26 U.S.C. § 280C: Certain expenses for which credits are allowable

§ 1.280C-1 Disallowance of certain deductions for wage or salary expenses.§ 1.280C-3 Disallowance of certain deductions for qualified clinical testing expenses when section 28 credit is allowable.§ 1.280C-4 Credit for increasing research activities.

Amended 1978, 1983

1983 Pub. L. 97-414 Pub. L. 97–414, § 4(b)(2)(A), substituted “Certain expenses for which credits are allowable” for “Portion of wages for which credit is claimed under section 40 or 44B” in section catchline.
1978 Pub. L. 95-600 Pub. L. 95–600, as amended by Pub. L. 96–178 and Pub. L. 96–222, substituted “section 40 or 44B” for “section 44B” in section catchline, and in text designated existing provisions as subsec. (b) and added subsec. (a).

Cases: Hightower v. Commissioner, T.C. Memo. 1982-559

Forms: Form 6765

Final rules 3

(a) Rule for employment credits No deduction shall be allowed for that portion of the wages or salaries paid or incurred for the taxable year which is equal to the sum of the credits determined for the taxable year under sections 45A(a), 45P(a), 45S(a)(1)(A), 51(a), and 1396(a). No deduction shall be allowed for that portion of the premiums paid or incurred for the taxable year which is equal to that portion of the paid family and medical leave credit which is determined for the taxable year under section 45S(a)(1)(B). In the case of a corporation which is a member of a controlled group of corporations (within the meaning of section 52(a)) or a trade or business which is treated as being under common control with other trades or businesses (within the meaning of section 52(b)), this subsection shall be applied under rules prescribed by the Secretary similar to the rules applicable under subsections (a) and (b) of section 52.

Amended 1984, 1993, 2005, 2008, 2017, 2018, 2025

2025 Pub. L. 119-21 Pub. L. 119–21, § 70304(b), substituted “45S(a)(1)(A)” for “45S(a)” and inserted “No deduction shall be allowed for that portion of the premiums paid or incurred for the taxable year which is equal to that portion of the paid family and medical leave credit which is determined for the taxable year under section 45S(a)(1)(B).” after “and 1396(a).”
2018 Pub. L. 115-141 Pub. L. 115–141, § 401(d)(6)(B)(iv), substituted “and 1396(a)” for “1396(a), 1400P(b), and 1400R”.
2018 Pub. L. 115-141 Pub. L. 115–141, § 401(a)(62), substituted “1396(a),” for “and 1396(a),”.
2017 Pub. L. 115-97 Pub. L. 115–97, § 13403(d)(1), inserted “45S(a),” after “45P(a),”.
2008 Pub. L. 110-245 Pub. L. 110–245 inserted “45P(a),” after “45A(a),”.
2005 Pub. L. 109-135 Pub. L. 109–135, § 201(b)(2), substituted “1400P(b), and 1400R” for “and 1400P(b)”.
2005 Pub. L. 109-135 Pub. L. 109–135, § 103(b)(2), substituted “1396(a), and 1400P(b)” for “and 1396(a)”.
1993 Pub. L. 103-66 Pub. L. 103–66, § 13322(c)(1), substituted “45A(a), 51(a), and” for “51(a)”.
1993 Pub. L. 103-66 Pub. L. 103–66, § 13302(b)(1), substituted “Rule for employment credits” for “Rule for targeted jobs credit” in heading and “the sum of the credits determined for the taxable year under sections 51(a) and 1396(a)” for “the amount of the credit determined for the taxable year under section 51(a)” in text.
1984 Pub. L. 98-369 Pub. L. 98–369, § 474(r)(10)(A), (B), redesignated subsec. (b) as (a), in heading substituted “targeted jobs credit” for “section 44B credit”, and in text substituted “No deduction shall be allowed for that portion of the wages or salaries paid or incurred for the taxable year which is equal to the amount of the credit determined for the taxable year under section 51(a)” for “No deduction shall be allowed for that portion of the wage or salaries paid or incurred for the taxable year which is equal to the amount of the credit allowable for the taxable year under section 44B (relating to credit for employment of certain new employees) determined without regard to the provisions of section 53 (relating to limitation based on amount of tax)”. Former subsec. (a), which had provided that no deduction would be allowed for that portion of the work incentive program expenses paid or incurred for the taxable year which was equal to the amount of the credit allowable for the taxable year under section 40 (relating to credit for expenses of work incentive programs) determined without regard to the provisions of section 50A(a)(2) (relating to limitation based on amount of tax), and that in the case of a corporation which was a member of a controlled group of corporations (within the meaning of section 50B(g)(1) or a trade or business which was treated as being under common control with other trades or businesses within the meaning of section 50B(g)(2), this subsection would be applied under rules prescribed by the Secretary similar to the rules applicable under paragraphs (1) and (2) of section 50B(g), was struck out.

