# ASC 323-740: Investments—Equity Method and Joint Ventures — Income Taxes—Proportional Amortization Method Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/323/740/) 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): 2026-09-09T23:41:07.480Z to 2026-09-09T23:41:51.330Z Record version: sha256:2ca5724f2ee694ff44f84c3f76114e5edb53270a6370f1add09e86e14f6e9337 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 323-740: Investments—Equity Method and Joint Ventures — Income Taxes—Proportional Amortization Method ### Machine-generated study aids ```json { "summary": "ASC 323-740 provides standalone guidance on the proportional amortization method for equity investments in flow-through limited liability entities made primarily to receive income tax credits and other income tax benefits (e.g., LIHTC and other tax credit programs). If the conditions in 323-740-25-1 are met and the method is elected on a tax-credit-program-by-tax-credit-program basis (323-740-25-4), the investor amortizes the initial cost of the investment in proportion to the income tax credits and other income tax benefits allocated to it, and reports that amortization within income tax expense (benefit) (323-740-35-2; 323-740-45-2).", "key_points": [ "Election conditions (323-740-25-1): it is probable the allocable income tax credits will be available; the investor cannot exercise significant influence over the underlying project's operating and financial policies; substantially all projected benefits (on a discounted basis) are from income tax credits and other income tax benefits; the projected yield based solely on tax credit and tax benefit cash flows is positive; and the investor is a limited liability investor for both legal and tax purposes.", "The proportional amortization method is an accounting policy election made on a tax-credit-program-by-tax-credit-program basis and applied consistently to all qualifying investments within the elected program, not investment by investment (323-740-25-4).", "Amortization equals the initial investment balance less expected residual value, multiplied by the ratio of current-period allocated income tax credits and other income tax benefits to total estimated credits and benefits over the life of the investment (323-740-35-2), with a practical expedient to use only income tax credits if substantially similar (323-740-35-4).", "Income tax credits are recognized in the period they are allocated to the investor for tax purposes; immediate recognition of all future credits at initial investment is prohibited (323-740-25-5; 323-740-30-1).", "Amortization is presented as a component of income tax expense (benefit), while non-income-tax-related benefits are included in pretax earnings when realized or realizable and gains or losses on sale go to pretax earnings (323-740-45-2; 323-740-35-5).", "Impairment is tested when events or circumstances indicate it is more likely than not that the carrying amount will not be realized; the loss equals carrying amount less fair value and may not be reversed (323-740-35-6); a liability is recognized for unconditional delayed equity contributions and for contingent contributions when probable (323-740-25-3).", "Disclosures under 323-740-50-1 and 50-1A apply to all investments in an elected tax credit program (even those failing the 25-1 conditions) and cover the nature of investments, credits and benefits recognized, investment balances and line items, amortization in tax expense, non-income-tax-related activity, and significant changes in the investment or the relationship with the project." ], "categories": [ "Income taxes", "Subsequent measurement", "Presentation", "Disclosure" ], "audience_level": "advanced", "student_note": "This is the \"tax equity\" accounting model expanded by ASU 2023-02 beyond affordable housing to all qualifying tax credit programs; the classic mistakes are treating the election as investment-by-investment (it is by tax credit program) and recognizing the full stream of future tax credits at the date of investment, which 323-740-25-5 forbids.", "related_topics": [ "323-10", "740-10", "740-30", "450", "842-50", "270-10" ], "key_concepts": [ "proportional amortization method", "tax credit investments", "flow-through limited liability entity", "significant influence", "income tax credits and other income tax benefits", "policy election by tax credit program", "delayed equity contributions", "low-income housing tax credit" ] } ``` Source downloaded (UTC): 2026-09-09T23:41:07.480Z to 2026-09-09T23:41:07.480Z Record version: sha256:43a37ef4ad4c3b9a7cc3cc8bbc4a9486d6221b62b957411a8a16ef9b959617f2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 323-740-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/323/740/#00-status) SEC content: no ##### [323-740-00-1](https://asc.understandingaccounting.org/asc/323/740/#323-740-00-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:41:07.480Z to 2026-09-09T23:41:07.480Z Record version: sha256:2c30c844b51d148e9667ba661e247088ea3159f06ad4628eeb42f95f51fd294f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following table identifies the changes made to this Subtopic.
