Title 26 — Internal Revenue CodeRelease 119-73
§45A Indian employment credit
Title 26 › Subtitle Subtitle A— - Income Taxes › Chapter CHAPTER 1— - NORMAL TAXES AND SURTAXES › Subchapter Subchapter A— - Determination of Tax Liability › Part PART IV— - CREDITS AGAINST TAX › Subpart Subpart D— - Business Related Credits › § 45A
Summary
Lets employers claim a tax credit equal to 20% of the extra money they spend on certain wages and employer-paid health insurance for eligible Native American workers in a year. To get the credit you compare the total qualified wages plus qualified employee health insurance costs paid in the taxable year to what the employer paid in the calendar year 1993. The credit is 20% of the amount that is higher than the 1993 total. For any one employee in a year, the wages plus health insurance counted can’t be more than $20,000. The credit does not apply to years that start after December 31, 2021. A “qualified employee” is a person who is an enrolled member of an Indian tribe (or the spouse of a member), who does most of their work on an Indian reservation and lives on or near that reservation while working. An employee stops being eligible if the employer pays them more than $30,000 in a year (that $30,000 is adjusted for later years by rules like those in section 415(d), using October 1, 1993 as the base). The credit excludes wages used for certain other credits, health insurance paid through salary-reduction plans, 5% owners, certain listed individuals, and people whose job is tribal gaming or in a gaming building. If an employee is fired within one year, the employer must lose the credit for that worker and add back prior credits, with some exceptions (voluntary quit, disability, misconduct, or continuity after certain business transfers). Employers in a controlled group share the credit in proportion to their wages. Short taxable years are prorated.
Full Legal Text
Title 26, §45A
Internal Revenue Code — Source: USLM XML via OLRC
(a)For purposes of section 38, the amount of the Indian employment credit determined under this section with respect to any employer for any taxable year is an amount equal to 20 percent of the excess (if any) of—
(1)the sum of—
(A)the qualified wages paid or incurred during such taxable year, plus
(B)qualified employee health insurance costs paid or incurred during such taxable year, over
(2)the sum of the qualified wages and qualified employee health insurance costs (determined as if this section were in effect) which were paid or incurred by the employer (or any predecessor) during calendar year 1993.
(b)For purposes of this section—
(1)(A)The term “qualified wages” means any wages paid or incurred by an employer for services performed by an employee while such employee is a qualified employee.
(B)The term “qualified wages” shall not include wages attributable to service rendered during the 1-year period beginning with the day the individual begins work for the employer if any portion of such wages is taken into account in determining the credit under section 51. If any portion of wages are taken into account under subsection (e)(1)(A) of section 51, the preceding sentence shall be applied by substituting “2-year period” for “1-year period”.
(2)(A)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 employee while such employee is a qualified employee.
(B)No amount paid or incurred for health insurance pursuant to a salary reduction arrangement shall be taken into account under subparagraph (A).
(3)The aggregate amount of qualified wages and qualified employee health insurance costs taken into account with respect to any employee for any taxable year (and for the base period under subsection (a)(2)) shall not exceed $20,000.
(c)For purposes of this section—
(1)Except as otherwise provided in this subsection, the term “qualified employee” means, with respect to any period, any employee of an employer if—
(A)the employee is an enrolled member of an Indian tribe or the spouse of an enrolled member of an Indian tribe,
(B)substantially all of the services performed during such period by such employee for such employer are performed within an Indian reservation, and
(C)the principal place of abode of such employee while performing such services is on or near the reservation in which the services are performed.
(2)An employee shall not be treated as a qualified employee for any taxable 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.
(3)The Secretary shall adjust the $30,000 amount under paragraph (2) for years beginning after 1994 at the same time and in the same manner as under section 415(d), except that the base period taken into account for purposes of such adjustment shall be the calendar quarter beginning October 1, 1993.
(4)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 determination as to whether the preceding sentence applies with respect to any employee for any taxable year shall be made without regard to subsection (e)(2).
(5)The term “qualified employee” shall not include—
(A)any individual described in subparagraph (A), (B), or (C) of section 51(i)(1),
(B)any 5-percent owner (as defined in section 416(i)(1)(B)), and
(C)any individual if the services performed by such individual for the employer involve 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 performed in a building housing such gaming activity.
