The Work Opportunity Tax Credit (WOTC) (IRC Sec. 51) is currently scheduled to expire on December 31, 2025. In the past, WOTC expired and was reauthorized numerous times. However, since 2015 Congress extended the program three times without allowing it to lapse.
In December 2015, the PATH Act (P.L. 114-113) retroactively authorized WOTC to January 1, 2015, and extended it through December 31, 2019. In December 2019, the Further Consolidated Appropriations Act, 2020 (P.L. 116-94) extended it through December 31, 2020. And in December 2020, the Consolidated Appropriations Act, 2021 (P.L. 116-260) extended WOTC through December 31, 2025.
Extension of Tax Cuts and Jobs Act
Congress is currently negotiating the path forward for extending the provisions of the Tax Cuts and Jobs Act passed during President Trump’s first term which expire at the end of 2025. Whether an extension of WOTC will be included in that process remains to be seen.
Legislative Proposal to Expand WOTC
Meanwhile, several lawmakers have reintroduced a proposal to enhance WOTC. This proposal, originally introduced at the end of 2023, has been reintroduced in the current Congress by Representatives Lloyd Smucker (PA-11), Steven Horsford (NV-4), Brian Fitzpatrick (PA-01), Mike Kelly (PA-16), Vern Buchanan (FL-16), and Tom Suozzi (NY-03). Senators Bill Cassidy (R-LA) and Maggie Hassan (D-NH) introduced a parallel bill in the Senate.
According to a press release, the bills, S. 492 and H.R. 1177, would “Increase the current credit percentage from 40% to 50% of qualified wages. Add a second level of credit for employees who work 400 or more hours. Eliminate the arbitrary age cap at which SNAP recipients are eligible for WOTC. This change will provide an incentive to hire older workers and better align the credit with previously adopted work reforms.”
Proposal of State Legislative Credits Similar to WOTC
Several states are also considering proposals to enact state credits in parallel with the federal program.
In New York, State Senator James Skoufis introduced Senate Bill 2429 and said, “The federal work opportunity tax credit has proven effective at employing hard-to-reach segments of society. Despite my skeptical eye when it comes to tax incentives, individuals from historically marginalized or disenfranchised groups have an opportunity for better employment because of this program, and employers have the opportunity to hire a diverse workforce with a myriad of experiences and skills – both vital benefits in today’s world. At a moment when there are so many federal programs at risk, now is the time to introduce a state credit and ensure New Yorkers of all stripes can get to work.” The bill would only apply to hires after January 1, 2026, and therefore depends on an extension of the federal program.
In Alabama, SB52 is also limited to employees hired after January 1, 2026. This bill would provide a state tax credit of up to $1,000 for WOTC certified hires who complete 12 consecutive months of employment.
A similar bill in Arizona, HB 2805, would also apply to employees hired after December 31, 2025, and provide a credit of up to $1,000 for WOTC certified employees.