rp-09-16.pdf

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Part III

Administrative, Procedural, and Miscellaneous

26 CFR 1.168(k)-1: Additional first year depreciation deduction
(Also: §§ 38, 41, 52, 53, 168, 383, 702, 1374,1502, 6031, 6401)

Rev. Proc. 2009-16

SECTION 1. PURPOSE
This revenue procedure supplements Rev. Proc. 2008-65, 2008-44 I.R.B. 1082,
to provide additional guidance under § 3081 of the Housing and Economic Recovery
Act of 2008, Pub. L. No. 110-289, 122 Stat. 2654 (July 30, 2008) (Housing Act).
Section 3081(a) of the Housing Act amends § 168(k) of the Internal Revenue Code by
adding § 168(k)(4), allowing corporations to elect not to claim the 50-percent additional
first year depreciation for certain new property acquired after March 31, 2008, and
placed in service generally before January 1, 2009, and instead to increase their
business credit limitation under § 38(c) and alternative minimum tax (AMT) credit
limitation under § 53(c). Section 3081(b) of the Housing Act allows certain automotive
partnerships to elect to be treated as making a refundable deemed payment of income

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tax in a certain amount. Rev. Proc. 2008-65 provides guidance regarding the effects of
making the § 168(k)(4) election, the property eligible for this election, and the
computation of the amount by which the business credit limitation and AMT credit
limitation may be increased if the § 168(k)(4) election is made. This revenue procedure
provides guidance regarding the time and manner for making the § 168(k)(4) election,
the allocation of the credit limitation increases allowed by this election among members
of a controlled group, the effect of the election on partnerships with corporate partners
that make the § 168(k)(4) election, the application of § 168(k)(4) to S corporations, and
the election under § 3081(b) of the Housing Act by certain automotive partnerships.
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 the limitations described in § 38(c) (relating to the general

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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. Rev. Proc. 2008-65
clarifies which depreciable property is eligible qualified property for purposes of the
§ 168(k)(4) election and clarifies the effects of making the § 168(k)(4) election.
.03 In general, the amount by which the § 168(k)(4) election increases the
business credit limitation under § 38(c) and the AMT credit limitation under § 53(c) is the
bonus depreciation amount. See
§ 168(k)(4)(A)(iii). Except as provided below, the
bonus depreciation amount generally is equal to 20 percent of the excess of the
aggregate amount of depreciation that would be allowable for eligible qualified property
if the Stimulus additional first year depreciation deduction applied to all such property,
over the aggregate amount of depreciation that would be allowable for all such property
if the Stimulus additional first year depreciation deduction did not apply. See

§ 168(k)(4)(C)(i). However, the bonus depreciation amount for any taxable year must
not exceed the maximum increase amount reduced by the sum of the bonus
depreciation amounts determined for all prior taxable years. See
§ 168(k)(4)(C)(ii). In
general, the maximum increase amount is equal to the lesser of $30 million, or 6
percent of the sum of the unexpired and unused pre-2006 business credit carryforwards
allocable to the research credit and AMT credit carryforwards to the current taxable
year. See
§ 168(k)(4)(C)(iii). For any taxable year, the bonus depreciation amount
allocated to either the business credit limitation or AMT credit limitation must not exceed
the amount of unexpired and unused pre-2006 business credit carryforwards allocable

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to the research credit or AMT credit carryforwards less bonus depreciation amounts
allocated to each limitation, respectively, for all prior taxable years. See
§ 168(k)(4)(E)(ii). 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
or 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).
.04 Rev. Proc. 2008-65 states that the Internal Revenue Service (IRS) and
Treasury Department intend to publish separate guidance on the time and manner for
making the § 168(k)(4) election and for specifying the allocation of the bonus
depreciation amount to increase the business and AMT credit limitations under,
respectively, §§ 38(c) and 53(c). This revenue procedure provides the time and manner
for making the § 168(k)(4) election (see section 3 of this revenue procedure) and
provides guidance on making and reporting the allocation of the bonus depreciation
amount to increase the business and AMT credit limitations (see section 4 of this
revenue procedure).
.05 Section 168(k)(4)(C)(iv) provides that all corporations that are treated as a
single employer under § 52(a) (generally any controlled group of corporations within the
meaning of § 1563(a), determined by substituting “more than 50 percent” for “more than
80 percent” each place it appears in § 1563(a)(1)) (hereinafter such group of
corporations is referred to as a “controlled group”) are treated as one taxpayer for
purposes of § 168(k)(4) and as having elected to apply § 168(k)(4) if any member of

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such controlled group so elects. This revenue procedure provides guidance regarding
the allocation of the bonus depreciation amount to increase the business and AMT
credit limitations among members of a controlled group (see section 4.02 of this
revenue procedure).
.06 Under § 168(k)(4)(G)(ii), if a corporation that makes the § 168(k)(4) election
is a partner in a partnership, the electing corporate partner’s distributive share of
partnership items under § 702 for any eligible qualified property placed in service by the
partnership must be computed by using the straight line method and without claiming
the Stimulus additional first year depreciation deduction. This revenue procedure
provides guidance regarding partnerships with corporate partners that make the
§ 168(k)(4) election (see section 5 of this revenue procedure).
.07 Except as provided in § 3081(b) of the Housing Act, only a corporation may
elect to apply § 168(k)(4). Some S corporations and their shareholders are uncertain
about whether § 168(k)(4) applies to them. This revenue procedure clarifies the
application of § 168(k)(4) to S corporations and their shareholders (see section 6 of this
revenue procedure).
.08 Section 3081(b)(1) of the Housing Act provides that an applicable partnership
may elect to be treated as making a refundable deemed payment of income tax in a
certain amount. This revenue procedure provides guidance regarding this election (see
section 7 of this revenue procedure).
.09 Section 168(k)(4) does not modify the rules under §§ 383 and 1502. Section
383 limitations do not affect the credit amounts that a taxpayer takes into consideration

