26 U.S.C. § 45A

Current through P.L. 118-106 (published on www.congress.gov on 10/04/2024)

Section 45A - Indian employment credit

(a) Amount of credit

For purposes of section 38, the amount of the Indian employment credit determined under this section with respect to any employer for any taxable year is an amount equal to 20 percent of the excess (if any) of-

(1) the sum of-

(A) the qualified wages paid or incurred during such taxable year, plus

(B) qualified employee health insurance costs paid or incurred during such taxable year, over

(2) the sum of the qualified wages and qualified employee health insurance costs (determined as if this section were in effect) which were paid or incurred by the employer (or any predecessor) during calendar year 1993.

(b) Qualified wages; qualified employee health insurance costs

For purposes of this section-

(1) Qualified wages

(A) In general

The term "qualified wages" means any wages paid or incurred by an employer for services performed by an employee while such employee is a qualified employee.

(B) Coordination with work opportunity credit

The term "qualified wages" shall not include wages attributable to service rendered during the 1-year period beginning with the day the individual begins work for the employer if any portion of such wages is taken into account in determining the credit under section 51. If any portion of wages are taken into account under subsection (e)(1)(A) of section 51, the preceding sentence shall be applied by substituting "2-year period" for "1-year period".

(2) Qualified employee health insurance costs

(A) In general

The term "qualified employee health insurance costs" means any amount paid or incurred by an employer for health insurance to the extent such amount is attributable to coverage provided to any employee while such employee is a qualified employee.

(B) Exception for amounts paid under salary reduction arrangements

No amount paid or incurred for health insurance pursuant to a salary reduction arrangement shall be taken into account under subparagraph (A).

(3) Limitation

The aggregate amount of qualified wages and qualified employee health insurance costs taken into account with respect to any employee for any taxable year (and for the base period under subsection (a)(2)) shall not exceed $20,000.

(c) Qualified employee

For purposes of this section-

(1) In general

Except as otherwise provided in this subsection, the term "qualified employee" means, with respect to any period, any employee of an employer if-

(A) the employee is an enrolled member of an Indian tribe or the spouse of an enrolled member of an Indian tribe,

(B) substantially all of the services performed during such period by such employee for such employer are performed within an Indian reservation, and

(C) the principal place of abode of such employee while performing such services is on or near the reservation in which the services are performed.

(2) Individuals receiving wages in excess of $30,000 not eligible

An employee shall not be treated as a qualified employee for any taxable year of the employer if the total amount of the wages paid or incurred by such employer to such employee during such taxable year (whether or not for services within an Indian reservation) exceeds the amount determined at an annual rate of $30,000.

(3) Inflation adjustment

The Secretary shall adjust the $30,000 amount under paragraph (2) for years beginning after 1994 at the same time and in the same manner as under section 415(d), except that the base period taken into account for purposes of such adjustment shall be the calendar quarter beginning October 1, 1993.

(4) Employment must be trade or business employment

An employee shall be treated as a qualified employee for any taxable year of the employer only if more than 50 percent of the wages paid or incurred by the employer to such employee during such taxable year are for services performed in a trade or business of the employer. Any determination as to whether the preceding sentence applies with respect to any employee for any taxable year shall be made without regard to subsection (e)(2).

(5) Certain employees not eligible

The term "qualified 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)), and

(C) any individual if the services performed by such individual for the employer involve the conduct of class I, II, or III gaming as defined in section 4 of the Indian Gaming Regulatory Act (25 U.S.C. 2703), or are performed in a building housing such gaming activity.

(6) Indian tribe defined

The term "Indian tribe" means any Indian tribe, band, nation, pueblo, or other organized group or community, including any Alaska Native village, or regional or village corporation, as defined in, or established pursuant to, the Alaska Native Claims Settlement Act (43 U.S.C. 1601 et seq.) which is recognized as eligible for the special programs and services provided by the United States to Indians because of their status as Indians.

(7) Indian reservation defined

The term "Indian reservation" has the meaning given such term by section 168(j)(6).

(d) Early termination of employment by employer

(1) In general

If the employment of any employee is terminated by the taxpayer before the day 1 year after the day on which such employee began work for the employer-

(A) no wages (or qualified employee health insurance costs) with respect to such employee shall be taken into account under subsection (a) for the taxable year in which such employment is terminated, and

(B) the tax under this chapter for the taxable year in which such employment is terminated shall be increased by the aggregate credits (if any) allowed under section 38(a) for prior taxable years by reason of wages (or qualified employee health insurance costs) taken into account with respect to such employee.

(2) Carrybacks and carryovers adjusted

In the case of any termination of employment to which paragraph (1) applies, the carrybacks and carryovers under section 39 shall be properly adjusted.

(3) Subsection not to apply in certain cases

(A) In general

Paragraph (1) shall not apply to-

(i) a termination of employment of an employee who voluntarily leaves the employment of the taxpayer,

(ii) a termination of employment of an individual who before the close of the period referred to in paragraph (1) 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

(iii) 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 (1), 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.

