Senate Approves HIRE Act
Friday, March 19, 2010
The United States Senate has approved legislation providing new
incentives for companies to hire unemployed workers and extending a
measure allowing taxpayers to write off up to USD250,000 in certain
The Hiring Incentives to Restore Employment (HIRE) Act, (H.R. 2847)
offers an exemption from Social Security payroll taxes for every worker
hired after February 3, 2010, and before January 1, 2011, who has been
unemployed for at least 60 days. The maximum value of the credit would
be equal to 6.2% of wages up to USD106,800, which is the Federal
Insurance Contributions Act wage cap. There would
also be an additional USD1,000 income tax credit for every new employee
retained for 52 weeks, to be taken on the employer’s 2011 income tax
The bill also extends 2008 and 2009 Section 179 expensing thresholds
so that taxpayers may elect to write‐off up to USD250,000 of certain
capital expenditures - subject to a phase‐out once expenditures exceed
USD800,000 – in 2010 in lieu of depreciating those costs over time.
Another provision allows issuers
of tax credit bonds for school construction and energy projects to
elect to convert these bonds into a Build America Bond. This means that the tax credit bond can be converted into a bond with a direct
subsidy to the issuer of the bond rather than the holder of the bond.
The Senate legislation also decreased the subsidy provided in the
conversion to 45% and 65% for small issuers.
The cost of these tax breaks is offset by a comprehensive set of
measures to reduce offshore non-compliance by giving the Internal Revenue Service (IRS) new
administrative tools to "detect, deter and discourage offshore tax
abuses." The proposals include: 30% withholding on US source payments
to foreign financial institutions, foreign trusts, and foreign
corporations that do not agree to disclose their US account holders and
owners to the IRS; requiring taxpayers to disclose their foreign
accounts on their US tax returns; increasing the statute of limitations
to six years for failure to report certain offshore transactions and
income; clarifying when a foreign trust is considered to have a US
beneficiary; and treating substitute dividend and dividend equivalent
payments to foreign persons as dividends for purposes of US withholding.
A second offset provision delays until 2020 the introduction of a
measure providing taxpayers with an election to take advantage of a
rule for allocating interest expense between United States sources and
foreign sources for purposes of determining a taxpayer’s foreign tax
credit limitation. Originally enacted in 2004, this election was not available to taxpayers until taxable years
beginning after 2008. Last year, the phase‐in of this rule was delayed
for two years, for taxable years beginning after 2010. In November
2009, the phase‐in of this rule was delayed for an additional seven
years, for taxable years beginning after 2017. The HIRE Act postpones
this for another three years.
The Senate passed the
HIRE Act as modified with a bipartisan vote of 68 to 29 on March 17,
and the bill will now go to the President for his signature.
“The bill we passed today is a targeted approach designed to get
Americans back to work right away by creating jobs to rebuild our
country’s infrastructure and providing tax cuts for businesses to hire
new workers," commented Senate Finance Committee Chairman Max Baucus
following the vote.
"Passing the HIRE Act represents a critical victory in our
job‐creation agenda and we will continue working to get Americans back
to work this year,” Baucus concluded.