The General Business Credit is actually a group of individual credits, each with its own  requirements, qualifications, tax benefits and tax schedule or form.  The credits are summarized as the General Business Credit, on Form 3800.  These credits can be taken directly by self-employed individuals or taxpayers who have rental property, or they can be passed through to individual taxpayers by partnerships, S corporations, estates, and trusts.

The tax benefits of these various individual credits, summarized under the general business credit can be carried forward from prior tax years, and in addition, your general business credit for the current year may be increased later by carrying back business credits from subsequent years.

How To Claim the General Business Credit

First you will have to get together and complete the forms for any of the credits that apply in your case.  You may also have to complete Form 3800, General Business Credit.

Who Has to Complete Form 3800

You will have to complete Form 3800 if any of the following apply:

• You have more than one of the credits.  But if you have any one of the following credits, you can have more than one credit and still not have to file Form 3800:
• Empowerment zone and renewal community employment credit (Form 8844),
• Renewable electricity and refined coal production credit (Form 8835, Section B).
• You have a carryback or carryforward of any of the credits, except for the credits mentioned above (Forms 8844, or 8835, Section B).
• Any of the credits, except for the ones mentioned above, are from passive activities (a trade or business in which you do not materially participate, or a rental activity, even if you do materially participate, unless you are a real estate professional).

Credits that Make Up the General Business Credit

All of the following are part of the general business credit.  The form that has to be filled out and filed with your income tax return is indicated for each credit.  It may also be necessary to complete Form 3800, General Business Credit, as indicated above.

Biodiesel Fuels Credit - Form 8864

This is a credit expressed as an amount per gallon for biodiesel or agri-biodiesel fuels that are produced, sold or used after December 31, 2004.  Before you claim a credit on Form 8864, you first have to take the qualified biodiesel fuel mixture credit on Form 720, Quarterly Federal Excise Tax Return.

Credit for Alcohol Used as a Fuel - Form 6478

You can take a credit for alcohol in the form of ethanol and methanol you sold or used as a fuel.  You can claim this credit on Form 6478 if you did not claim a credit on Form 720, or on Form 8849 or Form 4136, Credit for Federal Tax Paid on Fuels.

Credit for Contributions to Selected Community Development Corporations - Form 8847

This is a credit of 5% of a contribution made to a qualified community development corporation (CDC) before June 30, 1999.  The credit is figured over a 10-year period, based on the number of years the contribution is available for use by the CDC.  Selected community development corporations were announced by Housing and Urban Development (HUD) in 1994.

Credit for Employee Social Security and Medicare Taxes Paid on Certain Employee Tips - Form 8846

If your business is a food and beverage establishment, you can take this credit which is generally equal to the employer’s part of the payroll taxes on tips paid to your employees.  But you cannot take a credit for social security and Medicare taxes on tips used to meet the federal minimum wage requirements.

Credit for Employer-Provided Childcare Facilities and Services - Form 8882

You can claim a credit for 25% of your expenditures for qualified childcare facilities for your employees, plus 10% of your qualified expenses in finding childcare facilities and referring your employees to them.  Qualified childcare facility expenditures include amounts you pay or incur to acquire or construct your own childcare facility or to rehabilitate or expand it; your expenses to operate the facility; or amounts paid under a contract with an outside facility to provide childcare services.  In order to qualify, the childcare facility must meet all state and local government requirements and must be licensed as a childcare facility.  It must be open to all employees, and if childcare is your principal business, at least 30% of the enrollees must be dependents or employees of your business.

Credit for Increasing Research Activities - Form 6765

This credit is intended to stimulate spending on research and experimental activities.  Qualified research and development expenditures are defined under section 174 of the Internal Revenue Code (IRC).  Substantially all the research activities must be part of an experimentation process leading to a new or improved business function, performance, reliability, or quality.  The credit is 20% of the amount over your base amount, as defined in section 41(e) of the IRC.

Credit for Small Employer Pension Startup Costs - Form 8881

This is a credit for 50% of the costs, up to $1,000, paid or incurred to start up a pension plan for your employees, including a 401(k), SIMPLE plan, or SEP plan.  The credit is limited to $500 the first year you take the credit, and up to $500 for each of the following two years.  Qualified start-up costs include expenses to establish and administer the plan, and expenses to educate employees about the plan’s retirement benefits.

Disabled Access Credit - Form 8826

A business can take a credit of 50% of the eligible expenses (up to $10,000 of expenses) it pays or incurs to provide access to disabled persons.  These are expenses to comply with the applicable requirements under the Americans with Disabilities Act of 1990, and include expenses to remove barriers to access by persons with disabilities; to provide qualified interpreters or other methods of making audio materials available to persons with hearing impairments; to provide qualified readers or other methods of making visual materials available to persons with visual impairments; and to acquire or modify equipment so that it can be used by persons with disabilities.  Access expenditures must meet the standards agreed to by the Architectural and Transportation Barriers Compliance Board.

