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 2001 (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 12c, 12d, or 13

Schedule K-1 (Form 1041), line 14

Written statement from cooperative

a Shareholder

b Partner

c Beneficiary

d Patron

5 5

6 6

7

9

Part I



Cat. No. 16145S

3

4

3

4

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

EZE credits

from passthrough 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 2001 (see instructions)

Carryback of EZE credit from 2002 (see instructions)

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

cooperatives, see instructions.)

10

10

9

7

For Paperwork Reduction Act Notice, see page 3. Form 8844 (2001)

8 Carryforward of EZE credit to 2001 8

Part II EZE Credit Limit Based on Amount of Tax

● Individuals. Enter the amount from Form 1040, line 40

11

Corporations. Enter the amount from Form 1120, Schedule J, line 3; Form 1120-A,

Part I, line 1; or the applicable line of your return

●

●

14a 14a

Credit for child and dependent care expenses (Form 2441, line 9) 14b

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

b

14d

Foreign tax credit

d

e 14e

Possessions tax credit (Form 5735, line 17 or 27)

14f f

14g g

Credit for fuel from a nonconventional source

h

Qualified electric vehicle credit (Form 8834, line 20)

Add lines 14a through 14l 14m

Net income tax. Subtract line 14m from line 13. If zero, skip lines 16 through 20 and enter -0- on line 21 15

Alternative minimum tax:

● Individuals. Enter the amount from Form 6251, line 28

● Corporations. Enter the amount from Form 4626, line 15 12

● Estates and trusts. Enter the amount from Form 1041, Schedule I, line 39

Tentative minimum tax (see instructions) 16

11

Enter 25% (.25) of the excess, if any, of line 18 over $25,000 (see

instructions)

13

Subtract line 20 from line 15. If zero or less, enter -0-

20

EZE credit allowed for the current year. Enter the smaller of line 10 or line 23 here and on

Form 1040, line 50; Form 1120, Schedule J, line 6d; Form 1120-A, Part I, line 4a; Form 1041,

Schedule G, line 2c; or the applicable line of your return 24



Mortgage interest credit (Form 8396, line 11)

c 14c

Regular tax before credits:

Add lines 11 and 12 13

12

Enter the greater of line 17 or line 19

18

19

i

Adoption credit (Form 8839, line 14) 14h

District of Columbia first-time homebuyer credit (Form 8859, line 11) 14i

j

k

l

Child tax credit (Form 1040, line 48)

Education credits (Form 8863, line 18)

14j

14k

Estates and trusts. Enter the sum of the amounts from Form 1041, Schedule G, lines 1a

and 1b, or the amount from the applicable line of your return

Net regular tax. Subtract line 14m from line 11. If zero or less, enter -0-

15

21



16

Multiply line 16 by 75% (.75)

General business credit (see instructions)

Subtract line 22 from line 21. If zero or less, enter -0-

17

18

19

20

21

22

23

24

17

22

23

2001

Rate reduction credit (Form 1040, line 47)

m

14l
Form 8844 (2001) Page 2

Qualified zone employee means any employee of

the employer who:

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 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,

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.

Although the EZE credit is a component of the

general business credit, a special tax liability limit

applies. The allowable credit, therefore, is figured on

Form 8844 and is not carried to Form 3800, General

Business Credit.

Definitions

Empowerment zones are the areas designated from

qualifying areas nominated by state and local

governments. For purposes of the EZE credit for

calendar year 2001, the Secretary of Housing and

Urban Development (HUD) has designated parts 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. For tax years beginning in

2001, the credit is 20% of an employer’s calendar year

2001 qualified wages and certain training and

educational expenses paid or incurred on behalf of

qualified zone employees.

For purposes of the EZE credit for calendar year

2001, the Secretary of Agriculture (USDA) has

designated the following rural empowerment zones.

● 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).

● Philadelphia, PA/Camden, NJ (4.4 square miles).

● The Kentucky Highlands (part of Wayne and all of

Clinton and Jackson counties).

