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Employers in Hurricane-Affected Areas Can Receive a Federal Tax Credit for Retaining Staff

Compliance
Article
10/18/2017
  • The Disaster Tax Relief and Airport and Airway Extension Act includes a temporary provision giving a tax credit to employers in hurricane disaster zones for retaining their employees.
  • Legislation intended to assist those affected by Hurricanes Harvey, Irma, and Maria.
  • Eligible employers can take 40 percent of each employee’s wages, up to $6,000, as a credit for any worker continuously employed during the time periods the business’ principal place of employment was inoperable for each storm.

Retaining staff essential to storm recovery efforts

The Disaster Tax Relief and Airport and Airway Extension Act, signed into law on Sept. 29, 2017, includes a temporary provision that gives a tax credit to employers in hurricane disaster zones for retaining their employees. The credit is intended to encourage businesses to keep their workers, despite the disruption caused by Hurricanes Harvey, Irma, and Maria, which struck between Aug. 23 and Sept. 16, 2017.

The provision is part of the federal government’s disaster-related employment relief for hurricane victims. Hurricane Harvey struck the Houston area, Louisiana, and neighboring Gulf Coast regions Aug. 23-Sept. 2, 2017. Hurricane Irma lasted from Aug. 31 until Sept. 11, 2017, affecting the U.S. Virgin Islands and nine states. Hurricane Maria ravaged Puerto Rico on Sept. 20, 2017.

The retention credit is not a part of the Internal Revenue Code or the Work Opportunity Tax Credit (WOTC) program. Employers can get both the WOTC and the hurricane tax credit, but the same employee can’t be tied to both programs. Stated another way, your business cannot get credit on a worker for the WOTC and the Disaster Tax Relief and Airport and Airway Extension Act. But if employees have not been WOTC-eligible, they can now be “hurricane-eligible.”

Tax credits to boost companies’ efforts to reestablish themselves

The temporary provision allows employers in the disaster areas to take 40 percent of each employee’s wages, up to $6,000, as a credit for any worker continuously employed during the time periods for each storm beginning on the date on which the trade or business first became inoperable at the principal place of employment of the employee and ending on the date on which such trade or business has resumed significant operations at such principal place of employment. This includes wages “paid without regard to whether the employee performs no services, performs services at a different place of employment than such principal place of employment, or performs services at such principal place of employment before significant operations have resumed.”

Storm time periods:

  • Harvey – Aug. 23, 2017 to Jan. 1, 2018
  • Irma – Sept. 4, 2017 to Jan. 1, 2018
  • Maria – Sept. 16, 2017 to Jan. 1, 2018

The government intends the tax credits to help damaged businesses get up and running again.

Paychex can answer your questions

Paychex can help you identify, capture, substantiate, and defend tax credit opportunities like this one. If you’re unsure whether your business qualifies for the tax credit, and/or the amount of credit per employee, please contact us.

This website contains articles posted for informational and educational value. Paychex is not responsible for information contained within any of these materials. Any opinions expressed within materials are not necessarily the opinion of, or supported by, Paychex. The information in these materials should not be considered legal or accounting advice, and it should not substitute for legal, accounting, and other professional advice where the facts and circumstances warrant.
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