The work opportunity tax credit (WOTC) has been in existence for years; however, the Small Business and Work Opportunity Tax Act of 2007, P.L. 110-28 (SBWOTA), expanded the definition of some of the target groups, creating tax incentives that will affect more clients than originally expected. SBWOTA expanded the definition of qualified veteran to include certain disabled veterans and broadened the definition of a targeted group of high-risk youths, now referred to as designated community residents (DCRs).
The changes are effective for employees hired after May 25, 2007, and the WOTC will now sunset after Aug. 31, 2011. SBWOTA also permits individuals and corporations to claim the WOTC against the alternative minimum tax for tax years beginning after Dec. 31, 2006.
A qualified veteran now includes a person entitled to compensation for a service-connected disability who is hired not more than one year after a discharge or release from active duty in the U.S. armed forces or whose aggregate periods of unemployment during the one-year period ending on the hiring date equal or exceed six months.
A DCR is defined as someone who is at least 18 years of age, but not yet 40, on the hiring date and who has qualified wages for services performed while his or her principal place of abode is within an empowerment zone, enterprise community, renewal community, or rural renewal county.
RURAL RENEWAL COUNTIES
The rural renewal county is a new qualifying area added to the WOTC. It is defined as any county outside a metropolitan statistical area that had a net population loss during the periods 1990-1994 and 1995-1999. This definition includes 408 counties, covering 32 states and approximately 13% of all U.S. counties. The instructions to Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity...