(A) the credit allowable under subsection (a) (1) for such taxable year, and (B) the amounts which, by reason of this subsection, are added to the amount allowable for such taxable year and attributable to taxable years preceding the unused credit year. (c) EARLY TERMINATION OF EMPLOYMENT BY EMPLOYER, ETC.(1) GENERAL RULE.-Under regulations prescribed by the Secretary (A) Work incentive program expenses.-If the employment of any employee with respect to whom work incentive program expenses are taken into account under subsection (a) is terminated by the taxpayer at any time during the first 90 days of such employment (whether or not consecutive) or before the close of the 90th calendar day after the day in which such employee completes 90 days of employment with the taxpayer, the tax under this chapter for the taxable year in which such employment is terminated shall be increased by an amount (determined under such regulations) equal to the credits allowed under section 40 for such taxable year and all prior taxable years attributable to work incentive program expenses paid or incurred with respect to such employee.1 (B) Carrybacks and carryovers adjusted.-In the case of any termination of employment to which subparagraph (A) applies, the carrybacks and carryovers under subsection (b) shall be properly adjusted. (2) 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)(A), 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, (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, 1 Subparagraph (A) was amended by section 2107 (b) of P.L. 94-455. (iv) a termination of employment of an individual with respect to whom Federal welfare recipient employment incentive expenses (as described in section 50B (a) (2)) are taken into account under subsection (a), or (v) a termination of employment of an individual due to a substantial reduction in the trade or business operations of the taxpayer.1 (B) Change in form of business, etc.-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. (3) SPECIAL RULE.-Any increase in tax under paragraph (1) shall not be treated as tax imposed by this chapter for purposes of determining the amount of any credit allowable under subpart A. (d) FAILURE TO PAY COMPARABLE WAGES. (1) GENERAL RULE.-Under regulations prescribed by the Secretary, if during the period described in subsection (c) (1) (A), the taxpayer pays wages (as defined in section 50B (b)) to an employee with respect to whom work incentive program expenses are taken into account under subsection (a) which are less than the wages paid to other employees who perform comparable services, the tax under this chapter for the taxable year in which such wages are so paid shall be increased by an amount (determined under such regulations) equal to the credits allowed under section 40 for such taxable year and all prior taxable years attributable to work incentive program expenses paid or incurred with respect to such employee, and the carrybacks and carryovers under subsection (b) shall be properly adjusted. (2) SPECIAL RULE.-Any increase in tax under paragraph (1) shall not be treated as tax imposed by this chapter for purposes of determining the amount of any credit allowable under subpart A. 1 Subparagraph (A) was amended by section 401 of Public Law 94-12 and by section 2107 (c) of P.L. 94-455 by adding clauses (IV) and (V) respectively. SEC. 50B. DEFINITIONS; SPECIAL RULES. (a) WORK INCENTIVE PROGRAM EXPENSES. (1) IN GENERAL.-For purposes of this subpart, the term "work incentive program expenses" means the sum of— (A) the amount of wages paid or incurred by the taxpayer for services rendered during the first 12 months of employment (whether or not consecutive) of employees who are certified by the Secretary of Labor as (i) having been placed in employment under a work incentive program established under section 432 (b) (1) of the Social Security Act, and (ii) not having displaced any individual from employment, plus (B) the amount of Federal welfare recipient employment incentive expenses paid or incurred by the taxpayer for services rendered during the first 12 months of employment (whether or not consecutive). (2) DEFINITIONS.-For purposes of this section, the term "Federal welfare recipient employment incentive expenses" means the amount of wages paid or incurred by the taxpayer for services rendered to the taxpayer by an eligible employee (A) before January 1, 1980, or (B) in the case of an eligible employee whose services are performed in connection with a child day care services program of the taxpayer, before October 1, 1977. (3) EXCLUSION.-No item taken into account under paragraph (1) (A) shall be taken into account under paragraph (1)(B). No item taken into account under paragraph (1)(B) shall be taken into account under paragraph 1(A).1 (b) WAGES.-For purposes of subsection (a), the term "wages" means only cash remuneration (including amounts deducted and withheld). (c) LIMITATIONS.- (1) TRADE OR BUSINESS EXPENSES.