New Federal Law Gives Employers Monetary Incentives To Hire Unemployed Or Disabled Veterans

On November 21, 2011, President Obama signed into law the federal 3% Withholding Repeal and Job Creation Act, P.L. 112-56.  Title II of the 3% Withholding Repeal and Job Creation Act is known as the Veterans Opportunity to Work to Hire Heroes Act of 2011 (the “VOW to Hire Heroes Act”).  The VOW to Hire Heroes Act, which is aimed at lowering the high rate of unemployment among war veterans, gives employers financial incentives to hire out-of-work or disabled veterans.

The final text of the 3% Withholding Repeal and Job Creation Act does not yet appear to be available online.  However, the U.S. House of Representatives’ version of the bill, H.R. 674, is linked here.

The VOW to Hire Heroes Act establishes new tax credits for businesses which hire veterans who are out of work and/or who suffer from service-connected disabilities, as follows:

Short-term unemployed: Section 261(b) of the VOW to Hire Heroes Act gives an employer a tax credit of 40% of the first $6,000 of wages (up to a $2,400 credit) paid to any veteran in the first year of the veteran’s employment, if during the one-year period immediately preceding the veteran’s hiring date, the veteran endured aggregate periods of unemployment of four or more weeks but less than six months.  Section 261(b) of the VOW to Hire Heroes Act amends section 51(d)(3)(A) of the Internal Revenue Code of 1986 (the “Internal Revenue Code” or the “IRC”), 26 U.S.C. § 51(d)(3)(A).

Long-term unemployed: Sections 261(a) and 261(b) of the VOW to Hire Heroes Act confers on an employer a tax credit of 40% of the first $14,000 of first-year wages (up to a $5,600 credit) paid to any veteran, if during the one-year period immediately preceding the veteran’s hiring date, the veteran had aggregate periods of unemployment of six months or more.  Section 261(a) of the VOW to Hire Heroes Act amends section 51(b)(3) of the Internal Revenue Code, 26 U.S.C. § 51(b)(3).

Recent veterans with service-connected disabilities: Section 261(a) of the VOW to Hire Heroes Act maintains, for employers, the existing tax credit of 40% of the first $12,000 of first-year wages (up to a $4,800 credit) paid to any veteran who (i) is entitled to compensation for a service-related disability and (ii) has a hiring date which is not more than one year after having been discharged or released from active duty in the U.S. military.  This existing tax credit is set forth in section 51(b)(3) of the IRC.

Long-term unemployed veterans with service-connected disabilities: Section 261(a) of the VOW to Hire Heroes Act gives an employer a tax credit of 40% of the first $24,000 of wages (up to a $9,600 credit) paid to any veteran who (i) is entitled to compensation for a service-related disability and (ii) during the one-year period immediately preceding the veteran’s hiring date, endured aggregate periods of unemployment of six months or more.

A cynic might observe that a business can enjoy the full benefit of the VOW to Hire Heroes Act by hiring a veteran, continuing to employ that veteran merely for the number of weeks or months necessary to exhaust that Act’s applicable tax credit, and then firing the veteran.

If your company needs assistance or guidance on a labor or employment law issue and your company is located in the borough of Manhattan area, call Attorney David S. Rich at (347) 941-0760.