Internal Revenue Code:Sec. 1396. Empowerment zone employment credit

From TaxAlmanac

Location in Internal Revenue Code

     TITLE 26 - INTERNAL REVENUE CODE
      Subtitle A - Income Taxes
       CHAPTER 1 - NORMAL TAXES AND SURTAXES
        Subchapter U - Designation and Treatment of Empowerment Zones,
              Enterprise Communities, and Rural Development Investment Areas
          PART III - ADDITIONAL INCENTIVES FOR EMPOWERMENT ZONES
           Subpart A - Empowerment Zone Employment Credit
         

Statute

    Sec. 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.
 

Sources

    (Added Pub. L. 103-66, title XIII, Sec. 13301(a), Aug. 10, 1993,
    107 Stat. 549; amended Pub. L. 104-188, title I, Sec. 1201(e)(4),
    Aug. 20, 1996, 110 Stat. 1772; Pub. L. 105-34, title IX, Sec.
    951(b), 952(b), Aug. 5, 1997, 111 Stat. 885, 887; Pub. L. 106-554,
    Sec. 1(a)(7) (title I, Sec. 113(a), (b)), Dec. 21, 2000, 114 Stat.
    2763, 2763A-601.)
 

References in Text

                             REFERENCES IN TEXT
      The Taxpayer Relief Act of 1997, referred to in subsec. (b)(2),
    is Pub. L. 105-34, Aug. 5, 1997, 111 Stat. 788.
      Reference in subsec. (c)(3) to section 51 of this title treated
    as including reference to section 51A of this title, see section
    51A(d)(2) of this title.
 

Miscellaneous

                              PRIOR PROVISIONS
      A prior section 1396, added Pub. L. 95-600, title VI, Sec.
    601(a), Nov. 6, 1978, 92 Stat. 2895; amended Pub. L. 96-595, Sec.
    3(a)(6), (9), (10), Dec. 24, 1980, 94 Stat. 3465, related to
    minimum distributions by an electing general stock ownership
    corporation, prior to repeal by Pub. L. 99-514, title XIII, Sec.
    1303(a), Oct. 22, 1986, 100 Stat. 2658.
                                 AMENDMENTS
      2000 - Subsec. (b). Pub. L. 106-554, Sec. 1(a)(7) (title I, Sec.
    113(a)), amended subsec. (b) generally, substituting provisions
    establishing an applicable percentage of 20 percent for provisions
    setting out tables for determining the applicable percentage.
      Subsec. (e). Pub. L. 106-554, Sec. 1(a)(7) (title I, Sec.
    113(b)), 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).''
      1997 - Subsec. (b). Pub. L. 105-34 substituted ''For purposes of
    this section -
        ''(1) In general. - 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).
      Subsec. (e). Pub. L. 105-34, Sec. 952(b), added subsec. (e).
      1996 - Subsec. (c)(3). Pub. L. 104-188 substituted ''work
    opportunity credit'' for ''targeted jobs credit'' in heading.
                      EFFECTIVE DATE OF 2000 AMENDMENT
      Pub. L. 106-554, Sec. 1(a)(7) (title I, Sec. 113(d)), Dec. 21,
    2000, 114 Stat. 2763, 2763A-601, provided that: ''The amendments
    made by this section (amending this section and section 1400 of
    this title) shall apply to wages paid or incurred after December
    31, 2001.''
                      EFFECTIVE DATE OF 1997 AMENDMENT
      Amendment by section 951(b) of Pub. L. 105-34 effective Aug. 5,
    1997, except that designations of new empowerment zones made
    pursuant to amendments by section 951 of Pub. L. 105-34 to be made
    during 180-day period beginning Aug. 5, 1997, and no designation
    pursuant to such amendments to take effect before Jan. 1, 2000, see
    section 951(c) of Pub. L. 105-34, set out as a note under section
    1391 of this title.
                      EFFECTIVE DATE OF 1996 AMENDMENT
      Amendment by Pub. L. 104-188 applicable to individuals who begin
    work for the employer after Sept. 30, 1996, see section 1201(g) of
    Pub. L. 104-188, set out as a note under section 38 of this title.
 

References

                   SECTION REFERRED TO IN OTHER SECTIONS
      This section is referred to in sections 38, 39, 51A, 196, 280C,
    1397, 1400, 1400H of this title.