I 

116TH CONGRESS 

1ST SESSION H. R. 4922 

To amend the Internal Revenue Code of 1986 to provide a tax credit for 

angel investors in start-up businesses, to provide a credit for wages 

paid by start-up businesses to their first employees, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

OCTOBER 30, 2019 

Ms. JUDY CHU of California (for herself and Mr. BLUMENAUER) introduced 

the following bill; which was referred to the Committee on Ways and Means 

A BILL 

To amend the Internal Revenue Code of 1986 to provide 

a tax credit for angel investors in start-up businesses, 

to provide a credit for wages paid by start-up businesses 

to their first employees, and for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Providing Real Oppor5 tunities for Growth to Rising Entrepreneurs for Sustained 

6 Success (PROGRESS) Act’’. 


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1 SEC. 2. ANGEL INVESTOR TAX CREDIT. 

2 (a) IN GENERAL.—Subpart D of part IV of sub3 chapter A of chapter 1 of the Internal Revenue Code of 

4 1986 is amended by adding at the end the following new 

5 section: 

6 ‘‘SEC. 45T. ANGEL INVESTOR TAX CREDIT. 

7 ‘‘(a) GENERAL RULE.—For purposes of section 38, 

8 the angel investor credit determined under this section for 

9 any taxable year is an amount equal to the sum of the 

10 credit amounts determined for the taxable year for all 

11 qualified investments of the taxpayer. 

12 ‘‘(b) CREDIT AMOUNT.—For purposes of this sec13 tion— 

14 ‘‘(1) IN GENERAL.—The term ‘credit amount’ 

15 means, with respect to any qualified investment in a 

16 qualifying business entity, the lesser of— 

17 ‘‘(A) 10 percent of the amount of the 

18 qualified investment determined under sub19 section (c)(3) for the taxable year, or 

20 ‘‘(B) an amount equal to— 

21 ‘‘(i) 50 percent of such qualified in22 vestment, reduced (but not below zero) by 

23 ‘‘(ii) the amount of the credit deter24 mined under this section with respect to 

25 such qualified investment of the taxpayer 

26 for all preceding taxable years. 


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1 ‘‘(2) OVERALL DOLLAR LIMITATION.— 

2 ‘‘(A) IN GENERAL.—The credit amount de3 termined under paragraph (1) with respect to 

4 any qualified investment of a taxpayer in a 

5 qualifying business entity for any taxable year 

6 shall not exceed the lesser of— 

7 ‘‘(i) $10,000 (as increased for the tax8 able year by the cost-of-living adjustment 

9 under subsection (e)(2)), or 

10 ‘‘(ii) an amount equal to— 

11 ‘‘(I) an amount equal to 5 times 

12 the amount under clause (i) for the 

13 taxable year, reduced (but not below 

14 zero) by 

15 ‘‘(II) the amount of the credit 

16 determined under this section with re17 spect to such qualified investment of 

18 the taxpayer for all preceding taxable 

19 years. 

20 ‘‘(B) NO CREDIT AMOUNT BY REASON OF

21 COST-OF-LIVING ADJUSTMENT AFTER OVERALL

22 LIMIT FIRST REACHED.—No credit amount 

23 shall be determined under this section with re24 spect to any qualified investment of a taxpayer 

25 in a qualifying business entity for any taxable 


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1 year after the first taxable year for which the 

2 amount determined under subclause (II) of sub3 paragraph (A)(ii) equals or exceeds the amount 

4 determined under subclause (I) of such sub5 paragraph. 

6 ‘‘(3) REDUCTION IN CREDIT AMOUNT WHERE

7 LOAN RATE EXCEEDS PRIME RATE.— 

8 ‘‘(A) IN GENERAL.—If— 

9 ‘‘(i) the rate of interest (expressed as 

10 an annual percentage rate) on a qualified 

11 investment which is a qualifying loan, ex12 ceeds 

13 ‘‘(ii) the bank prime rate as of the 

14 first day of the month in which the loan is 

15 entered into (or such other time as the 

16 Secretary may specify), 

17 then each of the amounts determined under 

18 subparagraphs (A) and (B)(i) of paragraph (1) 

19 shall be reduced (but not below zero) by the 

20 amount which bears the same ratio to such 

21 amount as the number of full percentage points 

22 by which such rate of interest exceeds such 

23 bank prime rate bears to 25. 

