Tax Incentives Overview

As a seamless extension of your tax department, our team of professionals works closely with you to develop strategies that effectively and efficiently capture all opportunities. ADP's Tax Credit Services employs a proactive approach to obtaining and maximizing tax credits and incentives for our clients.

Potential Credit Savings

Federal Tax Incentives

The federal government allows businesses to claim tax credits for hiring members of targeted groups and for conducting business in specially designated areas. Tax credits are financial incentive programs designed to influence behaviors that stimulate the economy.

Work Opportunity Tax Credit [WOTC]

The WOTC program is designed to encourage employers to hire individuals from one of eight targeted groups*, including social assistance recipients, veterans, and qualified youth. Companies nationwide may claim a tax credit of up to $2,400 per certified employee. In some cases, the credit opportunity may even be higher. The opportunity for disabled veterans may be up to $4,800; while the opportunity for long-term family assistance recipients may be up to $9,000 over two years.

In order to qualify, an employee must:

• Be a new hire;
• Be a member of one of the targeted groups*;
• Have completed IRS Form 8850 prior to being hired;
• Work a minimum of 120 hours.

* Targeted groups consist of Welfare Recipients, Qualified Veterans, Supplemental Security Income Recipients, Ex-offenders, Qualified Summer Youth, Vocational Rehabilitation Referrals, Food Stamp Recipients 18-39 Years of Age, Designated Community Residents 18-39 Years of Age, and Long-Term Family Assistance Recipients.

NOTE: Historically, Fast Food and Lodging Industries can expect approximately 10% of the annual new hires to qualify as a targeted group.

Empowerment Zone/Renewal Community Employment Credits and Tax Benefits

New, existing, or relocated businesses that operate in a Federal Empowerment Zone or Renewal Community [EZ/RC] may claim a tax credit of up to $3,000 for every eligible full- or part-time employee that is hired or retained. To be eligible, a new or existing employee must reside in the EZ/RC and be employed for at least 90 days after the initial date of hire.

CA State Tax Incentives

California currently offers tax incentives ranging from wage tax credits, investment tax credits, property tax abatements, gross receipts tax exemptions, and sales/use tax credits and refunds to low-income financing to encourage and reward certain business activities. Each one varies in requirements and benefits.

Enterprise Zone Hiring Credit

To stimulate the economy, the hiring credit encourages employers to hire and retain employees from one of 20 broad target groups within a zone – a geographically defined area that shows significant economic distress. Highlights of the program include the following:

• 42 designated zones across the state;
• May be claimed for all qualified employees each year;
• Credit is based on calendar year wages;
• Credits may be claimed retroactively and/or carried forward;
• $37,440 Credit is the cumulative amount available over five years.

Identifying the incentives available to a company in a particular jurisdiction and determining the applicability of those incentives can often be a difficult, confusing, and labor-intensive task. Our team of attorneys and tax experts has a specialized knowledge that allows them to continuously follow these state programs to find the credits for which you qualify.

ADP/IPC Member Hotline: 1-800-745-6768