Credit for certain individuals hired by a small employer

(a)

In general

Subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following:

45S.

Certain individuals hired by a small employer

(a)

General Rule

For purposes of section 38, in the case of an eligible small employer, the small employer hiring credit determined under this section for any taxable year is the amount determined under subsection (b).(b)

Small employer hiring credit amount

The amount determined under this subsection for a taxable year with respect to a qualified small employer is the product of—(1)the tax rate in effect under section 3111(a) for the calendar year in which such taxable year ends, multiplied by(2)the wages paid by the qualified small employer with respect to employment of all covered employees during the taxable year.(c)

Qualified employer

For purposes of this subsection—(1)

In general

The term qualified small employer means with respect to any calendar year, an employer who on no business day of the preceding calendar year employed less than 2, or more than 150, employees.(2)

Employers not in existence in preceding year

In the case of an employer which was not in existence throughout the preceding calendar year, the determination of whether such employer is a small employer shall be based on the number of employees that it is reasonably expected such employer will employ on business days in the current calendar year.(3)

Special rules

For purposes of this subsection—(A)

Predecessor and successor

Any reference in this paragraph to an employer shall include a reference to any predecessor of, or successor to, such employer.(B)

Aggregation rule

All persons treated as a single employer under subsection (b), (c), (m), or (o) of section 414 shall be treated as one employer.(C)

Governmental employers not included

The term employer does not include the United States, any State, or any political subdivision thereof, or any instrumentality of the foregoing.(4)

Credit applies for only 1 year

If an election to claim the credit under this section is in effect for any calendar year, paragraph (1) shall not apply to such employer for any year after such calendar year.(d)

Covered employee

For purposes of this subsection—(1)

In general

The term covered employee means, with respect to any week, is an employee who—(A)first begins work for the employer for services performed by the employee—(i)in a trade or business of such qualified small employer, or(ii)in the case of a qualified small employer exempt from tax under section 501(a), in furtherance of the activities related to the purpose or function constituting the basis of the employer’s exemption under section 501, and(B)is employed on average at least 30 hours of service per week.(2)

Limitation to 5 employees

An employer may not treat more than 5 employees as covered employees.(3)

Hours of service

The Secretary, in consultation with the Secretary of Labor, shall prescribe such regulations, rules, and guidance as may be necessary to determine the hours of service of an employee, including rules for the application of this paragraph to employees who are not compensated on an hourly basis.(e)

Credit made available to tax-Exempt eligible small employers

(1)

In general

In the case of a tax-exempt eligible small employer, there shall be treated as a credit allowable under subpart C (and not allowable under this subpart) the amount of the credit determined under this section with respect to such employer.(2)

Tax-exempt eligible small employer

For purposes of this section, the term tax-exempt eligible small employer means an eligible small employer which is any organization described in section 501(c) which is exempt from taxation under section 501(a).(f)

Denial of double benefit

No deduction or credit shall be allowed under any other provision of this chapter with respect to the amount of the credit determined under this section.(g)

Election

This section shall apply to any taxpayer for any taxable year only if such taxpayer elects (at such time and in such manner as the Secretary may by regulations prescribe) to have this section apply for such taxable year.(h)

Termination

This section shall not apply with respect to wages paid after December 31, 2015.

(b)

Credit To Be Part of General Business Credit

Section 38(b) of the Internal Revenue Code of 1986 (relating to current year business credit) is amended by striking

plus

at the end of paragraph (35), by striking the period at the end of paragraph (36) and inserting , plus, and by inserting after paragraph (36) the following:

(37)the small employer hiring credit determined under section 45S.

(c)

Clerical Amendment

The table of sections for subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following:

Sec. 45S. Certain individuals hired by a small employer.

(d)

Effective date

The amendments made by this section shall apply to amounts paid or incurred in taxable years beginning after December 31, 2013.