U. S. Business Income Tax Return

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TREASURY/IRS AND OMB USE ONLY DRAFT

Instructions for Form 4255
(Rev. December 2025)

Certain Credit Recapture, Excessive Payments, and Penalties
Section references are to the Internal Revenue Code unless
otherwise noted.

General Instructions

Future Developments

Purpose of Form

For the latest information about developments related to Form
4255 and its instructions, such as legislation enacted after they
were published, go to IRS.gov/Form4255.

Excessive Payments (EPs), Excessive Credit Transfers, and
Penalties. This section was renamed, and columns (m), (n), (o),
and (p) were expanded to allow more detailed reporting.
Columns (m)(1) through (3) pertain to excessive credit transfers
and credit transfer recaptures under section 6418. Columns (n)
(1) through (3) pertain to excessive payments under section
6417. Columns (o)(1) through (3) pertain to penalty amounts for
failure to satisfy the prevailing wage requirements. Columns (p)
(1) through (3) pertain to the penalty amounts for failure to satisfy
the apprenticeship requirements.
Prevailing wage and apprenticeship (PWA) requirements.
Form 4255 may be used to report penalty amounts for failure to
satisfy the PWA requirements for an increased credit or
deduction claimed in the current year.
Form 4255 may also be used to report PWA recapture under
sections 48 and 48E for failure to satisfy the prevailing wage
requirements with respect to alteration or repair during the 5-year
period beginning on the date the project is placed in service. See
Regulations sections 1.48E-3(e) and 1.48-13(c)(4).
Emissions tier recapture for specified clean hydrogen production facility. Use Form 4255, Part III, to figure the emissions
tier recapture amount. See Description of Emissions Tier
Recapture, later.

Reminders
Notification of recapture. If you have made a transfer election
under section 6418, you must notify the transferee taxpayer of a
recapture event. See Note, later.
Line 1j, column (h). Reporting instructions are added for
emissions tier recapture and low-income communities bonus
credit recapture. See Line 1j, column (h), later.
Part I. General and specific instructions are added for new Part I
for reporting of investment credit recapture related to an elective
payment election (EPE) (both gross EPE amounts and net EPE
amounts) and a transfer election, an excessive credit transfer,
section 6418(g)(3) notification requirements, and excessive
payment (EP) and penalty amounts for failure to satisfy the PWA
requirements. See Part I. Summary, later.
Partnerships and S corporations. Certain amounts from
Form 4255 should be reported directly on the partnership or S
corporation return. See Partnerships and S corporations, later.

Nov 20, 2025

Investment Credit Recapture Requirements and
Special Rules

Generally, you must refigure the investment credit and may have
to recapture all or part of it if any of the following apply. However,
when a transfer election under section 6418 has been made, see
the note at the end of this section.
• You disposed of investment credit property before the end of 5
full years after the property was placed in service (the recapture
period).
• You changed the use of the property before the end of the
recapture period so that it no longer qualifies as investment
credit property.
• The business use of the property decreased before the end of
the recapture period so that it no longer qualifies (in whole or in
part) as investment credit property.
• Any building to which section 47(d) applies will no longer be a
qualified rehabilitated building when placed in service.
• Any property to which progress expenditures under section
48(b), 48A(b)(3), 48B(b)(3), 48C(b)(2), 48D(b)(5), or 48E applies
will no longer qualify as investment credit property when placed
in service.
• A qualified facility for which you claimed a section 48E credit
that has a greenhouse gas emissions rate (as determined under
Regulations section 1.45Y-5) of greater than 10 grams of CO2e
per kWh during the five-year period beginning on the date such
qualified facility is originally placed in service (five-year recapture
period). See Regulations section 1.48E-4(f), for more
information.
• Before the end of the recapture period, your proportionate
interest was reduced by more than one-third in a partnership, S
corporation, estate, or trust that allocated the cost or other basis
of property to you for which you claimed a credit.
• You returned leased property (on which you claimed a credit)
to the lessor before the end of the recapture period.
• In the case of a project under the Phase II or Phase III
gasification program, failure at any time during the applicable
recovery period (as defined in section 168(c)) to attain and
maintain the separation and sequestration requirements in
section 48B(d)(1)(B). For more information, see Notice 2009-23,
2009-16 I.R.B. 802, available at IRS.gov/irb/
2009-16_IRB#NOT-2009-23, as modified by Notice 2011-24,
2011-14 I.R.B. 603, available at IRS.gov/irb/
2011-14_IRB#NOT-2011-24; and amplified by Notice 2014-81,
2014-53 I.R.B. 1001, available at IRS.gov/irb/
2014-53_IRB#NOT-2014-81.
• In the case of a project under the Phase II or Phase III
qualifying advanced coal project program, failure during the
applicable recovery period (as defined in section 168(c)) to
attain and maintain the separation and sequestration
requirements in section 48A(e)(1)(G). For more information, see
Notice 2009-24, 2009-16 I.R.B. 817, available at IRS.gov/irb/

Instructions for Form 4255 (Rev. 12-2025) Catalog Number 68759M
Department of the Treasury Internal Revenue Service www.irs.gov

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What’s New

Use Form 4255 to figure the increase in the amount due for
certain credit recaptures, excessive payments, excessive credit
transfers, and penalty amounts for failure to satisfy the PWA
requirements.

