NEW JOBS CREDIT.

SEC. 202. NEW JOBS CREDIT. (a) In General.—Subpart A of part IV of subchapter A of chapter 1 (relating to credits allowable) is amended by inserting after section 44A the following new section: “SEC 44B. CREDIT FOR EMPLOYMENT OF CERTAIN NEW EMPLOYEES. “(a) General Rule.—There shall be allowed as a credit against the tax imposed by this chapter the amount determined under subpart D of this part. “(b) Regulations.—The Secretary shall prescribe such regulations as may be necessary to carry out the. purposes of this section and subpart D.” (b) Rules for Computing Credit.—Part IV of subchapter A of chapter 1 (relating to credits against tax) is amended by adding at the end thereof the following new subpart: “Subpart D—Rules for Computing Credit for Employment of Certain New Employees “Sec. 51. Amount of credit. “Sec. 52. Special rules. “Sec. 53. Limitation based on amount of tax. “SEC. 51. AMOUNT OF CREDIT. (a) Determination of Amount.—The amount of the credit allowable by section 44B shall be— “(1) for a taxable year beginning in 1977, an amount equal to 50 percent of the excess of the aggregate unemployment insurance wages paid during 1977 over 102 percent of the aggregate unemployment insurance wages paid during 1976, and 91 STAT. 142 “(2) for a taxable year beginning in 1978, an amount equal to 50 percent of the excess of the aggregate unemployment insurance wages paid during 1978 over 102 percent of the aggregate unemployment insurance wages paid during 1977. “(b) Minimum Preceding Year Wages.—For purposes of determining the amount of the credit under subsection (a) with respect to 1977 or 1978, 102 percent of the amount of the aggregate unemployment insurance wages paid during the preceding calendar year shall be deemed to be not less than 50 percent of the amount of such wages paid during 1977 or 1978, as the case may be. “(c) Total Wages Must Increase.—The amount of the credit allowable by section 44B for any taxable year shall not exceed the amount which would be determined for such year under subsection (a) (without regard to subsection (b)) if— “(1) the aggregate amounts taken into account as unemployment insurance wages were determined without any dollar limitation, and “(2) ‘105 percent’ were substituted for ‘102 percent’ in the appropriate paragraph of subsection (a). “(d) $100,000 Per Year Limitation on Credit.—Except as provided in subsection (e), the amount of the credit determined under this subpart for any employer (and the amount of the credit allowable by section 44B to any taxpayer) with respect to any calendar year shall not exceed $100,000. “(e) Additional 10 Percent Credit for Vocational Rehabilitation Referrals.— “(1) In general.—The amount of the credit allowable by section 44B for any taxable year beginning in 1977 or 1978 (determined without regard to this subsection) shall be increased by an amount equal to 10 percent of the unemployment insurance wages paid by the employer to vocational rehabilitation referrals during the calendar year in which such taxable year begins. “(2) Only first year taken into account.— For purposes of this subsection, unemployment insurance wages may be taken into account with respect to any individual— “(A) only to the extent attributable to services rendered during the 1-year period beginning with his first payment of wages by the employer after the beginning of such individual’s rehabilitation plan, and “(B) only if such first payment occurs after December 31, 1976. “(3) Only first $4,200 of wages taken into account for any individual.—For purposes of this subsection, the unemployment insurance wages paid during 1978 which are taken into account with respect to any individual shall not exceed $4,200 reduced by the amount of unemployment insurance wages paid by the employer to such individual during 1977. “(4) 20-percent limitation.—The amount of the credit allowable by reason of this subsection for any taxable year shall not exceed one-fifth of the credit determined for such year under this section without regard to this subsection and subsection (d). “(f) Definitions.—For purposes of this subpart— 91 STAT. 143 “(1) Unemployment insurance wages.—Except as otherwise provided in this subpart, the term ‘unemployment insurance wages’ has the meaning given to the term ‘wages’ by section 3306(b), except that, in the case of amounts paid during 1978, ‘$4,200’ shall be substituted for ‘$6,000’ each place it appears in section 3306(b). “(2) Agricultural labor.—If the services performed by any employee for an employer during more than one-half of any pay period (within the meaning of section 3306(d)) taken into account with respect to any calendar year constitute agricultural labor (within the meaning of section 3306(k)), the term ‘unemployment insurance wages’ means, with respect to the remuneration paid by the employer to such employee for such year, an amount equal to so much of such remuneration as constitutes ‘wages’ within the meaning of section 3121(a), except that the contribution and benefit base for each calendar year shall be deemed to be $4,200. “(3) Railway labor.—If more than one-half of the remuneration paid by an employer to an employee during the calendar year is remuneration for service described in section 3306(c) (9), the term ‘unemployment insurance wages’ means, with respect to such employee for such year, an amount equal to % of so much of the remuneration paid to such employee during such year as is subject to contributions under section 8(a) of the Railroad Unemployment Insurance Act (45 U.S.C. 358(a)). “(4) Vocational rehabilitation referral.