Code Section 51
|Code Section||Effective Date||Name of Act||Name of Provision||10yr Revenue Estimate ($millions)|
|51, 52||*12/31/2011||The American Taxpayer Relief Act of 2012||Work opportunity tax credit||-1,898|
|51, 52||11/21/2011||Three Percent Withholding Repeal and Job Creation Act of 2011||Returning Heroes and Wounded Warriors Work Opportunity Tax Credits||-193|
|51||8/31/2011||The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010||Work opportunity credit||-162|
|51||12/31/2008||The American Recovery and Reinvestment Act of 2009 (Public Law 111-5)||Modification of work opportunity tax credit||-231|
*Note on Effective Date
The provision is effective for individuals who begin work for the employer after December 31, 2011 (in the case of certain qualified veterans after December 31, 2012).
Work opportunity tax credit
Explanation of Provision
The credit is extended for all eligible categories through December 31, 2013.
Returning Heroes and Wounded Warriors Work Opportunity Tax Credits
Explanation of Provision
- In general
- Certification rules
- Qualifying tax-exempt organizations employing qualifying veterans
- Transfers to Federal Old-Age and Survivors Insurance Trust Fund
- Treatment of Possessions
1. In general
The provision modifies the work opportunity credit with respect to qualified veterans so that there are now five subcategories of qualified veterans: (1) in the case of veterans who were eligible to receive assistance under a supplemental nutritional assistance program (for at least a three month period during the year prior to the hiring date) the employer is entitled to a maximum credit of 40 percent of $6,000 of qualified first-year wages; (2) in the case of a qualified veteran who is entitled to compensation for a service connected disability, who is hired within one year of discharge, the employer is entitled to a maximum credit of 40 percent of $12,000 of qualified first-year wages; (3) in the case of a qualified veteran who is entitled to compensation for a service connected disability, and who has been unemployed for an aggregate of at least six months during the one year period ending on the hiring date, the employer is entitled to a maximum credit of 40 percent of $24,000 of qualified first-year wages; (4) in the case of a qualified veteran unemployed for at least four weeks but less than six months (whether or not consecutive) during the one-year period ending on the date of hiring, the maximum credit equals 40 percent of $6,000 of qualified first-year wages; and (5) in the case of a qualified veteran unemployed for at least six months (whether or not consecutive) during the one-year period ending on the date of hiring, the maximum credit equals 40 percent of $14,000 of qualified first-year wages.
The Act extends the credit for employers of qualified veterans through December 31, 2012, but does not extend the credit for other eligible categories.
3. Certification rules
Under the Act an otherwise qualified unemployed veteran is treated as certified by the designated local agency as having aggregate periods of unemployment (whichever is applicable under the qualified veterans rules described above) if such veteran is certified by such agency as being in receipt of unemployment compensation under a State or Federal law for such applicable periods. The Secretary of the Treasury is authorized to provide alternative methods of certification for unemployed veterans.
4. Qualifying tax-exempt organizations employing qualified veterans
If a qualified tax-exempt organization employs a qualified veteran (as described above) a tax credit against the FICA taxes of the organization is allowed on the wages of the qualified veteran which are paid for the veteran’s services in furtherance of the activities related to the function or purpose constituting the basis of the organization’s exemption under section 501. The credit available to such tax-exempt employer for qualified wages paid to a qualified veteran equals 26 percent (16.25 percent for employment of 400 hours or less) of qualified first-year wages. The amount of qualified first-year wages eligible for the credit is the same as those for non-tax-exempt employers (i.e., $6,000, $12,000, $14,000 or $24,000, depending on the category of qualified veteran). A qualified tax-exempt organization means an employer that is described in section 501(c) and exempt from tax under section 501(a).
5. Transfers to Federal Old-Age and Survivors Insurance Trust Fund
The Social Security Trust Funds are held harmless from the effects of this provision by a transfer from the Treasury General Fund.
6. Treatment of Possessions
The Act provides a reimbursement mechanism for the U.S. possessions (American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, the Commonwealth of Puerto Rico, and the United States Virgin Islands). The Treasury Secretary is to pay to each mirror code possession (Guam, the Commonwealth of the Northern Mariana Islands, and the United States Virgin Islands) an amount equal to the loss to that possession as a result of the Act changes to the qualified veterans rules. Similarly, the Treasury Secretary is to pay to each non-mirror Code possession (American Samoa and the Commonwealth of Puerto Rico) the amount that the Secretary estimates as being equal to the loss to that possession that would have occurred as a result of the Act changes if a mirror code tax system had been in effect in that possession. The Secretary will make this payment to a non-mirror Code possession only if that possession establishes to the satisfaction of the Secretary that the possession has implemented (or, at the discretion of the Secretary, will implement) an income tax benefit that is substantially equivalent to the qualified veterans credit allowed under the Act modifications. An employer that is allowed a credit against U.S. tax under the Act with respect to a qualified veteran must reduce the amount of the credit claimed by the amount of any credit (or, in the case of a non-mirror Code possession, another tax benefit) that the employer claims against its possession income tax.
Work opportunity credit
Explanation of Provision
The provision extends the work opportunity tax credit for four months (for individuals who begin work for an employer after August 31, 2011 before January 1, 2012).< a href="#sup">1831
Modification of work opportunity tax credit
Explanation of Provision 91
The provision creates a new targeted group for the work opportunity tax credit. That new category is unemployed veterans and disconnected youth who begin work for the employer in 2009 or 2010.
An unemployed veteran is defined as an individual certified by the designated local agency as someone who: (1) has served on active duty (other than for training) in the Armed Forces for more than 180 days or who has been discharged or released from active duty in the Armed Forces for a service-connected disability; (2) has been discharged or released from active duty in the Armed Forces during the five-year period ending on the hiring date; and (3) has received unemployment compensation under State or Federal law for not less than four weeks during the one-year period ending on the hiring date.
A disconnected youth is defined as an individual certified by the designated local agency as someone: (1) at least age 16 but not yet age 25 on the hiring date; (2) not regularly attending any secondary, technical, or post-secondary school during the six-month period preceding the hiring date; (3) not regularly employed during the six-month period preceding the hiring date; and (4) not readily employable by reason of lacking a sufficient number of skills.
For purposes of the disconnected youths, it is intended that a low-level of formal education may satisfy the requirement that an individual is not readily employable by reason of lacking a sufficient number of skills. Further, it is intended that the Internal Revenue Service, when providing general guidance regarding the various new criteria, shall take into account the administrability of the program by the State agencies.
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91 – For further discussion of the Work Opportunity Tax Credit see section 757 of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, Pub. L. No. 111–312, described in Part Sixteen of this document.
-Return to Explanation of Provision
1831 – The rule to allow unemployed veterans and disconnected youth who begin work for the employer in 2009 or 2010 to be treated as members of a targeted group is not extended.
-Return to Explanation of Provision