Work opportunity tax credit aims to boost hiring

Summary#

HB 2863 would amend Pennsylvania’s Tax Reform Code of 1971 to create a work opportunity tax credit. Its stated goal is to encourage employers to hire people in specified groups; the bill does not guarantee that hiring will increase.

  • Eligible taxpayers could claim a credit against certain Pennsylvania tax liabilities for wages paid to people in 10 targeted groups: TANF recipients, qualified veterans, people convicted of felonies, residents of specified zones or rural counties, vocational rehabilitation referrals, qualifying summer youth employees, SNAP recipients, SSI recipients, long-term TANF recipients, and long-term unemployed people.
  • The Department of Labor and Industry would certify whether a person belongs to a targeted group. Employers could rely on a certification or submit a prescreening notice and request certification within 28 days after the person starts work.
  • The bill says the credit is “up to $2,400,” but does not clearly explain how that amount is calculated or who it applies to. It also refers to a 40% rate and a 25% rate for some employees without setting out a clear general calculation.
  • Wages would not qualify for a person who previously worked for that employer, certain people related to or dependent on the taxpayer, or a person who works fewer than 120 hours. For 120 to 399 hours, the bill substitutes 25% for 40%.
  • Employers receiving a credit would have to report hiring and employment counts to the department each year. The department would have to notify employers about the credit and report credit and participation data to the General Assembly.

The bill is introduced and referred to the House Finance Committee; it is not law, and passage is uncertain.

What it means for you#

  • Employers and taxpayers: If you are a taxpayer subject to tax under Article III, IV, or VI and hire someone who meets the bill’s tests, you may be able to claim a credit against that tax liability. The credit would not apply to tax withheld from an employee’s pay. The bill also excludes wages for some work performed during a strike or lockout and for work where the employer receives state-funded on-the-job training payments.
  • Workers in the listed groups: The bill does not give you a direct payment or a right to a job. It would create an incentive for eligible employers to hire you if you meet the certification rules.
  • Young people and residents of designated areas: The bill includes summer employees aged 16 or 17 who work between May 1 and September 15 and live in a listed zone or rural renewal county. It also includes residents aged 18 to 39 in those areas, subject to separate wage rules.
  • Employers receiving the credit: You would have to report how many targeted individuals you hired and how many were working for you over specified periods. The bill does not set out a detailed application, appeal, or review process.

Money#

The bill authorizes a tax credit but provides no estimate of its cost to Pennsylvania.

  • The stated amount is up to $2,400, but the calculation and whether that limit applies per worker, employer, or another basis are unclear.
  • The credit could reduce tax revenue. The bill gives no estimate of how many employers or workers might qualify, or of the revenue loss.
  • The Department of Labor and Industry would have certification, notification, and reporting duties. The bill gives no staffing or administrative cost estimate and makes no specific appropriation.

What is unclear#

  • The bill does not give a clear formula for calculating the credit. Its reference to “up to $2,400 for the 12 months after” the provision takes effect also leaves unclear whether the credit would continue after that period.
  • The text refers to 40% and 25% rates, but does not clearly explain how those rates produce the stated credit amount.
  • The bill does not specify how certification requests are handled beyond the prescreening deadline, or set decision timelines, appeals, or rules for distributing the credit if claims exceed available amounts.
  • The bill uses terms such as “rural renewal county” and “substantial handicap to employment”; the supplied text does not explain how the department would apply them in practice.
  • The parent Tax Reform Code was not supplied, so the existing tax rules, credits, and any overlap with this proposal could not be verified.

Case for#

  • The bill appears intended to encourage hiring among groups it identifies as facing employment barriers, including people receiving public assistance, veterans, people with disabilities, people with felony convictions, and people who have been unemployed long-term.
  • A tax credit could lower the employer’s cost of hiring an eligible worker, while certification rules and minimum work-hour requirements limit which wages count.
  • The required reports could give lawmakers information on participation, credit claims, and where participating taxpayers are located.

Case against#

  • The credit’s calculation is unclear, making it hard for employers and the public to know the value of the incentive or its likely cost.
  • The bill creates certification and reporting duties but does not set out key process details, such as decision timelines and appeals.
  • It is unclear whether the department would have enough staff and resources to certify applicants and carry out its reporting duties.
  • The reports count hires and workers but do not require information about job quality, pay, or whether workers remain employed beyond the specified periods.