regulations section 1.48E-4(f) for more information.

• Any qualified facility property that ceases to be property eligible for the low-income communities bonus credit under section 48E(h). See Regulations section 1.48E(h)-1(n) for more information.

Exceptions to recapture. Recapture of the investment credit doesn’t apply to any of the following.

1. A transfer due to the death of the taxpayer.

2. A transfer between spouses or incident to divorce under section 1041. However, a later disposition by the transferee is subject to recapture to the same extent as if the transferor had disposed of the property at the later date.

3. A transaction to which section 381(a) applies (relating to certain acquisitions of the assets of one corporation by another corporation).

4. A mere change in the form of conducting a trade or business if:

a. The property is retained as investment credit

property in that trade or business, and

b. The taxpayer retains a substantial interest in that

trade or business.

A mere change in the form of conducting a trade or business includes a corporation that elects to be an S corporation and a corporation whose S election is revoked or terminated.

Any required increase in the amount due for certain credit recaptures, excessive payments, excessive credit transfers, and PWA penalty amounts are reported on Form 4255, Certain Credit Recapture, Excessive Payments, and Penalties. For more information, see Form 4255 and its instructions.