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in calculating its maximum increase amount under section 5.04 of Rev. Proc. 2008-65.
However, the increases in the business credit limitation under § 38(c) and AMT credit
limitation under § 53(c) that result from a § 168(k)(4) election do not allow a taxpayer to
utilize credit carryforwards that are otherwise limited by § 383.
SECTION 3. TIME AND MANNER FOR MAKING THE § 168(k)(4) ELECTION
.01 In General
. Except as provided in sections 3.02 and 3.03 of this revenue
procedure, a corporate taxpayer must make the § 168(k)(4) election by the due date
(including extensions) of the federal income tax return for the taxpayer’s first taxable
year ending after March 31, 2008. Even if the taxpayer does not place in service any
eligible qualified property during its first taxable year ending after March 31, 2008, the
taxpayer must make the § 168(k)(4) election for that taxable year if the taxpayer wishes
to apply the election to eligible qualified property placed in service in subsequent
taxable years. If a taxpayer is not a member of a controlled group, the taxpayer makes
the § 168(k)(4) election in the manner provided in either sections 3.02, 3.03, or 3.04 of
this revenue procedure. If a taxpayer is a member of a controlled group, the taxpayer
makes the § 168(k)(4) election in the manner provided in section 3.05 of this revenue
procedure. Failure to comply with any of the reporting or notification requirements
provided by this section 3 will nullify a taxpayer’s attempted § 168(k)(4) election.
.02 Taxpayer’s First Taxable Year Ending After March 31, 2008, Ends Before
December 31, 2008.
(1) In general
. Except as provided in section 3.03 of this revenue procedure, if
a taxpayer’s first taxable year ending after March 31, 2008, ends before December 31,

7
2008, and:
(a) If the taxpayer has not filed its original federal income tax return for such
taxable year on or before March 11, 2009, the taxpayer makes the § 168(k)(4) election:
(i) Either:
(I) By claiming the Stimulus additional first year depreciation deduction for
any eligible qualified property placed in service by the taxpayer during such taxable year
on its timely-filed federal income tax return for such taxable year. Such property must
not be property in a class for which the taxpayer elects out of the Stimulus additional
first year depreciation deduction under § 168(k)(2)(D)(iii); or
(II) By filing with its timely-filed federal income tax return for such taxable
year the 2007 Form 4562, Depreciation and Amortization (Including Information on
Listed Property), indicating that the taxpayer used the straight line method and did not
claim the Stimulus additional first year depreciation deduction for all eligible qualified
property. Taxpayers that choose to follow this section 3.02(1)(a)(i)(II) must not claim a
refundable credit on their original federal income tax return. To claim the refundable
credit, see section 3.02(1)(a)(ii).
(ii) By filing an amended federal income tax return for such taxable year in
the manner described in section 3.02(2) on or before the due date (without regard to
extensions) of the taxpayer’s federal income tax return for the succeeding taxable
year; and
(iii) If the taxpayer is a partner in a partnership, by notifying the partnership
in accordance with section 5.02 of this revenue procedure.

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(b) If the taxpayer has filed its original federal income tax return for such
taxable year on or before March 11, 2009, the taxpayer makes the § 168(k)(4) election
by following the procedures set forth in section 3.02(1)(a)(ii) and (iii) of this revenue
procedure.
(2) Special rules for filing amended return
. If the taxpayer filing the amended
federal income tax return under section 3.02(1)(a)(ii) of this revenue procedure:
(a) is not an S corporation, the taxpayer (i) includes the amount of the
refundable credit allowed by the § 168(k)(4) election on Line 5g of the Form 1120X,
Amended U.S. Corporation Income Tax Return, (ii) makes appropriate adjustments to
Lines 2, 3, and 4 of the Form 1120X to reflect the requirements of § 168(k)(4)(A)
(requiring that the depreciation deduction for all eligible qualified property be determined
by using the straight line method and by not claiming the Stimulus additional first year
depreciation deduction), and (iii) indicates in Part II of the Form 1120X that the taxpayer
is making the § 168(k)(4) election. The taxpayer should refer to the instructions to the
2008 Form 1120, U.S. Corporation Income Tax Return, the 2008 Form 3800, General
Business Credit, and the 2008 Form 8827, Credit for Prior Year Minimum Tax –
Corporations, for guidance regarding computation of the refundable credit and allocation
of the bonus depreciation amount between the business and AMT credit limitations; or
(b) is an S corporation, the taxpayer (i) makes appropriate adjustments to
Line 22b of the amended Form 1120S, U.S. Income Tax Return for an S Corporation, to
reflect the results described in section 6.02 of this revenue procedure from making the
§ 168(k)(4) election, (ii) makes appropriate adjustments on the amended Form 1120S to

9
reflect the requirements of § 168(k)(4)(A) (requiring that the depreciation deduction for
all eligible qualified property be determined by using the straight line method and by not
claiming the Stimulus additional first year depreciation deduction), and (iii) attaches a
statement to the amended Form 1120S indicating that the taxpayer is making the
§ 168(k)(4) 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) election. The S corporation also should follow the
instructions to the Form 1120S for filing an amended return.
.03 Special Rules for Taxpayers Whose First Taxable Year Ending After March
31, 2008, Ends Before December 31, 2008.
(1) If a taxpayer described in section 3.02(1)(b) of this revenue procedure
makes the § 168(k)(4) election on its timely-filed original federal income tax return and
receives a refundable credit attributable to the § 168(k)(4) election made on such return,
such taxpayer must not file the amended federal income tax return required by section
3.02(1)(a)(ii) and 3.02(1)(b) of this revenue procedure. However, such taxpayer must
follow the notification procedures described in section 3.02(1)(a)(iii) of this revenue
procedure.
(2) If a taxpayer described in section 3.02(1) of this revenue procedure wishes
to make the § 168(k)(4) election but has not placed in service any eligible qualified
property during its first taxable year ending after March 31, 2008, the taxpayer makes
the § 168(k)(4) election by attaching a statement to its timely-filed federal income tax
return for that taxable year, indicating that the taxpayer is making the § 168(k)(4)

