This paper gives the first estimates for employee use of the Empowerment Zone (EZ) wage tax credit, a wage subsidy claimed by employers who operate in and hire residents of federally designated areas experiencing economic distress in the 1990s. I show that about 6.4 percent (and at least 3.5 percent) of the working age population was claimed under the EZ wage credit for 1999. In addition, I estimate that 24.2 percent (and at least 13.1 percent) of those employed inside of the target area were claimed for the credit. These national estimates of use are created using information on credit dollars claimed from the IRS as well as population data on those eligible to be claimed from the Census. The measures of tax credit use presented in this paper are an alternative to firm use rates presented in the literature, and reveal how effective the credit is at reaching residents of the target area.

"Many small employers do not offerhealth insurance. The Small EmployerHealth Insurance Tax Credit wasestablished to help eligible smallemployers-businesses or tax-exemptentities-provide health insurance foremployees. The base of the credit ispremiums paid or the averagepremium for an employer's state ifpremiums paid were higher. In 2010,for small businesses, the credit was 35percent of the base unless thebusiness had more than 10 FTEemployees or paid average annualwages over $25,000.GAO was asked to examine (1) theextent to which the credit is claimedand any factors that limit claims,including how they can be addressed;(2) how fully IRS is ensuring that thecredit is correctly claimed; and (3) whatdata are needed to evaluate the effectsof the credit.GAO compared IRS data on creditclaims with estimates of eligibleemployers, interviewed various creditstakeholders and IRS officials as wellas academicians on evaluation,compared IRS credit compliancedocuments with the rules and practicesused for prior tax provisions and IRSstrategic objectives, and reviewedliterature and data."

To describe the extent to which the credit is being claimed, we reviewed IRS data on the claims for tax year 2010. To identify any factors that may limit credit claims and to assess how they could be addressed, we interviewed IRS officials as well as groups representing employers, tax preparers, and insurance brokers, and worked with them to assemble discussion groups on the credit. To assess how these factors could be addressed, we analyzed our interview results as well as relevant documents.