President Donald Trump has signed the Tax Cuts and Jobs Act into law. This law delivers a $1.4 trillion tax overhaul to the U.S. tax code. It provides generous cuts to corporations and simplifies tax brackets for individual filers, lowering taxes for most people. As part of the congressional process to address the tax reform, the future of tax provisions such as the Work Opportunity Tax Credit (WOTC) have became uncertain, particularly in the House. The House called for an unprecedented repeal of the program, as of December 21, 2017.
On Friday, December 15, Congress released the final draft of the tax-reform bill. We are happy to report that the conference committee deferred to the Senate position, which left WOTC as is. Therefore, WOTC has survived tax reform and will remain in place through its current expiration date of December 31, 2019. A vote is expected to take place by Wednesday, December 2017, to decide the fate of the tax-reform bill.
We continue to monitor the situation closely and will keep you up to date on the developments as we learn of them.
On Thursday, November 2, 2017, the House Ways and Means Committee released a first draft of tax reform. The Tax Cuts and Jobs Act H.R. 1 includes many of the items listed in the tax reform framework released by the Republicans in September, as well as additional details. The bill proposes fewer tax brackets for individuals as well as higher deductions for middle-class families and lowers corporate tax rates to 20%. It is estimated that H.R. 1 will also curtail federal government revenues by approximately $1.5 trillion over ten years. As it turns out, the proposed legislation also calls for a repeal of the Work Opportunity Tax Credit (WOTC) by December 31, 2017, along with several other provisions.
We are now eight months into 2017, and many employers are wondering what the status with tax reform is and how might impact the future of WOTC. As we mentioned in our last update, at the start of this year, House Speaker Paul Ryan proposed a plan to reform our tax code which was designed to be revenue-neutral. His plan proposed a Border Adjustment Tax (BAT) which would tax imports to the United States, but it would not tax exports. Continue reading “Update: Tax Reform and its Potential Impact on the Work Opportunity Tax Credit (WOTC)”
State Workforce Agencies (SWAs) responsible for the administration of the Work Opportunity Tax Credit program (WOTC) are working diligently to process retroactive and current WOTC program certification requests.
The US Department of Labor Employment and Training Administration is now issuing the balance of FY2016 funding in the amount of $14,856,655 to the SWAs for the implementation of the WOTC program activities through September 30, 2016. The appropriated level for FY2016 totals $18,485,000.Continue reading “US Department of Labor Issues Funding to State Workforce Agencies”
The PATH Act increased the expensing break for qualifying real-estate improvements. It also made it easier for improvements and expenses to qualify for bonus first-year depreciation, but the determinations of qualifying improvements and expenses are more complex. The detail of those new complications is lengthy. However, as summarized by Thomas Reuters in their Checkpoint New dated March 8, 2016, as a general rule, the cost of commercial real-estate improvements is recovered over a period of 39 years via straight-line depreciation only.
Recently released IRS Notice 2016-22 provides for a transitional relief period for the Work Opportunity Tax Credit (WOTC) program. This provides business with the opportunity to retroactively capture the WOTC program for hires made prior to its reauthorization i.e., the “hiatus” or period of time in which the WOTC program was expired due to Congressional inaction on the tax extenders bill.Continue reading “WOTC Program Transitional Relief Announced”
The senate voted 53-33 to pass H.R. 2029, the Omnibus appropriations and tax extenders bill and sent the bill to the President for his signature. The bill contains a five-year retroactive extension of WOTC and the VOW to Hire Heroes Act tax credits for hiring veterans. The President has said he will sign the bill. He has until midnight December 22 to do so because government funding runs out at that time.
The House has approved H.R. 2029 as amended with The Protecting Americans from Tax Hikes Act, which both renews and expands various tax credit programs. In particular, the Work Opportunity Tax Credit program (WOTC) will be renewed for a period of 5 years, with a retroactive start date of January 1, 2015 through December 31, 2019.
Also included in the renewal of the WOTC program is an expansion in which a new target group has been added to the existing nine groups. The new target group is the long-term unemployment recipient, which includes individuals who have been receiving federal or state unemployment for a period of at least 27 consecutive weeks prior to their hiring. Continue reading “Tax Credit Extenders H.R. 2029 Amendment #2 Passes House”
Ways and Means Chairman Kevin Brady sent to the House Rules Committee last night a 2-year tax extenders bill tabled as a House amendment to a Senate Amendment H.R. 34, “Tax Increase Prevention and Real Estate Investment Act of 2015.” This bill is only one option currently on the table with other options being a 5-year extension and a broader bill making some extenders permanent. Continue reading “WOTC Extension Discussion Progresses”