On Thursday, November 2, House Republicans released a copy of the Tax Cuts and Jobs Act, which would reform the U.S. tax code.
Several provisions in the draft legislation would impact training-related business and individual tax credits including the proposed repeals of the Work Opportunity Tax Credit (WOTC) business tax credit and section 127, the exclusion of employer-provided education assistance from individual income. The bill also proposes the elimination of the Life Long Learning credit, collapsing this provision into an updated version of the American Opportunity Tax Credit. The proposed repeals and consolidation of these provisions would be counterproductive for businesses looking for skilled workers and for workers in need of training and jobs.
- Work Opportunity Tax Credit: Currently, businesses can claim WOTC for hiring individuals who are members of certain target populations. The credit is claimed largely for hires who are Temporary Assistance for Needy Families (TANF) and Supplemental Nutrition Assistance Program (SNAP) eligible, two populations for whom training is crucial to improving employment outcomes. The House bill would repeal WOTC, eliminating the credit businesses attempt to claim for more than five million workers each year. NSC has a forthcoming brief that includes policy recommendations to expand WOTC to better serve the individuals for whom it is claimed and better address business needs.
- Section 127: The tax bill also proposes the elimination of a provision that allows individuals to receive up to $5,250 in tuition reimbursement from their employer without this amount counting towards their taxable income for the year. Particularly for small- and medium-sized businesses, this tuition reimbursement credit serves as a recruitment tool for new workers, a way to retain and upskill existing talent and a foundation for partnerships with local community and technical colleges who provide workers’ classroom education.
- The Lifetime Learning (LL) credit: The LL credit, an individual tax credit for up to $2,000 of tuition expenses, would also be eliminated under the House proposal. The bill proposes eliminating the LL credit and adding a fifth year of eligibility to the American Opportunity Tax Credit (AOTC). Under current law, many nontraditional students – those in less than ½ time programs, non-degree programs, and qualifying job training programs – qualify for the LL credit and do not qualify for either current or the proposed expanded AOTC. Cutting the program would mean that workers who attend community and technical schools to better meet business’ skill needs would no longer have access to the tax credits that can often make this kind of upskilling possible.
The House bill and the forthcoming Senate version, expected in the next week, come after both chambers agreed to a joint budget resolution that included reconciliation instructions enabling Congress to pass tax reform with only 51 votes in the Senate, negating the impact of a Senate filibuster. Members of Congressional leadership have set a goal to pass their tax reform legislation by the end of the calendar year, but have until the end of Fiscal Year (FY) 2018 – until September 30, 2018 – to do so under the current reconciliation instructions.
National Skills Coalition will continue to work with state and local partners to educate policy makers on the impact tax reform would have on workers and small- and medium-sized businesses and to oppose cuts to vital workforce education and training programs.
A number of NSC national partners have released further analysis of important components of the tax proposal, including Young Invincibles, Center on Budget Policy Priorities, and CLASP.