— The term ‘vocational rehabilitation referral’ means any individual who— “(A) has a physical or mental disability which, for such individual, constitutes or results in a substantial handicap to employment , and “(B) has been referred to the employer upon completion of (or while receiving) rehabilitative services pursuant to— “(i) an individualized written rehabilitation plan under a State plan for vocational rehabilitation services approved under the Rehabilitation Act of 1973, or “(ii) a program of vocational rehabilitation carried out under chapter 31 of title 38, United States Code. “(g) Rules for Application of Section.—For purposes of this subpart— “(1) Remuneration must be for trade or business employment within united states.—Remuneration paid by an employer to an employee during any calendar year shall be taken into account only if more than one-half of the remuneration so paid is for services performed in the United States in a trade or business of the employer. “(2) Special rule for certain determinations.—Any determination as to whether paragraph (1) of this subsection, or paragraph (2) or (3) of subsection (f). applies with respect to any employee for any calendar year shall be made without regard to subsections (a) and (b) of section 52. “SEC. 52. SPECIAL RULES. “(a) Controlled Group of Corporations.—For purposes of this subpart, all employees of all corporations which are members of the same controlled group of corporations shall be treated as employed by 91 STAT. 144a single employer. In any such case, the credit (if any) allowable by section 44B to each such member shall be its proportionate contribution to the increase in unemployment insurance wages giving rise to such credit. For purposes of this subsection, the term ‘controlled group of corporations’ has the meaning given to such term by section 1563 (a), except that— “(1) ‘more than 50 percent’ shall be substituted for ‘at least 80 percent’ each place it appears in section 1563(a) (1), and “(2) the determination shall be made without regard to subsections (a) (4) and (e) (3) (C) of section 1563. “(b) Employees of Partnerships, Proprietorships, Etc., Which Are Under Common Control.—For purposes of this subpart, under regulations prescribed by the Secretary— “(1) all employees of trades or business (whether or not incorporated) which are under common control shall be treated as employed by a single employer, and “(2) the credit (if any) allowable by section 44B with respect to each trade or business shall be its proportionate contribution to the increase in unemployment insurance wages giving rise to such credit. The regulations prescribed under this subsection shall be based on principles similar to the principles which apply in the case of subsection (a). “(c) Adjustments for Certain Acquisitions, Etc.—Under regulations prescribed by the Secretary— “(1) Acquisitions.—If, after December 31, 1975, an employer acquires the major portion of a trade or business of another person (hereinafter in this paragraph referred to as the ‘precedessor’) or the major portion of a separate unit of a trade or business of a predecessor, then, for purposes of applying this subpart for any calendar year ending after such acquisition, the amount of unemployment insurance wages deemed paid by the. employer during periods before such acquisition shall lie increased by so much of such wages paid by the precedessor with respect to the acquired trade or business as is attributable to the portion of such trade or business acquired by the employer. “(2) Dispositions.— If, after December 31, 1975— “(A) 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 paragraph (1) applies, and “(B) the employer furnishes the acquiring person such information as is necessary for the application of paragraph (1), then, for purposes of applying this subpart for any calendar year ending after such disposition, the amount of unemployment insurance 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. “(d) Tax-Exempt Organizations.—No credit shall be allowed under section 44B to any organization (other than a cooperative described in section 521) which is exempt from income tax under this chapter. 91 STAT. 145 “(e) Change in Status From Self-Employed to Employee.—If— “(1) during 1976 or 1977 an individual has net earnings from self-employment (as defined in section 1402(a)) which are attributable to a trade or business, and “(2) 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 unemployment insurance wages for 1976 or 1977. as the case may be. shall be increased by an amount equal to so much of the net earnings referred to in paragraph (1) as does not exceed $4,200. “(f) Subchapter S Corporations.—In the case of an electing small business corporation (as defined insertion 1371)— “(1) the amount of the credit determined under this subpart for any 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 an amount is apportioned under paragraph (1) shall be allowed, subject to section 53, a credit under section 44B for such amount. “(g) Estates and Trusts.—In the case of an estate or trust— “(1) the amount of the credit determined under this subpart for any taxable year shall be apportioned between the estate or trust and the beneficiaries on the basis of the income of the estate or trust allocable to each, “(2) any beneficiary to whom any amount has been apportioned under paragraph (1) shall be allowed, subject to section 53, a credit under section 44B for such amount, and “(3) the $100,000 amount specified in section 51(d) applicable to such estate or trust shall be reduced to an amount which hears the same ratio to $100,000 as the portion of the credit allocable to the estate or trust under paragraph (1) bears to the entire amount of such credit. “(h) Limitations With Respect to Certain Persons.