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 after December 20, 1994, and before January 1,

1995 (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 13d, 13e, 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 Limitation Based on Amount of Tax

7

10 b

c

8

a 11a

b 11b

c 11c

d 11d

e 11e

11f f

g 11g

h

j

12

a

b

c

13

15

14

17

15

16

18

Part I

Part II

%

%

%

%

Cat. No. 16145S

11h

i

3

4

3

4

13

14

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 1994 (see instructions)

Carryback of EZE credit to 1994 (see instructions)

Tentative EZE credit. Add lines 6 through 8. (S corporations, partnerships, estates, trusts, and

cooperatives, see instructions.)

Individuals. Enter amount from Form 1040, line 40

9

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

Credits that reduce regular tax before the EZE credit:

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

Credit for the elderly or the disabled (Sch. R (Form 1040), line 21)

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)

Orphan drug credit (Form 6765, line 10)

Credit for fuel from a nonconventional source

Qualified electric vehicle credit (Form 8834, line 19)

General business credit (see instructions)

Add lines 11a through 11i

Net regular tax. Subtract line 11j from line 10

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 H, line 37

Multiply line 13 by 75% (.75)

Net income tax:

Individuals. Add line 12 above and line 28 of Form 6251

Corporations. Add line 12 above and line 15 of Form 4626. Reduce the total by

any credit on Form 3800, line 34

Estates and trusts. Add line 12 above and line 39 of Form 1041, Schedule H

If line 12 is more than $25,000, enter 25% (.25) of the excess (see instructions)

Subtract line 14 or line 16, whichever is greater, from line 15. If less than zero, enter -0-

EZE credit allowed for the current year. Enter the smaller of line 9 or line 17. Complete lines 19

and 20 to determine how the credit is claimed on your tax return

10a

11

a

b

c

17

18

9

8

7

11i

11j

16

12

Form 8844 (1994)

19

Credit allowed against regular tax. Enter the smaller of line 18 or line 12 here and on Form 1040,

line 44; Form 1120, Schedule J, line 4e; Form 1120-A, Part I, line 2a; Form 1041, Schedule G, line

2c; or the appropriate line of your income tax return

19

20

Credit allowed against alternative minimum tax. If line 18 is greater than line 19, enter the excess

here (see instructions)

20

For Paperwork Reduction Act Notice, see page 3.
Form 8844 (1994) Page 3

● For an employee under age 19,

amounts paid or incurred by the

employer for a youth training program

operated by such employer in

conjunction with local education officials.

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

The following are not qualified zone

employees:

● Any relative of the employer described

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

a dependent of the employer described

in section 152(a)(9).

● If the employer is a corporation, any

individual who bears any of the

relationships described in section

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

dependent described in 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 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 on page 4.

● 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.

● Amounts paid or incurred by the

employer that are excludable from the

employee’s gross income as educational

assistance payments under section 127,

but only to the extent paid or incurred to

a person not related to the employer

under section 267(b) or 707(b)(1)

(substituting “10 percent” where “50

percent” appears in these sections), and

the employer and such other person are

not engaged in trades or businesses

under common control (within the

meaning of subsections (a) and (b) of

section 52).

Although the empowerment zone

employment (EZE) credit is a component

of the general business credit, section

38 provides a special tax liability

limitation for 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 next definition). Wages

have the same meaning as given in

section 51, 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 jobs 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

jobs credit for that employee.

In addition, the following amounts are

treated as wages paid to an 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: (a)

Atlanta, GA (9.29 square miles); (b)

Baltimore, MD (6.8 square miles); (c)

Chicago, IL (14.33 square miles); (d)

Detroit, MI (18.3 square miles); (e) New

York, NY (Manhattan and the Bronx) (7.6

square miles); and (f) 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.

General Instructions

Section references are to the Internal

Revenue Code.

Purpose of Form

The Revenue Reconciliation Act of 1993

amended section 38 and added new

sections 1396 and 1397 to allow an

income tax credit for qualified wages

and certain training and educational

expenses paid or incurred on behalf of

qualified zone employees. Use Form

8844 to figure the credit.

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 both the IRS and

the Office of Management and Budget

at the addresses listed in the

instructions for the tax return with which

this form is filed.

Recordkeeping 7 hr., 39 min.

Learning about the

law or the form 1 hr., 47 min.

Preparing and sending

the form to the IRS 1 hr., 59 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.

The Secretary of Agriculture (USDA)

designated the following rural

empowerment zones, which include

portions of the counties listed: (a)

Kentucky Highlands (Counties of Clinton,

Jackson, and Wayne), KY; (b) Mid-Delta

(Counties of Bolivar, Sunflower, Leflore,

Washington, Humphreys, and Holmes),

MS; and (c) 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.

These designations were made on

December 21, 1994. Each designation

remains in effect from December 21,

1994, 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.

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.

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 total of the unadjusted

bases (or, if larger, the fair market value)

of the assets owned or leased by the

employer and used in farming exceeds

$500,000.
Form 8844 (1994) Page 4

● The employee becomes disabled

before the 90th day. However, if the

disability ends before the end of the tax

year, the employer must offer

reemployment to the former employee.

An employee is not treated as

terminated if the corporate employer is

acquired by another corporation covered

under the rules in 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 jobs 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 limitation. 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 1994 EZE credit from

Form 8582-CR or Form 8810. See the

instructions for the applicable form for

details.

Line 8.—Use only if you amend your

1994 return to carryback unused EZE

credits from future tax years.

Line 9.—Flow-through entities allocate

the credit as follows:

Estates and trusts.—The line 9 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 9,

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 it has tax liability. Any excess is

shared among its patrons.

Line 11.—The credits listed in lines 11a

through line 11i 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 11i the credit from

line 15 of Form 3800. If you had only a

single separate general business credit

form, enter on line 11i the credit from

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

15 of Form 8586, Low-Income Housing

Credit).

Line 13.—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 16.—See section 38(c)(3) for

special rules for married couples filing

separate returns; controlled corporate

groups; mutual savings institutions,

regulated investment companies, and

real estate investment trusts; and

estates and trusts.

If you cannot use part of the credit

because of the tax liability limitation (line

18 is smaller than line 9), carry it forward

for 15 years. No carryback is allowed to

any year before 1994.

S corporations and partnerships.—

Allocate the line 9 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 18.—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 19 and 20.

Line 20.—Reduce the amount of AMT

that you figured on Form 6251, Form

4626, or Form 1041, Schedule H, by the

line 20 amount and enter the reduced

AMT amount on your income tax return

(Form 1040, line 48; Form 1120,

Schedule J, line 9a; 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 20

dollar amount.

Printed on recycled paper

Note: For 1994, use only amounts paid

or incurred from December 21 through

December 31 for services rendered after

December 20. For other details, see

Qualified zone wages and Qualified

zone employee on page 3.

● The employee is terminated because

of misconduct.