EXTENSION OF 10 PERCENT CREDIT FOR 4 YEARS AND FIRST-IN-F1RST-OUT TREATMENT OF INVESTMENT TAX CREDIT.

SEC. 802. EXTENSION OF 10 PERCENT CREDIT FOR 4 YEARS AND FIRST-IN-F1RST-OUT TREATMENT OF INVESTMENT TAX CREDIT. (a) In General.— Subsection (a) of section 46 (relating to determination of amount of investment credit) is amended— (1) by redesignating paragraphs (2) through (6) as (3) through (7), respectively, and (2) by striking out so much of such subsection as precedes paragraph (3)(as redesignated by paragraph (1) of this subsection) and inserting in lieu thereof the following: “(a) General Rule.— “(1) First-in-first-out rule.— The amount of the credit allowed by section 38 for the taxable year shall be an amount equal to the sum of— “(A) the investment credit carryovers carried to such taxable year, 90 STAT. 1581 “(B) the amount of the credit determined under paragraph (2) for such taxable year, plus “(C) the investment credit carrybacks carried to such taxable year. “(2) Amount of credit for current taxable year.— “(A) 10 percent credit.— Except as otherwise provided in subparagraph (B), in the case of a property described in subparagraph (D), the amount of the credit determined under this paragraph for the taxable year shall be an amount equal to 10 percent of the qualified investment (as determined under subsections (c) and (d)). “(B) Additional credit.— In the ease of a corporation which elects (at such time, in such form, and in such manner as the Secretary prescribes) to have the provisions of this subparagraph apply, the amount of the credit determined under this paragraph shall be an amount equal to— “(i) 11 percent of the qualified investment (as determined under subsections (c) and (d)), plus “(ii) an additional percent (not in excess of one-half percent) of the qualified investment (as determined under such subsections) equal in amount to the amount determined under section 801(e) of the Tax Reduction Act of 1975. An election may not be made to have the provisions of this subparagraph apply unless the corporation meets the requirements of section 301(d) of the Tax Reduction Act of 1975. “(C) 7 percent credit.— In the case of property not described in subparagraph (D), the amount of credit determined under this paragraph for the taxable year shall be an amount equal to 7 percent of the qualified investment (as determined under subsections (c) and (d)). “(D) Transitional rules.— The provisions of subparagraphs (A) and (B) shall apply only to— “(i) property to which subsection (d) does not apply, the construction, reconstruction, or erection of which is completed by the taxpayer after January 21, 1975, but only to the extent, of the basis thereof attributable to the construction, reconstruction, or erection after January 21, 1975, and before January 1, 1981, “(ii) property to winch subsection (d) does not apply, acquired by the taxpayer after January 21, 1975, and before January 1, 1981, and placed in service by the taxpayer before January 1, 1981, and “(iii) property to which subsection (d) applies, but only to the extent of the qualified investment (as determined under subsections (c) and (d)) with respect to qualified progress expenditures made after January 21, 1975, and before January I, 1981. For purposes of applying clause (ii) of subparagraph (B), the date ‘December 31, 1975’ shall be substituted for the date ‘January 21, 1975,’ each place it appears in this subparagraph.” (b) Conforming Amendments.— (1) Paragraphs (4), (5), (6), and (7) of section 46(a)(as redesignated by subsection (a)) are each amended by striking out “paragraph (2)” and inserting in lieu thereof “paragraph (3)”. 90 STAT. 1582 (2) Subsection (b) of section 46 (relating to carryback and carryover of unused credits) is amended to read as follows: “(b) Carryback and Carryover of Unused Credits.— “(1) In general.— If the sum of the amount of the investment credit carryovers to the taxable year mid er subsection (a)(1)(A) plus the amount determined under subsection (a)(1)(B) for the taxable year exceeds the amount of the limitation imposed by subsection (a)(3) for such taxable year (hereinafter in this subsection referred to as the ‘unused credit year’), such excess attributable to the amount determined under subsection (a)(1)(B) shall be— “(A) an investment credit carryback to each of tile 3 taxable years preceding the unused credit year, and “(B) an investment credit carryover to each of the 7 taxable years following the unused credit year, and, subject to the limitations imposed by paragraphs (2) and (3), shall be taken into account under the provisions of subsection (a)(1) in the manner provided in such subsection. The entire amount of the unused credit for an unused credit year shall be carried to the earliest of the 10 taxable years to which (by reason of subparagraphs (A) and (B)) such credit may be carried and then to each of the other 9 taxable years to the extent, because of the limitations imposed by paragraphs (2) and (3), such unused credit may not be taken into account under subsection (a)(1) for a prior taxable year to which such unused credit may be carried. in the case of an unused credit for an unused credit year ending before January 1, 1971. which is an investment credit carryover to a taxable year beginning after December 31, 1970 (determined without regard to this sentence), this paragraph shall be applied— “(C) by substituting ‘10 taxable years’ for ‘7 taxable years’ in subparagraph (B), and by substituting ‘13 taxable years’ for ‘10 taxable years’, and ‘12 taxable years’ for ‘9 taxable years’ in the preceding sentence, and “(D) by carrying such an investment, credit carryover to a later taxable year (than the taxable year to which it would, but for this Subparagraph, be carried) to which it may be carried if. because of the amendments made by section 802 (b)(2) of the Tax Reform Act of 1976, carrying such carryover to the taxable year to which it would, but for this subparagraph, be carried Would cause a portion of an unused credit from an unused credit year ending after December 31, 1970 to expire, “(2) Limitation on carrybacks.— The amount of the unused credit which may be taken into account under subsection (a)(1) for any preceding taxable year shall not exceed the amount by which the limitation imposed by subsection (a)(3) for such taxable year exceeds the sum of— “(A) the amounts determined under subparagraphs (A) and (B) of subsection (a)(1) for such taxable year, plus “(B) the amounts which (by reason of this subsection) are carried back to such taxable year and are attributable to taxable years preceding the unused credit year. “(3) Limitation on carryovers.— The amount of the unused credit which may be taken into account under subsection (a)(1)(A) for any succeeding taxable year shall not exceed the 90 STAT. 1583amount by which the limitation imposed by subsection (a)(3) for such taxable year exceeds the sum of the amounts which, by reason of this subsection, are carried to such taxable year and are attributable to taxable years preceding the unused credit year.” (3) Subparagraph (A) of section 46(c)(3) (relating to public utility property) is amended by striking out “subsection (a)(1)(C)” and inserting in lieu thereof “subsection (a)(2)(C)”. (4) Paragraph (1) of section 46(e) (relating to limitations with respect to certain persons) is amended by striking out “subsection (a)(2)” and inserting in lieu thereof “subsection (a)(3)”. (5) The first sentence of section 46 (f)(8) (relating to prohibition of immediate, flowthrough of investment credit) is amended by inserting after “the Tax Reduction Act of 1975” the following: “and the Tax Reform Act of 1976”. (6) Subsection (f) of section 48 (relating to estates and trusts) is amended by striking out “section 46(a)(2)” and inserting in lieu thereof “section 46(a)(3)”. (7) Section 301(d) of the Tax Reduction Act of 1975 is amended by striking out “section 46(a)(1)(B)” each place it appears and inserting in lieu thereof “section 46(a)(2)(B)”. (c) Effective Date.— The amendments made by this section shall apply to taxable years beginning after December 31, 1975.