Tax Alert Updates

2013 Tax Alerts

Governor Proposes Elimination of the CA Enterprise Zone
Legislative Changes to the New Mexico High-Wage Jobs Credit
New York's On-Time Budget Enacts New Tax Credits
IRS Grants New Extension Date of April 29, 2013 on Filing of 8850s
California – HCD Releases Proposed California Enterprise Zone Regulations
California – Governor Brown Releases Proposed Budget Plan
Federal Business Hiring Tax Credits Extended

2012 Tax Alerts

Legislative Update: WOTC Extender Update August, 2012
Veteran Related State Incentive Programs - May 15, 2012
State Legislative Updates – 1st Quarter - May 8, 2012
Arizona Enterprise Zone - Claiming 2nd and 3rd Year Credits - April 12, 2012
Legislative Update - April 9, 2012
Update on WOTC Extenders - February 20, 2012
IRS Approves Use of Electronic Signatures to Form 8850 - February 10, 2012
CAEZ Update – New Final Designations - January 20, 2012
Arizona Enterprise Zone Issue - January 13, 2012

2011 Tax Alerts

Legislative Update - December 30, 2011
Legislative Update - December 21, 2011
Legislative Update - December 9, 2011
Legislative Updates - November 22, 2011
New WOTC Veteran Categories - November 11, 2011
President Obama Proposes the American Jobs Act - September 23, 2011
WOTC Legislative Update - August 10, 2011
Training Grant Programs Updated with New Fiscal Year - July 27, 2011
Michigan Tax Reform Legislation Signed by Governor - June 1, 2011
Michigan Lawmakers Approve Repeal of the Michigan Business Tax - May 23, 2011
Arizona Governor Signs Important Economic Legislation - February 23, 2011
Governor Proposes Eliminating CAEZ Program - January 2011

Governor Proposes Elimination of the Enterprise Zone
May 15, 2013

On May 14th Governor Jerry Brown released a summary document of his May Revise proposal, and as expected the Governor is once again trying to eliminate the Enterprise Zone Program.

In order to eliminate the program, Governor Brown is proposing to reallocate the funds available under the Enterprise Zone Program ($730 million) and the Small Business Hiring Credit ($240 million) to three new incentives:

Sales tax exemption for manufacturing equipment;
New hiring credit based on census tracts and targeted primarily at the hiring of individuals on public assistance, long-term unemployed and veterans; and
Creation of a $100 million Go-Biz “slush fund.”

In terms of tax benefits for California businesses, this does not appear to be an equal swap. The elimination of the Enterprise Zone program and subsequent reallocation of funds will result in a significant decrease in hiring incentive benefits available to companies who utilize the Enterprise Zone program as the proposed new hiring credit is much more restrictive and limited in scope and application than the current Enterprise Zone program. Ultimately, this elimination and reallocation of funds will result in a tax increase for California’s Enterprise Zone businesses.

At this point specific information is limited but we do expect to learn more over the next few days. On May 23rd First Advantage is hosting a panel discussion, including CEON lobbyist Cassie Gilson and CAEZ President and Long Beach Zone Manager Craig Johnson, to discuss the environment around the EZ program, the recent developments and where we go from here. Here is the link to register for the webinar: https://cc.callinfo.com/r/1i1wahi0n051s.

For more information regarding the California Enterprise program or the upcoming webinar, please contact your Tax Manager or email tax@fadv.com.

Legislative Changes to the New Mexico High-Wage Jobs Credit
April 2013

New Mexico Governor Susana Martinez recently signed legislation, HB 641, resulting in changes to New Mexico's corporate income tax laws. The legislation affects various tax provisions including rates, apportionment for manufacturers, and various tax credits such as the high-wage jobs credit.

The High-Wage Jobs Credit is modified as follows:

Extends the program to July 1, 2020 (previously set to expire on July 1, 2015)
Clarifies through definitions a number of terms including "wages" and "benefits"
Clarifies that the maximum credit amount is $12,000 per job per qualifying period
Excludes jobs created through a merger, acquisition and other changes in corporate structure
Increases wage requirements to $60,000 in urban areas, and $40,000 in rural areas for jobs created on or after July 1, 2015
Requires that the taxpayer apply for the credit within 12 months following the end of the calendar year in which the taxpayer's final qualifying period closes
Limits eligible employers to those certified by the Economic Development Department to be eligible for job training program assistance, commonly known as "JTIP"
Requires that the employer certify benefits for each employee in a new job and increases the municipality population threshold to 60,000 (previously threshold was 40,000)
Provides that eligible employers must have made more than 50% of its sales of goods and services produced in New Mexico to persons outside New Mexico during the applicable qualifying period

If you would like to review HB 641, you can find it here at: http://www.nmlegis.gov/lcs/_session.aspx?Chamber=H&LegType=B&LegNo=641&year=13

If you would like to discuss the changes to the New Mexico High-Wage Jobs Credit, or if you would like to discuss tax credits and incentives in general, please contact your Tax Manager or email tax@fadv.com.

New York's On-Time Budget Enacts New Tax Credits
April 12, 2013

On March 28th New York Governor Cuomo signed into law the 2013-2014 budget bill. The budget includes a number of provisions intended to foster economic growth for business, as well as encourage the hiring of veterans and youth. There are three tax credits in the budget agreement that First Advantage would like to bring to your attention.

Extension of the New York Youth Works Program

Program extended as of 1/1/2014 through 12/31/2017 in what is referred to as "Five Distinct Pools of Tax Incentives."
Employer Application will be required each year ("Pool period").
Lowering of the qualified employee's city of residence population threshold to 55,000> from 62,000>.

Creation of the Hire a Vet Credit

Tax credit available for tax years beginning on or after 1/1/2015 and before 1/1/2017.
Veterans hired on or after 1/1/2014.
Must be employed full-time for at least one year.
Credit is 10 percent of wages paid, with a maximum credit of:
$5,000 per qualified veteran or
$15,000 per qualified disabled veteran
A "qualified veteran" is someone who served on active duty in the US Army, Navy, Air Force, Marine Corps, Coast Guard, Reserves or any branch of the US National Guards.

