What is WOTC

 

ON MARCH 27, 2020, THE PRESIDENT SIGNED INTO LAW THE CORONAVIRUS AID, AND RELIEF AND ECONOMIC SECURITY (CARES) ACT, H.R. 748

 

The CARES Act includes an Employee Retention Tax Credit (ERTC) which would:

 

• Provide a fully refundable tax credit of 50% of $10,000 in qualified wages and the allocable portion of health insurance to the qualified wages paid such employee who remains on an employer's payroll:

• For employers with up to 100 employees any wages and the allocable portion of healthcare qualify;
• For employers with more than 100 employees only those wages and the allocable portion of healthcare that exceeds the value of the work and/or time worked qualify.

• Defines eligible employers as any employer who's business during a calendar quarter:

• Fully or partially was suspended during the calendar quarter due to an order from a governmental authority limiting commerce, travel, or group meetings; or
• Beginning with the first calendar quarter after December 31, 2019 an employer had gross receipts that were 50% less for the same calendar quarter then in the previous year;and
• Ending with the calendar quarter following the first calendar quarter after gross receipts are 80% greater then the same calendar quarter in the prior year. 

• Makes both for-profit and not-for-profit employers eligible, but not state or local governments.
• Employers who receive a loan under the Paycheck Protection Program are not eligible for the employee retention tax credit. 

 

 

HOUSE PASSES THE HEALTH AND ECONOMIC RECOVERY OMNIBUS EMERGENCY SOLUTION (HEROES) ACT, H.R. 6800 ON MAY 15, 2020

 

The HEROES Act would make significant changes to the Employee Retention Tax Credit including:

• Increasing qualified wages to $15,000 per quarter for up to three quarters (maximum credible wages would be $45,000) up from the current $10,000;
• Increasing the percent of the credit to 80% from the current 50% (this would make the maximum credit $12,000 per quarter or $36,000 over three quarters;
• Codifying that the proportional amount of health care insurance paid for an employee by the employer during the period that the business was closed, operating at a reduced capacity, or who's income is between 50% and 90% of what it was during the same quarter of the precious year is eligible for the ERTC regardless of whether the employee was paid wages;
• Defining a large employer as having 1,500 full time equivalent employees as opposed to the HEROES Act which sets the threshold at 100 employees;
• Modifying the revenue loss test for businesses not subject to a government shutdown order by phasing out the credit between a 50% and 90% loss of gross receipts. Currently there is no phase out – eligibility ends at the point that gross receipts exceed 50% for the same calendar quarter during the previous year;                                                   
• Qualified wages would include tips deemed to be paid by the employer;
• Allowing employers to qualify for both a Payroll Protection Program loan and the Employee Retention Credit, but not for the same wages.  Currently, employers cannot qualify for both.

 

CONGRESS PASSES AND PRESIDENT SIGNS ONE YEAR WOTC EXTENSION:

On December 20, 2019, President Trump signed H.R. 1865 which funds domestic spending for FY 2020. A tax title was added which would extend WOTC, the hiring incentive for Empowerment Zones and the Indian Employment Credit through December 31, 2020. Also included in the package is the disaster tax relief hiring incentive. The domestic spending title on includes a $2,500,000 increase in WOTC funding for FY 2020 to help the state workforce agencies to modernize WOTC processing and clean up existing processing backlogs. This is the first increase in administrative funding in over twenty years

H.R. 1865 passed the House on December 17, 2019, by a vote of 297 to 120 and the Senate on December 19, 2019, by a vote of 71 to 23. Adding the tax title was in question up till the last minute and it was only added on December 16. We have been told that the active grassroots efforts of WOTC supporters played a significant part in persuading Congress to add a tax title.

The tax title to H.R. 1865 entitled the "Tax Payer Certainty and Disaster Relief Act of 2019" includes the following provisions:

> An extension of WOTC through 2020

> An extension from January 1, 2018 through December December 31, 2020 of:

- The Empowerment Zone hiring incentive and

- The Indian Employment Credit

> A Disaster Tax Relief retention credit for those who remained on an employer's payroll in an area which was designated as a federally "qualified disaster zone" between January 1, 2018 and sixty days after enactment which occurred on December 20, 2019. Any disaster which occurs after February 18, 2020 would not qualify, and

> The spending provisions of H.R. 1865, increases WOTC funding by $2,500,000 from an FY 2019 funding level of $19,800,000 to $21,423,000 for FY 2020

WOTC PERMANENCY BILLS INTRODUCED IN THE SENATE AND HOUSE

WOTC Permanency Bills:

On April 2nd, 2019, Senators Rob Portman (R-OH) and Ben Cardin (D-MD) along with Senators Roy Blunt (R-MO), Sherrod Brown (D-OH), Bill Cassidy (R-LA) and Bob Menendez (D-NJ) introduced "The Work Opportunity and Jobs Act", S.978, which would make WOTC permanent. This was followed on April 10th, 2019, by Congressman Mike Thompson (D-CA) and Tom Reed (R-NY), along with Congressman Bill Pascrell (D-NJ), Tom Rice (R-SC) and Tom Suozzi (D-NY), introducing H.R. 2213, which would also make WOTC permanent. The Senate and House Bills and Press Releases from when the bills were introduced can be found below:

H.R. 2213

H.R. 2213 Press Release

S. 978

S. 978 Press Release

Employment and Community Development Task Force Report:

The Finance Committee released its Tax Extenders Employment and Community Development Task Force Report in August 2019 which includes a discussion on WOTC, the Indian Employment Tax Credit and Empowerment Zones, all of which provide hiring tax incentives.

The five provisions they looked at were: