SECTION 5. BONUS DEPRECIATION

AMOUNT FOR EXTENSION PROPERTY

.01 In General . Under § 168(k)(4)(H)(i)(II), if a taxpayer has made the § 168(k)(4) election for its first taxable year ending after March 31, 2008, and does not make the election not to apply § 168(k)(4) to extension property, separate bonus depreciation amounts, maximum amounts, and maximum increase amounts are computed and applied to eligible qualified property that is not extension property and to extension property. Such a taxpayer computes its bonus depreciation amount for eligible qualified property that is not extension property in the manner described in section 5 of Rev. Proc. 2008–65 (as modified by section 7.02 of this revenue procedure). .02 Computation of Extension Property Bonus Depreciation Amount .

(1) In general . Except as provided in section 5.02(2) of this revenue procedure, a taxpayer described in section 5.01 of this revenue procedure computes its bonus depreciation amount for extension property (extension property bonus depreciation amount) in the manner described in section 5 of Rev. Proc. 2008–65 (as modified by section 7.02 of this revenue procedure), with the following additional modifications:

(a) Bonus depreciation amount . The bonus depreciation amount under § 168(k)(4)(C)(i) is computed only with regard to extension property; and

(b) Maximum amount . The maximum amount under § 168(k)(4)(C)(ii) equals the maximum increase amount (as computed under section 5.04 of Rev. Proc. 2008–65) less the sum of the extension property bonus depreciation amounts determined under § 168(k)(4)(C) for all preceding years. Therefore, a taxpayer described in section 5.01 of this revenue procedure may claim a maximum of $30 million of refundable credits relating to its § 168(k)(4) election applicable to eligible qualified property that is not extension property, and a maximum of $30 million of refundable credits relating to its § 168(k)(4) election applicable to extension property.

(2) Controlled groups . If a taxpayer described in section 5.01 of this revenue procedure is a member of a controlled group (as determined under section 3.05(1) of Rev. Proc. 2009–16), the taxpayer must compute the controlled group’s bonus depreciation amount for extension property (group extension property bonus depreciation amount). The group extension property bonus depreciation amount is computed in the same manner as described in section 4.02(2) or 4.02(3)(b)(ii) of Rev. Proc. 2009–16, as applicable, but taking into account the modifications described in section 5.02(1) of this revenue procedure.

.03 Allocation of Extension Property Bonus Depreciation Amount .

(1) In general . A taxpayer described in section 5.01 of this revenue procedure allocates its extension property bonus deprecation amount (computed under section 5.02 of this revenue procedure) between the business credit limitation under § 38(c) and the AMT credit limitation under § 53(c) in the same manner as provided in section 4 of Rev. Proc. 2009–16. Therefore, an allocation under this section 5.03 is reported with the taxpayer’s timely filed original federal income tax return for the taxable year.

(2) Controlled groups . The group extension property bonus depreciation amount (computed under section 5.02(2) of this revenue procedure) that is allocable to a member of a controlled group (as determined under section 3.05(1) of Rev. Proc. 2009–16) is determined by arriving at each member’s proportionate share of the group extension property bonus depreciation amount, unless all members of the group agree to an alternative allocation under section 4.02(3)(c) of Rev. Proc.

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(iii) Filing, with the Form 1120, the Form 4562, Depreciation and Amorti- zation (Including Information on Listed Property), for the taxpayer’s first taxable year ending after December 31, 2008, indicating that the taxpayer used the straight line method and did not claim the Stimulus additional first year depreciation deduction for all extension property; and

(iv) Providing written notification to any partnership in which the taxpayer is a partner that the taxpayer is making the § 168(k)(4) extension property election. This notification must be made on or before the due date (including extensions) of the taxpayer’s federal income tax return for its first taxable year ending after December 31, 2008. If the taxpayer makes a late § 168(k)(4) extension property election in accordance with section 6.06 of this revenue procedure, the notification to the partnership must be made no later than the date the taxpayer files its federal income tax return containing the late election.

