Employers interested in the Work Opportunity Tax Credit (WOTC) and the federal Empowerment Zone program received good news this morning. Just after 5:30 AM, President Donald Trump announced that he had signed the Bipartisan Budget Act of 2018.
With this deal, numerous expired tax benefits were retroactively reauthorized including federal Empowerment Zones. Renewing Empowerment Zones also impacts the WOTC program.
Qualification under WOTC Target Groups D and F, “Designated Community Resident” and “Summer Youth,” respectively, among other things requires that an employee reside within an authorized Empowerment Zone.
The Empowerment Zone program had expired on December 31, 2016. Anticipating that Congress would eventually reauthorize the program, thousands of employers have continued submitting WOTC applications for employees who reside in the zones. Recently, State Workforce agencies began sending out Denial Letters for those applications. Those denials will now have to be challenged and reversed.
Advice to employers and WOTC consultants: Review all denials and promptly appeal any denials under Target Groups D and F for 2017 new hires.
Unfortunately, the authorization only covered 2017. In practical terms, the Empowerment Zone program expired again on January 1, 2018. Better luck with the next bill.
After a flurry of last-hour compromise, the the Tax Cuts and Jobs Act (aka Republican tax reform bill) was finalized on Friday. At about 5:30 PM Eastern, an updated copy of the bill was released to the public (see Business Tax Reform, Section E (4).)
The pic below is from the the Business Tax Reform section, subsection E(4) dealing with the proposed repeal of the Work Opportunity Tax Credit. While indicating that the House Bill would have repealed the tax credit, it also states that the Senate bill had no such provision. More importantly, “The conference agreement does not follow the House bill provision.”
Excerpt from Final Legislation
Senator John Thune
I received this link to a recent article in Accounting Today from a colleague and a reader of The WOTC Planet. According to the article, Senator John Thune (Republican from South Dakota) has confirmed the Senate’s intention to act on expired tax incentives, which are typically reauthorized with a tax extenders bill.
Thune is currently Chair of the Senate Commerce Committee. According to Accounting Today:
The Senate plans to act on a slate of expired tax credits before month’s end, according to John Thune, the Senate’s No. 3 ranking Republican who serves on the Finance Committee. Lobbyists have been told the package of “tax extenders”—renewing tens of billions of dollars in expired tax incentives—could be hitched to must-pass government funding legislation expected in coming weeks.
I found a related mention, published on November 16 in the Wall Street Journal.
. . . [S]enators are also talking about a separate tax-extenders bill that would follow the broader [tax-reform] bill.
It’s not clear what would be in such a package, but Finance Committee members have mentioned renewable-energy tax breaks and the New Markets Tax Credit, which encourages investment in struggling areas
A 2017 tax extenders bill would offer another avenue to restore expired tax benefits missed by current tax reform deliberations.
Proponents of the Work Opportunity Tax Credit (WOTC) have been urging Congress to expand WOTC Target Groups and to make the program permanent. A 2017 tax extenders bill would provide one more potential means to those ends.
United States Senate Chamber
Saturday just before 2:00 AM Eastern, the Senate voted to pass its version of the Tax Cuts and Jobs Act. The Senate’s bill remains silent on the Work Opportunity Tax Credit (WOTC), which the House version seeks to repeal.
In this circumstance, silence is golden if you prefer that the WOTC program remain in place.
A draft of the proposal was leaked to Bloomberg on Saturday. You can read it here. To satisfy my own skepticism, I searched the 479 page bill for key words that could reference the WOTC program. I also read every instance found in the document of the word “repeal.” It’s clean. None of them refer to the WOTC Program.
The next phase will involve House and Senate appointees getting together to hash out their differences. If you support keeping the WOTC program alive, this is your last opportunity to contact members of Congress about this issue.
Senator Orin Hatch, R Utah
Yesterday, Chairman Senator Orin Hatch (R, Utah) released a revision to the Senate’s tax reform proposal. The revision is scheduled today for markup before the Senate Committee on Finance.
While there are substantial changes in the document, no additional threat to the Work Opportunity Tax Credit (WOTC) has materialized. The question of future amendments to the bill remains alive.
Thursday afternoon, the Ways and Means Committee finished the House’s markup of the Tax Cut and Jobs act, voting down amendments to add back the Work Opportunity Tax Credit (WOTC) and a number of other specialized tax benefits.
While this is bad news for WOTC proponents, better news emerged from the Senate today. The Senate Finance Committee released its own version of tax reform and it does not include the dreaded WOTC repeal.
Beginning on page 106 of the proposal, the Senate bill treads very lightly on existing business credits. Only three benefits are specifically modified including:
- a reduction of a tax credit based on expenses related to the clinical testing of certain drugs,
- a reduction of a rehabilitation credit earned through investments in rehabilitating historical properties, and
- the repeal of an existing deduction for unused general business credits for which the carry-forward period has expired.
