Tax Incentives

Fact Sheet Series
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JAN’S ACCOMMODATION FACT SHEET SERIES

TAX INCENTIVES

The Job Accommodation Network (JAN) is an international, toll-free, consulting service

that provides information regarding job accommodations. This publication summarizes

tax incentives related to accessibility and the employment of people with disabilities. If

you need further assistance, please contact an accountant or tax attorney. You can also

visit "JAN on the Web" at: http://askjan.org.

For information on specific agencies and organizations, please look in your local area

phone directory, specifically in the Blue Pages, for government contacts and the Yellow

Pages for other organizations.

The Disabled Access Credit (DAC)

P.L. 101-508, The Omnibus Budget Reconciliation Act of 1990, (OBRA '90), contains a tax

incentive to encourage small businesses to comply with the ADA. The DAC is found in Section

11611 of OBRA '90, which establishes Section 44 of the Internal Revenue Code of 1986. DAC

is available to an "eligible small business" and is equal to 50% of the "eligible access

expenditures" which do exceed $250 but do not exceed $10,250, for a maximum credit of

$5,000 a year. DAC became effective on the date of enactment of the law, November 5, 1990,

and applies to expenditures paid or incurred after that date. It is included as part of the General

Business Credit and is subject to the rules of current law which limit the amount of General

Business Credit that can be used for any taxable year. DAC can be carried forward up to 15

years and back for three years but not back to a taxable year prior to the date of enactment.

An "eligible small business" is "any person" whose gross receipts did not exceed

$1,000,000 for the preceding taxable year, or who employed not more that 30 full-time

employees during the preceding year. A full-time employee is defined as one who is

employed at least 30 hours per week for 20 or more calendar weeks in the taxable year.

In general, all members of a controlled group of corporations are treated as one person

for purposes of credit eligibility, and the dollar limitation among the members of any

group will be apportioned by regulation. In the case of a partnership, the expenditure

limitation requirements will apply to the partnership and to each partner. Similar rules

will apply to S corporations and their shareholders. "Eligible access expenditures" are

defined as "amounts paid or incurred by an eligible small business for the purpose of

enabling small businesses to comply with applicable requirements" of ADA.

Included are expenditures for:

1. Removing architectural, communication, physical or transportation barriers

which prevent a business from being accessible to, or usable by, individuals with

disabilities;

2. Providing qualified interpreters or other effective methods of making aurally

delivered materials available to individuals with hearing impairments;
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3. Providing qualified readers, taped texts, and other effective methods of making

visually delivered materials available to individuals with visual impairments;

4. Acquiring or modifying equipment or devices for individuals with disabilities;

and

5. Providing other similar services, modifications, materials or equipment.

All expenditures must be "reasonable" and must meet the standards promulgated by the

Internal Revenue Service (IRS) with the concurrence of the Architectural and

Transportation Barriers Compliance Board. Expenses incurred for new construction are

not eligible. For the purposes of DAC, disability is defined exactly as in the Americans

with Disabilities Act of 1990.

An eligible small business under Section 44 may deduct the difference between the

disabled access credit claimed and the disabled access expenditures incurred, up to

$15,000, under Section 190 provided such expenditures are eligible for the Section 190

deduction.

For additional information on the Disabled Access Credit, contact a local Internal

Revenue Service Office: http://www.irs.gov/businesses or call 800-829-4933 (V) 800-

829-4059 (TTY).

Architectural and Transportation Barrier Removal Deduction

In 1986, Congress amended Section 190 of the Tax Reform Act to extend permanently

the annual $35,000 tax deduction for the removal of architectural and transportation

barriers. P.L. 101-508, the Omnibus Budget Reconciliation Act of 1990, amended

Section 190 and reduced the deduction from $35,000 to $15,000, effective for tax years

after 1990. Under Section 190, businesses may choose to deduct up to $15,000 for

making a facility or public transportation vehicle, owned or leased for use in the

business, more accessible to and usable by individuals with disabilities. A facility is all or

any part of a building, structure, equipment, road, walk, parking lot, or similar property.

A public transportation vehicle is a vehicle such as a bus or railroad car, that provides

transportation service to the public, or to customers. The deduction may not be used for

expenses incurred for new construction, for a complete renovation of a facility or public

transportation vehicle, or for the normal replacement of depreciable property. In the

case of a partnership, the $15,000 limit applies to the partnership and to each partner.

Amounts in excess of the $15,000 maximum annual deduction can be added to the

basis of the property subject to depreciation. In order for expenses to be deductible,

accessibility standards established under the Section 190 Regulations must be met.

For additional information on Section 190, contact a local Internal Revenue Service

Office: http://www.irs.gov/businesses or call 800-829-4933 (V) 800-829-4059 (TTY).
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Rehabilitation Act of 1973

The Vocational Rehabilitation (VR) Program has a 73-year history of assisting people

with disabilities to prepare for and enter the competitive work force.

This is a Federal-State program and the Rehabilitation Act of 1973, as amended,

authorizes annual funding to state VR agencies in order that they can achieve the goals

of the program.

An On-The-Job Training Program can be set up by VR with an employer for an

individual client of VR. VR can share in the payment of the wages for the employee for a

limited time on a negotiated schedule. The position must be permanent full time, and

pay above minimum wage.

The VR staff can act as a recruiter and consultant for employers. They can conduct job

analyses, and provide rehabilitation engineering services for architectural barrier

removal and worksite modifications. Also, they can conduct awareness training for a

company's management and supervisory personnel. For more information, contact your

local state vocational rehabilitation agency.

Work Opportunity Tax Credit (WOTC) Program

On May 25, 2007, the President signed into law the Small Business and Work

Opportunity Tax Act of 2007 (P.L. 110-28). The legislative authority for the WOTC

program has been reauthorized until August 31, 2011. Along with the Tax-Relief and

Health Care act of 2006 (P.L. 109-432), this Act broadens the WOTC program. The

WOTC program, which was authorized by the Small Business Job Protection Act of

1996 (P.L. 104-188) and signed into law December 20, 2006, is a federal tax credit that

encourages employers to hire nine targeted groups of job seekers. It reduces

employers’ federal income tax liability as much as $2,400 for each new adult hire;

$1,200 for each new summer youth hire; $4,800 for each new disabled veteran hire;

and $9,000 for each new long-term family assistance recipient hired over a two-year

period. The changes created by P.L. 109-432 apply retroactively to individuals who

began to work for an employer after December 31, 2005. The changes created by P.L.

110-128 apply retroactively to individuals who began work for an employer after May 25,

2007 and before September 1, 2011. A specific update for veterans includes an

expansion of the category of “certain disabled veterans.” Furthermore, under President

Obama’s new stimulus package, unemployed veterans who meet certain criteria are

also part of the targeted groups of the WOTC program (15 SEC. 1221). This applies to

veterans hired after December 31, 2008. For additional information, see

http://www.doleta.gov/business/incentives/opptax/

Individuals with disabilities can contact their local state-Federal Vocational

Rehabilitation Office to receive a voucher. This is presented to the employer who

completes a small portion, and then mails it to the nearest local Employment Service

Office. That agency will send back to the employer a certificate which validates the tax

credit, and which the employer uses when filing Federal tax forms. Statements from

rehabilitation services are allowable, as is mail in documentation.
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This document was developed by the Job Accommodation Network, funded by a

contract agreement from the U.S. Department of Labor, Office of Disability Employment

Policy (DOL079RP20426). The opinions expressed herein do not necessarily reflect the

position or policy of the U.S. Department of Labor. Nor does mention of trade names,

commercial products, or organizations imply endorsement by the U.S. Department of

Labor.