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WOTC and Other Tax Extenders Must Wait

Thursday, February 16th, 2012

The House – Senate Conference has come to an agreement on what is now dubbed The Middle Class Tax Relief and Job Creation Act of 2012.  Expectations are high that both the House and Senate will quickly pass the bill.  President Obama has already indicated he will sign the bill.

Unfortunately, the tax extenders, including the general WOTC extension, were completely excluded from this legislation.  All WOTC categories except for those favoring military veterans must now wait to be extended by another yet future tax bill.

As I’ve summarized before, this situation is not unusual for the Work Opportunity Tax Credit (WOTC) program. Of the eight times Congress has acted to renew or extend the WOTC program, three were passed retroactively months after the program’s legislative authority had expired.

  • The first was in March 2002 after WOTC expired on December 31, 2001.
  • The second was in October 2004, about ten months after WOTC expired on December 31, 2003.
  • The worst example to date was in December 2006, when the program was reauthorized almost 12 months after its expiration.

In each of these events, the renewal was made effective retroactively back to the date of expiration.  In other words, employers were eligible to claim tax credits generated by properly certified employees hired between the expiration date and the date the WOTC program was renewed.

We continue to anticipate a similar re-authorization in 2012. For this reason, my firm will continue to process and submit WOTC applications under all employee-eligibility categories — not just for veterans.

As employers consider their strategy for 2012, they should remember that even though a general extension has not yet been passed, eligibility-categories for hiring military veterans are already authorized through 2012 by the VOW to Hire Heroes Act of 2011. The amount of tax credit currently offered for hiring unemployed veterans goes as high as $9,600 per qualifying hire.

This is an excellent opportunity to more affirmatively recruit veterans for your workforce.

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Latest News on Payroll Tax Cut Extension and WOTC Renewal

Wednesday, February 15th, 2012

I thought you might appreciate the following excerpt from a recent email update I received from WOTC Coalition President Paul Suplizio.  Some of this has been reported in the news but Paul’s perspective adds something important.  I am re-publishing this with his permission.

In a statement [Monday], Speaker John Boehner and Majority Leader Eric Cantor said they will no longer require offsets for the $100 billion cost to extend the payroll tax cut to the end of the year, and are preparing a bill that will extend the payroll tax cut separately if the conference reaches no agreement, leaving the conference to continue working on unemployment insurance and Medicare doctors’ payments.

The conference committee is being notified of this new Republican position, which means $100 billion of the total $160 billion cost of the payroll bill would not have to be offset.

The conferees still have time to reach agreement on a total package, but if they don’t the Speaker is free to make the effort to pass a stand-alone bill extending the payroll tax only. This would remove payroll tax as a partisan issue, but the Speaker is likely to need Democratic support because of the roughly ninety Republicans who would not vote to increase the deficit.

Senator Reid is expected to make the extenders part of the bill he has said he will introduce if the conference bogs down. He will have the option to bring it to a vote or attach it to any stand-alone payroll bill that passes the House.

Unemployment compensation and doc fix remain “must do” issues, even if payroll tax is passed separately—thus we continue to work for the tax extenders to be added to HR 3630 in conference.

If $40 billion for tax extenders is added, the total requiring offset would be $100 billion for unemployment insurance, doctors’ fix, and the tax extenders. Democrats are arguing unemployment insurance should not be offset, and a good case can be made for not offsetting the tax extenders.

Comments: The Republican leadership’s concession on not requiring a budget offset to the “cost” of the payroll-tax-cut extension reduces the total amount of offsets needed to pass all of the priority items.  One of those priority items is the tax extenders, which will presumably include WOTC.

What this boils down to is that we are likely to at least see legislation soon with tax extenders attached.  Whether Congress can pass it, of course, is a separate question.  Nothing is certain and the political environment remains volatile.

Posted in Federal Legislation, Work Opportunity Tax Credit | 2 Responses »
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NEW WOTC Forms, Electronic & FAX Filing and Transition Relief

Wednesday, February 15th, 2012

Catching up with the VOW to Hire Heroes Act, which was signed by President Obama in November of last year, the Internal Revenue Service has issued an updated Form 8850 and some very important guidance.

Links for your convenience:  The new IRS Form 8850.  IRS 8850 Instructions.  IRS Notice 2012-13

Disconnected Youth: Although not unexpected, I should note that in preparing the updated IRS 8850 Pre-screening Notice, the IRS has removed the questions related to qualifying Disconnected Youth.  This category expired on December 31, 2010. 

