@108 CHAP 8 旼컴컴컴컴컴컴컴컴컴컴컴컴컴컴컴컴컴컴컴컴컴컴컴� � TARGETED JOBS TAX CREDIT FOR HIRING EMPLOYEES � 읕컴컴컴컴컴컴컴컴컴컴컴컴컴컴컴컴컴컴컴컴컴컴컴� If you hire members of certain economically disadvantaged groups, the federal government will pay you a subsidy of up to $2,400 per employee in the form of "Targeted Jobs Tax Credits" against your income tax liability. Unfortunately, most small business employers seem to be unaware of this substantial tax subsidy or else mistakenly assume that it applies only if you hire ex-felons or the like. Part of the reason so many employers fail to take advantage of this tax giveaway appears to be on account of a Catch-22 in the way the program works: To qualify for the targeted jobs credit for hiring a disadvantaged category person, he or she must be certified as such by a designated state em- ployment security agency and the certification must be re- ceived by the employer (or requested in writing) at least one day before the employee begins work. At the same time, state and federal anti-discrimination laws make it very difficult for you as an employer to ask prospective job applicants if they belong to any of the disadvantaged groups that are eligible for the tax credits, since to do so could be considered a discriminatory hiring practice.... Solution? One possibility would be to routinely tell peo- ple when you decide to hire them, but before they start work for you, that your firm pays a $100 bonus to any new employee that can get a certification from the state agency that he or she qualifies as a member of one of the targeted groups. Then give the employee a list of the targeted group categories, and let him or her volunteer the infor- mation if they qualify. Remember, if it appears the new hire qualifies, you must request a certification from the state employment security agency at least a day BEFORE em- ployment begins. The targeted group individuals for whom you can claim the jobs tax credit when you hire them are as follows: . VOCATIONAL REHABILITATION REFERRALS. These are cer- tain handicapped individuals who have completed rehabilitation programs. . ECONOMICALLY DISADVANTAGED YOUTHS. People between ages 18 and 22 who are certified as being members of economically disadvantaged families. . ECONOMICALLY DISADVANTAGED VIETNAM VETERANS. . SSI RECIPIENTS. Persons receiving SSI payments from Social Security. . GENERAL ASSISTANCE RECIPIENTS. Persons receiving state or local welfare payments. . ECONOMICALLY DISADVANTAGED EX-CONVICTS. . YOUTHS PARTICIPATING IN A COOPERATIVE EDUCATION PROGRAM. Certain youths ages 16-20 who have not finished high school. . ELIGIBLE WORK INCENTIVE PROGRAM EMPLOYEES. . QUALIFIED SUMMER YOUTH EMPLOYEES. Economically disadvantaged youths 16 or 17 years old who are hired to work between May 1 and September 15, who were not previously employed by you. On the first $6,000 you pay an eligible target group em- ployee, you will earn tax credits of 40% of the wages, if the employee works a minimum of 90 days or 120 hours for you. (For "qualified summer youths" the minimum period is only 14 days or 20 hours, but the credit is allowed on only the first $3,000 of wages during the first 90 days.) The credit is not allowed for wages paid to strikebreakers or "scabs." NOTE: One drawback of this tax credit is that you must reduce the wages you can deduct dollar-for-dollar for the jobs credits you claim. That is, if you pay someone $1,000 and claim a $400 targeted jobs tax credit, you can only deduct $600 for wage expense on your tax return, not the full $1,000. NOTE THAT THE TARGETED JOBS TAX CREDIT WAS SCHEDULED TO EXPIRE ON JUNE 30, 1992, BUT WILL LIKELY BE EXTENDED AGAIN, RETROACTIVELY. @CODE: CA HI @CODE:NF @CODE:OF @CODE: CA California has its own jobs tax credit program, somewhat similar to the federal jobs credit described above. The California Employment Development Dept. (EDD) is the state agency that certifies individuals as eligible employees under both the federal and state jobs tax credit laws. There is some overlap with the federal targeted jobs cred- it in the categories of eligible employees, but for the most part the state requirements are different. The state jobs credit for eligible and certified employees is as follows: . For the first 12 months of employment, a tax credit equal to 10% of the first $3,000 of wages paid to the employee. . For the second year of employment, a tax credit of 10% of the first $3,000 of wages for such period. Thus, the maximum California jobs credit is $600 per em- ployee, earned over a 2-year period. The state jobs credit is NOT allowed as an offset against the California alterna- tive minimum tax or the corporation minimum franchise tax. Note that the California jobs credit is due to expire on December 31, 1993. California also provides certain special jobs tax credits for hiring disadvantaged or unemployed persons in "Enter- prise Zones" and "High-Density Unemployment Areas" that have been designated in certain parts of the state that are economically depressed. Employers in California may also claim a 50% credit (up to $600 per dependent) under a plan providing child care for employees, and, effective in 1994, certain small employers (25 or fewer employees) may claim a health care tax cred- it, generally the greater of $25 per month per covered em- ployee or 25% of the amount paid, as a credit against the employer's California income or franchise tax liability. @CODE:OF @CODE: HI @CODE:NF The Hawaii legislature has enacted a "targeted jobs tax credit" equal to 20% of the first $6,000 of "qualified first-year wages." It applies only to wages paid to an individual who is a vocational rehabilitation referral. In addition, Hawaii law provides a capital goods excise tax credit, which is essentially an investment credit of 4% of the cost of equipment placed in service by a busi- ness in Hawaii, which amounts to a full credit for the 4% General Excise Tax paid on the purchase. (This will increase to 4.5% for 1993 through 2002 if a county excise tax surcharge of 0.5% goes into effect for that period.) This law is modeled after the federal investment credit law that was in effect before 1986.