(b) S corporations . An S corporation makes the § 168(k)(4) extension property election by:

(i) Making appropriate adjustments to the appropriate line of the Form 1120S, U.S. Income Tax Return for an S Corpo- ration, for the taxpayer’s first taxable year ending after December 31, 2008, to reflect the results described in section 6.05(3) of this revenue procedure from making the § 168(k)(4) extension property election (for example, Line 22b of the 2008 Form 1120S); (ii) Attaching to the Form 1120S for the taxpayer’s first taxable year ending after December 31, 2008, a statement indicating that the taxpayer is making the § 168(k)(4) extension property election and a statement showing the computation of the increases to the business credit and AMT credit limitations under, respectively, §§ 38(c) and 53(c) resulting from making the § 168(k)(4) extension property election;

(iii) Filing, with the Form 1120S, the Form 4562 for the taxpayer’s first taxable year ending after December 31, 2008, indicating that the taxpayer used the straight line method and did not claim the Stimulus additional first year depreciation deduction for all extension property; and

(iv) Providing written notification to any partnership in which the taxpayer is a partner that the taxpayer is making the

the difference between the aggregate amount of depreciation that would be allowable for the property if the Stimulus additional first year depreciation deduction applied over the aggregate amount of depreciation that would be allowable for the property if the Stimulus additional first year depreciation deduction did not apply is $20 million. That amount for Property Y is $40 million. As of December 31, 2008, B has $300 million of unexpired and unused pre-2006 research and AMT credit carryforwards.

(a) Under section 5 of Rev. Proc. 2008–65 (as modified by section 7.02 of this revenue procedure), B’s bonus depreciation amount for its taxable year ending December 31, 2008, is 20 percent of $20 million, or $4 million (Property X). Because $4 million is less than (i) $30 million and (ii) 6 percent of B’s unexpired and unused pre-2006 research and AMT credit carryforwards (.06 X $300 million, or $18 million), B is not limited by the maximum increase amount. Therefore, B claims $4 million of refundable credits for its taxable year ending December 31, 2008.

(b) Under section 5 of Rev. Proc. 2008–65 (as modified by section 7.02 of this revenue procedure), B’s bonus depreciation amount for its taxable year ending December 31, 2009, is 20 percent of $40 million, or $8 million (Property Y). Under section 5.04 of Rev. Proc. 2008–65, B’s maximum increase amount is $18 million (the lesser of (i) $30 million and (ii) 6 percent of B’s unexpired and unused pre-2006 research and AMT credit carryforwards (.06 X $300 million, or $18 million)). Under section 5.03 of Rev. Proc. 2008–65, B’s maximum amount is $14 million ($18 million less the $4 million of bonus depreciation amounts determined for eligible qualified property that is not extension property for B’s taxable year ending December 31, 2008). Therefore, because $8 million is less than $14 million, B may claim $8 million of refundable credits attributable to eligible qualified property that is not extension property for its taxable year ending December 31, 2009.

(c) Under section 5.02(1)(a) of this revenue procedure, B’s extension property bonus depreciation amount is 20 percent of $20 million, or $4 million (Property Z). Under section 5.04 of Rev. Proc. 2008–65, B’s maximum increase amount is $18 million (the lesser of (i) $30 million and (ii) 6 percent of B’s unexpired and unused pre-2006 research and AMT credit carryforwards (.06 X $300 million, or $18 million)). Under section 5.02(1)(b) of this revenue procedure, B’s maximum amount is $18 million. Therefore, because $4 million is less than $18 million, B may claim $4 million of refundable credits attributable to extension property for its taxable year ending December 31, 2009.

SECTION 6. § 168(k)(4) EXTENSION PROPERTY ELECTION

.01 In General . If a corporate taxpayer did not make the § 168(k)(4) election for its first taxable year ending after March 31, 2008, the taxpayer may make the § 168(k)(4) extension property election. If the § 168(k)(4) extension property election is made, the election applies to all extension property placed in service by the taxpayer in the taxpayer’s first taxable

year ending after December 31, 2008, and in any subsequent taxable year. Even if the taxpayer does not place in service any extension property in its first taxable year ending after December 31, 2008, the taxpayer must make the § 168(k)(4) extension property election for that taxable year if the taxpayer wishes to apply the election to extension property placed in service in a subsequent taxable year. Sections 6.02, 6.03, and 6.04 of this revenue procedure provide the time and manner for making the § 168(k)(4) extension property election. Failure to comply with all of the requirements of section 6.02, 6.03, or 6.04 of this revenue procedure, as applicable, will nullify a taxpayer’s attempted § 168(k)(4) extension property election. Section 6.05 of this revenue procedure provides the effects of making the § 168(k)(4) extension property election and section 6.06 of this revenue procedure provides the procedures for making a late § 168(k)(4) extension property election.