—Under regulations prescribed by the Secretary, in the case of— “(1) an organization to which section 593 (relating to reserves for losses on loans) 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 in determining the amount of the credit under this subpart. “(i) $50,000 Limitation in the Case of Married Individuals Filing Separate Returns.-—Tn the case of a husband or wife who files a separate return, the limitation under section 51(d) shall be $50,000 in lieu of $100,000. This subsection shall not apply if the spouse of the taxpayer has no interest in a trade or business for the taxable year of such spouse which ends within or with the taxpayer’s taxable year. “(j) Certain Short Taxable Years.—If the employer has more than one taxable year beginning in 1977 or 1978, the credit under this subpart shall be determined for the employer’s last taxable year beginning in 1977 or 1978. as the case may be. 91 STAT. 146 “SEC. 53. LIMITATION BASED ON AMOUNT OF TAX. “(a) General Rule.—Notwithstanding section 51, the amount of the credit allowed by section 44 B for the taxable year shall not exceed the amount of the tax imposed by this chapter for the taxable year, reduced by the sum of the credits allowable under— “(1) section 33 (relating to foreign tax credit), “(2) section 37 (relating to credit for the elderly), “(3) section 38 (relating to investment in certain depreciable property), “(4) section 40 (relating to expenses of work incentive programs) , “(5) section 41 (relating to contributions to candidates for public office), “(6) section 42 (relating to general tax credit), and “(7) section 44A (relating to expenses for household and dependent care services necessary for gainful employment). For purposes of this subsection, any tax imposed for the taxable year by section 56 (relating to minimum tax for tax preferences), section 72(m) (5) (B) (relating to 10 percent tax on premature distributions to owner-employees), section 408(f) (relating to additional tax on income from certain retirement accounts), section 402(e) (relating to tax on lump-sum distributions), section 531 (relating to accumulated earnings tax), section 541 (relating to personal holding company tax), or section 1378 (relating to tax on certain capital gains of subchapter S corporations), and any additional tax imposed for the taxable year by section 1351(d)(1) (relating to recoveries of foreign expropriation losses), shall not be considered tax imposed by this chapter for such year. “(b) Special Rule for Pass-Thru of Credit.—In the case of a partner in a partnership, a beneficiary of an estate or trust, and a shareholder in a subchapter S corporation, the limitation provided by subsection (a) for the taxable year shall not exceed a limitation separately computed with respect to such person’s interest in such entity by taking an amount which bears the same relationship to such limitation as— “(1) that portion of the person’s taxable income which is allocable or apportionable to the person’s interest in such entity, bears to “(2) the person’s taxable income for such year reduced by his zero bracket amount (determined under section 63(d)), if any. “(c) Carryback and Carryover of Unused Credit.— “(1) Allowance of Credit.— If the amount of the credit determined under section 51 for any taxable year exceeds the limitation provided by subsection (a) for such taxable year (herein-after in this subsection referred to as the ‘unused credit year’), such excess shall be— “(A) a new employee credit carryback to each of the 3 taxable years preceding the unused credit year, and “(B) a new employee credit carryover to each of the 7 taxable years following the unused credit year, and shall be added to the amount allowable as a credit by section 44B for such years. If any portion of such excess is a carryback to a taxable year beginning before January 1, 1977, section 44B shall be deemed to have been in effect for such taxable year for purposes 91 STAT. 147of allowing such carryback as a credit under such section. The entire amount of the unused credit for an unused credit year shall be carried to the earliest of the 10 taxable years to which (by reason of subparagraphs (A) and (B)) such credit may be carried, and then to each of the other 9 taxable years to the extent that, because of the limitation contained in paragraph (2), such unused credit may not be added for a prior taxable year to which such unused credit may be carried. “(2) Limitation.— The amount of the unused credit which may be added under paragraph (1) for any preceding or succeeding taxable year shall not exceed the amount by which the limitation provided by subsection (a) for such taxable year exceeds the sum of— “(A) the credit allowable under section 44B 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 which are attributable to taxable years preceding the unused credit year.” (c) Deduction for Wages Paid Reduced by Amount of Credit.— (1) In general.