# ASC 323-740-55: Investments—Equity Method and Joint Ventures — Income Taxes—Proportional Amortization Method — 55 Implementation Guidance and Illustrations Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/323/740/#55-implementation-guidance-and-illustrations) Study and research edition. Verify current requirements with the official source. Summaries, enrichment, and tags are machine-generated study aids. Paragraph html preserves source markup; snippet is abbreviated. Pending content is not necessarily effective. Tables and mathematical or amendment markup are retained as HTML where Markdown would lose structure. Source downloaded (UTC): 2026-09-09T23:41:32.886Z to 2026-09-09T23:41:32.886Z Record version: sha256:e74190859775c112805ea012b17998913d5f0cc94323d42f262278a9278c5869 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 323-740-55: 55 Implementation Guidance and Illustrations [Read section](https://asc.understandingaccounting.org/asc/323/740/#55-implementation-guidance-and-illustrations) SEC content: no ### Proportional Amortization Method ##### [323-740-55-1](https://asc.understandingaccounting.org/asc/323/740/#323-740-55-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:41:32.886Z to 2026-09-09T23:41:32.886Z Record version: sha256:4d8d1e06b5e2b840e0d81fb780b5ee73e627bfb2019b37d8637b4e03f6c50b83 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Section is an integral part of the requirements of this Subtopic. #### Illustrations ##### [323-740-55-2](https://asc.understandingaccounting.org/asc/323/740/#323-740-55-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:41:32.886Z to 2026-09-09T23:41:32.886Z Record version: sha256:15d873bf5df9e19ceef2988a21b43675581871fea769ed7a47dbba46524d0a95 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates the application of the proportional amortization method of accounting for a limited liability investment in a low-income-housing tax credit structure, which is a type of investment that may be eligible to be accounted for using the proportional amortization method. ##### [323-740-55-3](https://asc.understandingaccounting.org/asc/323/740/#323-740-55-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:41:32.886Z to 2026-09-09T23:41:32.886Z Record version: sha256:e57f5e029fe1912774adcb4ef393b8620869046ca1736e6b484c60e532fcb3bc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following are the terms for this Example. - ![](https://asc.understandingaccounting.org/asc-img/GUID-4259E733-D2B4-486F-A112-0A8B29A66143-low.gif) Date of investment "January 1, 20X1" Purchase Price of Investment " $100,000 " ##### [323-740-55-4](https://asc.understandingaccounting.org/asc/323/740/#323-740-55-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:41:32.886Z to 2026-09-09T23:41:32.886Z Record version: sha256:8600a98a8fae1bde24be2e462677d1646ffd9e958fe23d25a690b253f7790379 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example has the following assumptions: 1. a All cash flows (except initial investment) occur at the end of each year. 2. b Depreciation expense is computed, for book and tax purposes, using the straight-line method with a 27.5 year life (the same method is used for simplicity). 3. c The investor made a $100,000 investment for a 5 percent limited partnership interest in the project at the beginning of the first year of eligibility for the tax credit. 4. d The partnership finances the project cost of $4,000,000 with 50 percent equity and 50 percent debt. 5. e The annual tax credit allocation (equal to 4 percent of the project's original cost) will be received for a period of 10 years. 6. f The investor's tax rate is 40 percent. 7. g The project will operate with break-even pretax cash flows including debt service during the first 15 years of operations. 