Federal Credits


FEDERAL WORK OPPORTUNITY TAX CREDIT (WOTC)

EXPLANATION OF PROGRAM

The Work Opportunity Tax Credit is a federal tax credit program that allows companies to generated tax credits for hiring individuals from a “targeted group.” One such targeted group includes Unemployed Veterans (for a full list of the targeted groups see below). This program, authorized under IRC Section 51, is an easy way to help reduce a company’s federal tax liability; the tax credit is good against federal alternative minimum tax.

Many companies are already hiring such targeted group individuals, by merely inserting a couple additional forms into the new hire paperwork process, a company could avail itself of these credits, without having to change its current hiring practices. Allow us to demonstrate our custom tailored online WOTC Screening Questionnaire tool that allows for easy, quick screening of new hires.

Here is a quick explanation of the program and major requirements in order to begin capturing WOTC credits.

Benefit: up to $2,400 Federal Tax Credit per new qualified “Targeted Group” employee

  • For qualified employees that work a minimum of 120 hours, the benefit is 25% of the first year’s wages up to $6,0001
  • For qualified employees that work a minimum of 400 hours, the benefit is 40% of the first year’s wages up to $6,0002

TARGETED GROUPS

  1. TANF Assistance Recipients – An individual who is a member of a family assistance under a state plan approved under part A of title IV of the Social Security Act relating to Temporary Assistance for Needy Families (TANF). The assistance must be received for any 9 months during the 18-month period that ends on the hiring date.
  2. Qualified Veteran – A veteran who is any of the following:

• Member of a family receiving assistance under the Food Stamp program for at least a 3-month period during the 15-month period ending on the hiring date;

• Entitled to compensation for a service-connected disability and is hired not more than 1 year after being discharged or released from active duty in the U.S. Armed Forces (qualified wages for this category are up to $12,000);

• Entitled to compensation for a service-connected disability and was unemployed for a period or periods totaling at least 6 months (whether or not consecutive) in the 1-year period ending on the hiring date (qualified wages for this category are up to$24,000)

• Unemployed for 4 weeks (but not more than 6 months) at any time in the 1-year period prior to being hired; or

• Unemployed for 6 months or more at any time during the 1-year period prior to being hired (qualified wages for this category are up to $14,000).

To be considered a veteran, the applicant must:

• Have served on Active Duty (not including training) in the Armed Forces of the United States for more than 180 days or have been discharged or released from active duty for a service-connected disability,

• Not have a period of active duty (not including training) of more than 90 days that ended during the 60-day period ending on the hiring date.

3. Qualified Ex-Felon – An ex-felon who has been convicted of a felony under any federal or state law, and is hired not more than 1 year after the conviction or release from prison for that felony.

4. Designated Community Residents – An individual who is 18 years old but not yet 40 year old who resides in a Federal Empowerment Zone, Renewal Community or Distressed Rural County.

5. Vocational Rehabilitation Recipients. An individual who has a physical or mental disability resulting in a substantial handicap to employment and who was referred to the employer upon completion of (or while receiving) rehabilitation services by a rehabilitation agency approved by the state, an employment network under the Ticket to Work program, or the Department of Veterans Affairs.

6. Qualified “Summer Youths” – An individual employed between May 1 and September 15 who is 16-17 year olds and who resides in an Empowerment Zone or Renewal Community (qualified wages for this category are up to $3,000)

7. Qualified Food Stamp Recipients – An individual who:

• Is at least age 18 but not yet age 40 on the hiring date, and

• Is a member of a family that—

o Has received food stamps for the 6-month period ending on the hiring date or

o Is no longer eligible for such assistance under section 6(o) of the Food Stamp Act of 1977, but the family received food stamps for at least 3 months of the 5-month period ending on the hiring date.

8. Qualified Supplemental Security Income (SSI) Recipients – An individual who is receiving supplemental security income benefits under title XVI of the Social Security Act (including benefits of the type described in section 1616 of the Social Security Act or section 212 of Public Law 93-66) for any month ending during the 60-day period ending on the hiring date

9. Qualified Long-Term Family Assistance Recipients – An individual who is a member of a family that:

• Has received TANF payments for at least 18 consecutive months ending on the hiring date, or

• Receives TANF payments for any 18 months (whether) or not consecutive) beginning after August 5, 1997, and the earliest 18- month period beginning after August 5, 1997, ended during the past 2 years, or

• Stopped being eligible for TANF payments because federal or state law limits the maximum period such assistance is payable and the individual is hired not more than 2 years after such eligibility ended.

