February 15, 2018 Federal tax credits and incentives expanded, modified, and retroactively extended under the Bipartisan Budget Act of 2018 On February 9, 2018, President Trump signed the Bipartisan Budget Act of 2018 (Pub. L. 115-123) (the “Act”). The Act contains a number of important tax provisions, including disaster tax relief and tax extenders. These provisions are described next in more detail. Disaster relief expansion – California wildfires The Act creates an employee retention credit for employers in disaster zones caused by the California wildfires. The new California wildfires employee retention credit is very similar to the Hurricane Harvey, Irma and Maria employee retention credits created by the Disaster Tax Relief and Airport and Airway Extension Act of 2017 (Pub. L. 115-63) (Disaster Tax Relief Act) on September 29, 2017. The California wildfires employee retention credit is available to employers that have locations in specified disaster zones that were rendered inoperable as a result of the wildfires and that continued to pay wages to employees during the inoperable period. The credit equals 40% of qualified wages (maximum $2,400 credit per employee). For more on the California wildfires employee retention credit see Tax Alert 2018-0332. Disaster relief modification – Wage addback The Act modifies the Hurricane Harvey, Irma and Maria employee retention credits by amending Section 503(a)(3), (b)(3), and (c)(3) of the Disaster Tax Relief Act so that the rules of Section 280C(a) now apply. The original Disaster Tax Relief Act as signed into law did not explicitly require employers to apply Section 280C(a). This modification means that employers claiming the Hurricane Harvey, Irma or Maria employee retention credits must reduce their deduction for salaries and wages by the amount of the credit. The same rule applies to the California wildfires employee retention credit. Retroactive extension of expired extenders The Act retroactively extends multiple tax provisions that expired on December 31, 2016, through December 31, 2017. Included among the extended tax provisions are federal tax credits such as the Federal Empowerment Zone credit and the Indian Employment credit. The Act did not address the Work Opportunity Tax Credit, which is not set to expire until December 31, 2019. On December 22, 2017, Senator Hatch (R-UT) introduced the Tax Extender Act of 2017, which calls for the extenders that expired on December 31, 2016, to be extended through December 31, 2018. In light of this week’s activity, it is unclear at this time when or if Sen. Hatch’s bill will be considered. On the House side, Ways and Means Tax Policy Subcommittee Chairman Vern Buchanan (R-FL) indicated during the week of February 4, 2018 that he would like to hold hearings on additional tax extenders soon. No timetable has been set for such hearings. ———————————————
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