OMB No. 1545-1444

Form 8844 Empowerment Zone Employment Credit

Department of the Treasury

Internal Revenue Service © Attach to your return.

Attachment

Sequence No. 99

Name(s) shown on return Identifying number

Tentative Empowerment Zone Employment (EZE) Credit

1 Enter the total qualified zone wages paid or incurred during calendar year 1996 (see instructions) 1

2 2

If you are a— Then enter total of current year EZE credit(s) from—

Schedule K-1 (Form 1120S), lines 12d, 12e, or 13

Schedule K-1 (Form 1065), lines 13c, 13d, or 14

Schedule K-1 (Form 1041), line 13

Written statement from cooperative

a Shareholder

b Partner

c Beneficiary

d Patron

5 5

6 6

EZE Credit Limit Based on Amount of Tax

7

11

9

12a

b 12b

c 12c

d 12d

e 12e

12f

g 12g

h

i

13

14

16

15

16

17

19

Part I

Part II

%

%

%

Cat. No. 16145S

12h

3

4

3

4

14

15

Current year credit. Multiply line 1 by 20% (.20) (see instructions)

EZE credits

from flowthrough entities

Total current year EZE credit. Add lines 2 and 3

EZE credit included on line 4 from passive activities (see instructions)

Subtract line 5 from line 4

EZE passive activity credit allowed for 1996 (see instructions)

Carryback of EZE credit to 1996 (see instructions)

Tentative EZE credit. Add lines 6 through 9. (S corporations, partnerships, estates, trusts, and

cooperatives, see instructions.)

● Individuals. Enter amount from Form 1040, line 38

10

● Corporations. Enter amount from Form 1120, Schedule J, line 3 (or Form 1120-A, Part I, line 1)

● Other filers. Enter regular tax before credits from your return

Credit for child and dependent care expenses (Form 2441, line 10)

Credit for the elderly or the disabled (Sch. R (Form 1040), line 20)

Mortgage interest credit (Form 8396, line 11)

Foreign tax credit (Form 1116, line 32, or Form 1118, Sch. B, line 12)

Possessions tax credit (Form 5735)

Credit for fuel from a nonconventional source

Qualified electric vehicle credit (Form 8834, line 19)

General business credit (see instructions)

Add lines 12a through 12h

Net regular tax. Subtract line 12i from line 11

Alternative minimum tax:

● Individuals. Enter amount from Form 6251, line 28

● Corporations. Enter amount from Form 4626, line 15, reduced by any credit

on Form 3800, line 36

● Estates and trusts. Enter amount from Form 1041, Schedule I, line 41

Net income tax. Add lines 13 and 14

Tentative minimum tax (see instructions):

● Individuals. Enter amount from Form 6251, line 26

● Corporations. Enter amount from Form 4626, line 13

● Estates and trusts. Enter amount from Form 1041, Schedule I, line 37

Multiply line 16 by 75% (.75)

If line 13 is more than $25,000, enter 25% (.25) of the excess (see instructions)

Enter the greater of line 17 or line 18

12a

18

19

10

9

7

12i

13

Form 8844 (1996)

20

Credit allowed against regular tax. Enter the smaller of line 13 or line 21 here and on Form 1040,

line 42; Form 1120, Schedule J, line 4d; Form 1120-A, Part I, line 2a; Form 1041, Schedule G, line

2c; or the applicable line of your return

20

23

Credit allowed against alternative minimum tax. If line 21 is greater than line 22, enter the excess

here and see instructions on how to claim the credit

21

For Paperwork Reduction Act Notice, see page 3.

8 Carryforward of EZE credit to 1996 8

f

96

11 Regular tax before credits:

%

Subtract line 19 from line 15. If zero or less, enter -0-

EZE credit allowed for the current year. Enter the smaller of line 10 or line 20. Complete lines 22

and 23 to determine how the credit is claimed on your tax return 21

22

22

23

17

18

Form 8844 (1996) Page 3

Qualified zone employee means any

employee of the employer who 

(a) performs substantially all of the

services for that employer within an

empowerment zone in the employer’s

trade or business and (b) has his or her

principal residence within that

empowerment zone while performing

these services. Both full-time and

part-time employees may qualify.

The following are not qualified zone

employees:

● Any relative of the employer described

in sections 152(a)(1) through 152(a)(8).

● If the employer is a corporation, any

individual who bears any of the

relationships described in sections

152(a)(1) through 152(a)(8) to, or is a

dependent described in section 152(a)(9)

of, an individual who owns (or is

considered to own under section 267(c))

more than 50% in value of the

outstanding stock of the corporation.

● If the employer is an entity other than

a corporation, any individual who owns

directly or indirectly more than 50% of

the capital and profits interest, including

constructive ownership, in the entity.

● If the employer is an estate or trust,

any individual who is a grantor,

beneficiary, or fiduciary of the estate or

trust (or a dependent, as described in

section 152(a)(9), of that individual), or

any individual who is a relative, as

described in sections 152(a)(1) through

152(a)(8), of the grantor, beneficiary, or

fiduciary of the estate or trust.

