‘‘(A) IN
GENERAL.—The term ‘qualified
small 
business 
employee’ 
means 
any
individual—
‘‘(i) hired by a qualified small busi-
ness located in a development zone, or
‘‘(ii) hired by a qualified small busi-
ness and who is certified by the designated
local agency as residing in such a develop-
ment zone.
‘‘(B) QUALIFIED SMALL BUSINESS.—The
term ‘qualified small business’ has the meaning
given the term ‘small employer’ by section
4980D(d)(2).
‘‘(C) DEVELOPMENT ZONE.—For purposes
of this section—
‘‘(i) IN GENERAL.—The term ‘devel-
opment zone’ means any area—
‘‘(I) which is nominated under
the procedures defined in sections
1400E(a)(1)(A) and 1400E(a)(4) for
renewal communities;
‘‘(II) which the Secretary of
Housing and Urban Development des-
ignates as a development zone, after
consultation with the Secretary of
Commerce;
‘‘(III) which has a population of
not less than 5,000 and not more
than 150,000;
‘‘(IV) which has a poverty rate
not less than 20 percent (within the
meaning of section 1400E(c)(3)(C));
‘‘(V) which has an average rate
of job growth of less than 1 percent
during the preceding 5-year period;
and
‘‘(VI) which, during the period
beginning January 1, 1990 and end-
ing with the date of the enactment of
this Act, has a net out-migration of
inhabitants, or other population loss,
from the area of at least 3 percent of
the population of the area during such
period.
‘‘(ii) NUMBER
OF
DESIGNATIONS.—
The Secretary of Housing and Urban De-
velopment may not designate more than
100 development zones.
‘‘(D) SPECIAL RULES FOR DETERMINING
AMOUNT OF CREDIT.—For purposes of applying
this subpart to wages paid or incurred to any
qualified small business employee—
‘‘(i) subsection (a) shall be applied by
substituting ‘‘20 percent of the qualified
first, second, third, fourth, or fifth year
wages’’ for ‘‘40 percent of the qualified
first year wages’’, and
‘‘(ii) in lieu of paragraphs (2) and (3)
of subsection (b), the following definitions
and special rule shall apply:
‘‘(I) 
QUALIFIED
FIRST-YEAR
WAGES.—The term ‘qualified first-
year wages’ means, with respect to
any individual, qualified wages attrib-
utable to service rendered during the
1-year period beginning with the day
the individual begins work for the em-
ployer.
‘‘(II) QUALIFIED
SECOND-YEAR
WAGES.—The term ‘qualified second-
year wages’ means, with respect to
any individual, qualified wages attrib-
utable to service rendered during the
1-year period beginning on the day
after the last day of the 1-year period
with respect to such individual deter-
mined under subclause (I).
‘‘(III) QUALIFIED
THIRD-YEAR
WAGES.—The term ‘qualified third-
year wages’ means, with respect to
any individual, qualified wages attrib-
utable to service rendered during the
1-year period beginning on the day
after the last day of the 1-year period
with respect to such individual deter-
mined under subclause (II).
‘‘(IV) QUALIFIED FOURTH-YEAR
WAGES.—The term ‘qualified fourth-
year wages’ means, with respect to
any individual, qualified wages attrib-
utable to service rendered during the
1-year period beginning on the day
after the last day of the 1-year period
with respect to such individual deter-
mined under subclause (III).
‘‘(V) 
QUALIFIED
FIFTH-YEAR
WAGES.—The term ‘qualified fifth-
year wages’ means, with respect to