dered during the 1-year period beginning with
the day the individual begins work for the em-
ployer if any portion of such wages is taken
into account in determining the credit under
section 51.
‘‘(2) QUALIFIED
EMPLOYEE
HEALTH
INSUR-
ANCE COSTS.—
‘‘(A) IN
GENERAL.—The term ‘qualified
employee health insurance costs’ means any
amount paid or incurred by an employer for
health insurance to the extent such amount is
attributable to coverage provided to any em-
ployee while such employee is a qualified em-
ployee.
‘‘(B) EXCEPTION
FOR
AMOUNTS
PAID
UNDER SALARY REDUCTION ARRANGEMENTS.—
No amount paid or incurred for health insur-
ance pursuant to a salary reduction arrange-
ment shall be taken into account under sub-
paragraph (A).
‘‘(c) QUALIFIED EMPLOYEE.—For purposes of this
section—
‘‘(1) IN GENERAL.—Except as otherwise pro-
vided in this subsection, the term ‘qualified em-
ployee’ means, with respect to any period, any em-
ployee of an employer if—
‘‘(A) substantially all of the services per-
formed during such period by such employee for
such employer are performed within an Indian
reservation,
‘‘(B) the principal place of abode of such
employee while performing such services is on
or near the reservation in which the services are
performed, and
‘‘(C) the employee began work for such
employer on or after January 1, 1994.
‘‘(2) CREDIT
ALLOWED
ONLY
FOR
FIRST
YEARS.—An employee shall not be treated as a
qualified employee for any period after the date 7
years after the day on which such employee first
began work for the employer.
‘‘(3) INDIVIDUALS
RECEIVING
WAGES
IN
EX-
CESS OF $30,000 NOT ELIGIBLE.—An employee shall
not be treated as a qualified employee for any tax-
able year of the employer if the total amount of the
wages paid or incurred by such employer to such
employee during such taxable year (whether or not
for services within an Indian reservation) exceeds
the amount determined at an annual rate of
$30,000. The Secretary shall adjust the $30,000
amount contained in the preceding sentence for
years beginning after 1993 at the same time and in
the same manner as under section 415(d).
‘‘(4) EMPLOYMENT MUST BE TRADE OR BUSI-
NESS EMPLOYMENT.—An employee shall be treated
as a qualified employee for any taxable year of the
employer only if more than 50 percent of the wages
paid or incurred by the employer to such employee
during such taxable year are for services performed
in a trade or business of the employer. Any deter-
mination as to whether the preceding sentence ap-
plies with respect to any employee for any taxable
year shall be made without regard to subsection
(f)(2).
‘‘(5) CERTAIN
EMPLOYEES
NOT
ELIGIBLE.—
The term ‘qualified employee’ shall not include—
‘‘(A) any individual described in subpara-
graph (A), (B), or (C) of section 51(i)(1),
‘‘(B) any 5-percent owner (as defined in
section 416(i)(1)(B)),
‘‘(C) any individual who is neither an en-
rolled member of an Indian tribe nor the spouse
of an enrolled member of an Indian tribe, and
‘‘(D) any individual if the services per-
formed by such individual for the employer in-
volve the conduct of class I, II, or III gaming
as defined in section 4 of the Indian Gaming
Regulatory Act (25 U.S.C. 2703), or are per-
formed in a building housing such gaming
activity.
‘‘(6) INDIAN TRIBE DEFINED.—The term ‘In-
dian tribe’ means any Indian tribe, band, nation,
pueblo, or other organized group or community, in-
cluding any Alaska Native village, or regional or vil-
lage corporation, as defined in, or established pursu-
ant to, the Alaska Native Claims Settlement Act (43
U.S.C. 1601 et seq.) which is recognized as eligible
for the special programs and services provided by
the United States to Indians because of their status
as Indians.
‘‘(7) INDIAN
RESERVATION
DEFINED.—The
term ‘Indian reservation’ means a reservation, as de-
fined in—
‘‘(A) section 3(d) of the Indian Financing
Act of 1974 (25 U.S.C. 1452(d)), or
‘‘(B) section 4(10) of the Indian Child
Welfare Act of 1978 (25 U.S.C. 1903 (10)).
‘‘(d) EARLY TERMINATION OF EMPLOYMENT BY EM-
PLOYER.—
‘‘(1) IN GENERAL.—If the employment of any
employee is terminated by the taxpayer before the
day 1 year after the day on which such employee
began work for the employer—
‘‘(A) no wages (or qualified employee
health insurance costs) with respect to such em-
ployee shall be taken into account under sub-
section (a) for the taxable year in which such
employment is terminated, and
‘‘(B) the tax under this chapter for the
taxable year in which such employment is ter-
minated shall be increased by the aggregate
credits (if any) allowed under section 38(a) for
prior taxable years by reason of wages (or
qualified employee health insurance costs) taken
into account with respect to such employee.
‘‘(2) 
CARRYBACKS
AND
CARRYOVERS
AD-
JUSTED.—In the case of any termination of employ-
ment to which paragraph (1) applies, the carrybacks
and carryovers under section 39 shall be properly
adjusted.