- -No item shall be taken into account under subsection (a) (1) (A) unless such item is incurred in a trade or business of the taxpayer.2 1 Section 50 B(a) was amended by section 401 of Public Law 94-12 and section 2107 (d) and (e) of Public Law 94-455. Paragrah (2) of this section was also amended by section 4 (b) and (c) of Public Law 94-401 effective with respect to individuals hired after September 7, 1976 whose services are performed in connection with a child day care. services program of the taxpayer. 2 Subsections (c) (1) and (c) (4) were amended by section 401 of Public Law 94-12. (2) REIMBURSED EXPENSES.-No item shall be taken into account under subsection (a) to the extent that the taxpayer is reimbursed for such item. (3) GEOGRAPHICAL LIMITATION.-No item shall be taken into account under subsection (a) with respect to any expense paid or incurred by the taxpayer with respect to employment outside the United States. (4) MAXIMUM PERIOD OF TRAINING OR INSTRUCTION.-No item with respect to any employee shall be taken into account under subsection (a) (1) (A) after the end of the 24-month period beginning with the date of initial employment of such employee by the taxpayer.2 (5) INELIGIBLE INDIVIDUALS.-No item shall be taken into account under subsection (a) with respect to an individual who (A) bears any of the relationships described in paragraphs (1) through (8) of section 152(a) to the taxpayer, or, if the taxpayer is a corporation, to an individual who owns, directly or indirectly, more than 50 percent in value of the outstanding stock of the corporation (determined with the application of section 267 (c)), (B) if the taxpayer is an estate or trust, is a grantor, beneficiary, or fiduciary of the estate or trust, or is an individual who bears any of the relationships described in paragraphs (1) through (8) of section 152(a) to a grantor, beneficiary, or fiduciary of the estate or trust, or (C) is a dependent (described in section 152 (a) (9)) of the taxpayer, or, if the taxpayer is a corporation, of an individual described in subparagraph (A), or, if the taxpayer is an estate or trust, of a grantor, beneficiary, or fiduciary of the estate or trust. (d) SUBCHAPTER S CORPORATIONS.-In case of an electing small business corporation (as defined in section 1371)— (1) the work incentive program expenses for each taxable year shall be apportioned pro rata among the persons who are shareholders of such corporation on the last day of such taxable year, and (2) any person to whom any expenses have been apportioned under paragraph (1) shall be treated (for purposes of this subpart) as the taxpayer with respect to such expenses. (e) ESTATES AND TRUSTS.-In the case of an estate or trust (1) the work incentive program expenses for any taxable year shall be apportioned between the estate or trust and the benefi ciaries on the basis of the income of the estate or trust allocable to each, (2) any beneficiary to whom any expenses have been apportioned under paragraph (1) shall be treated (for purposes of this subpart) as the taxpayer with respect to such expenses, and (3) the $50,000 amount specified under subparagraphs (A) and (B) of section 50A (a) (2) applicable to such estate or trust shall be reduced to an amount which bears the same ratio to $50,000 as the amount of the expenses allocated to the trust under paragraph (1) bears to the entire amount of such expenses.1 (f) LIMITATIONS WITH RESPECT TO CERTAIN PERSONS.-In the case of (1) an organization to which section 593 applies, (2) a regulated investment company or a real estate investment trust subject to taxation under subchapter M (section 851 and following), and (3) a cooperative organization described in section 1381 (a), rules similar to the rules provided in section 46 (e) shall apply under regulations prescribed by the Secretary.2 (g) ELIGIBLE EMPLOYEE. (1) ELIGIBLE EMPLOYEE.-For purposes of subsection (a) (1) (B), the term "eligible employee" means an individual (A) who has been certified by the Secretary of Labor or by the appropriate agency of State or local government as being eligible for financial assistance under part A of title IV of the Social Security Act and as having continuously received such financial assistance during the 90 day period which immediately precedes the date on which such individual is hired by the taxpayer, (B) who has been employed by the taxpayer for a period in excess of 30 consecutive days on a substantially full-time basis, (C) who has not displaced any other individual from employment by the taxpayer, and (D) who is not a migrant worker. The term "eligible employee" includes an employee of the taxpayer whose services are not performed in connection with a trade or business of the taxpayer. (2) MIGRANT WORKER.-For purposes of paragraph (1), the term "migrant worker" means an individual who is employed for services for which the customary period of employment by one 1 Paragraph (3) was amended by section 2107 (a) (4) of Pubile Law 94-455. Subsection (f) (3) was amended by section 302 of Public Law 94–12. 71-402 O 77 - 37 |