Business Glossary

1. contract clause allowing one party to recover some degree of possession of an asset. In leases calling for a percentage of revenues, such as those for shopping centers, the recapture clause provides that the developer get a percentage of profits in addition to a fixed rent.
2. in the tax code, the reclamation by the government of tax benefits previously taken. For example, where a portion of the profit on the sale of a depreciable asset represented accelerated depreciation or the investment credit , all or part of that gain would be "recaptured" and taxed as ordinary income , with the balance subject to the favorable capital gains tax . Recapture also has specialized applications in oil and other industries.Recapture assumed a new meaning under the 1986 Act whereby banks with assets of $500 million or more were required to take into income the balance of their reserve for bad debts . The Act called for recapture of income at the rate of 10%, 20%, 30%, and 40% for the years 1987 through 1990, respectively.

practice of a ceding company whereby insurance previously ceded to a reinsurer is returned to that ceding company.

1. taxing at ordinary rates part of the gain on a sale that represents prior depreciation allowances. See also depreciation recapture .
2. included in tax liability as a result of a sale that represents prior tax credits (such as the rehabilitation tax credit, investment tax credit, or low-income housing credit).