In a bid to retake the initiative on small-business policy, President Obama Wednesday is expected to propose a 10 percent tax credit tied to new hiring. But the policy appears designed as much to draw a political distinction as to generate new jobs. In describing the proposal, which Mr. Obama will flesh out in a visit to a Washington-area small business, the administration drew a sharp contrast with a Republican small-business tax cut that passed the House last month, which the White House contends is too tilted toward the wealthy.

Under the White House proposal, which the president previewed in a video address over the weekend, a company would get credit against income taxes worth up to 10 percent of the increase in total wages in 2012, which could come either in the form of salaries for new hires or raises. A company that increased its payroll by $4 million would see a $400,000 income tax credit.

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According to a report put out by Small Business Majority and Consumer Group Families USA, Federal health care reform has positive implications for job creation in the US. According to report put out by the Huffington Post, “hundreds of thousands of small business owners across the country have been able to claim a tax credit for offering their employees health benefits” (John Arensmeyer). One small business owner in particular is using the tax credit to his advantage by providing a better work environment for his employees, cutting costs, and expanding his business by hiring new employees.

“According to the report released today, more than 3.2 million small businesses employing 19.3 million Americans are eligible for the healthcare tax credit included in the law to help offset their premiums. Erica Hawthorne, the marketing manager for Ken Weinstein’s Philadelphia, Penn. Trolley Car Diner, is one of those 19.3 million.

Erica reports that Ken received a tax credit of 19 percent of his premiums, and that she has directly benefited. After being on an individual plan, Erica was able to gain better insurance when Ken decided to expand employee coverage after receiving the credit. ‘Offering employee health benefits has helped the business attract and retain staff,’ Erica said. ‘When I was able to switch over to the group plan, I saw a significant change in my premiums. It really increased my take-home pay. From an employee perspective, offering health insurance adds to the entire package of any job. It’s mutually beneficial for a business and its employees.’” – Huffington Post

The House overwhelmingly approved a measure Tuesday designed to make it easier for growing companies to attract investors and comply with securities laws. The bipartisan measure, strongly backed by both parties and the White House, passed 380 to 41.

The Jumpstart Our Business Startups Act, or JOBS Act, first passed the House earlier this month with wide bipartisan margins and the Senate approved it last week after adding amendments that provide additional safeguards on “crowdfunding” to prevent credit scams. The House needed to approve the changes before sending it to the White House for President Obama’s signature.

The legislation lifts Securities and Exchange Commission restrictions on running advertisements soliciting new investors and permits “crowdfunding” so that entrepreneurs can raise equity capital from larger pools of small investors. Small private companies also would be able to sell up to $50 million in shares as part of a public offering before having to register with the SEC, and could have as many as 1,000 shareholders, up from the current cap of 500.

House Majority Leader Eric Cantor (R-Va.) said passage of the bill was “an increasingly rare legislative victory in Washington where both sides seized the opportunity to work together, improved the bill and passed it with strong bipartisan support.”

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Coming in on the heels of Senator Pat Roberts (R-Kan) recent attempt to include a tax extender package in the current highway funding bill – the amendment failed by a vote of 47 to 51 – pointed interest in the subject of tax extenders is now a focus of various influential senators. Indeed, Senate Majority Leader Harry Reid (D-NV), Senate Finance Committee chairman Max Baucus (D-MT), Senate Minority Leader Mitch McConnel (R-KY) and Senator Orrin Hatch (R-UT) participated in a formal colloquy in which they discussed the subject of tax extenders in general and the need for certainty, and therefore, permanence of these tax provisions to allow “families, small business, and job creators” to execute effective business and tax planning strategies.

In his opening statement in the published colloquy Mr. Reid says:

 “I would like to take a moment to raise another issue of mutual interest – the extension of tax provisions that have expired or are expiring this year. These provisions, although temporary, are long-standing features of our tax system, including the research credit, renewable energy production and efficiency incentives, and the state sales tax deduction. They provide important benefits, not just for American families and businesses, but to our economy as a whole.”

“I would welcome the opportunity to work with my friend from Kentucky (Senator McConnell) in finding a path forward soon on tax extenders. It is important that we take care of this early in the year so that taxpayers can plan and make investment decisions.”

In response, and echoing Senator Reid’s sentiment, Senator McConnell Replies:

“These tax provisions certainly are important to millions of American families and businesses, and I would expect that Congress would act on these sooner rather than later. The uncertainty that follows when we allow these to expire and don’t allow families, small businesses and job creators generally to properly plan is unacceptable and damaging to our economy.”

In addition, speaking on the need for specific review of the tax provisions, Mr. McConnell continues:

 “For a number of years Congress has reflexively extended all of these measures without any meaningful review or oversight. I know that the Republican members of the Finance Committee would gladly join in a bipartisan effort to conduct a much needed critical review of these measures and recommend to the Senate which should be dropped, which need modification and which are worthy of support as currently constructed. The repeated expiration and renewal of these various targeted tax credits and the fact our corporate tax rate will soon be the highest among our major trading partners underscores the need for Congress to take on corporate tax reform at the earliest possible date.”

 

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A proposal unveiled earlier this week seeks to give employers an incentive to hire military veterans returning from combat theaters.

