26 U.S.C. § 45D — New markets tax credit

Page 269 TITLE 26—INTERNAL REVENUE CODE § 45D Amendment by section 1275(c)(4) of Pub. L. 99–514 ap- plicable to taxable years beginning after Dec. 31, 1986, with certain exceptions and qualifications, see section 1277 of Pub. L. 99–514, set out as a note under section 931 of this title. Pub. L. 99–514, title XVIII, § 1879(b)(3), Oct. 22, 1986, 100 Stat. 2906, provided that: ‘‘The amendments made by this subsection [amending this section] shall apply to amounts paid or incurred after December 31, 1982, in taxable years ending after such date.’’ EFFECTIVE DATE OF 1984 AMENDMENT Amendment by section 474(g) of Pub. L. 98–369 appli- cable to taxable years beginning after Dec. 31, 1983, and to carrybacks from such years, see section 475(a) of Pub. L. 98–369, set out as a note under section 21 of this title. Amendment by section 612(e)(1) of Pub. L. 98–369, ap- plicable to interest paid or accrued after December 31, 1984, on indebtedness incurred after December 31, 1984, see section 612(g) of Pub. L. 98–369, set out as an Effec- tive Date note under section 25 of this title. EFFECTIVE DATE Pub. L. 97–414, § 4(d), Jan. 4, 1983, 96 Stat. 2056, pro- vided that: ‘‘The amendments made by this section [en- acting this section and amending sections 280C and 6096 of this title] shall apply to amounts paid or incurred after December 31, 1982, in taxable years ending after such date.’’ SAVINGS PROVISION For provisions that nothing in amendment by section 401(d)(1)(D)(iii) of Pub. L. 115–141 be construed to affect treatment of certain transactions occurring, property acquired, or items of income, loss, deduction, or credit taken into account prior to Mar. 23, 2018, for purposes of determining liability for tax for periods ending after Mar. 23, 2018, see section 401(e) of Pub. L. 115–141, set out as a note under section 23 of this title. APPLICABILITY OF CERTAIN AMENDMENTS BY PUBLIC LAW 99–514 IN RELATION TO TREATY OBLIGATIONS OF UNITED STATES For applicability of amendment by section 701(c)(2) of Pub. L. 99–514 notwithstanding any treaty obligation of the United States in effect on Oct. 22, 1986, with provi- sion that for such purposes any amendment by title I of Pub. L. 100–647 be treated as if it had been included in the provision of Pub. L. 99–514 to which such amend- ment relates, see section 1012(aa)(2), (4) of Pub. L. 100–647, set out as a note under section 861 of this title. PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989 For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§ 1101–1147 and 1171–1177] or title XVIII [§§ 1800–1899A] of Pub. L. 99–514 require an amendment to any plan, such plan amendment shall not be required to be made before the first plan year beginning on or after Jan. 1, 1989, see section 1140 of Pub. L. 99–514, as amended, set out as a note under section 401 of this title. § 45D. New markets tax credit (a) Allowance of credit (1) In general For purposes of section 38, in the case of a taxpayer who holds a qualified equity invest- ment on a credit allowance date of such in- vestment which occurs during the taxable year, the new markets tax credit determined under this section for such taxable year is an amount equal to the applicable percentage of the amount paid to the qualified community development entity for such investment at its original issue. (2) Applicable percentage For purposes of paragraph (1), the applicable percentage is— (A) 5 percent with respect to the first 3 credit allowance dates, and (B) 6 percent with respect to the remainder of the credit allowance dates. (3) Credit allowance date For purposes of paragraph (1), the term ‘‘credit allowance date’’ means, with respect to any qualified equity investment— (A) the date on which such investment is initially made, and (B) each of the 6 anniversary dates of such date thereafter. (b) Qualified equity investment For purposes of this section— (1) In general The term ‘‘qualified equity investment’’ means any equity investment in a