### Question
How is the term applicable percentage defined?


### Answer
The term **applicable percentage** is defined in *26 U.S.C. § 280H* as the following:

> the percentage (not in excess of 95 percent) determined by dividing—



(A) the applicable amounts paid or incurred during the 3 taxable years immediately preceding the taxable year, by



(B) the adjusted taxable income of such corporation for such 3 taxable years

#### Citation:
  - *26 U.S.C. § 280H*
  - Heading: **Subtitle A-Income Taxes > CHAPTER 1-NORMAL TAXES AND SURTAXES > Subchapter B-Computation of Taxable Income > PART IX-ITEMS NOT DEDUCTIBLE**

