Three Tax Credit Opportunities Extended: WOTC, Federal Empowerment Zone And Indian Employment Credits

The Consolidated Appropriations Act, 2021 (CAA 2021), signed into law on December 27, 2020, extended three federal tax credits that were set to expire on December 31, 2020:

  • The Work Opportunity Tax Credit (WOTC) is extended through December 31, 2025 (however, the CAA 2021 does not include the COVID-19 unemployed target group proposed in the Senate HEALS Act during the summer of 2020);

  • The Federal Empowerment Zone tax credit is also extended through December 31, 2025; and

  • The Indian Employment Credit is extended through December 31, 2021.

WOTC

The WOTC provides for a general business credit of up to $9,600 to employers that hire and retain individuals from certain targeted groups that have faced barriers to employment. A targeted group for purposes of the WOTC includes a qualified IV-A recipient, qualified veteran, qualified ex-felon, designated community resident, vocational rehabilitation referral, qualified summer youth employee, qualified food stamp recipient, qualified SSI recipient, long-term family assistance recipient or long-term unemployment recipient. The WOTC is equal to a percentage of the first-year wages paid or incurred by an employer during the taxable year to employees who are members of a covered targeted group.

Read the entire article at BDO: https://www.bdo.com/insights/tax/state-and-local-tax/three-tax-credit-opportunities-extended

Chris Ewing