Today’s Budget Deal Reauthorizes Empowerment Zones Retroactively for 2017

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.

Washington DC Empowerment Zone is No More

This question has been coming up since the passage in January of the American Taxpayer Relief Act of 2012.  Did the act renew the Washington DC Empowerment Zone designation?

Answer: Unfortunately, no.

While the American Taxpayer Relief Act fo 2012 did renew and extend Empowerment Zones generally — retroactively for 2012 through the end of 2013, that renewal did not include the Washington D.C. zone, which would have required additional treatment in the law.

Here’s the excerpt from the IRS website.

 

The Designation of Washington, DC, as an Empowerment Zone, Expired After 2011 — 19-FEB-2013

If you downloaded the 2012 Form 8844 before February 12, 2013, please note the following.

The American Taxpayer Relief Act of 2012 did not extend Washington, DC’s designation as an empowerment zone. Under Internal Revenue Code section 1400, the designation of Washington, DC as an empowerment zone, expired after 2011.

 

 

Fresno CA Offering Tax Incentives Workshop to Inform Local Businesses

A workshop presented by the City of Fresno Downtown and Community Revitalization Department is scheduled for Thursday, August 25 from 3:30 to 5:00 PM at the Greater Fresno Area Chamber of Commerce.  Visit the event webpage for more information and to RSVP. Also see the event’s promotional flyer.

Topics include the CA Enterprise Zone program and Federal Empowerment Zone tax incentives. 

The Fresno California region is home to multiple tax-favor zones including the City of Fresno CA Enterprise Zone, the Fresno County Regional Enterprise Zone and the Fresno Federal Empowerment Zone.

Reader’s Question About Washington DC Empowerment Zone

Someone asked me recently (1) if the District of Columbia enterprise zone is considered to be a federal empowerment zone and (2) if all residents of the District of Columbia would be eligible employees for purposes of the empowerment zone employment credit.

There are ways in which the Washington DC zone is not exactly like other empowerment zones.  For purposes of the empowerment zone employment credit, however, it’s a relatively simple concept.

The instructions to IRS Form 8844 “Empowerment Zone and Renewal Community Employment Credit,” are relatively (cough couch) clear.

Under [Internal Revenue Code] section 1400, parts of Washington, DC, are treated as an empowerment zone. For details, use the RC/EZ/EC Address Locator at www.hud.gov/crlocator or see Notice 98-57, on page 9 of Internal Revenue Bulletin 1998-47 at www.irs.gov/pub/irs-irbs/irb98-47.pdf.

I read the relevant section of IRS Bulletin 1998-47 as suggested.  It confirms that parts of the District of Columbia are to be treated as an Empowerment Zone.  However, the bulletin is not helpful to the average person who wants to find out the boundaries of the zone . . . or discover if their businesses is eligible.  Just use the HUD address locator.

The IRS instructions to Form 8844 go on to define a “Qualified empowerment zone employee” as a full or part-time employee who:

(1) Performs substantially all of the services for that employer within an empowerment zone in the employer’s trade or business and

(2) Has his or her principal residence within that empowerment zone while performing those services

The rules for the Washington DC zone, however, differ as to point number 2. 

Employees who work in the Washington, DC, empowerment zone may live anywhere in the District of Columbia.

I hope that’s helpful.  If any reader has additional information to clarify the nature of the Washington zone, I will be happy to considering posting it here.  Send me a note, or post a comment, with your sources.