Renewal Community Wage Credits

Is this just for new hires?
No, the business can take the credit for existing employees as well.

How do I know if an employee lives in, and the business is located in, the Renewal Community?
Check the map and street list.

What kind of paperwork is involved here?
Not much.  All you have to do is to get signed verified statements from employees about where they live and their commitment to tell you if they move.  We have produced a sample form that you can look at and/or use.  Then, you use IRS Form 8844 to report the credit as part of your regular tax filing.

How do I calculate the credit?
You take 15% of wages paid to qualifying employees up to $10,000 in wages per employee per year - so the credit is capped at $1,500 per year per employee.  (You then need to reduce the business deduction for salaries and wages by the amount of the credit.)

• Example 1:  ABC Widget Co. has 4 employees who live and work in the RC and pays each of them $12,000.  ABC's RC wage credit would be:
  4 x $10,000 x .15 = $6,000
• Example 2:  ACME Cube Co. has 6 employees who live and work in the RC.  She pays three of them $15,000 and three of $8,000.  ACME's RC wage credit would be:
((3 x $10,000) + (3 x $8,000)) x .15 = $8,100

What about part-time employees?
Both part-time and full-time employees are eligible, as long as they've worked for you for at least 90 days.

Is there any limit on how many employees for whom I can take the credit?
No.

Can I use the credit for family members who work for me?
No.

What about myself as the business owner?
You can't use the credit for anyone who owns 5% or more of the business.

What about employees like construction workers, who might work sometimes in the Renewal Community and sometimes elsewhere?
You get the credit for the portion of time they're working in the Renewal Community.  You can use either a pay-period or a calendar-year method to prorate the credit.  For example, if a construction worker is paid weekly, you can claim the credit for weekly pay periods during which he/she works substantially all of his/her time in the Renewal Community.  There's no definition in the Renewal Community regulations for "substantially all," but it's defined as 85 per cent for other tax incentives.

What if the credit is more than my tax bill?
You can carry the credit forward to future years.

There are additional wage credits which you may be able to use, and which don't depend on where your business is located:

• The Work Opportunity Tax Credit (WOTC) is available for, among other workers, newly hired youth age 18-24 (as well as summer youth age 16 and 17) who live in the Renewal Community.  This credit may be as much as $2,400.  It is only available for the first year of employment.  You use IRS Form 5884 to report the credit when you prepare your federal tax filing.
• The Welfare-to-Work (W-to-W) Tax Credit applies to newly hired employees who are long-term family assistance recipients.  This credit applies to the first two years of employment and may be as much as $3500 in the first year and $5000 in the second.  It doesn't depend on where the employee lives.  You use IRS Form 8861 to report the credit when you prepare your federal tax filing.

Both of these credits require that you have prospective employees fill out IRS Form 8850 before you make a job offer.  You then forward those forms to the Louisiana Department of Labor, which will certify the worker as eligible for the credit.

These credits can be "stacked" on top of the Renewal Community wage credit, provided you've paid sufficient wages.  

Example:  Dave has a newly hired (and properly certified) employee who's 23 years old and lives in the Renewal Community, and who earns at least $16,000 this year.  Dave has wage credits of:

• 1 x $10,000 x .15 = $1,500 for the Renewal Community wage credit, and
• 1 x $6,000 x .40 = $2,400 for the Work Opportunity Tax Credit

for a total $3,900 credit against his federal taxes.