President Obama signed the 2010 Hiring Incentives to Restore Employment (“HIRE”) Act into law on March 18, 2010. The new law will provide incentives for hiring and retaining workers, along with a one year extension of IRC Section 179 expensing election and changes to Build America Bonds. The law also includes new compliance rules related to foreign bank accounts, as a follow up to the increased scrutiny they received over the last year.
Two provisions that focus on helping employers create jobs are the payroll tax exemption and the retained worker business tax credit.
Payroll Tax Exemption
A qualified employer’s share of Social Security tax, 6.2 percent of wages, will be waived for wages paid to qualified hires for any 2010 period starting after March 18 and extending through December 31, 2010.
Retained Worker Business Credit
An employer, who qualifies for the payroll tax exemption and retains the employee for at least 52 consecutive weeks, will also receive a credit for the lesser of $1,000 or 6.2 percent of the employee’s wages paid during the 52 week period.
Qualified hires include individuals who begin work after February 3, 2010 and before January 1, 2011; who have not been employed for more than 40 hours during the 60 day period prior to the date the employee begins working; and who is a new hire and not a replacement for another employee “unless such other employee was separated from employment voluntarily or for cause.”
IRC 179 Expense
The higher expensing election, which has been very beneficial to closely held businesses, and expired at the end of 2009, has now been extended to include 2010. As a result, the maximum expense election will remain at $250,000 and the threshold for qualified purchases at $800,000, for one more year. The Act also extends the expensing election to include off the shelf software.
Tax Credit Bonds
Congress has now enhanced the Build America Bond program established under the American Recovery and Reinvestment Act of 2009. The Act provides for an election for issuers of qualified tax credit bonds to receive a direct payment from the federal government equal to the amount of the federal tax credit otherwise provided for these bonds. For purposes of this provision, tax credit bonds include new renewable energy bonds, qualified energy conservation bonds, qualified zone academy bonds, and qualified school construction bonds.
Foreign Account Tax Compliance
The Bank Secrecy Act has long required taxpayers to file information returns if they have a financial interest in or signature authority over an account in a foreign country. The Act has increased the reporting and disclosure requirements imposed on taxpayers with any interest in “specified foreign financial assets” if the aggregate value of all such assets exceeds $50,000.
For purposes of the additional reporting and disclosure requirements, a specified foreign financial asset is:
- any financial account maintained by a foreign financial institution;
- any of the following assets which are not held in an account maintained by a financial institution:
- any stock or security issued by a person other than a U.S. person;
- any financial instrument or contract held for investment that has an issuer or counterparty which is other than a U.S. person; and
- any interest in a foreign entity.
The Act also requires withholding agents to withhold 30 percent of any withholdable payment to a foreign financial institution unless it agrees to comply with verification and due diligence procedures with respect to accounts held by US persons or US owned foreign entities.