ParagraphActionAccounting Standards UpdateDate
Current Tax Expense (or Benefit)AddedAccounting Standards Update No. 2014-0101/15/2014
Deferred Tax Expense (or Benefit)AmendedAccounting Standards Update No. 2015-0101/09/2015
Income TaxesSupersededAccounting Standards Update No. 2014-0101/15/2014
Income Tax Expense (or Benefit)AddedAccounting Standards Update No. 2014-0101/15/2014
InvestorSupersededAccounting Standards Update No. 2014-0101/15/2014
Not-for-Profit EntityAddedAccounting Standards Update No. 2014-0101/15/2014
Public Business EntityAmendedMaintenance Update 2017-06 (PDF)04/07/2017
Public Business EntityAmendedMaintenance Update 2016-11 (PDF)06/27/2016
Public Business EntityAddedAccounting Standards Update No. 2014-0101/15/2014
323-740-05-1AmendedAccounting Standards Update No. 2023-0203/29/2023
323-740-05-2SupersededAccounting Standards Update No. 2023-0203/29/2023
323-740-05-2AmendedAccounting Standards Update No. 2014-0101/15/2014
323-740-05-3SupersededAccounting Standards Update No. 2023-0203/29/2023
323-740-05-3AmendedAccounting Standards Update No. 2014-0101/15/2014
323-740-15-1AmendedAccounting Standards Update No. 2023-0203/29/2023
323-740-15-1AAddedAccounting Standards Update No. 2023-0203/29/2023
323-740-15-2SupersededAccounting Standards Update No. 2023-0203/29/2023
323-740-15-3SupersededAccounting Standards Update No. 2023-0203/29/2023
323-740-15-3AmendedAccounting Standards Update No. 2014-0101/15/2014
323-740-25-1 through 25-1C
AmendedAccounting Standards Update No. 2023-0203/29/2023
323-740-25-1AmendedAccounting Standards Update No. 2014-0101/15/2014
323-740-25-1A through 25-1C
AddedAccounting Standards Update No. 2014-0101/15/2014
323-740-25-2SupersededAccounting Standards Update No. 2023-0203/29/2023
323-740-25-2AmendedAccounting Standards Update No. 2014-0101/15/2014
323-740-25-2ASupersededAccounting Standards Update No. 2023-0203/29/2023
323-740-25-2AAddedAccounting Standards Update No. 2016-0101/05/2016
323-740-25-3 through 25-6
AmendedAccounting Standards Update No. 2023-0203/29/2023
323-740-25-3AmendedAccounting Standards Update No. 2016-0202/25/2016
323-740-25-4AmendedAccounting Standards Update No. 2014-0101/15/2014
323-740-25-5AmendedAccounting Standards Update No. 2014-0101/15/2014
323-740-25-6AmendedAccounting Standards Update No. 2016-0101/05/2016
323-740-30-1AmendedAccounting Standards Update No. 2023-0203/29/2023
323-740-30-1AmendedAccounting Standards Update No. 2014-0101/15/2014
323-740-30-2AmendedAccounting Standards Update No. 2023-0203/29/2023
323-740-30-2AmendedAccounting Standards Update No. 2016-0101/05/2016
323-740-35-1 through 35-6
AmendedAccounting Standards Update No. 2023-0203/29/2023
323-740-35-4 through 35-6
AmendedAccounting Standards Update No. 2014-0101/15/2014
323-740-35-4 through 35-6
AddedAccounting Standards Update No. 2014-0101/15/2014
323-740-45-1AmendedAccounting Standards Update No. 2023-0203/29/2023
323-740-45-1AmendedAccounting Standards Update No. 2014-0101/15/2014
323-740-45-2AmendedAccounting Standards Update No. 2014-0101/15/2014
323-740-45-3AmendedAccounting Standards Update No. 2023-0203/29/2023
323-740-45-3AmendedAccounting Standards Update No. 2016-0101/05/2016
323-740-50-1AmendedAccounting Standards Update No. 2023-0203/29/2023
323-740-50-1AddedAccounting Standards Update No. 2014-0101/15/2014
323-740-50-1AAmendedAccounting Standards Update No. 2025-1112/08/2025
323-740-50-1AAddedAccounting Standards Update No. 2023-0203/29/2023
323-740-50-2AmendedAccounting Standards Update No. 2025-1112/08/2025
323-740-50-2AmendedAccounting Standards Update No. 2023-0203/29/2023
323-740-50-2AddedAccounting Standards Update No. 2014-0101/15/2014
323-740-55-2AmendedAccounting Standards Update No. 2023-0203/29/2023
323-740-55-2 through 55-5
AmendedAccounting Standards Update No. 2014-0101/15/2014
323-740-55-4AmendedAccounting Standards Update No. 2023-0203/29/2023
323-740-55-5AmendedAccounting Standards Update No. 2023-0203/29/2023
323-740-55-6SupersededAccounting Standards Update No. 2014-0101/15/2014
323-740-55-7 through 55-9
SupersededAccounting Standards Update No. 2023-0203/29/2023
323-740-55-7AmendedAccounting Standards Update No. 2014-0101/15/2014
323-740-55-8AmendedAccounting Standards Update No. 2019-1212/18/2019
323-740-55-8AmendedAccounting Standards Update No. 2014-0101/15/2014
323-740-55-10SupersededAccounting Standards Update No. 2014-0101/15/2014
323-740-55-11 through 55-14
AddedAccounting Standards Update No. 2023-0203/29/2023
323-740-65-1AddedAccounting Standards Update No. 2014-0101/15/2014
323-740-65-2AddedAccounting Standards Update No. 2023-0203/29/2023
Source downloaded (UTC): 2026-09-09T23:41:09.897Z to 2026-09-09T23:41:09.897Z Record version: sha256:cc82ffa7efa1bd770f04d50e8aef18af8e98b74bbdad3725c5b76c79bfb2cd97 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 323-740-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/323/740/#05-overview-and-background) SEC content: no ### Proportional Amortization Method ##### [323-740-05-1](https://asc.understandingaccounting.org/asc/323/740/#323-740-05-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:41:09.897Z to 2026-09-09T23:41:09.897Z Record version: sha256:3b9777aa9c24f6b6b35b85b88b58ef99d6882d125b2e084ab7fb2ad6dc4d5145 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic contains standalone guidance on the use of the proportional amortization method to investments made primarily for the purpose of receiving income tax credits and other income tax benefits. Income tax accounting guidance on other types of equity method investments and joint ventures is contained in Subtopics 740-10 and 740-30. ##### [323-740-05-2](https://asc.understandingaccounting.org/asc/323/740/#323-740-05-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:41:09.897Z to 2026-09-09T23:41:09.897Z Record version: sha256:50f5618f9be244113d0cdb4718a1620c028d30766d5e165a21284aeca6f8dbe0 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/) ##### [323-740-05-3](https://asc.understandingaccounting.org/asc/323/740/#323-740-05-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:41:09.897Z to 2026-09-09T23:41:09.897Z Record version: sha256:99e9ef8e3d972833779484c2f86ed47ecec3dcbec07f1259ce9d4d9f9c6e3e72 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/) Source downloaded (UTC): 2026-09-09T23:41:11.801Z to 2026-09-09T23:41:11.801Z Record version: sha256:c8d3832d27078a17d6e787f4475175d89460c1af64c91c1048dc189a4ab31a80 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 323-740-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/323/740/#15-scope-and-scope-exceptions) SEC content: no ### Proportional Amortization Method #### Overall Guidance ##### [323-740-15-1](https://asc.understandingaccounting.org/asc/323/740/#323-740-15-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:41:11.801Z to 2026-09-09T23:41:11.801Z Record version: sha256:2b0027aaf2ee9a5acdcb605c0804db9ac5f1ca5afb87f16a9d0685c2c4dd9f9e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 323-10-15, with specific transaction qualifications and disclosure requirements noted in paragraph [323-740-15-1A](https://asc.understandingaccounting.org/asc/323/740/#323-740-15-1A). ##### [323-740-15-1A](https://asc.understandingaccounting.org/asc/323/740/#323-740-15-1A) Pending content: no Source downloaded (UTC): 2026-09-09T23:41:11.801Z to 2026-09-09T23:41:11.801Z Record version: sha256:9aa23319bee8f49c37652033fada540515de9aee2de3ece1ddfe566fb6e5d288 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in the Proportional Amortization Method Subtopic applies to equity investments that generate income tax credits and other income tax benefits from a tax credit program through limited liability entities that are flow-through entities for tax purposes, meet the criteria to be accounted for using the proportional amortization method in this Subtopic, and for which that method is elected on a tax-credit-program-by-tax-credit-program basis in accordance with paragraph [323-740-25-4](https://asc.understandingaccounting.org/asc/323/740/#323-740-25-4). Additionally, the disclosure requirements in paragraphs [323-740-50-1 through 50-2](https://asc.understandingaccounting.org/asc/323/740/#323-740-50-1) shall be applied to all investments that generate income tax credits and other income tax benefits from a tax credit program for which the entity has elected to apply the proportional amortization method, including investments within that elected program that do not meet the conditions to apply the proportional amortization method. ##### [323-740-15-2](https://asc.understandingaccounting.org/asc/323/740/#323-740-15-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:41:11.801Z to 2026-09-09T23:41:11.801Z Record version: sha256:492bed3ceb88183c4b18ef26e0fc1af9a5f4a1dde5a02edeedcb48052ae61d11 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/) ##### [323-740-15-3](https://asc.understandingaccounting.org/asc/323/740/#323-740-15-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:41:11.801Z to 2026-09-09T23:41:11.801Z Record version: sha256:b59c83985fda3914e27926b5724e702904669810dbebaa106420a06bd1c95cf2 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/) Source downloaded (UTC): 2026-09-09T23:41:15.826Z to 2026-09-09T23:41:15.826Z Record version: sha256:f1df001e724816b66d881d5c56e6b91d20fa2c0350e7ea6c61cfcb06376472cf Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 323-740-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/323/740/#25-recognition) SEC content: no ### Proportional Amortization Method ##### [323-740-25-1](https://asc.understandingaccounting.org/asc/323/740/#323-740-25-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:41:15.826Z to 2026-09-09T23:41:15.826Z Record version: sha256:4244040f4f2e1636842e609f1b2df6c3bb1a540265a5dd2817026d3b79be14f2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A reporting entity that invests in projects that generate income tax credits and other income tax benefits from a tax credit program through limited liability entities (that is, the investor) may elect to account for those investments using the proportional amortization method (described in paragraphs [323-740-35-2](https://asc.understandingaccounting.org/asc/323/740/#323-740-35-2) and [323-740-45-2](https://asc.understandingaccounting.org/asc/323/740/#323-740-45-2)) if elected in accordance with paragraph [323-740-25-4](https://asc.understandingaccounting.org/asc/323/740/#323-740-25-4), provided all of the following conditions are met: 1. a It is [probable](https://asc.understandingaccounting.org/glossary/p/#probable "The future event or events are likely to occur.") that the income tax credits allocable to the investor will be available. 2. aa The investor does not have the ability to exercise [significant influence](https://asc.understandingaccounting.org/glossary/s/#significant-influence "Paragraphs 323-10-15-6323-10-15-7323-10-15-8323-10-15-9323-10-15-10323-10-15-11 define significant influence.") over the operating and financial policies of the underlying project. 3. aaa Substantially all of the projected benefits are from income tax credits and other income tax benefits (for example, tax benefits generated from the operating losses of the investment). Projected benefits include, but are not limited to, income tax credits, other income tax benefits, and other non-income-tax-related benefits, including refundable tax credits (that is, those tax credits not dependent upon an investor’s income tax liability). Tax credits accounted for outside of the scope of Topic 740 (for example, refundable tax credits) shall be included in total projected benefits, but not in income tax credits and other income tax benefits when evaluating this condition. This condition shall be determined on a discounted basis using a discount rate that is consistent with the cash flow assumptions utilized by the investor for the purpose of making a decision to invest in the project. 4. b The investor's projected yield based solely on the cash flows from the income tax credits and other income tax benefits is positive. 5. c The investor is a limited liability investor in the limited liability entity for both legal and tax purposes, and the investor's liability is limited to its capital investment. ##### [323-740-25-1A](https://asc.understandingaccounting.org/asc/323/740/#323-740-25-1A) Pending content: no Source downloaded (UTC): 2026-09-09T23:41:15.826Z to 2026-09-09T23:41:15.826Z Record version: sha256:b694bd1dfb1c15d561f4f261f0bfc88b6da3192b003d409a8216654f73475cb8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In determining whether an investor has the ability to exercise significant influence over the operating and financial policies of the underlying project, a reporting entity shall consider the indicators of significant influence in paragraphs [323-10-15-6 through 15-7](https://asc.understandingaccounting.org/asc/323/10/#323-10-15-6) . In considering the operating and financial policies of the underlying project, the investor shall consider the operations, financial decisions, and related objectives of the project as a whole. ##### [323-740-25-1B](https://asc.understandingaccounting.org/asc/323/740/#323-740-25-1B) Pending content: no Source downloaded (UTC): 2026-09-09T23:41:15.826Z to 2026-09-09T23:41:15.826Z Record version: sha256:9edf0f7941753ff427ceca277509c7d726c2b0f042a87c919d9b20dcd5a8dd82 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Other transactions between the investor and the limited liability entity (for example, bank loans) shall not be considered when determining whether the conditions in paragraph [323-740-25-1](https://asc.understandingaccounting.org/asc/323/740/#323-740-25-1) are met, provided that all three of the following conditions are met: 1. a The reporting entity is in the business of entering into those other transactions (for example, a financial institution that regularly extends loans to other projects). 