8. h The project's taxable loss will be equal to depreciation expense. The cumulative book loss (and thus the cumulative depreciation expense) recognized by the investor is limited to the $100,000 investment. 9. i [Subparagraph superseded by Accounting Standards Update No. 2014-01](https://asc.understandingaccounting.org/updates/asu-2014-01/). 10. j It is assumed that all requirements are met to retain allocable tax credits so there will be no recapture of tax credits. 11. k The investor expects that the estimated residual value of the investment will be zero. 12. l All of the conditions described in paragraph [323-740-25-1](https://asc.understandingaccounting.org/asc/323/740/#323-740-25-1) are met to apply the proportional amortization method, and the entity has elected to use the proportional amortization method to account for its tax equity investments in this tax credit program in accordance with paragraph [323-740-25-4](https://asc.understandingaccounting.org/asc/323/740/#323-740-25-4). ##### [323-740-55-5](https://asc.understandingaccounting.org/asc/323/740/#323-740-55-5) Pending content: no Source downloaded (UTC): 2026-09-09T23:41:32.886Z to 2026-09-09T23:41:32.886Z Record version: sha256:f7ac188e9e81033d0629894255b0178ad4838d8f0b78466ef64cacaa8f346c76 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An analysis of the proportional amortization method follows. - ![](https://asc.understandingaccounting.org/asc-img/GUID-22F33BDA-CDD8-47BB-A76F-BA545BB4C2CE-low.gif) EITF 13-B Examples: Comparison of Effecftive Yield and Proportional Amortization Methods Effective Yield Method Year "Net Investment (1)" After Tax Effective Yield (2) "Amortization of Investment (3)" "Pre-tax Amortization of Investment (4)" "Tax Credits (5)" "Net losses/Tax Depreciation (6)" Tax Savings (7) "Total Tax Benefit (8)" "Current Tax Benefit (9)" "Deferred Tax Benefit (Expense) (10)" "Impact on Net Income (11)" 0 " $(100,000)" 1 " $95,289 " " $14,198 " " $4,711 " " $3,004 " " $16,000 " " $7,273 " " $2,909 " " $18,909 " " $15,905 " " $(1,708)" " $14,198 " 2 " 89,909 " " 13,529 " " 5,380 " " 4,118 " " 16,000 " " 7,273 " " 2,909 " " 18,909 " " 14,791 " " (1,262)" " 13,529 " 3 " 83,764 " " 12,765 " " 6,144 " " 5,392 " " 16,000 " " 7,273 " " 2,909 " " 18,909 " " 13,517 " (752) " 12,765 " 4 " 76,748 " " 11,893 " " 7,016 " " 6,845 " " 16,000 " " 7,273 " " 2,909 " " 18,909 " " 12,064 " (171) " 11,893 " 5 " 68,736 " " 10,897 " " 8,013 " " 8,506 " " 16,000 " " 7,273 " " 2,909 " " 18,909 " " 10,403 " 493 " 10,897 " 6 " 59,585 " " 9,759 " " 9,150 " " 10,402 " " 16,000 " " 7,273 " " 2,909 " " 18,909 " " 8,507 " " 1,252 " " 9,759 " 7 " 49,136 " " 8,460 " " 10,449 " " 12,567 " " 16,000 " " 7,273 " " 2,909 " " 18,909 " " 6,342 " " 2,118 " " 8,460 " 8 " 37,203 " " 6,976 " " 11,933 " " 15,040 " " 16,000 " " 7,273 " " 2,909 " " 18,909 " " 3,869 " " 3,107 " " 6,976 " 9 " 23,576 " " 5,282 " " 13,627 " " 17,863 " " 16,000 " " 7,273 " " 2,909 " " 18,909 " " 1,046 " " 4,236 " " 5,282 " 10 " 8,014 " " 3,347 " " 15,562 " " 21,088 " " 16,000 " " 7,273 " " 2,909 " " 18,909 " " (2,179)" " 5,526 " " 3,347 " 11 " 6,243 " " 1,138 " " 1,771 " " (1,896)" - " 7,273 " " 2,909 " " 2,909 " " 4,806 " " (3,668)" " 1,138 " 12 " 4,220 " 886 " 2,023 " " (1,477)" - " 7,273 " " 2,909 " " 2,909 " " 4,386 " " (3,500)" 886 13 " 1,911 " 599 " 2,310 " (999) - " 7,273 " " 2,909 " " 2,909 " " 3,908 " " (3,309)" 599 14 - 271 " 1,911 " (452) - " 5,455 " " 2,182 " " 2,182 " " 2,634 " " (2,363)" 271 15 - - - - - - - - - - - Total " $100,000 " " $100,000 " " $100,000 " " $160,000 " " $100,000 " " $40,000 " " $200,000 " " $100,000 " $(0) " $100,000 " internal rate of return based on tax credits and other tax benefits 