MONTGOMERY – A proposal to help returning Iraq and Afghanistan war veterans find work passed the Alabama House of Representatives on Tuesday, as lawmakers continued their commitment to making job growth legislation the top priority in the 2012 Regular Session. The House also passed enabling legislation for the Alabama Job Creation and Retention Act, which allows the Governor and economic developers to use incentives similar to ones used on the Mercedes project to lure industry to the state.

“We have a laser focus on passing legislation that helps more Alabamians find jobs,” Speaker Hubbard said. “I’m particularly pleased that we have made sure to take care of our veterans with the ‘Heroes for Hire’ bill. Those who served on the front lines deserve to go to the front of the line for new jobs.”

Rep. DuWayne Bridges (R-Valley), who chairs the House Veterans and Military Affairs Committee, said the “Heroes for Hire” bill shows Alabama is committed to caring for its veterans.

“Our men and women in uniform have dedicated years of service to this country and made great sacrifices that too often get taken for granted,” Rep. Bridges said. “In this tough economy we need to give returning veterans every advantage we can toward landing a job. Our ‘Heroes for Hire’ bill offers that by giving businesses a $2,000 tax credit for hiring a veteran recently returned from war.”

More information on the bills:

The “Heroes for Hire” Tax Credit Act, House Bill 152, sponsored by Rep. DuWayne Bridges (R-Valley), passed by a vote of 84 yays and no nays. With wars winding down in Iraq and Afghanistan, thousands of Alabama veterans will soon return home to a difficult economy in which it is hard to find a job.  This proposal would offer Alabama businesses a $2,000 tax credit for hiring a veteran recently returned from war.

The Alabama Job Creation and Retention Act, House Bill 160, sponsored by Rep. Barry Mask (R-Wetumpka), passed by a vote of 69 yays and 19 nays.  Alabama’s success in landing world-class companies like Mercedes, Honda, Hyundai and ThyssenKrupp proves how effective tax incentives can be for bringing jobs to this state.

This enabling bill (HB160) sets strict parameters for how incentives can be used to ensure return on investment. It requires legislative passage and referendum approval of a constitutional amendment allowing voters to give the Governor and the Alabama Development Office more flexibility in offering tax incentives to land major economic development projects and retain companies that might otherwise relocate outside Alabama without having to call a special session of the Legislature.

House Bill 159, the constitutional amendment, was carried over by the House to be considered at a later time.

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As reported today by the New Mexico Daily Lobo,

Rep. Dennis Roch (R, Texico) used a filibuster Thursday morning to delay the State Graduate Employment Tax Credit (SB 16), which would have given businesses incentives to hire college graduates from New Mexico. GPSA President Katie Richardson said the bill died waiting to be heard.

Also,

Sen. Timothy Keller (D, Albuquerque) sponsored the bill and said it was heralded as one of the best of the session. The good news is it should be straightforward when the legislature hears it in the next session, he said.

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.

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.

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. 

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.

According to Representative King,

“It’s basically going out and assisting both homeless individuals and the business community in the state of Utah to get individuals transitioned from being homeless to a more permanent setting– a home, a rental unit, something where they can really get their feet under them and move forward with their lives.”

Royce Van Tassell of the Utah Taxpayers Association spoke against the bill during the committee hearing.

“It’s not clear to the Taxpayer Association that social welfare is best conducted through the tax code,” Van Tassell said. “The fact is there is a $1,000 credit for each person and that money came from someplace and it will be paid for by somebody else.”

According to a Monday article in Accounting Today,

At Tuesday’s hearing, Senate Finance Committee Chairman Max Baucus, D-Mont., ranking Republican member Orrin Hatch, R-Utah, and the witnesses will discuss how best to approach tax extenders in order to create certainty and allow businesses to invest confidently and create jobs.

Witnesses scheduled to testify include Rutgers University economics department chair Rosanne Altshuler, George Mason University senior research fellow Jason J. Fichtner, University of Texas law professor Calvin H. Johnson, and U.S Chamber of Commerce chief tax counsel Caroline L. Harris.

Many of these details can be had on the hearing’s page on Senate Committee on Finance’s website.  Click here.

Submit a Statement for the Record (We all should do this now)

You and your organization or business can submit a statement to the committee to get your views into the record.  It’s a simple process but there are a few details of protocol that must be observed.  The following is copied directly from the Senate website (emphasis added by underlining).

Any individual or organization wanting to present their views for inclusion in the hearing record should submit a typewritten, single-spaced statement, not exceeding 10 pages in length. Title and date of the hearing, and the full name and address of the individual or organization must appear on the first page of the statement. Statements must be received no later than two weeks following the conclusion of the hearing.

Statements should be mailed (not faxed) to:

Senate Committee on Finance
Attn. Editorial and Document Section
Rm. SD-219
Dirksen Senate Office Bldg.
Washington, DC 20510-6200b

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.

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.