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Governor’s CA Enterprise Zone Proposal Calls for Elimination Not Revision

Thursday, May 23rd, 2013

On May 22, 2013, the California State Assembly’s Budget Subcommittee #4 held a hearing that explored Governor Jerry Brown’s latest economic tax incentive proposals as they relate to the State’s current enterprise zone program. In my previous post on this subject, based solely on the language published in the Governor’s May 2013 budget revision, I concluded that significant “revisions” were the target. The recent hearing makes it abundantly clear, however, that the words “elimination” and “replacement” better describe Governor Brown’s proposal.

Thank you to Max Shenker of TCC (Tax Credit Company) for posting a video of the hearing on Vimeo.

During the hearing, a representative from the Department of Finance offered the Governor’s perspective and responded to questions. After listening through all 69 minutes of the Subcommittee’s discussion and public comments on this issue, I can make the following observations.

The Governor’s proposal would create a new statewide tax incentive program with three prongs:

  1. A revamped hiring credit available to businesses who show a net increase in jobs and hire the long-term unemployed, unemployed veterans, and individuals receiving the federal earned income tax credit. In place of the administrative enterprise zone, the revamped hiring credit would be available to businesses within any census tract with demographics demonstrating a certain level of economic distress (to be defined by the program). 
  2. A new sales tax exemption for manufacturing industries. Unlike the State’s now abandoned Manufacturing Investment Credit (MIC), which offered an income tax credit based on the amount of sales tax paid on manufacturing and production equipment, this replacement would exempt manufactures from paying the State’s portion of the California sales tax (4%).
  3. A tax credit fund administered by the Governor’s Office of Business and Economic Development (aka GO-Biz) that would authorize the agency to offer negotiated tax benefits to businesses moving into or expanding within the State of California.

If you are familiar with California’s current enterprise zone hiring credit, it should be clear to you that this revamped hiring credit would be profoundly different.  Most employers currently benefiting will no longer be eligible for a hiring benefit — if simply because they are not regularly showing a net increase in jobs.

There was no discussion about the how much tax benefit the revamped hiring credit would offer.  Nor was there any discussion about how qualifying employees would be identified, documented, or certified.

Businesses holding existing tax credits could continue to carryover and utilize them for another 5 years.

Other EZ Benefits Not Mentioned
There was no mention of the current enterprise zone program’s other benefits: the Net Interest Deduction, EZ Business Deduction, Net Operating Loss Carryover, or bid preferences for vendors bidding on state fulfillment contracts. It is not clear to me if these would also be eliminated or modified.

Agency Players
The current enterprise zone program is administered by the California Department of Housing and Community Development (HCD). With the proposed changes, HCD could be removed from the picture. The revamped hiring credit would be administered by the Franchise Tax Board. The Sales Tax Exemption would fall to the Board of Equalization.  And, as stated above, the negotiated tax credit fund would be managed by Go-Biz.

 

The WOTC Planet Requests Your Feedback Regarding HIRE Act and IRS Disclosure of Transactions with Contractual Protection

Wednesday, September 5th, 2012

This is a request for reader feedback on an issue related to the HIRE Act worker retention tax credit that many employers are claiming with their 2011 federal income tax returns.

Question: Has anyone filed IRS Form 8886 “Reportable Transaction Disclosure Statement” (or had any related experience) in connection with service fees for the HIRE Act new hire retention tax credit program?

 

Some Background:  Per the instruction to IRS Form 8886, some tax transactions that involve the payment of a contingency fee (aka “contractual protection”) must be disclosed to the IRS. In non-technical terms, this is when someone claims a federal income tax benefit for which they also pay a service fee that is based on the amount of the tax benefit.

This kind of service fee, however, is very common when it comes to employment-based tax credit programs like the Work Opportunity Tax Credit, Empowerment Zone Employment Credit, the Indian Employment Tax Credit, and others. Employers usually require help with these programs and prefer to pay for that help based on the level of results achieved by their service provider.

Recognizing this, the IRS has specifically exempted WOTC, Empowerment Zones and six other programs from the disclosure requirement. See IRS Rev Proc 2007-20 (http://www.irs.gov/irb/2007-07_IRB/ar15.html).

The HIRE Act new hire retention tax credit is very similar in principle and procedure to the excluded programs.  However, it was a one-time program only affecting employees hired in 2010. To date, we have not found an updated IRS statement excluding it from the reporting requirement.

If you have come across information about this issue, we would like to hear from you.

 

Republican Congresswoman Lynn Jenkins to Co-Sponser WOTC Improvement Act

Friday, June 15th, 2012

Very good news for advocates of extending the Work Opportunity Tax Credit (WOTC)!   Another influential Republican has announced that she will co-sponsor H.R. 2082, the WOTC Improvement Act.   H.R. 2082 proposes to extend WOTC for three years while making various improvements to the program.

According to the Bill Summary and Status published by the Library of Congress, H.R. 2082 currently has 24 cosponsors . . . including Congressman Dan Lungren, my Representative for California district 3.

The following correspondence is published with permission.  Paul Suplizio, President of the WOTC Coalition, spells out the details in his announcement today.  Please, don’t overlook the good advice for consultants and employers who would also like to see the program extended.

***********

June 15, 2012

Several months of work paid off for John White and his team at WOTC Solutions when they were notified by Congresswoman Lynn Jenkins office today that she would co-sponsor H.R. 2082, the WOTC Improvements Act to extend WOTC retroactively for three years.

Congresswoman Jenkins is highly regarded and was recently selected by the House leadership to give, in a national radio address, the Republican reply to President Obama’s Saturday report to the nation.

Other Coalition members with Kansas operations who’ve been lobbying Congresswoman Jenkins and deserve congratulations and thanks for their efforts are MARS/Stout, National Restaurant Association, National Council of Chain Restaurants, National Grocers Association, Food Marketing Institute, Dillard’s, Duckwall-Alco Stores, and Payless Shoe Source. (We hope we didn’t miss anyone.)

Congresswoman Jenkins, a member of the House Ways and Means Committee, joins Congressman Aaron Schock, the bill’s sponsor, as the two Republican advocates for the bill on that committee. With united Democratic support assured, only a few more Republican sponsors will put a solid majority of Ways and Means behind WOTC—something that’s bound to influence Chairman Dave Camp when he writes tax legislation due in July.

Consequently, Coalition members should re-double their efforts lobbying Republican members of Ways and Means and other Republican congressmen in line with our 50-state lobbying plan.

Remember, Republicans who control the House are now actively considering which tax extenders are worthy of continuing and which will be dropped, so the issue is freshly before them and with elections nigh, this is a moment they are willing to listen.

Here are targets among Ways and Means Republicans that should be pressed: Congressman Rick Berg (ND) in a close race running for Senate, Congressmen Peter Roskam (IL), Jim Gerlach (PA), Pat Tiberi (OH), Eric Paulsen (MN), Kenny Marchant (TX), Tom Reed (NY), Vern Buchanan (FL).

We need to pick up these votes on Ways and Means, and the best way to do that is by going beyond our Washington contacts to organizing meetings with the congressman by people from his or her district as WOTC Solutions, MARS/Stout, Walton Management, Honkamp-Kreuger, and others are doing. The mere request of a meeting with these congressmen now, in the middle of an election, will have a powerful impact if it’s from voters in his district and will yield contacts in his office that you can work with, regularly asking, “Has the congressman made his decision on WOTC yet? Is he going to support us folks in the state?”

Again, thanks and congratulations to all who helped win the support of Congresswoman Lynn Jenkins. If I missed somebody, please accept our apology and let me know.

PAUL E. SUPLIZIO
President, WOTC Coalition

 

 

New York Senate Passes 2012 NEW JOBS-NY Job Creation Plan

Thursday, May 31st, 2012

On Wednesday, the New York State Senate passed the 2012 NEW JOBS-NY Job Creation Plan, which must now go before the state Assembly for consideration.  Among many other provisions, this plan would provide the following new hiring-based incentives.

SMALL BUSINESS JOBS CREDIT: The plan would provide a 10 percent tax credit for about 800,000 small businesses that have at least one employee, have business income of less than $250,000, and that file under the personal income tax. This tax credit would help encourage new job creation by saving small businesses $80 million.

“HIRE-NOW-NY” TAX INCENTIVE: Our Hire-Now-NY proposal includes direct incentives to encourage businesses to begin expanding their workforce again. For each new job they create, a business would get a tax credit of up to $5,000.

The HIRE NOW benefit would increase to $8,000 if the qualifying new employee was unemployed.

 “HIRE-A-VET” ENHANCED CREDIT: The Senate job creation plan would provide an enhanced tax credit of up to $10,000 to any business that hires a veteran returning home from military service.

Sorry, the Senate’s press release was very scant on detail. If this plan passes the NY Assembly, I will investigate further and provide additional details on the WOTC Planet.

See the full press release on the NY Senate’s website.

Tax Extenders: “Temporary tax provisions that are worthy should be made permanent”

Tuesday, May 1st, 2012

“Temporary tax provisions that are worthy should be made permanent.” So says, Congressman Pat Tiberi (R-OH), Chairman of the Subcommittee on Select Revenue in his opening remarks to last week’s subcommittee hearing on tax extenders.

[T]he current tax code is riddled with scores of provisions that have been enacted on a temporary basis. I say riddled not because I believe all these provisions are bad but because – while there are rare occasions when it makes sense to enact temporary tax provisions, such as during an economic downturn – most of the temporary provisions were made temporary not for policy reasons, but because of arcane budget or Senate rules. Making tax policy this way wreaks havoc on the ability of families and businesses to plan for the future with some certainty.