14.20% (1) End-of-year investment for a 5% limited partnership interest in the project net of amortization in Column (3) (2) Beginning investment x 14.20% (3) Column (5) + (Column (6) x 40% tax rate) - Column (2) (4) (Column (5) - Column (2)) / (1 - 40% tax rate) (5) "8 percent tax credit on $200,000 tax basis of underlying assets" (6) "Depreciation (on $200,000 tax basis of the underlying assets) using the straight-line method over 27.5 years." (7) Column (6) x 40% tax rate (8) Column (5) + Column (7) (9) Column (5) - Column (4) + (Column (6) x 40% tax rate). (10) "The change in deferred taxes resulting from the difference between the book and tax bases of the investment. In this Example, that amount can be determined as follows: (Column (4) - Column (6)) x 40% tax rate." (11) Column (9) + Column (10) STAFF RECOMMENDATION Proportional Amortization Method - Amortization in proportion to tax credits only Year "Net Investment (1)" "Tax Basis of Investment (2)" "Amortization of Investment (3)" "Tax Credits (4)" "Net losses/Tax Depreciation (5)" Tax Savings (6) "Total Tax Benefit (7)" "Deductible Temporary Difference (8)" Deferred Tax Asset (9) "Current Tax Benefit (10)" "Deferred Tax Benefit (Expense) (11)" "Impact on Net Income (12)" 0 " $(100,000)" 1 " $90,000 " " $92,727 " " $10,000 " " $16,000 " " $7,273 " " $2,909 " " $18,909 " " $2,727 " " $1,091 " " $8,909 " " $1,091 " " $10,000 " 2 " 80,000 " " 85,455 " " 10,000 " " 16,000 " " 7,273 " " 2,909 " " 18,909 " " 5,455 " " 2,182 " " 8,909 " " 1,091 " " 10,000 " 3 " 70,000 " " 78,182 " " 10,000 " " 16,000 " " 7,273 " " 2,909 " " 18,909 " " 8,182 " " 3,273 " " 8,909 " " 1,091 " " 10,000 " 4 " 60,000 " " 70,909 " " 10,000 " " 16,000 " " 7,273 " " 2,909 " " 18,909 " " 10,909 " " 4,364 " " 8,909 " " 1,091 " " 10,000 " 5 " 50,000 " " 63,636 " " 10,000 " " 16,000 " " 7,273 " " 2,909 " " 18,909 " " 13,636 " " 5,455 " " 8,909 " " 1,091 " " 10,000 " 6 " 40,000 " " 56,364 " " 10,000 " " 16,000 " " 7,273 " " 2,909 " " 18,909 " " 16,364 " " 6,545 " " 8,909 " " 1,091 " " 10,000 " 7 " 30,000 " " 49,091 " " 10,000 " " 16,000 " " 7,273 " " 2,909 " " 18,909 " " 19,091 " " 7,636 " " 8,909 " " 1,091 " " 10,000 " 8 " 20,000 " " 41,818 " " 10,000 " " 16,000 " " 7,273 " " 2,909 " " 18,909 " " 21,818 " " 8,727 " " 8,909 " " 1,091 " " 10,000 " 9 " 10,000 " " 34,545 " " 10,000 " " 16,000 " " 7,273 " " 2,909 " " 18,909 " " 24,545 " " 9,818 " " 8,909 " " 1,091 " " 10,000 " 10 - " 27,273 " " 10,000 " " 16,000 " " 7,273 " " 2,909 " " 18,909 " " 27,273 " " 10,909 " " 8,909 " " 1,091 " " 10,000 " 11 - " 20,000 " - - " 7,273 " " 2,909 " " 2,909 " " 20,000 " " 8,000 " " 2,909 " " (2,909)" - 12 - " 12,727 " - - " 7,273 " " 2,909 " " 2,909 " " 12,727 " " 5,091 " " 2,909 " " (2,909)" - 13 - " 5,455 " - - " 7,273 " " 2,909 " " 2,909 " " 5,455 " " 2,182 " " 2,909 " " (2,909)" - 14 - - - - " 5,455 " " 2,182 " " 2,182 " - - " 2,182 " " (2,182)" - 15 - - - - - - - - - - - - Total " $100,000 " " $160,000 " " $100,000 " " $40,000 " " $200,000 " " $100,000 " $- " $100,000 " (1) End-of-year investment for a 5% limited partnership interest in the project net of amortization in Column (3) (2) Beginning investment - Column (5) (3) "Initial investment of $100,000 x (Tax credits received during the year in Column (4) / Total anticipated tax credits in Column (4))" (4) "8 percent tax credit on $200,000 tax basis of underlying assets" (5) "Depreciation (on $200,000 tax basis of the underlying assets) using the straight-line method over 27.5 years." (6) Column (5) x 40% tax rate (7) Column (4) + Column (6) (8) Column (2) - Column (1) (9) Coulumn (8) x 40% tax rate (10) Column (7) - Column (3) (11) "The change in deferred taxes resulting from the difference between the book and tax bases of the investment. In this Example, that amount can be determined as follows: Difference between the current year amount in Column (9) - the prior year amount in Column (9)" (12) Column (10) + Column (11) Proportional Amortization Method - Amortization in proportion to tax credits and other tax benefits Year "Net Investment (1)" "Tax Basis of Investment (2)" "Amortization of Investment (2)" "Income Tax Credits (3)" "Net Losses/Tax Depreciation (4)" Other Income Tax Benefits from Tax Depreciation (5) "Income Tax Credits and Other Income Tax Benefits (6)" "Deductible Temporary Difference (8)" Deferred Tax Asset (9) "Current Tax Benefit (8)" "Deferred Tax Benefit (Expense) (11)" "Impact on Net Income (12)" "Income Tax Credits and Other Income Tax Benefits, Net of Amortization (7)" 0 " $(100,000)" 1 " $90,909 " " $92,727 " " $9,091 " " $8,000 " " $7,273 " " $2,909 " " $10,909 " " $2,182 " $873 " $9,454 " $873 " $10,327 " " $1,818 " 2 " 81,818 " " 85,454 " " 9,091 " " 8,000 " " 7,273 " " 2,909 " " 10,909 " " 4,364 " " 1,746 " " 9,454 " 873 " 10,327 " " 1,818 " 3 " 72,727 " " 78,181 " " 9,091 " " 8,000 " " 7,273 " " 2,909 " " 10,909 " " 6,546 " " 2,618 " " 9,454 " 873 " 10,327 " " 1,818 " 4 " 63,636 " " 70,908 " " 9,091 " " 8,000 " " 7,273 " " 2,909 " " 10,909 " " 8,728 " " 3,491 " " 9,454 " 873 " 10,327 " " 1,818 " 5 " 54,545 " " 63,635 " " 9,091 " " 8,000 " " 7,273 " " 2,909 " " 10,909 " " 10,910 " " 4,364 " " 9,454 " 873 " 10,327 " " 1,818 " 6 " 45,454 " " 56,362 " " 9,091 " " 8,000 " " 7,273 " " 2,909 " " 10,909 " " 13,092 " " 5,237 " " 9,454 " 873 " 10,327 " " 1,818 " 7 " 36,363 " " 49,089 " " 9,091 " " 8,000 " " 7,273 " " 2,909 " " 10,909 " " 15,274 " " 6,110 " " 9,454 " 873 " 10,327 " " 1,818 " 8 " 27,272 " " 41,816 " " 9,091 " " 8,000 " " 7,273 " " 2,909 " " 10,909 " " 17,456 " " 6,982 " " 9,454 " 873 " 10,327 " " 1,818 " 9 " 18,181 " " 34,543 " " 9,091 " " 8,000 " " 7,273 " " 2,909 " " 10,909 " " 19,638 " " 7,855 " " 9,454 " 873 " 10,327 " " 1,818 " 10 " 9,090 " " 27,270 " " 9,091 " " 8,000 " " 7,273 " " 2,909 " " 10,909 " " 21,820 " " 8,728 " " 9,454 " 873 " 10,327 " " 1,818 " 11 " 6,666 " " 19,997 " " 2,424 " - " 7,273 " " 2,909 " " 2,909 " " 16,002 " " 6,401 " " 1,454 " " (2,327)" (873) 485 12 " 4,242 " " 12,724 " " 2,424 " - " 7,273 " " 2,909 " " 2,909 " " 10,184 " " 4,074 " " 1,454 " " (2,327)" (873) 485 13 " 1,818 " " 5,451 " " 2,424 " - " 7,273 " " 2,909 " " 2,909 " " 4,366 " " 1,746 " " 1,454 " " (2,327)" (873) 485 14 - 0 " 1,818 " - " 5,451 " " 2,183 " " 2,183 " 0 0 " 1,098 " " (1,746)" (648) 365 15 - - - - - - - - - - - - - Total " $100,000 " " $80,000 " " $100,000 " " $40,000 " " $120,000 " " $100,000 " $0 " $100,000 " " $20,000 " (1) End-of-year investment for a 5% limited liability interest in the project net of amortization in Column (2). (2) "Initial investment of $100,000 x (total income tax benefits received during the year in Column (6) / total anticipated income tax benefits over the life of the investment of $120,000)." (3) "4 percent income tax credit on $200,000 tax basis of underlying assets." (4) "Depreciation (on $200,000 tax basis of the underlying assets) using the straight-line method over 27.5 years up to the amount of the initial investment of $100,000." (5) Column (4) x 40% tax rate. (6) Column (3) + Column (5). (8) Column (2) - Column (1) (9) Coulumn (8) x 40% tax rate (8) Column (7) - Column (3) (11) "The change in deferred taxes resulting from the difference between the book and tax bases of the investment. In this Example, that amount can be determined as follows: Difference between the current year amount in Column (9) - the prior year amount in Column (9)" (12) Column (10) + Column (11) (7) Column (6) – Column (2). ##### [323-740-55-6](https://asc.understandingaccounting.org/asc/323/740/#323-740-55-6) Pending content: no Source downloaded (UTC): 2026-09-09T23:41:32.886Z to 2026-09-09T23:41:32.886Z Record version: sha256:73ea046c536964b5af777055857aace06a43e7a6f8bbadd65edd03415c116fe5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-01](https://asc.understandingaccounting.org/updates/asu-2014-01/). ##### [323-740-55-7](https://asc.understandingaccounting.org/asc/323/740/#323-740-55-7) Pending content: no Source downloaded (UTC): 2026-09-09T23:41:32.886Z to 2026-09-09T23:41:32.886Z Record version: sha256:4ffe81d2cb6cf12d6e89987afc123b5d3293fddd550d08c85a385b06122ab22b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2023-02.](https://asc.understandingaccounting.org/updates/asu-2023-02/) ##### [323-740-55-8](https://asc.understandingaccounting.org/asc/323/740/#323-740-55-8) Pending content: no Source downloaded (UTC): 2026-09-09T23:41:32.886Z to 2026-09-09T23:41:32.886Z Record version: sha256:47e84978dc50579d3903a948c39abd7ec45315b41c5961f9c1dc2b4a1751c156 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2023-02.](https://asc.understandingaccounting.org/updates/asu-2023-02/) ##### [323-740-55-9](https://asc.understandingaccounting.org/asc/323/740/#323-740-55-9) Pending content: no Source downloaded (UTC): 2026-09-09T23:41:32.886Z to 2026-09-09T23:41:32.886Z Record version: sha256:75b00f02cf6f0a516a2bdace51029acb0778b70750caa114775db8e8e6710218 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2023-02.](https://asc.understandingaccounting.org/updates/asu-2023-02/) ##### [323-740-55-10](https://asc.understandingaccounting.org/asc/323/740/#323-740-55-10) Pending content: no Source downloaded (UTC): 2026-09-09T23:41:32.886Z to 2026-09-09T23:41:32.886Z Record version: sha256:f14bf91161775c37349410c8e510311d72ae790b53c7d00bf8df0fabc70ea9c9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-01](https://asc.understandingaccounting.org/updates/asu-2014-01/). ##### [323-740-55-11](https://asc.understandingaccounting.org/asc/323/740/#323-740-55-11) Pending content: no Source downloaded (UTC): 2026-09-09T23:41:32.886Z to 2026-09-09T23:41:32.886Z Record version: sha256:1531fe29f9ec78e2e05931f954de086e8878c9ce4c6335ff0eb80d2a4125f9ba Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates the application of the proportional amortization method for an investment that generates non-income-tax-related benefits in addition to income tax credits and other income tax benefits from a tax credit program. ##### [323-740-55-12](https://asc.understandingaccounting.org/asc/323/740/#323-740-55-12) Pending content: no Source downloaded (UTC): 2026-09-09T23:41:32.886Z to 2026-09-09T23:41:32.886Z Record version: sha256:2b5f5dd16606aecc7ec311afc03636d2bd2ec04ac81d76595e0afc9e162f6d02 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following are the terms for this Example: - ![](https://asc.understandingaccounting.org/asc-img/GUID-E77BBCF2-7EAB-4584-85A7-1717712EE319-low.gif) Date of investment: "January 1, 20X1" Purchase price of investment: "$102,000" ##### [323-740-55-13](https://asc.understandingaccounting.org/asc/323/740/#323-740-55-13) Pending content: no Source downloaded (UTC): 2026-09-09T23:41:32.886Z to 2026-09-09T23:41:32.886Z Record version: sha256:d89a63bb100ed877c6b5c3d64fe21ea213824d39201cde95998a2766200db8f6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example has the following assumptions: 1. a All cash flows (except the initial investment) occur at the end of each year. 2. b Depreciation expense is computed, for book and tax purposes, using the straight-line method with a 10-year life (the same method is used for simplicity). 