EZ Policy Blog

Illinois Congresswoman Debbie Halvorson has introduced H.R. 3908. the “Families of Disabled Veterans Work Opportunity Act of 2009.” The bill would expand the qualified veteran category for WOTC to include certified family members of certain disabled veterans such as those entitled to compensation for service-connected disabilities, or those unable to work because of a service-connected disability.

Congressmen Rooney (R-FL) and Boccieri (D-OH) who introduced H.R. 3784, the “Helping Invigorate and Revive our Economy Act of 2009,” which expands WOTC to cover all new hires and makes the program permanent, have introduced another bill to expand WOTC. Here is the press release from Rep. Rooney’s website:

Washington, D.C. – Today, Congressman Tom Rooney (R-Fla.) and Congressman John Boccieri (D-Ohio) introduced their second bipartisan job creation bill titled the Back to Work Tax Credit Act which encourages employers to create new jobs by hiring the long-term unemployed. The legislation, which builds upon the HIRE America Act introduced earlier this month by Rooney and Boccieri, specifically expands the Work Opportunity Tax Credit (WOTC) to give employers a tax credit for hiring people who have been collecting unemployment benefits for 26 weeks.

“Getting people back to work is job one for me,” said Rep. Tom Rooney. “Florida’s unemployment rate climbed to a staggering 11% last month. Hendry County has the highest unemployment rate in the state with 16.8% and St. Lucie is ranked third with 15.3%. These are unacceptable numbers that demand action. Finding real solutions requires bipartisan action and that is why I have partnered with my Democratic colleague and fellow freshman Rep. John Boccieri to introduce the ‘Back to Work Tax Credit Act’ to help get people back to work today.”

“With Ohio’s unemployment rate still higher than the national average, the time is now to put Ohioans back to work,” said Congressman Boccieri. “Though we have a long way to go to rebuild our economy, we are headed in the right direction with the Back to Work Tax Credit Act. This legislation is a win-win for employers and employees because it encourages businesses to hire additional workers, especially those who have been unemployed for many months. This legislation helps struggling employers in our district create new jobs, encourages economic growth, and helps Ohioans who want to work get back on their feet. I am proud we can come together not as Democrats or Republicans, but as Americans, to protect our workers, create economic development, and restore the hope and promise of America.”

“Creating jobs on the Treasure Coast is crucial to economic recovery,” said Stuart/Martin County Chamber of Commerce President Joe Catrambone. “Businesses in Martin County need help to grow and expand allowing them to hire additional employees — expanding the Work Opportunity Tax Credit is great way to encourage business to expand.”

The Back to Work Tax Credit Act helps people who most urgently need to get back to work by expanding the income tax credit to employers who hire the long-term unemployed. The bill expands the income tax credit to 40% of the first $6,000 in wages paid for employers who retain new hires on their payroll for at least 400 hours during the worker’s first year of employment.

Earlier this month, Boccieri and Rooney worked together to introduce the Helping Invigorate and Revive our Economy Act of 2009, also known as the HIRE America Act, to help create jobs for a larger pool of working Americans by expanding the WOTC to encourage employers to hire more employees in general, not just the long-term unemployed.

Currently the Work Opportunity Tax Credit is set to expire on August 31, 2011. The HIRE America Act would make these provisions permanent.

I recently reported on Congressman Tom Rooney’s (R-FL) bill to expand the federal WOTC program to include all new hires, now Congressman Phil Roe (R-TN) is working on another bill to expand WOTC specifically for rural areas.  From the press release:

WASHINGTON, DC – Today, Congressman Dr. Phil Roe (TN-1) introduced the Economic Stimulus for Rural Communities Act (H.R. 3807) in an effort to stimulate the economy and create quality jobs in rural America. In East Tennessee and across the nation, rural areas are often times hit harder during an economic downturn and they often lag in a recovery. Congressman Roe’s legislation would amend the tax code to make rural employers eligible for a tax credit when they hire a rural worker.

