I

106TH CONGRESS

1ST SESSION H. R. 2101

To amend the Internal Revenue Code of 1986 to modify and permanently

extend the work opportunity tax credit and to allow certain tax-exempt

organizations a credit against employment taxes in an amount equivalent

to the work opportunity tax credit allowable to taxable employers.

IN THE HOUSE OF REPRESENTATIVES

JUNE 9, 1999

Mr. HOUGHTON (for himself, Mr. RANGEL, Mr. WELLER, Mr. LEWIS of Georgia, Mrs. JOHNSON of Connecticut, Mr. MATSUI, Mr. RAMSTAD, Mr.

HAYWORTH, Mr. LEWIS of Kentucky, Mr. WATKINS, Mr. LEVIN, Mr.

MCNULTY, Mr. CARDIN, Mr. NEAL of Massachusetts, Ms. DUNN, Mr.

SWEENEY, Mr. ENGLISH, Mr. FOLEY, Mr. MCINNIS, Mrs. THURMAN, Mr.

JEFFERSON, Mr. COYNE, Mr. BECERRA, Mr. STARK, Mr. NUSSLE, and

Mrs. LOWEY) introduced the following bill; which was referred to the

Committee on Ways and Means

A BILL

To amend the Internal Revenue Code of 1986 to modify

and permanently extend the work opportunity tax credit

and to allow certain tax-exempt organizations a credit

against employment taxes in an amount equivalent to

the work opportunity tax credit allowable to taxable employers.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,
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1 SECTION 1. SHORT TITLE.

2 This Act may be cited as the ‘‘Work Opportunity Tax

3 Credit Reform and Improvement Act of 1999’’.

4 SEC. 2. PERMANENT EXTENSION AND MODIFICATION OF

5 WORK OPPORTUNITY TAX CREDIT.

6 (a) CREDIT MADE PERMANENT.—Subsection (c) of

7 section 51 of the Internal Revenue Code of 1986 is amend8 ed by striking paragraph (4) (relating to termination).

9 (b) CERTAIN BENEFITS TREATED AS WAGES ELIGI10 BLE FOR CREDIT.—Subsection (c) of section 51 of such

11 Code is amended by redesignating paragraph (3) as para12 graph (4) and by inserting after paragraph (2) the fol13 lowing new paragraph:

14 ‘‘(3) CERTAIN AMOUNTS TREATED AS WAGES.—

15 The term ‘wages’ includes amounts paid or incurred

16 by the employer which are excludable from the em17 ployee’s gross income under—

18 ‘‘(A) section 105 (relating to amounts re19 ceived under accident and health plans),

20 ‘‘(B) section 106 (relating to contributions

21 by employer to accident and health plans),

22 ‘‘(C) section 127 (relating to educational

23 assistance programs) or would be so excludable

24 but for section 127(d), but only to the extent

25 paid or incurred to a person not related to the

26 employer, or
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1 ‘‘(D) section 129 (relating to dependent

2 care assistance programs).

3 The amount treated as wages by subparagraph (A)

4 or (B) for any period shall be based on the reason5 able cost of coverage for the period, but shall not ex6 ceed the applicable premium for the period under

7 section 4980B(f)(4).’’

8 (c) CONSOLIDATION OF WELFARE-TO-WORK TAX

9 CREDIT AND WORK OPPORTUNITY TAX CREDIT.—

10 (1) IN GENERAL.—Paragraph (1) of section

11 51(d) of such Code is amended by striking ‘‘or’’ at

12 the end of subparagraph (G), by striking the period

13 at the end of subparagraph (H) and inserting ‘‘, or’’,

14 and by adding at the end the following new subpara15 graph:

16 ‘‘(I) a long-term family assistance recipi17 ent.’’

18 (2) DEFINITION.—Subsection (d) of section 51

19 of such Code is amended by redesignating para20 graphs (10), (11), and (12) as paragraphs (11),

21 (12), and (13), respectively, and by inserting after

22 paragraph (9) the following new paragraph:

23 ‘‘(10) LONG-TERM FAMILY ASSISTANCE RECIPI24 ENT.—
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1 ‘‘(A) IN GENERAL.—The term ‘long-term

2 family assistance recipient’ means any indi3 vidual who is certified by the designated local

4 agency—

5 ‘‘(i) as being a member of a family re6 ceiving assistance under a IV-A program

7 for at least the 18-month period ending on

8 the hiring date,

9 ‘‘(ii)(I) as being a member of a family

10 receiving such assistance for at least 18

11 months beginning after August 5, 1997,

12 and

13 ‘‘(II) as having a hiring date which is

14 not more than 2 years after the end of the

15 18th month beginning after August 5,

16 1997, that the individual is a member of a

17 family receiving such assistance, or

18 ‘‘(iii)(I) as being a member of a fam19 ily which ceased to be eligible after August

20 5, 1997, for such assistance by reason of

21 any limitation imposed by Federal or State

22 law on the maximum period such assist23 ance is payable to a family, and
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1 ‘‘(II) as having a hiring date which is

2 not more than 2 years after the date of

3 such cessation.

