VOW To Hire Heroes Credit Not Available to Governmental Entities
On February 10, 2012, the IRS released Notice 2012-13, providing guidance on the VOW to Hire Heroes Act of 2011 (the Act), enacted Nov. 21, 2011. That law expanded the Work Opportunity Tax Credit (WOTC) to businesses that hire eligible unemployed veterans, and for the first time also makes the credit available to certain tax-exempt organizations. The IRS also announced that employers will have more time to file the required certification form for employees hired on or after November 22, 2011, and before May 22, 2012. The American Taxpayer Relief Act of 2012 (ATRA) extended the WOTC for hiring certain workers through December 31, 2013.
The Act made the credit available to “qualified tax-exempt organizations” that hire qualified veterans for which the WOTC would have been allowable if the organization were not a qualified tax-exempt organization. Specifically, the Act adds new section 3111(e) to the Internal Revenue Code, permitting qualified tax-exempt organizations that hire qualified veterans on or after November 22, 2011, to claim a credit against the employer share of social security tax. Notice 2012-13 provides additional information and clarifies the eligibility of tax-exempt organizations and procedures for claiming the WOTC credit.
The Act, for purposes of this credit, defines a “qualified tax-exempt organization” as an employer that is an organization described in section 501(c) and exempt from taxation under section 501(a). Accordingly, an employer that is an agency or instrumentality of the federal government, or of a state, local, or Indian tribal government, is not a qualified tax-exempt organization unless it is an organization described in section 501(c) that is exempt from tax under section 501(a). Therefore, a governmental entity is not eligible for this credit unless it has a received recognition from the IRS as an exempt-organization under section 501(c).
For more information on how qualifying businesses or exempt organizations can claim the credit, see Notice 2012-13.