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.