10
election. If a taxpayer described in section 3.02(1)(b) of this revenue procedure wishes
to make the § 168(k)(4) election but has not placed in service any eligible qualified
property during its first taxable year ending after March 31, 2008, and did not attach a
statement to its original federal income tax return for such taxable year indicating that
the taxpayer is making the § 168(k)(4) election, the taxpayer must attach such
statement to the amended federal income tax return required by section 3.02(1)(a)(ii)
and 3.02(1)(b) of this revenue procedure and follow the notification procedures
described in section 3.02(1)(a)(iii) of this revenue procedure.
.04 Taxpayer’s First Taxable Year Ending After March 31, 2008, Ends on or After
December 31, 2008.
(1) C corporations. Except as provided in section 3.04(3) of this revenue
procedure, if a taxpayer’s first taxable year ending after March 31, 2008, ends on or
after December 31, 2008, a C corporation makes the § 168(k)(4) election by:
(a) Claiming the refundable credit on Line 32g of the 2008 Form 1120;
(b) Filing the 2008 Form 3800 or Form 8827, or both, as applicable.
Taxpayers should refer to the applicable instructions to the 2008 Forms 3800 and 8827
for guidance regarding computation of the refundable credit and allocation of the bonus
depreciation amount between the business credit limitation and AMT credit limitation;
(c) Filing the 2008 Form 4562, Depreciation and Amortization (Including
Information on Listed Property), indicating that the taxpayer used the straight line
method and did not claim the Stimulus additional first year depreciation deduction for all
eligible qualified property; and

11
(d) Notifying any partnership in which the C corporation is a partner, in
accordance with section 5.02 of this revenue procedure.
(2) S corporations
. Except as provided in section 3.04(3) of this revenue
procedure, if a taxpayer’s first taxable year ending after March 31, 2008, ends on or
after December 31, 2008, an S corporation makes the § 168(k)(4) election by:
(a) Making appropriate adjustments to Line 22b of the 2008 Form 1120S to
reflect the results described in section 6.02 of this revenue procedure from making the
§ 168(k)(4) election;
(b) Attaching to the Form 1120S a statement indicating that the taxpayer is
making the § 168(k)(4) 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) election;
(c) Filing the 2008 Form 4562 indicating that the taxpayer used the straight
line method and did not claim the Stimulus additional first year depreciation deduction
for all eligible qualified property; and
(d) Notifying any partnership in which the S corporation is a partner, in
accordance with section 5.02 of this revenue procedure.
(3) No eligible qualified property placed in service during first taxable year
ending after March 31, 2008, ending on or after December 31, 2008. If a taxpayer’s first
taxable year ending after March 31, 2008, ends on or after December 31, 2008, and the
taxpayer has not placed in service any eligible qualified property during such taxable
year, the taxpayer makes the § 168(k)(4) election by attaching a statement to its timely-

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filed federal income tax return for that taxable year, indicating that the taxpayer is
making the § 168(k)(4) election.
.05 Controlled Groups
.
(1) Determination of Controlled Group Members
.
(a) First taxable year ending after March 31, 2008. For purposes of applying
§ 168(k)(4) and this revenue procedure for the first taxable year ending after March 31,
2008, § 168(k)(4)(C)(iv) is applied to determine the members of a controlled group (as
defined in section 2.05 of this revenue procedure) on December 31, 2008, 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 March 31, 2008, ends on the same date for all
members of a controlled group (as defined in section 2.05 of this revenue procedure),
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 March 31, 2008.
(b) Subsequent taxable years
. For purposes of applying § 168(k)(4) and this
revenue procedure for any taxable year subsequent to a taxpayer’s first taxable year
ending after March 31, 2008, § 168(k)(4)(C)(iv) is applied to determine the members of
a controlled group (as defined in section 2.05 of this revenue procedure) on December
31. However, if a taxable year subsequent to the first taxable year ending after March
31, 2008, ends on the same date for all members of a controlled group (as defined in
section 2.05 of this revenue procedure), 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

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revenue procedure for that subsequent taxable year.
(2) Time and manner of making the § 168(k)(4) election.
(a) In general
. A § 168(k)(4) election made by any member of a controlled
group (as determined under section 3.05(1)(a) of this revenue procedure) is binding on
all other members of the controlled group for all members’ first taxable year ending after
March 31, 2008. If in a subsequent taxable year, a controlled group determined under
section 3.05(1)(b) of this revenue procedure (the second controlled group) includes 2 or
more members of a controlled group determined under 3.05(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) election of the first controlled group. Whether
members of the second controlled group that were not members of the first controlled
group are bound by a § 168(k)(4) election made by the first controlled group (or bound
by the first controlled group’s lack of a § 168(k)(4) election) is determined under the
rules of section 3.05(2)(d) of this revenue procedure.
(b) All members of a controlled group constitute a single consolidated group
.
If all members of a controlled group are members of an affiliated group of corporations
that file a consolidated return (hereinafter, a “consolidated group”), the common parent
(within the meaning of § 1.1502-77(a)(1)(i)) of the consolidated group makes the
§ 168(k)(4) 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 sections 3.01,
3.02, 3.03, or 3.04 of this revenue procedure, as applicable.