—Part IX of subchapter B of chapter 1 (relating to items not deductible) is amended by adding at the end thereof the following new section: “SEC. 280C. PORTION OF WAGES FOR WHICH CREDIT IS CLAIMED UNDER SECTION 44B. “No deduction shall be allowed for that portion of the wages or salaries paid or incurred for the taxable year which is equal to the amount of the credit allowable for the taxable year under section 44B (relating to credit for employment of certain new employees) determined without regard to the provisions of section 53 (relating to limitation based on amount of tax). In the case of a corporation which is a member of a controlled group of corporations (within the meaning of section 52(a)) or a trade or business which is treated as being under common control with other trades or businesses (within the meaning of section 52(b)), this section shall lie applied under rules prescribed by the Secretary similar to the rules applicable under subsections (a) and (b) of section 52.”. (2) Clerical amendment.—The table of sections for such part is amended by adding at the end thereof the following new item: “Sec. 280C. Portion of wages for which credit is claimed under section 44B.” (d) Technical and Conforming Amendments.— (1) Clerical amendments.— (A) The table of sections for subpart A of part IV of subchapter A of chapter 1 is amended by inserting after the item relating to sect ion 44A the following new item: “Sec. 44B. Credit for employment of certain new employees.” (B) The table of subparts for part IV of subchapter A of chapter 1 is amended by adding at the end thereof the following new item: “Subpart D. Rules for computing credit for employment of certain new employees.”. 91 STAT. 148 (2) Minimum tax.— (A) Section 56(c) (defining regular tax deduction) is amended by striking out “and” at the end of paragraph (7), by striking out the period at the end of paragraph (8) and inserting in lieu thereof “, and”, and by adding at the end thereof the following new paragraph: “(9) section 44B (relating to credit for employment of certain new employees).” (B) Subparagraph (A) of section 56(e) (1) (relating to tax carryover for timber) is amended— (i) by striking out “and” at the end of clause (ii), (ii) by striking out “exceed” at the end of clause (iii) and inserting in lien thereof “and”, and (iii) by inserting after clause (iii) the following new clause: “(iv) section 44B (relating to credit for employment of certain new employees), exceed”. (3) Corporate reorganizations.— (A) Subsection (c) of section 381 (relating to items of the distributor or transferor corporation) is amended by adding at the end thereof the following new paragraph: “(26) Credit under section 44B for employment of certain new employees.—The acquiring corporation shall take into account (to the extent proper to carry out the purposes of this section and section 44B. and under such regulations as may be prescribed by the Secretary) the items required to be taken into account for purposes of section 44B in respect of the distributor or transferor corporation.” (B) Section 383 (relating to special limitations on unused investment, credits, work incentive program credits, foreign taxes, and capital losses), as in effect for taxable years beginning after June 30, 1978, is amended— (i) by inserting “to any unused new employee credit of the corporation under section 53(c),” after “section 50A(b),”;and (ii) by striking out “WORK INCENTIVE PROGRAM CREDITS,” in the section heading and inserting in lieu thereof “WORK INCENTIVE PROGRAM CREDITS, NEW EMPLOYEE CREDITS,”. (C) Section 383 (as in effect on the day before the date of the enactment of the Tax Reform Act of 1976) is amended— (i) by inserting “to any unused new employee credit of the corporation which could otherwise be carried forward under section 53(c),” after “section 50A(b),”; and (ii) by striking out “WORK INCENTIVE PROGRAM CREDITS,” in the section heading and inserting in lieu thereof “WORK INCENTIVE PROGRAM CREDITS, NEW EMPLOYEE CREDITS,”. (D) The table of sections for part V of subchapter C of chapter 1 is amended by striking out “work incentive program credits,” in the item relating to section 383 and inserting in lieu thereof “work incentive program credits, new employee credits,”. 91 STAT. 149 (4) Statutes of limitation and interest relating to new employee credit carryback.— (A) Assessment and collection.—Section 6501 (relating to limitations on assessment and collection) is amended by adding at the end thereof the following new subsection: “(p) New Employee Credit Carrybacks.—In the case of a deficiency attributable to the application to the taxpayer of a new employee credit carryback (including deficiencies which may be assessed pursuant to the provisions of section 6213(b) (3)), such deficiency may be assessed at any time before the expiration of the period within which a deficiency for the taxable year of the unused new employee credit which results in such carryback may be assessed, or, with respect to any portion of a new employee credit carryback from a taxable year attributable to a net operating loss carryback, an investment credit carryback, a work incentive program credit carryback, or a capital loss carryback from a subsequent taxable year, at any time before the expiration of the period within which a deficiency for such subsequent taxable year may lie assessed.” (B) Credit or refund.—Section 6511(d) (relating to limitations on credit or refund) is amended by adding at the end thereof the following new paragraph: “(9) Special period of limitation with respect to new employee credit carrybacks.— “(A) Period of limitations.