“Even when the U.S. economy was growing, many rural Americans were struggling in their local economy,” said Roe. “As the American economy has slowed and national unemployment is almost 10 percent, this problem has only worsened. I will be introducing this economic stimulus bill in an effort to get more jobs into Tennessee’s First District and other rural areas across America.”

A recent article in the New York Times states that, “tax credits for companies that create new jobs is gaining support among economists” due to the highest unemployment numbers seen in this generation.
…
Roe’s economic stimulus bill for rural communities expands the Work Opportunity Tax Credit (WOTC) and gives companies, small and large, an incentive to locate and expand their business to rural areas and hire rural residents. Under this bill, an employer would be eligible to receive a tax credit, generally 40% of the first $6,000 in wages, for every job added in a rural area. The definition of “rural” would be determined by the Secretary of Agriculture.

Here is a press release from Rep. Tom Rooney:

Washington, D.C. –Today, Reps. Tom Rooney (R-Fla.) and John Boccieri (D- Ohio) introduced the Helping Invigorate and Revive our Economy Act of 2009, also known as the HIRE America Act, to help create jobs for hard working Americans. The HIRE America act will expand the Work Opportunity Tax Credit (WOTC) to encourage employers to hire additional employees.

“This bill is about creating new jobs,” said Rooney. “With unemployment in Florida over 10 percent, we have to find ways to create jobs and get Floridians back to work. The HIRE America Act is common sense legislation that gives employers additional incentives to create new jobs and hire more employees. By increasing the Work Opportunity Tax Credit and expanding it to cover all new hires we are putting money back in the pockets of business owners, allowing them to expand and start getting people back to work. We can no longer stand by as the unemployment rate continues to increase.”

The HIRE America Act increases the income tax credit for employers for each hire that is eligible under the current WOTC criteria up to 50 percent. The bill also creates a new income tax credit for all other hires outside the current WOTC up to 30 percent. Importantly the bill also increases the maximum wage eligibility for Veterans under the current WOTC from $12,000 to $16,000. Finally, the bill increases tax credits for employers who offer childcare services or benefits to employees up to 35 percent.

Currently, the Work Opportunity Tax Credit is set to expire on August 31, 2011. The HIRE America Act would make these provisions permanent.

The bill is H.R. 3784.

The IRS has released a new version of the 8850 to reflect recent changes to the Work Opportunity Tax Credit Program. There are new instructions as well.

H.R. 1 is titled “The American Recovery and Reinvestment Act of 2009,” and among the $1 trillion of stuff are two new WOTC target groups:

PART 3–INCENTIVES FOR NEW JOBS

SEC. 1421. INCENTIVES TO HIRE UNEMPLOYED VETERANS AND DISCONNECTED YOUTH.

(a) In General- Subsection (d) of section 51 is amended by adding at the end the following new paragraph:

`(14) CREDIT ALLOWED FOR UNEMPLOYED VETERANS AND DISCONNECTED YOUTH HIRED IN 2009 OR 2010-

`(A) IN GENERAL- Any unemployed veteran or disconnected youth who begins work for the employer during 2009 or 2010 shall be treated as a member of a targeted group for purposes of this subpart.

`(B) DEFINITIONS- For purposes of this paragraph–

`(i) UNEMPLOYED VETERAN- The term `unemployed veteran’ means any veteran (as defined in paragraph (3)(B), determined without regard to clause (ii) thereof) who is certified by the designated local agency as–

`(I) having been discharged or released from active duty in the Armed Forces during 2008, 2009, or 2010, and

`(II) being in receipt of unemployment compensation under State or Federal law for not less than 4 weeks during the 1-year period ending on the hiring date.

`(ii) DISCONNECTED YOUTH- The term `disconnected youth’ means any individual who is certified by the designated local agency–

`(I) as having attained age 16 but not age 25 on the hiring date,

`(II) as not regularly attending any secondary, technical, or post-secondary school during the 6-month period preceding the hiring date,

`(III) as not regularly employed during such 6-month period, and

`(IV) as not readily employable by reason of lacking a sufficient number of basic skills.’.

