Work Opportunity Tax Credit Extension

WOTC Extension Approved – Updates from the Senate Finance Committee – August 27th, 2012:

Senator Max Baucus (D.MT.) and Ranking Member Senator Orris Hatch (R.UT) announced a bipartisan agreement on a tax extenders bill.

Work opportunity tax credit. This bill extends for two years, through 2013, the provision that allows businesses to claim a work opportunity tax credit equal to 40 percent of the first $6,000 of wages paid to new hires of one of eight targeted groups. These groups include members of families receiving benefits under the Temporary Assistance to Needy Families (TANF) program, qualified ex-felons, designated community residents, vocational rehabilitation referrals, qualified summer youth employees, qualified food and nutrition recipients, qualified SSI recipients, and long-term family assistance recipients. Based on preliminary estimates, a two-year extension of this proposal is estimated to cost $1.8 billion over ten years.

Returning Heroes and Wounded Warriors Work Opportunity Tax Credits. Currently businesses are allowed to claim a work opportunity tax credit (WOTC) for hiring qualified veterans in the following targeted groups and up to the following credit amounts:

• · Veterans in a family receiving supplemental nutrition assistance: $2,400
• · Short-term unemployed veterans: $2,400
• · Service-related disabled veterans discharged from active duty within a year: $4,800
• · Long-term unemployed veterans: $5,600
• · Long-term unemployed service-related disabled veterans: $9,600

A credit against Social Security taxes is also available to tax-exempt employers. Transfers are made from general revenues to make the Social Security trust fund whole. The provision expires on December 31, 2012. The proposal would extend these credits for an additional year, though 2013. Based on preliminary estimates, a one-year extension of this proposal is estimated to cost $125 million over ten years.

The information below was origination posted on December 7, 2011:

The Work Opportunity Tax Credit (WOTC): An Employer-Friendly  Benefit for Hiring Veterans Most in Need of Employment

On November 21, 2011, President Obama signed into law the Vow to Hire Heroes Act of 2011.  Section 261 of the Act, the “Returning Heroes and Wounded Warriors Work Opportunity Tax Credits,” amends and expands the definition of WOTC’s Veteran target groups.  The changes and new provisions in this Act apply to individuals who begin to work for an employer the day after its enactment, November 22, 2011, and before January 1, 2013.

The Vow to Hire Heroes Act of 2011 includes the following provisions:

• Extends the current target group for Veterans receiving Supplemental Nutrition Assistance Program (SNAP) benefits with the same qualified wages cap¹ ($6,000) and maximum tax credit ($2,400).

• Extends the current target group for Veterans with a service-connected disability with the same qualified wages cap ($12,000) and maximum tax credit ($4,800).

• Extends the current target group for Veterans with a service-connected disability unemployed for at least 6 months with the qualified wages cap increased to $24,000 and the maximum tax credit increased to $9,600.

• Establishes a new target group for unemployed Veterans, similar to the Recovery Act of 2009 unemployed Veteran group that expired on December 31, 2010:

1. Veterans unemployed for at least 4 weeks with a qualified wages cap of $5,600 and maximum tax credit of $2,400.
2. Veterans unemployed for at least 6 months with qualified wages cap of $14,000 and maximum tax credit of $6,000.
3. State Workforce Agencies will certify veterans as meeting the required periods of unemployment based on receipt of unemployment insurance compensation.

Note:  The 5-year period ending on the hiring day requirement that was part of the Recovery Act unemployed veteran group was rescinded.

• Qualified “tax-exempt” (i.e., 501(c)) organizations can now participate by hiring qualified veterans and are now eligible to claim the WOTC.

• These provisions became effective the day after the President signed the Vow to Hire Heroes Act into law, November 22, 2011, through December 31, 2012.

• The Vow to Hire Heroes Act does not extend any of the other (non-Veteran) WOTC target groups, which currently expire on December 31, 2011.