4 ‘‘(B) SPECIAL RULES FOR DETERMINING

5 AMOUNT OF CREDIT.—For purposes of applying

6 this subpart to wages paid or incurred to any

7 long-term family assistance recipient—

8 ‘‘(i) the credit determined under this

9 section shall include 40 percent of the

10 qualified second-year wages for the taxable

11 year,

12 ‘‘(ii) notwithstanding subsection

13 (b)(3), the amount of the qualified first14 year wages, and the amount of qualified

15 second-year wages, which may be taken

16 into account with respect to any individual

17 shall not exceed $10,000 per year, and

18 ‘‘(iii) paragraph (1) of subsection (h)

19 shall be applied by substituting ‘$10,000’

20 for ‘$6,000’ in subparagraph (A) and

21 ‘$833.33’ for ‘$500’ in subparagraph (B).

22 ‘‘(C) QUALIFIED SECOND-YEAR WAGES.—

23 For purposes of subparagraph (B), the term

24 ‘qualified second-year wages’ means, with re25 spect to any individual, qualified wages attrib-
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1 utable to service rendered during the 1-year pe2 riod beginning on the day after the last day of

3 the 1-year period with respect to such indi4 vidual determined under subsection (b)(2).’’

5 (3) REPEAL OF SEPARATE WELFARE-TO-WORK

6 CREDIT.—

7 (A) Section 51A of such Code is hereby re8 pealed.

9 (B) The table of sections for subpart E of

10 part IV of subchapter A of chapter 1 of such

11 Code is amended by striking the item relating

12 to section 51A.

13 (d) CLARIFICATION OF FIRST YEAR OF EMPLOY14 MENT.—Paragraph (2) of section 51(i) of such Code is

15 amended by striking ‘‘during which he was not a member

16 of a targeted group’’.

17 (e) TECHNICAL CORRECTION.—Subparagraph (B) of

18 section 51(d)(2) of such Code is amended—

19 (1) by striking ‘‘plan approved’’ and inserting

20 ‘‘program funded’’, and

21 (2) by striking ‘‘(relating to assistance for

22 needy families with minor children)’’.

23 (f) EFFECTIVE DATE.—

24 (1) IN GENERAL.—Except as otherwise pro25 vided in this subsection, the amendments made by
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1 this section shall apply to individuals who begin

2 work for the employer after June 30, 1999.

3 (2) CLARIFICATION.—The amendment made by

4 subsection (d) shall apply to individuals who begin

5 work for the employer after June 30, 1999.

6 (3) TECHNICAL CORRECTION.—The amendment

7 made by subsection (e) shall take effect as if in8 cluded in the amendments made by section 1201 of

9 the Small Business Job Protection Act of 1996.

10 SEC. 3. TREATMENT OF WORK OPPORTUNITY WAGES AS

11 PAYMENT OF EMPLOYMENT TAX LIABILITY.

12 (a) IN GENERAL.—Chapter 25 of the Internal Rev13 enue Code of 1986 (relating to general provisions relating

14 to employment taxes) is amended by inserting after sec15 tion 3510 the following new section:

16 ‘‘SEC. 3511. TREATMENT OF WORK OPPORTUNITY WAGES

17 AS PAYMENT OF EMPLOYMENT TAX LIABIL18 ITY.

19 ‘‘(a) GENERAL RULE.—For purposes of this title, the

20 amount equal to the work opportunity credit amount with

21 respect to any wages paid for any calendar quarter by an

22 eligible tax-exempt employer shall be treated as a payment

23 by such employer of such employer’s employment tax li24 ability for such calendar quarter.
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1 ‘‘(b) WORK OPPORTUNITY CREDIT AMOUNT.—For

2 purposes of this section, the work opportunity credit

3 amount for any calendar quarter is the amount of the

4 credit determined under section 51 (relating to work op5 portunity credit) in accordance with the following:

6 ‘‘(1) MINIMUM EMPLOYMENT PERIODS.—For

7 purposes of applying section 51(i)(3), in lieu of the

8 hours of services actually performed by an individual

9 during any of the first 3 quarters of a calendar year,

10 an employer may make an estimate of the hours of

11 services an individual is reasonably expected to per12 form for the employer in such calendar year. The

13 employer shall adjust the deemed payments in ac14 cordance with subsection (c) for the last quarter of

15 such calendar year to reflect the hours of services

16 actually performed by such individual in such cal17 endar year.