(b) Effective Date- The amendments made by this section shall apply to individuals who begin work for the employer after December 31, 2008.

Charles Rangel Introduces Young Adult Jobs Bill

Embattled Rep. Charles Rangel (D-NY), chairman of the House Committee on Ways & Means, has introduced legislation to provide tax incentives for employers to hire “disconnected youth,” young adults, age 16 to 24, who are out of school and out of work.

…

H.R. 7066 includes youth aged 16 through 24 who are designated by a State employment security agency to have not been regularly employed or in school for the past six months and who lack basic skills for employment.

Senator Bob Corker (R – TN) is promoting the expansion of the Work Opportunity Tax Credit to include spouses of active duty military:

Sen. Corker said the Military Spouse Education and Employment Act of 2008 addresses these challenges through six key provisions:

Work Opportunity Tax Credit – Amends the Internal Revenue Code of 1986 to make employers of spouses of active duty military personnel (and Guard and Reserve with activation orders in excess of 90 days) eligible for the Work Opportunity Tax Credit, which provides an additional monetary incentive for employers to hire military spouses.

Special Work Opportunity Tax Credit for Military Spouses in Professional Employment – Doubles the value of the Work Opportunity Tax Credit to employers who (1) employ a military spouse in a professional career, (2) pay the spouse a salary of 150 percent of the median annual earnings rate, and (3) allow the spouse to work primarily from home. Military spouses seeking professional careers often push their active duty spouse to leave service in order to enable achievement of a professional career. This provision will create a monetary incentive for employers to make more professional career opportunities available to military spouses via telecommuting.

The U.S. Senate Special Committee on Aging has introduced a bill titled “Incentives for Older Workers Act” which includes a section to add a new eligibility category to the WOTC program. The press release can be found here. The bill would add a category:

QUALIFIED OLDER WORKER.—The term ‘qualified older worker’ means any individual who is certified by the designated local agency as being an individual who is age 55 or older and whose income is not more than 125 percent of the poverty line (as defined by the Office of Management and Budget), excluding any income that is unemployment compensation, a benefit received under title XVI of the Social Security Act (42 U.S.C. 1381 et seq.), a payment made to or on behalf of veterans or former members of the Armed Forces under the laws administered by the Secretary of Veterans Affairs, or 25 percent of a benefit received under title II of the Social Security Act (42 U.S.C. 401 et seq.).’’

The IRS has just published to its website the new form 8850 along with a new instructions publication detailing all of the changes made to WOTC by the Small Business and Work Opportunity Act of 2007 enacted on May 25.

Through an interesting series of events, a significant extension and expansion of the Work Opportunity Tax Credit is about to become law. As The New York Times reports, President Bush has won his standoff with Congress to receive a war funding bill that does not include any timetable for withdrawal. The bill includes billions of dollars in “pork,” and also includes the first federal increase in minimum wage in 10 years. And since the beginning of the minimum wage increase effort, certain tax credits have been bundled along to make it more palatable.

In the version that appears likely to be signed now by the President, the WOTC is extended until August 31, 2011 which is the longest single extension the program has ever received. But perhaps more importantly, the bill makes changes to the credit itself which will significantly enhance its value.

Well, not exactly. Congress has decided to lump the federal minimum wage increase, and its dependent tax credit sweeteners, into the emergency war spending bill that the President has vowed to veto because of its inclusion of a “surrender date.”

On Friday, the House passed an amended version of their minimum wage increase bill including some of the tax breaks that the Senate had tagged on. From ABC News:

The U.S. House of Representatives overwhelmingly approved a $1.8 billion small business tax cut package on Friday aimed at winning passage of a $2.10 increase in the hourly minimum wage.The 360 to 45 vote in favor of the bill moves lawmakers a step closer to approving the first federal minimum wage increase in a decade, a central campaign issue for Democrats who took control of Congress last month.

