26 U.S.C. § 3111 - U.S. Code - Unannotated Title 26. Internal Revenue Code § 3111. Rate of tax

(a) Old-age, survivors, and disability insurance. --In addition to other taxes, there is hereby imposed on every employer an excise tax, with respect to having individuals in his employ, equal to 6.2 percent of the wages (as defined in section 3121(a) ) paid by the employer with respect to employment (as defined in section 3121(b) ).

(b) Hospital insurance. --In addition to the tax imposed by the preceding subsection, there is hereby imposed on every employer an excise tax, with respect to having individuals in his employ, equal to 1.45 percent of the wages (as defined in section 3121(a) ) paid by the employer with respect to employment (as defined in section 3121(b) ).

(c) Relief from taxes in cases covered by certain international agreements. --During any period in which there is in effect an agreement entered into pursuant to section 233 of the Social Security Act with any foreign country, wages received by or paid to an individual shall be exempt from the taxes imposed by this section to the extent that such wages are subject under such agreement exclusively to the laws applicable to the social security system of such foreign country.

(d) Special exemption for certain individuals hired in 2010. --

(1) In general. --Subsection (a) shall not apply to wages paid by a qualified employer with respect to employment during the period beginning on the day after the date of the enactment of this subsection and ending on December 31, 2010, of any qualified individual for services performed--

(A)  in a trade or business of such qualified employer, or

(B)  in the case of a qualified employer exempt from tax under section 501(a) , in furtherance of the activities related to the purpose or function constituting the basis of the employer's exemption under section 501 .

(2) Qualified employer. --For purposes of this subsection--

(A) In general. --The term “qualified employer” means any employer other than the United States, any State, or any political subdivision thereof, or any instrumentality of the foregoing.

(B) Treatment of employees of post-secondary educational institutions. --Notwithstanding subparagraph (A), the term “qualified employer” includes any employer which is a public institution of higher education (as defined in section 101(b) of the Higher Education Act of 1965).

(3) Qualified individual. --For purposes of this subsection, the term “qualified individual” means any individual who--

(A)  begins employment with a qualified employer after February 3, 2010, and before January 1, 2011,

(B)  certifies by signed affidavit, under penalties of perjury, that such individual has not been employed for more than 40 hours during the 60-day period ending on the date such individual begins such employment,

(C)  is not employed by the qualified employer to replace another employee of such employer unless such other employee separated from employment voluntarily or for cause, and

(D)  is not an individual described in section 51(i)(1) (applied by substituting “qualified employer” for “taxpayer” each place it appears).

(4) Election. --A qualified employer may elect to have this subsection not apply.  Such election shall be made in such manner as the Secretary may require.

(5) Special rule for first calendar quarter of 2010. --

(A) Nonapplication of exemption during first quarter. --Paragraph (1) shall not apply with respect to wages paid during the first calendar quarter of 2010.

(B) Crediting of first quarter exemption during second quarter. --The amount by which the tax imposed under subsection (a) would (but for subparagraph (A)) have been reduced with respect to wages paid by a qualified employer during the first calendar quarter of 2010 shall be treated as a payment against the tax imposed under subsection (a) with respect to the qualified employer for the second calendar quarter of 2010 which is made on the date that such tax is due.

(e) Credit for employment of qualified veterans. --

(1) In general. --If a qualified tax-exempt organization hires a qualified veteran with respect to whom a credit would be allowable under section 38 by reason of section 51 if the organization were not a qualified tax-exempt organization, then there shall be allowed as a credit against the tax imposed by subsection (a) on wages paid with respect to employment of all employees of the organization during the applicable period an amount equal to the credit determined under section 51 (after application of the modifications under paragraph (3)) with respect to wages paid to such qualified veteran during such period.

(2) Overall limitation. --The aggregate amount allowed as a credit under this subsection for all qualified veterans for any period with respect to which tax is imposed under subsection (a) shall not exceed the amount of the tax imposed by subsection (a) on wages paid with respect to employment of all employees of the organization during such period.

(3) Modifications. --For purposes of paragraph (1), section 51 shall be applied--

(A)  by substituting “26 percent” for “40 percent” in subsection (a) thereof,

(B)  by substituting “16.25 percent” for “25 percent” in subsection (i)(3)(A) thereof, and

(C)  by only taking into account wages paid to a qualified veteran for services in furtherance of the activities related to the purpose or function constituting the basis of the organization's exemption under section 501 .

(4) Applicable period. --The term “applicable period” means, with respect to any qualified veteran, the 1-year period beginning with the day such qualified veteran begins work for the organization.

(5) Definitions. --For purposes of this subsection--

(A)  the term “qualified tax-exempt organization” means an employer that is an organization described in section 501(c) and exempt from taxation under section 501(a) , and

(B)  the term “qualified veteran” has meaning given such term by section 51(d)(3) .

(f) Credit for research expenditures of qualified small businesses.--

(1) In general.--In the case of a taxpayer who has made an election under section 41(h) for a taxable year, there shall be allowed as a credit against the tax imposed by subsection (a) for the first calendar quarter which begins after the date on which the taxpayer files the return specified in section 41(h)(4)(A)(ii) an amount equal to the payroll tax credit portion determined under section 41(h)(2) .

(2) Limitation.--The credit allowed by paragraph (1) shall not exceed the tax imposed by subsection (a) for any calendar quarter on the wages paid with respect to the employment of all individuals in the employ of the employer.

(3) Carryover of unused credit.--If the amount of the credit under paragraph (1) exceeds the limitation of paragraph (2) for any calendar quarter, such excess shall be carried to the succeeding calendar quarter and allowed as a credit under paragraph (1) for such quarter.

(4) Deduction allowed for credited amounts.--The credit allowed under paragraph (1) shall not be taken into account for purposes of determining the amount of any deduction allowed under chapter 1 for taxes imposed under subsection (a).


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