Empowerment Zone and Renewal Community Employment Credit - Form 8844

This credit is for businesses that have employees working in certain zones and communities.  The credit is 20% of qualified wages (up to $15,000 per year) paid to qualified employees of empowerment zones, and 15% of qualified wages (up to $10,000 per year) paid to qualified employees of renewal communities.  Lists of the qualifying urban and rural empowerment zones and renewal communities can be found in the instructions for Form 8844, which can be downloaded from the IRS website.  Housing and Urban Development also has a locater service on its website to determine whether a particular zone or community qualifies for this credit.

Enhanced Oil Recovery Credit - Form 8830

This is a credit that can be taken by owners of an operating mineral interest for costs of enhanced oil recovery costs.  The credit is 15% of these costs, and is reduced when the price per barrel of oil exceeds the base value of $28.

Indian Employment Credit - Form 8845

A credit can be taken for part of the qualified wages and health insurance costs of employees who are enrolled members of an Indian tribe, who perform substantially all of their services on an Indian reservation, while living on or near the reservation.  Each tribe determines who qualifies for enrollment and what documentation is needed to certify enrollment.  The credit is calculated as 20% of the increase in qualified wages and health insurance costs as compared to the year 1993.  The amount of qualified wages and health insurance costs is limited to $20,000 per employee each year.  But an employee is not qualified if total wages and health insurance costs are over $35,000.  For 1993, the limit for an employee to qualify is $30,000.

Low Sulfur Diesel Fuel Production Credit – Form 8896

This is a credit of $0.05 per gallon for low sulfur diesel fuel (15 parts per million or less) produced by a small business refiner during the year.  A small business refiner is a refiner of crude oil with an average daily domestic refinery run or average retained production of no more than 205,000 barrels.  The credit is for expenses paid or incurred after 2002.  If you have a credit from before 2004, you would not file Form 8896, and would include the credit on Form 3800.

Low Income Housing Credit - Form 8586

This is a credit for qualified low-income housing buildings placed in service after 1986.  The credit is taken over a 10-year period for residential rental buildings in low-income housing projects that are certified by the housing credit agency.  You will be allocated a credit for the present value of 10 annual credit amounts, equal to 70% of the building’s qualified basis, unless the building receives a federal subsidy, in which case the credit will be at 30% of the qualified basis.  For each building, you must have a Form 8609, Low-Income Housing Credit Allocation Certification.  If you are the building owner, you must file Schedule A of Form 8609, Annual Statement, each year of the 15-year compliance period.  If you are a partner, shareholder or beneficiary of a pass-through entity (partnership, S-corporation, trust, or estate), you only need to file Form 8586 to claim the credit, based on the information provided on your Schedule K-1. 

Orphan Drug Credit - Form 8820

A credit can be taken for qualified expenses incurred in testing certain drugs for treating rare diseases and conditions. The credit is 50% of qualified clinical testing expenses of drugs for a rare disease or condition pursuant to section 526 of the Food, Drug, and Cosmetic Act.

Renewable Electricity Production Credit - Form 8835

This credit for alternative sources of energy is generally calculated as cents per kilo-watt hour (kWh) for the sale of energy produced from qualified energy resources at a qualified facility owned, or in certain cases leased by the taxpayer.  Qualified energy resources include wind, closed-loop and open-loop biomass, poultry waste, geothermal energy, solar energy, small irrigation power, municipal solid waste, and refined coal.

Welfare - To - Work Credit - Form 8861

This credit provides businesses with an incentive to hire long-term family assistance recipients.  The credit is 35% of qualified first-year wages and 50% of qualified second-year wages.  In order to claim this credit, you must request and obtain a certification for each employee from the state employment security agency (SESA), proving that the employee is a long-term family assistance recipient.  If you do not receive the certification, you can complete Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity and Welfare-to-Work Credits, on or before the date you hire the employee.  Form 8850 must be signed by you and the employee and must then be submitted to the SESA by the 21st calendar day after the individual begins work.  This form can be downloaded from the IRS website.

Work Opportunity Credit - Form 5884

A credit that provides an incentive to businesses to hire persons from groups with a particularly high unemployment rate or with special employment needs. The credit is based on first-year wages paid to targeted group employees, including recipients of Temporary Assistance for Needy Families, veterans, ex-felons, high-risk youth, vocational rehabilitation referrals, summer youth employees, food stamp recipients, and social security insurance recipients.  The credit is 25% of qualified first-year wages for employees who worked for you for more than 120 hours but less than 400 hours, and 40% of qualified first-year wages for employees who worked for you for 400 hours or more.  To claim this credit you must request and obtain a certification for each employee from the SESA, proving that the employee is a member of one of the targeted groups mentioned.  You can also use Form 8850 as referenced above for the welfare-to-work credit.