● Mid-Delta, Mississippi (parts of Bolivar, Holmes,

Humphreys, Leflore, Sunflower, and Washington

counties).

● Rio Grande Valley, Texas (parts of Cameron, Hidalgo,

Starr, and Willacy counties).

You may call HUD at 1-800-998-9999 for information

on the urban empowerment zones. You may call the

USDA at 1-800-645-4712 about the rural

empowerment zones. On the Internet, visit the EZ/EC

Home Page at www.ezec.gov.

● A dependent of the employer described in section

152(a)(9).

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.

2. The value of the farm assets leased by the

employer.

● Performs substantially all of the services for that

employer within an empowerment zone in the

employer’s trade or business and

● Has his or her principal residence within that

empowerment zone while performing these services

(anywhere in the District of Columbia for the DC zone).

Both full-time and part-time employees may qualify.

Under section 1400, parts of Washington, DC, are

treated as an empowerment zone. For details, see

Notice 98-57, 1998-2 C.B. 671.

● Cleveland, OH (7.0 square miles).

● Los Angeles, CA (city and county) (19.7 square

miles).

● 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.
Form 8844 (2001) Page 3

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

Line 7

Line 9

Line 10

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.

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. Electing large

partnerships, include this credit in “general credits.”

Line 8

● 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.

● 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).

Line 5

The following are also treated as wages paid to an

employee.

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 amount capitalized by the amount of

the credit attributable to these costs.

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).

Enter the passive activity credit allowed for the 2001

EZE credit from Form 8582-CR or Form 8810. See the

instructions for the applicable form for details.

Enter the amount of the EZE credit you carried forward

from 2000.

Use only if you amend your 2001 return to carry back

an unused EZE credit from 2002.

If line 10 is zero, skip Part II.

● 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.

● The employee is terminated because of misconduct

as determined under the applicable state

unemployment compensation law.

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.

Line 1

Qualified zone wages are wages paid or incurred

by an employer for services performed by an employee

while the employee is a qualified zone employee

(defined earlier). 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.

Enter the total qualified zone wages paid or incurred

during calendar year 2001.

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.

Pass-through entities allocate the credit as follows.
Form 8844 (2001) Page 4

Line 19

Line 24

Paperwork Reduction Act Notice. 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.

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.

See the instructions for the tax return with which this

form is filed.

Recordkeeping 9 hr., 19 min.

Learning about the

law or the form 2 hr., 28 min.

Preparing and sending

the form to the IRS 2 hr., 45 min.

The time needed to complete and file this form will

vary depending on individual circumstances. The

estimated average time is:

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.

Line 16

● Individuals: Form 6251, line 26.

● Corporations: Form 4626, line 13.

● Estates and trusts: Form 1041, Schedule I, line 37.

Line 22

Enter the amount of all other allowed credits that make

up the general business credit. If you are filing Form

3800, enter on line 22 the amount shown on line 18b

of Form 3800. If you are filing only a single separate

general business credit form (other than Form 6765,

Credit for Increasing Research Activities), enter on line

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

line 18 of Form 8586, Low-Income Housing Credit). If

you are filing only Form 6765, enter the credit from line

55 of that form.

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.

Although you may not owe alternative minimum tax

(AMT), you generally must still compute the tentative

minimum tax (TMT) to figure your credit. For a small

corporation exempt from the AMT under section 55(e),

enter zero. Otherwise, complete and attach the

applicable AMT form or schedule. Enter on line 16 the

TMT from the line shown below.

If you cannot use all of the credit because of the tax

liability limit (line 23 is smaller than line 10), carry the

excess credit back 1 year then forward for up to 20

years. To carry back an excess credit, file an amended

income tax return (Form 1040X, 1120X, or other

amended return) for the prior tax year or an application

for tentative refund (Form 1045, Application for

Tentative Refund, or Form 1139, Corporation

Application for Tentative Refund). If you file an

application for tentative refund, it must be filed by the

end of the tax year following the tax year in which the

credit arose.