PRIA, Government Policy, Made Personal

§1397 Other Definitions and Special Rules

Title 26 › Subtitle A — Income Taxes › CHAPTER 1 — NORMAL TAXES AND SURTAXES › Subchapter U — Designation and Treatment of Empowerment Zones, Enterprise Communities, and Rural Development Investment Areas › PART III — ADDITIONAL INCENTIVES FOR EMPOWERMENT ZONES › Subpart A — Empowerment Zone Employment Credit › § 1397

Last updated Sep 22, 2026|Official source

Summary

Treats certain payments as wages for these tax rules. "Wages" mean the same thing as in the regular wage rules. Employer payments that are normally tax-free under school tuition assistance rules count as wages if the money goes to someone not related to the employer. Also, payments for youth training run by the employer with local schools count as wages for employees under 19. A person is "related" if they meet specific family or ownership tests or if businesses are under common control. When using those tests here, use 10 percent instead of 50 percent. Employers that are treated as one company under common-control rules are one employer here, and any credit is split by each employer’s share of the wages. Rules like other tax-code provisions about aggregation and allocation also apply.

Title 26, §1397

Internal Revenue Code, Source: USLM XML via OLRC

(a)Wages

For purposes of this subpart—

(1)In general

The term “wages” has the same meaning as when used in section 51.

(2)Certain training and educational benefits

(A)In general

The following amounts shall be treated as wages paid to an employee:

(i)Any amount paid or incurred by an employer which is excludable from the gross income of an employee under section 127, but only to the extent paid or incurred to a person not related to the employer.

(ii)In the case of an employee who has not attained the age of 19, any amount paid or incurred by an employer for any youth training program operated by such employer in conjunction with local education officials.

(B)Related person

A person is related to any other person if the person bears a relationship to such other person specified in section 267(b) or 707(b)(1), or such person and such other person are engaged in trades or businesses under common control (within the meaning of subsections (a) and (b) of section 52). For purposes of the preceding sentence, in applying section 267(b) or 707(b)(1), “10 percent” shall be substituted for “50 percent”.

(b)Controlled groups

For purposes of this subpart—

(1)all employers treated as a single employer under subsection (a) or (b) of section 52 shall be treated as a single employer for purposes of this subpart, and

(2)the credit (if any) determined under section 1396 with respect to each such employer shall be its proportionate share of the wages giving rise to such credit.

(c)Certain other rules made applicable

For purposes of this subpart, rules similar to the rules of section 51(k) and subsections (c), (d), and (e) of section 52 shall apply.

Notes & Related Subsidiaries

Editorial Notes

Prior Provisions

A prior section 1397, added Pub. L. 95–600, title VI, § 601(a), Nov. 6, 1978, 92 Stat. 2895, related to special rules applicable to an electing general stock ownership corporation, prior to repeal by Pub. L. 99–514, title XIII, § 1303(a), Oct. 22, 1986, 100 Stat. 2658.