Employer Contribution Tax Credit - NHCE Requirement

[austin3515]

The only NHCE requirement found in 45E seems to be in the definition of Qualifying Expenses for the admin expense credit.  If thre is not at least one NHCE in the plan, then the start-up costs are not "Qualifying."  That requirement seems not to apply to the 45E(f) credit for employer contributions.  So assuming these examples set up a plan and otherwise qualify (i.e., no plan in prior 3 years) are the following statements correct?

1) A sole propritership or partnership with no employees should be eligible for the credit regardless of what their earned income is because they have no FICA wages; and

2) An S-Corp with no employees that pays the owner 104,000 in 2025 (less than the threshold in 2025) should be eligible for the credit as well.

Oddly I can't find any articles clarifying that the employer contriubtion credit has an "at least 1 NHCE" requirement.  Of course none indicates that there IS such a requirement either...

 

[austin3515]

I think I have my own answer.  The "start-up credit" in paragraph (a) of 45E is increased by the 45E(f).  But it is still the credit under 45E(a).  45E(a) is for "qualified start up costs."  And qualified start-up costs are defined to include only costs related to a Plan that has at least one NHCE.  The key is that the 45E(f) credit is a 45E(a) credit and the Employer Contributions are therefor "qualified start-up costs" and subject to that definition.

Not a straight line, but definitely would be foolish to claim the exemption; the line is not straigtht, but it only has a slight arc.  Someone could probably argue this away but imagine arguing this applies to an owner-only plan when there is a pretty strong position to the contrary.