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You must refigure the investment credit if an emissions tier
recapture event occurred during the tax year. An emissions tier
recapture event occurs if one of the following occurs.
• You failed to obtain an annual verification report by the
deadline for filing your federal income tax return (including
extensions) for any tax year in which an annual verification report
is required under Regulations section 1.48-15(e)(1).
• The specified clean hydrogen production facility actually
produced hydrogen through a process (or processes) that
results in a lifecycle greenhouse gas (GHG) emissions rate that
can only support a lower energy percentage than the energy
percentage used to calculate the amount of the section 48 credit
for such facility for the year in which the facility is placed in
service.
• The specified clean hydrogen production facility actually
produced hydrogen through a process (or processes) that
results in a lifecycle GHG emissions rate of greater than 4
kilograms of CO2e per kilogram of hydrogen. See Regulations
section 1.48-15(f).
Note: When a transfer election under section 6418 has been
made, the rules require the transferee taxpayer, which is the
taxpayer to which the credit was transferred, to be notified by the
eligible taxpayer of a recapture event. The transferee taxpayer
then must calculate and is subject to recapture on the recapture
amount attributable to the transferred credit. The transferee
taxpayer must also notify the eligible taxpayer of the recapture
amount so that the eligible taxpayer can make any appropriate
basis adjustments, as provided under section 50(c). If the
eligible taxpayer didn’t transfer all of the credit, then the eligible
taxpayer is subject to recapture on the retained portion of the
credit. See section 6418(g)(3) and Regulations section
1.6418-5(d). There are also special rules for partnerships and S
corporations in the case of indirect dispositions (for example, the
disposition of a partnership interest by a partner as illustrated in
Example 5) where the recapture that results doesn’t require
notice or the transferee taxpayer to calculate a recapture
amount. See Regulations section 1.6418-3(a)(6) for further
information.
Exceptions to recapture. Recapture of the investment credit
doesn’t apply to the following.
• A transfer because of the death of the taxpayer.
• A transfer between spouses or incident to divorce under
section 1041. However, a later disposition by the transferee is
2

subject to recapture to the same extent as if the transferor had
disposed of the property at the later date.
• A transaction to which section 381(a) applies (relating to
certain acquisitions of the assets of one corporation by another
corporation).
• A mere change in the form of conducting a trade or business
if:
1. The property is retained as investment credit property in
that trade or business, and
2. The taxpayer retains a substantial interest in that trade or
business.
A mere change in the form of conducting a trade or business
includes a corporation that elects to be an S corporation and a
corporation whose S election is revoked or terminated.
For more details on the recapture rules, see section 50(a).

Carryover Adjustment on Recapture

For property subject to investment credit recapture, reduce any
remaining carryforwards and carrybacks from the property by the
recapture percentage used for the property on Part II, line 15.

Basis Adjustment on Recapture

For property subject to investment credit recapture, increase the
property’s basis as follows.
• For rehabilitation credit property, qualifying advanced coal
project property, qualifying gasification project property,
qualifying advanced energy project property, or advanced
manufacturing investment property, increase the basis by 100%
of the amount, attributable to each such property, of the
recapture tax, adjustments to carrybacks and carryforwards
under section 39, or adjustments to disallowed passive activity
credits.
• For energy property or clean electricity investment property,
increase the basis by 50% of the amount, attributable to each
such property, of the recapture tax, adjustments to carrybacks
and carryforwards under section 39, or adjustments to
disallowed passive activity credits.
If you are a partner or S corporation shareholder, adjust the
basis of your interest in the partnership or stock in the S
corporation to take into account the adjustment made to the
basis of property held by the partnership or S corporation.
For more information, see section 50(c) and Regulations
section 1.469-3(f).

Partnerships, S Corporations, Estates, and
Trusts

A partnership, S corporation, estate, or trust that allocated any or
all of a qualified investment to its partners, shareholders, or
beneficiaries must provide the information they need to refigure
the credit. See Regulations sections 1.46-3(f), 1.47-4(a) and (c),
1.47-5, and 1.47-6.

Partners, Shareholders, and Beneficiaries

If you are a partner, shareholder, or beneficiary and your
Schedule K-1 shows recapture of investment credit claimed in an
earlier year, you will need your copy of the original Form 3468,
Investment Credit, to complete this form.

Excessive Payment

In the case of any elective payment amount that the IRS
determines constitutes an excessive payment, the tax imposed
on such entity, partnership, or S corporation, by chapter 1,
regardless of whether such entity would otherwise be subject to
chapter 1 tax, for the tax year in which such determination is
made will be increased by an amount equal to the sum of the
amount of such excessive payment (EP) plus an amount equal to
Instructions for Form 4255 (Rev. 12-2025)

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2009-16_IRB#NOT-2009-24, as modified by Notice 2011-24,
and amplified by Notice 2012-51, 2012-33 I.R.B. 150, available
at IRS.gov/irb/2012-33_IRB#NOT-2012-51; and Notice 2015-14,
2015-10 I.R.B. 722, available at IRS.gov/irb/
2015-10_IRB#NOT-2015-14; and Notice 2020-88, 2020-53
I.R.B. 1795, available at IRS.gov/irb/
2020-53_IRB#NOT-2020-88.
• You engaged in an applicable transaction (involving the
material expansion of semiconductor manufacturing capacity),
as defined in section 50(a)(7)(D).
• Any qualified solar or wind facility property that ceases to be
property eligible for the low-income communities bonus credit
under section 48(e). See Regulations section 1.48(e)-1(n) for
more information.
• A net increase in the amount of nonqualified nonrecourse
financing occurred for any property to which section 49(a)(1)
applied. For more details, see Section C—Recapture From
Increase in Nonqualified Nonrecourse Financing, later.
• Any property, project, facility, or technology under sections 48
or 48E that you claimed the increased credit amount for
satisfying the PWA requirements and you fail to satisfy the
prevailing wage requirements with respect to alteration or repair
during the 5-year period beginning on the date the property,
project, facility, or technology is placed in service. See
Regulations sections 1.48E-3(e) and 1.48-13(c)(4).

TREASURY/IRS AND OMB USE ONLY DRAFT
20% of such EP (20% EP), if no reasonable cause. See
Regulations sections 1.48D-6(f) and 1.6417-6(a) for details. For
eligible entities who received an excessive payment as a result
of a transfer election under section 30D or 25E, please see
sections 30D(g)(7)(B) and 25E(f), and Regulations sections
1.30D-5(g)(2) and 1.25E-3(g)(2), respectively.