14
(c) All members of a controlled group do not constitute a single consolidated
group.
(i) In general
. This section 3.05(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. A member of
the controlled group makes the § 168(k)(4) election by:
(I) Following the procedures in section 3.05(2)(c)(ii) or (iii) of this revenue
procedure, as applicable; and
(II) Notifying all other members of the controlled group that the §
168(k)(4) election has been made. This notification must be made before the due date
(excluding extensions) of the member’s federal income tax return for the first taxable
year ending after March 31, 2008. If the electing member makes the § 168(k)(4)
election by filing an amended return under sections 3.02(1)(a)(ii) or 3.03(2) of this
revenue procedure, as applicable, the electing member must notify the other members
no later than the date it files an amended return containing the § 168(k)(4) election. If
the electing member is described in section 3.03(1) of this revenue procedure, the
electing member must notify the other members on or before March 11, 2009.
(ii) Controlled group member’s first taxable year ending after March 31,
2008, ends before December 31, 2008. If a controlled group member’s first taxable
year ending after March 31, 2008, ends before December 31, 2008, that member
makes the § 168(k)(4) election within the time and in the manner provided in sections

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3.02 or 3.03(2) of this revenue procedure, as applicable. In addition, the member must
attach to the amended federal income tax return:
(I) a statement describing the computation of the group bonus
depreciation amount (as provided in section 4.02(3)(b)(ii) of this revenue procedure);
and
(II) Schedule O (Form 1120X), Consent Plan and Apportionment
Schedule for a Controlled Group, and indicating in column (f) of Part IV that the
controlled group has made the § 168(k)(4) election and the portion of the group bonus
depreciation amount allocated to the member (as provided in section 4.02 of this
revenue procedure).
(iii) Controlled group member’s first taxable year ending after March 31,
2008, ends on or after December 31, 2008. If a controlled group member’s first taxable
year ending after March 31, 2008, ends on or after December 31, 2008, that member
makes the § 168(k)(4) election within the time provided in section 3.01 of this revenue
procedure and in the manner provided in section 3.04 of this revenue procedure. In
addition, the member must attach to the federal income tax return:
(I) a statement describing the computation of the group bonus
depreciation amount (as provided in section 4.02(3)(b)(ii) of this revenue procedure);
and
(II) Schedule O (Form 1120) and indicating in column (f) of Part IV that
the controlled group has made the § 168(k)(4) election and the portion of the group
bonus depreciation amount allocated to the member (as provided in section 4.02 of this

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revenue procedure).
(d) Effect of § 168(k)(4) election for members entering or leaving a controlled
group.
(i) Member leaves controlled group that made § 168(k)(4) election
. If a
taxpayer is a member of a controlled group that makes the § 168(k)(4) election (the old
group), and in a subsequent taxable year becomes a member of another controlled
group that has not made the § 168(k)(4) election (the new group), the § 168(k)(4)
election of the old group is not binding on the new group. The taxpayer, however,
continues to be treated as having made the § 168(k)(4) election and must continue to
apply §§ 167(f)(1) and 168 as if the § 168(k)(4) election was made. Similarly, if a
taxpayer is a member of a controlled group that makes the § 168(k)(4) election (the old
group), and in a subsequent taxable year leaves the old group and does not become a
member of another controlled group, the taxpayer continues to be treated as having
made the § 168(k)(4) election and must continue to apply §§ 167(f)(1) and 168 as if the
§ 168(k)(4) election was made.
(ii) Taxpayer becomes a member of a controlled group after § 168(k)(4)
election is made. If a taxpayer was not a member of any controlled group when the
taxpayer made the § 168(k)(4) election and in a subsequent taxable year becomes a
member of a controlled group that did not make the § 168(k)(4) election, the taxpayer’s
election is not binding on the controlled group. The taxpayer, however, continues to be
treated as having made the § 168(k)(4) election and must continue to apply §§ 167(f)(1)
and 168 as if the § 168(k)(4) election was made. If a taxpayer neither made the

17
§ 168(k)(4) election nor was a member of a controlled group that made the § 168(k)(4)
election, and in a subsequent taxable year becomes a member of a controlled group
that made the § 168(k)(4) election, the controlled group’s election does not apply to the
taxpayer.
(iii) Special rule for consolidated groups
. Notwithstanding section
3.05(2)(d)(i) and (ii) of this revenue procedure, a § 168(k)(4) election (or the lack of a
§ 168(k)(4) election) made by a consolidated group (or a controlled group in which the
consolidated group is a member) applies to any eligible qualified property placed in
service by a member of the consolidated group during a consolidated return year, even
if such member is not a member of the consolidated group on the date that controlled
group membership is determined under section 3.05(1)(a) of this revenue procedure.
(iv) Special rule for new taxpayers
. If a taxpayer was not in existence for
the first taxable year for which the § 168(k)(4) election is made by a controlled group (as
defined in section 3.05(1)(a) of this revenue procedure), immediately after the
taxpayer’s formation the taxpayer is a member of that controlled group, and the
taxpayer is a member of that controlled group as determined under section 3.05(1)(b) of
this revenue procedure, that controlled group’s § 168(k)(4) election, if any election is
made, applies to the taxpayer. For example, if a controlled group makes the § 168(k)(4)
election and subsequently transfers eligible qualified property to a newly formed
member of the same controlled group (on the day of its formation and on the
determination date under section 3.05(1)(b) of this revenue procedure), such property
remains eligible qualified property to which the § 168(k)(4) election applies and must be

18
depreciated using the straight line method.
(v) Overlapping groups. For purposes of this revenue procedure, for any
taxable year a taxpayer will not be considered a member of more than one controlled
group. A taxpayer is considered a member of a single controlled group in accordance
with the principles of § 1.1563-1T(c) of the temporary Income Tax Regulations.
.06 Limited Relief for Late Election
.
(1) Automatic 6-Month Extension. Pursuant to § 301.9100-2(b) of the
Procedure and Administration Regulations, an automatic extension of 6 months from
the due date of the federal tax return (excluding
extensions) for the taxpayer’s first
taxable year ending after March 31, 2008, is granted to make the § 168(k)(4) election,
provided the taxpayer timely filed the taxpayer’s federal tax return for the taxpayer’s first
taxable year ending after March 31, 2008, and the taxpayer satisfies the requirements in
§ 301.9100-2(c) and (d).
(2) Other Extensions
. A taxpayer that fails to make the § 168(k)(4) election for
the taxpayer’s first taxable year ending after March 31, 2008, as provided in section
3.01, 3.02, 3.03, 3.04, 3.05, or 3.06(1) of this revenue procedure but wants to do so
must file a request for an extension of time to make the election under the rules in
§ 301.9100-3.
SECTION 4. ALLOCATION OF THE BONUS DEPRECIATION AMOUNT
.01 In General
. A taxpayer allocates the bonus depreciation amount between the
business credit limitation under § 38(c) and the AMT credit limitation under § 53(c) by
the due date (including extensions) of the taxpayer’s federal income tax return for the

