Credit for increasing employment

(a)

In general

Subpart C of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to refundable credits) is amended by inserting after section 36A the following new section:

36B.

Credit for increasing employment

(a)

In general

There shall be allowed as a credit against the tax imposed by this subtitle— (1)for any taxable year beginning in 2010, an amount equal to 60 percent of the excess of— (A)the aggregate wages paid during 2010, over (B)the aggregate wages paid during 2009, and (2)for any taxable year beginning in 2011, an amount equal to 40 percent of the excess of— (A)the aggregate wages paid during 2011, over (B)the aggregate inflation-adjusted wages paid during 2010. (b)

Higher credit for increased employment in States with high unemployment

(1)

In general

The amount of credit allowable by subsection (a) (without regard to this subsection) shall be increased by— (A)30 percent of the increased high unemployment State wages for any taxable year beginning in 2010, and (B)20 percent of such wages for any taxable year beginning in 2011. (2)

Definitions

For purposes of this subsection— (A)

Increased high unemployment state wages

The term increased high unemployment State wages means, with respect to each high unemployment State, the excess which would be determined under subsection (a) for the taxable year (after the application of subsections (e) and (f)) if only wages paid to qualified employees with respect to such State were taken into account. (B)

Qualified employee

The term qualified employee means, with respect to any State, any employee of an employer if— (i)substantially all of the services performed during the taxable year by such employee for such employer are performed within such State in a trade or business of the employer, and (ii)the principal place of abode of such employee while performing such services is within such State.

Rules similar to the rules of paragraphs (2) and (3) of section 1396(d) shall apply for purposes of this subparagraph.

(C)

High unemployment State

The term high unemployment State means any State having an unemployment rate (using the most recent available data) as of the beginning of the taxable year for which the credit is being determined of at least 8.5 percent. (3)

Maximum wages taken into account

The aggregate increased high unemployment State wages which may be taken into account with respect to all high unemployment States for any taxable year shall not exceed the excess determined under subsection (a) for such year. (c)

Maximum credit

The amount of the credit allowable under this section for any employer with respect to any calendar year shall not exceed $500,000. (d)

Special rules for employers which are exempt from income tax or which have insufficient income tax liability

(1)

In general

In the case of an employer to which this subsection applies for any payroll period, the payroll taxes otherwise required to be paid to the Secretary with respect to such payroll period shall be reduced (but not below zero) by such period’s proportionate share of the employer’s estimated credit under subsection (a) for the taxable year which includes such period. (2)

Employers who which subsection applies

This subsection shall apply to— (A)any employer which is exempt from tax under section 501(a), and (B)any employer which estimates that the tax imposed by this subtitle for the taxable year will not exceed the credit allowable under subsection (a) for such year. (3)

Payroll taxes

For purposes of this subsection, the term payroll taxes means— (A)amounts required to be deducted and withheld for the payroll period under section 3401 (relating to wage withholding), (B)amounts required to be deducted for the payroll period under section 3102 (relating to FICA employee taxes), and (C)amounts of the taxes imposed for the payroll period under section 3111 (relating to FICA employer taxes). (4)

Amounts treated as paid to Secretary

The amount of the reduction under paragraph (1) shall be treated as paid to the Secretary on the day such amount would be required to be so paid without regard to this subsection. (5)

Reconciliation

(A)

In general

If there is a reduction under this subsection for 1 or more payroll periods ending during a taxable year, then the tax imposed by this chapter for such taxable year shall be increased by the aggregate amount of such reductions. (B)

Reconciliation

Any increase in tax under subparagraph (A) shall not be treated as tax imposed by this chapter for purposes of determining the amount of any credit (other than the credit under subsection (a)) allowable under this part. (e)

Minimum preceding year wages

For purposes of subsection (a)— (1)the amount taken into account under paragraph (1)(B) thereof shall not be less than 50 percent of the amount described in paragraph (1)(A) thereof, and (2)the amount taken into account under paragraph (2)(B) thereof shall not be less than 50 percent of the amount described in paragraph (2)(A) thereof. (f)