Benefit - up to a total of $9,000 per new qualified employees that work 400 hours or more

o Up to $4,000 in Year 1 (40% of $10,000 in wages); and

o Up to $5,000 in Year 2 (50% of $10,000 in wages).

10. Hurricane Katrina Employee (expired 8/28/09) – New hires hired between Aug. 28, 2005 and Aug. 28, 2009 who are residents of the GO Zone on Aug. 28, 2005 and work in the GO Zone.

11. Unemployed Veteran (expired 12/31/10) – A veteran who was discharged or released from active duty in the U.S. Armed Forces during the past 5 years and for at least 4 weeks during the past year, received unemployment compensation.

12. Disconnected Youth (expired 12/31/10) – New hire that:

• Is at least age 16 but not age 25 or older who does not have a certificate of graduation from a secondary school or General Education Development (GED) certificate;

• During the past 6 months has not attended a secondary, technical, or post-secondary school for more than an average of 10 hours per week, not counting periods during which the school was closed for scheduled vacations; and

• Was not employed, during each consecutive 3-month period within the past 6 months, or was employed but earned less than he/she would have earned if he/she had worked for the applicable minimum wage 30 hours every week during the 3-month period.

 

HISTORIC TAX CREDITS

FEDERAL REHABILITATION TAX CREDIT

To be eligible for the 20% Tax Credit:

  1. The building must be certified as a historic building in a National Register Historic District or must be individually listed in the National Register of Historic Places. Owners of historic buildings which are not currently on the Register may apply for Register listing through the Division of Historic Preservation by contacting the National Register staff at (225) 219-4595.
  2. The building must be used for income producing purposes, such as office, retail, rental residential, or industrial. The building must be depreciable and not used as a private residence.
  3. Exterior and interior work must be undertaken according to the Secretary of the Interior’s Standards for Rehabilitation.
  4. The project must meet the “substantial rehabilitation test.” In general, this means the cost of the rehabilitation work must exceed the adjusted basis of the building. If the building is a recent purchase, the adjusted basis is figured as the purchase price of the property less the appraised value of the land. If the building is not a recent purchase, the adjusted basis can be found by checking the building’s current depreciated value listed in the previous year’s income tax return.
  5. Projects are generally completed within two years. The specific requirement is that within 24 months the project must have expended enough funds to exceed the building’s adjusted basis. A project may take up to 60 months if permission is requested in advance.
  6. After rehabilitation, the building must be owned by the same owner and operated as an income-producing property for five years. If the owner sells the building before five years have passed, he loses 20% of the earned credit for each year short of the full five years.

The Application Process

The application is a three part process. Each part requires approval or “certification” by the National Park Service. The application is always submitted in duplicate to the Division of Historic Preservation, which retains one copy and forwards the other to the National Park Service.

  • Part 1: Documents the building as a certified historic structure and one that is eligible to receive the tax credit. If the building is individually listed on the National Register, a Part 1 need not be submitted. If a building is located within a National Register Historic District, a Part 1 must be submitted.
  • Part 2: Describes the proposed rehabilitation project. This should include all work items on which money is being spent.
  • Part 3: Request for Certification of Completed Work, documents that the work was completed according to Standards.

 

LOUISIANA STATE COMMERCIAL TAX CREDIT

To be eligible for the 25% Tax Credit:

  1. The building must be a contributing element to a Downtown Development District (DDD) or a Cultural District.
  2. The building must be used for an income-producing purpose.
  3. There is NO minimum holding period for the State Historic Credit
  4. Eligible expenses must exceed $10,000
  5. No taxpayer or entity affiliated with that taxpayer may receive more than $5 million in credits for rehabilitation work within a particular DDD.
  6. Rehabilitation must meet the Secretary of the Interior’s Standards for Rehabilitation.
  7. Any unused credit may be carried forward for up to five years.
  8. The credit may be sold to a third party under certain circumstances. Applicants are advised to consult their tax professional in this case.

The Application Process

The application is a three part process. Each part requires approval or “certification” by the Division of Historic Preservation.

  • Part 1: Documents the building as a certified historic structure and one that is eligible to receive the tax credit.
  • Part 2: Describes the proposed rehabilitation project. This should include all work items on which money is being spent.
  • Part 3: A Request for Certification of Completed Work, documents that the work was completed according to Standards.