Last Friday, Senator Rob Portman (R-OH) made an appearance during a webcast hosted by the Urban-Brookings Tax Policy Center. His remarks were optimistic about including a number of tax-extenders in a pandemic stimulus bill after the elections. I think that as a member of the Senate Finance Committee, Portman just might know something about it.
As described by Law 360, Portman called for expanding the Work Opportunity Tax Credit and making WOTC permanent. His WOTC expansion would create a new Target Group for people unemployed because of the pandemic. The U.S. Senate included this same provision in its July stimulus proposal. See post herein, “Senate COVID Bill Would Expand WOTC Again.”
The U.S. Department of Labor announced twelve state recipients of $2.5 million in grants to help improve their WOTC programs. WOTC is an acronym for Work Opportunity Tax Credit. Agencies in some states suffer from multi-year processing backlogs and severely need improvements.
According to Assistant Secretary of the Employment & Training Administration John Pallasch:
“The U.S. Department of Labor is committed to helping states that are in need of upgrading their Work Opportunity Tax Credit processing systems or conducting other activities to reduce their backlogs to ensure U.S. employers can benefit from the Federal tax credit.”
Photography by Karolina Grabowska
Today, the U.S. Senate released its version of round-two Covid-19 relief. CARES 2.0, officially titled the “American Workers, Families, and Employers Assistance Act,” includes a substantial expansion of the Work Opportunity Tax Credit (WOTC).
Unfortunately, CARES 2.0 does NOT include an extension of WOTC beyond 2020. Hopefull an extension will come later.
The Senate bill proposes to add a new WOTC target group known as “2020 COVID-19 Unemployment Recipients.” The definition of a qualified employee would be very simple. The person must have either received (or have been approved to receive) unemployment compensation during the week of their hire date, or the week immediately preceding their hire date.
Image of Senator Rob Portman of Ohio
According to a recent article published by Law360, some members of Congress are considering making general business tax credits, including the Work Opportunity Tax Credit (WOTC), refundable. The change would likely be temporary, as a contribution to COVID 19 recovery efforts.
From the article:
“Sen. Rob Portman, R-Ohio, a senior member of the Finance Committee, said he and other Republicans were looking into the idea of allowing a business to receive a refund, or cash payment. It would be equal to the business’ so-called general business credit, which represents the cumulative value of various tax credits, which currently can be carried back for one year or carried forward over 20 years under Internal Revenue Code Section 39.”
Most tax credits are not refundable. You can use the tax credit up to a certain amount to offset taxes owed. The amount leftover is then reserved (or carried forward) to be used against tax owed next year. If, however, a tax credit becomes refundable, then in essence it can be filed for a cash payment from the government, even if no tax is owed.
Portman also suggested Congress may examine ways to make all of the various tax credits more appealing to businesses. “We can look at all of the credits. If you look, there are 38 of them,”