‘‘(2) DEFINITIONS.—For purposes of this sub-
section— 
‘‘(A) INCREASED
HIGH
UNEMPLOYMENT 
STATE WAGES.—The term ‘increased high un-
employment State wages’ means, with respect 
to each high unemployment State, the excess 
which would be determined under subsection (a) 
for the taxable year (after the application of 
subsections (e) and (f)) if only wages paid to 
qualified employees with respect to such State 
were taken into account. 
‘‘(B) QUALIFIED
EMPLOYEE.—The term 
‘qualified employee’ means, with respect to any 
State, any employee of an employer if— 
‘‘(i) substantially all of the services 
performed during the taxable year by such 
employee for such employer are performed 
within such State in a trade or business of 
the employer, and 
‘‘(ii) the principal place of abode of 
such employee while performing such serv-
ices is within such State. 
Rules similar to the rules of paragraphs (2) and 
(3) of section 1396(d) shall apply for purposes 
of this subparagraph. 
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‘‘(C) HIGH UNEMPLOYMENT STATE.—The 
term ‘high unemployment State’ means any 
State having an unemployment rate (using the 
most recent available data) as of the beginning 
of the taxable year for which the credit is being 
determined of at least 8.5 percent. 
‘‘(3) MAXIMUM
WAGES
TAKEN
INTO
AC-
COUNT.—The aggregate increased high unemploy-
ment State wages which may be taken into account 
with respect to all high unemployment States for 
any taxable year shall not exceed the excess deter-
mined under subsection (a) for such year. 
‘‘(c) MAXIMUM CREDIT.—The amount of the credit 
allowable under this section for any employer with respect 
to any calendar year shall not exceed $500,000. 
‘‘(d) SPECIAL RULES FOR EMPLOYERS WHICH ARE 
EXEMPT FROM INCOME TAX OR WHICH HAVE INSUFFI-
CIENT INCOME TAX LIABILITY.— 
‘‘(1) IN GENERAL.—In the case of an employer 
to which this subsection applies for any payroll pe-
riod, the payroll taxes otherwise required to be paid 
to the Secretary with respect to such payroll period 
shall be reduced (but not below zero) by such peri-
od’s proportionate share of the employer’s estimated 
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credit under subsection (a) for the taxable year 
which includes such period. 
‘‘(2) EMPLOYERS WHO WHICH SUBSECTION AP-
PLIES.—This subsection shall apply to— 
‘‘(A) any employer which is exempt from 
tax under section 501(a), and 
‘‘(B) any employer which estimates that 
the tax imposed by this subtitle for the taxable 
year will not exceed the credit allowable under 
subsection (a) for such year. 
‘‘(3) PAYROLL TAXES.—For purposes of this 
subsection, the term ‘payroll taxes’ means— 
‘‘(A) amounts required to be deducted and 
withheld for the payroll period under section 
3401 (relating to wage withholding), 
‘‘(B) amounts required to be deducted for 
the payroll period under section 3102 (relating 
to FICA employee taxes), and 
‘‘(C) amounts of the taxes imposed for the 
payroll period under section 3111 (relating to 
FICA employer taxes). 
‘‘(4) AMOUNTS
TREATED
AS
PAID
TO
SEC-
RETARY.—The amount of the reduction under para-
graph (1) shall be treated as paid to the Secretary 
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on the day such amount would be required to be so 
paid without regard to this subsection. 
‘‘(5) RECONCILIATION.— 
‘‘(A) IN GENERAL.—If there is a reduction 
under this subsection for 1 or more payroll pe-
riods ending during a taxable year, then the tax 
imposed by this chapter for such taxable year 
shall be increased by the aggregate amount of 
such reductions. 
‘‘(B) RECONCILIATION.—Any increase in 
tax under subparagraph (A) shall not be treat-
ed as tax imposed by this chapter for purposes 
of determining the amount of any credit (other 
than the credit under subsection (a)) allowable 
under this part. 
‘‘(e) MINIMUM PRECEDING YEAR WAGES.—For pur-
poses of subsection (a)— 
‘‘(1) the amount taken into account under para-
graph (1)(B) thereof shall not be less than 50 per-
cent of the amount described in paragraph (1)(A) 
thereof, and 
‘‘(2) the amount taken into account under para-
graph (2)(B) thereof shall not be less than 50 per-
cent of the amount described in paragraph (2)(A) 
thereof. 
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‘‘(f) TOTAL WAGES MUST INCREASE.—The amount 
of credit allowed under this section for any taxable year 
shall not exceed the amount which would be so allowed 
for such year (without regard to subsection (e)) if— 
‘‘(1) the aggregate amounts taken into account 
as wages were determined without any dollar limita-
tion, and 
‘‘(2) 103 percent of the amount of wages other-
wise required to be taken into account under sub-
section (a)(1)(B) or subsection (a)(2)(B), as the 
case may be, were taken into account. 