24 ‘‘(B) SPECIAL RULES WHERE QUALIFYING

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1 MENT.—If 1 or more qualifying loans to which 

2 subparagraph (A) applies are treated as part of 

3 a single qualified investment under subsection 

4 (c)(1), then, for purposes of this subsection— 

5 ‘‘(i) the credit amount under para6 graph (1) for such single qualified invest7 ment shall be the sum of such credit 

8 amounts computed separately for each 

9 such qualifying loan and such credit 

10 amount computed for all other qualified in11 vestments treated as part of such single 

12 qualified investment, and 

13 ‘‘(ii) the limitation under paragraph 

14 (2) shall be applied to such sum. 

15 ‘‘(C) RULES RELATING TO INTEREST

16 RATES.— 

17 ‘‘(i) ANNUAL PERCENTAGE RATE.— 

18 The Secretary shall prescribe guidance or 

19 regulations for the calculation of the an20 nual percentage rate of interest on a loan 

21 for purposes of subparagraph (A)(i), in22 cluding rules which provide for— 

23 ‘‘(I) the calculation of the annual 

24 percentage rate in cases where there 

25 is a variable rate of interest, 


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1 ‘‘(II) the recalculation of the an2 nual percentage rate where the terms 

3 of the loan are modified after the loan 

4 is entered into, and 

5 ‘‘(III) the proper taking into ac6 count of lump sum payments, orienta7 tion and application fees, closing fees, 

8 invoice discounting fees, and any 

9 other loan fees. 

10 ‘‘(ii) BANK PRIME RATE.—For pur11 poses of subparagraph (A)(ii), the term 

12 ‘bank prime rate’ means the average pre13 dominant prime rate quoted by commercial 

14 banks to large businesses, as determined 

15 by the Board of Governors of the Federal 

16 Reserve System. 

17 ‘‘(4) SPECIAL RULES FOR PASS-THRU ENTI18 TIES.—For purposes of this subsection, if a qualified 

19 investment in a qualifying business entity is made by 

20 a partnership, trust, S corporation, or other pass21 thru entity, the limitations under this subsection 

22 with respect to the qualified investment shall apply 

23 at the partnership or other entity level and not at 

24 the partner or similar level. 


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1 ‘‘(c) QUALIFIED INVESTMENT.—For purposes of this 

2 section— 

3 ‘‘(1) IN GENERAL.—The term ‘qualified invest4 ment’ means, with respect to any qualifying business 

5 entity, either of the following of the taxpayer: 

6 ‘‘(A) The direct or indirect acquisition of 

7 stock, or a capital interest, in the entity at its 

8 original issue solely in exchange for cash. 

9 ‘‘(B) A qualifying loan made to the entity. 

10 If a taxpayer has or had more than 1 qualified in11 vestment in any qualifying business entity for the 

12 taxable year or any prior taxable year, all such in13 vestments shall be treated as a single qualified in14 vestment for purposes of applying this section. 

15 ‘‘(2) EXCEPTION FOR INVESTMENTS MADE BY

16 QUALIFIED ACTIVE INVESTORS AND RELATED PER17 SONS.—Such term shall not include any acquisition 

18 or loan made by a taxpayer who, immediately before 

19 the acquisition or loan, is a qualified active investor 

20 in the qualifying business entity or is related to any 

21 qualified active investor. 

22 ‘‘(3) AMOUNT OF QUALIFIED INVESTMENT.— 

23 The amount of a taxpayer’s qualified investment 

24 with respect to any qualifying business entity for 


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1 any taxable year shall be the monthly average for 

2 months ending within the taxable year of— 

3 ‘‘(A) the taxpayer’s aggregate unadjusted 

4 bases in all stock or interests described in para5 graph (1)(A) as of the close of each such 

6 month, and 

7 ‘‘(B) the aggregate outstanding principal 

8 amount of all qualified loans described in para9 graph (1)(B) as of the close of each such 

10 month. 

11 ‘‘(4) SPECIAL RULES FOR TRANSFERS OF

12 QUALIFYING LOANS.— 

13 ‘‘(A) IN GENERAL.—If a taxpayer sells, ex14 changes, or otherwise transfers all or any por15 tion of a qualifying loan which is a qualified in16 vestment in a qualifying business entity, such 

17 investment shall be treated as a qualified in18 vestment in the hands of the transferee (and 

19 not of the transferor) for periods after the 

20 transfer. This paragraph shall also apply to any 

21 subsequent transfer of such interest. 

22 ‘‘(B) COORDINATION OF LIMITS.—In ap23 plying subsection (b) to any qualifying loan 

24 treated as a qualified investment of a transferee 

25 under this paragraph— 


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1 ‘‘(i) all credits determined under this 

2 section for any periods before the transfer 

3 with respect to the qualified investment of 

4 any prior holder of such investment shall 

5 be taken into account under paragraphs 

6 (1)(B)(ii) and (2)(A)(ii)(II) of such sub7 section in the same manner as if such 

8 credits were determined for the transferee 

9 for prior taxable years, and 

10 ‘‘(ii) if only a portion of the qualified 

11 investment was transferred, the amount 

12 taken into account under such paragraphs 

13 by reason of clause (i) shall be ratably re14 duced to reflect only the portion so trans15 ferred. 

