8844 Instructions for Form 8844

2016

Instructions for Form 8844

Department of the Treasury
Internal Revenue Service

Empowerment Zone Employment Credit
Section references are to the Internal Revenue Code
unless otherwise noted.

Future Developments

For the latest information about developments related to
Form 8844 and its instructions, such as legislation
enacted after they were published, go to www.irs.gov/
form8844.

What's New

The empowerment zone designation is scheduled to
expire for periods after 2016.

General Instructions
Purpose of Form

Use Form 8844 to claim the empowerment zone
employment credit. For tax years that include December
31, 2016, the credit is 20% of the employer's qualified
wages (up to $15,000) paid or incurred during calendar
year 2016 on behalf of qualified empowerment zone
employees.
Partnerships and S corporations must file this form to
claim the credit. All others are generally not required to
complete or file this form if their only source for this credit
is a partnership, S corporation, estate, trust, or
cooperative. Instead, they can report this credit directly on
Form 3800, General Business Credit. The following
exceptions apply.
You are an estate or trust and the source credit can be
allocated to beneficiaries. For more details, see the
instructions for Form 1041, Schedule K-1, box 13, code K.
You are a cooperative and the source credit can or
must be allocated to patrons. For more details, see the
instructions for Form 1120-C, Schedule J, line 5c.

Empowerment Zones
Urban areas. Parts of the following urban areas were
empowerment zones. You can find out if your business or
an employee’s residence is located within an urban
empowerment zone by using the EZ/RC Address Locator
at egis.hud.gov/ezrclocator.
Pulaski County, AR
Tucson, AZ
Fresno, CA
Los Angeles, CA (city and county)
Santa Ana, CA
New Haven, CT
Jacksonville, FL
Miami/Dade County, FL
Chicago, IL
Gary/Hammond/East Chicago, IN
Boston, MA
Baltimore, MD
Detroit, MI
Dec 19, 2016

Minneapolis, MN
St. Louis, MO/East St. Louis, IL
Cumberland County, NJ
New York, NY
Syracuse, NY
Yonkers, NY
Cincinnati, OH
Cleveland, OH
Columbus, OH
Oklahoma City, OK
Philadelphia, PA/Camden, NJ
Columbia/Sumter, SC
Knoxville, TN
El Paso, TX
San Antonio, TX
Norfolk/Portsmouth, VA
Huntington, WV/Ironton, OH
Note. The treatment of parts of Washington, DC as an
empowerment zone ended at the end of 2011.
Rural areas. Parts of the following rural areas were
empowerment zones. You can find out if your business or
an employee’s residence is located within a rural
empowerment zone by using the EZ/RC Address Locator
at egis.hud.gov/ezrclocator.
Desert Communities, CA (part of Riverside County)
Southwest Georgia United, GA (part of Crisp County
and all of Dooly County)
Southernmost Illinois Delta, IL (parts of Alexander and
Johnson Counties and all of Pulaski County)
Kentucky Highlands, KY (part of Wayne County and all
of Clinton and Jackson Counties)
Aroostook County, ME (part of Aroostook County)
Mid-Delta, MS (parts of Bolivar, Holmes, Humphreys,
Leflore, Sunflower, and Washington Counties)
Griggs-Steele, ND (part of Griggs County and all of
Steele County)
Oglala Sioux Tribe, SD (parts of Jackson and Bennett
Counties and all of Shannon County)
Middle Rio Grande FUTURO Communities, TX (parts of
Dimmit, Maverick, Uvalde, and Zavala Counties)
Rio Grande Valley, TX (parts of Cameron, Hidalgo,
Starr, and Willacy Counties)
Qualified empowerment zone employee. A qualified
empowerment zone employee is any employee (full-time
or part-time) of the employer who:
Performs substantially all of the services for that
employer within an empowerment zone in the employer’s
trade or business, and
Has his or her principal residence within that
empowerment zone while performing those services.
See Qualified Employees below for a list of persons
who are not qualified employees.