19
taxable year. Except as provided in section 4.02 of this revenue procedure, the
taxpayer specifies this allocation by reporting the amounts on the appropriate lines of
the Forms 3800 and 8827. However, if a taxpayer’s first taxable year ending after
March 31, 2008, ends before December 31, 2008, the taxpayer makes and specifies the
allocation for such taxable year on the amended federal income tax return filed pursuant
to section 3.02(1)(a)(ii) or 3.03(2) of this revenue procedure. A different allocation may
be used for different taxable years.
.02 Controlled Groups
.
(1) In general. If a taxpayer is a member of a controlled group (as determined
under section 3.05(1) of this revenue procedure) and any member of the controlled
group makes the § 168(k)(4) election, the allocation of the group bonus depreciation
amount to each member of the controlled group must be determined in accordance with
section 4.02(2) or 4.02(3) of this revenue procedure, as applicable. This allocation of
the group bonus depreciation amount for any taxable year is reported on Schedule O
(Form 1120) (or a similar statement) that is attached to the federal income tax return or
amended federal income tax return for that taxable year, as the case may be, filed by
each member of the controlled group within the time provided in section 4.01 of this
revenue procedure. However, if a member of a controlled group does not have the
information necessary to allocate the group bonus depreciation amount for a taxable
year on or before the due date (including extensions) of the member’s federal income
tax return for the taxable year, the member must make and specify the allocation for
that taxable year on an amended federal income tax return for that taxable year that is

20
filed on or before the due date (including extensions) of the member’s federal income
tax return for the succeeding taxable year. The allocation described in this section 4.02
of this revenue procedure applies to all controlled group members who have made a
section 168(k)(4) election or who are treated as having made such an election pursuant
to section 3.05 of this revenue procedure.
(2) All members of a controlled group constitute a single consolidated group
. If
all members of a controlled group are members of a consolidated group (as defined in
section 3.05(2)(b) of this revenue procedure), the consolidated group determines its
bonus depreciation amount in accordance with section 5 of Rev. Proc. 2008-65, treating
the consolidated group as a single taxpayer. The allocation of the bonus depreciation
amount among the members of the consolidated group must be pursuant to an
allocation by the common parent in accordance with the principles of § 1502 and its
accompanying regulations.
(3) All members of a controlled group do not constitute a single consolidated
group.
(a) In general
. This section 4.02(3) 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. The allocation of the bonus
depreciation amount among the members of the controlled group must be made
pursuant to section 4.02(3)(b) or (c) of this revenue procedure, as applicable. Any
group bonus depreciation amount allocated to a consolidated group under this section

21
4.02(3) is allocated among the members of the consolidated group pursuant to an
allocation by the common parent in accordance with the principles of § 1502 and its
accompanying regulations.
(b) Allocation of group bonus depreciation amount
.
(i) In general. The bonus depreciation amount allocable to a member of a
controlled group is determined by arriving at each member’s proportionate share of the
group bonus depreciation amount, unless all members of the group agree to an
alternative allocation under section 4.02(3)(c) of this revenue procedure.
(ii) Computation of group bonus depreciation amount
. The group bonus
depreciation amount is computed as follows:
(A) First, calculate the bonus depreciation amount in the manner provided
in sections 5.01 and 5.02 of Rev. Proc. 2008-65 treating the controlled group as a single
taxpayer. To calculate this amount, the eligible qualified property placed in service by
each member of the controlled group during the taxable year is taken into account.
However, if some or all members of the controlled group have different taxable years,
the eligible qualified property to be taken into account is such property placed in service
by each member of the controlled group after March 31, 2008, and before January 1,
2009 (or, for taxable years ending in 2009 or thereafter, during such calendar year);
(B) Second, calculate the maximum increase amount in section 5.04 of
Rev. Proc. 2008-65, the business credit increase amount in section 5.05 of Rev. Proc.
2008-65, and the AMT credit increase amount in section 5.06 of Rev. Proc. 2008-65 by
taking into account the sum of all member’s pre-2006 unexpired and unused research

22
credits and AMT credits as of the last day of the taxable year. However, if the taxable
years of some or all members of the controlled group end on different dates, the sum of
all members’ pre-2006 unexpired and unused research credits and AMT credits as of
the last day of each member’s last taxable year ending on or before December 31
(determined for each calendar year) are taken into account; and
(C) Finally, calculate the maximum amount in section 5.03 of Rev. Proc.
2008-65 to arrive at the group bonus depreciation amount for the taxable year.
(iii) Member’s proportionate share of group bonus depreciation amount
.
Each member’s proportionate share of the group bonus depreciation amount is equal to
the group bonus depreciation amount determined under section 4.02(3)(b)(ii)(C) of this
revenue procedure multiplied by a fraction, the numerator of which is the amount such
member contributed to the total computed under section 4.02(3)(b)(ii)(A) of this revenue
procedure and the denominator of which is the total computed under section
4.02(3)(b)(ii)(A) of this revenue procedure. If the taxable years of some or all members
of the controlled group end on different dates, all (if any) of a member’s proportionate
share of group bonus depreciation amount must be claimed by such member in the
taxable year of the member to which such share relates (determined by reference to the
eligible qualified property’s placed in service date).
(c) Allocation agreement
. In lieu of the method provided in section 4.02(3)(b)
of this revenue procedure, the controlled group may allocate the group bonus
depreciation amount (computed as provided in section 4.02(3)(b)(ii) of this revenue
procedure) to any member in any proportion that all members of the controlled group

23
agree. Any agreement, and the amounts allocated to all members pursuant to such
agreement, must be shown on Schedule O (Form 1120) (or a similar statement) within
the time and in the manner provided in section 4.02(1) of this revenue procedure. A
subsequent agreement may be filed (shown on Schedule O (or similar statement) within
the time and in the manner provided in section 4.01(1) of this revenue procedure) that
varies the group bonus depreciation amounts allocated to controlled group members in
taxable years after the group’s first taxable year ending after March 31, 2008.
.04 Example 1
. A, B, and C are corporations that, on December 31, 2008, are
the only members of the ABC controlled group. A’s first taxable year ending after March
31, 2008, ends on June 30, 2008. B and C’s first taxable year ending after March 31,
2008, ends on December 31, 2008. As of June 30, 2008, A has $300 million of
unexpired and unused pre-2006 research and AMT credit carryforwards. As of
December 31, 2008, B and C each have $300 million of unexpired and unused pre-
2006 research and AMT credit carryforwards. Therefore, as of December 31, 2008, the
ABC controlled group has $900 million of unexpired and unused pre-2006 research and
AMT credit carryforwards.
On May 1, 2008, A and B each placed in service eligible qualified property that
costs $50 million and is 5-year property under § 168(e). On September 1, 2008, A also
placed in service eligible qualified property that costs $100 million and is 5-year property
under § 168(e). A, B, and C depreciate their 5-year property using the optional
depreciation table that corresponds with the general depreciation system, the 200-
percent declining balance method, a 5-year recovery period, and the half-year

24
convention. For each of the properties placed in service on May 1, 2008, 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
the property placed in service by A on September 1, 2008, is $40 million.
For its taxable year ending June 30, 2008, A makes the § 168(k)(4) election by
filing an amended federal income tax return (Form 1120X) on January 15, 2009, in the
manner provided by section 3.05(2)(c)(ii) of this revenue procedure. At the time A’s
Form 1120X is filed, A, B, and C have not entered into any agreement regarding the
allocation of the bonus depreciation amount among them.
(1) Under section 4.02(3)(b)(ii) of this revenue procedure, the ABC controlled
group’s group bonus depreciation amount is 20 percent of $80 million, or $16 million.
Under section 4.02(3)(b)(ii) of this revenue procedure, because $16 million is less than
(i) $30 million and (ii) 6 percent of the ABC controlled group aggregate unexpired and
unused pre-2006 research and AMT credits (.06 X $900 million, or $54 million), the ABC
controlled group is not limited by the maximum increase amount. Thus, under section
4.02(3)(b)(ii)(C) of this revenue procedure, the ABC controlled group’s group bonus
depreciation amount for the period ending on December 31, 2008, is $16 million.
(2) Under section 4.02(3)(b)(iii) of this revenue procedure, A’s proportionate
share of the group bonus depreciation amount is $12 million ($16 million X ($60
million/$80 million)). For its taxable year ending June 30, 2008, A may increase its

25
business credit and AMT credit limitations under, respectively, §§ 38(c) and 53(c) by,
and claim a refundable credit of, $4 million ($12 million X ($20 million/$60 million)) on its
Form 1120X. For its taxable year ending June 30, 2009, A may increase its business
credit and AMT credit limitations by $8 million ($12 million X ($40 million/$60 million))
(plus any group bonus depreciation amount calculated for the group and allocated to A
for the period January 1, 2009, through December 31, 2009). In addition, B’s
proportionate share of the group bonus depreciation amount is $4 million ($16 million X
($20 million/$80 million)). B may increase its business credit and AMT credit limitations
under, respectively, §§ 38(c) and 53(c) by, and claim a refundable credit of, $4 million
on its original federal income tax return for its taxable year ending December 31, 2008.
The ABC controlled group then has a maximum amount of $14 million of bonus
depreciation amount ($30 million less the $16 million allocated to A and B) remaining to
be used for eligible qualified property placed in service by the ABC controlled group
after December 31, 2008 (e.g., long-lived property or certain aircraft). The result of this
Example is the same if, instead of a single corporation, A represents a consolidated
group of corporations, except the $12 million of group bonus depreciation amount
allocated to A is reallocated within the A consolidated group pursuant to an allocation by
the common parent in accordance with the principles of § 1502 and its accompanying
regulations.
(b) Example 2
. The facts are the same as in Example 1, except A has no pre-
2006 business credit or AMT credit carryforwards as of the last day of its June 30, 2008,
taxable year and C has $600 million of pre-2006 research credit and AMT credit

26
carryforwards as of December 31, 2008. Although A may increase its §§ 38(c) and
53(c) credit limitations for its taxable year ending June 30, 2008, A has no credit
carryforwards that A may use to claim a refundable credit. Absent an allocation
agreement, B and C may not be allocated any portion of the bonus depreciation amount
that was allocated to A under section 4.02(3)(b)(iii) of this revenue procedure. The ABC
controlled group, therefore, has $26 million of group bonus depreciation ($30 million
less the $4 million allocated to B) remaining to be used for eligible qualified property
placed in service by the ABC controlled group after December 31, 2008.
(c) Example 3
. The facts are the same as Example 2, except A, B, and C have
entered into an agreement regarding the allocation of the group bonus depreciation
amount. The agreement provides that C will be allocated all of the group bonus
depreciation amount. C, therefore, may increase its business and AMT credit limitations
under, respectively, §§ 38(c) and 53(c) by, and claim a refundable credit of, $16 million
on its original income tax return for its taxable year ending December 31, 2008. Neither
A nor B may claim the refundable credit for their taxable years ending June 30, 2008,
and December 31, 2008, respectively. The ABC controlled group has a maximum
amount of $14 million of bonus depreciation amount ($30 million less the $16 million
allocated to C) remaining to be used for eligible qualified property placed in service by
the ABC controlled group after December 31, 2008.
SECTION 5. PARTNERSHIPS WITH CORPORATE PARTNERS THAT MAKE THE
§ 168(k)(4) ELECTION
.01 Partnership’s Information to Partner
.

