Legislative Update October 28, 2020
Will WOTC get renewed?
As we enter the elections and remaining part of Q4, many companies are wondering about the status of the Work Opportunity Tax Credit (WOTC) and its renewal. For those who may not know, the current WOTC program is set to expire on December 31, 2020 and unless congress passes legislation, the program will enter into a state of hiatus. Hiatuses are not uncommon for WOTC. In fact, since WOTC was created in 1996, it has had its share of hiatuses, which generally means that employers continue to screen and file the time-sensitive Form 8850 as usual, but certifications for employees hired after the program expired are not issued until the program is renewed. This leaves us with the question that most employers are wondering about: Will WOTC get renewed?
As is generally the case in an election year, legislation becomes more and more difficult as we approach the election. As we have seen, this proved to be true with the hopes for an additional stimulus bill. Everyone has been hopeful that a new economic stimulus bill would pass since there is a good chance the bill would include a new target group for WOTC centered around unemployment driven by the pandemic. With unemployment running very high, this could prove to be a significant group. There is also a possibility of expansion of other credits as well. However, as it turns out, the hope of a stimulus bill appear to be stalled until after the election, at which point a great deal will depend upon what happens in the election results.
Republicans have disagreed among themselves as to what should happen with the next round of stimulus. Senate Republicans wanted no more than $500B in additional aid they felt there is no need for any additional stimulus. The administration, while somewhat inconsistent in their position, has argued for a much larger package, around $1.8 trillion. If they were successful in negotiating that package, there was considerable question as to whether they could get the package through the senate. Traditionally, a bill will not be brought to the floor if a majority of the party in control does not support the package, which would probably have been the case with the administration package. Hence, the reason Senate Majority Leader Mitch McConnell (R-KY) was suggesting to the administration to postpose the stimulus bill until after the election.
Additionally, there have been disagreements between the administration and the Democrats. There are three major areas of disagreement. First is the size of the stimulus, with the Democrats wanting a much larger amount. Second is the issue of state and local aid and with the Republicans generally opposed to such aid because it might be perceived as bailing out poorly run cities. And the third issue relates to liability protections for businesses, with the Democrats opposed to such protections. While the election will have a significant impact on what will happen with the stimulus bill, there are bills which will need to be passed in a lame-duck session. For instance, the current continuing resolution funding the government expires in early December, therefore, another CR or funding bill will need to be passed soon. As such, we continue to push and lobby for these bills to contain an extension of the expiring tax provisions, including WOTC.
In conclusion, the next steps on the stimulus bill are contingent on the election results. The first question is who wins the election. If Joe Biden wins, there will likely be pressure to avoid negotiating with the administration in a lame-duck session and just wait until the new administration assumes power. Hence, they would delay the stimulus until February. However, House Speaker Nancy Pelosi (D-CA) has expressed she would prefer not to wait; however, it is unclear the bill could pass the senate. The second question is whether the Republicans maintain control of the senate. If the Senate shifts to Democratic control, they will be able to control what bills are brough to the floor, therefore, there will likely be pressure to wait for February to enact more stimulus. Regardless of the outcome, we remain optimistic there will be an extension of the expiring provisions, including WOTC, and believe there is also good chance the program will be expanded. Exactly how all of that will all unfold will depend on what happens November 3rd.
We hope you find this update useful. As your trusted advisor, Walton remains committed to driving lobbying efforts and keeping you abreast of important updates. As always, should you have any questions, do not hesitate to contact us.