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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.

Posted in Work Opportunity Tax Credit | 4 Responses »
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U.S. Senate Passes Tax Bill – Eyes Turn to House to Please Add Back Missing Tax Incentives!

Wednesday, December 15th, 2010

The Senate today passed the much anticipated tax bill without renewing the HIRE Act Payroll Tax Exemption, federal Renewal Communities, or the WOTC provisions for disconnected youth, unemployed veterans, or Gulf Opportunity Zone employers.  This is a disappointment, but not unexpected. 

Now that HR 4853 has been passed to the U.S. House of Representatives, eyes turn to susceptible House members seeking an amendment to add these provisions.  If these incentives are important to you, please consider contacting House Members from your jurisdictions and urge them to support including these 5 provisions with any amendments to the tax bill.  Make a special effort to contact Ways and Means Chairman Sander Levin.

Paul Suplizio, President of the WOTC Coalition, pointed out today that these 5 programs are “current-law job creation incentives” — so we are not urging the creation of any new program.  In summary, what we seek:

  1. Extension of the HIRE tax credits
  2. Extension of the Renewal Community program
  3. Extension of WOTC for disconnected youth
  4. Extension of WOTC for unemployed Iraq-Afghanistan era veterans
  5. Extension of WOTC for Gulf Opportunity Zone employers

On the bright side, the bill passed by the Senate does include reauthorization of:

  • The WOTC Program through 2011
  • The Research and Development Tax Credit
  • The Indian Employment Credit
  • The Empowerment Zone Program
  • The District of Columbia Enterprise Zone

See my previous post on this.

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Asking the US House to Include Key Tax Incentives in House Amendment

Monday, December 13th, 2010

As noted in my most recent post, some key employment incentives were left out of the Senate version of the tax bill being discussed in Washington D.C.  I received a correspondence today from Paul Suplizio, President of the WOTC Coalition, detailing current efforts to include the missing programs in the House version of the bill.

Specifically, the WOTC Coalition is urging that the following be included in the House bill if the opportunity for amendment materializes.

  • Reauthorization of the HIRE Act’s Payroll Tax Exemption for Employers
  • Reauthorization of Renewal Communities
  • Continuation of Disconnected Youth as a WOTC targeted group
  • Continuation the Unemployed Veterans as WOTC targeted group
  • Continuation of WOTC for Gulf Opportunity Zone employers

Efforts at persuasion are focused on Representative Sander Levin, Chairman of the House Committee on Ways and Means and Senator Max Baucus, Chairman of the Senate Committee on Finance. 

Representative Charles B. Rangel, a known expert and champion of the WOTC program within the House of Representatives has also been contacted with the hope that he will use his expertise to help persuade the Chairman to include these items in any amendment to the bill.

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Renewal of Key Tax Incentives Still Up In the Air

Thursday, December 9th, 2010

As reported by Jamie Dupree Washington Insider, Senate Majority Leader Harry Read’s office has released a summary of elements included in the Senate’s version of the tax compromise between President Obama and Congressional Republicans.  The list is long and may include other provision of interest to you.  For my purposes, however, this post focuses on employment-based tax incentives (and the much prized R&D credit).

The bad news (or maybe the good news, depending on your perspective and ability to read the future) is the House Democratic leadership seems to be digging in their heels against bringing a House version of the bill to the floor for a vote. 

I read through the Senate bill’s summary twice and bring you the follow excerpts:

R&D credit. The bill reinstates for two years (through 2011) the research credit.

Indian employment credit. The bill extends for two years (through 2011) the business tax credit for employers of qualified employees that work and live on or near an Indian reservation. The amount of the credit is 20 percent of the excess of wages and health insurance costs paid to qualified employees (up to $20,000 per employee) in the current year over the amount paid in 1993.

Empowerment Zones. The bill extends for two years (through 2011) the designation of certain economically depressed census tracts as Empowerment Zones. Businesses and individual residents within Empowerment Zones are eligible for special tax incentives.