18 ‘‘(2) ELIGIBLE TAX-EXEMPT EMPLOYER.—The

19 term ‘eligible tax-exempt employer’ means any orga20 nization described in section 501(c)(3) and exempt

21 from tax under section 501(a) but only with respect

22 to activities of such organization which do not con23 stitute an unrelated trade or business.

24 ‘‘(c) COORDINATION WITH DEPOSITORY REQUIRE25 MENTS.—
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1 ‘‘(1) IN GENERAL.—Any employer who is enti2 tled to treat any amount as a payment under sub3 section (a) for any calendar quarter may reduce, in

4 such manner as the Secretary may by regulations

5 prescribe, by a like amount, the amount otherwise

6 required to be deposited during such quarter by rea7 son of the employment tax liability of such employer.

8 ‘‘(2) QUARTERLY DETERMINATIONS.—The

9 amount of reduction permitted under paragraph (1)

10 for any calendar quarter shall be based on a sepa11 rate estimate for such quarter of the amount of

12 deemed payments to which the employer reasonably

13 expects to be entitled under subsection (a) for the

14 calendar year which includes such quarter and shall

15 be properly adjusted (under regulations prescribed

16 by the Secretary) to reflect the amount by which

17 prior reductions under subsection (a) during such

18 calendar year were in excess of, or less than, the

19 amounts which would be proper under such esti20 mate.

21 ‘‘(3) YEAR-END ADJUSTMENTS.—

22 ‘‘(A) EXCESS OF DEEMED PAYMENTS AL23 LOWABLE OVER DEPOSITORY BENEFIT

24 CLAIMED.—If the amount of deemed payments

25 to which an employer is entitled under sub-
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1 section (a) for any calendar year exceeds the

2 amount claimed by the employer under para3 graph (1) during such year, such excess shall be

4 treated for purposes of this title as an overpay5 ment made by such employer. For purposes of

6 determining interest, such overpayment shall be

7 treated as made on January 31 of the following

8 calendar year.

9 ‘‘(B) DEPOSITORY BENEFIT CLAIMED EX10 CEEDS DEEMED PAYMENT ALLOWABLE.—If the

11 amount claimed by the employer under para12 graph (1) during the calendar year exceeds the

13 amount of deemed payments to which such em14 ployer is entitled under subsection (a) for such

15 year, such excess shall be treated for purposes

16 of this title as an underpayment of the tax im17 posed by this chapter for such calendar year.

18 For purposes of determining interest, such un19 derpayment shall be allocated ratably among

20 the calendar quarters in such year (or in such

21 other manner as the Secretary may by regula22 tions prescribe).

23 ‘‘(d) PAYMENT TREATED AS MADE ON DUE DATE.—

24 Notwithstanding subsection (c), for purposes of deter25 mining interest, any deemed payment under subsection (a)
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1 for any calendar quarter shall be treated as made on the

2 due date for the return for such quarter.

3 ‘‘(e) EMPLOYMENT TAX LIABILITY.—For purposes

4 of this section, the term ‘employment tax liability’ means

5 liability for the taxes imposed by chapters 21 and 24.

6 ‘‘(f) SOCIAL SECURITY TRUST FUNDS.—This section

7 shall not be construed to affect amounts appropriated

8 under sections 201 and 1817(a) of the Social Security Act.

9 ‘‘(g) TERMINATION.—This section shall not apply to

10 wages paid to an individual who begins work for the em11 ployer after December 31, 2002.’’

12 (b) CLERICAL AMENDMENT.—The table of sections

13 for chapter 25 of such Code is amended by adding at the

14 end the following new item:

‘‘Sec. 3511. Treatment of work opportunity wages as payment of

employment tax liability.’’

15 (c) EFFECTIVE DATE.—The amendments made by

16 this section shall apply to individuals who begin work for

17 the employer after December 31, 1999.

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