16 ‘‘(d) QUALIFYING BUSINESS ENTITY.—For purposes 

17 of this section— 

18 ‘‘(1) DEFINITION.— 

19 ‘‘(A) IN GENERAL.—The term ‘qualifying 

20 business entity’ means, with respect to any 

21 qualified investment, any entity which is en22 gaged in the active conduct of 1 or more trades 

23 or businesses and with respect to which— 

24 ‘‘(i) the qualified active investor own25 ership requirements of paragraph (2) are 


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1 met immediately before and after the 

2 qualified investment, 

3 ‘‘(ii) the wage requirements of para4 graph (3) are met, and 

5 ‘‘(iii) the certification requirements of 

6 paragraph (4) are met. 

7 ‘‘(B) ENTITIES UNDER COMMON CON8 TROL.—For purposes of this section, all quali9 fying business entities treated as a single em10 ployer under subsection (a) or (b) of section 52 

11 or subsection (m) or (o) of section 414 shall be 

12 treated as a single qualifying business entity. 

13 ‘‘(2) QUALIFIED ACTIVE INVESTOR OWNERSHIP

14 REQUIREMENTS.—The requirements of this para15 graph are met with respect to any entity if qualified 

16 active investors own directly or indirectly— 

17 ‘‘(A) in the case of a corporation, more 

18 than 50 percent (by vote and value) of the 

19 stock in the corporation, and 

20 ‘‘(B) in the case of any other entity, more 

21 than 50 percent of the capital or profits inter22 ests in the entity. 

23 ‘‘(3) WAGE REQUIREMENTS.— 

24 ‘‘(A) IN GENERAL.—The requirements of 

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1 ty if the entity, during the taxable year of the 

2 entity preceding the taxable year in which the 

3 qualified investment is made— 

4 ‘‘(i) employed at least 1 full-time em5 ployee, or employees constituting a full6 time equivalent employee, in 1 or more 

7 trades or businesses actively conducted by 

8 the entity, and 

9 ‘‘(ii) paid W–2 wages to such em10 ployee or employees with respect to such 

11 employment. 

12 ‘‘(B) CERTAIN WAGES NOT TAKEN INTO

13 ACCOUNT.—W–2 wages shall not be taken into 

14 account under subparagraph (A) if paid by an 

15 entity to an employee, and such employee shall 

16 not be taken into account under subparagraph 

17 (A)(i), during any period the employee is— 

18 ‘‘(i) a qualified active investor, or 

19 ‘‘(ii) an employee other than a quali20 fied active investor who is a 5-percent 

21 owner (as defined in section 

22 416(i)(1)(B)(i)) of the entity. 

23 ‘‘(C) W–2 WAGES.—The term ‘W–2 wages’ 

24 means, with respect to any entity, the amounts 

25 described in paragraphs (3) and (8) of section 


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1 6051(a) paid by the entity with respect to em2 ployment of employees by the entity. Such term 

3 shall not include any amount which is not prop4 erly included in a return filed with the Social 

5 Security Administration on or before the 60th 

6 day after the due date (including extensions) 

7 for such return. 

8 ‘‘(D) FULL-TIME EMPLOYEES AND

9 EQUIVALENTS.—For purposes of this para10 graph— 

11 ‘‘(i) the term ‘full-time employee’ has 

12 the meaning given to such term by section 

13 4980H(c)(4), and 

14 ‘‘(ii) the determination of the number 

15 of employees constituting a full-time equiv16 alent shall be made in the same manner as 

17 under section 4980H(c)(2)(E). 

18 ‘‘(4) CERTIFICATION REQUIREMENTS.— 

19 ‘‘(A) IN GENERAL.—The requirements of 

20 this paragraph are met with respect to any enti21 ty if the entity certifies, in such form and man22 ner and at such time as the Secretary may pre23 scribe, that, at the time of the qualified invest24 ment, the entity— 


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1 ‘‘(i) is engaged in the active conduct 

2 of 1 or more trades or businesses, and 

3 ‘‘(ii) meets the requirements of para4 graphs (2) and (3) to be treated as a 

5 qualifying business entity. 

