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.
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