Excessive Credit Transfer

In the case of any portion of an eligible credit transferred to a
transferee taxpayer that the IRS determines constitutes an
excessive credit transfer, the tax imposed on the transferee
taxpayer by chapter 1, regardless of whether such entity would
otherwise be subject to chapter 1 tax, for the tax year in which
such determination is made will be increased by an amount
equal to the sum of the amount of such excessive credit transfer
plus an amount equal to 20% of such excessive credit transfer, if
no reasonable cause. See Regulations section 1.6418-5(a) for
details.

The prevailing wage and apprenticeship requirements generally
apply to all construction, alteration, or repair work, including work
by contractors and subcontractors. There are certain exceptions
to these requirements. You are solely responsible for ensuring
that these requirements are met for construction, alteration, or
repair work. For more information, see Prevailing wage and
apprenticeship requirements and Frequently asked questions
about the prevailing wage and apprenticeship under the Inflation
Reduction Act on IRS.gov.

Prevailing Wage Requirements

If you fail to meet the prevailing wage requirements, you will still
be eligible for the increased amount of the particular tax
incentive by making certain correction and penalty payments.
The penalty payment is reported in Part I, columns (o)(1), (o)(2),
and (o)(3).
Under the prevailing wage requirements, you must ensure
that all laborers and mechanics employed by you (or any
contractor or subcontractor) are paid wages at rates not less
than the applicable prevailing wage rate for work performed with
respect to a qualified facility (or property, project, technology,
residence, or equipment, as applicable) for the particular tax
incentive. See Form 7220, Prevailing Wage and Apprenticeship
(PWA) Verification and Corrections, and its instructions, for
details.

Apprenticeship Requirements

If you fail to meet the labor hours requirement, and/or you (or any
contractor or subcontractor) fail to meet the participation
requirement, you will still be eligible for the increased amount of
the particular tax incentive by making certain penalty payments.
The penalty payment is reported in Part I, columns (p)(1), (p)(2),
and (p)(3).
The apprenticeship requirements consist of the labor hours
requirement, ratio requirement, and participation requirement.
The apprenticeship requirements only apply during construction
of the qualified facility (or property, project, technology,
residence, or equipment, as applicable) for the particular tax
incentive. See Form 7220 and its instructions for details.

Description of Emissions Tier Recapture

The Inflation Reduction Act of 2022 (IRA 2022) added new
section 45V to the Code to allow taxpayers a credit for the
production of qualified clean hydrogen. IRA 2022 also amended
section 48 to allow taxpayers to make an irrevocable election
Instructions for Form 4255 (Rev. 12-2025)

Regulations section 1.48-15(f)(2) specifies that an emissions
tier recapture event occurs when:
• The taxpayer fails to obtain an annual verification report by the
deadline for filing its federal income tax return (including
extensions) for any tax year in which an annual verification report
is required under Regulations section 1.48-15(e)(1);
• The specified clean hydrogen production facility actually
produced hydrogen through a process (or processes) that
results in a lifecycle greenhouse gas (GHG) emissions rate that
can only support a lower energy percentage than the energy
percentage used to calculate the amount of the section 48 credit
for such facility for the year in which the facility is placed in
service; or
• The specified clean hydrogen production facility actually
produced hydrogen through a process (or processes) that
results in a lifecycle GHG emissions rate of greater than 4
kilograms of CO2e per kilogram of hydrogen.
The emissions tier recapture amount is calculated by
increasing the tax under chapter 1 of the Code for the tax year in
which there is an emissions tier recapture event by an amount
equal to 20% of the excess of the section 48 credit allowed to the
taxpayer for the specified clean hydrogen production facility for
the tax year in which the facility was placed in service over the
section 48 credit amount that would have been allowed had the
taxpayer used the energy percentage supported by the actual
production to calculate the amount of the section 48 credit. Thus,
up to 20% of the section 48 credit amount is potentially subject
to recapture in each tax year of the emissions tier recapture
period. Complete Form 4255, Part III, to figure the emissions tier
recapture amount.

Specific Instructions
Part I. Summary

Complete Part II as applicable before completing Part I.
Note: Part references are applicable for the 2024 general
business credit (GBC) tax form on which the credit or deduction
was determined.
Lines 1 and 2. Enter credit or deduction information from
form(s) listed on each credit line and Form 3800, General
Business Credit, Part III (Parts V and VI, if applicable).
Line 1g, column (h). Include in column (h) the recapture
amount of the increased credit for failing to meet the prevailing
wage requirements with respect to alterations or repairs during
the five-year recapture period. See Regulations section
1.48-13(c)(4) for more information. See Worksheet 3 to calculate
the recapture amount.
Line 1j, column (h). Include in column (h) the recapture
amount from an emissions tier recapture event with respect to a
specified clean hydrogen production facility. Complete Form
4255, Part III, to figure the emissions tier recapture amount.
Include in column (h) the recapture amount of low-income
communities bonus credit for energy credit under section 48 that
was originally calculated on Form 3468, Part VI, lines 3j, 11m,
17j, and/or 23j.
Include in column (h) the recapture amount of the increased
credit for failing to meet the prevailing wage requirements with
respect to alterations or repairs during the five-year recapture
period. See Regulations section 1.48-13(c)(4) for more
information. See Worksheet 3 to calculate the recapture amount.
3

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Penalty Payments for Failure To Satisfy the
Prevailing Wage and Apprenticeship
Requirements

under section 48(a)(15) to claim an energy credit under section
48 for the taxpayer’s basis in any qualified property that is part of
a specified clean hydrogen production facility placed in service
after 2022.

Line 3, column (q). Generally, enter the amount from Part I,
line 3, column (q) (which is the amount that can be reduced by
nonrefundable credits), on the appropriate line of your tax return.
For example, if completing Form 1120, U.S. Corporation Income
Tax Return, enter the amount from Part I, line 3, column (q), on
Form 1120, Schedule J, line 1g.
If you’re filing Form 1065 or Form 1120-S, see Partnerships
and S corporations, later.

Excessive Payments (EPs), Excessive Credit
Transfers, and Penalties (Including PWA Penalty
Amounts)

Line 3, column (r). Enter the amount from Part I, line 3, column
(r) (which is the amount that can’t be reduced by refundable
credits), on the appropriate line of your tax return. For example, if
completing Form 1120, enter the amount from Part I, line 3,
column (r), on Form 1120, Schedule J, line 9a.
If you’re filing Form 1065 or Form 1120-S, see Partnerships
and S corporations, later.

Column (m)(3). Enter section 6418(g)(3) credit transfer
recapture.
See Regulations sections 1.6418-3 and 5 for more details.

Partnerships and S corporations. Generally, partnerships
and S corporations that allocated all or any of a qualified
investment to partners or shareholders must provide to the
partners and shareholders the information they need to refigure
their credit. However, certain amounts from Form 4255 get
reported directly on the partnership or S corporation return.
• Line 3, columns (m)(1) and (m)(2).
• Line 3, columns (n)(1), (n)(2), and (n)(3).
• Line 3, columns (o)(1), (o)(2), (o)(3), (p)(1), (p)(2), and (p)(3).
If you’re filing Form 1065, report these amounts on Form
1065, line 27, Other taxes.
If you’re filing Form 1120-S, report these amounts on Form
1120-S, line 23c, along with any other amounts included in the
total for line 23c.

Amounts From Prior Year(s) Returns
Note: The PWA penalty payment may be reported for a credit or
deduction claimed in the current taxable year.
Column (a). Enter credit or deduction claimed in prior year(s)
(as adjusted, if applicable). See the Instructions for Form 3800.
Column (b). Enter the gross elective payment election (EPE)
amount included in column (a).
Column (c). Enter gross EPE amount in column (b) applied
against regular tax.
Column (d). Subtract column (c) from column (b) for net EPE
amount.
Column (e). Enter non-EPE credit that was applied against
regular tax.
Column (f). Subtract the sum of columns (b) and (e) from
column (a) for the carryover amount.

Column (m)(1). Enter section 6418(g)(2)(A)(i) excessive credit
transfer.
Column (m)(2). Enter section 6418(g)(2)(A)(ii) 20% of
excessive credit transfer.

Column (n)(1). If you owe an EP related to a gross EPE in
column (b), enter the EP portion related to a net EPE amount
from column (d).
Column (n)(2). If you owe an EP, enter the portion of the EP not
in column (n)(1) (excluding any 20% EP).
Column (n)(3). If you owe an EP, enter any 20% EP you owe.
Column (o)(1). Enter penalty amounts for failure to satisfy the
prevailing wage requirements related to a net EPE amount from
Form 7220, Part IV, column (f).
Column (o)(2). Enter penalty amounts for failure to satisfy the
prevailing wage requirements related to a non-net EPE amount
from Form 7220, Part IV, column (f).
Column (o)(3). Enter penalty amounts for failure to satisfy the
prevailing wage requirements not related to an EPE amount from
Form 7220, Part IV, column (f).
Column (p)(1). Enter penalty amounts for failure to satisfy the
apprenticeship requirements related to a net EPE amount from
Form 7220, Part III, column (i).
Column (p)(2). Enter penalty amounts for failure to satisfy the
apprenticeship requirements related to a non-net EPE amount
from Form 7220, Part III, column (i).
Column (p)(3). Enter penalty amounts for failure to satisfy the
apprenticeship requirements not related to an EPE amount from
Form 7220, Part III, column (i).
Penalty ratio. The PWA penalties reported in columns (o)(1) (o)(3) and (p)(1) - (p)(3) must be apportioned based on the ratio
of EPE, non-net EPE, and non-EPE amounts. If you do not have
an EPE enter the full penalty amounts in columns (o)(3) and/or
(p)(3). If you do have EPE amounts that must be apportioned,
use the ratio equations below.
Net EPE ratio

=

Non-net EPE ratio

=

Non-EPE ratio

=

Part I, column (d)
Part I, column (a)

Recapture
Column (g). Enter recapture percentage. See Line 15, later.
Enter “N/A” if more than one recapture event on one line.
Column (h). Enter amount of column (a) recaptured, including
reduction of carryover. See Basis Adjustment on Recapture,
earlier, and Worksheet 3, later.
Column (i). Enter portion of column (h) reducing credit
carryover in column (f).

Part I, column (c)
Part I, column (a)

Part I, column (e)
Part I, column (a)

Column (j). Enter portion of column (h) recapturing non-EPE
credit applied against regular tax in column (e).
Column (k). Enter portion of column (h) recapturing gross EPE
amount applied against regular tax from column (c).
Column (l). Enter portion of column (h) recapturing net EPE
amount from column (d).
4

Example. A taxpayer has the following amounts on Form 4255,
Part I.

Instructions for Form 4255 (Rev. 12-2025)

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(a)
Credit or
deduction
claimed in
prior
year(s) (as
adjusted, if
applicable)

1c
Form 7210

$1,000

(b)
(c)
(d)
(e)
Gross
Gross EPE
Net EPE
Non-EPE
elective
amount in
amount.
credit
payment column (b)
Subtract
(excess of
election
applied
column (c) column (a)
(EPE)
against
from
over
amount
regular tax column (b) column (b))
portion of
(section
that was
column (a) 38(c) limit)
applied
against
regular tax
$1,000

$300

$700

$0

The taxpayer has a $5,000 penalty amount for failure to satisfy
the prevailing wage requirements from Form 7220, Part IV,
column (f) that must be apportioned. Using the ratios above,
$3,500 (70% of $5,000) is entered in column (o)(1) and $1,500
(30% of $5,000) in column (o)(2).
Note: See Regulations section 1.45-7(c)(1) for prevailing wage
correction and penalty payment, and Regulations section
1.45-8(f)(2) for apprenticeship cure provision.

