## Facts

- Taxpayers (husband and wife) filed joint returns; the husband operated a small dental practice.
- Some patients were deaf or hearing-impaired; the dentist often communicated with them using handwritten notes, which was workable but inefficient.
- In 1995, the dentist purchased a specialized communication system to communicate more effectively with hearing-impaired patients.
- On their 1995 return, taxpayers claimed an IRC § 44 disabled access credit (and later sought a carryover to 1996) based on the cost of the system.
- The IRS disallowed the 1995 credit and the 1996 carryover and determined deficiencies for both years.
- Taxpayers petitioned the Tax Court, asserting the system was an “eligible access expenditure” under § 44(c) because it aided communication with disabled patients.

## Issues

1. Whether the taxpayers’ cost of a communication system constituted “eligible access expenditures” under IRC § 44(c) as amounts paid to enable the business to comply with applicable ADA requirements.
2. If the 1995 expenditure did not qualify for the § 44 credit, whether any unused credit could be carried over to 1996.

## Decision

- The Tax Court sustained the Commissioner’s disallowance of the § 44 credit for 1995 and the carryover to 1996.
- The court held the communication system was not an “eligible access expenditure” because taxpayers did not show it was purchased for the purpose of enabling compliance with applicable ADA requirements.
- Because no valid 1995 credit existed, no carryover to 1996 was available; the deficiencies for both years were sustained.

## Legal Principles

- IRC § 44(c) limits “eligible access expenditures” to amounts paid or incurred by an eligible small business “for the purpose of enabling” the business to comply with “applicable requirements” of the ADA.
- An expenditure that benefits disabled customers or improves service efficiency does not qualify for the § 44 credit absent proof that it was undertaken to meet ADA compliance obligations.
- Where the taxpayer cannot show that ADA requirements necessitated (or reasonably required) the expenditure to achieve compliance, the § 44 credit is unavailable, and any claimed carryover based on that credit fails.

## Conclusion

The Tax Court denied the § 44 disabled access credit because the taxpayers did not establish that the communication system was purchased to enable ADA compliance, rather than as a voluntary improvement in communicating with hearing-impaired patients; without a valid 1995 credit, no carryover to 1996 was permitted.


Fan v. Comm’r, 117 T.C. 32 (2001)