(4) Special rule

Any increase in tax under paragraph (1) shall not be treated as a tax imposed by this chapter for purposes of-

(A) determining the amount of any credit allowable under this chapter, and

(B) determining the amount of the tax imposed by section 55.

(e) Other definitions and special rules

For purposes of this section-

(1) Wages

The term "wages" has the same meaning given to such term in section 51.

(2) Controlled groups

(A) All employers treated as a single employer under section (a) or (b) of section 52 shall be treated as a single employer for purposes of this section.

(B) The credit (if any) determined under this section with respect to each such employer shall be its proportionate share of the wages and qualified employee health insurance costs giving rise to such credit.

(3) Certain other rules made applicable

Rules similar to the rules of section 51(k) and subsections (c), (d), and (e) of section 52 shall apply.

(4) Coordination with nonrevenue laws

Any reference in this section to a provision not contained in this title shall be treated for purposes of this section as a reference to such provision as in effect on the date of the enactment of this paragraph.

(5) Special rule for short taxable years

For any taxable year having less than 12 months, the amount determined under subsection (a)(2) shall be multiplied by a fraction, the numerator of which is the number of days in the taxable year and the denominator of which is 365.

(f) Termination

This section shall not apply to taxable years beginning after December 31, 2021.

26 U.S.C. § 45A

Added Pub. L. 103-66, title XIII, §13322(b), Aug. 10, 1993, 107 Stat. 559; amended Pub. L. 104-188, title I, §1201(e)(1), Aug. 20, 1996, 110 Stat. 1772; Pub. L. 105-206, §6023(1), July 22, 1998, 112 Stat. 824; Pub. L. 107-147, §613(a), Mar. 9, 2002, 116 Stat. 61; Pub. L. 108-311, §315, title IV, §404(b)(1), Oct. 4, 2004, 118 Stat. 1181, 1188; Pub. L. 109-432, div. A, title I, §111(a), Dec. 20, 2006, 120 Stat. 2940; Pub. L. 110-343, div. C, title III, §314(a), Oct. 3, 2008, 122 Stat. 3872; Pub. L. 111-312, §732(a), Dec. 17, 2010, 124 Stat. 3317; Pub. L. 112-240, §304(a), Jan. 2, 2013, 126 Stat. 2329; Pub. L. 113-295, div. A, title I, §114(a), title II, §216(a), Dec. 19, 2014, 128 Stat. 4014, 4034; Pub. L. 114-113, div. Q, title I, §161(a), Dec. 18, 2015, 129 Stat. 3066; Pub. L. 115-123, div. D, title I, §40301(a), Feb. 9, 2018, 132 Stat. 145; Pub. L. 116-94, div. Q, title I, §111(a), Dec. 20, 2019, 133 Stat. 3228; Pub. L. 116-260, div. EE, title I, §135(a), Dec. 27, 2020, 134 Stat. 3053.

Inflation Adjusted Items for Certain YearsFor inflation adjustment of certain items in this section, see Internal Revenue Notices listed in a table under section 401 of this title.

EDITORIAL NOTES

REFERENCES IN TEXTThe Alaska Native Claims Settlement Act, referred to in subsec. (c)(6), is Pub. L. 92-203, Dec. 18, 1971, 85 Stat. 688, which is classified generally to chapter 33 (§1601 et seq.) of Title 43, Public Lands. For complete classification of this Act to the Code, see Short Title note set out under section 1601 of Title 43 and Tables.The date of the enactment of this paragraph, referred to in subsec. (e)(4), is the date of enactment of Pub. L. 103-66, which was approved Aug. 10, 1993.

AMENDMENTS2020-Subsec. (f). Pub. L. 116-260 substituted "December 31, 2021" for "December 31, 2020".2019-Subsec. (f). Pub. L. 116-94 substituted "December 31, 2020" for "December 31, 2017".2018-Subsec. (f). Pub. L. 115-123 substituted "December 31, 2017" for "December 31, 2016". 2015-Subsec. (f). Pub. L. 114-113 substituted "December 31, 2016" for "December 31, 2014".2014-Subsec. (b)(1)(B). Pub. L. 113-295, §216(a), inserted at end "If any portion of wages are taken into account under subsection (e)(1)(A) of section 51, the preceding sentence shall be applied by substituting '2-year period' for '1-year period'."Subsec. (f). Pub. L. 113-295, §114(a), substituted "December 31, 2014" for "December 31, 2013". 2013-Subsec. (f). Pub. L. 112-240 substituted "December 31, 2013" for "December 31, 2011".2010-Subsec. (f). Pub. L. 111-312 substituted "December 31, 2011" for "December 31, 2009".2008-Subsec. (f). Pub. L. 110-343 substituted "December 31, 2009" for "December 31, 2007". 2006-Subsec. (f). Pub. L. 109-432 substituted "2007" for "2005".2004-Subsec. (c)(3). Pub. L. 108-311, §404(b)(1), inserted ", except that the base period taken into account for purposes of such adjustment shall be the calendar quarter beginning October 1, 1993" before period at end.Subsec. (f). Pub. L. 108-311, §315, substituted "December 31, 2005" for "December 31, 2004". 2002-Subsec. (f). Pub. L. 107-147 substituted "December 31, 2004" for "December 31, 2003". 1998-Subsec. (b)(1)(B). Pub. L. 105-206 substituted "work opportunity credit" for "targeted jobs credit" in heading. 1996-Subsec. (b)(1)(B). Pub. L. 104-188, which directed that subsec. (b)(1)(B) of this section be amended in the text by substituting "work opportunity credit" for "targeted jobs credit", could not be executed because the words "targeted jobs credit" did not appear in the text.

