Available Income Tax Credits*25B Yes Credit for certain retirement plan contributions—to encourage contributions to qualified retirement plans by individuals.45D No New markets tax credit—to encourage taxpayers to make equity investments in specified low-income communities.45E Yes Credit for small employer pension startup costs—to encourage small employers to establish qualified retirement plans for their employees.REFUNDABLE VERSUS NONREFUNDABLE CREDITSWORK OPPORTUNITY TAX CREDITa. Regular credit. The regular credit is 40% of the first $6,000 of wages per eligible employee in the first year of employment. The credit is available for employees who start work no later than December 31, 2003. (Note: Tax commentators widely believe that Congress will retroactively reinstate this expired credit.) Refer to Examples 11 and 12 in the text.WELFARE-TO-WORK CREDITa. Credit availability. The welfare-to-work credit is available for qualifying employees hired by December 31, 2003. (Note: Tax commentators widely believe that Congress will retroactively reinstate this expired credit.)RESEARCH ACTIVITIES CREDITCREDIT FOR EMPLOYER-PROVIDED CHILD CAREFOREIGN TAX CREDITADOPTION EXPENSES CREDITCHILD TAX CREDITADDITIONAL LECTURE RESOURCECREDIT FOR CHILD AND DEPENDENT CARE EXPENSESadditional lecture resourceADDITIONAL LECTURE RESOURCEADDITIONAL LECTURE RESOURCEEDUCATION TAX CREDITSCREDIT FOR CERTAIN RETIREMENT PLAN CONTRIBUTIONSChapter 12 Tax CreditsTax Credits as a Tax Policy Tool. Over the years, Congress has used tax credits extensively to encourage desirable activities including the conservation of energy (e.g., the energy tax credit), the rehabilitation of industrial and commercial buildings and certified historic structures (e.g., thetax credit for rehabilitation expenditures), and the provision of equity for selected taxpayer groups (e.g., the foreign tax credit, the earned income credit). Available Income Tax Credits* Code DiscussedSection in Text Description and Purpose21 Yes Child and dependent care expense credit—to help offset costsincurred for the care of certain individuals necessitated to enable ataxpayer to work outside the home.22 Yes Credit for the elderly or disabled—to provide tax relief for thosewho do not receive substantial benefits from tax-free SocialSecurity payments.23 Yes Adoption expenses creditto assist taxpayers who incurnonrecurring costs directly associated with the adoption process.24 Yes Child tax credit—to provide tax relief for low-to-moderate incomefamilies with children under age 17. In certain cases, this credit isrefundable.25 No Credit for certain mortgage interest paid—to reduce the cost ofacquiring a home for qualified first-time home buyers. Code DiscussedSection in Text Description and Purpose25A Yes Education tax credits—to help defray the cost of the first two yearsof higher education for low-to-middle income families (HOPEscholarship credit), and to help defray the cost of higher educationbeyond the first two years and costs incurred in maintaining orimproving existing job skills for low-to-middle income taxpayers(lifetime learning credit).25B Yes Credit for certain retirement plan contributions—to encouragecontributions to qualified retirement plans by individuals.27 Yes Foreign tax credit—to mitigate double taxation of income earnedin foreign countries.29 No Nonconventional source fuel credit—to encourage the productionof alternative energy sources.30 No Credit for qualified electric vehicles—a credit offsetting part of thecost of a qualified electric vehicle placed in service before 2007.30A No Puerto Rico economic activity credit—to encourage thedevelopment of business activity in Puerto Rico. This credit maybe claimed instead of the foreign tax credit and is scheduled toexpire for tax years beginning after 2005.31 Yes Taxes withheld on wages—to serve as an offset against the totaltax liability computed on the taxpayer’s income tax return.32 Yes Earned income credit—represents a negative tax or transfer ofwealth to lower-income taxpayers.33 No Tax withheld at the source on nonresident aliens and foreigncorporations—to serve as an offset against the total tax liabilitycomputed on the taxpayer’s income.34 No Credit for certain uses of gasoline and special fuels—an offset ofthe gasoline excise tax incurred by certain users of the fuel,including farmers and local transit systems.Code DiscussedSection in Text Description and Purpose35 No Credit for health insurance costs for certain individuals—intendedto help offset the cost of qualified health insurance coverage foreligible individuals.40 No Alcohol fuels credit—to encourage the production or blending ofalcohol with gasoline such that the fuel is of the type suitable foruse in an internal combustion engine. Scheduled to expire afterDecember 31, 2007.41 Yes Research activities credit—to encourage research anddevelopment. Currently, scheduled to expire after June 30, 2004.42 Yes Low-income housing credit—to encourage building owners tomake affordable housing available for low-income individuals.43 No Enhanced oil recovery credit—intended to help offset costsincurred on oil recovery projects that involve sophisticated andexpensive methods such as cyclic steam injection.44 Yes Disabled access credit—to encourage small businesses to maketheir businesses more accessible to disabled individuals.45 No Electricity produced from certain renewable resources—toencourage the production of energy from certain renewable sourcessuch as from wind, closed-loop biomass systems, and poultrywaste. Applies to qualified facilities placed in service beforeJanuary 1, 2004.45A No Indian employment credit—to encourage the employment andprovision of health insurance coverage for persons who areenrolled members of an Indian tribe. Scheduled to expire fortaxable years beginning after December 31, 2004.45B No Tax credit for FICA paid on tips—to offset the employer’s FICAcontribution on reported tips in excess of those treated as wagesunder the minimum wage laws.45C No Orphan drugs testing creditto encourage the development ofmedications to treat rare