In Revenue Procedure 2017-22, the IRS clarified earlier guidance
regarding safe harbors for corporate taxpayers receiving grants
from the government for capital improvements to transportation
Section 118 provides that gross income does not include
contributions to a corporation's capital from non-shareholders.
When money is contributed, the corporation must reduce the basis of
any property acquired within 12 months by the amount of the
contribution. I.R.C. § 362(c). Any excess contribution must be
applied to reduce the basis of other property held by the
In Revenue Procedure 2010-46, the IRS set forth a safe harbor
for capital investments in transportation trades or businesses.
Specifically, Revenue Procedure 2010-46 applies to grants received
under "(1) the Supplemental Discretionary Grants for Capital
Investments in Surface Transportation Infrastructure (TIGER
Discretionary Grants) program as authorized by Title XII, Division
A of ARRA; or (2) the National Infrastructure Investments (TIGER II
Discretionary Grants) program as authorized by the Transportation,
Housing and Urban Development, and Related Agencies Appropriations
Act for 2010 (Title I, Division A of the Consolidated
Appropriations Act, 2010 (Pub. L. 111-117))." Under the safe
harbor, if a corporate taxpayer receiving such a grant reduces the
basis of its property within the 12 month period, the IRS will not
challenge the taxpayer's classification of the grant as a
contribution to capital excludable from the taxpayer's
In Revenue Procedure 2017-22, the IRS clarified that the safe
harbor described above also will apply to any TIGER Discretionary
Grants authorized in the years following 2010 (the publication
year) and in any future years. This recent guidance is a helpful
clarification for all taxpayers receiving federal grants under
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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