This month, the House Ways and Means Committee released tax proposals that may eventually be included in the massive budget reconciliation bill currently making its way through Congress. For a general summary, check out this article in the Journal of Accountancy.
Our interest here is the proposal for a temporary expansion of the Work Opportunity Tax Credit (WOTC). The legislation replaces just a few key terms in the Internal Revenue Code, where the WOTC program is defined. Yet, the effect would be very valuable for employers who participate in the WOTC program.
Great news! The IRS has provided a new grace period extending the deadline for WOTC applications of employees who live in a federal empowerment zone. Two WOTC target groups are affected.
- Designated Community Residents (Group D)
- Summer Youth Employees (Group F)
Photo credit to Jacquelyn Martin/AP (Dusk falls over the Capitol, Monday, Dec. 21, 2020, in Washington)
Good news for the WOTC Program!
The Omnibus Spending bill signed by President Trump on Sunday includes a provision that extended the Work Opportunity Tax Credit (WOTC) for five more years. The new expiration date for the program is December 31, 2025. This bill made no other changes to the WOTC program.
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,”
This image includes members of the Equal Employment Opportunity Commission – Victoria Lipnic, Janet Dhillon, and Charlotte Burrows.
Today at approximately 2:00 PM Eastern, the U.S. Equal Employment Opportunity Commission (EEOC) voted to publish a new formal opinion letter clarifying that the proper use of IRS Form 8850 does not violate any of the anti-discrimination laws enforced by the EEOC.
IRS Form 8850, titled “Pre-Screening Notice and Certification Request for the Work Opportunity Credit” is a document employers must acquire from new employees “on or before” the day of their job offer, to qualify for the Work Opportunity Tax Credit. View the form here. Because this form inquires into an employee’s date of birth and disability, some employers express concern about potentially violating laws that prohibit such inquiry prior to making the hiring decision.
The bottom line is that proper use of IRS 8850 is not a violation of the Civil Rights Act or the Americans with Disabilities Act (ADA).
These are unexpected and difficult days. You’re very fortunate if Covid-19 has not disrupted your job or your workplace to some degree. Our office is experiencing the same kind of challenges.
Many people are working from home. If that’s an option in your industry, it’s a great blessing. These circumstances are forcing many of us to learn new ways to get it all done. When the Covid-19 contingencies are over, some industries will almost certainly choose to continue the work-from-home trend.
For now, however, many enterprises have little choice but to lay off workers. Millions of people are (at least temporarily) losing their jobs. It’s painful. It’s scary. But don’t lose hope because . . .
If you’ve ever struggled through completing Work Opportunity Tax Credit (WOTC) forms with an employee, you have surely also thought, “There must be a simpler way.” Maybe you’ve even had a good idea for making it better. Now is the time to make your voice and opinions heard!
The U.S. Department of Labor is now accepting public comments for revising a variety of WOTC-related forms.