Yes, a taxpayer may carry forward unused credits to another tax year, but the rules vary depending on the type of credit.
- General Business Credits: According to § 39 of the Internal Revenue Code, if the sum of the business credit carryforwards to the taxable year plus the amount of the current year business credit exceeds the limitation imposed by § 38(c), the excess can be carried back one year and carried forward for 20 years. Specific rules apply to different types of credits within this category:
- Marginal Oil and Gas Well Production Credit: This credit has a 5-year carryback and a 25-year carryforward.
- Applicable Credits: Defined in § 6417(b), these credits have a 3-year carryback and a 23-year carryforward.
- Capital Loss Carryovers: Under § 1212, corporations can carry back net capital losses to each of the three preceding taxable years and carry forward to each of the five succeeding taxable years. If the loss is attributable to a foreign expropriation loss, it can be carried forward for ten years.
- Energy Credits: The rules for energy credits, such as those under the Inflation Reduction Act of 2022, allow for carryforwards but do not permit carrybacks. For example, the Residential Clean Energy Property Credit allows for the unused amount of the credit to be carried forward to reduce tax liability in future tax years.
- Foreign Tax Credits: According to the Internal Revenue Manual, foreign tax credits that cannot be used in the current year due to limitations can be carried back one year and carried forward for ten years.
- Non-Refundable Credits: Generally, non-refundable credits can be carried forward if they exceed the tax liability in the current year. Specific rules for each credit type determine the carryforward period.
In summary, while many credits can be carried forward to future tax years, the specific rules and periods for carryforward vary by the type of credit.
Sources:
§ 39. Carryback and carryforward of unused credits
§ 1212. Capital loss carrybacks and carryovers
Publication 536 (2023)
Instructions for Form 3800 (2022)
IRM Part 4. Examining Process. Chapter 61. International Examination Guidelines. Section 10. Foreign Tax Credit
IRM Part 21. Customer Account Services. Chapter 7. Business Tax Returns and Non-Master File Accounts. Section 4. Income Taxes/Information Returns
