Federal PATH Act extends employee hiring credits, including WOTC
Multistate tax alert | December 22, 2015
On December 18, 2015, President Obama signed into law the Protecting Americans from Tax Hikes Act of 2015. This tax alert summarizes these law changes.
- Extended employee hiring credits
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On December 18, 2015, President Obama signed into law the Protecting Americans from Tax Hikes Act of 2015 (PATH),1 which includes the following modifications to current law:
- A five-year extension of the Work Opportunity Tax Credit (WOTC)
- A new target group added to the WOTC
- A two-year extension to the Empowerment Zone (EZ) hiring incentives
- A two-year extension to the Indian Employment Tax Credit (IETC)
This tax alert summarizes these law changes that are retroactively effective December 31, 2014, unless specified otherwise in the discussion that follows.
Extended employee hiring credits
Extends the Work Opportunity Tax Credit
PATH Section 142 extends the WOTC from December 31, 2014, through December 31, 2019.2 The WOTC is a federal income tax credit ranging between $2,400 and $9,600 for each qualified newly hired employee who falls into one of nine targeted groups. These groups include members of families receiving benefits under the Temporary Assistance to Needy Families program, designated community residents, vocational rehabilitation referrals, qualified ex-felons, qualified summer youth employees, qualified food and nutrition recipients, qualified Supplemental Security Income recipients, long-term family assistance recipients, and, qualified veterans.3
Section 142 also modifies the WOTC to make it available to businesses that hire “qualified long-term unemployment recipients” who begin work for an employer after December 31, 2015.4 The term qualified long-term unemployment recipient is defined as “any individual who is certified by the designated local agency as being in a period of unemployment which—(A) is not less than 27 consecutive weeks, and (B) includes a period in which the individual was receiving unemployment compensation under State or Federal law.”5
Extends Empowerment Zone tax incentives
PATH Section 171 extends from December 31, 2014, to December 31, 2016, the period for which an EZ designation shall be in effect for certain economically depressed census tracts.6 The EZ hiring credit program provides an annual federal income tax credit of up to $3,000 per EZ resident hired.7
Extends Indian Employment Tax Credit
PATH Section 161 extends through December 31, 2016, the federal income tax credit for the hiring of qualified persons that work and live on or near an Indian reservation.8 The program provides an annual tax credit of up to $4,000 based on wages and health insurance costs paid to qualified employees.9
If you have questions regarding the PATH provisions described in this alert, the WOTC generally, or state employment credits, please contact any of the following Deloitte Tax professionals:
Kevin Potter, director, Deloitte Tax LLP, New York, +1 212 492 3630
Bart Butler, senior manager, Deloitte Tax LLP, Dallas, +1 214 840 1188
Marcus Panasewicz, senior manager, Deloitte Tax LLP, Los Angeles, +1 213 688 1837
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The Multistate Tax alert archive includes external tax alerts issued by Deloitte Tax LLP's Multistate Tax practice during the last three years. These external alerts highlight selected developments involving state tax legislative, judicial, and administrative matters. The alerts provide a brief summary of specific multistate developments relevant to taxpayers, tax professionals, and other interested persons.
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1 H.R. 2029 114th Cong. (Dec. 18, 2015). See Deloitte Tax LLP’s Tax News & Views's December 18, 2015 issue for more details on this federal legislation.
2 PATH Sec 142(a), amending IRC §51(c)(4)(B).
3 IRC §51(a), (b), (d).
4 PATH Sec 142(b), amending IRC §51(d).
6 PATH Sec 171(a), amending IRC §1391(d)(1)(A)(i).
7 IRC §1386(c)(2).
8 PATH Sec 161(a), amending IRC §45A(f).
9 IRC §45(a).