‘‘(3) SUBSECTION NOT TO APPLY IN CERTAIN
CASES.—
‘‘(A) IN
GENERAL.—Paragraph (1) shall
not apply to—
‘‘(i) a termination of employment of
an employee who voluntarily leaves the em-
ployment of the taxpayer,
‘‘(ii) a termination of employment of
an individual who before the close of the
period referred to in paragraph (1) be-
comes disabled to perform the services of
such employment unless such disability is
removed before the close of such period
and the taxpayer fails to offer reemploy-
ment to such individual, or
‘‘(iii) a termination of employment of
an individual if it is determined under the
applicable State unemployment compensa-
tion law that the termination was due to
the misconduct of such individual.
‘‘(B) CHANGES IN FORM OF BUSINESS.—
For purposes of paragraph (1), the employment
relationship between the taxpayer and an em-
ployee shall not be treated as terminated—
‘‘(i) by a transaction to which section
381(a) applies if the employee continues to
be employed by the acquiring corporation,
or
‘‘(ii) by reason of a mere change in
the form of conducting the trade or busi-
ness of the taxpayer if the employee con-
tinues to be employed in such trade or
business and the taxpayer retains a sub-
stantial interest in such trade or business.
‘‘(4) SPECIAL
RULE.—Any increase in tax
under paragraph (1) shall not be treated as a tax
imposed by this chapter for purposes of—
‘‘(A) determining the amount of any credit
allowable under this chapter, and
‘‘(B) determining the amount of the tax
imposed by section 55.
‘‘(e) CREDIT LIMITATION AMOUNT.—For purposes of
this section—
‘‘(1) CREDIT LIMITATION AMOUNT.—The credit
limitation amount for a taxable year shall be an
amount equal to the credit rate (10 or 30 percent
as determined under subsection (a)) multiplied by
the increased credit base.
‘‘(2) INCREASED CREDIT BASE.—The increased
credit base for a taxable year shall be the excess
of—
‘‘(A) the sum of any qualified wages and
qualified employee health insurance costs paid
or incurred by the employer during the taxable
year with respect to employees whose wages
(paid or incurred by the employer) during the
taxable year do not exceed the amount deter-
mined under paragraph (3) of subsection (c),
over
‘‘(B) the sum of any qualified wages and
qualified employee health insurance costs paid
or incurred by the employer (or any prede-
cessor) during calendar year 1993 with respect
to employees whose wages (paid or incurred by
the employer or any predecessor) during 1993
did not exceed $30,000.
‘‘(3) SPECIAL
RULE
FOR
SHORT
TAXABLE
YEARS.—For any taxable year having less than 12
months—
‘‘(A) the amounts paid or incurred by the
employer shall be annualized for purposes of de-
termining the increased credit base, and
‘‘(B) the credit limitation amount shall be
multiplied by a fraction, the numerator of which
is the number of days in the taxable year and
the denominator of which is 365.
‘‘(f) OTHER DEFINITIONS AND SPECIAL RULES.—
For purposes of this section—
‘‘(1) WAGES.—The term ‘wages’ has the same
meaning given to such term in section 51.
‘‘(2) CONTROLLED GROUPS.—
‘‘(A) All employers treated as a single em-
ployer under section (a) or (b) of section 52
shall be treated as a single employer for pur-
poses of this section.
‘‘(B) The credit (if any) determined under
this section with respect to each such employer
shall be its proportionate share of the wages
and qualified employee health insurance costs
giving rise to such credit.
‘‘(3) CERTAIN OTHER RULES MADE APPLICA-
BLE.—Rules similar to the rules of section 51(k)
and subsections (c), (d), and (e) of section 52 shall
apply.
‘‘(4) 
COORDINATION
WITH
NONREVENUE
LAWS.—Any reference in this section to a provision
not contained in this title shall be treated for pur-
poses of this section as a reference to such provision
as in effect on the date of the enactment of this
paragraph.’’.
(c) DENIAL OF DEDUCTION FOR PORTION OF WAGES
EQUAL TO INDIAN EMPLOYMENT CREDIT.—
(1) Subsection (a) of section 280C of such Code
(relating to rule for targeted jobs credit) is amended
by striking ‘‘51(a)’’ and inserting ‘‘45A(a), 51(a),
and’’.
(2) Subsection (c) of section 196 of such Code
(relating to deduction for certain unused business
credits) is amended by striking ‘‘and’’ at the end of
paragraph (5), by striking the period at the end of
paragraph (6) and inserting ‘‘, and’’, and by adding
at the end the following new paragraph:
‘‘(7) the Indian employment credit determined
under section 45A(a).’’.
(d) DENIAL OF CARRYBACKS TO PREENACTMENT
YEARS.—Subsection (d) of section 39 of such Code is
amended by adding at the end thereof the following new
paragraph:
‘‘(4) NO CARRYBACK OF SECTION 45A CREDIT
BEFORE
ENACTMENT.—No portion of the unused
business credit for any taxable year which is attrib-
utable to the Indian employment credit determined
under section 45A may be carried to a taxable year
ending before the date of the enactment of section
45A.’’.
(e) CLERICAL AMENDMENT.—The table of sections
for subpart D of part IV of subchapter A of chapter 1
of such Code is amended by adding at the end thereof
the following:
‘‘Sec. 45A. Indian employment credit.’’.
(f) EFFECTIVE DATE.—The amendments made by
this section shall apply to wages paid or incurred after
December 31, 1993.
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HR 1325 IH——2