SECTION 2. BACKGROUND

.01 Section 168(k), amended by § 103 of the Economic Stimulus Act of 2008, Pub. L. No. 110–185, 122 Stat. 613 (February 13, 2008) (Stimulus Act), allows a 50-percent additional first year depreciation deduction (Stimulus additional first year depreciation deduction) for certain new property acquired by a taxpayer after 2007 and placed in service by the taxpayer before 2009 (before 2010 in the case of property described in § 168(k)(2)(B) or (C)).

.02 Section 3081(a) of the Housing Act added § 168(k)(4) to the Code. If a corporation elects to apply § 168(k)(4), § 168(k)(4)(A) provides that, for the corporation’s first taxable year ending after March 31, 2008, and for any subsequent taxable year, the corporation forgoes the Stimulus additional first year depreciation deduction allowable under § 168(k) for eligible qualified property placed in service by the taxpayer and increases each of the limitations described in § 38(c) (relating to the general business credit) and § 53(c) (relating to the AMT credit). As a result, the corporation will be able to claim unused credits from taxable years beginning before January 1, 2006, that are allocable to research expenditures or AMT liabilities. This revenue procedure clarifies which depreciable property is eligible qualified property (see section 3 of this revenue procedure) and clarifies the effects of making the election to apply § 168(k)(4) (see section 4 of this revenue procedure).

.03 Section 38(c)(1) limits the general business credit allowed under § 38(a) to the excess (if any) of the taxpayer’s net income tax (generally, the sum of the taxpayer’s regular tax liability and AMT liability less certain credits) over the greater of (i) the tentative minimum tax for the taxable year or (ii) 25 percent of so much of the taxpayer’s net regular tax liability (generally, the taxpayer’s regular tax liability less certain credits) as exceeds $25,000. Under § 38(b)(4), the general business credit includes the research credit determined under § 41. Section 53(c) provides that the amount of the minimum tax credit allowed for any taxable year shall

not exceed the excess (if any) of the regular tax liability of the taxpayer (reduced by certain credits) over the tentative minimum tax for the taxable year. In general, a taxpayer that makes the election to apply § 168(k)(4) increases the limitations under §§ 38(c) and 53(c) by the bonus depreciation amount. In general, the amount by which the bonus depreciation amount increases each of the credit limitations under §§ 38(c) and 53(c) is determined by the portion of the bonus depreciation amount that the taxpayer allocates to each credit limitation for the taxable year. This revenue procedure clarifies the computation of the bonus depreciation amount (see section 5 of this revenue procedure) and the limitations on a taxpayer’s allocation of the bonus depreciation amount between §§ 38(c) and 53(c) (see section 6 of this revenue procedure).

.04 To the extent that a taxpayer is allowed the business credit or AMT credit in an amount allocable to the aggregate increases in the business credit limitation and the AMT credit limitation that result from the § 168(k)(4) election, such amount(s) are treated as overpayments within the meaning of § 6401(b) that are refundable to the taxpayer. See § 168(k)(4)(F).

.05 Section 168(m), added by § 308(a) of the Energy Improvement and Extension Act of 2008, Pub. L. No. 110–343,

Stat. (October 3, 2008), allows a 50-percent additional first year depreciation deduction for qualified reuse and recycling property placed in service after August 31, 2008. Section 168(n), added by § 710(a) of the Heartland Disaster Tax Relief Act of 2008, Pub. L. No. 110–343,

Stat. (October 3, 2008), allows a 50-percent additional first year depreciation deduction for qualified disaster assistance property placed in service after December 31, 2007, with respect to federally declared disasters occurring after 2007 and before 2010. Both new Code provisions provide that property described in such provisions does not include property to which § 168(k) applies. Therefore, eligible qualified property for which a taxpayer makes the § 168(k)(4) election does not qualify for the 50-percent additional first year depreciation deduction allowed under § 168(m) and (n).

November 3, 2008 1083 2008–44 I.R.B.

.05 Time and Manner for Making Elec- tion . The IRS and Treasury intend to publish separate guidance on the time and manner of making the election.

.06 Revocation of Election . Once made, the election to apply § 168(k)(4) may be revoked only with the written consent of the Commissioner of Internal Revenue. See § 168(k)(4)(G)(i). To seek the Commissioner’s consent, the taxpayer must submit a request for a letter ruling. See Rev. Proc. 2008–1, 2008–1 I.R.B. 1 (or any successor).