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CODE cont'd. IRC § 51(d)(8)

A school which is not a public school shall be treated as a qualified school only if it is exempt from tax under section 501(a).

(D) Wages. In the case of remuneration attributable to services performed while the individual meets the requirements of clauses (i). (ii), and (ii) of subparagraph (A), wages, and unemployment insurance wages, shall be determined without regard to section 3306(c)(10)(C).

(9) Eligible work incentive employees.—The term “eligible work incentive em. ployee" means an individual who has been certified by the designated local agency

as

(A) being eligible for financial assistance under part A of title IV of the Social Security Act and as having continually received such financial assistance during the 90-day period which immediately precedes the date on which such individual is hired by the employer, or

(B) baving been placed in employment under a work incentive program established under section 432(b)(1) or 44D of the Social Security Act.

(10) Involuntarily terminated CETA employee.-The term "involuntarily terminated CETA employee" means an individual who is certified by the designated local agency as having been involuntarily terminated after December 31, 1980, from em. ployment financed in whole or in part under a program under part D of title II or title VI of the Comprehensive Employment and Training Act. This paragraph shall not apply to any individual who begins work for the employer after December 31. 1982.

(11) Members of economically disadvantaged families.-An individual is a member of an economically disadvantaged family if the designated local agency determines that such individual was a member of a family which had an income during the 6 months immediately preceding the earlier of the month in which such determination occurs or the month in which the hiring date occurs which, on an annual basis, would be 70 percent or less of the Bureau of Labor Statistics lower living standard. Any such determination shall be valid for the 45-day period beginning on the date such determination is made. Any such determination with respect to an individual who is a qualified summer youth employee or youth participating in a qualified cooperative education program with respect to any employer shall also apply for purposes of determining whether such individual is a member of another targeted group with respect to such employer. (12) Qualified summer youth employee.

(A) In general.—The term "qualified summer youth employee" means an in. dividual

(i) who performs services for the employer between May 1 and September 15,

(ii) who is certified by the designated local agency as having attained age 16 but not 18 on the hiring date (or if later, on May 1 of the calendar year in. volved),

(iii) who has not been an employee of the employer during any period prior to the 90-day period described in subparagraph (B)(iii), and

(iv) who is certified by the designated local agency as being a member of an economically disadvantaged family (as determined under paragraph (11)).

(B) Special rules for determining amount of credit.-For purposes of applying this subpart to wages paid or incurred to any qualified summer youth employee

(i) subsection (b)(2) shall be applied by substituting “any 90-day period be. tween May 1 and September 15" for "the l.year period beginning with the day the individual begins work for the employer", and

(ii) subsection (b)(3) shall be applied by substituting “$3,000" for "S6,000". (C) Special rule for continued employment for same employer.-In the case of

an individual who, with respect to the same employer, is certified as a member of 1450

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another targeted group after such individual has been a qualified summer youth employee, paragraph (14) shall be applied by substituting "certified" for "hired by the employer."

(13) Preemployment period.—The term “preemployment period" means the 60-day period ending on the hiring date.

(14) Hiring date.—The term “hiring date” means the day the individual is hired by the employer.

(15) Designated local agency.The term "designated local agency" means a State employment security agency established in accordance with the Act of June 6, 1933, as amended (29 U.S.C. 49-49n). (10) Special rules for certifications.

(A) In general. -An individual shall not be treated as a member of a targeted group unless, on or before the day on which such individual begins work for the employer, the employer

(i) has received a certification from a designated local agency that such individual is a member of a targeted group, or

(ii) has requested in writing such certification from the designated local agency. For purposes of the preceding sentence, if on or before the day on which such individual begins work for the employer, such individual has received from a desig. nated local agency (or other agency or organization designated pursuant to a written agreement with such designated local agency) a written preliminary determination that such individual is a member of a targeted group, then “the fifth day" shall be substituted for “the day" in such sentence. (B) Incorrect certification.—11–

(i) an individual has been certified as a member of a targeted coup, and

(ii) such certification is incorrect because it was based on false information provided by such individual, the certification shall be revoked and wages paid by the employer after the date on which notice of revocation is received by the employer shall not be treated as qual.

ified wages.

(C) Employer request must specify potential basis for eligibility.--In any request for a certification of an individual as a member of a targeted group, the employer shall

(i) specify each subparagraph (but not more than 2) of paragraph (1) by reason of which the employer believes that such individual is such a member, and

(ii) certify that a good faith effort was made to determine that such individual

is such a member. (e) (Repealed) (1) Remuneration Must Be for Trade or Business Employment.

(1) In general.-For purposes of this subpart, remuneration paid by w employer to an employee during any taxable year shall be taken into account only if more than one-half of the remuneration so paid is for services performed in a trade or business of the employer.

(2) Special rule for certain determination.-Any determination as to whether paragraph (1), or subparagraph (A) or (B) of subsection (hX1), applies with respect to any employee for any taxable year shall be made without regard to subsections (a) and (b) of section 52.

(Footnone IRC $51 continued)

IRC 351(0X16XC) in italics added by section 7103cX1). *89 OBRA.

Elective date (Sec. 7103(cX2). '89 OBRA). - Applies to individuals who begin work for the employer aher 12-31-89. PH. loc. Federal Taxes indSee also Recent Developments

1451

CODE cont'd. IRC S 518)

® United States Employment Service To Notify Employers of Availability of Che dit.—The United States Employment Service, in consultation with the Internal Revenue Service, shall take such steps as may be necessary or appropriate to keep employers ap prised of the availability of the targeted jobs credit determined under this subpart.

an) Special Rules for Agricultural Labor and Railway Labor.-For purposes of this subpart

(1) Unemployment insurance wages.

(A) Agricultural labor.—If the services performed by any employee for an enployer during more than one-half of any pay period (within the meaning of section 3306(d)) taken into account with respect to any 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 $6,000.

(B) Railway labor.—If more than one-balf of remuneration paid by an employer to an employee during any year is remuneration for service described in sec. tion 3306(cX9), the term "unemployment insurance wages" means, with respect to such employee for such year, an amount equal to so much of the remuneration paid to such employee during such year which would be subject to contributions under section 8(a) of the Railroad Unemployment Insurance Act (45 U.S.C. 358(a)) if the maximum amount subject to such contributions were $500 per moments

(2) Wages.-In any case to which subparagraph (A) and (B) of paragraph (1) applies, the term “wages” means unemployment insurance wages (determined without regard to any dollar limitation). (1) Certain Individuals Ineligible.

(1) Related individuals.—No wages 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. (2) Nonqualifying rebires.- No wages shall be taken into account under subsec. tion (a) with respect to any individual if, prior to the hiring date of such individual, such individual had been employed by the employer at any time during which he was not a member of a targeted group.

(3) Individuals not meeting minimum employment period.—No wages shall be taken into account under subsection (a) with respect to any individual unless such individual either

(A) is employed by the employer at least 90 days (14 days in the case of an individual described in subsection (d)(12)), or

(B) has completed at least 120 hours (20 hours in the case of an individual de

scribed in subsection (d)(12)) of services performed for the employer. 0) Treatment of Successor Employers; Treatment of Employees Performing Services for other Persons.1452

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(1) Treatment of successor employers.—Under regulations prescribed by the Secre tary, in the case of a successor employer referred to in section 3306(b)(1), the determi nation of the amount of the credit under this section with respect to wages paid b: such successor employer shall be made in the same manner as if such wages were paic by the predecessor employer referred to in such section.

(2) Treatment of employees performing services for other persons. No credi shall be determined under this section with respect to remuneration paid by an em ployer to an employee for services performed by such employee for another persor unless the amount reasonably expected to be received by the employer for such ser. vices from such other person exceeds the remuneration paid by the employer to such employee for such services. (k) Election to Have Targeted Jobs Credit Not Apply.

(1) In general.-A taxpayer may elect to have this section not apply for any tax. able year.

(2) Time for making election.-An election under paragraph (1) for any taxable year may be made (or revoked) at any time before the expiration of the 3-year period beginning on the last date prescribed by law for filing the return for such taxable year (determined without regard to extension). Manner of making election.-An election under paragraph (1) (or revocation

be made in such manner as the Secretary may by regulations prescribe.

