Tax Incentives to Hire, Retain, or Compensate Employees, brings together in one place analyses of the many income tax provisions designed to encourage employers to hire employees and to retain those employees. The Portfolio separates the analyses into three categories. The Portfolio also presents a history of the provisions as they have been added, expanded, and modified.
First, the Portfolio discusses incentives to hire or retain employees that are provided in the form of exclusions from gross income. This brings together in one place analyses of amounts that are taken into account in computing gross income on account of employment decisions.
Second, the Portfolio discusses incentives to hire or retain employees that are provided in the form of deductions. This brings together in one place analyses of amounts that are taken into account in computing taxable income on account of employment decisions.
Third, the Portfolio discusses incentives to hire or retain employees that are provided in the form of credits. This brings together in one place analyses of amounts that are subtracted in computing tax liability on account of employment decisions.
Among other items, the Portfolio discusses the tax treatment of Manpower Act payments, contributions to Black Lung benefits and employer liability trusts, the work opportunity credit, the welfare-to-work credit, and the Indian employment credit.
Tax Incentives to Hire, Retain, or Compensate Employees allows you to benefit from:
This Portfolio is part of the U.S. Income Portfolios Library, a comprehensive series that includes more than 200 Portfolios, which cover every federal tax topic with expert, in-depth analysis, and offer commentary on a wide range of federal taxation topics, including Compensation Planning, Deductions and Credits, Partnerships and Corporations, Special Pass-Through Entities, Corporate Reorganizations, Real Estate, Procedure and Administration, and more.
Portfolio Description
Authors
Technical Advisors
Description
Detailed Analysis
I. Introduction
A. In General
B. Historical Background
1. In General
2. Developments During the Era of the Internal Revenue Code of 1954
3. Developments During the Era of the Internal Revenue Code of 1986
II. Employment Incentives in the Form of Exclusions and Exemptions
A. State and Local Tax Incentives to Hire or Retain Employees
B. Manpower Act Payments
C. Exemption From OASDI Portion of FICA Taxes
III. Employment Incentives in the Form of Deductions
A. Employment Generally
B. Employer Contributions to Qualified and Other Plans
C. Social Security Payments Made With Respect to U.S. Citizens Employed by Foreign Subsidiary Corporations
2. Section 3121(l) Agreement
3. Foreign Subsidiary Corporation
D. Black Lung Benefit Trust Contributions
2. Payment
3. Limitation
a. In General
b. Funding Determinations
4. Carryforwards
E. Employer Liability Trust Contributions
2. Allocable to the Taxable Year
F. Deduction Limitation for Employment Credits
2. Controlled Groups and Commonly Controlled Businesses
IV. Employment Incentives in the Form of Credits
A. Work Opportunity Credit
2. Computation of Credit
b. Qualified First-Year Wages
(1) In General
(2) Qualified Summer Youth Employees
c. Qualified Second-Year Wages § 51(e)
3. Wages
b. Special Rules
(1) Agricultural and Railway Labor
(2) Successor Employers
(3) Employees Performing Services for Other Persons
c. Exceptions
(1) On-the-Job Training Payments
(2) Work Supplementation Payments
(3) Payments During Labor Disputes
(4) Coordination with Payroll Tax Forgiveness
(5) Payments to Employees Hired After Expiration of Credit
4. Members of Targeted Groups
a. Targeted Group Classification
(2) Qualified IV-A Recipient
(3) Qualified Veteran
(4) Qualified Ex-Felon
(5) Designated Community Resident
(6) Vocational Rehabilitation Referral
(7) Qualified Summer Youth Employee
(8) Qualified Supplemental Nutrition Assistance Program Recipient
(9) Qualified SSI Recipient
(10) Long-Term Family Assistance Recipient
