Work opportunity tax credit "extender" has limited window for opportunity.

• Author: Lemaster, Herb

Part of the various tax incentives signed into law in August 1996 included special extenders for provisions that had expired earlier when Congress could not come to an agreement. The Small Business Job Protection Act of 1996 (SBJPA) included a provision for the reinstatement of the Targeted Jobs Tax Credit under Sec. 51 as the Work Opportunity Tax Credit, which Congress believes win have a meaningful impact on the economy, as well as provide incentives to hire the disadvantaged.

In its basic form, the Work Opportunity Tax Credit allows a credit against Federal taxes equal to a percentage of qualified wages paid to employees from one or more of seven targeted groups starting after Sept. 30, 1995 and before Oct. 1, 1997.

The credit does not reinstate the Targeted Jobs Tax Credit to when the previous credit eligibility ended (Dec. 31, 1997 for employment), nor does it extend to employees hired after Oct. 1, 1997 Committee reports indicate that this is intentional, to give Congress an opportunity to see if the new tax credit has proven effective.

Amount of Credit

The credit allowed for each employee is 35% of qualified first-year wages, up to a maximum of $6,000 in wages. For qualified summer-youth employees, the maximum wage base is $3,000. The credit is treated as a general business credit and is subject to the annual tax liability limitations for other business credits.

Qualified Employees

Employees who quality for the Work Opportunity Tax Credit come from seven targeted groups. 1. Qualified IV-A recipients: Generally, individuals under each states welfare programs for assistance for families with dependent children (AFDC). The family must have received the assistance for at least nine months (all or part of which ends on the hiring date of the employee). Each member of the family is treated as receiving the assistance. 2. Qualified veterans: Veterans also must be part of a family receiving benefits under the IV-A program for 12 months or food stamps for three months. In addition, only those veterans who served on active duty for at least 180 days or have been discharged for a service-connected disability qualify. However, if the active duty occurs within 60 days of the hiring, the veteran does not qualify. 3. Qualified ex-felons: Persons convicted of a Federal or state felony and hired within one year after conviction, or release from prison. The ex-felon cannot be holding a high- or moderate-paying job when the prospective employer...