Caution: If you’re filing Form 1065 or Form 1120-S, certain
amounts from column (q) and column (r) get reported directly on
the partnership or S corporation return. Don’t report these same
amounts using the Schedule K-1 of Form 1065 or Form 1120-S.
See Partnerships and S corporations, earlier.
Column (q). Enter amount that can be reduced by
nonrefundable credits. Add amounts on:
• Lines 1a through 2z in columns (n)(1), (n)(2), and (n)(3);
• Lines 2a through 2z in columns (j), (k), and (l); and
• Lines 1a through 2z in columns (m)(1) and (m)(2).
Column (r). Enter amount that can’t be reduced by
nonrefundable credits. Add amounts on:
• Lines 1a through 2z in columns (o)(1), (o)(2), (o)(3), (p)(1), (p)
(2), and (p)(3);
• Lines 1a through 1z in columns (j), (k), and (l); and
• Lines 1b, 1g, and 1j in column (m)(3).
Column (s). Enter net EPE repaid. Add columns (l) and (n)(1).
Column (t). Enter 20% EP in column (n)(3) plus penalty
amounts for failure to satisfy the PWA requirements related to
the net and non-net EPE amounts from columns (o)(1), (o)(2),
(p)(1), and (p)(2). Add columns (n)(3), (o)(1), (o)(2), (p)(1), and
(p)(2).

Part II. Recapture Calculation
Section A—Properties
Lines A through D. Use lines A through D to describe the
property(ies) for which you must refigure the credit. If you need
to list additional properties, complete and attach additional
Forms 4255 to list all the properties for which you must refigure
the credit.

Section B—Original Credit

Use Section B to refigure the original credit.
Line 1. Enter the rate you used to figure the original credit from
the Form 3468 that you filed. For combined heat and power
system property, enter the effective rate used to figure the
original credit, taking into account the limit under section 48(c)(3)
(B).

Instructions for Form 4255 (Rev. 12-2025)

Line 3. If section 49(a)(1) didn’t apply to the property, enter -0-.
If section 49(a)(1) applied to the property, enter the net change
in nonqualified nonrecourse financing related to the property
during the tax year. Enter a net increase in nonqualified
nonrecourse financing as a positive number. Enter a net
decrease in nonqualified nonrecourse financing as a negative
number. For more information about section 49, see the
instructions for Section C.
Line 4. Subtract line 3 from line 2.
Tip: If line 3 is negative, then the entry on line 4 will be larger
than the entry on line 2.
Line 5. Multiply line 1 by line 4. If the credit for the property for
which you must refigure the credit was limited to a dollar amount
(for example, by the kilowatt limit in section 48(c)(1)(B)), don’t
enter more than the amount of the applicable limit on line 5.
Line 6. Enter the total of all credits taken for the property on
Form 3800, General Business Credit, in prior years. But don’t
include the amount of any credit previously recaptured due to an
increase in nonqualified nonrecourse financing.

Section C—Recapture From Increase in
Nonqualified Nonrecourse Financing

Use Section C to figure any increase in tax for the recapture of
an investment tax credit under section 49.
Generally, section 49(a)(1) applies to property:

• Placed in service by individuals or certain closely held

corporations during a tax year in which they were engaged in
activities described in section 465(c), and
• Used in connection with an activity subject to the at-risk loss
limitation under section 465.
The credit base of this property for investment credit
purposes may be limited if you borrowed against the property
and are protected against loss, or if you borrowed money from a
person who is related or who has an interest (other than as a
creditor) in the business activity. The credit base must be
reduced by the amount of any nonqualified nonrecourse
financing related to the property at the end of the tax year.
If, at the close of a tax year following the year property
described in section 49(a)(1) was placed in service, the
nonqualified nonrecourse financing for the property has
increased or decreased, then the credit base for the property
changes accordingly. The changes may result in an increased
credit or a recapture of the credit in the year of the change. See
sections 49 and 465 for details.
Line 8. If the original credit had been figured using the
current-year tax base in the year the property was first placed in
service, you may have been able to use other general business
credits instead. Use Worksheet 1 to calculate the amount of
unused general business credits that would have been allowed
under section 38.
Tip: When completing Worksheet 1, include any general
business credits that could have been carried forward or carried
back to a year affected by the recapture of the original credit.
5

DRAFT

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Totals by Type

Line 2. Enter the credit base (cost or other basis) that you used
to figure the original credit.
If section 49(a)(1) applied to the property and there was a net
increase in nonqualified nonrecourse financing with respect to
the property in previous tax years, enter the credit base you used
to figure the original credit, reduced by the amount of that net
increase. If there was a net decrease in nonqualified
nonrecourse financing with respect to the property in previous
tax years, enter the credit base you used to figure the original
credit, increased by the amount of that net decrease. For more
details, see the instructions for Section C.

