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Update: Tax Reform and the Future of WOTC

Recent Developments

The Senate Finance Committee voted the tax reform bill out of committee on Thursday, November 16 in a similar fashion to the House plan, suggesting an aligned strategy orchestrated by Republican leadership. All Democratic amendments were voted down by party-line votes. All Republican amendments were withdrawn in favor of the Chairman’s mark. As it turns out, the bill that was voted on does not reference WOTC. This likely means that WOTC will be left in place until December 31, 2019, based on the existing law.

While it seems that most of the Democratic amendments were an act of political showmanship, Senator Ben Cardin (D-MD) offered an amendment to extend or make permanent a series of tax credits. While the amendment was voted down, the conversation was interesting. First, many Republican senators had positive words for Mr. Cardin and expressed support for the basic principles of his amendment. Senator Hatch (R-UT) made a comment that they have a plan to do a “tax extender” bill and that it would be the better vehicle for the Cardin amendment. Several Republican senators referenced that there would be another opportunity at which point they would support the Cardin amendment, but they would not support it as part of the tax reform.

So, what does this all mean?

Not sure, yet. We know the United States Senate Committee on Finance has strong support for several tax programs, including WOTC. It appears that they bifurcated their approach to do two separate tax bills, one for reform, then a separate extender bill. Much of the Senate bill is financed through gimmicks, such as making individual tax cuts temporary when they know they will be extended later and delaying the corporate tax reduction.

We must bear in mind that the budget rules for reconciliation have rigid requirements and Republicans may feel that a tax-extender bill could pass using regular rules instead, since it would get some Democratic support. This strategy provides an alternative for Republicans to finance the reform bill outside of reconciliation rules. The tax reform bill would meet budget rules and then a separate bill would add on additional goodies which would have violated the Byrd rule. Given the fluidity of this situation, this is our best guess.

What to watch for now?

There are several things that are important for the survival of WOTC in the near future. First, we must make sure that the Senate version of tax reform becomes the dominant version in the conference committee. The biggest issue will be the one-year delay of the corporate tax cuts. By delaying the tax cut, it makes no sense to repeal WOTC, as the House proposed bill suggests, because instead of cutting taxes, Congress would be passing a significant tax increase on corporations. Therefore, if it is decided to delay the cut, the conference committee will most likely accept the Senate version of tax credits, leaving WOTC in place.

In addition, since all of this appears to be orchestrated in conjunction with the Republican leadership, it seems unlikely Senator Hatch would be referencing an extender bill that was not part of overall design. It will be interesting to see what lawmakers make up the conference committee, although it’s possible that the end result has already been decided, causing the appointments to the conference committee to reflect as such.

In politics, this is not a guarantee that the Senate will get the votes they need. In fact, there is already one “no” vote and several undecided. It’s possible that Republicans have already done a vote whip on these issues and have concluded they have the necessary votes to pass. Nevertheless, the repeal of the individual mandate from the Obamacare puts a real wrench into the system and will likely cause enhanced opposition to the bill. This could play out in unexpected ways.

Stay tuned for more to come as new developments continue. As your trusted advisor, Walton is committed to reporting the latest and most-accurate information as it relates to Tax Reform and its impact on the future of WOTC. If you have any questions, contact us at

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