House Bill 275, sponsored by a broad bipartisan coalition of state legislators, would create the “Veterans Opportunity Tax Credit.” Companies would receive a maximum $1,500 annual tax credit, for a period of three years, for each qualifying veteran they hire.

Speaking at a press conference on Thursday to unveil the measure, State Rep. Harvey Kenton, R-Milford, a U.S. Navy veteran, said he could identify with those military men and women who must re-acclimate to civilian life after having served their country. Rep. Kenton, a co-sponsor of the bill, was quick to note that all 14 of his colleagues in the House Minority Caucus were also sponsoring the legislation.

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Manufacturing Incentives

To improve incentives for manufacturing, the framework calls for making the Research and Experimentation Tax Credit permanent, noting that it has been extended temporarily 14 times since its creation in 1981, with some extensions lasting just 6 months. The credit was allowed to lapse for 12 months in the mid-1990s, and, as of Jan. 1, 2012, the R&E tax credit has expired again.

“Making the R&D tax credit permanent is a good thing,” said Steve Henley, national tax practice leader at CBIZ MHM. “Having all these extenders expiring and Congress coming in and extending them again is not good tax policy.”

It also proposes to make the credit simpler, noting that currently, businesses must choose between using a complex formula for calculating their R&E Tax Credit that provides a 20 percent credit rate for investments over a certain base and a much simpler one that provides a 14 percent credit in excess of a base amount. “The complex formula is so outdated that it takes into account the amount of a business’s R&D expenses from 1984 to 1988,” said the document. “The President’s Framework would increase the rate of the simpler credit to 17 percent, which would make it more attractive and simplify tax filing for businesses. In addition, the credit would be made permanent to increase certainty and effectiveness.”

Kelly Phillips Erb, Contributor (Forbes.com)

Remember the newly expanded tax credit for hiring veterans that was passed last year?

The IRS has finally issued more guidance on the credit. The Returning Heroes and Wounded Warriors Work Opportunity Tax Credits was part of the VOW to Hire Heroes Act of 2011, which was announced on Veterans Day last year. The credit give employers a tax credit for hiring a qualified veteran. A qualified veteran is defined as a veteran with aggregate periods of unemployment of at least 4 weeks but less than 6 months in the year prior to being hired or with aggregate periods of unemployment of 6 months or more in the year prior to being hired.

The law allows employers a tax credit per veteran. The maximum credit is applicable for employers who hire vets with service-related disabilities. Other factors that affect the amount of the credit include the length of the veteran’s unemployment before hire, hours worked and the amount of wages paid. Also important? Whether the employer is a for-profit employer or a tax-exempt organization.

The IRS has also released the applicable forms. The federal form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit, (downloads as a pdf) must be filed by June 19, 2012 for employers who make a qualified vet hire between November 22, 2011, and May 22, 2012. Eligible employers who make a hire after May 22, 2012, must file the federal form 8850 within 28 days after work begins.

The IRS has confirmed that the form 8850 may be transmitted electronically or via fax, assuming that the state workforce agencies accept submissions in those formats.

To claim the credit, an employer figures the amount on the federal form 5884, Work Opportunity Credit, (downloads as a pdf) and entered on a federal form 3800, General Business Credit, (downloads as a pdf) to be filed together with the employer’s income tax return.

For more information, check out Notice 2012-13 (downloads as a pdf).

• By Meredith Shiner
• Roll Call Staff
• Feb. 14, 2012, 4:17 p.m.

Top negotiators are nearing a deal to extend the payroll tax cut, unemployment benefits and a fix to Medicare doctors’ payments, sources close to leadership in both parties said today.

With leaders in both parties publicly threatening to move ahead with backup plans, members of a conference committee assigned to resolve the differences between the House and the Senate appear to have gotten the boost they needed to break their impasse when House GOP leaders Monday backed off demands that the payroll tax holiday be fully offset.

Both leadership sources and sources close to the conference committee were cautiously optimistic that the group could have a deal in hand before the House moves to a vote on a stand alone tax cut bill, which is slated for floor action Wednesday.

Aides said that the remaining key issues facing lead conferees House Ways and Means Chairman Dave Camp (R-Mich.) and Senate Finance Chairman Max Baucus (D-Mont.) are whether to include expiring tax extender provisions. They also were working on the final details on offsets for the nearly $60 billion required to pay for jobless benefits and the Medicare “doc fix,” which fills the gaps for doctors treating Medicare patients.

Major progress in the talks began in earnest at the end of last week and continued through the weekend. Sources said they believe the next 12 hour to 24 hours will be crucial in determining whether the House and Senate will vote on the conference report, which is can’t be amended, or whether they will move on separate legislation which would have to start in the House.

“I’m hopeful and cautiously optimistic that the House will work with us so that the conference can be completed to include that, and hopefully also some of our tax extenders,” Senate Majority Leader Harry Reid (D-Nev.) said today. “So I’m not going to get into hypotheticals to what happens, but right now, we’re waiting to see what we get from the House, and then we’ll decide what we have to do in the foreseeable future after that.”

A source familiar with the talks said that spectrum auctions and savings from federal workers’ pension reform likely will be used to offset the costs of the unemployment insurance and doc fix extensions.

Multiple sources confirmed that House Republican leadership will present the potential agreement to their conference at a meeting tonight.