● Any person who owns (or is

considered to own under section 318)

more than 5% of the outstanding or

voting stock of the employer, or if not a

corporate employer, more than 5% of

the capital or profits interest in the

employer.

● Any individual employed by the

employer for less than 90 days. For

exceptions, see Early Termination of

Employee below.

● Any individual employed by the

employer at any private or commercial

golf course, country club, massage

parlor, hot tub facility, suntan facility,

Although the EZE credit is a

component of the general business

credit, a special tax liability limit applies

to this credit. The credit is, therefore,

figured separately and is never carried to

Form 3800, General Business Credit.

Definitions

Qualified zone wages means any

wages paid or incurred by an employer

for services performed by an employee

while the employee is a qualified zone

employee (see below). Wages have the

same meaning as given in section 51,

and are generally defined as those

wages subject to the Federal

Unemployment Tax Act without regard to

the dollar limitation. For each qualified

zone employee, the amount of qualified

zone wages that may be taken into

account for a calendar year is limited to

the first $15,000. Wages do not include

any amount taken into account in

figuring the work opportunity credit on

Form 5884. The $15,000 limit is reduced

by the amount of wages paid or incurred

during the year that are used in figuring

the work opportunity credit for that

employee.

Empowerment zones are the nine areas

designated from qualifying areas

nominated by state and local

governments. The Secretary of Housing

and Urban Development (HUD)

designated portions of the following

cities as urban empowerment zones:

General Instructions

Section references are to the Internal

Revenue Code.

Purpose of Form

Use Form 8844 to claim the

empowerment zone employment (EZE)

credit. The credit is 20% of an

employer’s current year qualified wages

and certain training and educational

expenses paid or incurred on behalf of

qualified zone employees.

Paperwork Reduction

Act Notice

If you have comments concerning the

accuracy of these time estimates or

suggestions for making this form

simpler, we would be happy to hear from

you. You can write to the IRS at the

address listed in the instructions for the

tax return with which this form is filed.

Recordkeeping 8 hr., 8 min.

Learning about the

law or the form 1 hr., 12 min.

Preparing and sending

the form to the IRS 1 hr., 22 min.

The time needed to complete and file

this form will vary depending on

individual circumstances. The estimated

average time is:

We ask for the information on this

form to carry out the Internal Revenue

laws of the United States. You are

required to give us the information. We

need it to ensure that you are complying

with these laws and to allow us to figure

and collect the right amount of tax.

Each designation remains in effect

until the earliest of:

1. December 31, 2004,

2. The termination date designated by

the state and local governments in their

zone application, or

3. The date HUD or USDA revokes a

designation.

The Secretary of Agriculture (USDA)

designated the following rural

empowerment zones, which include

portions of the counties listed:

● Atlanta, GA (9.29 square miles);

● Baltimore, MD (6.8 square miles);

● Chicago, IL (14.33 square miles);

● Detroit, MI (18.3 square miles);

● New York, NY (Manhattan and the

Bronx) (7.6 square miles); and

● Philadelphia, PA/Camden, NJ (4.4

square miles).

For the geographic boundaries of the

zones, contact the local and state

governments that submitted the zone

application to HUD.

● Kentucky Highlands (Counties of

Clinton, Jackson, and Wayne), KY;

● Mid-Delta (Counties of Bolivar,

Sunflower, Leflore, Washington,

Humphreys, and Holmes), MS; and

● Rio Grande Valley (Counties of Starr,

Cameron, Hidalgo, and Willacy), TX.

For the geographic boundaries of the

zones, contact the local and state

governments that submitted the zone

application to USDA.

● Amounts paid or incurred by the

employer on behalf of an employee

under age 19 for a youth training

program operated by that employer in

conjunction with local education officials. You are not required to provide the

information requested on a form that is

subject to the Paperwork Reduction Act

unless the form displays a valid OMB

control number. Books or records

relating to a form or its instructions must

be retained as long as their contents

may become material in the

administration of any Internal Revenue

law. Generally, tax returns and return

information are confidential, as required

by section 6103.

● A dependent of the employer

described in section 152(a)(9).

Also treated as wages paid to an

employee are:

● Amounts paid or incurred by the

employer as educational assistance

payments excludable from the

employee’s gross income under section

127, but only if paid or incurred to a

person who is not related to the

employer. For this purpose, a person is

related to the employer only if that

person has a relationship to the

employer described in section 267(b) or

707(b)(1) (substituting “10 percent”

where “50 percent” appears in these

sections), or the employer and that

person are engaged in trades or

businesses under common control

(within the meaning of subsections (a)

and (b) of section 52).
Form 8844 (1996) Page 4

● The employee becomes disabled

before the 90th day. However, if the

disability ends before the 90th day, the

employer must offer to reemploy the

former employee.

An employee is not treated as

terminated if the corporate employer is

acquired by another corporation under

section 381(a) and the employee

continues to be employed by the

acquiring corporation. Nor is a mere

change in the form of conducting the

trade or business treated as a

termination if the employee continues to

be employed in such trade or business

and the taxpayer retains a substantial

interest therein.

