On December 20, 2019, President Trump signed H.R.1865 - Further Consolidated Appropriations Act, 2020 that extends a few historically popular tax-relief programs for businesses, including the Federal Empowerment Zone Credit, Work Opportunity Tax Credit (WOTC), Family and Medical Leave Act Credit, and the Employee Retention Credit. Information on the status of the extension of these programs has long been anticipated by companies, and it seems there is finally some indication that a resolution on the future of these programs will be resolved in the upcoming weeks.
The bill calls to extend the expiration date of federal empowerment zones from December 31, 2017 to December 31, 2020. Empowerment zones are areas designated with having high poverty and unemployment. These areas offer a variety of tax incentives for businesses, including a tax credit of up to $3,000 per year for each employee who resides in the zone. Businesses have been taking advantage of empowerment zone tax benefits since they were introduced in 1993 and have been extended several times since their inception. The zones have boosted economic activity in struggling areas and stimulated job growth throughout the years.
The WOTC, also set to expire at the end of 2019, has been extended through the end of 2020. WOTC is a federal tax credit of up to $10,000 per eligible employee, available to employers hiring individuals from certain target groups, like impoverished people, formerly incarcerated people, veterans, and other individuals experiencing barriers to employment. To participate in the program, businesses must pre-screen employees. The program incentivizes businesses to hire people from a more diverse group of eligible candidates and provides opportunities otherwise not afforded to disadvantaged individuals.
The bill also extends the Family and Medical Leave Act (FMLA) Employer Credit through 2020 and applies to tax years after December 31, 2019. The Employer Credit for paid FMLA is a general business credit based on wages paid to employees taking advantage of FMLA. Employers must offer at least two weeks of paid family and medical leave annually to all qualifying full-time employees, and paid leave must be a minimum of 50% of the wages normally paid to the employees. Qualifying employees are employees that have been employed for at least a year and did not earn more than $72,000 in 2017. The credit is a percentage of the amount paid to qualifying employees while on family and medical leave for up to 12 weeks per taxable year, and the maximum credit a company can claim is 25% of wages paid.
In the past, the federal government has approved tax credits for natural disasters that caused businesses to temporarily close. The credits are reserved for employers that paid their employees during closure. Qualified disaster areas are locations affected by natural disasters and designated by the Federal Emergency Management Agency (FEMA) and approved by the President. The bill extends that credit to businesses located in designated areas affected by disasters in 2018 and 2019. The credit is equal to 40% of the qualified wages paid to employees during the disaster, up to a maximum credit of $2,400 per employee.
The extension of these credit programs has long been awaited by companies, small and large, across the country for almost two years, and this bill is a welcomed relief.
TECHNICAL INFORMATION CONTACTS:
Allea Newbold
Principal
Ryan
813.228.7100
allea.newbold@ryan.com
Matt Lowell
Director
Ryan
321.251.2924
matt.lowell@ryan.com
The material presented in this communication is intended to provide general information only and should solely be seen as broad guidance and not directed to the particular facts or circumstances of any individual who may read this publication. No liability is accepted for acts or omissions taken in reliance upon the content of this piece. Before taking (or not taking) any action, readers should seek professional advice specific to their situation from Ryan, LLC or other tax professionals. For additional information about this topic, please contact us at info@ryan.com.