November 6, 2017 House tax reform bill would eliminate WOTC The House Ways and Means Committee released the text of its tax reform bill on Thursday, November 2. The bill would eliminate various deductions and credits, including the Work Opportunity Tax Credit (WOTC). Background The WOTC was created to incentivize employers to hire individuals facing significant barriers to employment — for example, veterans and the long-term unemployed — by offering a tax credit to employers that hire those individuals. In December 2015, the Protecting Americans from Tax Hikes Act of 2015 extended the WOTC to include individuals hired on or before December 31, 2019. Proposed repeal The WOTC would be subject to early repeal under the new House tax reform bill. Specifically, as the proposed text is drafted, the WOTC would be repealed effective for wages paid or incurred to individuals who begin work after 2017. According to the Joint Committee on Taxation's scoring, the early repeal would increase revenues by $3.6 billion over 2018-2027. The JCT's score only takes into account the total amount of credit claimed by taxpayers each year and the cost of administering the program; it does not account for any savings that may result when federally-funded welfare payments are reduced or eliminated for WOTC-eligible individuals who move into employment. Although the inclusion of the repeal of the WOTC in the House bill was unexpected, the release of this text is a preliminary step toward enacting tax reform. The markup process begins in earnest Monday in the House Ways and Means Committee, where further debate on the bill's provisions will occur. Certain provisions could be amended before the bill advances to the full House for a vote. Separately, the Senate is also working on its draft of a tax reform bill, which is expected to be released within the next two weeks. The two versions will inevitably contain differences that must be reconciled before a tax reform bill could be enacted into law. Despite the proposed tax reform bill, employers should continue to target and hire WOTC-eligible individuals and submit IRS Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit, to the designated state workforce agency on a timely basis. The proposed early repeal of the WOTC would not disqualify wages paid after December 31, 2017, to eligible employees hired on or before December 31, 2017, so employers should plan to track wages paid to eligible employees throughout the 2018 and possibly 2019 (for eligible long-term family assistance recipients) tax years in order to calculate credit in future tax years. ———————————————
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