With a few exceptions, temporary tax provisions that are worthy should be made permanent. Those that are not worthy should be terminated. That kind of certainty might not happen until we pass comprehensive tax reform, but in the meantime today’s hearing provides a formal opportunity for the subcommittee to hear from our House colleagues about the merits of extending—or not extending—many of these tax policies.

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Nothing to Do With Hiring Credits – Welcome to the World Little Hromiko!!!

Monday, March 19th, 2012

I don’t expect readers of The WOTC Planet to be interested in my personal life.  That’s not what this site is about.  HOWEVER, I have to share this.

My new little boy Abram Vaughn Hromiko was born this afternoon just after 1:00 PM Pacific.  I’ll be taking a few days off.  See you on the other side.

National Restaurant Association Turns Up WOTC Heat on Congress

Tuesday, February 7th, 2012

In a letter today addressed to all members of Congress, the National Restaurant Association called on legislators to extend the Work Opportunity Tax Credit (WOTC) program and a 15-year depreciation allowance for certain kinds of assets important to the restaurant industry. 

The letter, signed by Scott DeFife, Executive Vice President, Policy and Government Affairs, begins with the following statement.

On behalf of the National Restaurant Association, I am writing to strongly urge Congress to prospectively and retroactively extend tax provisions that expired at the end of 2011.  Two particular provisions of significance to the restaurant industry are: 15-year depreciation for restaurants and the Work Opportunity Tax Credit (WOTC). We urge consideration of these measures as part of the discussions on extending through 2012 the payroll-tax reduction that expires at the end of this month.

Read the entire letter here.

Stay tuned.  There is more to come about the ongoing House-Senate conference currently seeking an agreement on extending the 2011 payroll-tax cut.   It’s not just the National Restaurant Association that is urging legislators to address WOTC and other tax extenders with this bill.

For a Limited Time Only: New York Youth Works Tax Credit Now Available

Wednesday, January 4th, 2012

The New York Youth Works Tax Credit program was signed into law by Governor Andrew M. Cuomo last month on December 9th.  The program’s hiring credit is effective for qualifying at-risk youth hired between January 1 and July 1, 2012.

The Business Council of New York State has published a detailed facts sheet  describing the program’s eligible employers and employees and the amounts and terms attached to the tax credits.  The fact sheet is available on the Council’s website.

Governor Cuomo issued a press release at the time the legislation was signed.  The following excerpts are drawn therefrom.

Governor Andrew M. Cuomo today signed a bill creating “NY Youth Works,” an inner city youth employment program that will combat high unemployment in the state’s metro areas. The new law includes $25 million in tax credits for businesses that hire unemployed and disadvantaged youth and $62 million to support job training programs.

The NY Youth Works program provides $25 million in tax credits to benefit employers that hire unemployed youth over the first six months of 2012, with the ultimate goal of permanent, unsubsidized employment. . . . Eligible participants for the jobs program include unemployed, low-income youth aged 16 through 24 who are located in one of the following areas: Albany, Brookhaven, Buffalo, Hempstead, Mount Vernon, New Rochelle, New York City, Rochester, Schenectady, Syracuse, Utica, and Yonkers.

Urgent WOTC Call to Action – Unique Opportunity Limited to This Morning

Wednesday, November 16th, 2011

I received late arriving news on Tuesday from Paul Suplizio of the WOTC Coalition that Congressman Aaron Schock will be making the case for WOTC renewal at the House Republican luncheon today. The luncheon will be from noon until 1:00 PM (eastern), on Wednesday November 16th.

The immediate goal THIS MORNING is to give other Republican House members an advance notice that Congressman Schock will be speaking on this subject and to ask them to support him.

If you’ve been lobbying a Republican House member in this effort, this morning is a crucial opportunity. Call your member and speak to their Legislative Director, Appointment Secretary or other staff members and give them the information and request.

Here is the message, as suggested by Mr. Suplizio:

“At the House Republican luncheon today, Congressman Aaron Schock will call for action on a bill to extend the work opportunity tax credit and several other important tax provisions. Please get word to Congressman _______________that Congressman Schock will be asking for action on WOTC and several other important provisions of the tax code which will expire on December 31st . Tell Congressman_____________ it will be very helpful if he or she would support Congressman Schock in this matter.”

Please note, the recent VOW to Hire Heroes Act has already passed the Senate and is being shepherded through the House. It is expected to become law and will expand and extend the WOTC program’s military veteran categories. Congressman Schock’s address will be making the case for extending the rest of the WOTC program.

 

Convenient Resource for Employers and for Tax Incentive Advisors

Friday, November 4th, 2011

This just popped up in the news although I’m not sure when it actually became available.  Business Facilities: The Location Advisor has published online its 2011 Incentives Guide: A comprehensive guide to state incentives offered throughout the U.S.

I can’t vouch for the publication’s accuracy (that’s not my job), but I am definitely impressed with how much information they’ve gathered into one place.  They’ve included brief description of hiring and investment incentives for each state.  Click through (above) and check it out.