26 U.S.C. § 45A — Indian employment credit

(a) Amount of credit Employers get a tax credit equal to 20% of an increase. Start with what you paid in qualified wages plus qualified employee health insurance costs for Indian employees this year. Subtract what you (or a business you took over) paid in those same categories back in 1993, calculated as if this credit had existed then. Multiply the difference by 20% — that's your credit. (b) Qualified wages; qualified employee health insurance costs (1) Qualified wages: Wages you pay a "qualified employee" for their work. But wages you already counted toward the Work Opportunity Credit (section 51) don't count here — normally for the employee's first year on the job, or the first two years if any part of their pay was counted under a specific part of that other credit. (2) Qualified employee health insurance costs: Money you spend on health insurance covering a qualified employee counts, except money that came out of the employee's own pay through a salary-reduction arrangement does not count. (3) Limitation: For any one employee, you can count at most $20,000 total of wages plus health insurance costs per year — and the same $20,000 cap applies when figuring the 1993 base-year comparison amount. (c) Qualified employee (1) In general: A "qualified employee" is someone who is an enrolled member of an Indian tribe (or married to one), who does substantially all of their work for you on an Indian reservation, and whose home is on or near that reservation while they're doing that work. (2) Individuals receiving wages in excess of $30,000 not eligible: If you pay an employee more than $30,000 a year in total wages (counting all their pay, not just their reservation work), that employee is not a qualified employee for that year. (3) Inflation adjustment: The Secretary must raise the $30,000 cap each year after 1994, the same way section 415(d) adjusts retirement plan limits, using the calendar quarter starting October 1, 1993 as the base period. (4) Employment must be trade or business employment: An employee only counts as qualified for a year if more than half of what you paid them that year was for work in your actual trade or business. (5) Certain employees not eligible: These people never count as qualified employees: certain relatives and owners already excluded from the Work Opportunity Credit under section 51(i)(1)(A)-(C); anyone who owns 5% or more of the business (as defined in section 416(i)(1)(B)); and anyone whose job involves running, or is performed inside a building housing, class I, II, or III gambling under the Indian Gaming Regulatory Act. (6) Indian tribe defined: Any tribe, band, nation, pueblo, or other organized Indian group or community — including an Alaska Native village or regional/village corporation under the Alaska Native Claims Settlement Act — that is recognized as eligible for special federal Indian programs and services. (7) Indian reservation defined: Has the meaning given in section 168(j)(6). (d) Early termination of employment by employer (1) In general: If you fire a qualified employee before they've worked a full year for you, two things happen: you can't count that employee's wages or health costs for the year you fired them, and the tax you owe for that year goes up by the total credit you claimed for that employee in earlier years. (2) Carrybacks and carryovers adjusted: If this payback happens, any credit amounts you'd carried back or forward to other tax years must be corrected to match. (3) Subsection not to apply in certain cases: You don't owe this payback if: the employee quit voluntarily; the employee became disabled and either that disability ended before the year was up and you failed to offer them their job back, or the disability continued; or a state unemployment agency ruled the firing was due to the employee's own misconduct. Also, a change in the legal form of your business is not treated as "firing" someone if they keep working in that trade or business under the new entity, and you keep a real ownership stake in it. (4) Special rule: The extra tax owed under this payback rule is not treated as a regular tax when figuring the amount of any other credit, or when figuring the alternative minimum tax under section 55. (e) Other definitions and special rules (1) Wages: Has the same meaning as in section 51. (2) Controlled groups: Businesses treated as a single employer under the related-business rules (section 52(a) or (b)) are combined into one employer for this credit too, and each business's own credit is its proportional share of the combined qualified wages and health costs. (3) Certain other rules made applicable: Rules similar to section 51(k) and section 52(c), (d), and (e) apply here as well. (4) Coordination with nonrevenue laws: If this section refers to a law outside the tax code, that reference is fixed to how that law read on the date this paragraph was enacted. (5) Special rule for short taxable years: If your tax year is shorter than 12 months, your 1993 base-year comparison amount is scaled down — multiplied by a fraction: the number of days in your short tax year, divided by 365. (f) Termination This section does not apply to tax years beginning after December 31, 2021.