So Far, So Good – WOTC Program Survives in Senate’s Revised Tax Reform Plan

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.

Update on Tax Reform – Senate Bill Does Not Repeal WOTC

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.

Tax Reform Proposal to Repeal WOTC

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.

WOTC-like Employee Retention Credit For Employers Affected By Hurricanes Harvey, Irma and Maria

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.

Congresswoman Carol Shea-Portal’s Military Spouse Hiring Act Would Expand WOTC Target Groups

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.

What’s New?

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?

US Legislators from Illinois Unveil Proposal to Expand WOTC for At-risk Youth

An article today in Enews Park Forest highlights proposals by US Representative Robin Kelly and US Senator Dick Durbin to expand the Work Opportunity Tax Credit (aka WOTC).  They’re calling it The HERO for At-Risk Youth Act.

Specifically, the bill would provide a tax credit of up to $2,400 for businesses that hire and train youth ages 16-25 who are out of school and out of work. The legislation would also expand the summer youth program under the Work Opportunity Tax Credit (WOTC), which provides a tax credit to businesses which hire for summer employment youth ages 16-17 who are enrolled in school and who live in highly distressed urban communities known as Empowerment Zones, by doubling the amount of the credit to $2,400 and expanding the program to include year-round employment.

The first part sounds like a remake of WOTC’s now expired Disconnected Youth target group.  I’ll report more as things progress (if they progress).

Congress Renews Effort to Expand WOTC with Foster Youth Target Group

Last September, Democrat Representative from Washington State, Jim McDermott introduced HR 5947, the Improved Employment Outcomes for Foster Youth Act of 2016. That bill died with the passing of the last Congress.

A similar bill has now been introduced to the new Congress.  H.R.2060 and S.885 were both introduced to their respective chambers on April 6, 2017. While the text of the new bills is not yet available, both of their titles state that they would “amend the Internal Revenue Code of 1986 to include foster care transition youth as members of [WOTC] targeted groups.”

See my post from last September for detailed coverage of the original bill.  My guess is that the current bills are very similar.

DOL Issues Revised Forms for Work Opportunity Tax Credit WOTC

The Department of Labor has issued revised and updated forms including the ETA 9061 Individual Characteristics Form and ETA 9175 Long Term Unemployment Recipient Self Attestation Form.

There are significant changes on both forms, simplifying and clarifying the requirements for Long Term Unemployment Recipients or LTURs. Number 23 on ETA 9061 has been reduced from a double-parted (2 check boxes) to a single-check box question. The new language is easier to understand and less likely to trip-up new hires.

The ETA 9175 Self Attestation Form or SAF, has been greatly simplified.  The employer’s tax ID line has been removed. The statement section has also been completely revised.  See pic below.

Revised SAF

These simplifications will be a great blessing to new hires and the state workforce agencies that evaluate their eligibility.  The changes, however, will require design-level changes to the computer-based software and databases used by agencies to manage the data provided on the forms.  The same is true for survey- and application-management systems used by employers and authorized agents.

A grace period for transitioning to the forms has been granted through April 11, 2017. That’s 39 days from today.  The race is on!

Good luck everyone!

Student Loan Repayment Act of 2016 Would Add Student Debtors as New WOTC Target Group

dennisross_florida-republican

Representative Dennis Ross (FL Republican)

An interesting opinion piece by Representative Dennis Ross (Republican from Florida) titled “Responsible solutions to repaying student loans,” recently popped up in Florida Politics. Ross was contributing as a guest writer.

Ross introduced the Student Loan Repayment Act to the US House of Representatives in September this year.  Student debtors carrying at least $10,000 in education loans, who have earned an Associate’s Degree or better, would be classified as qualified “Student Loan Repayers.”  This large group of Americans would thus become a new target group under the Work Opportunity Tax Credit (WOTC) program.

The bill also proposes tax benefits to employers who help employees repay their student loans via matching contributions to an employer-administered Student Loan Repayment Plan.  See the full text of the bill here.  As of today, the bill has no co-sponsors.