26 U.S.C. § 1396 | Empowerment zone employment credit

(a)

Amount of credit

For purposes of section 38, the amount of the empowerment zone employment credit determined under this section with respect to any employer for any taxable year is the applicable percentage of the qualified zone wages paid or incurred during the calendar year which ends with or within such taxable year.

(b)

Applicable percentage

For purposes of this section, the applicable percentage is 20 percent.

(c)

Qualified zone wages

(1)

In general

For purposes of this section, the term “qualified zone wages” means any wages paid or incurred by an employer for services performed by an employee while such employee is a qualified zone employee.

(2)

Only first $15,000 of wages per year taken into account

With respect to each qualified zone employee, the amount of qualified zone wages which may be taken into account for a calendar year shall not exceed $15,000.

(3)

Coordination with work opportunity credit

(A)

In general

The term “qualified zone wages” shall not include wages taken into account in determining the credit under section 51.

(B)

Coordination with paragraph (2)

The $15,000 amount in paragraph (2) shall be reduced for any calendar year by the amount of wages paid or incurred during such year which are taken into account in determining the credit under section 51.

(d)

Qualified zone employee

For purposes of this section—

(1)

In general

Except as otherwise provided in this subsection, the term “qualified zone employee” means, with respect to any period, any employee of an employer if—

(A)

substantially all of the services performed during such period by such employee for such employer are performed within an empowerment zone in a trade or business of the employer, and

(B)

the principal place of abode of such employee while performing such services is within such empowerment zone.

(2)

Certain individuals not eligible

The term “qualified zone employee” shall not include—

(A)

any individual described in subparagraph (A), (B), or (C) of section 51(i)(1),

(B)

any 5-percent owner (as defined in section 416(i)(1)(B)),

(C)

any individual employed by the employer for less than 90 days,

(D)

any individual employed by the employer at any facility described in section 144(c)(6)(B), and

(E)

any individual employed by the employer in a trade or business the principal activity of which is farming (within the meaning of subparagraph (A) or (B) of section 2032A(e)(5)), but only if, as of the close of the taxable year, the sum of—

(i)

the aggregate unadjusted bases (or, if greater, the fair market value) of the assets owned by the employer which are used in such a trade or business, and

(ii)

the aggregate value of assets leased by the employer which are used in such a trade or business (as determined under regulations prescribed by the Secretary),

exceeds $500,000.

(3)

Special rules related to termination of employment

(A)

In general

Paragraph (2)(C) shall not apply to—

(i)

a termination of employment of an individual who before the close of the period referred to in paragraph (2)(C) becomes disabled to perform the services of such employment unless such disability is removed before the close of such period and the taxpayer fails to offer reemployment to such individual, or

(ii)

a termination of employment of an individual if it is determined under the applicable State unemployment compensation law that the termination was due to the misconduct of such individual.

(B)

Changes in form of business

For purposes of paragraph (2)(C), the employment relationship between the taxpayer and an employee shall not be treated as terminated—

(i)

by a transaction to which section 381(a) applies if the employee continues to be employed by the acquiring corporation, or

(ii)

by reason of a mere change in the form of conducting the trade or business of the taxpayer if the employee continues to be employed in such trade or business and the taxpayer retains a substantial interest in such trade or business.

Pub. L. 103–66, title XIII, § 13301(a)Aug. 10, 1993107 Stat. 549 Pub. L. 104–188, title I, § 1201(e)(4)Aug. 20, 1996110 Stat. 1772 Pub. L. 105–34, title IXAug. 5, 1997111 Stat. 885 Pub. L. 106–554, § 1(a)(7) [title I, § 113(a), (b)]Dec. 21, 2000114 Stat. 2763(Added , , ; amended , , ; , §§ 951(b), 952(b), , , 887; , , , 2763A–601.)

Editorial Notes

References in Text

Pub. L. 105–34Aug. 5, 1997111 Stat. 788The Taxpayer Relief Act of 1997, referred to in subsec. (b)(2), is , , . For complete classification of this Act to the Code, see Tables.

Prior Provisions

Pub. L. 95–600, title VI, § 601(a)Nov. 6, 197892 Stat. 2895 Pub. L. 96–595, § 3(a)(6)Dec. 24, 198094 Stat. 3465 Pub. L. 99–514, title XIII, § 1303(a)Oct. 22, 1986100 Stat. 2658A prior section 1396, added , , ; amended , (9), (10), , , related to minimum distributions by an electing general stock ownership corporation, prior to repeal by , , .

Amendments

Pub. L. 106–554, § 1(a)(7) [title I, § 113(a)]2000—Subsec. (b). , amended subsec. (b) generally, substituting provisions establishing an applicable percentage of 20 percent for provisions setting out tables for determining the applicable percentage.

Pub. L. 106–554, § 1(a)(7) [title I, § 113(b)]Subsec. (e). , struck out heading and text of subsec. (e). Text read as follows: “This section shall be applied without regard to any empowerment zone designated under section 1391(g).”

Pub. L. 105–341997—Subsec. (b). substituted “For purposes of this section—

In general“(1) .—Except as provided in paragraph (2), the term ‘applicable percentage’ means the percentage determined in accordance with the following table:”

for “For purposes of this section, the term ‘applicable percentage’ means the percentage determined in accordance with the following table:” and added par. (2).

Pub. L. 105–34, § 952(b)Subsec. (e). , added subsec. (e).

Pub. L. 104–1881996—Subsec. (c)(3). substituted “work opportunity credit” for “targeted jobs credit” in heading.

Statutory Notes and Related Subsidiaries

Effective Date of 2000 Amendment

Pub. L. 106–554, § 1(a)(7) [title I, § 113(d)]Dec. 21, 2000114 Stat. 2763

section 1400 of this titleDecember 31, 2001“The amendments made by this section [amending this section and ] shall apply to wages paid or incurred after .”

, , , 2763A–601, provided that:

Effective Date of 1997 Amendment

section 951(b) of Pub. L. 105–34Aug. 5, 1997section 951 of Pub. L. 105–34Aug. 5, 1997Jan. 1, 2000section 951(c) of Pub. L. 105–34 section 1391 of this titleAmendment by effective , except that designations of new empowerment zones made pursuant to amendments by to be made during 180-day period beginning , and no designation pursuant to such amendments to take effect before , see , set out as a note under .

Effective Date of 1996 Amendment

Pub. L. 104–188Sept. 30, 1996section 1201(g) of Pub. L. 104–188 section 38 of this titleAmendment by applicable to individuals who begin work for the employer after , see , set out as a note under .