I 

109TH CONGRESS 

2D SESSION H. R. 5146 

To amend the Internal Revenue Code of 1986 to allow a credit against 

tax to qualified small employers who create new jobs. 

IN THE HOUSE OF REPRESENTATIVES 

APRIL 6, 2006 

Mr. KNOLLENBERG 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 allow a 

credit against tax to qualified small employers who create 

new jobs. 

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 ‘‘Job Creation Incentive 

5 Act of 2006’’. 

6 SEC. 2. JOB CREATION CREDIT FOR SMALL EMPLOYERS. 

7 (a) ALLOWANCE OF CREDIT.—Subpart D of part IV 

8 of subchapter A of chapter 1 of the Internal Revenue Code 

9 of 1986 (relating to business related credits) is amended 

10 by inserting after section 45M the following new section: 


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1 ‘‘SEC. 45N. JOB CREATION CREDIT FOR SMALL EMPLOYERS. 

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

3 in the case of a qualified small employer, the amount of 

4 the job creation credit determined under this section for 

5 a taxable year is an amount equal to 5 percent of the 

6 amount of qualified wages paid by the qualified small em7 ployer to a qualified employee during the taxable year. 

8 ‘‘(b) LIMITATIONS.— 

9 ‘‘(1) MAXIMUM CREDIT.—With respect to a 

10 qualified small employer, the total amount of the job 

11 creation credit determined under subsection (a) for 

12 any taxable year shall not exceed 25 percent of the 

13 qualified small employer’s regular tax liability (as 

14 defined in section 26(b)). 

15 ‘‘(2) DOLLAR LIMITATION.—With respect to a 

16 qualified employee, the amount of the job creation 

17 credit determined under subsection (a) for a taxable 

18 year shall not exceed $2,500. 

19 ‘‘(3) EMPLOYMENT REQUIREMENT.—With re20 spect to a qualified employee employed by a qualified 

21 small employer, the amount of the job creation cred22 it determined under subsection (a) shall be zero if 

23 the qualified small employer does not maintain dur24 ing the first 180 days that the qualified employee is 

25 employed a number of employees equal to or greater 

26 than the number of employees employed by the emVerDate Aug 31 2005 22:16 Apr 13, 2006 Jkt 049200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H5146.IH H5146

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1 ployer on the first day of the qualified employee’s 

2 employment. 

3 ‘‘(c) DEFINITIONS.—For purposes of this section, 

4 with respect to a taxable year— 

5 ‘‘(1) QUALIFIED SMALL EMPLOYER.—The term 

6 ‘qualified small employer’ means an employer who 

7 employs not more than 100 employees during the 

8 taxable year. 

9 ‘‘(2) QUALIFIED EMPLOYEE.—In the case of a 

10 qualified small employer, the term ‘qualified em11 ployee’ means an employee of the qualified small em12 ployer— 

13 ‘‘(A) who is not hired to replace a former 

14 employee of the qualified small employer, 

15 ‘‘(B) who completes the first 180 days and 

16 960 hours of employment during such taxable 

17 year, and 

18 ‘‘(C) whose employment by the qualified 

19 small employer results in an increase in the 

20 total number of employees employed by the 

21 qualified small employer. 

22 ‘‘(3) QUALIFIED WAGES.—In the case of a 

23 qualified small employer, the term ‘qualified wages’ 

24 means any wages paid or incurred by the qualified 

25 small employer for services performed by an emVerDate Aug 31 2005 22:16 Apr 13, 2006 Jkt 049200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H5146.IH H5146

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1 ployee of such qualified small employer, except that 

2 such term shall not include the cash value of all re3 muneration (including benefits) paid in any medium 

4 other than cash. 

5 ‘‘(d) DENIAL OF DOUBLE BENEFIT.—No deduction 

6 shall be allowed under this chapter for any amount taken 

7 into account in determining the credit under this section. 

8 ‘‘(e) ELECTION NOT TO CLAIM CREDIT.—This sec9 tion shall not apply to a taxpayer for any taxable year 

10 if such taxpayer elects to have this section not apply for 

11 such taxable year.’’. 

12 (b) CREDIT TO BE PART OF GENERAL BUSINESS

13 CREDIT.—Subsection (b) of section 38 of such Code (re14 lating to general business credit) is amended by striking 

15 ‘‘and’’ at the end of paragraph (29), by striking the period 

16 at the end of paragraph (30) and inserting ‘‘, and’’, and 

17 by adding at the end the following new paragraph: 

18 ‘‘(31) the job creation credit determined under 

19 section 45N(a).’’. 

20 (c) CONFORMING AMENDMENT.—The table of sec21 tions for subpart D of part IV of subchapter A of chapter 

22 1 of such Code is amended by inserting after the item 

23 relating to section 45M the following new item: 

‘‘Sec. 45N. Job creation credit for small employers.’’. 


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

2 this section shall apply to taxable years beginning after 

3 December 31, 2006. 

Æ 


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