6 ‘‘(B) CERTIFICATION PROVIDED TO INVES7 TORS AND SECRETARY.—An entity shall— 

8 ‘‘(i) provide the certification under 

9 subparagraph (A) to the person making 

10 the qualified investment at the time such 

11 investment is made, and 

12 ‘‘(ii) include such certification, and 

13 the names, addresses, and taxpayer identi14 fication numbers of the entity’s qualified 

15 active investors and the persons making 

16 the qualified investment, with its return of 

17 tax for the taxable year which includes the 

18 date of the qualified investment. 

19 ‘‘(C) CERTIFICATION INCLUDED WITH RE20 TURN CLAIMING CREDIT.—No credit shall be 

21 determined under subsection (a) with respect to 

22 any taxpayer making a qualified investment in 

23 a qualifying business entity unless the taxpayer 

24 includes the certification under subparagraph 

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1 turn of tax for any taxable year for which such 

2 credit is being claimed. 

3 ‘‘(D) TIMELY FILED RETURN REQUIRED.— 

4 The requirements of subparagraph (B)(ii) or 

5 (C) shall be treated as met only if the return 

6 described in such subparagraph is filed on or 

7 before its due date (including extensions). 

8 ‘‘(5) QUALIFIED ACTIVE INVESTOR.— 

9 ‘‘(A) IN GENERAL.—The term ‘qualified 

10 active investor’ means, with respect to any enti11 ty, an individual who— 

12 ‘‘(i) is a citizen or resident of the 

13 United States, 

14 ‘‘(ii) materially participates (within 

15 the meaning of section 469(h)) in 1 or 

16 more trades or businesses actively con17 ducted by the entity, 

18 ‘‘(iii) holds stock, or a capital or prof19 its interest, in the entity, and 

20 ‘‘(iv) meets the income requirements 

21 of subparagraph (B). 

22 ‘‘(B) INCOME REQUIREMENTS.—The re23 quirements of this subparagraph are met with 

24 respect to an individual if the average annual 

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1 able years of the individual immediately pre2 ceding the taxable year in which the qualified 

3 investment is made does not exceed the applica4 ble amount. 

5 ‘‘(C) APPLICABLE AMOUNT.—For purposes 

6 of this paragraph, the term ‘applicable amount’ 

7 means, with respect to any taxable year in 

8 which a qualified investment is made— 

9 ‘‘(i) in the case of an individual not 

10 described in clause (ii), $100,000 (as in11 creased for the taxable year by the cost-of12 living adjustment under subsection (e)(2)), 

13 and 

14 ‘‘(ii) in the case of an individual who 

15 is a married individual filing a joint return 

16 or who is a head of household (as defined 

17 in section 2(b)) for the taxable year, an 

18 amount equal to 2 times the amount in ef19 fect under clause (i) for the taxable year. 

20 ‘‘(D) RULES FOR DETERMINING AVERAGE

21 TAXABLE INCOME.—For purposes of this para22 graph— 

23 ‘‘(i) a married individual filing a sepa24 rate return of tax for any taxable year 

25 shall include the taxable income of their 


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1 spouse in computing the individual’s aver2 age taxable income for any period unless 

3 the Secretary determines that the spouse’s 

4 information is not available to the indi5 vidual, and 

6 ‘‘(ii) the Secretary shall prescribe 

7 rules for the determination of average tax8 able income in cases where the individual 

9 had different filing statuses for the 3 tax10 able years described in subparagraph (B). 

11 ‘‘(e) DEFINITIONS AND SPECIAL RULES.—For pur12 poses of this section— 

13 ‘‘(1) RELATED PERSONS.—A person shall be 

14 treated as related to another person if the person 

15 bears a relationship to such other person described 

16 in section 267(b), except that section 267(b) shall be 

17 applied by substituting ‘5 percent’ for ‘50 percent’ 

18 each place it appears. 

19 ‘‘(2) COST-OF-LIVING ADJUSTMENTS.—In the 

20 case of any taxable year beginning after 2020, the 

21 $10,000 amount under subsection (b)(2)(A)(i) and 

22 the $100,000 amount under subsection (d)(5)(C)(i) 

23 shall each be increased by an amount equal to— 

24 ‘‘(A) such dollar amount, multiplied by 


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1 ‘‘(B) the cost-of-living adjustment under 

2 section 1(f)(3) for the calendar year in which 

3 the taxable year begins, determined by sub4 stituting ‘2019’ for ‘2016’ in subparagraph 

5 (A)(ii) thereof. 

6 If any increase in such $10,000 amount is not a 

7 multiple of $100, such increase shall be rounded to 

8 the next lowest multiple of $100 and if any increase 

9 in such $100,000 amount is not a multiple of 

10 $1,000, such increase shall be rounded to the next 

11 lowest multiple of $1,000. 