Creation of the Minimum Wage Reimbursement Credit

Tax credit available for tax years beginning on or after 1/1/2014 through 2019.
Credit amount equals:
- 1/1/2014 to 1/1/2015: Number of hours worked X $0.75;
- 1/1/2015 to 1/1/2016: Number of hours worked x $1.31
- 1/1/2016 to 1/1/2019: Number of hours worked x $1.35
For hiring individuals in New York between the ages of 16 and 19 years old who are in school and get paid minimum wage.

For more information on these New York programs please contact your Tax Manager or email tax@fadv.com.

IRS Grants New Extension Date of April 29, 2013 on Filing of 8850s for Those Hired After December 31, 2011 and Before April 1, 2013
March 8, 2013

Effective immediately, the IRS has issued a new extension date of April 29, 2013 for filing of 8850's under the Work Opportunity Tax Credit Program.

This newly issued IRS guidance (Notice 2013-14) provides employers that hire members of targeted groups additional time beyond the 28-day deadline for submitting Form 8850, "Pre-Screening Notice and Certification Request for the Work Opportunity Credit," to designated local agencies.

Why this extension?

With the Work Opportunity Tax Credit extended retroactively for 2012 for members of targeted groups (other than qualified veterans), the IRS recognized that employers may need additional time to comply with section 51(d)(13)(A) for those targeted groups.

Additionally, with the credit for qualified veterans set to expire for those hired after December 31, 2012, employers that hire qualified veterans after December 31, 2012 may also need additional time to comply.

What this means to our Clients

An employer that hires a member of a targeted group -- as defined in section 51(d)(2) through (d)(10), other than a qualified veteran described in section 51(d)(3) -- after December 31, 2011 and before April 1, 2013, will be considered to have satisfied the requirements of section 51(d)(13)(A)(ii) if it submits the completed Form 8850 no later than April 29, 2013.
An employer that hires any qualified veteran described in section 51(d)(3) after December 31, 2011 and before April 1, 2013, will be considered to have satisfied the requirements of section 51(d)(13)(A)(ii) if it submits the completed Form 8850 no later than April 29, 2013.

The benefits of this extension

Under this new ruling, we now have the opportunity to file the 8850 through April 29, 2013, if 1) we didn't previously receive an 8850 from your Company, or 2) if we received it late
Hiring of Veterans now carries a January 1, 2013 retro date. (The original filing date was 12/31/12 under the Vow to Hire Heroes Act)

Your account manager will be contacting you in the near-term and provide specific details as to what this 8850 extension means to your Company.

California – HCD Releases Proposed California Enterprise Zone Regulations
January 16, 2013

The past year has held a lot of speculation as to how Governor Brown would propose to reform the California Enterprise Zone program. On Friday, January 11th, the California Department of Housing and Community Development (HCD) released the much anticipated proposed regulations reforming the EZ program. The regulations do not contain many surprises, but it is interesting to see how HCD and Governor Brown decided to effectuate the changes to the program. The scope of the changes is vast, and many of them will result in complications for both Zone administrators and employers.

The changes will impact Zone administrators, taxpayers and consultants. Below is a very brief summary of the proposed regulations by topic.

Increased Voucher Fee (§ 8460)
- Increases the Voucher Application fee from $10 to the maximum fee allowed of $15.
Voucher Applications (§ 8464)
- Changes to the information required on the application in regards to the employee and/or employer.
Obtaining a Voucher (§ 8465)
- Limits retroactive vouchering to one (1) year from the date of hire for employees hired on or after the effective date of the regulations.
- Voucher Application must be submitted within 12 months of the effective date of the regulations for those employees hired prior to the regulation's effective date.
- Must establish the "Date of Hire" and include hiring document.
- Re-hire test – within 12 months.
- Leased/Temporary Employees – utilizes a common law employee test.
Targeted Employment Area (TEA) (§ 8465.1)
- Changes the process for establishing and certifying TEAs.
Acceptable Documentation (§ 8466)
- Establishes very specific requirements regarding which documents are acceptable to establish eligibility for each category.
- Modifies acceptable documents to establish third party verification of employee residence for TEA category.
- Clarifying definition of specific terms for some categories.
Adds section governing the auditing of Enterprise Zone performance and establishing accountability for the Zones. (Article 15, §§ 8468 - 8471)
- Failure to comply with the regulations could result in a zone losing the ability to expand or de-designation.

As currently drafted, the new provisions will apply to Voucher Applications submitted as of the effective date of the regulations. Any Voucher Applications submitted prior to the effective date will be subject to the rules in effect as of the date submitted.

As required by law, the proposed regulations are open to written comment from any interested person for 45 days (February 28, 2013). Written comments should be mailed to: Enterprise Zone Program, Attn: Colin Parent, Department of Housing and Community Development, P.O. Box 942054, Sacramento, CA 94252-2054 or faxed to (916) 323-6016. HCD will conduct four public hearings on February 12th in Los Angeles, February 13th in San Diego, February 20th in Oakland and February 28th in Sacramento. Following the 45-day public comment period, HCD may adopt the proposed regulations as is. If HCD makes modifications, other than minor technical or grammatical changes, which are sufficiently related to the proposed regulations, HCD will make the modified text available for comment for at least an additional 15 days before adopting the regulations as final. At the conclusion of this 15 day period, HCD would most likely adopt the regulations.

HCD has created a website specific to the Enterprise Zone reform regulations: http://www.hcd.ca.gov/ezregs/. We encourage you to review the proposed regulations and submit comments to HCD. Meanwhile, First Advantage will continue to take an active role with our California Employment Network (CEON) partners and the Enterprise Zone community to support improvement of the California Enterprise Zone Program.