qualified community development entity if— (A) such investment is acquired by the tax- payer at its original issue (directly or through an underwriter) solely in exchange for cash, (B) substantially all of such cash is used by the qualified community development en- tity to make qualified low-income commu- nity investments, and (C) such investment is designated for pur- poses of this section by the qualified com- munity development entity. Such term shall not include any equity invest- ment issued by a qualified community devel- opment entity more than 5 years after the date that such entity receives an allocation under subsection (f). Any allocation not used within such 5-year period may be reallocated by the Secretary under subsection (f). (2) Limitation The maximum amount of equity invest- ments issued by a qualified community devel- opment entity which may be designated under paragraph (1)(C) by such entity shall not ex- ceed the portion of the limitation amount al- located under subsection (f) to such entity. (3) Safe harbor for determining use of cash The requirement of paragraph (1)(B) shall be treated as met if at least 85 percent of the ag- gregate gross assets of the qualified commu- nity development entity are invested in quali- fied low-income community investments. (4) Treatment of subsequent purchasers The term ‘‘qualified equity investment’’ in- cludes any equity investment which would (but for paragraph (1)(A)) be a qualified equity investment in the hands of the taxpayer if such investment was a qualified equity invest- ment in the hands of a prior holder. (5) Redemptions A rule similar to the rule of section 1202(c)(3) shall apply for purposes of this subsection. (6) Equity investment The term ‘‘equity investment’’ means— (A) any stock (other than nonqualified pre- ferred stock as defined in section 351(g)(2)) in an entity which is a corporation, and Page 270 TITLE 26—INTERNAL REVENUE CODE § 45D 1 See References in Text note below. (B) any capital interest in an entity which is a partnership. (c) Qualified community development entity For purposes of this section— (1) In general The term ‘‘qualified community develop- ment entity’’ means any domestic corporation or partnership if— (A) the primary mission of the entity is serving, or providing investment capital for, low-income communities or low-income per- sons, (B) the entity maintains accountability to residents of low-income communities through their representation on any gov- erning board of the entity or on any advi- sory board to the entity, and (C) the entity is certified by the Secretary for purposes of this section as being a quali- fied community development entity. (2) Special rules for certain organizations The requirements of paragraph (1) shall be treated as met by— (A) any specialized small business invest- ment company (as defined in section 1044(c)(3)),1 and (B) any community development financial institution (as defined in section 103 of the Community Development Banking and Fi- nancial Institutions Act of 1994 (12 U.S.C. 4702)). (d) Qualified low-income community investments For purposes of this section— (1) In general The term ‘‘qualified low-income community investment’’ means— (A) any capital or equity investment in, or loan to, any qualified active low-income community business, (B) the purchase from another qualified community development entity of any loan made by such entity which is a qualified low-income community investment, (C) financial counseling and other services specified in regulations prescribed by the Secretary to businesses located in, and resi- dents of, low-income communities, and (D) any equity investment in, or loan to, any qualified community development enti- ty. (2) Qualified active low-income community business (A) In general For purposes of paragraph (1), the term ‘‘qualified active low-income community business’’ means, with respect to any tax- able year, any corporation (including a non- profit corporation) or partnership if for such