26 USC 45 - Indian employment credit

View all text of Subpart D [§ 38 - § 45AA]

§ 45A. Indian employment credit

(a) Amount of creditFor purposes of section 38, the amount of the Indian employment credit determined under this section with respect to any employer for any taxable year is an amount equal to 20 percent of the excess (if any) of—

(1) the sum of—

(A) the qualified wages paid or incurred during such taxable year, plus

(B) qualified employee health insurance costs paid or incurred during such taxable year, over

(2) the sum of the qualified wages and qualified employee health insurance costs (determined as if this section were in effect) which were paid or incurred by the employer (or any predecessor) during calendar year 1993.

(b) Qualified wages; qualified employee health insurance costsFor purposes of this section—

(1) Qualified wages

(A) In general

(B) Coordination with work opportunity credit

(2) Qualified employee health insurance costs

(A) In general

(B) Exception for amounts paid under salary reduction arrangements

(3) Limitation

(1) In generalExcept as otherwise provided in this subsection, the term “qualified employee” means, with respect to any period, any employee of an employer if—

(A) the employee is an enrolled member of an Indian tribe or the spouse of an enrolled member of an Indian tribe,

(B) substantially all of the services performed during such period by such employee for such employer are performed within an Indian reservation, and

(C) the principal place of abode of such employee while performing such services is on or near the reservation in which the services are performed.

(2) Individuals receiving wages in excess of $30,000 not eligible

(3) Inflation adjustment

(4) Employment must be trade or business employment

(5) Certain employees not eligibleThe term “qualified employee” shall not include—

(A) any individual described in subparagraph (A), (B), or (C) of section 51(i)(1),

(B) any 5-percent owner (as defined in section 416(i)(1)(B)), and

(C) any individual if the services performed by such individual for the employer involve the conduct of class I, II, or III gaming as defined in section 4 of the Indian Gaming Regulatory Act (25 U.S.C. 2703), or are performed in a building housing such gaming activity.

(6) Indian tribe defined

(7) Indian reservation defined

(d) Early termination of employment by employer

(1) In generalIf the employment of any employee is terminated by the taxpayer before the day 1 year after the day on which such employee began work for the employer—

(A) no wages (or qualified employee health insurance costs) with respect to such employee shall be taken into account under subsection (a) for the taxable year in which such employment is terminated, and

(B) the tax under this chapter for the taxable year in which such employment is terminated shall be increased by the aggregate credits (if any) allowed under section 38(a) for prior taxable years by reason of wages (or qualified employee health insurance costs) taken into account with respect to such employee.

(2) Carrybacks and carryovers adjusted

(3) Subsection not to apply in certain cases

(A) In generalParagraph (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) 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, or

(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.

(B) Changes in form of businessFor 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.

(4) Special ruleAny increase in tax under paragraph (1) shall not be treated as a tax imposed by this chapter for purposes of—

(A) determining the amount of any credit allowable under this chapter, and

(B) determining the amount of the tax imposed by section 55.

(e) Other definitions and special rulesFor purposes of this section—

(1) Wages

(2) Controlled groups

(A) 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 this section.

(B) The credit (if any) determined under this section with respect to each such employer shall be its proportionate share of the wages and qualified employee health insurance costs giving rise to such credit.

(3) Certain other rules made applicable

(4) Coordination with nonrevenue laws

(5) Special rule for short taxable years

(f) Termination

(Added Pub. L. 103–66, title XIII, § 13322(b), Aug. 10, 1993, 107 Stat. 559; amended Pub. L. 104–188, title I, § 1201(e)(1), Aug. 20, 1996, 110 Stat. 1772; Pub. L. 105–206, title VI, § 6023(1), July 22, 1998, 112 Stat. 824; Pub. L. 107–147, title VI, § 613(a), Mar. 9, 2002, 116 Stat. 61; Pub. L. 108–311, title III, § 315, title IV, § 404(b)(1), Oct. 4, 2004, 118 Stat. 1181, 1188; Pub. L. 109–432, div. A, title I, § 111(a), Dec. 20, 2006, 120 Stat. 2940; Pub. L. 110–343, div. C, title III, § 314(a), Oct. 3, 2008, 122 Stat. 3872; Pub. L. 111–312, title VII, § 732(a), Dec. 17, 2010, 124 Stat. 3317; Pub. L. 112–240, title III, § 304(a), Jan. 2, 2013, 126 Stat. 2329; Pub. L. 113–295, div. A, title I, § 114(a), title II, § 216(a), Dec. 19, 2014, 128 Stat. 4014, 4034; Pub. L. 114–113, div. Q, title I, § 161(a), Dec. 18, 2015, 129 Stat. 3066; Pub. L. 115–123, div. D, title I, § 40301(a), Feb. 9, 2018, 132 Stat. 145; Pub. L. 116–94, div. Q, title I, § 111(a), Dec. 20, 2019, 133 Stat. 3228; Pub. L. 116–260, div. EE, title I, § 135(a), Dec. 27, 2020, 134 Stat. 3053.)