Cat. No. 66393K

Qualified Employees

under section 381(a) and the employee continues to be
employed by the acquiring corporation. Nor is a mere
change in the form of conducting the trade or business
treated as a termination if the employee continues to be
employed in such trade or business and the taxpayer
retains a substantial interest therein.

Any person may be a qualified employee except the
following.
Any relative of the employer described in sections
152(d)(2)(A) through 152(d)(2)(G).
A dependent of the employer described in section
152(d)(2)(H).
If the employer is a corporation, any individual who
bears any of the relationships described in sections
152(d)(2)(A) through 152(d)(2)(G), or is a dependent, as
described in section 152(d)(2)(H), of an individual who
owns (or is considered to own under section 267(c)) more
than 50% in value of the outstanding stock of the
corporation.
If the employer is an entity other than a corporation, any
individual who owns directly or indirectly more than 50%
of the capital and profits interest, including constructive
ownership, in the entity.
If the employer is an estate or trust, any individual who
is a grantor, beneficiary, or fiduciary of the estate or trust
(or a dependent, as described in section 152(d)(2)(H), of
such an individual), or any individual who is a relative, as
described in sections 152(d)(2)(A) through 152(d)(2)(G),
of the grantor, beneficiary, or fiduciary of the estate or
trust.
Any person who owns (or is considered to own under
section 318) more than 5% of the outstanding or voting
stock of the employer, or if not a corporate employer,
more than 5% of the capital or profits interest in the
employer.
Any individual employed by the employer for less than
90 days. For exceptions, see Early termination of
employee, later.
Any individual employed by the employer at any private
or commercial golf course, country club, massage parlor,
hot tub facility, suntan facility, racetrack or other facility
used for gambling, or any store the principal business of
which is the sale of alcoholic beverages for consumption
off premises.
Any individual employed by the employer in a trade or
business of which the principal activity is farming (see
Note below), but only if at the close of the tax year the
sum of the following amounts exceeds $500,000.
1. The larger of the unadjusted bases or fair market
value of the farm assets owned by the employer.
2. The value of the farm assets leased by the
employer.
Note. Certain farming activities are described in section
2032A(e)(5)(A) or (B).

Wages

Wages are defined in section 51(c) and generally are
wages (excluding tips) subject to the Federal
Unemployment Tax Act (FUTA), without regard to the
FUTA dollar limitation. The following are also treated as
wages.
Amounts paid or incurred by the employer as
educational assistance payments excludable from the
employee’s gross income under section 127. However,
this does not apply if the employee has a relationship to
the employer described in section 267(b) or 707(b)(1)
(substituting “10 percent” for “50 percent” in those
sections) or the employer and employee are engaged in
trades or businesses under common control (within the
meaning of sections 52(a) and (b)).
Amounts paid or incurred by the employer on behalf of
an employee under age 19 for a youth training program
operated by that employer in conjunction with local
education officials.

Specific Instructions
Complete lines 1 and 2 to figure the current year credit for
your trade or business. Skip lines 1 and 2 if you are only
claiming a credit that was allocated to you from a
pass-through entity.

Line 1—Qualified Empowerment Zone
Wages

Enter the total qualified empowerment zone wages paid or
incurred during the calendar year 2016. The credit must
be figured using only the wages that you paid or incurred
in the calendar year that ended with or within your tax
year. For example, if your tax year began on April 1, 2016,
and ended on March 31, 2017, you must figure wages
based on the calendar year that began on January 1,
2016, and ended on December 31, 2016. Wages paid
after the end of the calendar year may be used only to
figure the credit claimed on the following year’s tax return.
Qualified empowerment zone wages are qualified
wages paid or incurred by an employer for services
performed by an employee while the employee is a
qualified empowerment zone employee (defined earlier).
The maximum wages that may be taken into account for
each employee is limited to $15,000. The $15,000 amount
for any employee is reduced by the amount of wages paid
or incurred during the calendar year on behalf of that
employee that are used in figuring the work opportunity
credit (Form 5884).