3. c The investor contributed $102,000, or 5 percent of the equity capital, for an interest in the limited partnership at the beginning of the first year of eligibility for the income tax credit. 4. d The partnership will receive income tax credits from an income tax credit program. The income tax credits will be received over a four-year period. 5. e There is no reduction of tax basis as a result of the income tax credits. 6. f The investor will receive cash proceeds based on a fixed percentage of the project’s cash generated during the life of the project. 7. g The investor’s tax rate is 40 percent. 8. h The income tax credits are not subject to recapture. 9. i The investor expects that the estimated residual investment will be nominal (zero is assumed for simplicity). 10. j All of the conditions described in paragraph [323-740-25-1](https://asc.understandingaccounting.org/asc/323/740/#323-740-25-1) are met to apply the proportional amortization method, and the entity has elected to use the proportional amortization method to account for its tax equity investments in this tax credit program in accordance with paragraph [323-740-25-4](https://asc.understandingaccounting.org/asc/323/740/#323-740-25-4). 11. k After 10 years, the investor has a right to require that the project sponsor purchase the investor’s equity interest for a nominal amount (zero is assumed for simplicity). It is assumed that the option will be exercised. ##### [323-740-55-14](https://asc.understandingaccounting.org/asc/323/740/#323-740-55-14) Pending content: no Source downloaded (UTC): 2026-09-09T23:41:32.886Z to 2026-09-09T23:41:32.886Z Record version: sha256:18cc1160e9e415b3982db8a2ea6e594d25ed7a324946d6c18eab41c514ecf07c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An analysis of the proportional amortization method follows. - ![](https://asc.understandingaccounting.org/asc-img/GUID-4041E1C6-C095-456C-9C53-F508459B4386-low.gif) Year "Net Investment (a)" Amortization of Investment (b) Income Tax Credits (c) Net Losses / Tax Depreciation (d) Other Income Tax Benefits from Tax Depreciation (e) "Income Tax Credits and Other Income Tax Benefits (f)" "Income Tax Credits and Other Income Tax Benefits, Net of Amortization (g)" "Non-Income-Tax-Related Cash Returns (h)" 1 " $81,600 " " $20,400 " " $20,000 " " $10,000 " " $4,000 " " $24,000 " " $3,600 " $200 2 " 61,200 " " 20,400 " " 20,000 " " 10,000 " " 4,000 " " 24,000 " " 3,600 " 200 3 " 40,800 " " 20,400 " " 20,000 " " 10,000 " " 4,000 " " 24,000 " " 3,600 " 200 4 " 20,400 " " 20,400 " " 20,000 " " 10,000 " " 4,000 " " 24,000 " " 3,600 " 200 5 " 17,000 " " 3,400 " - " 10,000 " " 4,000 " " 4,000 " 600 200 6 " 13,600 " " 3,400 " - " 10,000 " " 4,000 " " 4,000 " 600 200 7 " 10,200 " " 3,400 " - " 10,000 " " 4,000 " " 4,000 " 600 200 8 " 6,800 " " 3,400 " - " 10,000 " " 4,000 " " 4,000 " 600 200 9 " 3,400 " " 3,400 " - " 10,000 " " 4,000 " " 4,000 " 600 200 10 - " 3,400 " - " 10,000 " " 4,000 " " 4,000 " 600 200 Total " $102,000 " " $80,000 " " $100,000 " " $40,000 " " $120,000 " " $18,000 " " $2,000 " (a) End-of-year carrying amount of the investment net of amortization in Column (b). (b) "Initial investment of $102,000 x (total income tax credits and other income tax benefits received during the year in Column (f))/total anticipated income tax credits and other income tax benefits over the life of the investment of $120,000)." (c) Represents the income tax credits allocated to the investor. (d) "Income tax losses, principally from depreciation, passed on to the investor." (e) Column (d) x 40% tax rate. (f) Column (c) + Column (e). (g) Column (f) - Column (b). (h) Non-income-tax-related benefits recognized in current-period pre-tax earnings when received. This represents the cash proceeds received by the investor based on the cash generated from the project.