Please contact your First Advantage Tax Manager if you have any questions about the proposed regulations or if you would like to share your thoughts for incorporation into our response.

California – Governor Brown Releases Proposed Budget Plan
Reform not elimination of Enterprise Zones
January 11, 2013

Governor Brown unveiled his 2013-2014 budget proposal at the state capitol in Sacramento on Thursday. In a change from the previous years' budget proposal, this year the Governor is proposing reform of the Enterprise Zone through new regulations. Here is the language regarding Enterprise Zones from the Governor's Budget Summary:

Enterprise Zone Regulatory Reform

The Budget includes savings relating to new regulations for the Enterprise Zone program.

The proposed regulations will accomplish the following reforms:

Limit retrovouchering by requiring all voucher applications to be made within one year of the date of hire.
Require third party verification of employee residence within a Targeted Employment Area.
Streamline the vouchering process for hiring veterans and recipients of public assistance.
Create stricter zone audit procedures and audit failure procedures.

These regulatory reforms will primarily affect Corporation Tax revenue, but will also have an impact on Personal Income Tax revenue. The regulations, in total, are expected to increase General Fund revenue by $10 million in 2012-13 and $50 million in 2013-14. The Administration will be pursuing further Enterprise Zone reform through legislation.

The full budget summary can be downloaded at: http://www.ebudget.ca.gov/pdf/BudgetSummary/FullBudgetSummary.pdf

Federal Business Hiring Tax Credits Extended
January 4, 2013

On January 2nd President Obama signed into law The American Taxpayer Relief Act of 2012 (H.R. 8). The bill was passed by the Senate with an 89 to 8 vote and the House with a 257 to 167 vote. This is significant as the bill extends through 2013 and retroactively applies back to January 1, 2012 a number of business tax credits including:

Federal Empowerment Zones (FEZ)
Indian Employment Credit (IEC)
Work Opportunity Tax Credit (WOTC)

The bill also extends, and in some cases modifies, other business tax credits and incentives including the research credit, the new markets tax credit, the energy related tax credits and the bonus depreciation provisions.

You may contact First Advantage if you have any questions or would like more details regarding this new development or regarding business credits and incentives in general at tax@fadv.com.

The entire bill can be downloaded at: http://www.gpo.gov/fdsys/pkg/BILLS-112hr8eas/pdf/BILLS-112hr8eas.pdf

Legislative Update: WOTC Extenders Update
August, 2012

Before leaving for the August recess, the Senate Finance Committee approved the Family and Business Tax Cut Certainty Act of 2012, an extender package that contains a retroactive extension of WOTC through December 31, 2013. The bill included the new veterans' credits as well as credits for Federal Enterprise Zones. Unfortunately, the bill did not include the Washington DC Enterprise Zone. This is an important step forward for WOTC because it means that the Senate Finance Committee is on record in favor of WOTC and that will be the position of the Senate in final negotiations on a tax bill later this year. It is unclear when the bill will be taken up in the Senate and it is expected that final action may be deferred until after the elections.

Although the House held hearings on extenders earlier this year, there was no movement on putting an extender bill together before the recess. Between now and September, when they return, we would ask you to do what you can to help deliver the message to the tax-writing committee members of the House, who have not yet co-sponsored H.R. 2082 – Work Opportunity Credit Improvements Act, that they should cosponsor this bill. While there was much resistance up until now to sponsor tax legislation due to the hope for overall tax reform, there will be no tax reform this year and thus, that conflict no longer exists.

What can you do to help?
Below is the list of potential co-sponsors and the email address to use for the Tax Aides and a sample email. Please take the time to send emails to each and every one of the offices where you have business locations.

Tax Aides Email List

Letter Sample
Dear Congressman/Congresswoman ___________

I want to urge you to support renewal of the Work Opportunity Tax Credit (WOTC) which has helped us hire hard-to-employ workers and unemployed and disabled veterans in your district. WOTC has played a key role in helping millions of Americans transition from dependence on public assistance into productive jobs. And now, thanks to the VOW Act, returning veterans with difficulty reentering the workforce due to disabilities and other challenges have become part of the core program.

With an expectation that WOTC will be renewed, we have continued to incur the costs associated with recruiting, hiring, training and retaining WOTC eligible job applicants. If WOTC is not extended, not only will we have incurred the added expense of participating in the program, but effectively we will also experience a tax increase.

These economic times present even greater challenges to moving unemployed people back into the labor force. Congress needs to act quickly to extend WOTC. I urge you to co-sponsor the Schock/Rangel bill, H.R. 2082 – Work Opportunity Credit Improvements Act, which would extend WOTC. Your support will go a long way in helping renew the business tax extenders so important to employers.

Sincerely,

For questions about these or any other existing or proposed hiring tax credits, email tax@fadv.com or contact your First Advantage account manager.

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Veteran Related State Incentive Programs
May 15, 2012

Recently Enacted for Hiring Veterans

As more and more of the brave men and women that serve in the United States Armed Forces return home from overseas, there has been a concerted effort to provide these individuals with opportunities to find good jobs and resume their careers in the workforce. One method to accomplish this goal is for states to provide incentives to businesses that hire and employ these men and women. At the end of 2011, the Federal Government took steps to help veterans through extending and enacting new provisions under the WOTC program (The Vow to Hire Heroes Act of 2011). Following the Federal Government's lead, a number of states have swiftly proposed and enacted new incentive programs based on hiring veterans.

