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If a WOTC or W2W tax credit arises in a tax year
beginning after December 31, 1997, the credit may be carried back one
year and forward 20 years. Unused WOTC credits that can be taken in a
carryback or carryover year cannot be more than the tax liability
limitation for that year, less any WOTC tax credit that is:
- earned in the carryback or carryover year, or
- claimed in the carryover year from a year earlier
than the current year.
The WOTC, as a component of the general business credit, is subject to
the net tax liability limitation of Section 38 of the Internal Revenue
Code and the carryback and carryover rules of Section 39 as quoted
below:
IRS Code Section 39(a) as amended by the Tax Relief Act of 1997
(applies to credits arising in tax years beginning after Dec. 31, 1997)
- 1-Year Carryback and 20-Year Carryforward
If the sum of the business credit carryforwards to the taxable year
plus the amount of the current year business credit for the taxable
year exceeds the amount of the limitation imposed by subsection (c) of
section 38 for such taxable year (hereinafter in this section referred
to as the "unused credit year"), such excess (to the extent
attributable to the amount of the current year business credit) shall
be:
1. a business credit carryback to
each of the 1 taxable year(s) preceding the unused credit year, and
2. a business credit carryforward
to each of the 20 taxable years following the unused credit year, and,
subject to the limitations imposed by subsections (b) and 9c), shall be
taken into account by the provisions of section 38(a) in the manner
provided in section 39(a).
- Amount Carried to Each Year
1. Entire Amount Carried to First
Year. The entire amount of the unused credit year be carried to the
earliest of the 22 taxable years to which (by reference to paragraph
(1) such credit may be carried.
2. Amount Carried To Other 21
Years. The amount of the unused credit shall be carried to each of the
other 21 years to the extent that the credit may not be taken into
account under section 38 (a) for a prior taxable year because of the
limitations of subsections (b) and (c).
Source: ETA Handbook No. 408 Second Ed, Nov. 1998
U.S. Dept. of Labor Employment & Training
Administration
U.S. Employment Service
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