‘‘(g) WAGES; INFLATION-ADJUSTED WAGES.—For 
purposes of this section— 
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2), the term ‘wages’ has the meaning given 
to such term by section 3306(b). 
‘‘(2) RAILWAY AND AGRICULTURAL LABOR.— 
Rules similar to the rules of section 51(h) shall 
apply for purposes of this section. 
‘‘(3) INFLATION-ADJUSTED WAGES.—The term 
‘inflation-adjusted wages’ means the aggregate 
wages paid during 2010 increased by an amount 
equal to— 
‘‘(A) such aggregate wages, multiplied by 
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‘‘(B) the cost-of-living adjustment deter-
mined under section 1(f)(3) for 2010, deter-
mined by substituting ‘calendar year 2008’ for 
‘calendar year 1992’ in subparagraph (B) 
thereof. 
Any increase determined under the preceding sen-
tence shall be rounded in such manner as the Sec-
retary shall prescribe. 
‘‘(h) SPECIAL RULES.— 
‘‘(1) ADJUSTMENTS
FOR
CERTAIN
ACQUISI-
TIONS, ETC.— 
‘‘(A) ACQUISITIONS.—If, after December 
31, 2008, an employer acquires the major por-
tion of a trade or business of another person 
(hereinafter in this subparagraph referred to as 
the ‘predecessor’) or the major portion of a sep-
arate unit of a trade or business of a prede-
cessor, then, for purposes of applying this sec-
tion for any calendar year ending after such ac-
quisition, the amount of wages deemed paid by 
the employer during periods before such acqui-
sition shall be increased by so much of such 
wages paid by the predecessor with respect to 
the acquired trade or business as is attributable 
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to the portion of such trade or business ac-
quired by the employer. 
‘‘(B) DISPOSITIONS.—If, after December 
31, 2008— 
‘‘(i) an employer disposes of the major 
portion of any trade or business of the em-
ployer or the major portion of a separate 
unit of a trade or business of the employer 
in a transaction to which subparagraph 
(A) applies, and 
‘‘(ii) the employer furnishes the ac-
quiring person such information as is nec-
essary for the application of subparagraph 
(A), 
then, for purposes of applying this section for 
any calendar year ending after such disposition, 
the amount of wages deemed paid by the em-
ployer during periods before such disposition 
shall be decreased by so much of such wages as 
is attributable to such trade or business or sep-
arate unit. 
‘‘(2) CHANGE
IN
STATUS
FROM
SELF-EM-
PLOYED TO EMPLOYEE.—If— 
‘‘(A) during 2009 or 2010 an individual 
has net earnings from self-employment (as de-
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fined in section 1402(a)) which are attributable 
a trade or business, and 
‘‘(B) for any portion of the succeeding cal-
endar year such individual is an employee of 
such trade or business, 
then, for purposes of determining the credit allow-
able for a taxable year beginning in such succeeding 
calendar year, the employer’s aggregate wages for 
2009 or 2010, as the case may be, shall be increased 
by an amount equal to so much of the net earnings 
referred to in subparagraph (A) as does not exceed 
the median household income in the United States 
for 2009 or 2010, as the case may be. 
‘‘(3) CERTAIN OTHER RULES TO APPLY.—Rules 
similar to the following rules shall apply for pur-
poses of this section: 
‘‘(A) Section 51(f) (relating to remunera-
tion must be for trade or business employment). 
‘‘(B) Section 51(1)(1) (relating to related 
individuals ineligible). 
‘‘(C) Section 51(k) (relating to treatment 
of successor employers; treatment of employees 
performing services for other persons). 
‘‘(D) Section 52 (relating to special rules). 
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‘‘(4) SHORT TAXABLE YEARS.—If the employer 
has more than 1 taxable year beginning in 2010 or 
2011, the credit under this section shall be deter-
mined for the employer’s last taxable year beginning 
in 2010 or 2011, as the case may be. 
‘‘(i) TAX-EXEMPT EMPLOYERS TREATED AS TAX-
PAYERS.—Solely for purposes of this section and section 
6402, employers exempt from tax under section 501(a) 
shall be treated as taxpayers.’’. 
(b) DENIAL OF DOUBLE BENEFIT.—Subsection (a) 
of section 280C of such Code is amended by inserting 
‘‘36B(a),’’ before ‘‘45A(a)’’. 
(c) CONFORMING AMENDMENTS.— 
(1) Section 1324(b)(2) of title 31, United 
States Code, is amended by inserting ‘‘36B,’’ after 
‘‘36A,’’. 
(2) The table of sections for subpart C of part 
IV of subchapter A of chapter 1 of such Code is 
amended by inserting after the item relating to sec-
tion 36A the following new item: 
‘‘Sec. 36B. Credit for increasing employment.’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2009. 
Æ 
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