The tax cut package is meant to attract Senate Republican and White House support for raising the hourly minimum wage to $7.25 over two years from $5.15. In January, the House voted for the wage increase without the tax cuts. But the closely divided Senate added $8.3 billion in tax cuts to the bill and the two chambers have to work out their differences.

House Ways and Means Committee Chairman Charles Rangel, a New York Democrat, has made clear he believes the Senate measure went too far and noted that the more modest House bill has won some important backing from business groups.

“Not only did we achieve bipartisanship on this bill, but we’ve received key endorsements from the business community that underscore the strength of this tax relief for small businesses,” Rangel said in a statement.

Rep. Jim McCrery of Louisiana, the top Republican on the Ways and Means Committee, said in a statement that the minimum wage increase would cost small businesses more than $16 billion over five years and that he would support more business tax relief. New congressional rules require the tax cuts to be offset and McCrery said he had “serious reservations” about some of the revenue raising provisions in the Senate bill.

In particular, a provision in the Senate bill that would limit deferred compensation plans for corporate executives has drawn criticism from business groups and House members.

The House bill would extend tax breaks to encourage hiring of veterans, the handicapped and high-risk youths through 2008. The bill also would raise the amount of investment in new equipment that small businesses can immediately write off to $125,000 from $112,000 and extend the break through 2010.

The House has changed the Senate’s plan for a five year extension of WOTC to no extend just through 2008. As a matter of fact, I think that is exactly what I predicted would happen…

The Senate version of the minimum wage increase which includes a five year extension of the WOTC passed this afternoon by a 94-3 margin. It seems that Senate Majority Leader Reid’s tune has changed slightly as compared to my earlier post:

A spokesman for Senate Majority Leader Harry Reid, D-Nev., said the tax breaks are necessary to overcome a potential GOP filibuster.”Of course, Democrats would prefer to pass a clean increase in the minimum wage,” said the spokesman, Jim Manley. “The fact is that Republicans have made it very clear that the only way we will pass a modest increase in the minimum wage is with tax breaks for small business.”

A number of news outlets are carrying an Associate Press article stating that the tax breaks being linked to an increase in the federal minimum wage passed through committee:

Tax breaks for small businesses sailed through a Senate committee Wednesday, paving the way for an expected boost in the federal minimum wage for workers those businesses hire.

I’ll make a prediction now that if these changes to WOTC continue to progress at all, the five year extension being discussed will be lowered to one or two.

I previously wrote about the effect of an increase in the minimum wage when such an increase was enacted here in California. Now the new Democrat majority in Congress is moving to increase the federal minimum as well. Interestingly, Democrat Senator Max Baucus, the new chairman of the Senate Finance Committee, feels there is a need to increase tax incentives for businesses in order to help them cope with a minimum wage increase. The website tax-news.com has a press release. And here is a link to a PDF report from the Senate Committee describing the Senator’s recommendations. The Senator, a long-time advocate of the Work Opportunity Tax Credit, is proposing some significant enhancements to the incentive. None of the ideas are new, but now that he is the Committee Chair and the provisions are being linked to the inevitable increase in the minimum wage, I wonder if they will have a better chance of passage.

Over the weekend Congress finally managed to pass an extension of the federal Welfare to Work and Work Opportunity Tax Credits. Both of these programs had expired as of 12/31/2005 and employers have been frustrated waiting for the traditional short-term renewals that Congress keeps passing. Assuming the President’s signature, the program will be renewed retroactively and will be set to expire as of 12/31/2007. This kind of system ensures steady employment for lobbyists.

This time around, however, there are actually some substantive changes to enhance the program. The 21 day time limit for submitting forms is being extended to 28 days, income restrictions are being lifted from the ex-felon category, the age limit is being increased for food-stamp recipients, and the two programs are being fused into one.