P.L. 111–312, Approved December 17, 2010 (124 Stat. 3296)

SEC. 601. [26 U.S.C. 1401 note.] TEMPORARY EMPLOYEE PAYROLL TAX CUT

(a)  In General.—Notwithstanding any other provision of law—

(1)  with respect to any taxable year which begins in the payroll tax holiday period, the rate of tax under section 1401(a) of the Internal Revenue Code of 1986 shall be 10.40 percent, and

(2)  with respect to remuneration received during the payroll tax holiday period, the rate of tax under 3101(a) of such Code shall be 4.2 percent (including for purposes of determining the applicable percentage under sections 3201(a) and 3211(a)(1) of such Code).

(b) Coordination With Deductions for Employment Taxes.—

(1)  Deduction in computing net earnings from self-employment.—For purposes of applying section 1402(a)(12) of the Internal Revenue Code of 1986, the rate of tax imposed by subsection 1401(a) of such Code shall be determined without regard to the reduction in such rate under this section.

(2)^[464]  Individual deduction.—In the case of the taxes imposed by section 1401 of such Code for any taxable year which begins in the payroll tax holiday period, the deduction under section 164(f) of such Code with respect to such taxes shall be equal to the sum of—

(A)  59.6 percent of the portion of such taxes attributable to the tax imposed by section 1401(a) of such Code (determined after the application of this section), plus

(B)  one-half of the portion of such taxes attributable to the tax imposed by section 1401(b) of such Code. Effective as if enacted in P.L. 111–312, December 17, 2010.

(c)^[465]  Payroll Tax Holiday Period.—The term “payroll tax holiday period” means—

(1)  in the case of the tax described in subsection (a)(1), calendar years 2011 and 2012, and

(2)  in the case of the taxes described in subsection (a)(2), the period beginning January 1, 2011, and ending February 29, 2012.

(d)  Employer Notification.—The Secretary of the Treasury shall notify employers of the payroll tax holiday period in any manner the Secretary deems appropriate.

(e) Transfers of Funds.—

(1)  Transfers to federal old-age and survivors insurance trust fund.—There are hereby appropriated to the Federal Old-Age and Survivors Trust Fund and the Federal Disability Insurance Trust Fund established under section 201 of the Social Security Act (42 U.S.C. 401) amounts equal to the reduction in revenues to the Treasury by reason of the application of subsection (a). Amounts appropriated by the preceding sentence shall be transferred from the general fund at such times and in such manner as to replicate to the extent possible the transfers which would have occurred to such Trust Fund had such amendments not been enacted.

(2)  Transfers to social security equivalent benefit account.—There are hereby appropriated to the Social Security Equivalent Benefit Account established under section 15A(a) of the Railroad Retirement Act of 1974 (45 U.S.C. 231n–1(a)) amounts equal to the reduction in revenues to the Treasury by reason of the application of subsection (a)(2). Amounts appropriated by the preceding sentence shall be transferred from the general fund at such times and in such manner as to replicate to the extent possible the transfers which would have occurred to such Account had such amendments not been enacted.

(3)  Coordination with other federal laws.—For purposes of applying any provision of Federal law other than the provisions of the Internal Revenue Code of 1986, the rate of tax in effect under section 3101(a) of such Code shall be determined without regard to the reduction in such rate under this section.

(f)^[466] Special Rules for 2012.—

(1)  Limitation on self-employment income.—In the case of any taxable year beginning in 2012, subsection (a)(1) shall only apply with respect to so much of the taxpayer’s selfemployment income (as defined in section 1402(b) of the Internal Revenue Code of 1986) as does not exceed the excess (if any) of—

(A)  $18,350, over

(B)  the amount of wages and compensation received during the portion of the payroll tax holiday period occurring during 2012 subject to tax under section 3101(a) of such Code or section 3201(a) of such Code.

(2)  Coordination with deduction for employment taxes.—In the case of a taxable year beginning in 2012, subparagraph (A) of subsection (b)(2) shall be applied as if it read as follows:

“(A)  the sum of—

“(i)  59.6 percent of the portion of such taxes attributable to the tax imposed by section 1401(a) of such Code (determined after the application of this section) on so much of self-employment income (as defined in section 1402(b) of such Code) as does not exceed the amount of self-employment income described in paragraph (1), plus

“(ii)  one-half of the portion of such taxes attributable to the tax imposed by section 1401(a) of such Code (determined without regard to this section) on self-employment income (as so defined) in excess of such amount, plus”.

(g)^[467] Recapture of Excess Benefit.—

(1)  In general.—There is hereby imposed on the income of every individual a tax equal to 2 percent of the sum of wages (within the meaning of section 3121(a)(1) of the Internal Revenue Code of 1986) and compensation (to which section 3201(a) of such Code applies) received during the period beginning January 1, 2012, and ending February 29, 2012, to the extent the amount of such sum exceeds $18,350.

(2)  Regulations.—The Secretary of the Treasury or the Secretary’s delegate shall prescribe such regulations or other guidance as may be necessary or appropriate to carry out this subsection, including guidance for payment by the employee of the tax imposed by paragraph (1).