Alabama — Enacted the "Heroes for Hire Tax Credit" providing a tax credit equal to $1,000 for hiring a veteran recently returned from war. An eligible veteran must have received an honorable or general discharge within two years of his hire date and must satisfy the requirements for the tax credit under the Full Employment Act of 2011.
New Mexico — Enacted the "Veteran Employment Tax Credit" providing a tax credit of up to $1,000 of gross wages paid to a qualified military veteran in New Mexico. A qualified veteran is an individual hired within two years of receiving an honorable discharge and works at least 40 hours per week in the taxable year the credit is claimed.
Vermont — Enacted the "Recently Deployed Veteran Tax Credit" providing a tax credit equal to $2,000 for each new full-time employee who is a recently deployed veteran. A qualified veteran must have left federal, active duty within 24 months, was a resident of Vermont when entered military service or served in a guard or reserve unit in Vermont, and is eligible to receive or exhausted unemployment benefits in Vermont. The veteran must be hired between May 25, 2011 and December 31, 2012.
Wisconsin — Enacted the "Veteran Employment Credit" providing a tax credit equal to $10,000 over four years for hiring a disabled veteran full-time and a $5,000 tax credit for hiring a disabled veteran part-time. Qualified veteran must have served under honorable conditions, must have a service-connected disability rating of at least 50%, and must have received unemployment compensation benefits for at least one week prior to being hired.

** Many states, including New Jersey, Delaware, and Illinois have proposed veterans related bills in the state legislature that appear to have support. First Advantage will continue to monitor all states for any new developments.

As you may know a few states already offer incentives specifically related to employing individuals who serve or served in the Armed Forces.

Arizona — Credit for Employing National Guard Members - $1,000 for each qualifying employee
Illinois — Veterans Job Credits – Up to $1,200 per qualifying employee
West Virginia — Military Incentive Program Tax Credit – Credit amount various based on the employee
California — Enterprise Zone Program – Up to $37,440 in credit over 5 years

Besides the specific incentives referenced above, many states offer additional incentives and benefits related to hiring or employing veterans/military personnel through state Enterprise Zone programs, various tax exemptions, training grants, etc. If your company operates with an initiative to hire and employ individuals serving or who have served in the Armed Forces, there may be tax benefits available to you.

For more information on these programs or other legislation, contact your tax manager or email tax@fadv.com.

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State Legislative Updates – 1st Quarter
May 8, 2012

Enacted State Tax Credits

Alabama — Enacted the Heroes for Hire Act which provide a $1,000 tax credit for employers that hire a veteran recently returned from war. An eligible veteran must have received an honorable or general discharge within two years of his hire date and must satisfy the requirements for the tax credit under Alabama's Full Employment Act of 2011.
New Jersey — The Grow New Jersey Assistance Program was enacted to authorize tax credits up to $8,000 for 10 years for each full-time job created or retained. Credits are available for businesses that make, acquire or lease a specified capital investment at a qualified business facility at which a specified number of employees will be retained, or which create a specified number of jobs in qualified industries.
New Mexico — The Veteran Employment Tax Credit was enacted to provide a $1,000 corporate tax credit to business owners for wages paid to each qualified full-time employed military veteran until January 1, 2017.
New York — The Credit Created for Transportation Companies was enacted to provide a corporate franchise tax credit of up to $10,000 for the purchase of new vehicles or upgrading a vehicle to make it accessible by individuals with disabilities by transportation companies that provide transportation to people with disabilities.
Vermont — Vermont's legislature enacted the Recently Deployed Veteran Tax Credit providing a tax credit equal to $2,000 for each new full-time employee who is a recently deployed veteran. The qualified veteran must be hired between May 25, 2011 and December 31, 2012.
Wisconsin — Wisconsin's legislature enacted the Veteran Employment Credit which provides a $10,000 tax credit over four years to employers that hire a disabled veteran to work full-time; $5,000 tax credit for hiring a disabled veteran part-time. For full-time hires, the employer earns a $4,000 credit in the first year of employment and $2,000 per year for the succeeding three years of employment.

Amended State Tax Credits

Arizona — With regard to the Arizona Enterprise Zone Program, new legislation clarifies that first, second and third year credits can be claimed after June 30, 2011 for qualified employees hired prior to June 30, 2011.
Indiana — The investment date deadline for the Hoosier Business Investment Tax Credit, the Hoosier Alternative Fuel Vehicle Manufacturer Tax Credit and the New Employee Tax Credit has been changed to include any investment made before January 1, 2017. The previous date was January 1, 2014.
Utah — The Enterprise Zone Credit has been amended to eliminate rules relating to reports to the Department of Workforce Services and clarifies that a business entity may not claim enterprise zone credits if the business entity is primary engaged in retail trade, which is defined as retail trade operations constituting more than 50% of the entity's total operations.
Utah — The tax credit for research activities has been amended to decrease the credit available for qualified research expense from 9.2% to 7.5%.
Utah — The Recycling Market Zone Recycling Machinery and Equipment Credit and the Recycling Market Development Zone Qualified Expenditures Credit have been extended to December 31, 2020 from 2012.
Utah — The Alternative Energy Development Act was repealed and the Alternative Energy Development Tax Credit and the Alternative Energy Manufacture Tax Credit were enacted.
Virginia — The Major Business Facility Job Tax Credit was extended through December 31, 2014 (previously 2012) and the Coalfield Employment Enhancement Credit was extended to January 1, 2017 (previously 2015).

First Advantage continuously monitors and is involved in new legislation to provide you with the greatest benefit possible. For more information on these programs or other legislation, contact your tax manager or email tax@fadv.com.

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Legislative Update
April 9, 2012

This legislative year, members of Congress in the tax writing committees are considering the business tax extenders, including WOTC, in the context of the larger goal of tax reform, leaving members of Congress who support the WOTC extension fewer options for bills to attach business extenders. First Advantage is informed that there may be a positive shift in Congressional attitude due in part to the WOTC community's collective effort as well as others who support different business extenders.

Because of the overriding interest in tax reform and fewer traditional tax vehicles, WOTC supporters in Congress recently attempted to tack on extenders to the Highway Trust Fund bill. After the Highway Bill passed without the expired provisions, Majority Leader Harry Reid (D-NV), Minority Leader Mitch McConnell (R-KY), Finance Chairman Max Baucus (D-MT) and Ranking Finance Republican Orrin Hatch (R-UT) engaged in a colloquy. They all made it clear that they want to enact an extension of the business tax extenders as soon as possible. While there was some discussion about reviewing the list of extenders and possibly eliminating some, we have consistently been assured by members and their staffs that WOTC is popular and is in the top tier of business tax extenders that Congress wants to reauthorize.

