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[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[S. 5144 Introduced in Senate (IS)]

<DOC>

118th CONGRESS
  2d Session
                                S. 5144

To amend the Internal Revenue Code of 1986 to provide a tax credit for 
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 SENATE OF THE UNITED STATES

                           September 24, 2024

   Mr. Wyden introduced the following bill; which was read twice and 
                  referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL

 
To amend the Internal Revenue Code of 1986 to provide a tax credit for 
investors in start-up businesses, to provide a credit for wages paid by 
 start-up businesses to their first employees, and for other purposes.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Providing Real Opportunities for 
Growth to Rising Entrepreneurs for Sustained Success (PROGRESS) Act''.

SEC. 2. SMALL BUSINESS INVESTOR TAX CREDIT.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 is amended by adding at the end 
the following new section:

``SEC. 45BB. SMALL BUSINESS INVESTOR TAX CREDIT.

    ``(a) General Rule.--For purposes of section 38, the small business 
investor credit determined under this section for any taxable year is 
an amount equal to the sum of the credit amounts determined for the 
taxable year for all qualified investments of the taxpayer.
    ``(b) Credit Amount.--For purposes of this section--
            ``(1) In general.--The term `credit amount' means, with 
        respect to any qualified investment in a qualifying business 
        entity, the lesser of--
                    ``(A) 10 percent of the amount of the qualified 
                investment determined under subsection (c)(3) for the 
                taxable year, or
                    ``(B) an amount equal to--
                            ``(i) 50 percent of such qualified 
                        investment, reduced (but not below zero) by
                            ``(ii) the amount of the credit determined 
                        under this section with respect to such 
                        qualified investment of the taxpayer for all 
                        preceding taxable years.
            ``(2) Overall dollar limitation.--
                    ``(A) In general.--The credit amount determined 
                under paragraph (1) with respect to any qualified 
                investment of a taxpayer in a qualifying business 
                entity for any taxable year shall not exceed the lesser 
                of--
                            ``(i) $10,000 (as increased for the taxable 
                        year by the cost-of-living adjustment under 
                        subsection (e)(2)), or
                            ``(ii) an amount equal to--
                                    ``(I) an amount equal to 5 times 
                                the amount under clause (i) for the 
                                taxable year, reduced (but not below 
                                zero) by
                                    ``(II) the amount of the credit 
                                determined under this section with 
                                respect to such qualified investment of 
                                the taxpayer for all preceding taxable 
                                years.
                    ``(B) No credit amount by reason of cost-of-living 
                adjustment after overall limit first reached.--No 
                credit amount shall be determined under this section 
                with respect to any qualified investment of a taxpayer 
                in a qualifying business entity for any taxable year 
                after the first taxable year for which the amount 
                determined under subclause (II) of subparagraph (A)(ii) 
                equals or exceeds the amount determined under subclause 
                (I) of such subparagraph.
            ``(3) Reduction in credit amount where loan rate exceeds 
        prime rate.--
                    ``(A) In general.--If--
                            ``(i) the rate of interest (expressed as an 
                        annual percentage rate) on a qualified 
                        investment which is a qualifying loan, exceeds
                            ``(ii) the bank prime rate as of the first 
                        day of the month in which the loan is entered 
                        into (or such other time as the Secretary may 
                        specify),
                then each of the amounts determined under subparagraphs 
                (A) and (B)(i) of paragraph (1) shall be reduced (but 
                not below zero) by the amount which bears the same 
                ratio to such amount as the number of full percentage 
                points by which such rate of interest exceeds such bank 
                prime rate bears to 25.
                    ``(B) Special rules where qualifying loans treated 
                as part of single investment.--If 1 or more qualifying 
                loans to which subparagraph (A) applies are treated as 
                part of a single qualified investment under subsection 
                (c)(1), then, for purposes of this subsection--
                            ``(i) the credit amount under paragraph (1) 
                        for such single qualified investment shall be 
                        the sum of such credit amounts computed 
                        separately for each such qualifying loan and 
                        such credit amount computed for all other 
                        qualified investments treated as part of such 
                        single qualified investment, and
                            ``(ii) the limitation under paragraph (2) 
                        shall be applied to such sum.
                    ``(C) Rules relating to interest rates.--
