New Law Expands Credit for Hiring Military Veterans

November 21, 2011

Congress is doing more than just saluting our military veterans. Lawmakers are creating more opportunities for them to obtain employment. New federal legislation -- called the Vow to Hire Heroes Act -- provides an expanded jobs credit to employers who hire out-of-work veterans.

The new law also includes another unrelated provision that repeals a future withholding requirement for payments from government units to certain contractors.

In a rare display of non-partisan politics, the legislation was quickly approved by both the Senate and the House. President Obama signed the bill into law on November 21, 2011.

"Over the past decade, nearly three million service members have transitioned back to civilian life, joining the millions who have served through the decades. And as we end the war in Iraq and we wind down the war in Afghanistan, over a million more will join them over the next five years. Just think about the skills these veterans have acquired, often at a very young age.  Think about the leadership that they've learned, the cutting-edge technologies that they've mastered, their ability to adapt to changing and unpredictable circumstances you just can't get from a classroom. Think about how many have led others to life -and-death missions by the time they're 25 or 26 years old.
    This is exactly the kind of leadership and responsibility that every American business should be competing to attract...And yet, too many can't find a job worthy of their tremendous talents...That's not right. It doesn't make sense -- not for our veterans, not for our families, not for America -- and we're determined to change that."

-- President Barack Obama

Here is a brief description of the two parts of the new law:

1. New jobs credit: The new law allows a maximum tax credit of $2,400 for employers who hire veterans who have been out of work for at least one month. The maximum credit is increased to $5,600 for hiring veterans who have been unemployed for a minimum of six months. And the maximum credit per worker jumps to $9,600 for employers who hire unemployed vets with a service-connected disability.

This legislation amends the current rules for the Work Opportunity Tax Credit. Generally, employers may claim a maximum tax credit of up to $2,400 for hiring a worker from one of several economically-disadvantaged "target" groups, including qualified veterans.

The WOTC is equal to 40 percent of the first $6,000 of qualified wages. A maximum credit of $4,800 is available for hiring veterans with service-connected disabilities. For 2009 and 2010 only, unemployed veterans were treated as a target group eligible for the maximum $2,400 credit. The WOTC is scheduled to expire after 2011, but could be extended, as it has been several times before.

The new credit for hiring veterans takes effect on the date of enactment. It is scheduled to expire at the end of 2012.

In addition, the new law expands several programs designed to help returning veterans seek gainful employment. Specifically, it:

Extends education and training programs targeted at veterans from earlier eras;
Requires the Department of Labor (DOL) to find ways of improving acclimation to civilian life and translating skills learned in the military to the private sector;
Improves transition assistance planning to returning troops;
Enables soldiers who have almost completed active duty time to start applying for federal jobs; and
Makes it easier for veterans to acquire certificates or licenses needed to function in the business world.
The provisions relating to hiring veterans were part of a much larger jobs package proposed by the Obama administration earlier this year. Other parts of the proposed legislation have stalled in Congress.  

2. Government payments to contractors: The new legislation also eliminates a controversial rule that would have required federal, state and local government entities to withhold three percent of certain payments to contractors for goods and services. This withholding requirement, created by a law enacted five years ago, was designed to crack down on tax abuses. The withheld funds would have ultimately been returned to the businesses in the form of credits against their federal taxes.

However, government officials have argued that businesses would simply increase the cost of the goods and services they provide to governments to compensate for the delay. The requirement would also place an extra burden on government agencies that would have to train personnel and implement new systems.

The three percent withholding requirement, which was already postponed twice, was scheduled to take effect in 2013. Now it has been repealed.

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