—If the claim for credit or refund relates to an overpayment attributable to a new employee credit carryback, in lieu of the 3-year period of limitation prescribed in subsection (a), the period shall be that period which ends with the expiration of the 15th day of the 40th month (or 39th month, in the case of a corporation) following the end of the taxable year of the unused new employee credit which results in such carryback (or, with respect to any portion of a new employee credit carryback from a taxable year attributable to a net operating loss carryback, an investment credit carryback, a work incentive program credit carryback, or a capital loss carryback from a subsequent taxable year, the period shall be that period which ends with the expiration of the 15th day of the 40th month, or 39th month, in the case of a corporation, following the end of such taxable year) or the period prescribed in subsection (c) in respect of such taxable year, whichever expires later. In the case of such a claim, the amount of the credit or refund may exceed the portion of the tax paid within the period provided in subsection (b) (2) or (c), whichever is applicable, to the extent of the amount of the overpayment attributable to such carryback. “(B) Applicable rules.—If the allowance of a credit or refund of an overpayment of tax attributable to a new employee credit carryback is otherwise prevented by the operation of any law or rule of law other than section 7122, relating to compromises, such credit or refund may be allowed or made, if claim therefor is filed within the period provided in subparagraph (A) of this paragraph. In the case of any such claim for credit or refund, the determination by any court, including the Tax Court, in any proceeding in which 91 STAT. 150 the decision of the court has become final shall not be conclusive with respect to the new employee credit, and the effect of such credit, to the extent that such credit is affected by a carryback which was not in issue in such proceeding.” (C) Interest on underpayments.—Section 6601(d) (relating to income tax reduced by carryback or adjustment tor certain unused deductions) is amended by adding at the end thereof the following new paragraph: “(5) New employee credit carryback.— If the credit allowed by section 44B for any taxable year is increased by reason of a new employee credit carryback, such increase shall not affect the computation of interest under this section for the period ending with the last day of the taxable year in which the new employee credit carryback arises, or, with respect to any portion of a new employee credit carryback from a taxable year attributable to a net operating loss carryback, an investment credit carryback, a work incentive program credit carryback, or a capital loss carryback from a subsequent taxable year, such increase shall not affect the computation of interest under this section for the period ending with the last day of such subsequent taxable year.” (D) Interest on overpayments.—Section 6611(f) (relating to refund of income tax caused by carryback or adjustment for certain unused deductions) is amended by adding at the end thereof the following new paragraph: “(5) New employee credit carryback.—-For purposes of subsection (a), if any overpayment of tax imposed by subtitle A results from a new employee credit carryback, such overpayment shall be deemed not to have been made before the close of the taxable year in which such new employee credit carryback arises, or, with respect to any portion of a new employee credit carryback from a taxable year attributable to a net operating loss carryback, an investment credit carryback, a work incentive program credit carryback, or a capital loss carryback from a subsequent taxable year, such overpayment shall be deemed not to have been made before the close of such subsequent taxable year.” (5) Tentative carryback adjustments.— (A) Application for adjustment.— Section 6411 (relating to quick refunds in respect of tentative carryback adjustments) is amended— (i) by striking out “or unused work incentive program credit” each place it appears in such section and inserting in lieu thereof “unused work incentive program credit, or unused new employee credit”, (ii) by inserting after “section 50A(b),” in the first sentence of subsection (a) “by a new employee credit carryback provided in section 53(c),”, (iii) by striking out “or a work incentive program carryback from” in the second sentence of subsection (a) and inserting in lieu thereof “, a work incentive program carryback, or a new employee credit carryback from”, and (iv) by striking out “investment credit carryback)” in the second sentence of subsection (a) and inserting in lieu thereof “investment credit carryback, or, in the case 91 STAT. 151of a new employee credit carryback, to an investment credit carryback or a work incentive program carryback)”. (B) Tentative carryback adjustment assessment period.— Section 6501 (m) (relating to tentative carryback adjustment assessment period) is amended— (i) by striking out “or a work incentive program carryback” and inserting in lieu thereof “a work incentive program carryback, or a new employee credit carryback”, and (ii) by striking out. “(j), or to)” each place it appears and inserting in lieu thereof “(j), (o), or (p)”. (6) Designation of income tax payment.—Section 6096(b) (relating to designation of income tax payments to Presidential Election Campaign Fund) is amended by striking out “and 44A” and inserting in lieu thereof “44A, and 44B”. (e) Effective Date.—The amendments made by this section shall apply to taxable years beginning after December 31, 1976, and to credit carrybacks from such years.