2. b The terms of those other transactions are consistent with the terms of arm's-length transactions. 3. c The reporting entity does not acquire the ability to exercise significant influence over the operating and financial policies of the underlying project as a result of those other transactions. ##### [323-740-25-1C](https://asc.understandingaccounting.org/asc/323/740/#323-740-25-1C) Pending content: no Source downloaded (UTC): 2026-09-09T23:41:15.826Z to 2026-09-09T23:41:15.826Z Record version: sha256:e99eb47798b55adc776a2a6d93d33bdfa02eecb5825ef5cd615522eb1a5034f5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. At the time of the initial investment, a reporting entity shall evaluate whether the conditions in paragraphs [323-740-25-1 through 25-1B](https://asc.understandingaccounting.org/asc/323/740/#323-740-25-1) have been met to elect to apply the proportional amortization method on the basis of facts and circumstances that exist at that time. A reporting entity shall subsequently reevaluate the conditions upon the occurrence of either of the following: 1. a A change in the nature of the investment (for example, if the investment is no longer in a flow-through entity for tax purposes) 2. b A change in the relationship with the underlying project that could result in the reporting entity no longer meeting the conditions in paragraphs [323-740-25-1 through 25-1B](https://asc.understandingaccounting.org/asc/323/740/#323-740-25-1). ##### [323-740-25-2](https://asc.understandingaccounting.org/asc/323/740/#323-740-25-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:41:15.826Z to 2026-09-09T23:41:15.826Z Record version: sha256:7515ba7c5b40e411bca84e83e3611d1a60adb49bcef775e0d0e990589d6c2ff3 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/) ##### [323-740-25-2A](https://asc.understandingaccounting.org/asc/323/740/#323-740-25-2A) Pending content: no Source downloaded (UTC): 2026-09-09T23:41:15.826Z to 2026-09-09T23:41:15.826Z Record version: sha256:c59b0e04414156bae0ed20c6b7168ba71322ef21bfe57b3dc87d97b229b6e336 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/) ##### [323-740-25-3](https://asc.understandingaccounting.org/asc/323/740/#323-740-25-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:41:15.826Z to 2026-09-09T23:41:15.826Z Record version: sha256:6de1ebe68efacf3473465447f8ed8c0b142298fb2f83a242581aae0319f4ccfa Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A liability shall be recognized for delayed equity contributions that are unconditional and legally binding. A liability also shall be recognized for equity contributions that are contingent upon a future [event](https://asc.understandingaccounting.org/glossary/e/#event "A happening of consequence to an entity. The term encompasses both transactions and other events affecting an entity.") when that contingent event becomes [probable](https://asc.understandingaccounting.org/glossary/p/#probable "The future event or events are likely to occur."). Topic 450 and paragraph [842-50-55-2](https://asc.understandingaccounting.org/asc/842/50/#842-50-55-2) provide additional guidance on the accounting for delayed equity contributions. ##### [323-740-25-4](https://asc.understandingaccounting.org/asc/323/740/#323-740-25-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:41:15.826Z to 2026-09-09T23:41:15.826Z Record version: sha256:0fb4cb6fc966091becf34982f448bd5a9784899a0d6c922aa6e1fb2bc0cb3e83 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The decision to apply the proportional amortization method is an accounting policy decision to be elected on a tax-credit-program-by-tax-credit-program basis that shall be applied consistently to all investments within an elected tax credit program that meet the conditions in paragraph [323-740-25-1](https://asc.understandingaccounting.org/asc/323/740/#323-740-25-1) rather than a decision to be applied to individual investments that meet the conditions in paragraph [323-740-25-1](https://asc.understandingaccounting.org/asc/323/740/#323-740-25-1). ##### [323-740-25-5](https://asc.understandingaccounting.org/asc/323/740/#323-740-25-5) Pending content: no Source downloaded (UTC): 2026-09-09T23:41:15.826Z to 2026-09-09T23:41:15.826Z Record version: sha256:fbe161aef1ba6e61ce44bed985bcc19b109b791cab84ec10d21c691468cfffc4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall recognize income tax credits in the period that they are allocated to the investor for tax purposes. Unless all income tax credits are allocated to the investor at the date of initial investment, immediate recognition of the entire benefit of the income tax credits to be received during the term of an investment that generates income tax credits and other income tax benefits from a tax credit program is not permitted (that is, income tax credits shall not be recognized in the financial statements before the year in which the credit arises). ##### [323-740-25-6](https://asc.understandingaccounting.org/asc/323/740/#323-740-25-6) Pending content: no Source downloaded (UTC): 2026-09-09T23:41:15.826Z to 2026-09-09T23:41:15.826Z Record version: sha256:eecec0bfe2531dd4b50b2310a9d8251e4ec5691a8e6c2bfc5620fe6a85e9632e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Example 1 (see paragraph [323-740-55-2](https://asc.understandingaccounting.org/asc/323/740/#323-740-55-2)) illustrates the application of the proportional amortization method to a limited partnership investment that generates income tax credits and other income tax benefits from a tax credit program. Example 2 (see paragraph [323-740-55-11](https://asc.understandingaccounting.org/asc/323/740/#323-740-55-11)) illustrates the application of the proportional amortization method to a limited partnership investment that generates income tax credits, other income tax benefits, and non-income-tax-related benefits from a tax credit program. Source downloaded (UTC): 2026-09-09T23:41:19.906Z to 2026-09-09T23:41:19.906Z Record version: sha256:af46f9daad6247974531d6c6d3a673015edbda85d7d2f921c146a249070de5a1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 323-740-30: 30 Initial Measurement [Read section](https://asc.understandingaccounting.org/asc/323/740/#30-initial-measurement) SEC content: no ### Proportional Amortization Method ##### [323-740-30-1](https://asc.understandingaccounting.org/asc/323/740/#323-740-30-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:41:19.906Z to 2026-09-09T23:41:19.906Z Record version: sha256:e3724047e8fb1d7eb32cbb727d8dc406937e86921c6b8956040e0db9a40e262e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph [323-740-25-5](https://asc.understandingaccounting.org/asc/323/740/#323-740-25-5) prohibits immediate recognition of income tax credits, at the time of initial investment, for the entire benefit of tax credits to be