A press release by Ways and Means Committee Chairman Dave Camp (R-MI) and Select Revenue Measures Subcommittee Chairman Pat Tiberi (R-OH) indicated the House will take up a review of tax extenders after the April recess. The primary sponsor, Aaron Schock (R-IL), will testify for WOTC in member hearings.

House Speaker John A. Boehner (R-OH) told reporters on March 29 he expects some sort of vote on extenders or other expiring portions of the tax code before November's elections. It appears the momentum for some type of legislation on expiring provisions is building.

We will continue to look for opportunities outside of the conventional tax vehicles for WOTC. We have made significant progress, and will keep up the effort until Congress acts. If you have questions or would like more information, contact your account manager or email tax@fadv.com.

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Arizona Enterprise Zone - Claiming 2nd and 3rd Year Credits
April 12, 2012

As we have previously communicated, the Arizona Enterprise Zone Program expired on June 30, 2011 and up until now there was no definitive guidance as to whether a company could continue to claim 2nd and 3rd year credits for tax years beginning after June 30, 2011. In fact, there were conflicting positions within Arizona on this issue. First Advantage is pleased to let you know that legislation has been enacted that resolves this issue in a manner that may be beneficial to your company.

The Arizona Department of Revenue (DOR) has issued with its revised Form 304 a new Notice regarding this issue. The DOR has also updated accordingly its instructions for the Enterprise Zone program. The Notice states:

Legislation has been enacted to allow taxpayers to claim second and third year credits, and include wages paid after June 30, 2011, in the calculation of the credit. The Form 304-2 for 2010 and 2011, and the instructions for Form 304 for 2011 have been updated to reflect the changes contained in Laws 2012, Ch 3, §60 (SB 1045).

With the enactment of this new legislation and assuming all requirements of the program are satisfied, a business may now be allowed to claim 2nd and 3rd year credits through tax year 2013. Also, the calculation of the Enterprise Zone credit may include wages paid through the full tax year and is no longer limited to wages paid prior to June 30, 2011.

If you have questions or would like more information, contact your account manager or email tax@fadv.com.

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Update on WOTC Extenders
February 20, 2012

Congress has passed the Middle Class Tax Relief and Job Creation Act of 2012 (Payroll Tax Bill), which is to be sent to President Obama.
The WOTC Extenders are not included in the Middle Class Tax Relief and Job Creation Act of 2012.

A couple of thing to take note:

The Senate joined the House in passing the Middle Class Tax Relief and Job Creation Act of 2012. The bill passed the Senate 60-36 and the House 293 to 132. This has been reputed to be a high priority for President Obama and he is expected to sign it into law very soon. Although WOTC and other business extenders were not included, now that the Middle Class Tax Relief and Job Creation Act of 2012 is completed we are hearing that Congress will have the time to examine these provisions and decide which merit extension. In the coming months, we believe that there will be hearings on the extenders followed by legislation to renew those that are deemed worthy.
Your visits, calls and emails have contributed to creating the needed awareness by the members of Congress. They are mindful of the importance of WOTC and the impact in helping individuals move from being dependent on public assistance to becoming gainfully employed. The importance of WOTC and other business extenders has been recognized and has gained support.
The groundwork laid by the WOTC community over the past three months has been terrific, but we will need to continue to educate members of Congress of the importance to employers back home of extending WOTC and urge them to do so as soon as possible. As we move forward on our Hill visits in support of WOTC, we would welcome companies that will come to Washington to meet with their Representatives. Please let us know if you would like to come to Washington, and when you are available.

If you have questions or would like more information, contact your account manager or email tax@fadv.com.

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IRS Approves Use of Electronic Signatures to Form 8850
February 10, 2012

Yesterday, February 9, 2012, the Internal Revenue Service issued Notice 2012-13 providing additional guidance on the use of electronic signatures with Form 8850 and the electronic submission of Form 8850 to state workforce agencies as part of regulations for the new veteran categories. Notice 2012-13 appears to provide two alternative methods of certification using electronic signatures and a new alternative method for filing or signing Form 8850 via facsimile. These methods will purportedly allow a consistent method of filing the Form 8850 across the country, if a filer has the ability to support electronic signatures.

These alternative methods as set forth in the Notice include:

Applicant and employer both sign electronically
Employer may print a hard copy that is signed electronically by both the applicant and the employer.
Applicant signs Form 8850 electronically and the employer provides a physical signature
This method allows the applicant to sign the Form 8850 electronically and submits the form electronically to the employer. Once received, the form is printed with the Form 8850 showing 'electronically signed' in the applicant's signature. The employer or authorized representative signs a hard copy of the Form 8850 and submits for certification.
Employer can file or sign Form 8850 by facsimile
This allows acceptance of the facsimile transmission of applicant and employer signatures on a Form 8850 if the applicable DLA accepts Form 8850 via facsimile, and the applicant and employer intend the signatures on the faxed copy to be their signatures on the faxed copy to be their signatures for purposes of the document.

According to the Notice, the alternative methods are available to any employer required to submit a Form 8850 in order to obtain WOTC for any member of a targeted group under § 51 or the equivalent credit under § 3111(e). This Notice opens up a multitude of new avenues for certifying applicants. In the view of First Advantage, this should provide employers more flexibility in the signing, certification and filing processes and is expected to better facilitate maximizing credit under the program.

In addition it is understood that the IRS expects the Department of Labor (DOL) to issue further guidance to state workforce agencies regarding the use of electronic signature. First Advantage will continue to monitor this development and will keep our customers informed of additional guidance as it becomes available.

First Advantage has been anticipating these changes and has been working proactively to take full advantage of these alternative methods. First Advantage will be reaching out to its customers about these new methods on an individual basis.