year— (i) at least 50 percent of the total gross income of such entity is derived from the active conduct of a qualified business within any low-income community, (ii) a substantial portion of the use of the tangible property of such entity (whether owned or leased) is within any low-income community, (iii) a substantial portion of the services performed for such entity by its employees are performed in any low-income commu- nity, (iv) less than 5 percent of the average of the aggregate unadjusted bases of the property of such entity is attributable to collectibles (as defined in section 408(m)(2)) other than collectibles that are held primarily for sale to customers in the ordinary course of such business, and (v) less than 5 percent of the average of the aggregate unadjusted bases of the property of such entity is attributable to nonqualified financial property (as defined in section 1397C(e)). (B) Proprietorship Such term shall include any business car- ried on by an individual as a proprietor if such business would meet the requirements of subparagraph (A) were it incorporated. (C) Portions of business may be qualified ac- tive low-income community business The term ‘‘qualified active low-income community business’’ includes any trades or businesses which would qualify as a qualified active low-income community business if such trades or businesses were separately in- corporated. (3) Qualified business For purposes of this subsection, the term ‘‘qualified business’’ has the meaning given to such term by section 1397C(d); except that— (A) in lieu of applying paragraph (2)(B) thereof, the rental to others of real property located in any low-income community shall be treated as a qualified business if there are substantial improvements located on such property, and (B) paragraph (3) thereof shall not apply. (e) Low-income community For purposes of this section— (1) In general The term ‘‘low-income community’’ means any population census tract if— (A) the poverty rate for such tract is at least 20 percent, or (B)(i) in the case of a tract not located within a metropolitan area, the median fam- ily income for such tract does not exceed 80 percent of statewide median family income, or (ii) in the case of a tract located within a metropolitan area, the median family in- come for such tract does not exceed 80 per- cent of the greater of statewide median fam- ily income or the metropolitan area median family income. Subparagraph (B) shall be applied using possessionwide median family income in the case of census tracts located within a posses- sion of the United States. (2) Targeted populations The Secretary shall prescribe regulations under which 1 or more targeted populations Page 271 TITLE 26—INTERNAL REVENUE CODE § 45D 2 So in original. (within the meaning of section 103(20) of the Riegle Community Development and Regu- latory Improvement Act of 1994 (12 U.S.C. 4702(20))) may be treated as low-income com- munities. Such regulations shall include pro- cedures for determining which entities are qualified active low-income community busi- nesses with respect to such populations. (3) Areas not within census tracts In the case of an area which is not tracted for population census tracts, the equivalent county divisions (as defined by the Bureau of the Census for purposes of defining poverty areas) shall be used for purposes of deter- mining poverty rates and median family in- come. (4) Tracts with low population A population census tract with a population of less than 2,000 shall be treated as a low-in- come community for purposes of this section if such tract— (A) is within an empowerment zone the designation of which is in effect under sec- tion 1391, and (B) is contiguous to 1 or more low-income communities (determined without regard to this paragraph). (5) Modification of income requirement for census tracts within high migration rural counties (A) In general In the case of a population census tract lo- cated within a high migration rural county, paragraph (1)(B)(i) shall be applied by sub- stituting ‘‘85 percent’’ for ‘‘80 percent’’. (B) High migration rural county For purposes of this paragraph, the term ‘‘high migration rural county’’ means any county which, during the 20-year period end- ing with the year in which the most recent census was conducted, has a net out-migra- tion of inhabitants from the county of at least 10 percent of the population of the county at the beginning of such period. (f) National limitation on amount of investments designated (1) In general There is a new markets tax credit limitation for each calendar year. Such limitation is— (A) $1,000,000,000 for 2001, (B) $1,500,000,000 for 2002 and 2003, (C) $2,000,000,000 for 2004 and 2005, (D) $3,500,000,000 for 2006 and 2007, (E) $5,000,000,000 for 2008, (F) $5,000,000,000 for 2009, (G) $3,500,000,000 for each of calendar years 2010 through 2019, and (H) $5,000,000,000 for for 2 each of calendar years 2020 through 2025. (2) Allocation of limitation The limitation under paragraph (1) shall be allocated by the Secretary among qualified community development entities selected by the Secretary. In making allocations under the preceding sentence, the Secretary shall give priority to any entity— (A) with a record of having successfully provided capital or technical assistance to disadvantaged businesses or communities, or (B) which intends to satisfy the require- ment under subsection (b)(1)(B) by making qualified low-income community invest- ments in 1 or more businesses in which per- sons unrelated to such entity (within the meaning of section 267(b) or 707(b)(1)) hold the majority equity interest. (3) Carryover of unused limitation If the new markets tax credit limitation for any calendar year exceeds the aggregate amount allocated under paragraph (2) for such year, such limitation for the succeeding cal- endar year shall be increased by the amount of such excess. No amount may be carried under the preceding sentence to any calendar year after 2030. (g) Recapture of credit in certain cases (1) In general If, at any time during the 7-year period be- ginning on the date of the original issue of a qualified equity investment in a qualified community development entity, there is a re- capture event with respect to such invest- ment, then the tax imposed by this chapter for the taxable year in which such event occurs shall be increased by the credit recapture amount. (2) Credit recapture amount For purposes of paragraph (1), the credit re- capture amount is an amount equal to the sum of— (A) the aggregate decrease in the credits allowed to the taxpayer under section 38 for all prior taxable years which would have re- sulted if no credit had been determined under this section with respect to such in- vestment, plus (B) interest at the underpayment rate es- tablished under section 6621 on the amount determined under subparagraph (A) for each prior taxable year for the period beginning on the due date for filing the return for the prior taxable year involved. No deduction shall be allowed under this chap- ter for interest described in subparagraph (B). (3) Recapture event For purposes of paragraph (1), there is a re- capture event with respect to an equity invest- ment in a qualified community development entity if— (A) such entity ceases to be a qualified community development entity, (B) the proceeds of the investment cease to be used as required of subsection (b)(1)(B), or (C) such investment is redeemed by such entity. (4) Special rules (A) Tax benefit rule The tax for the taxable year shall be in- creased under paragraph (1) only with re- spect to credits allowed by reason of this section which were used to reduce tax liabil- Page 272 TITLE 26—INTERNAL REVENUE CODE § 45D ity. In the case of credits not so used to re- duce tax liability, the carryforwards and carrybacks under section 39 shall be appro- priately adjusted. (B) No credits against tax Any increase in tax under this subsection shall not be treated as a tax imposed by this chapter