                            ``(i) Annual percentage rate.--The 
                        Secretary shall prescribe guidance or 
                        regulations for the calculation of the annual 
                        percentage rate of interest on a loan for 
                        purposes of subparagraph (A)(i), including 
                        rules which provide for--
                                    ``(I) the calculation of the annual 
                                percentage rate in cases where there is 
                                a variable rate of interest,
                                    ``(II) the recalculation of the 
                                annual percentage rate where the terms 
                                of the loan are modified after the loan 
                                is entered into, and
                                    ``(III) the proper taking into 
                                account of lump sum payments, 
                                orientation and application fees, 
                                closing fees, invoice discounting fees 
                                and any other loan fees.
                            ``(ii) Bank prime rate.--For purposes of 
                        subparagraph (A)(ii), the term `bank prime 
                        rate' means the average predominant prime rate 
                        quoted by commercial banks to large businesses, 
                        as determined by the Board of Governors of the 
                        Federal Reserve System.
            ``(4) Special rules for pass-thru entities.--For purposes 
        of this subsection, if a qualified investment in a qualifying 
        business entity is made by a partnership, trust, S corporation, 
        or other pass-thru entity, the limitations under this 
        subsection shall apply at the entity level.
    ``(c) Qualified Investment.--For purposes of this section--
            ``(1) In general.--The term `qualified investment' means, 
        with respect to any qualifying business entity, either of the 
        following of the taxpayer:
                    ``(A) The direct or indirect acquisition of stock, 
                or a capital interest, in the entity at its original 
                issue solely in exchange for cash.
                    ``(B) A qualifying loan made to the entity.
        If a taxpayer has or had more than 1 qualified investment in 
        any qualifying business entity for the taxable year or any 
        prior taxable year, all such investments shall be treated as a 
        single qualified investment for purposes of applying this 
        section.
            ``(2) Exception for investments made by qualified active 
        investors and related persons.--Such term shall not include any 
        acquisition or loan made by a taxpayer who, immediately before 
        the acquisition or loan, is a qualified active investor in the 
        qualifying business entity or is related to any qualified 
        active investor.
            ``(3) Amount of qualified investment.--The amount of a 
        taxpayer's qualified investment with respect to any qualifying 
        business entity for any taxable year shall be the monthly 
        average for months ending within the taxable year of--
                    ``(A) the taxpayer's aggregate unadjusted bases in 
                all stock or interests described in paragraph (1)(A) as 
                of the close of each such month, and
                    ``(B) the aggregate outstanding principal amount of 
                all qualified loans described in paragraph (1)(B) as of 
                the close of each such month.
            ``(4) Special rules for transfers of qualifying loans.--
                    ``(A) In general.--If a taxpayer sells, exchanges, 
                or otherwise transfers all or any portion of a 
                qualifying loan which is a qualified investment in a 
                qualifying business entity, such investment shall be 
                treated as a qualified investment in the hands of the 
                transferee (and not of the transferor) for periods 
                after the transfer. This paragraph shall also apply to 
                any subsequent transfer of such interest.
                    ``(B) Coordination of limits.--In applying 
                subsection (b) to any qualifying loan treated as a 
                qualified investment of a transferee under this 
                paragraph--
                            ``(i) all credits determined under this 
                        section for any periods before the transfer 
                        with respect to the qualified investment of any 
                        prior holder of such investment shall be taken 
                        into account under paragraphs (1)(B)(ii) and 
                        (2)(A)(ii)(II) of such subsection in the same 
                        manner as if such credits were determined for 
                        the transferee for prior taxable years, and
                            ``(ii) if only a portion of the qualified 
                        investment was transferred, the amount taken 
                        into account under such paragraphs by reason of 
                        clause (i) shall be ratably reduced to reflect 
                        only the portion so transferred.
    ``(d) Qualifying Business Entity.--For purposes of this section--
            ``(1) Definition.--
                    ``(A) In general.--The term `qualifying business 
                entity' means, with respect to any qualified 
                investment, any entity which is engaged in 1 or more 
                trades or businesses and with respect to which--
                            ``(i) the qualified active investor 
                        ownership requirements of paragraph (2) are met 
                        immediately before and after the qualified 
                        investment,