.02 Time and Manner for Making the § 168(k)(4) Extension Property Election .

(1) Time for making election . Except as provided in section 6.06 of this revenue procedure, a corporate taxpayer must make the § 168(k)(4) extension property election by the due date (including extensions) of the federal income tax return for the taxpayer’s first taxable year ending after December 31, 2008. If the taxpayer has filed such federal income tax return and did not make the § 168(k)(4) extension property election but wants to do so, see section 6.06 of this revenue procedure for how to make a late election.

(2) Manner of making election . Except as provided in sections 6.03 and 6.04 of this revenue procedure:

(a) C corporations . A C corporation makes the § 168(k)(4) extension property election by:

(i) Claiming the refundable credit on the appropriate line of the Form 1120, U.S. Corporation Income Tax Return, for the taxpayer’s first taxable year ending after December 31, 2008 (for example, Line 32g of the 2008 Form 1120);

(ii) Filing, with the Form 1120, the Form 3800, General Business Credit, or Form 8827, Credit for Prior Year Min- imum Tax—Corporations, or both, as applicable, for the taxpayer’s first taxable year ending after December 31, 2008;

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§ 1.1502–77(a)(1)(i)) of the consolidated group makes the § 168(k)(4) extension property election on behalf of all members of the consolidated group. The common parent makes this election within the time and in the manner provided in section 6.02 or 6.03 of this revenue procedure, as applicable.

(c) All members of a controlled group do not constitute a single consolidated group . This section 6.04(2)(c) applies when separate federal income tax returns are filed by some or all members of a controlled group. If a controlled group includes, but is not limited to, members of a consolidated group, the consolidated group is treated as a single member of the controlled group. For purposes of this section 6.04(2)(c), the § 168(k)(4) extension property election of a consolidated group that is a member of a controlled group is made by the common parent (within the meaning of § 1.1502–77(a)(1)(i)) on behalf of the consolidated group. A member of a controlled group makes the § 168(k)(4) extension property election by:

(i) Following the procedures in section 6.02 or 6.03 of this revenue procedure, as applicable;

(ii) Attaching to the member’s federal income tax return a statement describing the computation of the group extension property bonus depreciation amount (as provided in section 6.05(2) of this revenue procedure);

(iii) Attaching to the member’s federal income tax return Schedule O (Form 1120) and indicating in column (f) of Part IV that the controlled group has made the § 168(k)(4) extension property election and the portion of the group extension property bonus depreciation amount allocated to the member (as provided in section 5.03(2) of this revenue procedure); and

(iv) Notifying all other members of the controlled group that the § 168(k)(4) extension property election will be made. This notification must be made before the due date ( excluding extensions) of the electing member’s federal income tax return for the first taxable year ending after December 31, 2008.

.05 Effects of Making § 168(k)(4) Ex- tension Property Election .

(1) In general . If a taxpayer makes the § 168(k)(4) extension property election,

§ 168(k)(4) extension property election. This notification must be made on or before the due date (including extensions) of the taxpayer’s federal income tax return for its first taxable year ending after December 31, 2008. If the taxpayer makes a late § 168(k)(4) extension property election in accordance with section 6.06 of this revenue procedure, the notification to the partnership must be made no later than the date the taxpayer files its federal income tax return containing the late election.

.03 No Extension Property Placed In Service During First Taxable Year End- ing After December 31, 2008 . If a corporate taxpayer did not make the § 168(k)(4) election for its first taxable year ending after March 31, 2008, and the taxpayer does not place in service any extension property during the taxpayer’s first taxable year ending after December 31, 2008, the taxpayer makes the § 168(k)(4) extension property election by attaching a statement to its timely-filed original federal income tax return for its first taxable year ending after December 31, 2008, indicating that the taxpayer is making the § 168(k)(4) extension property election and by following the procedures in section 6.02(2)(a)(iv) of this revenue procedure.

.04 Controlled Groups . (1) Determination of Controlled Group Members . This section 6.04(1) provides rules for the determination of membership in a controlled group (as defined in section 2.05 of Rev. Proc. 2009–16) for purposes of the § 168(k)(4) extension property election.

(a) First taxable year ending after De- cember 31, 2008 . For the first taxable year ending after December 31, 2008, § 168(k)(4)(C)(iv) is applied to determine the members of a controlled group (as defined in section 2.05 of Rev. Proc. 2009–16) on December 31, 2009, and all such members on that date are treated as a controlled group and as one taxpayer. However, if the first taxable year ending after December 31, 2008, ends on the same date for all members of a controlled group (as defined in section 2.05 of Rev. Proc. 2009–16), all members on such ending date are treated as a controlled group and as one taxpayer for purposes of applying § 168(k)(4) and this revenue procedure for the first taxable year ending after December 31, 2008.

(b) Subsequent taxable years . For any taxable year subsequent to a taxpayer’s first taxable year ending after December 31, 2008, § 168(k)(4)(C)(iv) is applied to determine the members of a controlled group (as defined in section 2.05 of Rev. Proc. 2009–16) on December 31. However, if a taxable year subsequent to the first taxable year ending after December 31, 2008, ends on the same date for all members of a controlled group (as defined in section 2.05 of Rev. Proc. 2009–16), all members on such ending date are treated as a controlled group and as one taxpayer for purposes of applying § 168(k)(4) and this revenue procedure for that subsequent taxable year.

(2) Time and manner of making the § 168(k)(4) extension property election .

(a) In general . If any member of a controlled group (as determined under section 6.04(1)(a) of this revenue procedure) makes the § 168(k)(4) extension property election, such election is binding on all other members of the controlled group for the members’ first taxable year ending after December 31, 2008. If in a subsequent taxable year, a controlled group determined under section 6.04(1)(b) of this revenue procedure (the second controlled group) includes 2 or more members of a controlled group determined under 6.04(1)(a) of this revenue procedure (the first controlled group), all members of the second controlled group that were members of the first controlled group are deemed to have made (or not made, as the case may be) the § 168(k)(4) extension property election of the first controlled group. For purposes of this section 6.04, the rules provided in section 3.05(2)(d) of Rev. Proc. 2009–16 (relating to the effect of a § 168(k)(4) election to members entering and leaving a controlled group) apply. Accordingly, whether members of the second controlled group that were not members of the first controlled group are bound by a § 168(k)(4) extension property election made by the first controlled group (or bound by the first controlled group’s lack of a § 168(k)(4) extension property election) is determined under the rules of section 3.05(2)(d) of Rev. Proc. 2009–16.

(b) All members of a controlled group constitute a single consolidated group . If all members of a controlled group are members of a consolidated group, the common parent (within the meaning of

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into after March 31, 2008, and before January 1, 2009. Section 168(k)(4)(D)(ii) and (k)(2)(A)(iii). However, see section 3.03 of this revenue procedure for an exception to this rule;

.02 Section 5.02(5) of Rev. Proc. 2008–65 is modified to read as follows: (5) With respect to long production period property, only the adjusted basis of such property attributable to manufacture, construction, or production after March 31, 2008, and before January 1, 2010, is taken into account in determining the aggregate depreciation amounts under sections 5.01(1) and (2) of this revenue procedure. Section 168(k)(4)(D)(iii). The amounts of adjusted basis of the property attributable to manufacture, construction, or production after March 31, 2008, and before January 1, 2010, are referred to as “progress expenditures.” For purposes of determining progress expenditures under this section 5.02(5), rules similar to the rules in section 4.02(1)(b) of Notice 2007–36, 2007–1 C.B. 1000, 1001 (relating to progress expenditures for GO Zone extension real property), apply.

.03 Section 5.06 of Rev. Proc. 2008–65 is modified to read as follows:

.06 AMT Credit Increase Amount . The AMT credit increase amount means the portion of the minimum tax credit under § 53(b) for the first taxable year ending after March 31, 2008, determined by taking into account only the adjusted net minimum tax for taxable years beginning before January 1, 2006. See § 168(k)(4)(E)(iv). For purposes of this section 5.06, minimum tax credits shall be treated as allowed on a first-in, first-out basis. Section 168(k)(4)(E)(iv).