(6)The term “Indian tribe” means any Indian tribe, band, nation, pueblo, or other organized group or community, including any Alaska Native village, or regional or village corporation, as defined in, or established pursuant 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)The term “Indian reservation” has the meaning given such term by section 168(j)(6).
(d)(1)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 employee shall be taken into account under subsection (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 terminated 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)In the case of any termination of employment to which paragraph (1) applies, the carrybacks and carryovers under section 39 shall be properly adjusted.
(3)(A)Paragraph (1) shall not apply to—
(i)a termination of employment of an employee who voluntarily leaves the employment of the taxpayer,
(ii)a termination of employment of an individual who before the close of the period referred to in paragraph (1) becomes 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 reemployment to such individual, or
(iii)a termination of employment of an individual if it is determined under the applicable State unemployment compensation law that the termination was due to the misconduct of such individual.
(B)For purposes of paragraph (1), the employment relationship between the taxpayer and an employee 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 business of the taxpayer if the employee continues to be employed in such trade or business and the taxpayer retains a substantial interest in such trade or business.
(4)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)For purposes of this section—
(1)The term “wages” has the same meaning given to such term in section 51.
(2)(A)All employers treated as a single employer under section (a) or (b) of section 52 shall be treated as a single employer for purposes 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)Rules similar to the rules of section 51(k) and subsections (c), (d), and (e) of section 52 shall apply.
(4)Any reference in this section to a provision not contained in this title shall be treated for purposes of this section as a reference to such provision as in effect on the date of the enactment of this paragraph.
(5)For any taxable year having less than 12 months, the amount determined under subsection (a)(2) 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)This section shall not apply to taxable years beginning after December 31, 2021.
Legislative History
Notes & Related Subsidiaries
Inflation Adjusted Items for Certain YearsFor inflation adjustment of certain items in this section, see Internal Revenue Notices listed in a table under section 401 of this title.
Editorial Notes
References in Text
The Alaska Native Claims Settlement Act, referred to in subsec. (c)(6), is Pub. L. 92–203, Dec. 18, 1971, 85 Stat. 688, which is classified generally to chapter 33 (§ 1601 et seq.) of Title 43, Public Lands. For complete classification of this Act to the Code, see
Short Title
note set out under section 1601 of Title 43 and Tables. The date of the enactment of this paragraph, referred to in subsec. (e)(4), is the date of enactment of Pub. L. 103–66, which was approved Aug. 10, 1993.
Amendments
2020—Subsec. (f). Pub. L. 116–260 substituted “
December 31, 2021” for “
December 31, 2020”. 2019—Subsec. (f). Pub. L. 116–94 substituted “
December 31, 2020” for “
December 31, 2017”. 2018—Subsec. (f). Pub. L. 115–123 substituted “
December 31, 2017” for “
December 31, 2016”. 2015—Subsec. (f). Pub. L. 114–113 substituted “
December 31, 2016” for “
December 31, 2014”. 2014—Subsec. (b)(1)(B). Pub. L. 113–295, § 216(a), inserted at end “If any portion of wages are taken into account under subsection (e)(1)(A) of section 51, the preceding sentence shall be applied by substituting ‘2-year period’ for ‘1-year period’.” Subsec. (f). Pub. L. 113–295, § 114(a), substituted “
December 31, 2014” for “
December 31, 2013”. 2013—Subsec. (f). Pub. L. 112–240 substituted “
December 31, 2013” for “
December 31, 2011”. 2010—Subsec. (f). Pub. L. 111–312 substituted “
December 31, 2011” for “
December 31, 2009”. 2008—Subsec. (f). Pub. L. 110–343 substituted “
December 31, 2009” for “
December 31, 2007”. 2006—Subsec. (f). Pub. L. 109–432 substituted “2007” for “2005”. 2004—Subsec. (c)(3). Pub. L. 108–311, § 404(b)(1), inserted “, except that the base period taken into account for purposes of such adjustment shall be the calendar quarter beginning
October 1, 1993” before period at end. Subsec. (f). Pub. L. 108–311, § 315, substituted “
December 31, 2005” for “
December 31, 2004”. 2002—Subsec. (f). Pub. L. 107–147 substituted “
December 31, 2004” for “
December 31, 2003”. 1998—Subsec. (b)(1)(B). Pub. L. 105–206 substituted “work opportunity credit” for “targeted jobs credit” in heading. 1996—Subsec. (b)(1)(B). Pub. L. 104–188, which directed that subsec. (b)(1)(B) of this section be amended in the text by substituting “work opportunity credit” for “targeted jobs credit”, could not be executed because the words “targeted jobs credit” did not appear in the text.
