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2016 Tax Credits and Incentives Following Year-End Legislation

U.S.-based businesses could have a major opportunity to benefit from tax credits following year-end legislation. The Omnibus Spending Bill H.R. 2029 and the PATH Act (Protecting Americans from Tax Hikes Act of 2015), signed into law at the end of 2015, include the extension of more than 50 tax credits and incentive programs that expired on Dec. 31, 2014. This includes an array of federal tax credits that offer incentives to employers who implement various hiring, training and investing practices.

  • Work Opportunity Tax Credit (WOTC) – Extended for five years through 2019, WOTC is designed to encourage employers to hire and retain individuals from various target groups, including veterans of war, welfare recipients and the newly added “long-term unemployed” category, among others. Through this program, businesses can qualify for a tax credit of up to $9,600 per eligible employee for the first year of employment.
  • Federal Empowerment Zone Employment Credit – Businesses that hire employees who live and work in an empowerment zone, which are designated distressed urban and rural areas, may be eligible for an employment credit of up to $3,000 per eligible employee through the end of 2016.
  • Employer Wage Credit for Employees Who Are Active Duty Members of the Uniformed Services- For businesses that employ members of the uniformed services, the PATH Act removes the limitation to small businesses that employ fewer than 50 employees and expands eligibility to any size business, including large enterprises, beginning in 2016. In addition, the PATH Act makes this credit permanent. The maximum credit available is 20% of differential wages paid to each qualified employee who has been called to active duty, up to a maximum of a $4,000 credit per qualified employee.
  • Indian Employment Credit – Through this program, employers are eligible for a credit based on the first $20,000 of qualified wages and health benefits they pay to eligible employees who are an enrolled member of an Indian tribe (or whose spouse is an enrolled member of an Indian tribe), who live on or near an Indian reservation and work on the reservation. This credit is extended through the end of 2016, and businesses can receive up to $4,000 per eligible employee to whom they have paid wages and health benefits.

Do you have the right technology and processes to help you identify and capture tax credits and incentives for which you are eligible? Don’t miss out on opportunities to lower your business’ effective tax rate.

ADP’s Tax Credits Services can help businesses identify and capture eligible tax credits and incentives for 2016 and retroactive credits for which they might still qualify on both a state and federal level. A solution that can help keep track of updated tax credit and incentive programs that result from new legislation can play a key role in a company’s overall workforce management strategy. This type of tax credit solution also can help businesses mitigate risk associated with noncompliance, improve efficiencies and drive growth.

For ongoing legislative updates and their impact on employers, please subscribe to receive our Eye on Washington email alerts.


The information provided in this blog post is for informational purposes only and not for the purpose of providing accounting, legal, or tax advice. The information and services ADP provides should not be deemed a substitute for the advice of any such professional. Such information is by nature subject to revision and may not be the most current information available.

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