Measure Will Provide Tax Credits For Hiring Unemployed Workers

On March 18, President Barack Obama signed into law the Hiring Incentives to Restore Employment (HIRE) Act. The bill contains approximately $17.6 billion in tax credits to stimulate employment and contributes about $20 billion toward highway and transit infrastructure programs. The President stated that while the jobs bill was "absolutely necessary," it was "by no means enough" and that "[t]here's a lot more that we're going to need to do to spur hiring in the private sector and bring about full economic recovery."

One of the more important provisions for business is the tax credit for hiring unemployed workers. In particular, HIRE exempts companies from paying the 6.2% Social Security payroll tax through December 31, 2010 for certain new employees. To qualify, the new employee must begin working after February 3, 2010, and before January 1, 2011, and certify that they have not worked more than 40 hours during the 60-day period before employment begins. Also, this new employee may not replace an existing employee of the employer unless the other employee's employment terminated voluntarily or for cause.

In addition, companies would receive a $1,000 tax credit on their 2011 tax return for each new employee who commences employment during the year and is employed for at least one year. The HIRE Act also includes a provision that will reimburse the Social Security Trust Fund from the general fund for the lost payroll taxes it will incur from the payroll tax exemption. Estimates are that these tax credits could stimulate the creation of up to 300,000 jobs.

Another provision of the HIRE Act that is especially important to small business is the increase in the "expensing" tax allowance. Small businesses will be able to write off up to $250,000 of certain capital assets and equipment instead of depreciating them over time.

Approximately $77.2 billion is provided in the HIRE Act for the surface transportation program last authorized by the 2009 transportation legislation. The HIRE Act will continue funding for a variety of federal-aid highway, transportation and surface transportation construction projects through the end of this calendar year.

The HIRE Act also generates revenue to offset the various investments or expenditures. One key revenue source would be a limitation on the ability of multinational corporations to shift assets among foreign institutions to minimize withholding tax.

Note: This article was published in the March/April 2010 issue of the Employment Law Authority.