received over a period of time during the term of an investment that generates income tax credits and other income tax benefits from a tax credit program (that is, income tax credits shall not be recognized in the financial statements before the year in which the credit arises). ##### [323-740-30-2](https://asc.understandingaccounting.org/asc/323/740/#323-740-30-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:41:19.906Z to 2026-09-09T23:41:19.906Z Record version: sha256:fa2bb52283e790eaf73504f18e4d7666475554b3a2044597b700610ffdda1733 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Example 1 (see paragraph [323-740-55-2](https://asc.understandingaccounting.org/asc/323/740/#323-740-55-2)) illustrates the application of the proportional amortization method to a limited partnership investment that generates income tax credits and other income tax benefits from a tax credit program. Example 2 (see paragraph [323-740-55-11](https://asc.understandingaccounting.org/asc/323/740/#323-740-55-11)) illustrates the application of the proportional amortization method to a limited partnership investment that generates income tax credits, other income tax benefits, and non-income-tax-related benefits from a tax credit program. Source downloaded (UTC): 2026-09-09T23:41:22.838Z to 2026-09-09T23:41:22.838Z Record version: sha256:400f40279df216cfc5d1b680b8d6270713ef79f5eb6a244c91d661b0a1c642ec Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 323-740-35: 35 Subsequent Measurement [Read section](https://asc.understandingaccounting.org/asc/323/740/#35-subsequent-measurement) SEC content: no ### Proportional Amortization Method ##### [323-740-35-1](https://asc.understandingaccounting.org/asc/323/740/#323-740-35-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:41:22.838Z to 2026-09-09T23:41:22.838Z Record version: sha256:4b5e1e90b2570172c60ef115aafb6f045d30dea378d4d9c3aedb931d8c3638a7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This guidance addresses the methodology for measuring an investment that is accounted for using the proportional amortization method. ##### [323-740-35-2](https://asc.understandingaccounting.org/asc/323/740/#323-740-35-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:41:22.838Z to 2026-09-09T23:41:22.838Z Record version: sha256:a397150800bbd0648b628047375d5927172ef214b9703656d78d1284c23434cb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Under the proportional amortization method, the investor amortizes the initial cost of the investment in proportion to the income tax credits and other income tax benefits allocated to the investor. The amortization amount shall be calculated as follows: 1. a The initial investment balance less any expected residual value of the investment, multiplied by 2. b The percentage of actual income tax credits and other income tax benefits allocated to the investor in the current period divided by the total estimated income tax credits and other income tax benefits expected to be received by the investor over the life of the investment. ##### [323-740-35-3](https://asc.understandingaccounting.org/asc/323/740/#323-740-35-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:41:22.838Z to 2026-09-09T23:41:22.838Z Record version: sha256:f45021038f349d06ba37a54ccebf50b0e98c4e5a0e8c1e8d94b5da7ff5ffd5d7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Example 1 (see paragraph [323-740-55-2](https://asc.understandingaccounting.org/asc/323/740/#323-740-55-2)) illustrates the application of the proportional amortization method to a limited liability investment that generates income tax credits and other income tax benefits from a tax credit program. Example 2 (see paragraph [323-740-55-11](https://asc.understandingaccounting.org/asc/323/740/#323-740-55-11)) illustrates the application of the proportional amortization method to a limited partnership investment that generates income tax credits, other income tax benefits, and non-income-tax-related benefits from a tax credit program. ##### [323-740-35-4](https://asc.understandingaccounting.org/asc/323/740/#323-740-35-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:41:22.838Z to 2026-09-09T23:41:22.838Z Record version: sha256:5aeb97b693ab4232d82b9766f06a85af7046c9338e562f2cddb8424031d47c5b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. As a practical expedient, an investor is permitted to amortize the initial cost of the investment in proportion to only the income tax credits allocated to the investor if the investor reasonably expects that doing so would produce a measurement that is substantially similar to the measurement that would result from applying the requirement in paragraph [323-740-35-2](https://asc.understandingaccounting.org/asc/323/740/#323-740-35-2). ##### [323-740-35-5](https://asc.understandingaccounting.org/asc/323/740/#323-740-35-5) Pending content: no Source downloaded (UTC): 2026-09-09T23:41:22.838Z to 2026-09-09T23:41:22.838Z Record version: sha256:10e9e1ffa180e2418ef53c48317a510c3332d048a0590e738ffec8c5ab9af7ea Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Any expected residual value of the investment shall be excluded from the proportional amortization calculation. Non-income-tax-related benefits received from operations of the limited liability entity shall be included in pre-tax earnings when realized or realizable. Gains or losses on the sale of the investment, if any, shall be included in pre-tax earnings at the time of sale. ##### [323-740-35-6](https://asc.understandingaccounting.org/asc/323/740/#323-740-35-6) Pending content: no Source downloaded (UTC): 2026-09-09T23:41:22.838Z to 2026-09-09T23:41:22.838Z Record version: sha256:65c3583b2f3c41fd1a88b201e15e1c2b5da616f2bfb03e6d5a9fe8519c7965f0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An investment shall be tested for impairment when events or changes in circumstances indicate that it is more likely than not that the carrying amount of the investment will not be realized. An impairment loss shall be measured as the amount by which the carrying amount of an investment exceeds its fair value. A previously recognized impairment loss shall not be reversed. Source downloaded (UTC): 2026-09-09T23:41:25.607Z to 2026-09-09T23:41:25.607Z Record version: sha256:aa3c56486247aa0db5c48ba402f3ed13c4d4c1e74a112bf5c7852bc0714851a9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 323-740-45: 45 Other Presentation Matters [Read section](https://asc.understandingaccounting.org/asc/323/740/#45-other-presentation-matters) SEC content: no ### Proportional Amortization Method ##### [323-740-45-1](https://asc.understandingaccounting.org/asc/323/740/#323-740-45-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:41:25.607Z to 2026-09-09T23:41:25.607Z Record version: sha256:0be57cbe5066f3111d021107f5db5f9007948d503457477e831e601422a3d265 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This guidance addresses