Statutory Notes and Related Subsidiaries
Effective Date
of 2020 Amendment Pub. L. 116–260, div. EE, title I, § 135(b), Dec. 27, 2020, 134 Stat. 3053, provided that: “The amendment made by this section [amending this section] shall apply to taxable years beginning after December 31, 2020.”
Effective Date
of 2019 Amendment Pub. L. 116–94, div. Q, title I, § 111(b), Dec. 20, 2019, 133 Stat. 3228, provided that: “The amendment made by this section [amending this section] shall apply to taxable years beginning after December 31, 2017.”
Effective Date
of 2018 Amendment Pub. L. 115–123, div. D, title I, § 40301(b), Feb. 9, 2018, 132 Stat. 145, provided that: “The amendment made by this section [amending this section] shall apply to taxable years beginning after December 31, 2016.”
Effective Date
of 2015 Amendment Pub. L. 114–113, div. Q, title I, § 161(b), Dec. 18, 2015, 129 Stat. 3066, provided that: “The amendment made by this section [amending this section] shall apply to taxable years beginning after December 31, 2014.”
Effective Date
of 2014 Amendment Pub. L. 113–295, div. A, title I, § 114(b), Dec. 19, 2014, 128 Stat. 4014, provided that: “The amendment made by this section [amending this section] shall apply to taxable years beginning after December 31, 2013.” Pub. L. 113–295, div. A, title II, § 216(b), Dec. 19, 2014, 128 Stat. 4034, provided that: “The amendment made by this section [amending this section] shall take effect as if included in the provision of the Tax Relief and Health Care Act of 2006 [Pub. L. 109–432] to which it relates.”
Effective Date
of 2013 Amendment Pub. L. 112–240, title III, § 304(b), Jan. 2, 2013, 126 Stat. 2329, provided that: “The amendment made by this section [amending this section] shall apply to taxable years beginning after December 31, 2011.”
Effective Date
of 2010 Amendment Pub. L. 111–312, title VII, § 732(b), Dec. 17, 2010, 124 Stat. 3317, provided that: “The amendment made by this section [amending this section] shall apply to taxable years beginning after December 31, 2009.”
Effective Date
of 2008 Amendment Pub. L. 110–343, div. C, title III, § 314(b), Oct. 3, 2008, 122 Stat. 3872, provided that: “The amendment made by this section [amending this section] shall apply to taxable years beginning after December 31, 2007.”
Effective Date
of 2006 Amendment Pub. L. 109–432, div. A, title I, § 111(b), Dec. 20, 2006, 120 Stat. 2940, provided that: “The amendment made by this section [amending this section] shall apply to taxable years beginning after December 31, 2005.”
Effective Date
of 2004 Amendment Pub. L. 108–311, title IV, § 404(f), Oct. 4, 2004, 118 Stat. 1188, provided that: “The
Amendments
made by this section [amending this section and section 403, 408, 415, 530, and 4972 of this title] shall take effect as if included in the provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 [Pub. L. 107–16] to which they relate.”
Effective Date
of 1996 AmendmentAmendment by Pub. L. 104–188 applicable to individuals who begin work for the employer after Sept. 30, 1996, see section 1201(g) of Pub. L. 104–188, set out as a note under section 38 of this title.
Effective Date
Section applicable to wages paid or incurred after Dec. 31, 1993, see section 13322(f) of Pub. L. 103–66, set out as an
Effective Date
of 1993 Amendment note under section 38 of this title.
Reference
Citations & Metadata
Citation
26 U.S.C. § 45A
Title 26 — Internal Revenue Code
Last Updated
Apr 6, 2026
Release point: 119-73