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What’s Going on with Tax Credits in Washington?

H.R. 4853 has been amended in the Senate to become the “Middle Class Tax Relief Act of 2010.” A summary of the entire bill can be found here.

As far as tax credits go, The package includes an extension of the Research and Development credit, Indian Hiring Incentive, Empowerment Zones, New Markets, the Wage Credit for Active Duty Military and the core WOTC programs through December 31, 2011. WOTC is currently set to expire Aug. 31, 2011 and this would make put it on the same schedule as all of the other programs, which should help when the time comes to extend it again.

The bill does not include an extension of various WOTC add-ons such as Katrina, disconnected youth, or the unemployed veterans credit. Nor does the bill extend the federal Renewal Communities.

There is also no extension of the HIRE ACT. Instead there is a new 2% employee payroll tax holiday. There had been earlier reports that the payroll tax holiday would reduce both the employees’ and the employers’ taxes by 2%, this was incorrect and the reduction will only apply to withholding from employees. This boosts the take-home pay of everyone on a payroll, but does not provide any incentive to businesses for hiring.

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