Cases: Allen v. Commissioner, 118 T.C. 1 (2002); Ventas, Inc. v. United States, 381 F.3d 1156 (Fed. Cir. 2004)

(b) Credit for qualified clinical testing expenses for certain drugs

Amended 1984

1984 Pub. L. 98-369 Pub. L. 98–369, § 474(r)(10)(A), redesignated subsec. (c) as (b). Former subsec. (b) redesignated (a).

Cited by 1

(1) In general No deduction shall be allowed for that portion of the qualified clinical testing expenses (as defined in section 45C(b)) otherwise allowable as a deduction for the taxable year which is equal to the amount of the credit allowable for the taxable year under section 45C (determined without regard to section 38(c)).

Amended 1984, 1986, 1996

1996 Pub. L. 104-188 Pub. L. 104–188, § 1205(d)(7), substituted “section 45C(b)” for “section 28(b)”, “section 45C” for “section 28”, and “section 38(c)” for “subsection (d)(2) thereof”.
1986 Pub. L. 99-514 Pub. L. 99–514, § 1847(b)(8), substituted “section 28(b)” for “section 29(b)” in par. (1) and “section 28” for “section 29” in pars. (1) and (2)(A).
1984 Pub. L. 98-369 Pub. L. 98–369, § 474(r)(10)(C), substituted “29” for “44H”.

Cited by 2

(2) Similar rule where taxpayer capitalizes rather than deducts expenses If—

Cited by 1

(A) the amount of the credit allowable for the taxable year under section 45C (determined without regard to section 38(c)), exceeds

Amended 1984, 1986, 1996

1996 Pub. L. 104-188 Pub. L. 104–188, § 1205(d)(7)(B), (C), substituted “section 45C” for “section 28” and “section 38(c)” for “subsection (d)(2) thereof”.
1986 Pub. L. 99-514 Pub. L. 99–514, § 1847(b)(8), substituted “section 28(b)” for “section 29(b)” in par. (1) and “section 28” for “section 29” in pars. (1) and (2)(A).
1984 Pub. L. 98-369 Pub. L. 98–369, § 474(r)(10)(C), substituted “29” for “44H”.

(B) the amount allowable as a deduction for the taxable year for qualified clinical testing expenses (determined without regard to paragraph (1)),

the amount chargeable to capital account for the taxable year for such expenses shall be reduced by the amount of such excess.

(3) Election of reduced credit

Amended 1984, 1986, 2017

2017 Pub. L. 115-97 Pub. L. 115–97, § 13401(b), added par. (3) and redesignated former par. (3) as (4).
1986 Pub. L. 99-514 Pub. L. 99–514, § 231(d)(3)(E), substituted “section 41(f)(5)”, “section 41(f)(1)(B)”, and “section 41(f)(1)” for “section 30(f)(5)”, “section 30(f)(1)(B)”, and “section 30(f)(1)”, respectively.
1984 Pub. L. 98-369 Pub. L. 98–369, § 474(r)(10)(D), substituted “section 30(f)(5)” for “section 44F(f)(5)”, “section 30(f)(1)(B)” for “section 44F(f)(1)(B)”, and “section 30(f)(1)” for “section 44F(f)(1)”.

