Work Opportunity Tax Credit
The Work Opportunity Tax Credit (WOTC) makes it easier for the lodging industry to lead the way in moving welfare recipients into the work force.
Under WOTC, employers can earn up to a $2,400 tax credit for wages paid to individuals from eight targeted disadvantaged groups (including former welfare recipients). Similarly, the Welfare-to-Work tax credit (WWTC) gives employers hiring former long-term welfare recipients a credit of up to $8,500 over two years. Employers can earn the credit based on wages paid as well as on certain educational and healthcare benefits given to employees.
Over the years, these programs have been extended by Congress for limited times, often after their expiration. This unwieldy dynamic limits the long-term planning employers are able to do and thus limits a greater participation in the program. For example, Congress allowed WOTC and WWTC to expire on December 31, 2001. On March 9, 2002, President Bush signed legislation reauthorizing WOTC and WWTC through December 31, 2003. The reauthorization was retroactive to January 1, 2002.
WOTC and WWTC once again lapsed on December 31, 2003, but after extensive lobbying by AH&LA, Congress passed and President Bush signed an extension of the programs to December 31, 2005 which was retroactive to January 1, 2004.
AH&LA has long urged a permanent reauthorization of WOTC and WWTC. Two bills were introduced in the 109th Congress (H.R. 1272/S. 595) would have consolidate these credits and make them permanent. However, neither bill was acted upon before the end of the session in 2006.
There was another WOTC extension bill in the 110th Congress. On May 25, 2007, the President signed into law (Public Law 110-28) the "Small Business and Work Opportunity Tax Act of 2007" found in an appropriations bill (H.R. 2206). The legislation once again extends the tax credit, this time through August 31, 2011.
The IRS Webpage on WOTC credits is found here.
For more information, contact AH&LA Senior Vice President for Governmental Affairs Shawn McBurney at (202) 289-3123,
smcburney@ahla.com.(Updated August 2008)