This Alert is for informational purposes only and is not intended to be construed as providing legal or tax advice.

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CAEZ Update – New Final Designations
January 20, 2012

The California Department of Housing and Community Development (HCD) recently announced that three conditional enterprise zones have received final designation. The three zones receiving final designation and their designation dates are:

Anaheim effective February 1, 2012;
Sequoia Valley effective October 6, 2010; and
Sacramento effective April 5, 2009.

Businesses located within one of these zone boundaries may be eligible to receive various tax incentives, including a hiring credit for each qualified employee hired totaling up to $37,000 over a 5 year period.

If you have any questions, please contact your account manager or email tax@fadv.com.

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Arizona Enterprise Zone Issue
January 13, 2012

The Arizona Enterprise Zone Program expired on June 30, 2011. The sunset legislation provided no guidance as to whether a company would be able to continue to claim 2nd and 3rd year credits for tax years beginning after June 30, 2011. Initially the Arizona Commerce Authority advised that companies who continue to meet the applicable requirements would be able to claim the 2nd and 3rd year credits and any carry forward credits after the program's expiration date. However, the Department of Revenue later issued Notice Form 304 which provides differing instructions regarding use of the credits.

Notice Form 304 states:

Currently, no first, second or third year credits may be claimed in any tax year beginning after June 30, 2011. If legislation is enacted to allow second and third year credits, the information will be posted on the Department's website. All enterprise zone credits properly claimed can be carried forward for the respective five year carry forward period.

Since the release of Notice Form 304, we have been advised by the Commerce Authority that the 2012 legislative session may address this issue. We are hopeful that the Arizona Legislature will allow companies to claim the 2nd and 3rd year credits in tax years that begin after June 30, 2011. First Advantage is monitoring the situation and will keep you informed as new developments arise.

If you have any questions, please contact your account manager or email tax@fadv.com.

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Legislative Update
December 30, 2011

As you are likely aware, the WOTC program expires effective 12/31/2011. While the program is strongly supported in Congress, due to the current political situation in Washington, an extension of the program has not yet been approved by Congress.

There have been five instances in the past where Congress did not pass an extension prior to the end of the program, then, retroactively passed an extension the following year. This is what we believe will happen next year.

What does this mean for your company and First Advantage? Business as usual.

First Advantage will continue processing the WOTC program with the expectation of a retroactive extension, and your staff should continue to manage the WOTC process as though nothing has changed. We have been in this situation before, and progressing with business as usual has always proven to be the best strategy.

While it is impossible to know what actions Congress will take, we are optimistic the program will be extended. Particularly so considering the President has already signed into law new Veteran WOTC categories active through 12/31/2012.

Bear in mind that even when a retroactive extension of the WOTC program has occurred in the past, in order to capture the WOTC credits earned during the hiatus, all of the standard WOTC processing rules apply, including having the Form 8850 submitted to the State Workforce Agencies by the 28 day deadline. That is why it is so important to operate as though the expiration never occurred.

We will keep you informed of any important news pertaining to the WOTC program. If you have questions in the meantime, please contact your account manager or email tax@fadv.com.

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Legislative Update
December 21, 2011

The House rejected the Senate version of the payroll tax cut 229-193. As of the afternoon of December 20th, it is unclear whether the Senate will reconvene so that a conference committee can take place to reach a resolution on the payroll tax cut. Even if that committee does take place, the mark up for the bill will be limited to extensions of the payroll tax cut, the "doc" fix, and an extension of UI benefits. We do not believe that the committee will consider other extenders, such as WOTC, to be part of that bill.

This means that the program will go into a hiatus until Congress reconvenes next year and takes action on an extender bill. Program hiatus is not new for WOTC. There have been five such breaks that were covered retroactively by Congress when the tax bills finally passed. First Advantage will continue its efforts to maximize your potential credits and will keep you informed of any further development.

Max Baucus (D-Mont.), Chairman of the Senate Finance Committee has made the following statement: "We came together today to pass a package that provides much-needed relief for middle-class families and a boost for our economy by extending the payroll tax holiday and continuing assistance for the unemployed while ensuring that our seniors have access to their doctors. We've been fighting to get these done and we're going to keep fighting to extend other expiring tax cuts for families and small businesses to put more money back in their pockets and provide certainty for our economy when Congress reconvenes. As we work together on comprehensive tax reform for the long-term, reaching a permanent agreement on expiring tax cuts right away must be our top priority."

Thank you for your participation in calls and emails in our efforts to get the expiring provisions as part of the final bill for 2011. We need to keep this effort going in 2012.

If you have any questions, please contact your account manager or email tax@fadv.com.

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Legislative Update
December 9, 2011

It has become apparent that Congress will most likely not complete an extender bill this year. Congressional leaders have been working behind the scenes to put together one very limited tax bill to extend the payroll tax cut, long-term unemployment insurance, and a provision to fix doctors Medicare payments. This means that in order to get WOTC extended, WOTC proponents must create a nexus between the Unemployment Insurance extension and the need for a jobs program.

There is precedence for connecting the two. In 2007, when Congress enacted the Small Business and Work Opportunity Act, WOTC was extended for 44 months in conjunction with the extension of UI benefits. At the time, it was felt that if they were going to extend UI then they should extend WOTC as a supporting jobs program.

This message needs to be reinforced with calls from WOTC supporters before Tuesday, December 13. If you would like to help, contact the leadership offices and urge them to extend WOTC before they adjourn for the year.

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Legislative Updates
November 22, 2011

President Signs New Veteran WOTC Categories into Law
Beginning today, November 22, 2011, First Advantage will be screening for the new Veteran WOTC categories that passed last week as part of H.R. 674 and was signed into law yesterday. The categories and credits are as follows (new/enhanced categories in blue):

Veteran Category Chart

Super Committee Update and WOTC Implications
We now know that the Super Committee will be unable to reach an agreement on deficit reduction. From a WOTC perspective, the extenders were never part of the Super Committee agenda. While the ability to work together on deficit reduction may be indicative of challenges that lie ahead for WOTC supporters, there are tax provisions outside of the extenders such as Alternative Minimum Tax that may provide a vehicle for the expiring provisions.