for purposes of determining the amount of any credit under this chapter or for purposes of section 55. (h) Basis reduction The basis of any qualified equity investment shall be reduced by the amount of any credit de- termined under this section with respect to such investment. This subsection shall not apply for purposes of section 1202. (i) Regulations The Secretary shall prescribe such regulations as may be appropriate to carry out this section, including regulations— (1) which limit the credit for investments which are directly or indirectly subsidized by other Federal tax benefits (including the cred- it under section 42 and the exclusion from gross income under section 103), (2) which prevent the abuse of the purposes of this section, (3) which provide rules for determining whether the requirement of subsection (b)(1)(B) is treated as met, (4) which impose appropriate reporting re- quirements, (5) which apply the provisions of this section to newly formed entities, and (6) which ensure that non-metropolitan counties receive a proportional allocation of qualified equity investments. (Added Pub. L. 106–554, § 1(a)(7) [title I, § 121(a)], Dec. 21, 2000, 114 Stat. 2763, 2763A–605; amended Pub. L. 108–357, title II, §§ 221(a), (b), 223(a), Oct. 22, 2004, 118 Stat. 1431, 1432; Pub. L. 109–432, div. A, title I, § 102(a), (b), Dec. 20, 2006, 120 Stat. 2934; Pub. L. 110–343, div. C, title III, § 302, Oct. 3, 2008, 122 Stat. 3866; Pub. L. 111–5, div. B, title I, § 1403(a), Feb. 17, 2009, 123 Stat. 352; Pub. L. 111–312, title VII, § 733(a), (b), Dec. 17, 2010, 124 Stat. 3317, 3318; Pub. L. 112–240, title III, § 305(a), (b), Jan. 2, 2013, 126 Stat. 2329; Pub. L. 113–295, div. A, title I, § 115(a), (b), Dec. 19, 2014, 128 Stat. 4014; Pub. L. 114–113, div. Q, title I, § 141(a), (b), Dec. 18, 2015, 129 Stat. 3056; Pub. L. 115–141, div. U, title IV, § 401(a)(18), (d)(4)(B)(iii), Mar. 23, 2018, 132 Stat. 1185, 1209; Pub. L. 116–94, div. Q, title I, § 141(a), (b), Dec. 20, 2019, 133 Stat. 3234; Pub. L. 116–260, div. EE, title I, § 112(a), (b), Dec. 27, 2020, 134 Stat. 3050.) Editorial Notes REFERENCES IN TEXT Section 1044, referred to in subsec. (c)(2)(A), was re- pealed by Pub. L. 115–97, title I, § 13313(a), Dec. 22, 2017, 131 Stat. 2133. AMENDMENTS 2020—Subsec. (f)(1)(H). Pub. L. 116–260, § 112(a), sub- stituted ‘‘for each of calendar years 2020 through 2025’’ for ‘‘2020’’. Subsec. (f)(3). Pub. L. 116–260, § 112(b), substituted ‘‘2030’’ for ‘‘2025’’. 2019—Subsec. (f)(1)(H). Pub. L. 116–94, § 141(a), added subpar. (H). Subsec. (f)(3). Pub. L. 116–94, § 141(b), substituted ‘‘2025’’ for ‘‘2024’’. 2018—Subsec. (f)(1)(F). Pub. L. 115–141, § 401(a)(18), in- serted ‘‘, and’’ at end. Subsec. (h). Pub. L. 115–141, § 401(d)(4)(B)(iii), sub- stituted ‘‘section 1202’’ for ‘‘sections 1202, 1400B, and 1400F’’. 2015—Subsec. (f)(1)(G). Pub. L. 114–113, § 141(a), sub- stituted ‘‘for each of calendar years 2010 through 2019’’ for ‘‘for 2010, 2011, 2012, 2013, and 2014’’. Subsec. (f)(3). Pub. L. 114–113, § 141(b), substituted ‘‘2024’’ for ‘‘2019’’. 2014—Subsec. (f)(1)(G). Pub. L. 113–295, § 115(a), sub- stituted ‘‘2013, and 2014’’ for ‘‘and 2013’’. Subsec. (f)(3). Pub. L. 113–295, § 115(b), substituted ‘‘2019’’ for ‘‘2018’’. 2013—Subsec. (f)(1)(G). Pub. L. 112–240, § 305(a), sub- stituted ‘‘2010, 2011, 2012, and 2013’’ for ‘‘2010 and 2011’’. Subsec. (f)(3). Pub. L. 112–240, § 305(b), substituted ‘‘2018’’ for ‘‘2016’’. 2010—Subsec. (f)(1)(G). Pub. L. 111–312, § 733(a), added subpar. (G). Subsec. (f)(3). Pub. L. 111–312, § 733(b), substituted ‘‘2016’’ for ‘‘2014’’. 2009—Subsec. (f)(1)(D). Pub. L. 111–5, § 1403(a)(2), sub- stituted ‘‘and 2007,’’ for ‘‘, 2007, 2008, and 2009.’’ Subsec. (f)(1)(E), (F). Pub. L. 111–5, § 1403(a)(1), (3), added subpars. (E) and (F). 2008—Subsec. (f)(1)(D). Pub. L. 110–343 substituted ‘‘2008, and 2009’’ for ‘‘and 2008’’. 2006—Subsec. (f)(1)(D). Pub. L. 109–432, § 102(a), sub- stituted ‘‘, 2007, and 2008’’ for ‘‘and 2007’’. Subsec. (i)(6). Pub. L. 109–432, § 102(b), added par. (6). 