TREASURY/IRS AND OMB USE ONLY DRAFT
Worksheet 1
Use Worksheet 1 to calculate the amount of unused general business credits that would have been allowed instead of the credit from
the recapture property. If you need to account for more than 5 years, complete Steps 4 through 6 for those years on additional copies
of the worksheet. Include the total for all years on Step 7.
Year
______

Year
______

Year
______

Year
______

Step 1. Identify the first year that the aggregate amount of credit
allowed for the property was more than the amount on line 5.
Enter the excess as a positive number . . . . . . . . . . . . . . . . . .
______
Step 2. Figure the amount of other general business credits that
could have been used in that year had the amount in Step 1 not
been allowed. Enter the result as a positive number . . . . . . . .
______
Step 3. Subtract any general business credits that were actually
allowed in any previous tax year from the result of Step 2 . . . . .
______
Step 4. For the following year, figure the reduction in general business
credits that would have been allowed for that year if:
1. No amount on line 7 had been allowed as a credit, and
2. Any other credits were used as calculated in Step 2 above . . . . . . . . . .
______ ______ ______ ______
Step 5. Figure the amount of other general business credits that would have
been allowed to offset the reduction figured in Step 4 . . . . . . . . . . . . . . .
______ ______ ______ ______
Step 6. Subtract any general business credits that were actually allowed in
any previous tax year from the result of Step 5 . . . . . . . . . . . . . . . . . . . .
______ ______ ______ ______
Step 7. Repeat Steps 4 through 6 above for each of the following tax years. Then add the amount from Step 3 to the
amount from each iteration of Step 6. Enter the result on line 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Don’t include any credits that were previously recaptured. If you
previously used the credit to offset the recapture of a credit on
another property, treat it as a credit allowed in a previous tax
year.
Multiple recapture properties. If you are recapturing
investment credits from multiple properties in Section C,
complete Form 4255, Part II, Section C, line 7, for each property
before using Worksheet 1. Then fill out Worksheet 1, reapplying
any allowable investment credits as if no credit had been allowed
for any of the properties in excess of the refigured credit for that
property on line 5. As you complete the worksheet, separately
identify the amount of unused general business credits that
could have been used instead of the excess credit from each
property. If an unused general business credit could have been
used instead of the excess credit from more than one property
(for example, the amount figured in Step 1 or Step 3 for a single
year is attributable to more than one property), apply the unused
credit to the property with the highest original credit rate on
line 1. When completing Step 7, add the amounts from Steps 3
and 6 separately by property and enter the results in the
corresponding property column of line 8.
Caution: In calculating the amount reported on line 8, the
tentative minimum tax (TMT) limitation in section 38(c)(1)(A)
applies to all GBCs except to the specified credits listed in
section 38(c)(4)(B) and to any eligible small business credits
from 2010 (ESBCs) under former section 38(c)(5). For specified
credits and ESBCs, TMT in section 38(c)(1)(A) is deemed $0.

Section D—Recapture From Disposition of
Property, Cessation of Use as Qualified Credit
Property, or Certain Expansions in Connection
With Advanced Manufacturing Facilities
Use Section D to figure any increase in tax for the recapture of
an investment tax credit under section 50.

Line 10. Enter the date (MM/DD/YYYY) on which the property
was placed in service, using the first day of the month in which
6

Total

______

______
______

the property was placed in service. For example, if the property
was placed in service on February 20, 2023, enter 02/01/2023
on line 10. See Regulations section 1.47-1(c) for more
information.
Line 11. Generally, this will be the date you disposed of the
property. For more details, see Regulations section 1.47-1(c).
For recapture of the advanced manufacturing credit under
section 48D, enter the date of the applicable transaction. See
section 50(a)(3) and (7) and Regulations section 1.50-2.
Line 12. Don’t enter partial years. If the property was held less
than 12 months, enter -0-. In case of failure to attain or maintain
the separation and sequestration requirements applicable to a
Phase II or III gasification program or a Phase II or III advanced
coal program, enter -0-. In case of an applicable transaction by
an applicable taxpayer before the close of the 10-year period
beginning on the date such taxpayer placed in service
investment credit property that is eligible for the advanced
manufacturing investment credit, enter -0-.
Line 13. If you had never taken the recaptured credit, you may
have been able to use other general business credits instead.
Use Worksheet 2 to calculate the amount of unused general
business credits that would have been allowed under section 38.
Tip: When completing Worksheet 2, include any general
business credits that could have been carried forward or carried
back to a year affected by the recapture of the original credit.
Don’t include any credits that were previously recaptured. If you
previously used the credit to offset the recapture of a credit on
another property, treat it as a credit allowed in a previous tax
year.
Multiple recapture properties. If you are recapturing
investment credits from multiple properties in Section D,
complete Form 4255, Section B, line 6, for each property before
using Worksheet 2. Then fill out Worksheet 2, reapplying any
allowable investment credits as if no credit had been allowed for
any of the properties. As you complete the worksheet, separately
identify the amount of unused general business credits that
Instructions for Form 4255 (Rev. 12-2025)

DRAFT

DRAFT

Steps

First
Year
______

TREASURY/IRS AND OMB USE ONLY DRAFT
Worksheet 2
Use Worksheet 2 to calculate the amount of unused general business credits that would have been allowed under section 38 had
there been no credit from the recapture property. If you need to account for more than 5 years, complete Steps 4 through 6 for those
years on additional copies of the worksheet. Include the total for all years on Step 7.
First
Year
______

Year
______

Year
______

Year
______

Year
______

Step 1. Identify the first year that an amount from line 6 was
allowed as a credit. Enter that amount as a positive number . . .
______
Step 2. Figure the amount of other general business credits that
could have been used in that year had the amount in Step 1 not
been allowed. Enter the result as a positive number . . . . . . . .
______
Step 3. Subtract any general business credits that were actually
allowed in any previous tax year from the result of Step 2 . . . . .
______
Step 4. For the following year, figure the reduction in general business
credits that would have been allowed for that year if:
1. No amount on line 6 had been allowed as a credit, and
2. Any other credits were used as calculated in Step 2 above . . . . . . . . . .
______ ______ ______ ______
Step 5. Figure the amount of other general business credits that would have
been allowed to offset the reduction figured in Step 4 . . . . . . . . . . . . . . .
______ ______ ______ ______
Step 6. Subtract any general business credits that were actually allowed in
any previous tax year from the result of Step 5 . . . . . . . . . . . . . . . . . . . .
______ ______ ______ ______
Step 7. Repeat Steps 4 through 6 above for each of the following tax years. Then add the amount from Step 3 to the
amount from each iteration of Step 6. Enter the result on line 13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total

______

______

DRAFT

DRAFT

Steps

______

could have been used instead of the recaptured credit from each
property. If an unused general business credit could have been
used instead of a recaptured credit from more than one property
(for example, the amount figured in Step 1 or Step 3 for a single
year is attributable to more than one property), apply the unused
credit first to the property with the highest recapture percentage
on line 15. When completing Step 7, add the amounts from
Steps 3 and 6 separately by property and enter the results in the
corresponding property column of line 13.

cessation of use as an investment credit property or an
applicable transaction.

