Specific Instructions

Table of Contents

Note.

Any wages or other expenses taken into account in determining the American Samoa economic development credit may not be taken into account in determining the research credit under section 41.

Line 1

Enter 60% of the sum of:

  • The aggregate amount of the corporation's qualified wages for the tax year and

  • The allocable employee fringe benefit expenses of the corporation for the tax year.

Qualified wages.   Qualified wages are wages paid or incurred by the corporation during the tax year in connection with the active conduct of a trade or business in American Samoa to an employee for services performed in American Samoa, but only if the services are performed while the employee's principal place of employment is in American Samoa.

  The term “wages” generally means wages as defined in section 3306(b), but without regard to any dollar limitation contained in that section. For this purpose, section 3306(b) is applied as if the term “United States” includes American Samoa. See section 936(i)(1)(D)(ii) for a special rule for agricultural labor and railway labor.

  The wages that are taken into account for the tax year for any employee are limited to 85% of the old-age, survivors, and disability insurance (OASDI) contribution and benefit base for the calendar year in which that tax year begins. The OASDI contribution and benefit base for 2012 is $110,100 and for 2013 is $113,700.

  Special rules apply to part-time employees and employees whose principal place of employment with the corporation is not within American Samoa at all times during the tax year.

  For more information, see section 936(i)(1).

Allocable employee fringe benefit expenses.   The total amount of employee fringe benefit expenses taken into account in figuring the economic-activity limitation is the amount deductible by the corporation in the tax year for:
  • Employer contributions to stock bonus, pensions, profit-sharing, or annuity plans,

  • Employer-provided health or accident plan coverage for the employees, and

  • The cost of life or disability insurance provided to employees.

Note.

Any amount treated as qualified wages may not be treated as an employee fringe benefit expense.

  The amount of allocable employee fringe benefit expenses for a tax year is equal to the total amount of employee fringe benefit expenses (defined above) multiplied by a fraction. The fraction consists of the corporation's qualified wages (defined above) for the tax year, divided by the aggregate amount of wages paid or incurred by the corporation during the tax year.

  The allocable employee fringe benefit expenses cannot exceed 15% of the corporation's qualified wages for the tax year.

  For more information, see section 936(i)(2).

Lines 2–4

Qualified tangible property means any tangible property used by the corporation in the active conduct of a trade or business within American Samoa.

Short-life qualified tangible property is qualified tangible property that is 3-year or 5-year property under section 168.

Medium-life qualified tangible property is qualified tangible property that is 7-year or 10-year property under section 168.

Long-life qualified tangible property is qualified tangible property that is not short-life or medium-life qualified tangible property.

For more information, see section 936(i)(4).

Note.

In the case of any qualified tangible property to which section 168 (as in effect before the date of enactment of the Tax Reform Act of 1986) applies, any references above to section 168 are to that Code section as then in effect.

For more information on depreciation, see the Instructions for Form 4562 and Publication 946.

Line 7

Include the line 7 credit on your income tax return on the same line on which the qualified electric vehicle (QEV) credit is reported. Enter “Form 5735” and the amount next to the entry space for that line. On the 2012 Form 1120, the QEV is reported on Schedule J, line 5b. The credit must also be included on the QEV line of the following forms as applicable: Form 3800, Form 6478, Form 8835, Form 8860, Form 8910, Form 8911, and Form 8912.


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