2004—Subsec. (e)(2). Pub. L. 108–357, § 221(a), amended heading and text of par. (2) generally, substituting pro- visions relating to regulations under which 1 or more targeted populations could be treated as low-income communities for provisions authorizing Secretary to designate any area within any census tract as a low-in- come community if certain conditions were met. Subsec. (e)(4). Pub. L. 108–357, § 221(b), added par. (4). Subsec. (e)(5). Pub. L. 108–357, § 223(a), added par. (5). Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2020 AMENDMENT Pub. L. 116–260, div. EE, title I, § 112(c), Dec. 27, 2020, 134 Stat. 3050, provided that: ‘‘The amendments made by this section [amending this section] shall apply to calendar years beginning after December 31, 2020.’’ EFFECTIVE DATE OF 2019 AMENDMENT Pub. L. 116–94, div. Q, title I, § 141(c), Dec. 20, 2019, 133 Stat. 3234, provided that: ‘‘The amendments made by this section [amending this section] shall apply to cal- endar years beginning after December 31, 2019.’’ EFFECTIVE DATE OF 2015 AMENDMENT Pub. L. 114–113, div. Q, title I, § 141(c), Dec. 18, 2015, 129 Stat. 3056, provided that: ‘‘The amendments made by this section [amending this section] shall apply to cal- endar years beginning after December 31, 2014.’’ EFFECTIVE DATE OF 2014 AMENDMENT Pub. L. 113–295, div. A, title I, § 115(c), Dec. 19, 2014, 128 Stat. 4014, provided that: ‘‘The amendments made by this section [amending this section] shall apply to cal- endar years beginning after December 31, 2013.’’ EFFECTIVE DATE OF 2013 AMENDMENT Pub. L. 112–240, title III, § 305(c), Jan. 2, 2013, 126 Stat. 2329, provided that: ‘‘The amendments made by this section [amending this section] shall apply to calendar years beginning after December 31, 2011.’’ EFFECTIVE DATE OF 2010 AMENDMENT Pub. L. 111–312, title VII, § 733(c), Dec. 17, 2010, 124 Stat. 3318, provided that: ‘‘The amendments made by Page 273 TITLE 26—INTERNAL REVENUE CODE § 45E this section [amending this section] shall apply to cal- endar years beginning after 2009.’’ EFFECTIVE DATE OF 2006 AMENDMENT Pub. L. 109–432, div. A, title I, § 102(c), Dec. 20, 2006, 120 Stat. 2934, provided that: ‘‘The amendments made by this section [amending this section] shall take effect on the date of the enactment of this Act [Dec. 20, 2006].’’ EFFECTIVE DATE OF 2004 AMENDMENT Pub. L. 108–357, title II, § 221(c), Oct. 22, 2004, 118 Stat. 1431, provided that: ‘‘(1) TARGETED AREAS.—The amendment made by sub- section (a) [amending this section] shall apply to des- ignations made by the Secretary of the Treasury after the date of the enactment of this Act [Oct. 22, 2004]. ‘‘(2) TRACTS WITH LOW POPULATION.—The amendment made by subsection (b) [amending this section] shall apply to investments made after the date of the enact- ment of this Act [Oct. 22, 2004].’’ Pub. L. 108–357, title II, § 223(b), Oct. 22, 2004, 118 Stat. 1432, provided that: ‘‘The amendment made by this sec- tion [amending this section] shall take effect as if in- cluded in the amendment made by section 121(a) of the Community Renewal Tax Relief Act of 2000 [Pub. L. 106–554, § 1(a)(7) [title I, § 121(a)], enacting this section].’’ EFFECTIVE DATE Section applicable to investments made after Dec. 31, 2000, see § 1(a)(7) [title I, § 121(e)] of Pub. L. 106–554, set out as a Effective Date of 2000 Amendment note under section 38 of this title. SAVINGS PROVISION Amendment by section 401(d)(4)(B)(iii) of Pub. L. 115–141 not applicable to certain obligations issued, DC Zone assets acquired, or principal residences acquired before Jan. 1, 2012, see section 401(d)(4)(C) of Pub. L. 115–141, set out as a note under former section 1400 of this title. For provisions that nothing in amendment by section 401(d)(4)(B)(iii) of Pub. L. 115–141 be construed to affect treatment of certain transactions occurring, property acquired, or items of income, loss, deduction, or credit taken into account prior to Mar. 23, 2018, for purposes of determining