12 ‘‘(3) RULES RELATING TO ENTITIES.— 

13 ‘‘(A) SOLE PROPRIETORSHIPS.—If a tax14 payer carries on 1 or more trades or businesses 

15 as sole proprietorships, all such trades or busi16 nesses shall be treated as a single entity for 

17 purposes of applying this section. 

18 ‘‘(B) APPLICATION TO DISREGARDED EN19 TITIES.—In the case of any entity with a single 

20 owner which is disregarded as an entity sepa21 rate from its owner for purposes of this title, 

22 this section shall be applied in the same manner 

23 as if such entity were a corporation. 


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1 ‘‘(f) REGULATIONS.—The Secretary shall prescribe 

2 such regulations or other guidance as may be necessary 

3 to carry out the provisions of this section.’’. 

4 (b) CREDIT TO BE PART OF GENERAL BUSINESS

5 CREDIT.—Section 38(b) of such Code is amended by strik6 ing ‘‘plus’’ at the end of paragraph (31), by striking the 

7 period at the end of paragraph (32) and inserting ‘‘, plus’’, 

8 and by adding at the end the following new paragraph: 

9 ‘‘(33) the angel investor credit determined 

10 under section 45T(a).’’. 

11 (c) CREDIT ALLOWED AGAINST ALTERNATIVE MIN12 IMUM TAX.—Section 38(c)(4)(B) of such Code is amended 

13 by redesignating clauses (x), (xi), and (xii) as clauses (xi), 

14 (xii), and (xiii), respectively, and by inserting after clause 

15 (ix) the following new clause: 

16 ‘‘(x) the credit determined under sec17 tion 45T,’’. 

18 (d) CLERICAL AMENDMENT.—The table of sections 

19 for subpart D of part IV of subchapter A of chapter 1 

20 of such Code is amended by adding at the end the fol21 lowing new item: 

‘‘Sec. 45T. Angel investor tax credit.’’. 

22 (e) EFFECTIVE DATE.—The amendments made by 

23 this section shall apply to qualified investments made in 

24 taxable years beginning after December 31, 2019. 


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1 SEC. 3. FIRST EMPLOYEE BUSINESS WAGE CREDIT. 

2 (a) ALLOWANCE OF CREDIT.— 

3 (1) IN GENERAL.—Subpart D of part IV of 

4 subchapter A of chapter 1 of the Internal Revenue 

5 Code of 1986, as amended by section 2, is amended 

6 by adding at the end the following new section: 

7 ‘‘SEC. 45U. FIRST EMPLOYEE BUSINESS WAGE CREDIT. 

8 ‘‘(a) GENERAL RULE.—For purposes of section 38, 

9 in the case of a qualifying business entity, the first em10 ployee business wage credit determined under this section 

11 for any taxable year is an amount equal to 25 percent 

12 of the qualified wages of the entity for the taxable year. 

13 ‘‘(b) DOLLAR LIMITATIONS.— 

14 ‘‘(1) IN GENERAL.—The amount of the credit 

15 determined under subsection (a) with respect to any 

16 qualifying business entity for any taxable year shall 

17 not exceed the lesser of— 

18 ‘‘(A) $10,000 (as increased for the taxable 

19 year by the cost-of-living adjustment under sub20 section (f)), or 

21 ‘‘(B) the excess (if any) of— 

22 ‘‘(i) an amount equal to 4 times the 

23 amount under subparagraph (A) for the 

24 taxable year, over 


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1 ‘‘(ii) the amount of the credit deter2 mined under this section with respect to 

3 such entity for all preceding taxable years. 

4 ‘‘(2) NO CREDIT BY REASON OF COST-OF-LIV5 ING ADJUSTMENT AFTER OVERALL LIMIT FIRST

6 REACHED.—No credit shall be determined under this 

7 section with respect to any qualifying business entity 

8 for any taxable year after the first taxable year for 

9 which the amount determined under clause (ii) of 

10 paragraph (1)(B) equals or exceeds the amount de11 termined under clause (i) of such paragraph. 

12 ‘‘(3) PASS-THRU ENTITIES.—If a qualifying 

13 business entity is a partnership, trust, S corporation, 

14 or other pass-thru entity, the limitations under this 

15 subsection shall apply at the partnership or other 

16 entity level and not at the partner or similar level. 

17 ‘‘(c) QUALIFIED WAGES.—For purposes of this sec18 tion— 

19 ‘‘(1) IN GENERAL.—The term ‘qualified wages’ 

20 means, with respect to any qualifying business enti21 ty, the amount of W–2 wages paid or incurred dur22 ing any eligible taxable year to employees for serv23 ices performed in connection with the active conduct 

24 of a trade or business by the entity. 


