Extension and enhancement of work opportunity credit

(a) Extension of credit Section 51(c)(4) of the Internal Revenue Code of 1986 is amended by striking December 31, 2025 and inserting September 30, 2030. (b) Increased credit for qualified small businesses (1) In general Section 51 of such Code is amended— (A) by redesignating subsections (f) through (k) as subsections (g) through (l), respectively, and (B) by inserting after subsection (e) the following new subsection: (f) Increased credit for qualified small businesses (1) In general In the case of a qualified small business, the amount of the work opportunity credit determined under this section for the taxable year shall include— (A) 50 percent of the qualified second-year wages for such year, (B) 75 percent of the qualified third-year wages for such year, (C) 90 percent of the qualified fourth-year wages for such year, and (D) 100 percent of the qualified fifth-year wages for such year. (2) Limitation on wages per year taken into account (A) In general The amount of the qualified second-year wages, qualified third-year wages, qualified fourth-year wages, or qualified fifth-year wages which may be taken into account with respect to any individual shall not exceed the applicable amount for the taxable year. (B) Applicable amount For purposes of subparagraph (A), the term applicable amount means— (i) in the case of any individual who is a qualified veteran by reason of subsection (d)(3)(A)(ii)(II), the dollar amount in effect for the taxable year under subsection (b)(3)(B)(i), (ii) in the case of any individual who is a qualified veteran by reason of subsection (d)(3)(A)(iv), the dollar amount in effect for the taxable year under subsection (b)(3)(B)(ii), (iii) in the case of any individual who is a qualified veteran by reason of subsection (d)(3)(A)(ii)(I), the dollar amount in effect for the taxable year under subsection (b)(3)(B)(iii), (iv) in the case of any individual who is a long-term family assistance recipient, the dollar amount in effect for the taxable year under subsection (e)(1)(B), and (v) in the case of any individual not described in clause (i), (ii), (iii), or (iv), the dollar amount in effect for the taxable year under subsection (b)(3)(B)(iv). (3) Individuals not meeting minimum employment periods (A) Reduction of increased credit for individuals performing fewer than 400 hours of service In the case of an individual who has performed at least 120 hours, but less than 400 hours, of service for the qualified small business during the taxable year, paragraph (1) shall be applied— (i) by substituting 30 percent for 50 percent in subparagraph (A) thereof, (ii) by substituting 40 percent for 75 percent in subparagraph (B) thereof, (iii) by substituting 45 percent for 90 percent in subparagraph (C) thereof, and (iv) by substituting 50 percent for 100 percent in subparagraph (D) thereof. (B) Denial of increased credit for individuals performing fewer than 120 hours of service No wages shall be taken into account under paragraph (1) with respect to any individual unless such individual has performed at least 120 hours of service for the qualified small business during the taxable year. (4) Special rules for agricultural and railway labor In the case of a long-term family assistance recipient to whom subparagraph (A) or (B) of subsection (i)(1) applies, rules similar to the rules of such subparagraphs shall apply except that— (A) such subparagraph (A) shall be applied by substituting ‘the dollar amount in effect for the taxable year under subsection (e)(1)(B)’ for ‘the dollar amount in effect for the taxable year under subsection (b)(3)(B)(iv)’, and (B) such subparagraph (B) shall be applied by substituting 1/12 of the dollar amount in effect for the taxable year under subsection (e)(1)(B) for 1/12 of the dollar amount in effect for the taxable year under subsection (b)(3)(B)(iv). (5) Definitions For purposes of this subsection— (A) Qualified small business The term qualified small business means any person which is a small business concern (as defined in section 3 of the Small Business Act). (B) Qualified second-year wages The term qualified second-year wages means qualified wages— (i) which are paid to an individual with respect to whom the qualified small business claimed credit under this section for the qualified first-year wages of such individual, and (ii) which are attributable to service rendered during the 1-year period beginning on the day after the last day of the 1-year period with respect to such individual determined under subsection (b)(2). (C) Qualified third-year wages The term qualified third-year wages means qualified wages— (i) which are paid to an individual with respect to whom the qualified small business claimed credit under this section for the qualified first-year wages and qualified second-year wages of such individual, and (ii) which are attributable to service rendered during the 1-year period beginning on the day after the last day of the 1-year period with respect to such individual determined under subparagraph (B). (D) Qualified fourth-year wages The term qualified fourth-year wages means qualified wages— (i) which are paid to an individual with respect to whom the qualified small business claimed credit under this section for the qualified first-year wages, qualified second-year wages, and qualified third-year wages of such individual, and (ii) which are attributable to service rendered during the 1-year period beginning on the day after the last day of the 1-year period with respect to such individual determined under subparagraph (C). (E) Qualified fifth-year wages The term qualified fifth-year wages means qualified wages— (i) which are paid to an individual with respect to whom the qualified small business claimed credit under this section for the qualified first-year wages, qualified second-year wages, qualified third-year wages, and qualified fourth-year wages of such individual, and (ii) which are attributable to service rendered during the 1-year period beginning on the day after the last day of the 1-year period with respect to such individual determined under subparagraph (D). (6) Regulations The Secretary shall prescribe such regulations or other guidance as may be necessary to carry out the purposes of this subsection, including regulations or other guidance providing for requirements for recordkeeping or information reporting for purposes of administering this subsection.. (2) Conforming amendments (A) Section 51 of such Code, as amended by the preceding provisions of this section, is amended— (i) in subsection (c)(1), by striking subsection (h)(2) and inserting subsection (i)(2), (ii) in subsection (e)— (I) in paragraph (1), in the matter preceding subparagraph (A), by striking With and inserting Subject to subsection (f), with, and (II) in paragraph (3), by striking subsection (h)(1) and inserting subsection (i)(1), and (iii) in subsection (g)(2), by striking subsection (h)(1) and inserting subsection (i)(1). (B) Section 45A of such Code is amended— (i) in subsection (b)(1)(B), by adding at the end the following new sentence: If any portion of wages are taken into account under subsection (f)(1) of section 51, the preceding sentence shall be applied by substituting 5-year period for 1-year period., (ii) in subsection (c)(5)(A), by striking section 51(i)(1) and inserting section 51(j)(1), and (iii) in subsection (e)(3), by striking section 51(k) and inserting section 51(l). (C) Section 45S(h)(2) of such Code is amended by striking section 51(j) and inserting section 51(k). (D) Section 1396(d)(2)(A) of such Code is amended by striking section 51(i)(1) and inserting section 51(j)(1). (E) Section 1397(c) of such Code is amended by striking section 51(k) and inserting section 51(l). (F) Section 3111(e)(3)(B) of such Code is amended by striking subsection (i)(3)(A) and inserting subsection (j)(3)(A). (c) Inflation adjustment (1) In general Section 51 of such Code, as amended by the preceding provisions of this section, is amended by adding at the end the following new subsection: (m) Inflation adjustment (1) In general In the case of any taxable year beginning after 2027, each of the dollar amounts in subsection (b)(3)(B) and the $10,000 amount in subsection (e)(1)(B) shall be increased by an amount equal to— (A) such dollar amount, multiplied by (B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting ‘calendar year 2026’ for ‘calendar year 2016’ in subparagraph (A)(ii) thereof. (2) Rounding Any increase determined under paragraph (1) shall be rounded to the nearest multiple of $100.. (2) Conforming amendments (A) Limitation on wages per year taken into account Section 51(b)(3) of such Code is amended to read as follows: (3) Limitation on wages per year taken into account (A) In general The amount of the qualified first-year wages which may be taken into account with respect to any individual shall not exceed the applicable amount for the taxable year. (B) Applicable amount For purposes of subparagraph (A), the term applicable amount means— (i) $24,000 in the case of any individual who is a qualified veteran by reason of subsection (d)(3)(A)(ii)(II), (ii) $14,000 in the case of any individual who is a qualified veteran by reason of subsection (d)(3)(A)(iv), (iii) $12,000 in the case of any individual who is a qualified veteran by reason of subsection (d)(3)(A)(ii)(I), and (iv) $6,000 in the case of any individual not described in clause (i), (ii), or (iii).. (B) Qualified summer youth employees Section 51(d)(7)(B)(ii) of such Code is amended to read as follows: (ii) the amount of the qualified first-year wages which may be taken into account with respect to such employee shall not exceed 50 percent of the dollar amount in effect for the taxable year under subsection (b)(3)(B)(iv).. (C) Special rules for agricultural labor and railway labor (i) In general Section 51(i)(1) of such Code, as redesignated by subsection (b), is amended— (I) in subparagraph (A), by striking $6,000 and inserting the dollar amount in effect for the taxable year under subsection (b)(3)(B)(iv), and (II) in subparagraph (B), by striking $500 and inserting 1/12 of the dollar amount in effect for the taxable year under subsection (b)(3)(B)(iv). (ii) Related conforming amendments Section 51(e)(3) of such Code is amended by striking subparagraphs (A) and (B) and inserting the following new subparagraphs: (A) such subparagraph (A) shall be applied by substituting ‘the dollar amount in effect for the taxable year under subsection (e)(1)(B)’ for ‘the dollar amount in effect for the taxable year under subsection (b)(3)(B)(iv)’, and (B) such subparagraph (B) shall be applied by substituting 1/12 of the dollar amount in effect for the taxable year under subsection (e)(1)(B) for 1/12 of the dollar amount in effect for the taxable year under subsection (b)(3)(B)(iv).. (d) Effective dates (1) Extension The amendment made by subsection (a) shall apply to individuals who begin work for the employer after December 31, 2025. (2) Enhancement; inflation adjustment The amendments made by subsections (b) and (c) shall apply to individuals who begin work for the employer after December 31, 2026.