liability for tax for periods ending after Mar. 23, 2018, see section 401(e) of Pub. L. 115–141, set out as a note under section 23 of this title. SPECIAL RULE FOR ALLOCATION OF INCREASED 2008 LIMITATION Pub. L. 111–5, div. B, title I, § 1403(b), Feb. 17, 2009, 123 Stat. 352, provided that: ‘‘The amount of the increase in the new markets tax credit limitation for calendar year 2008 by reason of the amendments made by subsection (a) [amending this section] shall be allocated in accord- ance with section 45D(f)(2) of the Internal Revenue Code of 1986 to qualified community development enti- ties (as defined in section 45D(c) of such Code) which— ‘‘(1) submitted an allocation application with re- spect to calendar year 2008, and ‘‘(2)(A) did not receive an allocation for such cal- endar year, or ‘‘(B) received an allocation for such calendar year in an amount less than the amount requested in the allocation application.’’ GUIDANCE ON ALLOCATION OF NATIONAL LIMITATION Pub. L. 106–554, § 1(a)(7) [title I, § 121(f)], Dec. 21, 2000, 114 Stat. 2763, 2763A–610, provided that: ‘‘Not later than 120 days after the date of the enactment of this Act [Dec. 21, 2000], the Secretary of the Treasury or the Secretary’s delegate shall issue guidance which speci- fies— ‘‘(1) how entities shall apply for an allocation under section 45D(f)(2) of the Internal Revenue Code of 1986, as added by this section; ‘‘(2) the competitive procedure through which such allocations are made; and ‘‘(3) the actions that such Secretary or delegate shall take to ensure that such allocations are prop- erly made to appropriate entities.’’ AUDIT AND REPORT Pub. L. 106–554, § 1(a)(7) [title I, § 121(g)], Dec. 21, 2000, 114 Stat. 2763, 2763A–610, provided that: ‘‘Not later than January 31 of 2004, 2007, and 2010, the Comptroller Gen- eral of the United States shall, pursuant to an audit of the new markets tax credit program established under section 45D of the Internal Revenue Code of 1986 (as added by subsection (a)), report to Congress on such program, including all qualified community develop- ment entities that receive an allocation under the new markets credit under such section.’’ § 45E. Small employer pension plan startup costs (a) General rule For purposes of section 38, in the case of an el- igible employer, the small employer pension plan startup cost credit determined under this section for any taxable year is an amount equal to 50 percent of the qualified startup costs paid or incurred by the taxpayer during the taxable year. (b) Dollar limitation The amount of the credit determined under this section for any taxable year shall not ex- ceed— (1) for the first credit year and each of the 2 taxable years immediately following the first credit year, the greater of— (A) $500, or (B) the lesser of— (i) $250 for each employee of the eligible employer who is not a highly compensated employee (as defined in section 414(q)) and who is eligible to participate in the eligi- ble employer plan maintained by the eligi- ble employer, or (ii) $5,000, and (2) zero for any other taxable year. (c) Eligible employer For purposes of this section— (1) In general The term ‘‘eligible employer’’ has the mean- ing given such term by section 408(p)(2)(C)(i). (2) Requirement for new qualified employer plans Such term shall not include an employer if, during the 3-taxable year period immediately preceding the 1st taxable year for which the credit under this section is otherwise allow- able for a qualified employer plan of the em- ployer, the employer or any member of any controlled group including the employer (or any predecessor of either) established or main- tained a qualified employer plan with respect to which contributions were made, or benefits were accrued, for substantially the same em- ployees as are in the qualified employer plan. (d) Other definitions For purposes of this section— (1) Qualified startup costs (A) In general The term ‘‘qualified startup costs’’ means any ordinary and necessary expenses of an