Since WOTC is a “general business credit”, it would likely be affected by the last provision. But the repeal does not affect the tax credit itself — only the ability of tax payers to eventually claim expired WOTC credit as a deduction if they were not able to utilize it before the end of WOTC’s 20-year carry-forward period.
The Wall Street Journal published a helpful comparison of the Senate and House version of tax reform. Click on the image to review the table in larger format.
The Senate bill is now up for discussion and additional markup. More details will be fleshed out in coming days.
According to The Hill this evening, the differences between the two bills:
. . . likely sets up a difficult conference negotiation between the chambers later in the year, assuming Senate Majority Leader Mitch McConnell (R-Ky.) can round up enough votes to pass the legislation — an uncertain prospect at this point.
You’re probably already aware of the House’s tax reform proposal, which in it’s current form would repeal the Work Opportunity Tax Credit (WOTC) program. Repeal would be effective 01/01/2018. The draft reform bill was introduced 7 days ago as H.R. Bill 1, the Tax Cut and Jobs Act.
The repeal of WOTC as proposed is wholesale and complete. Here’s the text in its entirety:
SEC. 3404. REPEAL OF WORK OPPORTUNITY TAX CREDIT.
(a) In General.—Subpart F of part IV of subchapter A of chapter 1 is amended by striking section 51 (and by striking the item relating to such section in the table of sections for such subpart).
(b) Clerical Amendment.—The heading of such subpart F (and the item relating to such subpart in the table of subparts for part IV of subchapter A of chapter 1) are each amended by striking “Rules for Computing Work Opportunity Credit” and inserting “Special Rules”.
(c) Effective Date.—The amendments made by this section shall apply to amounts paid or incurred to individuals who begin work for the employer after December 31, 2017.
After one week, no effort to remove or amend this provision has so far gained significant traction. In addition to NEON, The WOTC Coalition, and other more specific interest groups, many individuals are also reaching out to their members in the House and Senate.
If you or your organization are involved in this effort, please let me know.
Have your heard?
Congress passed and President Trump signed a bill on September 29 that provides a temporary WOTC-like tax benefit for businesses impacted by three recent powerful hurricanes.
H.R.3823 – Disaster Tax Relief and Airport and Airway Extension Act of 2017 includes the “Employee Retention Credit for Employers Affected by Hurricanes” Harvey, Irma and Maria.
Eligible employers include any that *conducted an active trade or business *within one of the bill’s defined disaster relief zones *on the date the hurricanes struck, whose business then *became inoperable between that date and December 31, 2017 because of the hurricane.
Eligible employees are persons who worked for such a business, whose principal place of employment was within the disaster relief zone at the time the hurricane struck.
Like WOTC, the tax credit amount equals 40% of the first $6,000 in wages paid. Consideration is limited, however, to wages paid during the relief period, which ends December 31, 2017.
An eligible employee could have also generated the Work Opportunity Tax Credit (WOTC) prior to the hurricane. Wages paid to such a WOTC-employee are eligible for the Retention Credit unless those same wages are concurrently generating the WOTC benefit itself. In other words, you can’t claim both benefits on the same wages — but you can claim the two benefits one after the other.
Photo by Allegra Boverman.
It’s called the Military Spouse Hiring Act (H.R.2318). If passed, military spouses would become the newest Target Group for the Work Opportunity Tax Credit (WOTC).
Congresswoman Carol Shea-Portal (D, NH) introduced this simple proposal to the House Committee on Ways and Means on May 3 of this year.
When I stumbled across this bill today, I felt embarrassed at first. How could I have overlooked it? Then I dug a little deeper.
For a bill with 28 bipartisan co-sponsors, it received surprisingly little media coverage. Try a Google search using the bill’s title. I just did.
There is not a single main-stream media source within the entire first two pages of results. Everything is either government or military oriented — good sources for their unique constituents but most people aren’t tuned in there.
Nothing new has happened in the Congressional record since May, when it was referred to committee.
I’ll continue to monitor this and will keep you informed.
Seriously, I’m asking you. What’s new in your WOTC world?
We would love to hear about your work adventures, your plans, your challenges.
There’s not much news right now about WOTC on the national front. We know there are some suggestions floating around for program expansion. And every once in while, a feel-good story or a local workshop pops up in a headline or a press release.
Are you working in a state workforce agency somewhere in our great nation? I know some of the agencies are facing challenges with updating their technology. It happens every time Congress changes or expands the WOTC program’s eligibility requirements.
Are you working in a state that is suffering from an extended backlog of WOTC applications? I’m not offering criticism. We all have our challenges. What do you need? What do you wish you had? What would make it better?
How about veterans? Is anyone expanding their domain in a way that might help more veterans use the WOTC program to get jobs? We’ve seen how difficult it is, perhaps it’s impossible, to change the world on a large scale. So many variables, so much money, bureaucracies, disconnected organizations and systems. Yet, a few dedicated people could make a meaningful difference locally for military veterans in their own community.
Tells us. What’s new with you?