Both Congressman David Camp (R-MI), Chair of the House Ways and Means Committee, and Senator Baucus (D-MT), Chair of the Senate Finance Committee, have indicated they will be looking for ways to pass the extenders before leaving for the December recess. This timeframe is what we have expected all year and now the discussions will continue and intensify over the coming weeks. First Advantage will have representatives on the Hill the first week of December and we will know more about what will be expected during the remaining days of this legislative year.

Action Needed on H.R. 2082 to Extend WOTC
H.R. 2082, the bill introduced by Representatives Aaron Schock (R-IL) and Charles Rangel (D-NY) of the Committee on Ways and Means to extend and enhance WOTC still needs the support of a majority of House Members. That means your voice is imperative to getting the message out to all the House offices over the next two weeks. The link below will provide two easy ways to contact your representative and help keep the pressure on Congress to extend WOTC.

Support the WOTC Extension

If you have questions or would like more information, contact us at tax@fadv.com.

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New WOTC Veteran Categories
November 11, 2011

On November 10, 2011 the Senate passed (H.R. 674), including the amendment S. Amdt. 927 by Senator Jon Tester (Democrat - Montana) that added a WOTC credit for hiring wounded or unemployed veterans into the bill. All veterans are included in this amendment. The House is expected to pass the bill next week, with day of enactment as the effective date for hires through 2012. First Advantage will initiate screening procedures and let you know modifications as they are implemented.

Veterans are potentially eligible providing they meet at least one of the criteria below:

Entitled to compensation for a service connected disability and has a hiring date which is not more than 1 year after having been discharged or released from active duty.
- Wages subject to the credit = $12,000 (potential $4,800 credit)
Has aggregate period of unemployment during the 1 year period ending on the hiring date which equals or exceeds 6 months.
- Wages subject to the credit = $14,000 (potential $5,600 credit)
Entitled to compensation for a service connected disability and who has aggregate periods of unemployment during the 1 year period which equals or exceeds 6 months.
- Wages subject to the credit = $24,000 (potential $9,600 credit)
Has aggregate periods of unemployment during the 1 year period ending on the hiring date which equal or exceed 4 weeks.
- Wages subject to the credit = $6,000 (potential $2,400 credit)

Because the provision has its own "simplified certification system" our lobbyists are in communication with both the IRS and DOL to encourage them to allow employers to continue to use the current forms and to agree to alternative certification measures modeled on those in H.R. 2082.

WOTC Extension
First Advantage continues working on the extension of core WOTC, and we believe the renewed interest in the program with the new veteran categories will be beneficial. The timeline for Congressional action still appears to be before the year-end recess in December.

If you have not had a chance to contact House members and would like to, there is now a website to make it easy to contact specific offices: www.wotcmeansjobs.org.

If you have questions or would like more information, contact us at tax@fadv.com.

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President Obama Proposes the American Jobs Act
September 23, 2011

On Monday, September 12, 2011, President Obama sent his job creation plan, the American Jobs Act, to Congress. According to the White House, the proposed legislation is intended to have a substantial impact on the economy through various targeted tax cuts, infrastructure spending and new job training assistance, among other things. First Advantage would like to make you aware of the following hiring related items included in the President's proposal.

Tax Credits for Hiring the Unemployed
The President's proposal includes three tax credits related to the hiring of unemployed individuals or veterans. These credits are:

A $4,000 tax credit for hiring individuals who have been unemployed for more than six months
A $5,600 tax credit for hiring veterans who have been unemployed for more than six months
A $9,600 tax credit for hiring individuals with service-connected disabilities that have been unemployed for more than six months

Payroll Tax Breaks Both employees and employers would benefit from a reduction in FICA payroll taxes due:

Employees – The proposal would continue the employee payroll tax reduction (4.2% in lieu of 6.2%) beyond 2011, while further reducing the tax rate to 3.1% on the first $106,800 of wages.
Employers – The proposal would cut the employer's share of FICA taxes in half to 3.1% on the first $5 million in wages paid to employees. It would also provide a payroll tax holiday, up to $50 million in wages, for 2012 on the increase in wages paid in 2012 over 2011 due to hiring new employees or providing employee raises.

New Job Training Assistance
The President's proposal would create the "Bridge to Work" program as a way to help unemployed workers connect with potential employers, and allow a potential employer to determine if a potential employee is a fit for the position prior to hire. The program would allow unemployed workers to continue to collect unemployment benefits while they take temporary unpaid jobs or pursue work-based training.

First Advantage representatives, working in conjunction with our lobbying group NEON, are in Washington this week meeting with members of the tax-writing committee from both parties to urge support for both H.R. 2082, the Work Opportunity Credit Improvements Act, and President Obama's proposal. It is too early to predict how much of the American Jobs Act will become law, but this could be a vehicle to enact the tax provisions set to expire this year, including WOTC.

In addition to meeting with the tax-writing committee members, NEON and First Advantage representatives will meet with as many of the 12 Deficit "Super Committee" members as possible in the coming weeks to urge them to use this opportunity to extend the expiring provisions and changes to WOTC that will help reduce unemployment as the president has proposed.

First Advantage will keep you abreast of the new developments as they arise. If you have questions in the meantime, send an email to tax@fadv.com or contact your First Advantage account manager.

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WOTC Legislative Update
August 10, 2011

Two milestone events occurred during the past week. Congress came to agreement and passed the debt limit increase and the President spoke to the people outlining tax credits as a way to get America, especially veterans, back to work. Click Here to read more about these proposed credits.

After the August recess, there will be at least two legislative vehicles with potential to advance a WOTC extension.