                            ``(ii) the wage requirements of paragraph 
                        (3) are met, and
                            ``(iii) the certification requirements of 
                        paragraph (4) are met.
                    ``(B) Entities under common control.--For purposes 
                of this section, all qualifying business entities 
                treated as a single employer under subsection (a) or 
                (b) of section 52 or subsection (m) or (o) of section 
                414 shall be treated as a single qualifying business 
                entity.
            ``(2) Qualified active investor ownership requirements.--
        The requirements of this paragraph are met with respect to any 
        entity if qualified active investors own directly or 
        indirectly--
                    ``(A) in the case of a corporation, more than 50 
                percent (by vote and value) of the stock in the 
                corporation, and
                    ``(B) in the case of any other entity, more than 50 
                percent of the capital or profits interests in the 
                entity.
            ``(3) Wage requirements.--
                    ``(A) In general.--The requirements of this 
                paragraph are met with respect to any entity if the 
                entity, during the taxable year of the entity preceding 
                the taxable year in which the qualified investment is 
                made--
                            ``(i) employed at least 1 full-time 
                        employee, or employees constituting a full-time 
                        equivalent employee, in 1 or more trades or 
                        businesses of the entity, and
                            ``(ii) paid W-2 wages to such employee or 
                        employees with respect to such employment.
                    ``(B) Certain wages not taken into account.--W-2 
                wages shall not be taken into account under 
                subparagraph (A) if paid by an entity to an employee, 
                and such employee shall not be taken into account under 
                subparagraph (A)(i), during any period the employee 
                is--
                            ``(i) a qualified active investor, or
                            ``(ii) an employee other than a qualified 
                        active investor who is a 5-percent owner (as 
                        defined in section 416(i)(1)(B)(i)) of the 
                        entity.
                    ``(C) W-2 wages.--The term `W-2 wages' means, with 
                respect to any entity, the amounts described in 
                paragraphs (3) and (8) of section 6051(a) paid by the 
                entity with respect to employment of employees by the 
                entity.
                    ``(D) Full-time employees and equivalents.--For 
                purposes of this paragraph--
                            ``(i) the term `full-time employee' has the 
                        meaning given to such term by section 
                        4980H(c)(4), and
                            ``(ii) the determination of the number of 
                        employees constituting a full-time equivalent 
                        shall be made in the same manner as under 
                        section 4980H(c)(2)(E).
            ``(4) Certification requirements.--
                    ``(A) In general.--The requirements of this 
                paragraph are met with respect to any entity if the 
                entity certifies, in such form and manner and at such 
                time as the Secretary may prescribe, that, at the time 
                of the qualified investment, the entity--
                            ``(i) is engaged in 1 or more trades or 
                        businesses, and
                            ``(ii) meets the requirements of paragraphs 
                        (2) and (3) to be treated as a qualifying 
                        business entity.
                    ``(B) Certification provided to investors and 
                secretary.--An entity shall--
                            ``(i) provide the certification under 
                        subparagraph (A) to the person making the 
                        qualified investment at the time such 
                        investment is made, and
                            ``(ii) include such certification, and the 
                        names, addresses, and taxpayer identification 
                        numbers of the entity's qualified active 
                        investors and the persons making the qualified 
                        investment, with its return of tax for the 
                        taxable year which includes the date of the 
                        qualified investment.
                    ``(C) Certification included with return claiming 
                credit.--No credit shall be determined under subsection 
                (a) with respect to any taxpayer making a qualified 
                investment in a qualifying business entity unless the 
                taxpayer includes the certification under subparagraph 
                (A) with respect to the investment with its return of 
                tax for any taxable year for which such credit is being 
                claimed.
                    ``(D) Timely filed return required.--The 
                requirements of subparagraph (B)(ii) or (C) shall be 
                treated as met only if the return described in such 
                subparagraph is filed on or before its due date 
                (including extensions).
            ``(5) Qualified active investor.--
                    ``(A) In general.--The term `qualified active 
                investor' means, with respect to any entity, an 
                individual who--
                            ``(i) is a citizen or resident of the 
