to any eligible employee, work incentive program expenses attributable to service rendered during the one-year period which begins on the day the eligible employee begins work for the taxpayer.

(3) SECOND-YEAR WORK INCENTIVE PROGRAM EXPENSES.-The term "second-year work incentive program expenses" means, with respect to any eligible employee, work incentive program expenses attributable to service rendered during the one-year period which begins on the day after the last day of the one-year period described in paragraph (2).

(4) LIMITATION ON AMOUNT OF WORK INCENTIVE PROGRAM EXPENSES. The amount of the work incentive program expenses taken into account with respect to any eligible employee for any one-year period described in paragraph (2) or (3) (as the case may be) shall not exceed $6,000.

(5) TERMINATION.-The term "work incentive program expenses" shall not include any amount paid or incurred in any taxable year beginning after December 31, 1981.

[Sec. 50B (b)]

(b) WAGES.-For purposes of subsection (a), the term "wages" means only cash remuneration (including amounts deducted and withheld).

(c) LIMITATIONS.

[Sec. 50B (c)]

(1) REIMBURSED EXPENSES.-No item shall be taken into account under subsection (a) to the extent that the taxpayer is reimbursed for such item.

(2) 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.

(3) 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 paragraph (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.

[Sec. 50B (d)]

(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.

[Sec. 50B (e)]

(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 beneficiaries on the basis of the income of the estate or trust allocable to each, and

(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.

[Sec. 50B (f)]

(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 subsections (e) and (h) of section 46 shall apply under regulations prescribed by the Secretary.

[Sec. 50B (g)]

(g) SPECIAL RULES FOR CONTROLLED GROUPS.—

(1) 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 a single employer. In any such case, the credit (if any) allowable by section 40 to each such member shall be its proportionate share of the work incentive program expenses 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

(A) "more than 50 percent" shall be substituted for "at least 80 percent" each place it appears in section 1563 (a) (1), and

(B) the determination shall be made without regard to subsections (a) (4) and (e) (3) (C) of section 1563.

(2) EMPLOYEES OF PARTNERSHIPS, PROPRIETORSHIPS, ETC., WHICH ARE UNDER COMMON CONTROL.-For purposes of this subpart, under regulations prescribed by the Secretary

(A) 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

(B) the credit (if any) allowable by section 40 with respect to each trade or business shall be its proportionate share of the work incentive program expenses giving rise to such credit.

The regulations prescribed under this paragraph shall be based on principles similar to the principles which apply in the case of paragraph (1).

[Sec. 50B (h)]

(h) ELIGIBLE EMPLOYEE.

(1) ELIGIBLE EMPLOYEE. For purposes of this subpart 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

(i) 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 90day period which immediately precedes the date on which such individual is hired by the employer, or

(ii) having been placed in employment under a work incentive program established under section 432 (b) (1) of the Social Security Act,

(B) who has been employed by the taxpayer for a period in excess of 30 consecutive days on a substantially full-time basis (except as provided in subsection (i)),

(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 employer is less than 30 days if the nature of such services requires that such individual travel from place to place over a short period of time.

[Sec. 50B (i)]

(i) SPECIAL RULES WITH RESPECT TO EMPLOYMENT OF DAY CARE WORKERS.

(1) ELIGIBLE EMPLOYEE. -An individual who would be an “eligible employee" (as that term is defined for purposes of this section) except for the fact that such an individual's employment is not on a substantially full-time basis, shall be deemed to be an eligible employee as so defined, if such employee's employment is rc

lated to the provision of child day care services and is performed on either a full-time or part-time basis.

(2) ALTERNATIVE COMPUTATION WITH RESPECT TO CHILD DAY CARE

SERVICES ELIGIBLE EMPLOYEES PAID FROM FUNDS MADE AVAILABLE UNDER TITLE XX OF THE SOCIAL SECURITY ACT.-The amount of the credit allowed a taxpayer under section 40, as determined under section 50A and the preceding provisions of this section, with respect to work incentive program expenses paid or incurred by him with respect to an eligible employee whose services are performed in connection with a child day care services program conducted by the taxpayer, and with respect to whom the taxpayer is reimbursed (in whole or in part) from funds made available pursuant to section 2007 of the Social Security Act, at the option of the taxpayer shall be equal to 100 percent of the unreimbursed wages paid or incurred by the taxpayer with respect to such employee, but not more than the amount of the limitation in paragraph (4).

(3) UNREIMBURSED WAGES. For purposes of this subsection, the term "unreimbursed wages" means work incentive program expenses for which the taxpayer was not reimbursed under section 2007 of the Social Security Act or any other grant or program. (4) LIMITATION.-The amount of the credit, as determined under paragraph (2), with respect to any employee shall not exceed the lesser of

(A) an amount equal to $6,000 minus the amount of the funds reimbursed to the taxpayer with respect to such employee from funds made available pursuant to section 2007 of the Social Security Act; or

(B) with respect to work incentive program expenses attributable to service rendered

(i) during the one-year period which begins on the day such employee begins work for the taxpayer, an amount equal to the lesser of

(I) $3,000, or

(II) 50 percent of the sum of the amount of the unreimbursed wages of such employee and the amount reimbursed to the taxpayer with respect to such employee from funds made available pursuant to section 2007 of the Social Security Act; or

(ii) during the one-year period which begins on the day after the last day of the one-year period described in clause (i), an amount equal to the lesser of

(I) $1,500, or

(II) 25 percent of the sum of the amount of the unreimbursed wages of such employee and the amount reimbursed to the taxpayer with respect to such employee from funds made available pursuant to section 2007 of the Social Security Act.

(j) CROSS REFERENCE.

[Sec. 50B (j)]

For application of this subpart to certain acquiring corporations, see section 381 (c) (24).

(Targeted Jobs Tax Credit)1

*

SEC. 44B. CREDIT FOR EMPLOYMENT OF CERTAIN NEW EMPLOYEES.

(a) GENERAL RULE.-At the election of the taxpayer, 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.

(c) ELECTION.

(1) TIME FOR MAKING ELECTION.-An election under subsection (a) 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 cxtensions).

(2) MANNER OF MAKING ELECTION.-Any election under subsection (a) (or revocation thereof) shall be made in such manner as the Secretary may by regulations prescribe.

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]

SEC. 51. AMOUNT OF CREDIT.

[Sec. 51(a)]

(a) DETERMINATION OF AMOUNT.-The amount of the credit allowable by section 44B for the taxable year shall be the sum of

(1) 50 percent of the qualified first-year wages for such year, and (2) 25 percent of the qualified second-year wages for such year.

[Sec. 51(b)]

(b) QUALIFIED WAGES DEFINED. For purposes of this subpart— (1) IN GENERAL.-The term "qualified wages" means the wages paid or incurred by the employer during the taxable year to individuals who are members of a targeted group.

(2) QUALIFIED FIRST-YEAR WAGES.-The term "qualified firstyear wages" means, with respect to any individual, qualified wages attributable to service rendered during the 1-year period beginning with the day the individual begins work for the employer (or, in the case of a vocational rehabilitation referral, the day the individual begins work for the employer on or after the beginning of such individual's rehabilitation plan).

(3) QUALIFIED SECOND-YEAR WAGES.-The term "qualified second-year wages" means, with respect to any individual, the quali

1 As amended through Public Law 97-448.