Cited by 1

(A) In general In the case of any taxable year for which an election is made under this paragraph—

(i) paragraphs (1) and (2) shall not apply, and

(ii) the amount of the credit under section 45C(a) shall be the amount determined under subparagraph (B).

(B) Amount of reduced credit The amount of credit determined under this subparagraph for any taxable year shall be the amount equal to the excess of—

Cited by 1

(i) the amount of credit determined under section 45C(a) without regard to this paragraph, over

Cited by 1

(ii) the product of—

(I) the amount described in clause (i), and

(II) the maximum rate of tax under section 11(b).

(C) Election An election under this paragraph for any taxable year shall be made not later than the time for filing the return of tax for such year (including extensions), shall be made on such return, and shall be made in such manner as the Secretary shall prescribe. Such an election, once made, shall be irrevocable.

(4) Controlled groups In the case of a corporation which is a member of a controlled group of corporations (within the meaning of section 41(f)(5)) or a trade or business which is treated as being under common control with other trades or business (within the meaning of section 41(f)(1)(B)), this subsection shall be applied under rules prescribed by the Secretary similar to the rules applicable under subparagraphs (A) and (B) of section 41(f)(1).

Amended 2017

2017 Pub. L. 115-97 Pub. L. 115–97, § 13401(b), added par. (3) and redesignated former par. (3) as (4).

Amended 1983, 1984, 1988, 1989, 2017

2017 Pub. L. 115-97 Pub. L. 115–97, § 13206(d)(2)(C), redesignated par. (4) as (3).
1989 Pub. L. 101-239 Pub. L. 101–239, § 7814(e)(2)(A), redesignated par. (3) as (4).
1988 Pub. L. 100-647 Pub. L. 100–647 added subsec. (c).
1984 Pub. L. 98-369 Pub. L. 98–369, § 474(r)(10)(A), redesignated subsec. (c) as (b).
1983 Pub. L. 97-414 Pub. L. 97–414, § 4(b)(1), added subsec. (c).

(1) In general The domestic research or experimental expenditures (as defined in section 174A(b)) otherwise taken into account as a deduction or charged to capital account under this chapter shall be reduced by the amount of the credit allowed under section 41(a).

Amended 1989, 1999, 2000, 2017, 2025

2025 Pub. L. 119-21 Pub. L. 119–21, § 70302(b)(2)(B), amended par. (1) generally. Prior to amendment, text read as follows: “If—
“(A) the amount of the credit determined for the taxable year under section 41(a)(1), exceeds
“(B) the amount allowable as a deduction for such taxable year for qualified research expenses or basic research expenses,
the amount chargeable to capital account for the taxable year for such expenses shall be reduced by the amount of such excess.”
2017 Pub. L. 115-97 Pub. L. 115–97, § 13206(d)(2)(A), added par. (1) and struck out former par. (1). Prior to amendment, text read as follows: “No deduction shall be allowed for that portion of the qualified research expenses (as defined in section 41(b)) or basic research expenses (as defined in section 41(e)(2)) otherwise allowable as a deduction for the taxable year which is equal to the amount of the credit determined for such taxable year under section 41(a).”
2000 Pub. L. 106-554 Pub. L. 106–554 struck out “or credit” after “deduction” in two places.
1999 Pub. L. 106-170 Pub. L. 106–170 inserted “or credit” after “deduction” in two places.
1989 Pub. L. 101-239 Pub. L. 101–239, § 7110(c)(1), struck out “50 percent of” before “the amount of the credit”.

Cited by 2

(2) Election of reduced credit

Amended 2017

2017 Pub. L. 115-97 Pub. L. 115–97, § 13206(d)(2)(B)–(D), redesignated par. (3) as (2), substituted “paragraph (1)” for “paragraphs (1) and (2)” in subpar. (A)(i), and struck out former par. (2) which related to rule where taxpayer capitalizes rather than deducts expenses.

(A) In general In the case of any taxable year for which an election is made under this paragraph—

Amended 1989

1989 Pub. L. 101-239 Pub. L. 101–239, § 7110(c)(1), struck out “50 percent of” before “the amount of the credit”.

(i) paragraph (1) shall not apply, and

(ii) the amount of the credit under section 41(a) shall be the amount determined under subparagraph (B).