                        United States,
                            ``(ii) materially participates (within the 
                        meaning of section 469(h)) in 1 or more trades 
                        or businesses of the entity,
                            ``(iii) holds stock, or a capital or 
                        profits interest, in the entity, and
                            ``(iv) meets the income requirements of 
                        subparagraph (B).
                    ``(B) Income requirements.--The requirements of 
                this subparagraph are met with respect to an individual 
                if the average annual adjusted taxable income of the 
                individual for the 3 taxable years of the individual 
                immediately preceding the taxable year in which the 
                qualified investment is made does not exceed the 
                applicable amount.
                    ``(C) Applicable amount.--For purposes of this 
                paragraph, the term `applicable amount' means, with 
                respect to any taxable year in which a qualified 
                investment is made--
                            ``(i) in the case of an individual not 
                        described in clause (ii), $100,000 (as 
                        increased for the taxable year by the cost-of-
                        living adjustment under subsection (e)(2)), and
                            ``(ii) in the case of an individual who is 
                        a married individual filing a joint return or 
                        who is a head of household (as defined in 
                        section 2(b)) for the taxable year, an amount 
                        equal to 2 times the amount in effect under 
                        clause (i) for the taxable year.
                    ``(D) Rules for determining average taxable 
                income.--For purposes of this paragraph--
                            ``(i) a married individual filing a 
                        separate return of tax for any taxable year 
                        shall include the adjusted taxable income of 
                        their spouse in computing the individual's 
                        average adjusted taxable income for any period 
                        unless the Secretary determines that the 
                        spouse's information is not available to the 
                        individual, and
                            ``(ii) the Secretary shall prescribe rules 
                        for the determination of average adjusted 
                        taxable income in cases where the individual 
                        had different filing statuses for the 3 taxable 
                        years described in subparagraph (B).
                    ``(E) Adjusted taxable income.--The term `adjusted 
                taxable income' means taxable income computed without 
                regard to the deductions under sections 172 and 199A.
    ``(e) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Related persons.--A person shall be treated as 
        related to another person if the person bears a relationship to 
        such other person described in section 267(b), except that 
        section 267(b) shall be applied by substituting `5 percent' for 
        `50 percent' each place it appears.
            ``(2) Cost-of-living adjustments.--In the case of any 
        taxable year beginning after 2025, the $10,000 amount under 
        subsection (b)(2)(A)(i) and the $100,000 amount under 
        subsection (d)(5)(C)(i) shall each be increased by an amount 
        equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment under section 
                1(f)(3) for the calendar year in which the taxable year 
                begins, determined by substituting `2024' for `2016' in 
                subparagraph (A)(ii) thereof.
        If any increase in such $10,000 amount is not a multiple of 
        $100, such increase shall be rounded to the next lowest 
        multiple of $100 and if any increase in such $100,000 amount is 
        not a multiple of $1,000, such increase shall be rounded to the 
        next lowest multiple of $1,000.
            ``(3) Rules relating to entities.--
                    ``(A) Sole proprietorships.--If a taxpayer carries 
                on 1 or more trades or businesses as sole 
                proprietorships, all such trades or businesses shall be 
                treated as a single entity for purposes of applying 
                this section.
                    ``(B) Application to disregarded entities.--In the 
                case of any entity with a single owner which is 
                disregarded as an entity separate from its owner for 
                purposes of this title, this section shall be applied 
                in the same manner as if such entity were a 
                corporation.
    ``(f) Regulations.--The Secretary shall prescribe such regulations 
or other guidance as may be necessary to carry out the provisions of 
this section.''.
    (b) Credit To Be Part of General Business Credit.--Section 38(b) of 
such Code is amended by striking ``plus'' at the end of paragraph (40), 
by striking the period at the end of paragraph (41) and inserting ``, 
plus'', and by adding at the end the following new paragraph:
            ``(42) the small business investor credit determined under 
        section 45BB(a).''.
    (c) Credit Allowed Against Alternative Minimum Tax.--Section 
38(c)(4)(B) of such Code is amended by redesignating clauses (x), (xi), 
and (xii) as clauses (xi), (xii), and (xiii), respectively, and by 
inserting after clause (ix) the following new clause:
                            ``(x) the credit determined under section 
                        45BB,''.
    (d) Clerical Amendment.--The table of sections for subpart D of 
part IV of subchapter A of chapter 1 of such Code is amended by adding 
at the end the following new item:

