Best Practices in Employment-based Tax Incentives for Hospitality Employers
By Brandon Edwards President, Tax Credit Co. | December 19, 2010
Implementing a program to capture hiring-based tax incentives can yield significant value to hospitality employers. Executed properly, the investment of time and resources will result in a compelling and material improvement to bottom-line financial performance. With the most current tax incentive programs in place, hospitality employers are able to add an average of over $600 per new employee hired. Over a three year period, including retroactive credits, this can easily add up to hundreds of thousands of dollars per location.
The key programs to focus on are:
- Work Opportunity Tax Credit (WOTC):
Around since the mid-90's, WOTC encourages hiring people on government aid such as food stamps, welfare, disability, etc., as well as members of groups that have barriers to employment such as ex-felons, disabled or unemployed veterans, Native Americans, etc. The program has become the primary vehicle for providing hiring incentives at the federal level for specific urgent needs, including post-911 hiring in Manhattan, areas affected by Hurricane Katrina and Rita, veterans returning from Iraq and Afghanistan and others. Applications for qualified hires have to be submitted within 28 days of start date.
Potential Value: Up to $9,000 per qualified hire.
Average Value: $1,800 per qualified hire.
Qualification Rate: 15-20 percent.
- HIRE Act (Hire Now Tax Cut):
The HIRE Act, also known as the Hire Now Tax Cut, provides a payroll tax exemption for all non-governmental employers in the United States for each person they hire that worked for less than 41 hours in the 60 days prior to starting work with the employer. It also provides an income tax credit of up to $1,000 for each of those qualified employees that are retained for 52 weeks. It can be claimed retroactively and does not require an application or certification process, as the employer self-certifies the employees.
Potential Value: Up to $7,621 per qualified hire.
Average Value: $900 per qualified hire.
Qualification Rate: Over 50 percent.