27
(1) In general. If a corporation makes the § 168(k)(4) election and is a partner
in a partnership (electing corporate partner), the partnership must provide the electing
corporate partner with sufficient information to apply § 168(k)(4)(G)(ii) in determining its
distributive share of partnership items under § 702 relating to any eligible qualified
property placed in service by the partnership during the taxable year. This information
must be provided in the time and manner required by § 6031(b) and § 1.6031(b)-
1T(a)(3)(ii) and (b). If the partnership has filed its federal tax return for its first taxable
year ending after March 31, 2008, on or before February 9, 2009, and did not provide
the electing corporate partner with sufficient information to apply § 168(k)(4)(G)(ii), the
partnership must provide such information to the electing corporate partner by the later
of May 11, 2009, or 90 calendar days after receiving the corporate partner’s notification
as required by section 5.02 of this revenue procedure.
(2) Determination of Electing Corporate Partner’s Distributive Share
. A
partnership must compute an electing corporate partner’s distributive share of
depreciation and make other correlative adjustments attributable to eligible qualified
property placed in service by the partnership using any reasonable method that is
consistent with the intent of § 168(k)(4)(G)(ii). For example, the partnership may apply
principles similar to those in § 743(b) and the regulations thereunder to the extent
appropriate to make adjustments to the basis of the eligible qualified property and the
electing corporate partner’s distributive share of depreciation attributable to such
property.
.02 Electing Corporate Partner’s Notification to Partnership
. An electing

28
corporate partner must notify the partnership, in writing, that the corporate partner is
making the § 168(k)(4) election. This notification must be made on or before the due
date (including extensions) of the electing corporate partner’s federal income tax return
for its first taxable year ending after March 31, 2008. If the electing corporate partner
makes the § 168(k)(4) election by filing an amended return under sections 3.02(1)(a)(ii)
or 3.03(2) of this revenue procedure, as applicable, the electing corporate partner must
notify the partnership on or before the date it files an amended return containing the §
168(k)(4) election. If the electing corporate partner is described in section 3.03(1) of
this revenue procedure, the electing corporate partner must notify the partnership on or
before March 11, 2009. Failure to comply with the notification requirement provided by
this section 5.02 will nullify a taxpayer’s attempted § 168(k)(4) election.
SECTION 6. APPLICATION OF § 168(k)(4) TO S CORPORATIONS AND THEIR
SHAREHOLDERS
.01 In General
. An S corporation is allowed to make the § 168(k)(4) election.
However, any business or AMT credit limitation increases that result from a § 168(k)(4)
election are applied at the corporate level and not at the shareholder level. Thus, a
shareholder of an S corporation must not increase the shareholder’s business or AMT
credit limitations under, respectively, §§ 38(c) and 53(c) by the bonus depreciation
amount that results from a § 168(k)(4) election made by the S corporation.
.02 Applicability to S Corporations
. Under § 1374(a), an S corporation is subject
to tax on its recognized built-in gains during its taxable year. In general, under
§ 1374(b)(3)(B), an S corporation is allowed as a credit against the § 1374(a) tax any

29
business and AMT credit carryforwards that arose in a taxable year in which the
corporation was a C corporation. The credits allowed by § 1374(b)(3)(B) are subject to
three limitations: the business credit limitation in § 38(c), the AMT credit limitation in
§ 53(c), and the amount of the § 1374(a) tax. Sections 1374(b)(3)(B) and 1.1374-6(b).
If an S corporation makes the § 168(k)(4) election, the S corporation calculates its
bonus depreciation amount as provided in section 5 of Rev. Proc. 2008-65, increases its
business and AMT credit limitations, uses the straight line method for depreciating its
eligible qualified property, and must not claim the Stimulus additional first year
depreciation deduction for such property. However, the § 168(k)(4) election does not
increase the S corporation’s § 1374(b)(3)(B) limitation. Therefore, if the § 168(k)(4)
election is made, an S corporation may not claim business credits or AMT credits in
excess of its § 1374(a) tax for the taxable year. Any credits allowed as a result of the
increase in the business or AMT credit limitations, which may be used only as an
additional credit against the § 1374(a) tax, are not refundable to the S corporation.
.03 Time and Manner for Making the § 168(k)(4) Election
. An S corporation
makes the § 168(k)(4) election within the time and in the manner provided in section 3
of this revenue procedure.
SECTION 7. APPLICATION OF § 3081(b) OF THE HOUSING ACT
.01 In General
. Section 3081(b)(1) of the Housing Act allows an applicable
partnership to elect to be treated as making a deemed payment of income tax (the
“deemed payment”) in the amount determined under section 7.03 of this revenue
procedure. This election applies to any taxable year during which eligible qualified

30
property is placed in service by the applicable partnership. See section 3 of Rev. Proc.
2008-65 for determining which depreciable property qualifies as eligible qualified
property. Notwithstanding any other provision of the Code, the deemed payment is
refundable to the applicable partnership and may not be treated as an offset or credit
against any tax liability of the applicable partnership or any partner. Section
3081(b)(2)(A) of the Housing Act.
.02 Definition of Applicable Partnership
. An applicable partnership is a domestic
partnership that was formed effective on August 3, 2007, and will produce in excess of
675,000 automobiles during the period beginning on January 1, 2008, and ending on
June 30, 2008. Section 3081(b)(4)(A) of the Housing Act.
.03 Computation of the Deemed Payment
. Pursuant to § 3081(b)(1)(A) and
(b)(3) of the Housing Act, the amount of the deemed payment for the taxable year is
equal to the lesser of:
(1) 20 percent of the excess (if any) of the aggregate amount of depreciation
that would be allowable for eligible qualified property placed in service by the applicable
partnership during the taxable year if the Stimulus additional first year depreciation
deduction applied to all such property, over the aggregate amount of depreciation that
would be allowable for all eligible qualified property placed in service by the applicable
partnership during the taxable year if the Stimulus additional first year depreciation
deduction did not apply to any such property. For purposes of computing this amount,
the rules in section 5.02 of Rev. Proc. 2008-65 apply;
(2) the applicable partnership’s research credit (determined under § 41) for the