``Sec. 45BB. Small business investor tax credit.''.
    (e) Effective Date.--The amendments made by this section shall 
apply to qualified investments made in taxable years beginning after 
December 31, 2024.

SEC. 3. FIRST EMPLOYEE BUSINESS WAGE CREDIT.

    (a) Allowance of Credit.--
            (1) In general.--Subpart D of part IV of subchapter A of 
        chapter 1 of the Internal Revenue Code of 1986, as amended by 
        section 2, is amended by adding at the end the following new 
        section:

``SEC. 45CC. FIRST EMPLOYEE BUSINESS WAGE CREDIT.

    ``(a) General Rule.--For purposes of section 38, in the case of a 
qualifying business entity, the first employee business wage credit 
determined under this section for any taxable year is an amount equal 
to 25 percent of the qualified wages of the entity for the taxable 
year.
    ``(b) Dollar Limitations.--
            ``(1) In general.--The amount of the credit determined 
        under subsection (a) with respect to any qualifying business 
        entity for any taxable year shall not exceed the lesser of--
                    ``(A) $10,000 (as increased for the taxable year by 
                the cost-of-living adjustment under subsection (f)), or
                    ``(B) the excess (if any) of--
                            ``(i) an amount equal to 4 times the amount 
                        under subparagraph (A) for the taxable year, 
                        over
                            ``(ii) the amount of the credit determined 
                        under this section with respect to such entity 
                        for all preceding taxable years.
            ``(2) No credit by reason of cost-of-living adjustment 
        after overall limit first reached.--No credit shall be 
        determined under this section with respect to any qualifying 
        business entity for any taxable year after the first taxable 
        year for which the amount determined under clause (ii) of 
        paragraph (1)(B) equals or exceeds the amount determined under 
        clause (i) of such paragraph.
            ``(3) Pass-thru entities.--If a qualifying business entity 
        is a partnership, trust, S corporation, or other pass-thru 
        entity, the limitations under this subsection shall apply at 
        the entity level.
    ``(c) Qualified Wages.--For purposes of this section--
            ``(1) In general.--The term `qualified wages' means, with 
        respect to any qualifying business entity, the amount of W-2 
        wages paid or incurred during any eligible taxable year to 
        employees for services performed in connection with a trade or 
        business of the entity.
            ``(2) Exception for qualified active investors and 5-
        percent owner-employees.--W-2 wages shall not be taken into 
        account under paragraph (1) if paid by an entity to an 
        employee, and such employee shall not be taken into account 
        under paragraph (3)(A), during any period the employee is--
                    ``(A) a qualified active investor, or
                    ``(B) an employee other than a qualified active 
                investor who is a 5-percent owner (as defined in 
                section 416(i)(1)(B)(i)) of the entity.
            ``(3) Eligible taxable year.--
                    ``(A) In general.--The term `eligible taxable year' 
                means any taxable year of a qualifying business 
                entity--
                            ``(i) which occurs during the period--
                                    ``(I) beginning with the first 
                                taxable year of the entity in which the 
                                entity employed at least 1 full-time 
                                employee (or employees constituting a 
                                full-time equivalent employee) in 1 or 
                                more trades or businesses of the entity 
                                during the taxable year and paid W-2 
                                wages to such employee or employees 
                                with respect to such employment, and
                                    ``(II) ending with the last taxable 
                                year for which a credit may be 
                                determined for the entity under this 
                                section by reason of the limitation 
                                under subsection (b)(2), and
                            ``(ii) in the case of a taxable year other 
                        than the first taxable year described in clause 
                        (i)(I), with respect to which the entity meets 
                        the employment and wage requirements of such 
                        clause.
                Such term shall not include any taxable year during 
                such a period if the first taxable year described in 
                clause (i)(I) of the entity (or any predecessor) begins 
                before January 1, 2024.
                    ``(B) W-2 wages; full-time employees.--For purposes 
                of this subsection, W-2 wages, full-time employees, and 
                full-time employee equivalents shall be determined in 
                the same manner as under section 45BB.
    ``(d) Qualifying Business Entity.--For purposes of this section--
            ``(1) Qualifying business entity defined.--
                    ``(A) In general.--The term `qualifying business 
                entity' means, with respect to any taxable year for 
                which a credit under this section is being determined, 
                any entity--
                            ``(i) which is engaged in 1 or more trades 
                        or businesses,
                            ``(ii) with respect to which the qualified 
                        active investor ownership requirements of 
                        paragraph (2) of section 45BB(d) are met as of 
                        the close of such taxable year (rather than 
                        immediately before and after the qualified 
                        investment), and
                            ``(iii) with respect to which the 
                        certification requirements of paragraph (2) are 
                        met.
                    ``(B) Entities under common control.--For purposes 
                of this section--
                            ``(i) In general.--All qualifying business 
                        entities treated as a single employer under 
                        subsection (a) or (b) of section 52 or 
                        subsection (m) or (o) of section 414 shall be 
                        treated as a single qualifying business entity.
                            ``(ii) Allocation of credit.--Except as 
                        provided in regulations, the credit under this 
                        section shall be allocated among the entities 
                        comprising the single entity described in 
                        clause (i) in proportion to the qualified wages 
                        of each such entity taken into account under 
                        subsection (a).