District of Columbia Enterprise Zone. The bill extends for two years (through 2011) the designation of certain economically depressed census tracts within the District of Columbia as the District of Columbia Enterprise Zone. Businesses and individual residents within this enterprise zone are eligible for special tax incentives. The bill also extends for two years (through 2011) the $5,000 first-time homebuyer credit for the District of Columbia.

Work opportunity tax credit (WOTC). Under current law, businesses are allowed to claim a work opportunity tax credit equal to 40 percent of the first $6,000 of wages paid to new hires of one of nine targeted groups. These groups include members of families receiving benefits under the Temporary Assistance to Needy Families (TANF) program, qualified veterans, designated community residents, and others. The WOTC program is currently set to expire August 31, 2011. The bill extends this provision through December 31, 2011 and would be effective for employees hired after date of enactment.

Noticeably missing from the summary are extensions for a number of WOTC program target groups.  Current WOTC provisions provide for at least 12 targeted groups (A through K plus Hurrican Katrina employees), not merely the 9 mentioned in the summary. Specifically, missing from the summary are Hurricane Katrina Victims, Disconnected Youth, and Unemployed Veterans.  HOWEVER, I have not read the actual text of the bill.  These specific issues might be addressed there. 

Also, I see no mention of extending the HIRE Act’s employer payroll tax exemption into 2011.  I do, however, see a new Payroll Tax Holiday provision, which provides an automatic 2% reduction of the employee portion of the social security tax for all employees and self-employed individuals.

Keeping our fingers crossed . . ..

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Jobs Bill Passes House – Tax Credits Expanded Big Time!

Friday, September 24th, 2010

As we anticipated, the U.S. House of Representatives has sent the Small Business Jobs Bill to President Obama’s desk for signing.  The Senate passed HR 5297 last week, sending it to the House where it was passed on Wednesday.  See previous post.  President Obama is expected to sign.

The bill significantly expands the usability of all of the General Business Credits established by Section 38 (b) of the Internal Revenue Code.   This includes the Work Opportunity Tax Credit (WOTC), the Empowerment Zone Employment Credit and the Research & Development Credit, among many others.

First, it’s important to understand that this is a “Small Business” jobs bill.  In other words, the tax credit provisions apply only to businesses whose average annual gross income does not exceed $50 million (averaged over the past 3 years). Note that it also does not apply to publically traded corporations.

Beginning with tax credits generated in 2010, the bill’s tax credit provisions:

  • Apply to businesses with $50 million or less in gross income (averaged over past 3 years)
  • Allow all “general business credits” generated in 2010 (and/ or carried forward to 2010) to be carried back 5 years to secure tax refunds
  • Removes the alternative minimum tax (AMT) provision that previously limited the use of tax credits by businesses subject to AMT

Now, we sit back and wait for President Obama to sign the bill so we can get to work!

[Update 10-11-2011: Although the legislative summary by Senate Finance Committee does not mention this, the IRS website states that these provisions only apply to tax credit generated in 2010 or that was carried forward to 2010 from prior periods.  Here's the IRS language: 

"This is a one year initiative applicable only to the tax year 2010 (For fiscal year filers, the effective tax year is the first tax year beginning after December 31, 2009). The five-year carryback period is available only for credits carried forward to the tax year 2010 and/or earned in the tax year 2010"

End update]

[Update 10/24/2011:  The day after I posted the previous update above, the IRS changed the language I quoted, creating a much different picture of the tax credit available for carry back.  As of October 12, 2011 the IRS site reads : 

"This is a one year initiative applicable only to the tax year 2010 (For fiscal year filers, the effective tax year is the first tax year beginning after December 31, 2009). The five-year carryback period is available only for credits earned in the tax year 2010."

Note that it now explicitly states that only credit generated in tax year 2010 is able to be carried  back 5 years.

End update.]