STATUTORY NOTES AND RELATED SUBSIDIARIES

EFFECTIVE DATE OF 2020 AMENDMENT Pub. L. 116-260, div. EE, title I, §135(b), Dec. 27, 2020, 134 Stat. 3053, provided that: "The amendment made by this section [amending this section] shall apply to taxable years beginning after December 31, 2020."

EFFECTIVE DATE OF 2019 AMENDMENT Pub. L. 116-94, div. Q, title I, §111(b), Dec. 20, 2019, 133 Stat. 3228, provided that: "The amendment made by this section [amending this section] shall apply to taxable years beginning after December 31, 2017."

EFFECTIVE DATE OF 2018 AMENDMENT Pub. L. 115-123, div. D, title I, §40301(b), Feb. 9, 2018, 132 Stat. 145, provided that: "The amendment made by this section [amending this section] shall apply to taxable years beginning after December 31, 2016."

EFFECTIVE DATE OF 2015 AMENDMENT Pub. L. 114-113, div. Q, title I, §161(b), Dec. 18, 2015, 129 Stat. 3066, provided that: "The amendment made by this section [amending this section] shall apply to taxable years beginning after December 31, 2014."

EFFECTIVE DATE OF 2014 AMENDMENT Pub. L. 113-295, div. A, title I, §114(b), Dec. 19, 2014, 128 Stat. 4014, provided that: "The amendment made by this section [amending this section] shall apply to taxable years beginning after December 31, 2013." Pub. L. 113-295, div. A, title II, §216(b), Dec. 19, 2014, 128 Stat. 4034, provided that: "The amendment made by this section [amending this section] shall take effect as if included in the provision of the Tax Relief and Health Care Act of 2006 [Pub. L. 109-432] to which it relates."

EFFECTIVE DATE OF 2013 AMENDMENT Pub. L. 112-240, §304(b), Jan. 2, 2013, 126 Stat. 2329, provided that: "The amendment made by this section [amending this section] shall apply to taxable years beginning after December 31, 2011."

EFFECTIVE DATE OF 2010 AMENDMENT Pub. L. 111-312, §732(b), Dec. 17, 2010, 124 Stat. 3317, provided that: "The amendment made by this section [amending this section] shall apply to taxable years beginning after December 31, 2009."

EFFECTIVE DATE OF 2008 AMENDMENT Pub. L. 110-343, div. C, title III, §314(b), Oct. 3, 2008, 122 Stat. 3872, provided that: "The amendment made by this section [amending this section] shall apply to taxable years beginning after December 31, 2007."

EFFECTIVE DATE OF 2006 AMENDMENT Pub. L. 109-432, div. A, title I, §111(b), Dec. 20, 2006, 120 Stat. 2940, provided that: "The amendment made by this section [amending this section] shall apply to taxable years beginning after December 31, 2005."

EFFECTIVE DATE OF 2004 AMENDMENT Pub. L. 108-311, §404(f), Oct. 4, 2004, 118 Stat. 1188, provided that: "The amendments made by this section [amending this section and sections 403, 408, 415, 530, and 4972 of this title] shall take effect as if included in the provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 [Pub. L. 107-16] to which they relate."

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.

EFFECTIVE DATESection applicable to wages paid or incurred after Dec. 31, 1993, see section 13322(f) of Pub. L. 103-66, set out as an Effective Date of 1993 Amendment note under section 38 of this title.

Secretary: The term "Secretary" means the Secretary of the Treasury or his delegate.
State: The term "State" shall be construed to include the District of Columbia, where such construction is necessary to carry out provisions of this title.
corporation: The term "corporation" includes associations, joint-stock companies, and insurance companies.
taxable year: The term "taxable year" means the calendar year, or the fiscal year ending during such calendar year, upon the basis of which the taxable income is computed under subtitle A. "Taxable year" means, in the case of a return made for a fractional part of a year under the provisions of subtitle A or under regulations prescribed by the Secretary, the period for which such return is made.
taxpayer: The term "taxpayer" means any person subject to any internal revenue tax.
trade or business: The term "trade or business" includes the performance of the functions of a public office.
transaction: The term "transaction" includes a series of transactions.