Software Club 210: Light Red/Club_Software_210_Light_Red_Micro_Star_1997.iso/sba/f250.sbe

Text File | 1997-01-01 | 14KB | 327 lines

@108 CHAP 8

        ┌───────────────────────────────────────────────┐
        │ TARGETED JOBS TAX CREDIT FOR HIRING EMPLOYEES │
        │  (NOW KNOWN AS THE "WORK OPPORTUNITY CREDIT"  │
        └───────────────────────────────────────────────┘

If you hire members of certain economically disadvantaged
groups, the federal government will pay you a subsidy of up
to $2,100 per employee in the form of "Work Opportunity
Tax Credits" (formerly known as "Targeted Jobs Tax Credits")
against your income tax liability.  Unfortunately, most
small business employers seem to be unaware of this
substantial tax subsidy or else mistakenly assume that
it applies only if you hire ex-felons or the like.

Part of the reason so many employers failed to take advantage
of this tax giveaway in the past was on account of a Catch-22
in the way the program worked, before its recent revision in
1996:  To qualify for the old targeted jobs credit for hiring
a disadvantaged category person, he or she had to be certified
as such by a designated state employment security agency and
the certification was required to be received by the employer
(or requested in writing) at least one day before the employee
began work.

At the same time, state and federal anti-discrimination
laws make it very difficult for you as an employer to ask
prospective job applicants if they belong to any of the
disadvantaged groups that are eligible for the tax credits,
since to do so could be considered a discriminatory hiring
practice....

Accordingly, many employers simple didn't bother to try to
obtain the old targeted jobs credit.

The new work opportunity credit, which will expire on May
31, 1997, provides a better mechanism for determining if
an employee is a member of a targeted group.  The new rule
is as follows:

  . An agency certification must be received on or before
    a worker commences employment, or,

  . On or before an offer of employment is made to an
    individual, the employer must complete a "pre-screening
    notice" (on the new Form 8850, Work Opportunity Credit
    Pre-Screening Notice and Certification Request), which
    obtains necessary information from the job applicant,
    on the basis of which the employer believes the person
    is an eligible member of a targeted group.  The employer
    then has 21 days after the person begins work in which
    to submit the Form 8850, signed by both employer and
    employee, to the state employment security agency,
    requesting the certification that is needed to obtain
    the work opportunity jobs credit for federal income
    tax purposes.

The targeted group individuals for whom you can claim the
jobs tax credit when you hire them are as follows has also
been slightly revised under the new work opportunity
credit provisions enacted in 1996:

    . QUALIFIED IV-A RECIPIENTS.  Individuals certified by
      the designated local agency as being a member of a
      family receiving assistance under a program approved
      under part A of Title IV of the Social Security Act.

    . QUALIFIED VETERANS.  Includes certain veterans who
      are members of a family receiving food stamps or
      assistance under a IV-A plan.

    . QUALIFIED EX-FELONS.  This category includes certain
      recently convicted or released felons with low
      family incomes.

    . HIGH-RISK YOUTHS.  Youths age 18 or older but under
      25 who live in empowerment zones or enterprise
      communities.

    . VOCATIONAL REHABILITATION REFERRALS.  These are
      certain individuals with substantial physical or
      mental disabilities who have completed (or are
      currently enrolled in) vocational rehabilitation
      programs.

    . QUALIFIED SUMMER YOUTH EMPLOYEES.  Economically
      disadvantaged youths 16 or 17 years old who are
      hired to work between May 1 and September 15, who
      were not previously employed by you.

    . QUALIFIED FOOD STAMP RECIPIENTS.  Youths between
      age 18 and 25 who are members of families receiving
      food stamp assistance and who meet certain other
      requirements.

On the first $6,000 you pay an eligible target group
employee, you will earn tax credits of 35% of the wages
(formerly 40%, under the old targeted jobs credit), if the
employee works a minimum of 180 days or 400 hours for you.
(For "qualified summer youths" the minimum period
is only 20 days or 120 hours, but the credit is allowed
on only the first $3,000 of wages during the first 90 days.)
The credit is not allowed for wages paid to strikebreakers
or "scabs."  NOTE: One drawback of this tax credit is that
you must reduce the wages you can deduct dollar-for-dollar
for the jobs credits you claim.  That is, if you pay someone
$1,000 and claim a $350 targeted jobs tax credit, you can
only deduct $650 for wage expense on your tax return, not
the full $1,000.

@CODE: CA
California has its own jobs tax credit program, somewhat
similar to the federal jobs credit described above.  The
California Employment Development Dept. (EDD) is the state
agency that certifies individuals as eligible employees
under both the federal and state jobs tax credit laws.
There is some overlap with the federal targeted jobs credit
in the categories of eligible employees, but for the most
part the state requirements are different.

The state jobs credit for eligible and certified employees
is as follows:

    . For the first 12 months of employment, a tax credit
      equal to 10% of the first $3,000 of wages paid to the
      employee.

    . For the second year of employment, a tax credit of
      10% of the first $3,000 of wages for such period.

Thus, the maximum California jobs credit is $600 per
employee, earned over a 2-year period.  The state jobs
credit is NOT allowed as an offset against the California
alternative minimum tax or the corporation minimum franchise
tax.  Note that the California jobs credit expired on
December 31, 1993 (unless it is unless retroactively
extended).

California has also provided certain special jobs tax
credits for hiring disadvantaged or unemployed persons in
"Enterprise Zones" and "High-Density Unemployment Areas"
that have been designated in certain parts of the state
that are economically depressed.  Note, however, that
the previous Enterprise Zone Act and Employment and Economic
Incentive Act have been repealed by a new Enterprise Zone
Act, which goes into effect on January 1, 1997, which makes
numerous modifications and improvements over the prior Acts.

Employers in California may also claim a 50% credit (up to
$600 per dependent) under a plan providing child care for
employees.

        ┌───────────────────────────────────────────────┐
        │       CALIFORNIA INVESTMENT TAX CREDIT        │
        └───────────────────────────────────────────────┘

Effective January 1, 1994, California began to allow a 6%
investment tax credit (ITC) on certain purchases of equipment
and other tangible personal property purchased for use by a
"qualified person" where the property is placed in service
in California.  Such personal property must be used primarily
in any stage of the manufacturing, processing, refining,
fabricating, or recycling of property, beginning at the
point any raw materials are received by the "qualified
person" and introduced into the process, and ending at the
point at which the manufacturing, etc. process has altered
the property to its completed form (including packaging,
if required).

(Effective September 11, 1994, if you pay sales tax or use
tax on the purchase of equipment that would qualify for the
investment tax credit, and if you are "pre-qualified" by the
Board of Equalization as a "new business," you may instead
elect to receive a refund of the sales or use tax, 6% in
1994, or 5% in 1995 and subsequently, in lieu of claiming
the 6% investment credit on your income or franchise tax
return.  Businesses that operate in Enterprise Zones or
Program Areas may be able to claim BOTH a sales tax and
income tax credit.)