We’ve been clinging to the hope that it would be added-back with the extension of WOTC.  I personally have not given up on that hope.  Also, if I am not mistaken, the Department of Labor’s current instructions to State Workforce Agencies still requires them to reserve disconnected youth applications on file pending future instructions.

Notice 2012-13: Notice 2012-13 provides guidance on a number of important issues and should not be overlooked.  I suggest a thorough reading.  Major topics covered include:

  • Background of the new veterans categories
  • Transition relief (a grace period extending the 28-day submission deadline for IRS 8850 for qualified veterans hired between November 22, 2011 and May 22, 2012)
  • The use of electronic signatures for IRS 8850
  • Signing or filing IRS 8850 by FAX transmission
  • Guidance for tax-exempt organizations claiming WOTC

Request for Comments: In addition to the guidance provided by the IRS on these topics, the IRS is also requesting comments about (1) alternative methods for certification of qualified veterans and (2)alternative methods of filing Form 8850.

In summary, with this notice the IRS has given us a lot to think about and a lot of work to do. 

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WOTC Call to Action – New Developments for WOTC and Tax Extenders

Friday, January 27th, 2012

There are new developments in the effort to include WOTC and other tax-extenders in the upcoming payroll tax cut bill. A Senate-House conference is currently negotiating to extend the payroll tax cut, which expires in February.

Paul Suplizio, President of the WOTC Coalition, reports that Ways and Means Chairman Dave Camp is “waving off in advance an expected offer from Senator Baucus” to include tax extenders in the bill. Max Baucus is Chairman of the Senate Finance Committee.

Mr. Suplizio goes on to explain, however, that while Chairman Camp’s statements should be taken seriously they do not halt the current tax-extenders discussion.

The Senate and President Obama both want the tax extenders in the bill. As a result, WOTC and other tax extenders have become a negotiating chip for Chairman Camp and the House Republicans who want to include other important but controversial provision in the bill.

For WOTC supporters, our job now is at least two-fold. (1) We must persuade Senate conferees to INSIST on including WOTC and the other extenders in the bill. And (2) we must persuade House Speaker Boehner that it will be in the House Republicans’ interest to agree on their inclusion.

Paul Suplizio said it well in a recent correspondence to members of the WOTC Coalition.

“We need to drive home to Speaker Boehner that not including the extenders is putting House Republicans on record as favoring a tax increase on businesses, farmers, communities, and workers—a tax increase they don’t need at this stage of the recovery.”

Is your fax machine and telephone working? Time is short. Time to roll.

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Senators Baucus and Reid — Tax Extenders Should Be Included In Payroll Tax Cut Deal

Tuesday, January 24th, 2012

Negotiations are on again to extend the 2011 payroll tax cut until the end of 2012.  The House-Senate Conference met on Tuesday — the first time this year — and the road to an agreement appears rocky.  Optimism is alive – but there are also some big disagreements to sort through.

Both sides of the discussion agree that a deal must be made before the end of February when the current 2-month extension expires.

Of great interest to us is the question of the other tax extenders. The House of Representative’s payroll tax cut proposal does not include the tax extenders or WOTC.  However, Senate Majority Leader Harry Reid and Senate Finance Committee Chairman Max Baucus are reported to have both suggested today that the Conference should examine the expired tax provisions at this time.  (See today’s article in The Hill, scroll down to end.)

Democrats are looking to possibly tuck other provisions into a payroll-tax deal. On Tuesday, Baucus and Reid both suggested that the conference committee examine tax provisions that expired at the end of 2011 — the so-called tax extenders.

On the other hand,

The [House] Ways and Means Committee chairman [Republican Dave Camp] also told reporters after the meeting that conferees should first try to resolve core issues — such as the payroll-tax cut, unemployment benefits and the Medicare “doc fix” — and leave other issues until the end of the negotiations.

 “I think initially we need to have a pretty strict scope of conference,” Camp said. “Let’s figure out what we have been tasked with doing.”

Representative Camp is well aware of WOTC and has been the focus of significant lobbying efforts.  We are keeping our fingers crossed.  Keep your phone and fax machine ready.  The conference members need to hear from you.

More from the New York Times.

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WOTC – Calm Before the Storm in Congress

Tuesday, January 10th, 2012

Is it the calm before a storm? Congress is on vacation. The Senate is scheduled to reconvene on January 23rd. The House on January 17th.

Before members of Congress left for the holiday in December, they had tumultuously agreed on a 2-month extension of the 2011 payroll tax cut and left many expiring tax items floating into limbo. The Work Opportunity Tax Credit, of course, is counted among these unfinished items.

Although nothing has made significant news yet, the conference that was promised last month by House and Senate leaders is already busy behind the scenes. According to Paul Suplizio, lobbyist and President of the WOTC Coalition, conferees for the Senate and House respectively are in discussion with their own members but not yet with each other. The first meeting between Senate and House conferees will likely take place next week.

The goal of the conference is to hammer out a compromise that will allow Congress to pass a full-year extension of the payroll tax cut, in addition to other high-priority items. They need to do it before the end of February when the 2-month extension expires.

Our goal is to include WOTC and other tax items in that legislation. The conferees, however, face historically difficult and stressful circumstances. WOTC remains in a very precarious situation. If the tax extenders do not make it into the anticipated payroll tax cut bill, it will be difficult to see another vote on these items until after the November election.

During the past 15 years, WOTC has expired and been renewed at least 7 times. Three of these renewals took place well into the next calendar years — as much as 11 months after expiration.

If the program is not renewed in February, business will continue as usual. Employers will continue to screen for all of the WOTC target groups. The State Workforce Agencies, however, will receive instructions to place a hold on WOTC employee certifications — except for those who qualify under the military veteran categories, which have been extended already through December 2012.

Then, as soon as the renewal legislation is passed, the State Workforce Agencies will complete and issue the rest of the outstanding WOTC employee certifications.  We’ve lived through it before. But let’s hope it doesn’t come to that.

My office will be following the lead of the WOTC Coalition by contacting key legislators during the upcoming weeks. I’ll post new information and guidance as it becomes available.

Please feel welcome to contact me personally if you would like to discuss (or simply commiserate). vah@WOTCPlanet.com

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WOTC Extension Must Wait Until 2012

Friday, December 23rd, 2011

It’s been all over the news. The U. S. House and Senate agreed to pass a 2-month extension of the 2011 payroll tax reduction. Unfortunately, the tax extenders including WOTC, Research and Development and other important tax incentive programs were not included in this hotly contested legislation.

It is clear, however, that the White House and Senate leadership continue to support tax extenders, which are one of the Senate’s top priorities.

With the agreement to pass the 2-month extension of the payroll tax reduction, Senate and House leaders have also agreed to appoint conferees to hammer out a full 12-month extension. It is in this process that we have our next opportunity to see tax extenders, including WOTC, gain traction for 2012 renewals.

Paul Suplizio, President of the WOTC Coalition, has set the Coalition on course to begin a new campaign on January 2, 2012. The objective, of course, is to persuade House and Senate conference members to include the full-WOTC extension and other tax extenders in the final payroll bill.

Stay tuned . . . it won’t be long.

 

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Renewal of WOTC and Payroll Tax Cut Still Possible This Year

Monday, December 19th, 2011

If you’ve been following the news during the past few days, you might be aware that Congressional leaders are sparring over legislation to extend the existing payroll tax cut. Over the weekend, the Senate rejected the House’s proposal and responded with a proposed 2-month extension, obviously intended to buy time for further negotiations.

Neither version of the legislation included WOTC nor other sought after tax-extenders. This is not, however, the end of the game.

The limited 2-month extension is not looked upon favorably by the House Republican leadership, which is demanding a full year.  The House is scheduled to vote on the bill this evening.

According to Bloomberg,

With the House set to return to Washington [Monday], Republican leaders are studying their options, Laena Fallon, a spokeswoman for House Majority Leader Eric Cantor, a Virginia Republican, said in an e-mail.

When the House meets [Monday evening], it will either vote to amend the Senate-passed measure “so that it is responsible and in line with the needs of hard-working taxpayers and middle class families” or vote to appoint representatives to a House-Senate conference to reconcile differences between the two chambers, she said.

Got that? The House will either amend the Senate bill and return it. Or it will vote to appoint a conference with the Senate to negotiate revisions. If the House does call for a conference, the Senate leadership (aka Senator Harry Reid) could accept or reject it. But rejecting it in that case would result in a tax increase on January 1 as the payroll tax reduction expires. Not a pretty political sight.

If a conference is called, Paul Suplizio, President of the WOTC Coalition sees still another opportunity to get WOTC and other tax extenders passed this year.