DEPORTS

[9511] ('89 OBRA, P.L. 101-239, 12-19-89). Extension of targeted jobs credit.

provision, the credit does not apply with (Conference Explanation)

respect to individuals who begin work for House bill

the employer after December 31, 1991. The credit is extended for two years,

Senate amendment through December 31, 1991, with one No provision. modification. The modification would re- Conference agreement quire that employers: (1) specifically iden. The conference agreement follows the tify the categories (but not to exceed two) House bill, except that the credit is exfor which the individual is believed to be tended for nine months. The provision apeligible when requesting certification and

plies with respect to targeted-group indi. (2) indicate that a good faith effort was

viduals who begin work for the employer made to determine that the individual is

after December 31, 1989, and before Octoeligible for the credit. The authorization for appropriations is

ber 1, 1990. Under the provision, the extended for two years, October 1, 1989–

credit does not apply with respect to indiSeptember 30, 1991.

viduals who begin work for the employer The provision applies with respect to

after September 30, 1990. targeted-group individuals who begin work The authorization for appropriations is for the employer after December 31, 1989, extended for one year, October 1, 1989 and before January 1, 1992. Under the September 30, 1990. [9511.005] ('88 Technical and Miscellaneous Revenue Act (°88 TAMRA, P.L. 100-647, 11-10-88). Extension of targeted jobs credit. (House Explanation)

are: (1) vocational rehabilitation referrals;

(2) economically disadvangted youths aged Present Law-Tux credit provisions.

18 through 24; (3) economically disadvan. The targeted jobs tax credit is available on

taged Vietnam-era veterans; (4) Supplemenan elective basis for hiring individuals from

tal Security Income (SSI) recipients; (5) nine targeted groups. The targeted groups

general assistance recipients; (6) economi. PH. Inc.-Federal Taxes 2nd-See also Recent Developments

1453 COMMITTEE REPORTS cont'd. IRC § 51

cally disadvangted cooperative education are extended for two years. The category students aged 16 through 19; (7) economi. of economically disadvantaged youth is cally disadvantaged former convicts; (8) restricted to employees aged 18 through Aid to Families with Dependent Children 21. (AFDC) recipients and Work Incentive Effective Date. The provision applies (WIN) registrants; and (9) economically with respect to targeted-group individuals disadvaged summer youth employees aged who begin work for the employer after 16 or 17. Targeted group membership December 31, 1988 and before January 1, must be certified.

1991. Under the provision, the credit does The credit generally is equal to 40 per- not apply with respect to individuals who cent of the first $6,000 of qualified first.

begin work for the employer after Decemyear wages paid to a member of a targeted

ber 31, 1990. group. Thus, the maximum credit generally

The authorization for appropriations is is $2,400 per individual. With respect to

effective for the period October 1, 1988 economically disadvantaged summer youth

through September 30, 1990 (fiscal years employees, however, the credit is equal to

1989-1990). 85 percent of up to $3,000 of wages, for a

(Conference Report) maximum credit of $2,550.

The credit is not available for wages paid to a targeted group member unless Senate amendment-Under the Senate the individual either (1) is employed by the amendment, the credit is extended for six employer for at least 90 days (14 days in months, and the authorization for approthe case of economically disadvantaged priation is extended one year. Also, the summer youth employees), or (2) has com- credit for disadvantaged summer youth pleted at least 120 hours of work per. employees is reduced from 85 percent to formed for the employer (20 hours in the

40 percent. case of economically disadvantaged sum- The provision applies with respect to mer youth employees). Also, the employ targeted-group individuals who begin work er's deduction for wages must be reduced

for the employer after December 31, 1988 by the amount of the credit.

and before July 1, 1989. Under the provi. The credit is available with respect to sion, the credit does not apply with respect targeted-group individuals who begin work

to individuals who begin work for the emfor the employer before January 1, 1989.

ployer after June 30, 1989. Authorization of appropriations. Present

The authorization for appropriations is law also authorizes appropriations for ad

effective for the period October 1, 1988, ministrative and publicity expenses relating

through September 30, 1989 (fiscal year to the credit through September 30, 1988.

1989). These monies are to be used by the Internal Revenue Service (IRS) and Department agreement follows the House bill and the

Conference Agreement-The conference of Labor to inform employers of the credit

Senate amendment with modifications. The program.

agreement follows the House bill provision

10 restrict the category of economically Explanation of Provision-The credit disadvantged youth, except that this cateand the authorization for appropriations gory will include employees age 18 to 22

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