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House to Vote on HR 5297 Small Business Jobs Bill Next Week

Friday, September 17th, 2010

According to House Majority Leader Steny Hoyer (Dem) the U.S. House of Representatives will vote on the Small Business Jobs Bill next week.  HR 5297 was passed by the Senate earlier this week, and sent back to the House for approval.  It is believed that if the bill passes the House this time, it will also be signed by President Obama.

From Representative Hoyer’s press release:

Next week, we will take action on the Small Business Lending Act, which we are discussing with our Members. This bill will provide needed assistance to small businesses and help them expand and add jobs. There will be no votes in the House on Tuesday, September 21st. The House will meet for legislative business on Wednesday, September 22nd, at 2:00 p.m., with votes postponed until 6:00 p.m

As I mention in my post on Tuesday, this bill would provide a 5-year carryback for Work Opportunity Tax Credits and would expand the utilization of all other general business credits by removing limitations associated with the alternative minimum tax or AMT.

See other posts on this subject.

[Update 10-11-2011: Although the legislative summary by Senate Finance Committee does not mention this, the IRS website states that these provisions only apply to tax credit generated in 2010 or that was carried forward to 2010 from prior periods.  Here's the IRS language: 

"This is a one year initiative applicable only to the tax year 2010 (For fiscal year filers, the effective tax year is the first tax year beginning after December 31, 2009). The five-year carryback period is available only for credits carried forward to the tax year 2010 and/or earned in the tax year 2010"

End update]

[Update 10/24/2011:  The day after I posted the previous update above, the IRS changed the language I quoted, creating a much different picture of the tax credit available for carry back.  As of October 12, 2011 the IRS site reads : 

"This is a one year initiative applicable only to the tax year 2010 (For fiscal year filers, the effective tax year is the first tax year beginning after December 31, 2009). The five-year carryback period is available only for credits earned in the tax year 2010."

Note that it now explicitly states that only credit generated in tax year 2010 is able to be carried  back 5 years.

End update.]

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Small Business Jobs Bill Passes Senate Includes WOTC 5-Year Carryback And More

Tuesday, September 14th, 2010

The U.S. Senate has passed HR 5297, the Small Business Jobs Bill, by a vote of 61-37.  The bill, which will be highly beneficial to some of my clients, must now go back to the House of Representatives for reconsideration there.

If passed into law, this bill will include a number of provisions relevant to hiring-based tax incentives like the Work Opportunity Tax Credit and the federal Empowerment Zone Employment Credit.

First, it would allow for general business credits, including the Work Opportunity Tax Credit, to be carried back five years. In other words, if a small business generates more WOTC than it can use in 2010, that excess credit can be carried back and utilized against tax already paid in 2009, 2008, 2007, 2006, or 2005 — resulting in tax refunds.

The Senate Finance Committee’s summary explains as follows:

Under current law, a business’ unused general business credit may generally be carried back to offset taxes paid in the previous year, and the remaining amount may be carried forward for 20 years to offset future tax liabilities. This bill extends the one year carry back for general business credits to five years for certain small businesses. This applies to general business credits for those sole proprietorships, partnerships and non-publicly traded corporations with $50 million or less in average annual gross receipts for the prior three years.

Also, the use of general business credits would no longer be limited by the Alternative Minimum Tax or AMT.

Under the Alternative Minimum Tax (AMT), taxpayers may generally only claim allowable general business credits against their regular tax liability, and only to the extent that their regular tax liability exceeds their AMT liability. A few credits may be used to offset AMT liability, such as the credit for small business employee health insurance expense. This bill allows certain small businesses to use all types of general business credits against their AMT. This applies to general business credits for those sole proprietorships, partnerships and non-publicly traded corporations with $50 million or less in average annual gross receipts for the prior three years.

An important note here is that utilization of the Work Opportunity Tax Credit is ALREADY NOT subject to the AMT limitations. The federal Empowerment Zone Employment Credit, on the other hand, would gain greater application under this bill.

For all provisions, see the Senate Finance Committee’s summary of HR 5297.

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