the income statement presentation of an investment that is accounted for using the proportional amortization method. ##### [323-740-45-2](https://asc.understandingaccounting.org/asc/323/740/#323-740-45-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:41:25.607Z to 2026-09-09T23:41:25.607Z Record version: sha256:8c0fc2f1466485eee61662d59dd9203eca9eee460d2301f0ef882ca147da1868 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Under the proportional amortization method, the amortization of the investment in the limited liability entity is recognized in the income statement as a component of [income tax expense (or benefit)](https://asc.understandingaccounting.org/glossary/i/#income-tax-expense-or-benefit "The sum of current tax expense (or benefit) and deferred tax expense (or benefit)."). The [current tax expense (or benefit)](https://asc.understandingaccounting.org/glossary/c/#current-tax-expense-or-benefit "The amount of income taxes paid or payable (or refundable) for a year as determined by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues for that year.") shall be accounted for pursuant to the general requirements of Topic 740. ##### [323-740-45-3](https://asc.understandingaccounting.org/asc/323/740/#323-740-45-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:41:25.607Z to 2026-09-09T23:41:25.607Z Record version: sha256:e28b064e32f61f89a3fcd0bd153fd690bea7fea5cff6617c9e2c691ca83f76f4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Example 1 (see paragraph [323-740-55-2](https://asc.understandingaccounting.org/asc/323/740/#323-740-55-2)) illustrates the application of the proportional amortization method to a limited partnership investment that generates income tax credits and other income tax benefits from a tax credit program. Example 2 (see paragraph [323-740-55-11](https://asc.understandingaccounting.org/asc/323/740/#323-740-55-11)) illustrates the application of the proportional amortization method to a limited partnership investment that generates income tax credits, other income tax benefits, and non-income-tax-related benefits from a tax credit program. Source downloaded (UTC): 2026-09-09T23:41:29.117Z to 2026-09-09T23:41:29.117Z Record version: sha256:cdc2d67a11e6f04f6a549b4b7aa26d071b7cbce7783bc8fe33771807c960bb84 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 323-740-50: 50 Disclosure [Read section](https://asc.understandingaccounting.org/asc/323/740/#50-disclosure) SEC content: no ### Proportional Amortization Method ##### [323-740-50-1](https://asc.understandingaccounting.org/asc/323/740/#323-740-50-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:41:29.117Z to 2026-09-09T23:41:29.117Z Record version: sha256:3e608239cc804842bd8efe85124eabe4e1674b359e7423611a6d6de20d61f37e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A reporting entity shall disclose information in annual and interim periods that enables users of its financial statements to understand the following information about its investments that generate income tax credits and other income tax benefits from a tax credit program for which it has elected on a tax-credit-program-by-tax-credit-program basis to apply the proportional amortization method, including investments within that elected tax credit program that do not meet the conditions in paragraph [323-740-25-1](https://asc.understandingaccounting.org/asc/323/740/#323-740-25-1): 1. a The nature of its investments 2. b The effect of the recognition and measurement of its investments and the related income tax credits and other income tax benefits on its financial position and results of operations. ##### [323-740-50-1A](https://asc.understandingaccounting.org/asc/323/740/#323-740-50-1A) Pending content: yes Source downloaded (UTC): 2026-09-09T23:41:29.117Z to 2026-09-09T23:41:29.117Z Record version: sha256:fbed2265ebb09232d26926542a628f673b7c506806f093bf4fba926c62ee188c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. To meet the objectives in paragraph [323-740-50-1](https://asc.understandingaccounting.org/asc/323/740/#323-740-50-1), a reporting entity shall disclose the following information about its investments that generate income tax credits and other income tax benefits from a tax credit program for which it has elected on a tax-credit-program-by-tax-credit-program basis to apply the proportional amortization method, including investments within that elected tax credit program that do not meet the conditions in paragraph [323-740-25-1](https://asc.understandingaccounting.org/asc/323/740/#323-740-25-1): 1. a The amount of income tax credits and other income tax benefits recognized during the period, including the line item in the statement of operations and statement of cash flows in which it has been recognized 2. b The amount of investments and the line item in which the investments are recognized in the statement of financial position 3. c For investments accounted for using the proportional amortization method, the amount of investment amortization recognized as a component of income tax expense (benefit) 4. d For investments accounted for using the proportional amortization method, the amount of non-income-tax-related activity and other returns received that is recognized outside of income tax expense (benefit) and the line item in the statement of operations and statement of cash flows in which it has been recognized 5. e For investments accounted for using the proportional amortization method, significant modifications or events that resulted in a change in the nature of the investment or a change in the relationship with the underlying project. Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance: [270-10-65-1](https://asc.understandingaccounting.org/asc/270/10/#270-10-65-1)To meet the objectives in paragraph [323-740-50-1](https://asc.understandingaccounting.org/asc/323/740/#323-740-50-1), a reporting entity shall disclose the following information in annual and interim reporting periods about its investments that generate income tax credits and other income tax benefits from a tax credit program for which it has elected on a tax-credit-program-by-tax-credit-program basis to apply the proportional amortization method, including investments within that elected tax credit program that do not meet the conditions in paragraph [323-740-25-1](https://asc.understandingaccounting.org/asc/323/740/#323-740-25-1): 1. a The amount of income tax credits and other income tax benefits recognized during the period, including the line item in the statement of operations and statement of cash flows in which it has been recognized 2. b The amount of investments and the line item in which the investments are recognized in the statement of financial position 3. c For investments accounted for using the proportional amortization method, the amount of investment amortization recognized as a component of income tax expense (benefit) 