“If it gets to a conference, Ways and Means Chairman Dave Camp of Michigan would be one of the conferees for the House (he was floor manager for the House bill) and Finance Chairman Max Baucus of Montana a likely conferee for the Senate.”

“Chairman Camp has been the target of much of our lobbying and knows the situation of WOTC and the extenders. Senator Baucus has been a champion for including WOTC and the other extenders in the payroll bill.”

If you have any opportunity to encourage Representative Dave Camp or Senator Max Baucus, now is the time. Senator Harry Reid and his friends in the Whitehouse should also be contacted.  Senator Reid will likely require encouragement from the Whitehouse to include WOTC and other tax extenders in any negotiated resolution to this legislative conflict.

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DOL (Also) Issues New WOTC Instructions for Vow to Hire Heroes Act

Monday, December 12th, 2011

The following instructions are copied directly from the document recently published by the US Department of Labor.

Vow to Hire Heroes Act – Work Opportunity Tax Credit Provisions: Interim Instructions for State Workforce Agencies and Employers

On November 21, 2011, the President signed into law the “Vow to Hire Heroes Act”, which amends and expands the definition of Veteran target groups for the Work Opportunity Tax Credit (WOTC). These provisions became effective the day after the President signed the Act into law (November 22, 2011).

The Employment and Training Administration (ETA) is working to revise and issue ETA Forms 9061 and 9058, and update all other program-related materials, to reflect changes to the Veteran target groups. During this transition period until revised forms are issued, employers are instructed to continue to use the current ETA Form 9061.

When requesting certification for the Veteran target groups using ETA Form 9061, employers and consultants should do the following:

1) When using the hard copies of Form 9061, indicate in red at the top margin of the form the Veteran target group for which they are requesting certification.

2) When using an electronic form for the 9061 with those states that are fully automated, indicate in black at the top margin of the form the Veteran target group for which they are requesting certification.

Note: ETA will notify states with a date for the end of this transition period and the date when employers are to start using only the revised forms and program materials. State Workforce Agencies are to accept the current forms until additional guidance is provided by ETA.

3) Employers and consultants must continue to adhere to the “28-day timely filing” requirement.

4) Employers and consultants should follow any other instructions IRS may issue. States and Participating Agencies should continue to use the current ETA Form 9062 and follow its instructions, which already provide for the Veteran target groups.

State Workforce Agencies should continue to use ETA Form 9058, Report 1, until further ETA guidance.

 

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Vow to Hire Heroes Act: DOL Publishes Summary of New WOTC Provisions

Monday, December 12th, 2011

Thank you to Rik Moore of the National Telecommuting Institute, Inc. for bringing this to my attention early last week.

The US Department of Labor has offered new guidance bringing into focus the WOTC provisions of the recently passed Vow to Hire Heroes Act of 2011.   A summary of WOTC-related provisions from the act has been published on the Department of Labor’s website.  The following is copied directly from that document.  Please download the entire document in order to see footnotes and introductory content not included here.

• Extends the current target group for Veterans receiving Supplemental Nutrition Assistance Program (SNAP) benefits with the same qualified wages cap ($6,000) and maximum tax credit ($2,400).

• Extends the current target group for Veterans with a service-connected disability with the same qualified wages cap ($12,000) and maximum tax credit ($4,800).

• Extends the current target group for Veterans with a service-connected disability unemployed for at least 6 months with the qualified wages cap increased to $24,000 and the maximum tax credit increased to $9,600.

• Establishes a new target group for unemployed Veterans, similar to the Recovery Act of 2009 unemployed Veteran group that expired on December 31, 2010:

o Veterans unemployed for at least 4 weeks with a qualified wages cap of $6,000 and maximum tax credit of $2,400.

o Veterans unemployed for at least 6 months with qualified wages cap of $14,000 and maximum tax credit of $5,600.

o State Workforce Agencies will certify veterans as meeting the required periods of unemployment based on receipt of unemployment insurance compensation.

Note: The 5-year period ending on the hiring day requirement that was part of the Recovery Act unemployed veteran group was rescinded.

• Qualified “tax-exempt” (i.e., 501(c)) organizations can now participate by hiring qualified veterans and are now eligible to claim the WOTC.

• These provisions became effective the day after the President signed the Vow to Hire Heroes Act into law, November 22, 2011, through December 31, 2012.

• The Vow to Hire Heroes Act does not extend any of the other (non-Veteran) WOTC target groups, which currently expire on December 31, 2011.

 

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