(11) Hurricane Katrina Employee
(12) Unemployed Veteran
(13) Disconnected Youth
b. Certification Requirements
(2) Incorrect Certifications
c. Designated Local Agency
d. Hiring Date
5. Disqualified Individuals
b. Related Individuals
c. Nonqualifying Rehires
d. Individuals Not Meeting Minimum Employment Period
6. Special Rules with Respect to Employers
a. Controlled Corporate Groups
b. Commonly Controlled Employers
(2) Common Control
(a) In General
(b) Parent-Subsidiary Group
(c) Brother-Sister Group
(d) Combined Group
(e) Special Rules
c. Tax-Exempt Organizations
d. Estates and Trusts
e. Regulated Investment Companies and Real Estate Investment Trusts
f. Farmers' and Other Cooperatives
7. Election to Forgo Credit
8. Deduction for Wages Reduced by Credit
B. Indian Employment Credit
3. Qualified Wages and Health Insurance Costs
a. Qualified Wages
b. Qualified Health Insurance Costs
c. Nonqualifying Wages and Health Insurance Costs
d. Limitation on Amount
e. Special Rules
(1) Successor Employers
(2) Employees Performing Services for Other Persons
4. Qualified Employees
b. Ineligible Employees
(2) Highly Compensated Employees
(3) Non-Business Employees
(4) Related Individuals
(5) Five Percent Owners
(6) Gaming Employees
5. Special Rules with Respect to Employers
b. Tax-Exempt Organizations
c. Estates and Trusts
d. Regulated Investment Companies and Real Estate Investment Trusts
e. Farmers' and Other Cooperatives
C. Employer-Provided Child Care Credit
2. Qualified Child Care Expenditures
3. Qualified Child Care Resource and Referral Expenditures
4. Recapture of Credit
b. Estates and Trusts
c. Partnerships
6. Impact on Adjusted Basis
D. Differential Wage Payment Credit
2. Eligible Small Business Employer
b. Disqualification
3. Qualified Employee
4. Eligible Differential Wage Payments
5. Special Rules
a. Tax-Exempt Organizations
c. Regulated Investment Companies and Real Estate Investment Trusts
E. Employer Social Security Credit
2. Excess Employer Social Security Tax
3. Election to Forgo Credit
F. Small Employer Pension Plan Startup Cost Credit
2. Limitation
3. Eligible Employer
4. Qualified Startup Costs
5. Aggregation Rules
6. Election to Forgo Credit
G. Empowerment Zone Employment Credit
3. Qualified Zone Wages
4. Qualified Zone Employee
a. Eligible Employees
(2) Related Individuals
(3) Five Percent Owners
(4) Short-Term Employees
(5) Recreational Employees
(6) Farm Employees
6. Empowerment Zone
b. Conditions for Designation
c. Eligibility Criteria
d. Renewal Communities
(2) Designation Procedures
(3) Period Designation Effective
(4) Area and Eligibility Requirements
(5) Required State and Local Commitments
(6) Treatment of Governments
H. The Disaster Credits
1. The Hurricane Katrina Employer Housing Credit
b. Amount Excludible from Gross Income
c. Qualified Employee
d. Qualified Employer
e. Gulf Opportunity Zone
2. Midwestern Disaster Area Employer Housing Credit
e. Midwestern Disaster Area
3. Hurricane Katrina Employee Retention Credit
b. Eligible Employer
c. Eligible Employee
d. Gulf Opportunity Zone
e. Qualified Wages
4. Hurricane Rita Employee Retention Credit
d. Rita Gulf Opportunity Zone
5. Hurricane Wilma Employee Retention Credit
d. Wilma Gulf Opportunity Zone
6. Kansas Disaster Area Employee Retention Credit
d. Kansas Disaster Area
7. Midwestern Disaster Area Employee Retention Credit
d. Midwestern Disaster Area
f. Applicable Disaster Date
8. Disqualified Individuals
9. Special Rules with Respect to Employers
b. Controlled Corporate Groups
c. Commonly Controlled Employers
d. Tax-Exempt Organizations
e. Estates and Trusts
f. Regulated Investment Companies and Real Estate Investment Trusts
g. Farmers' and Other Cooperatives
I. Small Employer Health Insurance Credit
Working Papers
Table of Worksheets
Worksheet 1 Former Indian Reservations in Oklahoma (Notice 98-45, 1998-35 I.R.B. 7)
Worksheet 2 List of Empowerment Zone Designations in Pub. 954, Tax Incentives for Empowerment Zones and Other Distressed Communities