4. d For investments accounted for using the proportional amortization method, the amount of non-income-tax-related activity and other returns received that is recognized outside of income tax expense (benefit) and the line item in the statement of operations and statement of cash flows in which it has been recognized 5. e For investments accounted for using the proportional amortization method, significant modifications or events that resulted in a change in the nature of the investment or a change in the relationship with the underlying project. ##### [323-740-50-2](https://asc.understandingaccounting.org/asc/323/740/#323-740-50-2) Pending content: yes Source downloaded (UTC): 2026-09-09T23:41:29.117Z to 2026-09-09T23:41:29.117Z Record version: sha256:b1548199f670cc7a22f4a1c1039e8ff4ebe7af222b6ab164294309a230416694 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. To meet the objectives in paragraph [323-740-50-1](https://asc.understandingaccounting.org/asc/323/740/#323-740-50-1), a reporting entity may consider disclosing the following about its investments that generate income tax credits and other income tax benefits from a tax credit program for which it has elected on a tax-credit-program-by-tax-credit-program basis to apply the proportional amortization method, including investments within that elected tax credit program that do not meet the conditions in paragraph [323-740-25-1](https://asc.understandingaccounting.org/asc/323/740/#323-740-25-1): 1. a [Subparagraph superseded by Accounting Standards Update No. 2023-02](https://asc.understandingaccounting.org/updates/asu-2023-02/). 2. b [Subparagraph superseded by Accounting Standards Update No. 2023-02](https://asc.understandingaccounting.org/updates/asu-2023-02/). 3. c [Subparagraph superseded by Accounting Standards Update No. 2023-02](https://asc.understandingaccounting.org/updates/asu-2023-02/). 4. d For investments accounted for using the equity method, the amount of investment income or loss included in pretax income 5. e Any commitments or contingent commitments (for example, guarantees or commitments to provide additional capital contributions), including the amount of delayed equity contributions and the year or years in which contingent commitments are expected to be paid 6. f The amount and nature of impairment losses during the year resulting from the forfeiture or ineligibility of income tax credits or other circumstances. For example, in a qualified affordable housing project investment, those impairment losses may be based on actual property-level foreclosures, loss of qualification due to occupancy levels, compliance issues with tax code provisions, or other issues. Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance: [270-10-65-1](https://asc.understandingaccounting.org/asc/270/10/#270-10-65-1)To meet the objectives in paragraph [323-740-50-1](https://asc.understandingaccounting.org/asc/323/740/#323-740-50-1), a reporting entity may consider disclosing the following in annual and interim reporting periods about its investments that generate income tax credits and other income tax benefits from a tax credit program for which it has elected on a tax-credit-program-by-tax-credit-program basis to apply the proportional amortization method, including investments within that elected tax credit program that do not meet the conditions in paragraph [323-740-25-1](https://asc.understandingaccounting.org/asc/323/740/#323-740-25-1): 1. a [Subparagraph superseded by Accounting Standards Update No. 2023-02](https://asc.understandingaccounting.org/updates/asu-2023-02/). 2. b [Subparagraph superseded by Accounting Standards Update No. 2023-02](https://asc.understandingaccounting.org/updates/asu-2023-02/). 3. c [Subparagraph superseded by Accounting Standards Update No. 2023-02](https://asc.understandingaccounting.org/updates/asu-2023-02/). 4. d For investments accounted for using the equity method, the amount of investment income or loss included in pretax income 5. e Any commitments or contingent commitments (for example, guarantees or commitments to provide additional capital contributions), including the amount of delayed equity contributions and the year or years in which contingent commitments are expected to be paid 6. f The amount and nature of impairment losses during the year resulting from the forfeiture or ineligibility of income tax credits or other circumstances. For example, in a qualified affordable housing project investment, those impairment losses may be based on actual property-level foreclosures, loss of qualification due to occupancy levels, compliance issues with tax code provisions, or other issues. 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. Source downloaded (UTC): 2026-09-09T23:41:35.438Z to 2026-09-09T23:41:35.438Z Record version: sha256:8ad71781a35dccd7de0e0e6072de62213b75db32b0fa331e369b8ca263499681 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 323-740-65: 65 Transition and Open Effective Date Information [Read section](https://asc.understandingaccounting.org/asc/323/740/#65-transition-and-open-effective-date-information) SEC content: no ##### [323-740-65-1](https://asc.understandingaccounting.org/asc/323/740/#323-740-65-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:41:35.438Z to 2026-09-09T23:41:35.438Z Record version: sha256:a6ccb07b371a3b83418e824435911fcbea2cf2f23347337c452f297272464529 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph superseded on 10/26/2017 after the end of the transition period stated in Accounting Standards Update No. 2014-01, _Investments—Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Qualified Affordable Housing Projects_. ##### [323-740-65-2](https://asc.understandingaccounting.org/asc/323/740/#323-740-65-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:41:35.438Z to 2026-09-09T23:41:35.438Z Record version: sha256:7ce3206524e25bf6b4d37e88d12ac81f30adc9367164e0455dfed2baf72613dc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph superseded on 07/02/2026 after the end of the transition period stated in Accounting Standards Update No. 2023-02, _Investments—Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method_. Source downloaded (UTC): 2026-09-09T23:41:42.973Z to 2026-09-09T23:41:42.973Z Record version: sha256:c3facc28f074e59a578fbc60dbdd326e42dc4277222d391a41be8ac8e92feebc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 323-740-S00: SEC 00 Status [Read section](https://asc.understandingaccounting.org/asc/323/740/#sec-00-status) SEC content: yes ##### [323-740-S00-1](https://asc.understandingaccounting.org/asc/323/740/#323-740-S00-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:41:42.973Z to 2026-09-09T23:41:42.973Z Record version: sha256:ba0a9f275381cd567e46de9b847fd81f6b641d53ae3bad140eda2a233c9031c6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following table identifies the changes made to this Subtopic.
