Section 2.6. Qualification for and computation of credit

(a) Qualification for credit.

(1) The employer is not qualified to claim the credit until employment has continued for at least 1 full year, unless prior thereto, the employe:

(i) Has voluntarily left the employment of the employer.

(ii) Becomes disabled or dies.

(iii) Has been terminated for cause—the termination for cause as defined by the Department of Labor and Industry Office of Employment Security Regulations and Standards. See section 402(e) of The Unemployment Compensation Law (43 P. S. § 802(e)).

(2) If an event listed in paragraph (1) occurs prior to the expiration of 1 year, the EIP credit shall be reduced to the fraction of the year which corresponds to each full month that the eligible employe has worked. For example: assume that an employer is eligible for an $1,800 EIP credit. However, 1 month prior to having worked a full year, the employe voluntarily quits. In this case the employer’s EIP credit is 11/12 x 1,800/1 or $1,650. Employment initiated during 1 year may be claimed as an EIP credit at the conclusion of the term of employment or 1 year, whichever first occurs.

(b) Conditional credit. An employer may conditionally take an EIP credit at the time it files its annual return for the portion of the tax year completed by an employe, computed under subsection (a). As to a qualified employe who is working but who has not completed a full year, should the employer subsequently not be qualified for the EIP credit because the employe has terminated prior to the expiration of a full year for any reason other than one set forth in subsection (a)(1) the conditional credit shall be disallowed and interest and additions or penalties shall become payable from the due date of the tax as provided by law. For example: John Taxpayer hired Employe and paid him $6,000 from July 1, 19X0 to December 31, 19X0. Taxpayer’s (line 12) personal income tax is $1,000 and he has no other credits. His employment incentive tax credit is $900 ($6,000 x 30% x 6/12 = $900). In this example, as the taxpayer has already reached his maximum qualified first year’s wage ($6,000), the taxpayer may take the balance ($1,800 - $900 = $900) in the subsequent taxable year, provided the employe is employed until July 1, 19X1. Note, if the employe is discharged on January 1, 19X1, the conditional credit will be disallowed.

The provisions of this § 2.6 adopted July 16, 1982, effective July 17, 1982, 12 Pa.B. 2292; amended October 28, 1988, effective October 29, 1988, 18 Pa.B. 4866. Immediately preceding text appears at serial page (105752).

Notation

Authority

The provisions of this § 2.6 amended under section 506 of The Administrative Code of 1929 (71 P. S. § 186); section 491(e) of the Public Welfare Code (62 P. S. § 491(e)); and section 1701-A(e) of the Tax Reform Code of 1971 (72 P. S. § 8701-A(e)).