The Three Percent Withholding Repeal and Job Creation Act (2011 Heroes Act) expands tax incentives that encourage employers to hire military veterans. The 2011 Heroes Act enhances the Work Opportunity Tax Credit (WOTC) by creating the Returning Heroes Tax Credit and the Wounded Warriors Tax Credit.
In general, the WOTC rewards employers with a tax credit for hiring individuals from targeted groups. The WOTC was extended by the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (2010 Tax Relief Act) through the end of 2011. The targeted groups eligible for the WOTC as extended by the 2010 Tax Relief Act are:
- families receiving Temporary Assistance for Needy Families (TANF);
- qualified veterans (certain veterans receiving food stamps and certain veterans with service-connected disabilities);
- qualified ex-felons;
- designated community residents;
- vocational rehabilitation referrals;
- qualified summer youth employees;
- qualified food stamp recipients;
- qualified Supplemental Security Income recipients; and
- long-term family assistance (TANF) recipients.
However, the 2011 Heroes Act expands the WOTC to include:
- Employers that hire veterans who have been looking for employment for more than six months may be eligible for a Returning Heroes Tax Credit of up to $5,600 per employee; employers that hire veterans who have been looking for employment for less than six months may be eligible for a credit of up to $2,400 per employee.
- Employers that hire veterans with service-connected disabilities who have been looking for employment for more than six months may be eligible for a Wounded Warriors Tax Credit of up to $9,600 per employee.
The Returning Heroes Credit and the Wounded Warriors Credit apply to individuals who begin work after November 21, 2011 and on or before December 31, 2012. However, the 2011 Heroes Act does not extend the December 31, 2011 sunset date on the WOTC provided by the 2010 Tax Relief Act for any targeted group except for qualified veterans.
Exempt Organizations. The 2011 Heroes Act also makes the Returning Heroes Tax Credit and the Wounded Warriors Tax Credit, as well as the credit for veterans receiving food stamps and veterans with service-connected disabilities who do not meet the criteria for the Wounded Warrior Credit, available to tax-exempt employees. A tax exempt employer for purposes of this extension is an organization described in Code Sec. 501(c) and exempt from taxation under Code Sec. 501(a).
If you would like more information on the incentives to hire military veterans, please call our office at your earliest convenience.