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1 ‘‘(2) EXCEPTION FOR QUALIFIED ACTIVE IN2 VESTORS AND 5-PERCENT OWNER-EMPLOYEES.—W– 

3 2 wages shall not be taken into account under para4 graph (1) if paid by an entity to an employee, and 

5 such employee shall not be taken into account under 

6 paragraph (3)(A), during any period the employee 

7 is— 

8 ‘‘(A) a qualified active investor, or 

9 ‘‘(B) an employee other than a qualified 

10 active investor who is a 5-percent owner (as de11 fined in section 416(i)(1)(B)(i)) of the entity. 

12 ‘‘(3) ELIGIBLE TAXABLE YEAR.— 

13 ‘‘(A) IN GENERAL.—The term ‘eligible tax14 able year’ means any taxable year of a quali15 fying business entity— 

16 ‘‘(i) which occurs during the period— 

17 ‘‘(I) beginning with the first tax18 able year of the entity in which the 

19 entity employed at least 1 full-time 

20 employee (or employees constituting a 

21 full-time equivalent employee) in 1 or 

22 more trades or businesses actively 

23 conducted by the entity during the 

24 taxable year and paid W–2 wages to 


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1 such employee or employees with re2 spect to such employment, and 

3 ‘‘(II) ending with the last taxable 

4 year for which a credit may be deter5 mined for the entity under this section 

6 by reason of the limitation under sub7 section (b)(2), and 

8 ‘‘(ii) in the case of a taxable year 

9 other than the first taxable year described 

10 in clause (i)(I), with respect to which the 

11 entity meets the employment and wage re12 quirements of such clause. 

13 Such term shall not include any taxable year 

14 during such a period if the first taxable year 

15 described in clause (i)(I) of the entity (or any 

16 predecessor) begins before January 1, 2020. 

17 ‘‘(B) W–2 WAGES; FULL-TIME EMPLOY18 EES.—For purposes of this subsection, W–2 

19 wages, full-time employees, and full-time em20 ployee equivalents shall be determined in the 

21 same manner as under section 45T. 

22 ‘‘(d) QUALIFYING BUSINESS ENTITY.—For purposes 

23 of this section— 

24 ‘‘(1) QUALIFYING BUSINESS ENTITY DE25 FINED.— 


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1 ‘‘(A) IN GENERAL.—The term ‘qualifying 

2 business entity’ means, with respect to any tax3 able year for which a credit under this section 

4 is being determined, any entity— 

5 ‘‘(i) which is engaged in the active 

6 conduct of 1 or more trades or businesses, 

7 ‘‘(ii) with respect to which the quali8 fied active investor ownership requirements 

9 of paragraph (2) of section 45T(d) are met 

10 as of the close of such taxable year (rather 

11 than immediately before and after the 

12 qualified investment), and 

13 ‘‘(iii) with respect to which the certifi14 cation requirements of paragraph (2) are 

15 met. 

16 ‘‘(B) ENTITIES UNDER COMMON CON17 TROL.—For purposes of this section— 

18 ‘‘(i) IN GENERAL.—All qualifying 

19 business entities treated as a single em20 ployer under subsection (a) or (b) of sec21 tion 52 or subsection (m) or (o) of section 

22 414 shall be treated as a single qualifying 

23 business entity. 

24 ‘‘(ii) ALLOCATION OF CREDIT.—Ex25 cept as provided in regulations, the credit 


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1 under this section shall be allocated among 

2 the entities comprising the single entity de3 scribed in clause (i) in proportion to the 

4 qualified wages of each such entity taken 

5 into account under subsection (a). 

6 ‘‘(2) CERTIFICATION REQUIREMENTS.— 

7 ‘‘(A) IN GENERAL.—The requirements of 

8 this paragraph are met with respect to any enti9 ty for any taxable year described in paragraph 

10 (1) if the entity certifies, in such form and 

11 manner and at such time as the Secretary may 

12 prescribe, that the entity meets the require13 ments described in clauses (i) and (ii) of para14 graph (1)(A). 

15 ‘‘(B) CERTIFICATION PROVIDED TO SEC16 RETARY.—An entity shall include the certifi17 cation under subparagraph (A), and the names, 

18 addresses, and taxpayer identification numbers 

19 of the entity’s qualified active investors (and 

20 employees who are 5-percent owners described 

21 in subsection (c)(2)(B)), with its return of tax 

22 for the taxable year to which the certification 

23 relates. The requirement of this subparagraph 

24 is met only if such return is filed before its due 

25 date (including extensions). 