            ``(2) Certification requirements.--
                    ``(A) In general.--The requirements of this 
                paragraph are met with respect to any entity for any 
                taxable year described in paragraph (1) if the entity 
                certifies, in such form and manner and at such time as 
                the Secretary may prescribe, that the entity meets the 
                requirements described in clauses (i) and (ii) of 
                paragraph (1)(A).
                    ``(B) Certification provided to secretary.--An 
                entity shall include the certification under 
                subparagraph (A), and the names, addresses, and 
                taxpayer identification numbers of the entity's 
                qualified active investors (and employees who are 5-
                percent owners described in subsection (c)(2)(B)), with 
                its return of tax for the taxable year to which the 
                certification relates. The requirement of this 
                subparagraph is met only if such return is filed before 
                its due date (including extensions).
            ``(3) Qualified active investor.--For purposes of this 
        section (including applying the requirements of paragraph (2) 
        of section 45BB(d) for purposes of paragraph (1)(A)(ii)), the 
        term `qualified active investor' has the same meaning given 
        such term by section 45BB(d)(5), except that such section shall 
        be applied separately for each taxable year described in 
        paragraph (1) (rather than the taxable year of the qualified 
        investment).
    ``(e) Election To Apply Credit Against Payroll Taxes.--
            ``(1) In general.--At the election of a qualifying business 
        entity, section 3111(g) shall apply to the payroll tax credit 
        portion of the credit otherwise determined under subsection (a) 
        for the taxable year and such portion shall not be treated 
        (other than for purposes of section 280C) as a credit 
        determined under subsection (a).
            ``(2) Payroll tax credit portion.--For purposes of this 
        subsection, the payroll tax credit portion of the credit 
        determined under subsection (a) with respect to any qualifying 
        business entity for any taxable year is the least of--
                    ``(A) the amount specified in the election made 
                under this subsection,
                    ``(B) the credit determined under subsection (a) 
                for the taxable year (determined before the application 
                of this subsection), or
                    ``(C) in the case of a qualifying business entity 
                other than a partnership, estate, S corporation or 
                other pass-thru entity, the amount of the business 
                credit carryforward under section 39 carried from the 
                taxable year (determined before the application of this 
                subsection to the taxable year).
            ``(3) Election.--
                    ``(A) In general.--Any election under this 
                subsection for any taxable year--
                            ``(i) shall specify the amount of the 
                        credit to which such election applies,
                            ``(ii) shall be made on or before the due 
                        date (including extensions) of the return for 
                        the taxable year, and
                            ``(iii) may be revoked only with the 
                        consent of the Secretary.
                    ``(B) Special rule for pass-thru entities.--In the 
                case of a partnership, estate, S corporation, or other 
                pass-thru entity, the election made under this 
                subsection shall be made at the entity level.
    ``(f) Cost-of-Living Adjustments.--In the case of any taxable year 
beginning after 2025, the $10,000 amount under subsection (b)(1)(A) 
shall be increased by an amount equal to--
            ``(1) such dollar amount, multiplied by
            ``(2) the cost-of-living adjustment under section 1(f)(3) 
        for the calendar year in which the taxable year begins, 
        determined by substituting `2024' for `2016' in subparagraph 
        (A)(ii) thereof.
If any increase in such amount is not a multiple of $100, such increase 
shall be rounded to the next lowest multiple of $100.
    ``(g) Other Rules.--For purposes of this section--
            ``(1) Rules relating to entities.--Rules similar to the 
        rules of section 45BB(e)(3) shall apply.
            ``(2) Election not to have credit apply.--
                    ``(A) In general.--A taxpayer may elect not to have 
                this section apply for any taxable year.
                    ``(B) Other rules.--Rules similar to the rules of 
                paragraphs (2) and (3) of section 51(j) shall apply for 
                purposes of this paragraph.
            ``(3) Certain other rules made applicable.--Rules similar 
        to the rules of subsections (c), (d), and (e) of section 52 
        shall apply.
    ``(h) Regulations.--The Secretary shall prescribe such regulations 
or other guidance as may be necessary to carry out the provisions of 
this section, including regulations--
            ``(1) preventing the avoidance of the limitations under 
        this section in cases in which there is a successor or new 
        qualified business entity with respect to the same trade or 
        business for which a predecessor qualified business entity 
        already claimed the credit under this section,
            ``(2) to minimize compliance and recordkeeping burdens 
        under the provisions of this section, and
            ``(3) for recapturing the benefit of credits determined 
        under section 3111(g) in cases where there is a recapture or a 
        subsequent adjustment to the payroll tax credit portion of the 
        credit determined under subsection (a), including requiring 
        amended income tax returns in the cases where there is such an 
        adjustment.''.
            (2) Credit to be part of general business credit.--Section 
        38(b) of such Code, as amended by section 2, is amended by 
        striking ``plus'' at the end of paragraph (41), by striking the 
        period at the end of paragraph (42) and inserting ``, plus'', 
        and by adding at the end the following new paragraph:
            ``(43) the first employee business wage credit determined 
        under section 45CC(a).''.
            (3) Credit allowed against alternative minimum tax.--
        Section 38(c)(4)(B) of such Code, as amended by section 2, is 
        amended by redesignating clauses (xi), (xii), and (xiii) as 
        clauses (xii), (xiii), and (xiv), respectively, and by 
        inserting after clause (x) the following new clause:
                            ``(xi) the credit determined under section 
                        45CC,''.
            (4) Clerical amendment.--The table of sections for subpart 
        D of part IV of subchapter A of chapter 1 of such Code, as 
        amended by section 2, is amended by adding at the end the 
        following new item:

``Sec. 45CC. First employee business wage credit.''.
    (b) Payroll Tax Credit.--Section 3111 of the Internal Revenue Code 
of 1986 is amended by adding at the end the following new subsection:
    ``(g) Credit for First Employee Business Wage Expenses.--
            ``(1) In general.--In the case of a taxpayer who has made 
        an election under section 45CC(e) for a taxable year, there 
        shall be allowed as a credit against the tax imposed by 
        subsection (a) for the first calendar quarter which begins 
        after the date on which the taxpayer files the return for the 
        taxable year an amount equal to the payroll tax credit portion 
        determined under section 45CC(e)(2).
            ``(2) Limitation.--The credit allowed by paragraph (1) 
        shall not exceed the tax imposed by subsection (a) for any 
        calendar quarter on the wages paid with respect to the 
        employment of all individuals in the employ of the employer.
            ``(3) Carryover of unused credit.--If the amount of the 
        credit under paragraph (1) exceeds the limitation of paragraph 
        (2) for any calendar quarter, such excess shall be carried to 
        the succeeding calendar quarter and allowed as a credit under 
        paragraph (1) for such quarter.
            ``(4) Deduction allowed for credited amounts.--
        Notwithstanding section 280C(a), the credit allowed under 
        paragraph (1) shall not be taken into account for purposes of 
        determining the amount of any deduction allowed under chapter 1 
        for taxes imposed under subsection (a).''.
    (c) Coordination With Deductions and Other Credits.--
            (1) Deductions.--Section 280C(a) of the Internal Revenue 
        Code of 1986 is amended by inserting ``45CC(a),'' after 
        ``45S(a),''.
            (2) Other credits.--
                    (A) Section 41(b)(2)(D) of such Code is amended by 
                adding at the end the following:
                            ``(iv) Exclusion for wages to which first 
                        employee wage credit applies.--The term `wages' 
                        shall not include any amount taken into account 
                        in determining the credit under section 
                        45CC.''.
                    (B) Section 45A(b)(1) of such Code is amended by 
                adding at the end the following:
                    ``(C) Coordination with first employee wage 
                credit.--The term `qualified wages' shall not include 
                wages if any portion of such wages is taken into 
                account in determining the credit under section 
                45CC.''.
                    (C) Section 1396(c)(3) of such Code is amended--
                            (i) by striking ``section 51'' each place 
                        it appears and inserting ``section 45CC or 
                        51'', and
                            (ii) by inserting ``and first employee 
                        wage'' after ``opportunity'' in the heading 
                        thereof.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2024.
                                 <all>
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