(B) Amount of reduced credit The amount of credit determined under this subparagraph for any taxable year shall be the amount equal to the excess of—

Cited by 1

(i) the amount of credit determined under section 41(a) without regard to this paragraph, over

Cited by 1

(ii) the product of—

(I) the amount described in clause (i), and

(II) the maximum rate of tax under section 11(b).

(C) Election An election under this paragraph for any taxable year shall be made not later than the time for filing the return of tax for such year (including extensions), shall be made on such return, and shall be made in such manner as the Secretary may prescribe. Such an election, once made, shall be irrevocable.

(3) Controlled groups Paragraph (3) of subsection (b) shall apply for purposes of this subsection.

Amended 1989, 2017

2017 Pub. L. 115-97 Pub. L. 115–97, § 13206(d)(2)(C), redesignated par. (4) as (3). Former par. (3) redesignated (2).
2017 Pub. L. 115-97 Pub. L. 115–97, § 13001(b)(1)(A), substituted “section 11(b)” for “section 11(b)(1)”.
1989 Pub. L. 101-239 Pub. L. 101–239, § 7814(e)(2)(A), added par. (3). Former par. (3) redesignated (4).
1989 Pub. L. 101-239 Pub. L. 101–239, § 7110(c)(1), struck out “50 percent of” before “the amount described”.

Cited by 4

(d) Credit for low sulfur diesel fuel production The deductions otherwise allowed under this chapter for the taxable year shall be reduced by the amount of the credit determined for the taxable year under section 45H(a).

Amended 2004, 2007

2007 Pub. L. 110-172 Pub. L. 110–172 amended heading and text generally. Prior to amendment, text read as follows: “No deduction shall be allowed for that portion of the expenses otherwise allowable as a deduction for the taxable year which is equal to the amount of the credit determined for the taxable year under section 45H(a).”
2004 Pub. L. 108-357 Pub. L. 108–357 added subsec. (d).

(e) Mine rescue team training credit No deduction shall be allowed for that portion of the expenses otherwise allowable as a deduction for the taxable year which is equal to the amount of the credit determined for the taxable year under section 45N(a).

Amended 2006

2006 Pub. L. 109-432 Pub. L. 109–432 added subsec. (e).

(f) Credit for security of agricultural chemicals No deduction shall be allowed for that portion of the expenses otherwise allowable as a deduction taken into account in determining the credit under section 45O for the taxable year which is equal to the amount of the credit determined for such taxable year under section 45O(a).

Amended 2008

2008 Pub. L. 110-246 Pub. L. 110–246, § 15343(c), added subsec. (f).

(g) Credit for health insurance premiums No deduction shall be allowed for the portion of the premiums paid by the taxpayer for coverage of 1 or more individuals under a qualified health plan which is equal to the amount of the credit determined for the taxable year under section 36B(a) with respect to such premiums.

Amended 2010, 2018

2018 Pub. L. 115-141 Pub. L. 115–141, § 401(d)(3)(B)(iii), struck out subsec. (g) relating to qualifying therapeutic discovery project credit.
2010 Pub. L. 111-148 Pub. L. 111–148, § 9023(c)(2), added subsec. (g) relating to qualifying therapeutic discovery project credit.
2010 Pub. L. 111-148 Pub. L. 111–148, § 1401(b), added subsec. (g) relating to credit for health insurance premiums.

(h) Credit for employee health insurance expenses of small employers No deduction shall be allowed for that portion of the premiums for qualified health plans (as defined in section 1301(a) of the Patient Protection and Affordable Care Act), or for health insurance coverage in the case of taxable years beginning in 2010, 2011, 2012, or 2013, paid by an employer which is equal to the amount of the credit determined under section 45R(a) with respect to the premiums.

Amended 2010

2010 Pub. L. 111-148 Pub. L. 111–148, § 10105(e)(3), substituted “2010, 2011” for “2011”.
2010 Pub. L. 111-148 Pub. L. 111–148, § 1421(d)(1), added subsec. (h).