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1 ‘‘(3) QUALIFIED ACTIVE INVESTOR.—For pur2 poses of this section (including applying the require3 ments of paragraph (2) of section 45T(d) for pur4 poses of paragraph (1)(A)(ii)), the term ‘qualified 

5 active investor’ has the same meaning given such 

6 term by section 45T(d)(5), except that such section 

7 shall be applied separately for each taxable year de8 scribed in paragraph (1) (rather than the taxable 

9 year of the qualified investment). 

10 ‘‘(e) ELECTION TO APPLY CREDIT AGAINST PAY11 ROLL TAXES.— 

12 ‘‘(1) IN GENERAL.—At the election of a quali13 fying business entity, section 3111(g) shall apply to 

14 the payroll tax credit portion of the credit otherwise 

15 determined under subsection (a) for the taxable year 

16 and such portion shall not be treated (other than for 

17 purposes of section 280C) as a credit determined 

18 under subsection (a). 

19 ‘‘(2) PAYROLL TAX CREDIT PORTION.—For 

20 purposes of this subsection, the payroll tax credit 

21 portion of the credit determined under subsection 

22 (a) with respect to any qualifying business entity for 

23 any taxable year is the least of— 

24 ‘‘(A) the amount specified in the election 

25 made under this subsection, 


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1 ‘‘(B) the credit determined under sub2 section (a) for the taxable year (determined be3 fore the application of this subsection), or 

4 ‘‘(C) in the case of a qualifying business 

5 entity other than a partnership, estate, S cor6 poration or other pass-thru entity, the amount 

7 of the business credit carryforward under sec8 tion 39 carried from the taxable year (deter9 mined before the application of this subsection 

10 to the taxable year). 

11 ‘‘(3) ELECTION.— 

12 ‘‘(A) IN GENERAL.—Any election under 

13 this subsection for any taxable year— 

14 ‘‘(i) shall specify the amount of the 

15 credit to which such election applies, 

16 ‘‘(ii) shall be made on or before the 

17 due date (including extensions) of the re18 turn for the taxable year, and 

19 ‘‘(iii) may be revoked only with the 

20 consent of the Secretary. 

21 ‘‘(B) SPECIAL RULE FOR PASS-THRU ENTI22 TIES.—In the case of a partnership, estate, S 

23 corporation, or other pass-thru entity, the elec24 tion made under this subsection shall be made 

25 at the entity level. 


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1 ‘‘(f) COST-OF-LIVING ADJUSTMENTS.—In the case of 

2 any taxable year beginning after 2020, the $10,000 

3 amount under subsection (b)(1)(A) shall be increased by 

4 an amount equal to— 

5 ‘‘(1) such dollar amount, multiplied by 

6 ‘‘(2) the cost-of-living adjustment under section 

7 1(f)(3) for the calendar year in which the taxable 

8 year begins, determined by substituting ‘2019’ for 

9 ‘2016’ in subparagraph (A)(ii) thereof. 

10 If any increase in such amount is not a multiple of $100, 

11 such increase shall be rounded to the next lowest multiple 

12 of $100. 

13 ‘‘(g) OTHER RULES.—For purposes of this section— 

14 ‘‘(1) RULES RELATING TO ENTITIES.—Rules 

15 similar to the rules of section 45T(e)(3) shall apply. 

16 ‘‘(2) ELECTION NOT TO HAVE CREDIT APPLY.— 

17 ‘‘(A) IN GENERAL.—A taxpayer may elect 

18 not to have this section apply for any taxable 

19 year. 

20 ‘‘(B) OTHER RULES.—Rules similar to the 

21 rules of paragraphs (2) and (3) of section 51(j) 

22 shall apply for purposes of this paragraph. 

23 ‘‘(3) CERTAIN OTHER RULES MADE APPLICA24 BLE.—Rules similar to the rules of subsections (c), 

25 (d), and (e) of section 52 shall apply. 


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1 ‘‘(h) REGULATIONS.—The Secretary shall prescribe 

2 such regulations or other guidance as may be necessary 

3 to carrying out the provisions of this section, including 

4 regulations— 

5 ‘‘(1) preventing the avoidance of the limitations 

6 under this section in cases in which there is a suc7 cessor or new qualified business entity with respect 

8 to the same trade or business for which a prede9 cessor qualified business entity already claimed the 

10 credit under this section, 

11 ‘‘(2) to minimize compliance and recordkeeping 

12 burdens under the provisions of this section, and 

13 ‘‘(3) for recapturing the benefit of credits deter14 mined under section 3111(g) in cases where there is 

15 a recapture or a subsequent adjustment to the pay16 roll tax credit portion of the credit determined under 

17 subsection (a), including requiring amended income 

18 tax returns in the cases where there is such an ad19 justment.’’. 