Early termination of employee. Generally, an
individual is not a qualified empowerment zone employee
unless employed for at least 90 days. The 90-day
requirement does not apply in the following situations.
The employee is terminated because of misconduct as
determined under the applicable state unemployment
compensation law.
The employee becomes disabled before the 90th day.
However, if the disability ends before the 90th day, the
employer must offer to reemploy the former employee.
An employee is not treated as terminated if the
corporate employer is acquired by another corporation

Line 2

In general, you must reduce your deduction for salaries
and wages and certain educational and training costs by
the line 2 credit amount. You must make this reduction
even if you cannot take the full credit this year because of
the tax liability limit. If you capitalized any costs on which
-2-

Instructions for Form 8844 (2016)

you figured the credit, reduce the amount capitalized by
the amount of the credit attributable to these costs.
Members of a controlled group of corporations and
businesses under common control are treated as a single
employer in determining the credit. The members share
the credit in the same proportion that they paid or incurred
qualifying wages.

its tax liability limit. Therefore, to figure the unused amount
of the credit allocated to patrons, the cooperative must
first figure its tax liability. While any excess is allocated to
patrons, any credit recapture applies as if the cooperative
had claimed the entire credit.
If the cooperative is subject to the passive activity rules,
include on line 3 any empowerment zone and renewal
community employment credits from passive activities
disallowed for prior years and carried forward to this year.
Complete Form 8810, Corporate Passive Activity Loss
and Credit Limitations, to determine the allowed credit that
must be allocated between the cooperative and the
patrons. For details, see the Instructions for Form 8810.

Line 3

Enter total empowerment zone employment credits from:
Schedule K-1 (Form 1065), Partner's Share of Income,
Deductions, Credits, etc., box 15 (code L);
Schedule K-1 (Form 1120S), Shareholder's Share of
Income, Deductions, Credits, etc., box 13 (code L);
Schedule K-1 (Form 1041), Beneficiary's Share of
Income, Deductions, Credits, etc., box 13 (code K); and
Form 1099-PATR, Taxable Distributions Received
From Cooperatives, box 10, or other notice of credit
allocation.
Partnerships and S corporations must always report the
above credits on line 3. Also, estates and trusts that can
allocate the above credits to beneficiaries and
cooperatives that can allocate the above credits to
patrons must always report these credits on line 3. All
other filers figuring a separate credit on earlier lines must
also report the above credits on line 3. All others not using
earlier lines to figure a separate credit can report the
above credits directly on Form 3800, Part III, line 3.

Estates and trusts. Allocate the empowerment zone
employment credit on line 4 between the estate or trust
and the beneficiaries in the same proportion as income
was allocated and enter the beneficiaries' share on line 5.
If the estate or trust is subject to the passive activity rules,
include on line 3 any empowerment zone and renewal
community employment credits from passive activities
disallowed for prior years and carried forward to this year.
Complete Form 8582-CR, Passive Activity Credit
Limitations, to determine the allowed credit that must be
allocated between the estate or trust and the
beneficiaries. For details, see the Instructions for Form
8582-CR.

Line 5
Cooperatives. A cooperative described in section
1381(a) must allocate to its patrons the credit in excess of
Paperwork Reduction Act Notice. We ask for the information on this form to carry out the Internal Revenue laws of the
United States. You are required to give us the information. We need it to ensure that you are complying with these laws
and to allow us to figure and collect the right amount of tax.
You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act
unless the form displays a valid OMB control number. Books or records relating to a form or its instructions must be
retained as long as their contents may become material in the administration of any Internal Revenue law. Generally, tax
returns and return information are confidential, as required by section 6103.

h

The time needed to complete and file this form will vary depending on individual circumstances. The estimated burden
for individual and business taxpayers filing this form is approved under OMB control number 1545-0074 and 1545-0123
and is included in the estimates shown in the instructions for their individual and business income tax return. The
estimated burden for all other taxpayers who file this form is shown below.
Recordkeeping . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Learning about the law or the form . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Preparing and sending the form to the IRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4 hr., 4 min.
2 hr., 22 min.
2 hr., 33 min.

If you have comments concerning the accuracy of these time estimates or suggestions for making this form simpler,
we would be happy to hear from you. See the instructions for the tax return with which this form is filed.

Instructions for Form 8844 (2016)

-3-