Total wages must increase

The amount of credit allowed under this section for any taxable year shall not exceed the amount which would be so allowed for such year (without regard to subsection (e)) if— (1)the aggregate amounts taken into account as wages were determined without any dollar limitation, and (2)103 percent of the amount of wages otherwise required to be taken into account under subsection (a)(1)(B) or subsection (a)(2)(B), as the case may be, were taken into account. (g)

Wages; inflation-Adjusted wages

For purposes of this section— (1)

In general

Except as provided in paragraph (2), the term wages has the meaning given to such term by section 3306(b). (2)

Railway and agricultural labor

Rules similar to the rules of section 51(h) shall apply for purposes of this section. (3)

Inflation-adjusted wages

The term inflation-adjusted wages means the aggregate wages paid during 2010 increased by an amount equal to— (A)such aggregate wages, multiplied by (B)the cost-of-living adjustment determined under section 1(f)(3) for 2010, determined by substituting calendar year 2008 for calendar year 1992 in subparagraph (B) thereof.

Any increase determined under the preceding sentence shall be rounded in such manner as the Secretary shall prescribe.

(h)

Special rules

(1)

Adjustments for certain acquisitions, etc

(A)

Acquisitions

If, after December 31, 2008, an employer acquires the major portion of a trade or business of another person (hereinafter in this subparagraph referred to as the predecessor) or the major portion of a separate unit of a trade or business of a predecessor, then, for purposes of applying this section for any calendar year ending after such acquisition, the amount of wages deemed paid by the employer during periods before such acquisition shall be increased by so much of such wages paid by the predecessor with respect to the acquired trade or business as is attributable to the portion of such trade or business acquired by the employer. (B)

Dispositions

If, after December 31, 2008— (i)an employer disposes of the major portion of any trade or business of the employer or the major portion of a separate unit of a trade or business of the employer in a transaction to which subparagraph (A) applies, and (ii)the employer furnishes the acquiring person such information as is necessary for the application of subparagraph (A),

then, for purposes of applying this section for any calendar year ending after such disposition, the amount of wages deemed paid by the employer during periods before such disposition shall be decreased by so much of such wages as is attributable to such trade or business or separate unit.

(2)

Change in status from self-employed to employee

If— (A)during 2009 or 2010 an individual has net earnings from self-employment (as defined in section 1402(a)) which are attributable a trade or business, and (B)for any portion of the succeeding calendar year such individual is an employee of such trade or business,

then, for purposes of determining the credit allowable for a taxable year beginning in such succeeding calendar year, the employer’s aggregate wages for 2009 or 2010, as the case may be, shall be increased by an amount equal to so much of the net earnings referred to in subparagraph (A) as does not exceed the median household income in the United States for 2009 or 2010, as the case may be.

(3)

Certain other rules to apply

Rules similar to the following rules shall apply for purposes of this section: (A)Section 51(f) (relating to remuneration must be for trade or business employment). (B)Section 51(1)(1) (relating to related individuals ineligible). (C)Section 51(k) (relating to treatment of successor employers; treatment of employees performing services for other persons). (D)Section 52 (relating to special rules). (4)

Short taxable years

If the employer has more than 1 taxable year beginning in 2010 or 2011, the credit under this section shall be determined for the employer’s last taxable year beginning in 2010 or 2011, as the case may be. (i)

Tax-Exempt employers treated as taxpayers

Solely for purposes of this section and section 6402, employers exempt from tax under section 501(a) shall be treated as taxpayers.

(b)

Denial of double benefit

Subsection (a) of section 280C of such Code is amended by inserting 36B(a), before 45A(a). (c)

Conforming amendments

(1)Section 1324(b)(2) of title 31, United States Code, is amended by inserting 36B, after 36A,. (2)The table of sections for subpart C of part IV of subchapter A of chapter 1 of such Code is amended by inserting after the item relating to section 36A the following new item:

Sec. 36B. Credit for increasing employment..

(d)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2009.