A Democratic Jobs Bill – This would provide the opportunity to demonstrate that WOTC is a critical tool in helping individuals who ordinarily face high barriers to employment enter the job market.
Extension of the Alternative Minimum Tax – This would contain a pared down list of tax extenders which are designed to encourage hiring and reduce the cost of doing business.

Your Support is Important
The grassroots support from the WOTC community for both the Jobs Bill and the Alternative Minimum Tax extension is critical. First Advantage representatives are actively working to secure the extension and enhancement of the WOTC program. Your First Advantage account manger will contact you with information on how you can help.

If you have questions or would like more information, send an email to tax@fadv.com or contact your First Advantage account manager.

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Training Grant Programs Updated with New Fiscal Year
July 27, 2011

With new budgets in place starting in July, many states have made changes to existing Training Grant programs including application process, eligibility requirements, and funding amounts. Deficits in most states have made grant programs targets for increased scrutiny at both the application and compliance stages. However, continuing high unemployment makes training imperative in order to keep businesses and their employees competitive with technologies and skill sets. Many state programs are beginning to address re-training needs for the unemployed, and partnering with businesses to improve transferable skills for their local workforce.

The Arizona Job Training Program is Expected to Re-Open Soon
The program is currently accepting applications for Net New Applicants only. New applications for the Incumbent Training Program will be accepted beginning in mid to late September (Date to be announced by ACA). Click here for Qualification and Grant Amount details

First Advantage will continue to monitor changes to state programs, and keep you informed of new opportunities.

If you have questions or would like more information, send an email to tax@fadv.com or contact your account manager.

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Michigan Tax Reform Legislation Signed by Governor
June 1, 2011

As expected, Michigan Governor Rick Snyder signed legislation (H.B. 4361 and H.B. 4362) on May 25, 2011 repealing the Michigan Business Tax (MBT), eliminating business tax credits and creating a new 6% corporate income tax rate effective as of January 1, 2012. The elimination of the MBT and the imposition of a new corporate income tax is part of the substantial tax reform occurring in Michigan.

First Advantage will continue to monitor tax legislation in the state and keep you informed as new tax developments arise.

If you have questions or would like more information, send an email to tax@fadv.com or contact your account manager.

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Michigan Lawmakers Approve Repeal of the Michigan Business Tax
May 23, 2011

On May 12, 2011, the Michigan Legislature passed a tax reform package, HB 4361, HB 4362 and HB 4479, that if signed by Governor Rick Snyder will replace the Michigan Business Tax (MBT) with a six percent (6%) corporate income tax effective January 1, 2012. In its current form, the new corporate income tax will not retain any of the tax credits available under the MBT except the alternate tax credit. This new legislation could have an impact on the tax credits your company is claiming.

House Bill 4361 creates the corporate income tax on C-corporations, while HB 4362 allows taxpayers with "certificated" credits to elect to claim them under the MBT until those credits and their carry forwards are exhausted. "Certificated" credits are those credits which are awarded as a result of the taxpayer obtaining a voucher or certificate through an agreement with the State and include:

Early Stage Venture Capital Credit
Brownfield Redevelopment Credit
MEGA Credits
Media Production and Media Infrastructure Credits
Historic Preservation Credit
Renaissance Zone Credit
Farmland Preservation Credit
NASCAR Safety and NASCAR Speedway Credits

Governor Snyder is expected to sign this new legislation. First Advantage will continue to monitor this legislation and will inform you when new information is available.

Please contact First Advantage if you have questions, would like more information, or are interested in how your business can help. Email tax@fadv.com or contact your account manager.

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Arizona Governor Signs Important Economic Legislation
February 23, 2011

On February 17, 2011 Arizona Governor Jan Brewer signed into law the Arizona Competitiveness Package. Below are key highlights of this new legislation.

Enterprise Zone Program Expiring
The Arizona Enterprise Zone will expire on June 30, 2011. This package creates a new program called the Quality Jobs Program in its place.

Quality Jobs Program
Effective July 1, 2011, the Quality Jobs Program will allow an employer to claim up to $9,000 in tax credits, over three years, on up to 400 new qualifying positions per year if capital investment and job growth requirements are satisfied.

Job Training Program
The Arizona Job Training Program was set to expire as of 1/1/2012. This package reauthorizes the Job Training Program to continue to provide job-specific, reimbursable grants to train employees for new careers beyond 1/1/2012.

Arizona Competes Fund
The package establishes a discretionary program labeled the "Deal Closing Fund" to provide funds for investment in business projects that stimulate and promote industries that provide stable, high-wage jobs. The program require a business achieve certain performance measures and pay wages above the county's average wage.

Elimination of the Department of Commerce
The package eliminates the Arizona Department of Commerce and replaces that department with the Arizona Commerce Authority. The goal of this transition is to allow the Arizona Commerce Authority to focus solely on the retention and recruitment of quality jobs to Arizona.

If you have questions or would like more details, please contact me or send an email to tax@fadv.com.

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Governor Proposes Eliminating CAEZ Program
January 2011

In an effort to close a $28 billion state budget deficit, California Governor Jerry Brown suggested eliminating a number of state programs, including the California Enterprise Zone program. While the program has been targeted for elimination for several years, this is the first time a sitting governor has called to eliminate CAEZs. This proposal appears to have additional support from the state's senate president and speaker. It's also generating increased program scrutiny with editorials applauding the governor for his determination to balance the budget and characterizing the CAEZ program as costly and unproductive.

As a member of the California Employment Opportunities Network (CEON) and the California Association of Enterprise Zones, First Advantage is actively engaged in the continuation of the CAEZ program. We've joined a growing coalition of supporters that includes local governments, local chambers of commerce, manufactures and other organizations to initiate grassroots support for and legislative understanding of the program and the positive impact it's having on businesses and workers.

First Advantage is monitoring all activity and working with the coalition to keep CAEZ intact. We'll continue to provide updates and the tools you need to contact your California legislators in support of the program.

Please contact First Advantage if you have questions, would like more information, or are interested in how your business can help. Email tax@fadv.com or contact your account manager.

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