Form 3800

The General Business Credit isn’t one tax credit but comprises several specific credits to support business activities like research, oil recovery, reforestation, and pension plan formation. Each specific credit has its own rules and requirements, but all can be claimed as part of the General Business Credit. A taxpayer is limited in claiming this tax break each year to claiming either their net income tax (calculated on Form 1040 or 1120 minus the tentative minimum tax) or 25 percent of any excess net regular tax liability over $25,000 ($12,500 for married filing separately).

General business credits are calculated through a multiple-step formula. First, businesses must determine their net regular tax liability (i.e., the sum of regular and alternative minimum tax liabilities for that year) before deducting nonrefundable credits like foreign tax credit and energy-related credits from that figure; any remaining credits then qualify as eligible business credits in that year.

If a business generates more credits than they can use in one tax year, any unused credits are carried back or forward as carryback/carryforward credits and are subject to certain limitations. Their rules can differ between individuals and corporations depending on which section of the tax code applies.

To claim its credit, businesses must file IRS Form 3800, General Business Credit. This form lists available credits and their limits; their claims should follow an orderly sequence to meet their overall limit before any higher-up credits become deductible. Furthermore, any excess generated must be carried forward until used up or expire.

What is the Purpose of the General Business Credit Form?

IRS Form 3800 General Business Credit Form allows a taxpayer to report all eligible credits. It helps them calculate the total amount of tax carrybacks and carryforwards they are entitled to claim each year and lists them in priority order according to when they were used in each tax year.

General Business Credit limits are usually set according to either (1) net income tax computed on Form 6251 (or Form 4626 for C corporations) or (2) 25% of any excess of regular taxes over $25,000. This restriction remains in place even if no alternative minimum tax liability exists.

If the credit limit has been reached or credits carried back from prior years, or a carryback has occurred, an amended return must be filed for the year of carryback using either Form 1040X (Amended Individual Income Tax Return), or 1120X (Amended Corporation Income Tax Return).

General Business Credit includes alternative motor vehicle credits, biodiesel and renewable diesel fuel credits, investment credits, electricity coal Indian coal credits, empowerment zone employment credits, and empowerment zone employment credits.