A bill to amend the Internal Revenue Code of 1986 to expand the work opportunity tax credit for small business jobs creation.

Summary: Small Business Jobs Tax Credit Act of 2004 - Amends the Internal Revenue Code to include qualified small business employees as a targeted group eligible for the work opportunity tax credit. Defines "qualified small business employee" as an individual who resides in and is hired by a small business located in a development zone. Defines "development zone" as any area which has (1) a development zone designation and a nomination as a renewal community; (2) a population between 5,000 and 150,000; (3) a certain level of poverty; (4) an annual average rate of job growth of less than two percent over a specified period; and (5) a population loss of at least two percent since 1990. Sets forth special rules for determining the amount of the allowable credit based upon wages paid to employees in a development zone over a five-year period.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Small Business Jobs Tax Credit Act 
of 2004''.

SEC. 2. FINDINGS.

    Congress finds the following:
            (1) In many parts of the United States, segments of large 
        cities, smaller cities, and rural areas are experiencing 
        population loss and low job growth that hurt the surrounding 
        communities.
            (2) In areas hurt by low job growth, people are forced to 
        leave the communities they have lived in their whole life to 
        secure a job.
            (3) A small business tax credit to promote jobs in areas 
        suffering from low job growth and population loss would spur 
        economic growth and would provide incentives for businesses to 
        take advantage of an often underutilized, well-educated 
        workforce.
            (4) By promoting economic growth, such a tax credit would 
        revitalize these areas that are less likely to receive other 
        Federal investments.

SEC. 3. EXPANSION OF WORK OPPORTUNITY TAX CREDIT.

    (a) In General.--Section 51(d)(1) of the Internal Revenue Code of 
1986 (relating to members of targeted groups) is amended by striking 
``or'' at the end of subparagraph (G), by striking the period at the 
end of subparagraph (H) and inserting ``, or'', and by adding at the 
end the following:
                    ``(I) a qualified small business employee.''.
    (b) Qualified Small Business Employee.--Section 51(d) of the 
Internal Revenue Code of 1986 is amended by redesignating paragraphs 
(10) through (12) as paragraphs (11) through (13), respectively, and by 
inserting after paragraph (9) the following:
            ``(10) Qualified small business employee.--
                    ``(A) In general.--The term `qualified small 
                business employee' means any individual--
                            ``(i) hired by a qualified small business 
                        located in a development zone, or
                            ``(ii) hired by a qualified small business 
                        and who is certified by the designated local 
                        agency as residing in such a development zone.
                    ``(B) Qualified small business.--The term 
                `qualified small business' has the meaning given the 
                term `small employer' by section 4980D(d)(2).
                    ``(C) Development zone.--For purposes of this 
                section--
                            ``(i) In general.--The term `development 
                        zone' means any area--
                                    ``(I) which is nominated under the 
                                procedures defined in sections 
                                1400E(a)(1)(A) and 1400E(a)(4) for 
                                renewal communities;
                                    ``(II) which the Secretary of 
                                Housing and Urban Development 
                                designates as a development zone, after 
                                consultation with the Secretary of 
                                Commerce;
                                    ``(III) which has a population of 
                                not less than 5,000 and not more than 
                                150,000;
                                    ``(IV) which has a poverty rate not 
                                less than 20 percent (within the 
                                meaning of section 1400E(c)(3)(C));
                                    ``(V) which has an average annual 
                                rate of job growth of less than 2 
                                percent during any 3 years of the 
                                preceding 5-year period; and
                                    ``(VI) which, during the period 
                                beginning January 1, 1990 and ending 
                                with the date of the enactment of this 
                                Act, has a net out-migration of 
                                inhabitants, or other population loss, 
                                from the area of at least 2 percent of 
                                the population of the area during such 
                                period.
                            ``(ii) Number of designations.--The 
                        Secretary of Housing and Urban Development may 
                        not designate more than 100 development zones.
                    ``(D) Special rules for determining amount of 
                credit.--For purposes of applying this subpart to wages 
                paid or incurred to any qualified small business 
                employee--
                            ``(i) subsection (a) shall be applied by 
                        substituting ``20 percent of the qualified 
                        first, second, third, fourth, or fifth year 
                        wages'' for ``40 percent of the qualified first 
                        year wages'', and
                            ``(ii) in lieu of paragraphs (2) and (3) of 
                        subsection (b), the following definitions and 
                        special rule shall apply:
                                    ``(I) Qualified first-year wages.--
                                The term `qualified first-year 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.
                                    ``(II) Qualified second-year 
                                wages.--The term `qualified second-year 
                                wages' means, with respect to any 
                                individual, qualified wages 
                                attributable to service rendered during 
                                the 1-year period beginning on the day 
                                after the last day of the 1-year period 
                                with respect to such individual 
                                determined under subclause (I).
                                    ``(III) Qualified third-year 
                                wages.--The term `qualified third-year 
                                wages' means, with respect to any 
                                individual, qualified wages 
                                attributable to service rendered during 
                                the 1-year period beginning on the day 
                                after the last day of the 1-year period 
                                with respect to such individual 
                                determined under subclause (II).
                                    ``(IV) Qualified fourth-year 
                                wages.--The term `qualified fourth-year 
                                wages' means, with respect to any 
                                individual, qualified wages 
                                attributable to service rendered during 
                                the 1-year period beginning on the day 
                                after the last day of the 1-year period 
                                with respect to such individual 
                                determined under subclause (III).
                                    ``(V) Qualified fifth-year wages.--
                                The term `qualified fifth-year wages' 
                                means, with respect to any individual, 
                                qualified wages attributable to service 
                                rendered during the 1-year period 
                                beginning on the day after the last day 
                                of the 1-year period with respect to 
                                such individual determined under 
                                subclause (IV).
                                    ``(VI) Only first $15,000 of wages 
                                per year taken into account.--The 
                                amount of the qualified first, second, 
                                third, fourth, and fifth year wages 
                                which may be taken into account with 
                                respect to any individual shall not 
                                exceed $15,000 per year.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to individuals who begin work for the employer after the date of 
the enactment of this Act.