VOL. 110 | NO. 225 | Wednesday, November 20, 1996
lj 10/5 cates
New tax credit program helps existing businesses
By LAURIE JOHNSON
The Daily News
A new tax credit program that encourages employers to hire individuals from economically disadvantaged areas may open up job opportunities for as many as 25,000 workers in Shelby and Fayette counties.
The federal government recently announced the creation of the "Work Opportunities Tax Credit," which offers a $2,100 wage tax credit per employee to businesses hiring qualified young adults living in an enterprise zone (EZ) or empowerment community (EC).
The program is part of the Small Business Job Protection Act recently enacted by the U.S. Congress and applies to workers hired between Oct. 1, 1996 and Sept. 30, 1997. It replaces the 16-year-old Targeted Jobs Tax Credit program that expired in 1994.
"For a large employer, this could mean a substantial amount of savings on their income taxes," said Eric Kelley, executive director of the Fayette County Chamber of Commerce. "A significant advantage of the program is that the company does not have to be located within the empowerment zone, just so the person they hire lives in enterprise community and qualifies."
About 30,000 people live in Fayette County, and roughly three-fourths of the county five census tracts out of seven is designated EC/EZ. Kelley estimated that about a third of the people living in Fayette Countys EZ/EC zones were eligible for employment under the program.
Seventeen census tracts in Shelby County are considered EZ eight in north Memphis, seven in south Memphis and two census tracts in Orange Mound. The population of these areas is about 60,000.
"Its a very powerful program, because it provides some incentives that otherwise wouldnt be available to businesses," said Corky Neal, deputy director for the Memphis Department of Housing and Community Development.
According to Neal, about 20 percent of the residents in Shelby Countys designated EZ areas would be eligible for the WOTC program.
An added plus is that while many incentive programs are designed to recruit outside industries into the area, the WOTC applies equally to existing businesses and industries, Kelley said.
Seven targeted groups of workers are eligible for the tax credit, including recipients of Aid to Families with Dependent Children (AFDC), military veterans receiving AFDC or food stamps, disabled workers, economically disadvantaged ex-felons and adults age 18 to 24 (for summer work, youths age 16 and 17) who reside in EZ/ECdesignated areas.
"The program will be employer-driven," said Roger Littlejohn, state WOTC coordinator with the Tennessee Department of Employment Security. "One of our priorities is to get the information out to the employers so they can better identify potential candidates for the tax credit and then show them how to incorporate prescreening for the program into their formal hiring process."
The program applies to employees who have never worked for the employer before and who will be working on the job at least 180 days or 400 hours. In the case of summer youth workers, the tax credit is 35 percent of the first $3,000 in wages, and the required retention period is 20 days or 120 hours.
Employers can claim a 35 percent credit applied to their federal income tax on the first $6,000 in wages paid during each eligible employees first year of employment.
The new federal tax credit dovetails well with the pool of Tennessees Families First participants now entering the labor market, said Hazel Albert, acting commissioner of Employment Security.
"The Families First welfare reform initiative crates a source of additional workers for Tennessee employers, and the Work Opportunity Tax Credit provides an extra inducement for hiring from this group of potential employees," she said.
Kelley said the Fayette County Chamber has received a number of inquiries from both Fayette County and Shelby County employers interested in learning more about the tax credit program.
"Were going to follow through on this," said Bill Coleman, sales manager for Diversified Pallets Inc. in Piperton. "We need production people, and we would like to take advantage of the program. For a small business, it seems like a great opportunity."
Coleman said he had reviewed the program, and his next step was to contact the WOTC regional coordinator in Atlanta for more information.
"Our only concern up front is that we might get loaded down with a lot of extra paperwork and hassle," Coleman said. "If that were going to be the case, then it would not be worth it to us."
"Were looking for any tax benefits we can get," said D. J. Frye, manager of finance for Specialty Alloys in Gallaway, Tenn. "We do have a need to employ people in this area, and we are going to be looking for people that will qualify for this tax credit."
To apply for the credit, the employer and job applicant must complete an IRS Form 8850 (the Work Opportunity Credit Pre-Screening Notice and Certification Request) on or before the day the employer offers an applicant the job, Littlejohn said. This form must be mailed to the Tennessee Department of Employment Security within 21 days of the first day on the job.
The employer also must complete a WOTC Applicant Characteristics form for each eligible employee.
After Employment Security processes the forms and confirms the employees target group eligibility, the department will send a tax certification to the employer that may be filed with the companys tax returns.
For an information packet or additional information about the WOTC, contact the Fayette County Chamber of Commerce at 465-8690 or the Tennessee Department of Employment Security at 1-800-432-5268 (in-state only). Requests also may be faxed to the department by dialing 615-532-1612.