Carryback
and Carryover of Unused Credits
If a WOTC
or W toW 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) 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:
- a business credit carryback to each of the 1 taxable
year(s) preceding the unused credit year, and
- 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).
2) Amount
Carried to Each Year
- 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.
- 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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MCM now to find out if you are eligible to receive valuable
tax credits!
