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Legislative Update – July 29, 2020

Legislative Update – July 29,2020

New Stimulus Bill in the Works

Senate Republicans just unveiled the initial draft of a trillion dollar stimulus bill. While the bill will require negotiation with Senate Democrats and is expected to undergo significant modification, there are several components that are positive, particularly for employers. Therefore, we want to share what we know about the bill so far and give you an idea of where things seem to be headed.

New WOTC Target Group

The bill includes a newly created WOTC target group: 2020 Covid-19 Unemployment Recipients. This is defined as someone who was receiving unemployment insurance in the week they were hired or in the previous week. The time period for eligibility is from the enactment date of the bill until January 1, 2021. The credit amount is up to $5,000 per qualified individual (50% of the first $10,000 in wages paid). If approved in the final bill, this additional tax credit would be significant. As of June 18th, there were 20 million people, or about 15% of all wages paid in the US, in this group.

An All New Safe and Healthy Workplace Credit

The proposal bill also calls for the creation of a new tax credit called “The Safe and Healthy Workplace Credit.” The bill creates a temporary tax incentive through the end of 2020 to help businesses defray costs for testing, personal protective equipment (PPE), and reconfiguring workplaces. This would apply to every type of business; from storefront to manufacturing plants; offices to health-care facilities.

This program is designed to promote and enable our employers to take the federal and state recommended steps to prevent the spread of Covid-19 in their workplaces. This helps businesses afford these costs so they can bring back their employees quickly while alleviating the fears of spreading the virus. The refundable tax credit against payroll taxes is for costs incurred by the business for Covid-19 safety costs, such as testing, PPE, reconfiguring, and technology. The credit is limited to $1,000 per employee for the first 500 employees, $750 per employee for the next 500 employees, and $500 for each employee thereafter.

For example, a retail store with 40 workers seeks to resume providing jobs and services to its community — the challenge is how to do so safely…

In order to reconfigure their store to help maintain social distancing, provide adequate sanitation stations, and implement other protocols to ensure their workers are safe at work, they spend $60,000. These dollars go toward PPE, screening/testing, disinfecting, and plexiglass shields. That company would receive a $30,000 tax credit against its federal payroll taxes. If that credit exceeds their payroll tax obligations, the company receives a refund from the Internal Revenue Service (IRS).

New Workplace Safety Screening Solution – coming soon!

We are delighted to inform you that the Walton team is collaborating with some of our partners to develop and launch new products geared to help businesses reopen safely and reduce the risks associated with exposure to the Coronavirus. Our solution will monitor temperatures and screen all employees daily prior to entry and deliver detailed contact-tracing intelligence to help companies track and minimize potential exposure risks. Stay tuned for more info…

What’s Next?

Negotiations will begin and continue through the first week of August, so we can expect to see a vote in the Senate by middle of August. As your trusted advisor, we will continue to keep you abreast of critical developments and changes as things progress.

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 in renewed. This leaves us with the question that most employers are wondering about: Will WOTC get renewed?

Possible New Target Group for WOTC

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 the possibility of expansion of other credits as well. However, as it turns out, the hope of a new stimulus bill appear to be stalled until after the election, at which point a great deal will depend on 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, 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 postpone the stimulus bill until after the election.

3 Major Areas of Disagreement

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 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 of 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.

Next Steps

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 if 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 will be brought 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 a good chance the program will be expanded. Exactly how all that will 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, please don’t hesitate to contact us.

work opportunity tax credit sign on desk

WOTC Extension Discussion Progresses

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”

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