Work Opportunity Tax Credit extended and expanded Tax Insights

Tax Insights
from State and Local Tax Services
Work Opportunity Tax Credit
extended and expanded
December 21, 2015
In brief
On December 18, 2015, President Obama signed the Consolidated Appropriations Act, 2016, which
retroactively extends the Work Opportunity Tax Credit (WOTC) to January 1, 2015, through December
31, 2019. In addition, the credit is expanded to include a new eligibility category, Long-Term
Unemployment Recipient.
In detail
WOTC extended for five
years, expanded to assist
long-term unemployment
recipients
Under the new law, taxpayers
may claim the WOTC on
qualified employees hired from
January 1, 2015, through
December 31, 2019, providing
stability to a program that
undergoes frequent
reauthorizations.
In addition, eligibility for the
credit will be expanded on
January 1, 2016, to include a
new eligibility category, ‘LongTerm Unemployment
Recipient,’ defined as an
individual who has been
unemployed for not less than 27
consecutive weeks and includes
a period in which the individual
was receiving unemployment
compensation under State or
Federal law.
Program specifics
The WOTC offers taxpayers a
federal income tax credit worth
as much as 40% of qualified first
year wages for hiring qualified
employees. Qualified employees
are certified by State Workforce
Agencies as members of
targeted groups as defined
under IRC Sec. 51(d)(1-9)
including qualified:
 IV-A Recipient
 Veteran
 Ex-felon
 Designated Community
Resident
 Vocational Rehabilitation
Referral
 Summer Youth Employee
 Supplemental Nutrition
Assistance Program Benefits
Recipient
 Supplemental Security
Insurance Recipient
 Long-Term Family
Assistance Recipient
Effective January 1, 2016, the
following target group will be
added:
 Long-Term Unemployment
Recipient
As the WOTC has been on
hiatus since December 31, 2014,
it is anticipated that employees
hired following this date will be
eligible for retroactive screening
for a defined period of time
during 2016, similar to last year.
Guidance from the Internal
Revenue Service on the
retroactive period is pending.
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Tax Insights
The takeaway
With the WOTC being reauthorized
through 2019, taxpayers may have
several years of stability not
previously experienced with the
credit. This may present an
opportunity for taxpayers to
reevaluate their ability to claim the
credit going forward.
In anticipation of a retroactive
screening period, taxpayers that have
not previously claimed the WOTC
credit may screen employees hired
during 2015 for qualification.
Let’s talk
If you have questions about the Work Opportunity Tax Credit, please contact:
State and Local Tax Services
Melanie McDaniel
Partner, Los Angeles
National Credits & Incentives Practice
Leader
+1 (713) 356-5539
[email protected]
Thomas Henry
Principal, Stamford
New York Metro Credits & Incentives
Leader
+1 (203) 979-0371
[email protected]
Mike Harris
Partner, Chicago
Midwest Credits & Incentives Leader
+1 (312) 298-3296
[email protected]
Kenneth Hunter
Partner, Boston
East Region Credits & Incentives Leader
+1 (617) 530-5335
[email protected]
Annette Fago
Director, Los Angeles
+1 (213) 356-6221
[email protected]
Brooke Perez
Manager, Los Angeles
+1 (213) 270-8671
[email protected]
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