31
taxable year; or
(3) $30 million less any deemed payments made by the applicable partnership
under § 3081(b) of the Housing Act for all prior taxable years.
.04 Effect of Making Election under § 3081(b) of the Housing Act
. If an
applicable partnership makes the election to apply § 3081(b) of the Housing Act (the “§
3081(b) Housing Act election”), the applicable partnership (1) must determine the
depreciation deduction for any eligible qualified property placed in service by the
partnership during the taxable year by using the straight line method and by not
claiming the Stimulus additional first year depreciation deduction, and (2) must reduce
the amount of its research credit for the taxable year by the amount of the deemed
payment for the taxable year. Section 3081(b)(1)(B) and (C).
.05 Time and Manner of Making § 3081(b) Housing Act Election
.
(1) Time for making election. An applicable partnership must make the §
3081(b) Housing Act election by the due date (including extensions) of the Form 1065,
U.S. Return of Partnership Income, for the partnership’s first taxable year ending after
March 31, 2008. Even if an applicable partnership does not place in service any eligible
qualified property during its first taxable year ending after March 31, 2008, the
partnership must make the § 3081(b) Housing Act election for that taxable year if the
partnership wishes to apply the election to eligible qualified property placed in service in
subsequent taxable years.
(2) Manner of making election
. An applicable partnership makes the § 3081(b)
Housing Act election by making the following statement (printed legibly or typed) on its

32
timely-filed Form 1065 for the first taxable year ending after March 31, 2008, in the
space below the signature section of the Form 1065: “A refund in the amount of $[Insert
Amount] is requested pursuant to Section 3081(b)(1) of P.L. 110-289, the Housing and
Economic Recovery Act of 2008.”
(3) Limited Relief for Late Election
.
(a) Automatic 6-Month Extension. Pursuant to § 301.9100-2(b) of the
Procedure and Administration Regulations, an automatic extension of 6 months from
the due date of the federal tax return (excluding
extensions) for the applicable
partnership’s first taxable year ending after March 31, 2008, is granted to make the
§ 3081(b) Housing Act election, provided the applicable partnership timely filed its
federal tax return for its first taxable year ending after March 31, 2008, and the
applicable partnership satisfies the requirements in § 301.9100-2(c) and (d).
(b) Other Extensions
. An applicable partnership that fails to make the
§ 3081(b) Housing Act election for the applicable partnership’s first taxable year ending
after March 31, 2008, as provided in section 7.05(1) and (2) of this revenue procedure
or in section 7.05(3)(a) of this revenue procedure but wants to do so must file a request
for an extension of time to make the election under the rules in § 301.9100-3.
.06 Filing of Form 1065
.
(1) In general
. For the taxable year in which the § 3081(b) Housing Act
election is made (the “year of election”) and for any subsequent taxable year in which
an applicable partnership is claiming a refundable deemed payment under § 3081(b) of
the Housing Act, the partnership’s Form 1065 and related forms and schedules

33
(including Schedules K-1) must not be filed electronically. Further, the applicable
partnership must mail the Form 1065 and related forms and schedules (including
Schedules K-1) to: Internal Revenue Service, 1973 N. Rulon White Blvd., Attn: Audrey
Martinez Mail Stop 1120, Ogden, UT 84201.
(2) Taxable years subsequent to the year of election
. If the applicable
partnership claims a refundable deemed payment under § 3081(b) of the Housing Act
for any taxable year subsequent to the year of election, the partnership must make the
following statement (printed legibly or typed) on its Form 1065 for that taxable year in
the space below the signature section of the Form 1065: “A refund in the amount of
$[Insert Amount
] is requested pursuant to Section 3081(b)(1) of P.L. 110-289, the
Housing and Economic Recovery Act of 2008.”
SECTION 8. EFFECT ON OTHER DOCUMENTS
Rev. Proc. 2008-65 is amplified and supplemented.
SECTION 9. PAPERWORK REDUCTION ACT
The collections of information contained in this revenue procedure have been
reviewed and approved by the Office of Management and Budget in accordance with
the Paperwork Reduction Act (44 U.S.C. 3507) under control number 1545-2133. An
agency may not conduct or sponsor, and a person is not required to respond to, a
collection of information unless the collection of information displays a valid OMB
control number.
The collections of information in this revenue procedure are in sections 3, 4, 5,
and 7. This information is necessary and will be used to determine whether the

34
taxpayer is eligible to make the § 168(k)(4) election and the amount by which the
election increases the taxpayer’s applicable credit limitations. The collections of
information are required for the taxpayer to make the § 168(k)(4) election. The likely
respondents are the following: business and other for-profit institutions.
The estimated total annual reporting and/or recordkeeping burden is 2,700 hours.
The estimated annual burden per respondent/recordkeeper varies from 0.25
hours to 1 hour, depending on individual circumstances, with an estimated average of
0.5 hours. The estimated number of respondents is 5,400. The estimated annual
frequency of responses is on occasion.
SECTION 10. EFFECTIVE DATE
This revenue procedure is effective January 23, 2009.
SECTION 11. DRAFTING INFORMATION
The principal author of this revenue procedure is Jeffrey T. Rodrick of the Office
of Associate Chief Counsel (Income Tax & Accounting). For further information
regarding this revenue procedure, contact Mr. Rodrick on (202) 622-4930 (not a toll free
call).