Effective October 1, 2009, a bad debt deduction may be claimed by a third-party lender provided the retailer who reported the tax and the lender financing the sale execute and maintain a written election designating which party may claim the deduction. The following conditions must also be met:

• No deduction or refund was previously claimed or allowed on any portion or the account receivable.
• The account receivable has been found worthless and written off by the seller that made the sale or by the lender on or after September 30, 2009.

The written election must be in compliance with section 166 of the Internal Revenue Code which states who may take the bad debt deduction.

A third-party lender that qualifies to claim a bad debt deduction, may request a refund of this deduction by completing Form 4783, Refund Request of Tax Paid on Bad Debt and returning it to the address provided.

• 4783, Refund Request of Tax Paid on Bad Debt (available soon)