20 (2) CREDIT TO BE PART OF GENERAL BUSI21 NESS CREDIT.—Section 38(b) of such Code, as 

22 amended by section 2, is amended by striking ‘‘plus’’ 

23 at the end of paragraph (32), by striking the period 

24 at the end of paragraph (33) and inserting ‘‘, plus’’, 


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1 and by adding at the end the following new para2 graph: 

3 ‘‘(34) the first employee business wage credit 

4 determined under section 45U(a).’’. 

5 (3) CREDIT ALLOWED AGAINST ALTERNATIVE

6 MINIMUM TAX.—Section 38(c)(4)(B) of such Code, 

7 as amended by section 2, is amended by redesig8 nating clauses (xi), (xii), and (xiii) as clauses (xii), 

9 (xiii), and (xiv), respectively, and by inserting after 

10 clause (x) the following new clause: 

11 ‘‘(xi) the credit determined under sec12 tion 45U,’’. 

13 (4) CLERICAL AMENDMENT.—The table of sec14 tions for subpart D of part IV of subchapter A of 

15 chapter 1 of such Code, as amended by section 2, is 

16 amended by adding at the end the following new 

17 item: 

‘‘Sec. 45U. First employee business wage credit.’’. 

18 (b) PAYROLL TAX CREDIT.—Section 3111 of the In19 ternal Revenue Code of 1986 is amended by adding at the 

20 end the following new subsection: 

21 ‘‘(g) CREDIT FOR FIRST EMPLOYEE BUSINESS WAGE

22 EXPENSES.— 

23 ‘‘(1) IN GENERAL.—In the case of a taxpayer 

24 who has made an election under section 45U(e) for 

25 a taxable year, there shall be allowed as a credit 


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1 against the tax imposed by subsection (a) for the 

2 first calendar quarter which begins after the date on 

3 which the taxpayer files the return for the taxable 

4 year an amount equal to the payroll tax credit por5 tion determined under section 45U(e)(2). 

6 ‘‘(2) LIMITATION.—The credit allowed by para7 graph (1) shall not exceed the tax imposed by sub8 section (a) for any calendar quarter on the wages 

9 paid with respect to the employment of all individ10 uals in the employ of the employer. 

11 ‘‘(3) CARRYOVER OF UNUSED CREDIT.—If the 

12 amount of the credit under paragraph (1) exceeds 

13 the limitation of paragraph (2) for any calendar 

14 quarter, such excess shall be carried to the suc15 ceeding calendar quarter and allowed as a credit 

16 under paragraph (1) for such quarter. 

17 ‘‘(4) DEDUCTION ALLOWED FOR CREDITED

18 AMOUNTS.—Notwithstanding section 280C(a), the 

19 credit allowed under paragraph (1) shall not be 

20 taken into account for purposes of determining the 

21 amount of any deduction allowed under chapter 1 

22 for taxes imposed under subsection (a).’’. 

23 (c) COORDINATION WITH DEDUCTIONS AND OTHER

24 CREDITS.— 


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1 (1) DEDUCTIONS.—Section 280C(a) of the In2 ternal Revenue Code of 1986 is amended by insert3 ing ‘‘45U(a),’’ after ‘‘45S(a),’’. 

4 (2) OTHER CREDITS.— 

5 (A) Section 41(b)(2)(D) of such Code is 

6 amended by adding at the end the following: 

7 ‘‘(iv) EXCLUSION FOR WAGES TO

8 WHICH FIRST EMPLOYEE WAGE CREDIT

9 APPLIES.—The term ‘wages’ shall not in10 clude any amount taken into account in 

11 determining the credit under section 

12 45U.’’. 

13 (B) Section 45A(b)(1) of such Code is 

14 amended by adding at the end the following: 

15 ‘‘(C) COORDINATION WITH FIRST EM16 PLOYEE WAGE CREDIT.—The term ‘qualified 

17 wages’ shall not include wages if any portion of 

18 such wages is taken into account in determining 

19 the credit under section 45U.’’. 

20 (C) Section 1396(c)(3) of such Code is 

21 amended— 

22 (i) by striking ‘‘section 51’’ each place 

23 it appears and inserting ‘‘section 45U or 

24 51’’, and 


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1 (ii) by inserting ‘‘AND FIRST EM2 PLOYEE WAGE’’ after ‘‘OPPORTUNITY’’ in 

3 the heading thereof. 

4 (d) EFFECTIVE DATE.—The amendments made by 

5 this section shall apply to taxable years beginning after 

6 December 31, 2019. 

Æ 


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