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Bipartisan Budget Act of 2018 Extends Empowerment Zone Tax Incentives And Indian Employment Tax Credit Through 2017

Paul Suplizio, President WOTC Coalition - The House passed the Bipartisan Budget Act early this morning, 240-186, and sent the bill to the President, who has signed it. The bill becomes law as of today, February 9. Employers can begin claiming certifications issued by State Workforce Agencies for 2017 WOTC hires of Empowerment Zone residents, 2017 Empowerment Zone tax credits, and 2017 Indian Employment tax credits, effective today. MARS STOUT continued to screen for these credits after the programs expired on December 31, 2016 to prevent any loss of credit if they were retroactively reinstated. Since that has now occurred, we’re prepared to provide these credits when your tax department needs them for filing. Extension of Indian Employment Tax Credit is at Section 40301, p.199 of the Senate amendment. Empowerment Zone tax incentives are at Section 40311, p.203. The bill extends these provisions and most other extenders through 2017, not 2018 as the Senate advocated.

Great News! The Conference Agreement allows WOTC to continue through December 31, 2019. Read the details from WOTC Coalition President below.

The Conference Report on H.R. 1 states on page 810: “The Conference Agreement does not follow the House bill provision.” This section of the Report shows the Conference considered the House proposal for WOTC repeal, the end result being that the House deferred to the Senate, leaving current law unchanged. This allows WOTC to continue till December 31, 2019. Veterans scored a noteworthy success maintaining the deduction for student loans discharged for death or disability (p. 75). Another breakthrough is adoption of Senator Tim Scott’s bill establishing “Opportunity Zones,” similar to the expired Empowerment Zones (p. 355). The tax bill doesn’t currently authorize WOTC for Opportunity Zone employers and residents, but bringing WOTC to these zones will be an important goal for our 2018 campaign. All page references are to the copy of the Report posted at www.wsj.com.

Tax Reform on Fast Track

Paul Suplizio, WOTC Coalition President An emergency meeting of the Republican caucus last night apparently resulted in just enough assurance that any repeal will be softened by a formula equalizing the burden between high-tax and low-tax states. Both Senate and House having now passed identical budget resolutions, reconciliation is in effect for both tax reform and another try at repealing Obamacare. Speaker Paul Ryan says the House tax reform bill being finalized by Ways and Means Chairman Kevin Brady will be released next week. When Brady schedules a mark-up of the bill, our supporters in Ways and Means must be ready with an amendment to make WOTC permanent if it’s not in the chairman’s mark. As there are 24 Republicans and 16 Democrats on Ways and Means, 21 votes will be needed to pass an amendment for permanent WOTC if the chairman opposes the amendment. We are counting on five Republicans (Reed, Jenkins, Paulsen, Kelly, and Curbelo) to join sixteen Democrats to form a majority—provided all are present for the vote or give their proxy (it’s our job to assure they’re ready to offer the amendment and that they’ll be there to vote). In the meantime, we are continuing to urge Republican newcomers to the committee (Tom Rice, SC; David Schweikert, AZ; Jackie Walorski, IN; Kristi Noem, SD; and Mike Bishop, MI, to add their votes when the WOTC amendment comes up. We are mustering all our resources behind this effort. We need everyone to join in!

President Signs Disaster Tax Relief Bill With Employee Retention Credit

President Trump signed into law the Disaster Tax Relief and Airport and Airway Extension Act of 2017 to deliver targeted tax relief to victims of Hurricanes Harvey, Irma, and Maria. The law includes an employee retention tax credit for employers. Qualifying businesses with locations in declared disaster counties can seek a tax credit for continuing to pay their employees during the timeframe that the business was impacted by the disaster. Employers can seek a 40% credit for wages paid to employees (up to a maximum wage base of $6,000) for a tax credit of up to $2,400 per employee during the period when a business location became inoperable or was significantly impacted due to the hurricane(s) up until the date the location resumed full operations, or until January 1, 2018, whichever comes first. The Act does not define the terms “inoperable” or “resumed significant operations,” which is consistent with language from previous storm relief measures. An employer therefore has some flexibility in determining how to define “inoperable” or “resumed significant operations” for its business, based on its own business metrics and how it was uniquely impacted by each storm. In addition to closures, business disruptions also qualify as inoperability factors with regards to the Employee Retention Credit. Consider the following scenarios by location/facility: Have you experienced a decline in business revenue? Have you experienced not being fully staffed due to employee impacts? Have you experienced safety or cleanup efforts including things like mold mitigation that impacted your business flow? Have you experienced electrical or internet or phone call loss or interruptions? Consider all circumstances outside of business-as-usual… MARS STOUT is assisting businesses throughout this process to pinpoint by location, conditions that would meet qualifying inoperability criteria.

Optimistic on Tax Reform/WOTC in the Budget

WOTC Coalition President Paul Suplizio shares with us his latest insight from Capitol Hill. He explains with the President’s budget now public and Obamacare set aside for now, that leadership is optimistic that they can achieve agreement on a budget that lifts the debt ceiling, funds the government for FY 2018 and passes tax reform before the close of the year.

Paul notes that leaders are aiming to pass a congressional budget in June, containing some of the President’s cuts, rejecting others and some are preparing to cut into entitlements that weren’t touched. The President will likely fight for his signature demands of defense, veterans, infrastructure, school choice, immigration and the wall.

WOTC is presently in the “Tax Expenditures” section of the budget and projected costs assume expiration at the end of 2019. The State Workforce Agencies that administer the tax credit are on the reduction block, which will likely be a disagreement point for Appropriation Committees.

Paul sees agreement from both houses as key to passing tax reform – overrides can be made under reconciliation but tax reform can’t be filibustered and a simple majority can pass the bill. Content negotiations will intensify with the Treasury Secretary and passage could be delayed until 2018. The President’s budget requires revenue neutrality meaning eliminating to find funding, while Congress is generally agreeable to allowing cuts to add to the deficit.

WOTC looks to be on solid ground as the President’s letter on the budget states, “Work must be the center of our social policy.” The tax reform struggle will likely pit stake holders against one another for a place in the bill that will be decided by 535 congressman and senators before the Republicans eventually pass it. If this takes a long time, we’ll simply have more opportunities to reach out to our own legislators in support of WOTC.

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