Employer payroll increase credit

(a)

In general

Subchapter B of chapter 65 of the Internal Revenue Code of 1986 is amended by adding at the end the following new section:

6433.

Employer payroll increase credits

(a)

In general

Each qualified employer shall be treated as having made a payment against the tax imposed by section 3111(a) or section 3221(a), whichever is applicable, for each qualified quarter an amount equal to the credit amount. (b)

Credit amount

(1)

In general

For purposes of this section, the credit amount with respect to any qualified quarter is equal to the applicable percentage of the qualified payroll increase of such employer for such qualified quarter. (2)

Applicable percentage

For purposes of paragraph (1), the applicable percentage with respect to any qualified quarter is— (A)in the case of an employer that employs fewer than 100 employees during such quarter, 20 percent, and (B)in the case of an employer that employs 100 or more employees during such quarter, 15 percent. (c)

Dollar limitation

The total credit amount with respect to any employer shall not exceed $500,000 for all qualified quarters. (d)

Qualified employer

For purposes of this section, the term qualified employer means any American employer other than the United States, any State, or any instrumentality thereof. (e)

Qualified payroll increase

For purposes of this section— (1)

In general

The term qualified payroll increase with respect to any qualified quarter means the amount, if any, by which a qualified employer's qualified payroll for such quarter exceeds the qualified payroll for such quarter of the calendar year preceding the year in which such qualified quarter falls. (2)

Qualified payroll

The term qualified payroll means the amount of all wages (within the meaning of section 3121(a)) paid or incurred by a qualified employer to the employees of such employer, except that, with respect to each such employee for any quarter of the employer, such wages shall be taken into account only to the extent that such wages do not exceed the contribution and benefit base as determined under section 230 of the Social Security Act. (3)

Railway labor

In the case of remuneration subject to the tax imposed by section 3221(a), paragraph (1) shall be applied by substituting all compensation (within the meaning of section 3231(e)) for all wages (within the meaning of section 3121(a)). (4)

Special rule for large employers

In the case of an employer described in subsection (b)(2)(B), no qualified payroll increase shall be taken into account for any qualified quarter unless the qualified payroll increase with respect to such qualified quarter exceeds 3 percent of the qualified payroll for such quarter of the calendar year preceding the year in which such qualified quarter falls. (f)

Qualified quarter

For purposes of this section, the term qualified quarter means— (1)the calendar quarter which includes the date of the enactment of the Small Business Job Creation Tax Act of 2010, and (2)each of the 3 calendar quarters following such quarter. (g)

Definitions

Except as provided in subsection (h)(1), any term used in this section which is also used in section 3111 has the same meaning as when used in such section. (h)

Special rules

For purposes of this section— (1)

Employee

The term employee includes only individuals who are citizens or lawful residents of the United States who receive wages, remuneration, compensation, or tips from an employer for work performed within a State or a possession of the United States. (2)

Maintenance of base employment requirement

This section shall not apply to any qualified employer for any qualified quarter if the total number of employees of such employer during such quarter is less than the total number of such employees during the quarter preceding such quarter, determined by not taking into account any employee who is a seasonal employee during such preceding quarter. (3)

Controlled groups

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 the dollar limitation under subsection (c), except that any employer which is not an American employer shall not be taken into account. (4)

New employers

(A)

In general

In the case of a qualified employer which comes into existence after the date of the enactment of the Small Business Job Creation Tax Act of 2010 and before January 1, 2012— (i)the term qualified quarter means— (I)the first calendar quarter for which such qualified employer is in existence, and (II)each of the 3 quarters following such quarter, (ii)the qualified payroll increase of such employer for the quarter described in clause (i)(I) shall be equal to the amount of the employer's qualified payroll for such quarter, and (iii)the qualified payroll increase of such employer for any quarter described in clause (i)(II) shall be the amount, if any, by which the employer's qualified payroll for such quarter exceeds the qualified payroll of the quarter preceding such quarter. (B)

Transition rule

(i)

In general

In the case of a qualified employer which comes into existence— (I)after the last day of the calendar quarter which is 5 calendar quarters before the date of the enactment of the Small Business Job Creation Tax Act of 2010, and (II)before such date of enactment,

the qualified payroll increase of such employer for any transition quarter shall be the amount, if any, by which the employer's qualified payroll for such quarter exceeds the qualified payroll of the quarter preceding such quarter.

(ii)

Transition quarter

For purposes of clause (i), the term transition quarter means a qualified quarter with respect to which the qualified payroll increase cannot be determined under subsection (e)(1) solely because the employer was not in existence during such quarter of the calendar year preceding the year in which such qualified quarter falls.

(b)

Clerical amendment

The table of sections for subchapter B of chapter 65 of the Internal Revenue Code of 1986 is amended by adding at the end the following new item:

Sec. 6433. Employer payroll increase credits.

(c)

Notification

Not later than 30 days after the date of the enactment of this Act, the Commissioner of Internal Revenue shall notify all employers required to withhold employment taxes under chapter 21 or 22 of the Internal Revenue Code of 1986 of the enactment and applicability of section 6433 of the Internal Revenue Code of 1986, as added by this Act. (d)

Investigation and report on enforcement actions

Not later than 6 months after the date of the enactment of this Act, and quarterly thereafter, the Commissioner of Internal Revenue shall submit a report to the Committee on Finance of the Senate and the Committee on Ways and Means of the House of Representatives on the enforcement measures taken to prevent and penalize fraud related to section 6433 of the Internal Revenue Code of 1986, including such information as— (1)general statistics related to the application of such section, (2)cases of fraud, and (3)the status of investigatory and prosecutorial actions related to such cases. (e)

Effective date

The amendments made by subsections (a) and (b) shall apply to calendar quarters beginning with the calendar quarter which includes the date of the enactment of this Act.