Fun with Form 3800

This is part of a series on Form 3800. I started with this piece about how much the public can or should learn about obscure details of law, followed by this piece about laws that divide the population between people who directly benefit from the credit and people who have never heard of the credit. This section provides examples of such laws, diving into Form 3800 (PDF) itself.

The first two pages Form 3800, General Business Credits, are largely an equation stretched out over two pages, because IRS assumes that everybody does their taxes with an abacus. Skip to Part III on page three, which is the list of tax subsidies.

Each line is its own story. If I had a class of 36 or fewer students, I’d give each student one line to dig into.

Line 1u is miner rescue training credits, because apparently companies underinvest in the training to rescue their employees in case of disaster.

Line 1n is a credit for wholesalers on every case they buy of distilled spirits bottled in the U.S.

There is a class of investment corporation aimed at low-income areas, with community members on the board. These corporations get a credit on Line 1i, “new markets”. Unpacking the IRS description of low-income areas of the U.S. as “new markets” is an essay that will have to wait for another day.

Does your business have fewer than 30 employees, and do you have to comply with the Americans with Disabilities Act, because it is a federal law? Line 1e will help you out. It also covers recording books on tape and other steps toward a more accessible world, as long as they are by a small business.

Are you a smaller railroad company (not one of the big seven) who has privately-owned facilities that you use to operate your business? Great, line 4g will help you out.

Does your company do research and experimentation (R&E)? It probably does, given that those broad terms are left undefined in the US Code, though please bear in mind that this credit applies to “research or experimental expenditure only to the extent that the amount thereof is reasonable under the circumstances.” First, you get to expense your investment instead of depreciating it (on Form 4562). It’s too boring for news coverage, but minor changes in depreciation rules can have a massive effect on what corporations pay in taxes, and the rule that R&E depreciates immediately is at this point a relatively major part of the tax code.

Second, did you increase your R&E spending this year relative to years past? That too merits a tax credit, on line 1c.

It’s up to you if you want to be outraged that these carve-outs exist, or delighted that there are subsidies in place for helping the disabled get to work, providing childcare facilities for employees (line 1k), and making wholesale purchases of Skyy vodka. My joking descriptions aside, I don’t want to make thumbs-up or thumbs-down judgments here.

But I’m betting that you didn’t know that these credits even exist. Yet here they are, clearly listed on page three of Form 3,800. You can see that it’s an active page, with spaces for new credits and blanks for elimination of old credits (like line 1v, which was a credit for theft prevention measures on fertilizers and pesticides). It’s certainly a long list, with line one alone going all the way through the alphabet to part 1bb. Check the instructions to line 1zz for the list of credits that have been dropped in recent history, like Hurricane Katrina-related credits, which is not nearly as long.

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