Specific Instructions

Complete lines 1 and 2 to figure the

current year credit for your trade or

business. Skip lines 1 and 2 if you are

claiming only a credit that was allocated

to you from a flow-through entity. The

following rules apply to lines 1 and 2:

● The qualified zone employee may earn

more than $15,000, but only the first

$15,000 of qualified zone wages paid or

incurred during the calendar year that

ends with or within the tax year (reduced

by wages used to figure the work

opportunity credit) is taken into account

for the credit.

● Members of a controlled group of

corporations and businesses under

common control are treated as a single

employer in determining the credit. The

members share the credit in the same

proportion that they paid or incurred

qualifying wages.

Line 2.—In general, you must reduce

your deduction on your return for

salaries and wages and certain

educational and training costs by the

line 2 credit amount. You must make this

reduction even if you cannot take the full

credit this year because of the tax

liability limit. If you capitalized any costs

on which you figured the credit, reduce

the depreciable basis by the amount of

the credit attributable to these costs.

Line 5.—Enter the amount included on

line 4 that is from a passive activity.

Generally, a passive activity is a trade or

business in which you did not materially

participate. Rental activities are generally

considered passive activities, whether or

not you materially participate. For

details, see Form 8582-CR, Passive

Activity Credit Limitations (for

individuals, trusts, and estates), or Form

8810, Corporate Passive Activity Loss

and Credit Limitations (for corporations).

Line 7.—Enter the passive activity credit

allowed for the 1996 EZE credit from

Form 8582-CR or Form 8810. See the

instructions for the applicable form for

details.

Line 9.—Use only if you amend your

1996 return to carry back unused EZE

credits from future tax years.

Line 10.—Flow-through entities allocate

the credit as follows:

Estates and trusts.—The line 10 credit

is allocated between the estate or trust

and the beneficiaries in proportion to the

income allocable to each. On the dotted

line to the left of the amount on line 10,

the estate or trust should enter its part

of the total credit. Label it “1041

PORTION” and use this amount in Part II

to figure the credit to claim on Form

1041, U.S. Income Tax Return for

Estates and Trusts.

Cooperatives.—Most tax-exempt

organizations cannot take the EZE

credit, but a cooperative described in

section 1381(a) takes the credit to the

extent of its tax liability. Allocate the

credit in excess of the tax liability limit to

the patrons of the cooperative.

Line 12.—The credits listed on lines 12a

through line 12h reduce your regular tax

before the EZE credit. This includes all

other allowed credits that make up the

general business credit. If you filed Form

3800, enter on line 12h the credit from

line 17 of Form 3800. If you had only a

single separate general business credit

form, enter on line 12h the credit from

the last line of the credit form (e.g., line

17 of Form 8586, Low-Income Housing

Credit).

Line 16.—Enter the tentative minimum

tax (TMT) that was figured on the

appropriate alternative minimum tax

(AMT) form or schedule. Although you

may not owe AMT, you must still

compute the TMT to figure your credit.

Line 18.—See section 38(c)(3) for

special rules that apply to married

individuals filing separate returns,

controlled groups, regulated investment

companies, real estate investment

trusts, and estates and trusts.

If you cannot use part of the credit

because of the tax liability limit (line 21

is smaller than line 10), generally carry it

back 3 years and then forward for 15

years. However, no carryback is allowed

to any tax year ending before January 1,

1994.

S corporations and partnerships.—

Allocate the line 10 credit among the

shareholders or partners. Attach Form

8844 to the return and show the credit

for each shareholder or partner on

Schedule K-1.

Line 21.—Because the EZE credit is

allowed against both the regular tax and

AMT, you must distribute the credit

between the two taxes by completing

lines 22 and 23.

Line 23.—Reduce the amount of AMT

that you figured on Form 6251, Form

4626, or Form 1041, Schedule I, by the

line 23 amount and enter the reduced

AMT amount on your income tax return

(Form 1040, line 46; Form 1120,

Schedule J, line 9; Form 1120-A, Part I,

line 6; or Form 1041, Schedule G, line

6). On the dotted line to the left of the

AMT entry, write “EZE” and the line 23

dollar amount.

Line 8.—Enter the amount of the EZE

credit you carried forward from 1995.

● The employee is terminated because

of misconduct as determined under the

applicable state unemployment

compensation law.

Early Termination of

Employee

Generally, an individual is not a qualified

zone employee unless employed for at

least 90 days. The 90-day requirement

does not apply in the following

situations:

● Any individual employed by the

employer in a trade or business, the

principal activity of which is farming

(within the meaning of section

2032A(e)(5)(A) or (B)), if at the close of

the tax year the sum of the following

amounts exceeds $500,000:

1. The larger of the unadjusted bases

or fair market value of the farm assets

owned by the employer, and

2. The value of the farm assets leased

by the employer.

racetrack or other facility used for

gambling, or any store the principal

business of which is the sale of alcoholic

beverages for consumption off premises.