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WOTC Status Update 12/23/11
Both the House and Senate have passed a two month extension to the payroll tax cut. While it was hoped that WOTC would be part of this conversation, ultimately the legislature chose to focus only on the tax cut and not any of the tax extenders.
This two month extension does, however, force the legislature to renegotiate the payroll tax cut early next year. It is a possibility that at that time the payroll tax cut talks would also include WOTC and the extenders. For now, the core WOTC program will enter hiatus on Jan 1, 2012 while the specific veteran provisions in the Vow to Hire Heroes Act of 2011 will continue through 2012.
Disconnected Youth Form Expiration Guidance 12/2/2011
For the Disconnected Youth (DY) WOTC target group, the applicant must fill out the Department of Labor form called the Youth Self-Attestation. As some have noted, this document shows an expiration date of November 30, 2011 (i.e. yesterday). That date, however, refers to the form only. TALX has learned that the State Workforce Agencies (SWA) were given notice yesterday and were instructed to continue to accept this form for the DY category until the end of the year. If WOTC is extended before then, a new DY form will likely be published. If WOTC is not extended this form will expire and we will have to revisit this in January. Note that H.R. 2082, the WOTC extension bill, reformulates and extends DY as "High Risk Youth" as part of its core legislation.
New Veterans Category Passed by the Senate 11/10/11
In a vote of 95-0, the Senate today passed legislation that expands and extends the veteran category of the Work Opportunity Tax Credit (WOTC). The credit amounts will range from $2,400 to $9,600 per eligible hired veteran. This extension takes effect on the day the President enacts it and runs through December 31, 2012. This legislation will be voted on by the House of Representatives next week – it is expected to pass expeditiously.
Returning Heroes and Wounded Warrior Tax Credit
President Obama delivered a speech on Friday, August 5, 201, at the Washington Navy Yard which centered around a series of reforms that will better prepare service members for civilian workforce. During the speech, the President unveiled the "Returning Heroes and Wounded Warrior Tax Credit" which seems to follow the WOTC framework. The tax credits would provide the following:
- Maximum credit of $9,600 for firms that hire veterans with service-connected disabilities who have been unemployed long-term (6 or more months) - The "Wounded Warrior Tax Credit" will double the long-term unemployed credit of $4,800.
- Maximum credit of $4,800 for veterans with a service-connected disability (maintain the existing WOTC category)
- Maximum credit of $2,400 for every short-term unemployed hire
President Obama Unveiled the American Jobs Act
September 8, 2011, U.S. President Barack Obama unveiled a $447 billion package of spending initiatives and tax cuts intended to "provide a jolt to an economy that has stalled" and increase hiring. The President unveiled the American Jobs Act.
The "American Jobs Act" package includes tax cuts for employers and employees, spending on schools and roads and assistance for the jobless. More than half of the plan consists of payroll-tax cuts for employees and employers for 2012, which is estimated to cost $240 billion. In addition, the proposals included a tax credit for hiring veterans and the long-term unemployed, as well as an extension of unemployment insurance benefits.
Obama's America's Jobs Act Proposes Expansion of WOTC Eligibility
The bill proposes that tax-exempt organizations will be allowed to apply the qualifying credit amounts against payroll tax liability. Additionally, it proposes simplification of certification for these categories.
- Sec. 201 of the bill proposes the "Returning Heroes" and the "Wounded Warrior" hiring tax credits for veterans. This would provide tax credits from $5,600 to $9,600 to encourage the hiring of unemployed veterans, and up to $9,600 for hiring unemployed workers with service-connected disabilities who have been looking for a job for more than six months. These proposed categories resemble the now expired unemployed veterans and unemployed and disabled veterans categories of WOTC.
- Sec. 351 of the bill proposes a category for long term unemployed workers. The bill defines long term unemployed worker to mean any individual who was not a student for at least 6 months during the 1-year period ending on the hiring date and is certified as having aggregate periods of unemployment which equal or exceed 6 months.
There are no legislative updates for 2nd Quarter 2011.
President Announces New Economic Team
President Obama announced the addition of several new members to his economic team. He stressed that part of their mission is to "maximize the steps" already taken to encourage businesses to hire more workers and invest in new plants and equipment.
The president named Gene Sperling to succeed Lawrence Summers as director of the National Economic Council (NEC). Sperling is currently counselor to Treasury Secretary Timothy F. Geithner and served as NEC director in the Clinton administration from 1996 to 2000. The president praised Sperling for his role in negotiating the recent tax-cut compromise, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, and leading the administration's efforts in passage of the Small Business Jobs Act of 2010.
Business Incentives
- Work Opportunity Tax Credit (WOTC) was set to expire on August 31, 2011 and has been extended through 2011.
- Several business tax credits, which had expired at the end of 2009, have been extended for two years (2010 and 2011):
- Empowerment Zones
- District of Columbia Enterprise Zones
- Indian Employment Credit
- R&D Credit
- New Markets Tax Credit
Payroll Tax Cuts
- Reduces the employee's portion of Social Security taxes from 6.2 percent to 4.2 percent for wages earned up to $106,800 in calendar year 2011. Self-employed individuals contribution rate would be reduced from 12.4% to 10.4% for wages earned up to $106,800.
Alternative Minimum Tax (AMT)
- Provides a patch to assist middle-income taxpayers by providing higher exemption amounts and other targeted relief for 2010 and 2011.
Individuals
- Individual Income tax rates will remain at the current levels and will continue at those levels through 2012.
- The earned income tax credit and the child tax credit have been enhanced and extended through 2012.
Unemployment Benefits
- The extension of unemployment benefits for the next 13 months.
Federal Estate Tax
- Estate tax relief for 2 years, set at a 35 percent with a $5 million exemption, along with other changes.
The following provisions were not extended as part of the Tax Relief Act of 2010:
Business Incentives
- WOTC targeted groups, Unemployed Veterans and Disconnected Youths expired on December 31, 2010.
- Hiring Incentives to Restore Employment (HIRE) Act expired on December 31, 2010.
- Renewal Community Zones expired on December 31, 2009.
- WOTC targeted group, Hurricane Katrina expired on August 28, 2009.
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