ParagraphActionAccounting Standards UpdateDate
323-740-S99-1AmendedAccounting Standards Update No. 2009-0709/15/2009
323-740-S99-2AmendedAccounting Standards Update No. 2017-0301/23/2017
Source downloaded (UTC): 2026-09-09T23:41:45.795Z to 2026-09-09T23:41:45.795Z Record version: sha256:71eb21e469789eb9735d5d5904334d11e79752796ece44997929048dd4bdd6c4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 323-740-S25: SEC 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/323/740/#sec-25-recognition) SEC content: yes ### Qualified Affordable Housing Project Investments ##### [323-740-S25-1](https://asc.understandingaccounting.org/asc/323/740/#323-740-S25-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:41:45.795Z to 2026-09-09T23:41:45.795Z Record version: sha256:f3a40d2153441ffb67c168546d8f6fc47b94c0e2cfb983f7f47f72303dc20fdf Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See paragraph [323-740-S99-2](https://asc.understandingaccounting.org/asc/323/740/#323-740-S99-2), SEC Observer Comment: Accounting for Tax Benefits Resulting from Investments in Affordable Housing Projects, for SEC Staff views on extending the application of the effective yield method policy election used in affordable housing project investment to analogous situations. Source downloaded (UTC): 2026-09-09T23:41:48.685Z to 2026-09-09T23:41:48.685Z Record version: sha256:51ff1efd04f5bf637d6324ceefe17d6ada148a68f9a858cafa3d3bbbcfdc7b01 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 323-740-S50: SEC 50 Disclosure [Read section](https://asc.understandingaccounting.org/asc/323/740/#sec-50-disclosure) SEC content: yes #### Income Taxes of Equity Method Investee ##### [323-740-S50-1](https://asc.understandingaccounting.org/asc/323/740/#323-740-S50-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:41:48.685Z to 2026-09-09T23:41:48.685Z Record version: sha256:67e45d32bae891bcc9f8d147ad13c523b9a99df463625994ca2f1c872bd7e76f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See paragraph [323-740-S99-1](https://asc.understandingaccounting.org/asc/323/740/#323-740-S99-1), SAB Topic 6.I.2, for SEC Staff views on disclosures pertaining to the income taxes of an equity method investee. Source downloaded (UTC): 2026-09-09T23:41:51.330Z to 2026-09-09T23:41:51.330Z Record version: sha256:7aa35ba7a808f722b2f52293124bef97a1af671893f1ad82578b620077562b75 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 323-740-S99: SEC 99 SEC Materials [Read section](https://asc.understandingaccounting.org/asc/323/740/#sec-99-sec-materials) SEC content: yes #### SEC Staff Guidance ##### [323-740-S99-1](https://asc.understandingaccounting.org/asc/323/740/#323-740-S99-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:41:51.330Z to 2026-09-09T23:41:51.330Z Record version: sha256:b4b210d5e74152c01864b52d3f491f1b5856eeb89cc00579c926af85569ead55 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following is the text of SAB Topic 6.I.2, Taxes of Investee Company. - Question: If a registrant records its share of earnings or losses of a 50% or less owned person on the equity basis and such person has an effective tax rate which differs by more than 5% from the applicable statutory Federal income tax rate, is a reconciliation as required by Rule 4-08(g) \[paragraph [235-10-S99-1](https://asc.understandingaccounting.org/asc/235/10/#235-10-S99-1)\] necessary? - Interpretive Response: Whenever the tax components are known and material to the investor's (registrant's) financial position or results of operations, appropriate disclosure should be made. In some instances where 50% or less owned persons are accounted for by the equity method of accounting in the financial statements of the registrant, the registrant may not know the rate at which the various components of income are taxed and it may not be practicable to provide disclosure concerning such components. - It should also be noted that it is generally necessary to disclose the aggregate dollar and per-share effect of situations where temporary tax exemptions or "tax holidays" exist, and that such disclosures are also applicable to 50% or less owned persons. Such disclosures should include a brief description of the factual circumstances and give the date on which the special tax status will terminate. See Topic 11.C \[paragraph [740-10-S99-2](https://asc.understandingaccounting.org/asc/740/10/#740-10-S99-2)\]. ### Qualified Affordable Housing Project Investments ##### [323-740-S99-2](https://asc.understandingaccounting.org/asc/323/740/#323-740-S99-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:41:51.330Z to 2026-09-09T23:41:51.330Z Record version: sha256:e44e0640264f8ee07c5250cc2b6855d82571b35850e228fc43b8e4b0d66e59cc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following is the text of SEC Observer Comment: Accounting for Tax Benefits Resulting from Investments in Qualified Affordable Housing Projects. **\[The SEC Staff conformed this Comment to the guidance issued in Accounting Standards Update No. 2014-01, _Investments—Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Qualified Affordable Housing Projects_.\]** - It has been observed that the decision to apply the proportional amortizationmethod of accounting is an accounting policy decision to be applied consistently to all investments in qualified affordable housing projects that meet the conditions in paragraph [323-740-25-1](https://asc.understandingaccounting.org/asc/323/740/#323-740-25-1) rather than a decision to be applied to individual investments that qualify for use of the proportional amortization method. The SEC staff believes that it would be inappropriate to extend the proportional amortization method of accounting to situations analogous to those described in paragraph [323-740-05-3](https://asc.understandingaccounting.org/asc/323/740/#323-740-05-3).