Caution: In calculating the amount reported on line 13, the
tentative minimum tax (TMT) limitation in section 38(c)(1)(A)
applies to all GBCs except to the specified credits listed in
section 38(c)(4)(B) and to any eligible small business credits
from 2010 (ESBCs) under former section 38(c)(5). For specified
credits and ESBCs, TMT in section 38(c)(1)(A) is deemed $0.

Use Part III to calculate the emissions tier recapture amount. See
Description of Emissions Tier Recapture, earlier. Enter the total
increase in tax resulting from emissions tier recapture in Part I,
line 1j, column (h). See Line 1j, column (h), earlier.

Line 14. Subtract line 13 from line 6 to calculate the aggregate
decrease in general business credits that would have been
allowed under section 38 had there been no credit from this
property.
Line 15. Enter the recapture percentage from the following
table. Enter 100 for certain expansions in connection with
advanced manufacturing facilities. See section 50(a)(3)(A).
IF the number of full years on
line 12 of Form 4255 is . . .

THEN the recapture percentage
is . . .

0
1
2
3
4
5 or more

100
80
60
40
20
0

Line 16. Multiply the amount on line 14 by the percentage on
line 15 to calculate the recapture tax due to disposition or

Instructions for Form 4255 (Rev. 12-2025)

Line 17. If applicable, enter the IRS-issued registration number
for your facility with an EPE or credit transfer election.

Part III. Emissions Tier Recapture for Property
That Is Part of a Specified Clean Hydrogen
Production Facility

Examples
Example 1. Investment credit recapture. In January of
2023, you claimed an energy credit of $100,000 on property A.
You used $20,000 of the credit to offset tax in 2023 and used
$16,000 as a carryforward to offset tax in 2024. You had $64,000
remaining carryforward for property A at the end of 2024. You
have no other tax credits for other properties for any other years.
You disposed of the property in June of 2025. Your recapture
percentage is 60%. Because you have no other credits for
properties for other years, you enter -0- on line 13. You enter
$36,000 on line 6 (the credit from property A used in 2023 and
2024). Your total increase in tax for 2025 is $21,600 (60% of
$36,000). Your remaining credit carryforward for property A is
also reduced by the recapture percentage of 60%. Your
remaining carryforward is $25,600 (40% of $64,000). You
increase your basis for property A by $60,000 ($21,600 +
$38,400).
Example 2. Investment credit recapture. The facts are the
same as in Example 1, except that you also claimed an energy
credit on property B in 2023 of $12,000, which you didn’t use to
offset your tax. As before, you disposed of property A in June of
2025. You enter $36,000 on line 6 (the credit from property A
used in 2023 and 2024). However, you could have used your
$12,000 of unused credit from property B for 2023 against your
7

TREASURY/IRS AND OMB USE ONLY DRAFT
2023 tax had no credit been available from property A.
Therefore, you enter $12,000 on line 13 and $24,000 ($36,000 $12,000) on line 14. Your total increase in tax for 2025 is $14,400
(60% of $24,000). Your remaining credit carryforward for
property A is also reduced by the recapture percentage of 60%.
Your remaining carryforward is $25,600 (40% of $64,000). You
increase your basis for property A by $52,800 ($14,400 +
$38,400).

Example 4. Investment credit recapture. In July of 2023,
you claimed an energy credit of $100,000 from property A. You
used $1,000 of the credit to offset tax in 2023 and used $99,000
as a carryforward to offset tax in 2024. In 2025, you claimed an
energy credit of $75,000 from property B and used none of the
credit to offset tax.
On February 1, 2025, property A ceased to be investment
credit property and you must refigure the credit from property A.
Your recapture percentage is 80%. You enter $100,000 on line 6.
No carryback or carryforward credits are available for 2023 to
offset the $1,000 credit used for property A. However, you could
have carried the energy credit of $75,000 from property B back
to 2024 had no credit been available from property A that year.
Therefore, you enter $75,000 on line 13 and $25,000 ($100,000 $75,000) on line 14. Your total increase in tax for 2025 is $20,000
(80% of $25,000). You increase your basis in property A by
$20,000.
Example 5. Transfer of eligible credits and recapture to a
transferor partnership. A and B each contributed $150,000 of
cash to AB partnership for the purpose of investing in energy
property. The partnership agreement provides that A and B
share equally in all items of income, gain, loss, deduction, and
credit of AB partnership. AB partnership invests $300,000 in an
energy property in accordance with section 48 and places the
energy property in service on January 1, 2024. As of the end of
2024, AB partnership has $90,000 of eligible credits under
section 48 for the energy property. Before the due date for AB

