The Issue
Hiring Tax Credit for Unemployed Veterans
Congress has passed legislation that includes an expanded provision from the American Jobs Act to provide tax credits for nonprofit employers who hire unemployed veterans.
The proposal includes tax incentives to for-profit and nonprofit employers who hire long-term unemployed individuals and veterans.
Hiring Heroes Act of 2011
President Obama has signed legislation that includes an expanded provision from the American Jobs Act that provides tax credits to nonprofit employers that hire unemployed veterans.
The Hiring Heroes Act (PL 112-56) provides a tax credit to qualifying employers that hire service-disabled and unemployed veterans. For nonprofit employers that hire veterans on or after November 22, 2011, the amount of the credit per new hire, to be applied against the employer share of social security tax, is:
- 16.25% of the qualified first-year wages for 120-400 hours of employment service
- 26% of the qualified first-year wages for 400 or more hours of employment service
The Internal Revenue Service (IRS) published guidance in February 2012 as part of Notice 2012-13 on how qualifying employers can claim the new hiring credit. Eligible tax-exempt organizations are instructed to claim the credit on Form 5884-C.
Background
On September 8, 2011 President Obama proposed the American Jobs Act of 2011, a $447 billion proposal to spur job creation and further economic recovery that among other provisions included incentives to hire veterans and the payroll tax cut. While the legislation was not passed in its entirety, Congress did pass the Hiring Heroes Act of 2011 which included and expanded upon provisions from the president’s American Jobs Act of 2011. Separately, at the end of 2011 Congress temporarily extended the payroll tax cut which would have otherwise expired on December 31, 2011. In mid-February Congress extended the payroll tax cut for the remainder of 2012.
See Independent Sector's analysis of the legislation, as well as a summary of the offsets contained in the proposal and a White House fact sheet on the legislation's benefits for nonprofit organizations and their employees.
Legislation
A revised version of the American Jobs Act was introduced in the Senate in 2011. Despite replacing a controversial offset proposed by the president to cap itemized deductions for high-income earners with a surtax on millionaires (see below), a Senate vote on the measure was blocked. See a section-by-section summary of the proposal.
Impact on the Charitable Deduction
In 2011 Senate Majority Leader Harry Reid (D-NV) introduced an amended version of the American Jobs Act that replaces the president's proposed 28 percent cap on itemized deductions, including the charitable deduction, for individuals earning over $200,000 ($250,000 for couples) with a 5.6 percent surtax on taxpayers earning over $1 million a year. Read Diana's Letter