8

Example 6. Basis reduction and recapture for EPE. In
December 2023, G, a government entity, places in service P,
which is energy property eligible for the energy credit determined
under section 48 (section 48 credit). G properly completes the
pre-filing registration in accordance with Regulations section
1.6417-5 as an applicable entity to make an election under
section 6417 for 2023. G timely files its 2023 Form 990-T in
2024, properly making the EPE in accordance with Regulations
section 1.6417-2 for a section 48 energy credit determined with
respect to P. On its Form 990-T, G properly determines that the
amount of section 48 credit determined with respect to P is
$100,000 and that its net elective payment amount is $100,000.
The IRS sends G a $100,000 refund. Pursuant to section 50(c),
G reduces its basis in P by $50,000.
In July 2025, P ceases to be investment credit property with
respect to G. Because this occurs before the close of the
recapture period set forth in section 50, section 50(a)(1)(A)
provides that the tax under chapter 1 for 2025 is increased by
the recapture percentage of the aggregate decrease in the
credits allowed under section 38 for all prior tax years that would
have resulted solely from reducing to zero any credit determined
under subpart E of part IV of subchapter A of chapter 1 with
respect to such property. Because P ceased to be investment
credit property within 2 full years after P was placed in service,
section 50(a)(1)(B) provides that the recapture percentage is
80%. G must properly report the recapture event in 2025, paying
an $80,000 tax. Because G is a government entity, G reports the
recapture event on a Form 990-T or any Form provided in further
guidance, along with supplemental forms such as Form 4255,
Certain Credit Recapture, Excessive Payments, and Penalties.
G's basis in P is increased by $40,000.

Instructions for Form 4255 (Rev. 12-2025)

DRAFT

DRAFT

Example 3. Investment credit recapture. In January of
2023, you claimed an energy credit of $100,000 from property A.
You used all of the credit to offset $100,000 of tax in 2023. In
2024, you claimed an energy credit of $75,000 from property B
and used none of the credit to offset tax. In June of 2025,
property A ceased to be investment credit property and you must
refigure the credit from property A. Your recapture percentage is
60%. You enter $100,000 on line 6. However, you could have
carried the energy credit of $75,000 from property B back to
2023 had no credit been available from property A. Therefore,
you enter $75,000 on line 13 and $25,000 ($100,000 - $75,000)
on line 14. Your total increase in tax for 2025 is $15,000 (60% of
$25,000). You increase your basis in property A by $15,000.

partnership's 2024 tax return (with extension), AB partnership
transfers the $90,000 of eligible credits to an unrelated
transferee taxpayer X for $80,000.
In 2025, A reduces its proportionate interest in the general
profits of AB partnership by 50%, causing a recapture event to A
under Regulations section 1.47-6(a)(2). The energy property
isn’t disposed of by the transferor partnership and continues to
be energy property with respect to such transferor partnership.
AB partnership should not provide notice of recapture to
transferee taxpayer X as a result of the recapture event under
Regulations section 1.47-6(a)(2) for A’s sale and transferee
taxpayer X isn’t liable for any recapture amount. A, however, is
subject to recapture as provided in Regulations section 1.47-6(a)
(2) and based on its share of the basis (or cost) of the energy
property to which the eligible credits were determined under
Regulations section 1.46-3(f)(2).

TREASURY/IRS AND OMB USE ONLY DRAFT
Worksheet 3
Use Worksheet 3 to calculate the recapture amount for any failure to satisfy the prevailing wage requirements with respect to the
alteration or repair of any project under sections 48 and 48E.
Property, Project, Facility, or Technology
Enter the type of property, project, facility, or technology and its address.
A
B
C
D

Property, Project, Facility, or Technology
B

C

D

1 Amount of section 48E or 48 credit that
was originally calculated on Form 3468,
Part V, lines 1c and/or 3c and/or Part VI,
lines 1c, 3c, 5h, 7c, 9e, 11f, 13c, 15c, 17c,
19c, 21c, 23c, 25c, 25f, 25i, and/or 25l.
Only include amounts for meeting the
prevailing wage requirements . . . . . . . .

DRAFT

DRAFT

A

2 Multiply line 1 by 0.80 . . . . . . . . . . . .
3 Date property/project/facility/technology
was placed in service . . . . . . . . . . . . .
4 Date property/project/facility/technology
failed prevailing wage requirements . . .
5 Number of full years between the date on
line 3 and the date on line 4 . . . . . . . . .
6 Recapture percentage. See the table
below . . . . . . . . . . . . . . . . . . . . . . . . .
7 Multiply line 2 by the percentage on
line 6 . . . . . . . . . . . . . . . . . . . . . . . . .
8 IRS-issued registration number, if
applicable . . . . . . . . . . . . . . . . . . . . .
9 Total increase in tax. Add columns A
through D, line 7. Enter here and on the
applicable line(s) in Part I, column (h) . .

IF the number of full years on
line 5 is . . .

THEN the recapture percentage
is . . .

0
1
2
3
4
5 or more

Instructions for Form 4255 (Rev. 12-2025)

100
80
60
40
20
0

9

TREASURY/IRS AND OMB USE ONLY DRAFT
Paperwork Reduction Act Notice. We ask for the information on this form to carry out the Internal Revenue laws of the United
States. You are required to give us the information. We need it to ensure that you are complying with these laws and to allow us to
figure and collect the right amount of tax.
You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act unless the form
displays a valid OMB control number. Books or records relating to a form or its instructions must be retained as long as their contents
may become material in the administration of any Internal Revenue law. Generally, tax returns and return information are confidential,
as required by section 6103.
The time needed to complete and file this form will vary depending on individual circumstances. The estimated burden for individual
and business taxpayers filing this form is approved under OMB control number 1545-0074 and 1545-0123 and is included in the
estimates shown in the instructions for their individual and business income tax returns. The estimated burden for all other taxpayers
who file this form is shown below.
Recordkeeping . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6 hr., 27 min.

Learning about the law or the form. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 hr., 35 min.

Preparing and sending the form to the IRS . . . . . . . . . . . . . . . . . . . . . . . . .

1 hr., 46 min.

DRAFT

DRAFT

If you have comments concerning the accuracy of these time estimates or suggestions for making this form simpler, we would be
happy to hear from you. See the instructions for the tax return with which this form is filed.

10

Instructions for Form 4255 (Rev. 12-2025)