Capitol Insights: Breaking down the new WOTC expansion bill
Capitol Insights provides weekly updates on federal activity that may affect employer tax credits, workforce planning, and hiring incentives. Each edition focuses on developments that matter for organizational strategy and long-term decision making.
Latest update
Our latest Insight focused on the introduction of the Improve and Enhance the Work Opportunity Credit Act, a proposal that would update WOTC eligibility rules and expand support for several target groups. It also highlighted the growing bipartisan interest surrounding the extension and renewal of the Work Opportunity Tax Credit. Read Week 7 here .
At a glance:
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Bipartisan bill proposes a five-year Work Opportunity Tax Credit extension
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Wage calculations would shift to a two-tier structure
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WOTC qualified wages would be indexed to inflation
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The SNAP age limit would be removed
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A new target group would be created for military spouses
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Most updates would apply to individuals hired after December 31, 2025
Understanding the proposal
Lawmakers introduced the Improve and Enhance the Work Opportunity Credit Act to extend the Work Opportunity Tax Credit through 2030 and update several parts of how the credit is calculated. The Senate version is S. 3265 and the House version is H.R. 6321. Senate cosponsors include Roger Marshall, Peter Welch, and Catherine Cortez Masto on the Finance Committee, and John Boozman, Tim Kaine, Jerry Moran, and Jim Justice outside the committee. The full House cosponsor list has not yet been published.
Although the bill is still early in the legislative process, the proposed updates are important for employers preparing workforce and budget plans for 2025 and future years.
Key differences
Below is a summary of how the proposal compares to current WOTC rules.
| Topic | Current WOTC | Proposed Changes |
|
Program sunset |
Scheduled to end Dec 31, 2025 |
Extends for five years through Dec 31, 2030 |
|
Wage base |
Up to 40% of the first $6,000 in qualified first-year wages |
50% of the first $6,000 in qualified first-year wages, plus 50% of an additional $6,000 for employees who complete at least 400 hours. Wage limits for veterans, summer youth employees, and long-term family assistance recipients would also be updated |
|
Inflation indexing |
Not indexed |
Indexed to 2024 inflation |
|
SNAP age limit |
Age cap applies |
Age limit removed |
|
Military spouses |
Not a stand-alone category |
New WOTC target group |
|
Outreach initiative |
No formal initiative |
Federal agencies are authorized to promote WOTC in key industries |
|
Effective dates |
Current rules in place |
Most updates apply to hires after Dec 31, 2025 |
The table provides employers with a simple view of how eligibility, credit value, and administrative considerations could shift if the bill moves forward.
What this means for employers
If enacted, these changes would affect how organizations evaluate and plan for WOTC-related savings.
For employers already using the Work Opportunity Tax Credit, the proposed wage base update may increase the potential credit for eligible hires, especially for roles with higher wage levels or longer training periods. Indexing wages to inflation would help the credit keep pace with rising compensation, reducing the gap between actual labor costs and the credit’s capped amount.
Removing the SNAP age limit and creating a stand-alone category for military spouses would broaden WOTC eligibility in ways that may strengthen hiring pipelines. Many employers already engage these groups, and expanded eligibility could make WOTC calculations more straightforward.
For employers not currently leveraging the WOTC tax credit, the proposed updates could make participation more attractive. A longer extension through 2030 improves predictability, and the expanded categories may open new paths to eligibility. These conditions support stronger planning around tax credit forecasting and workforce investment.
A more strategic look at legislative activity
Rather than focusing narrowly on procedural steps, it is helpful to view this proposal through the lens of congressional timing and employer impact. WOTC has historically received bipartisan support, and the structure of this bill indicates an effort to stabilize the credit for several years. This aligns with broader federal discussions on workforce participation and hiring incentives.
While there is no formal movement scheduled yet, multi-year extensions often emerge within larger tax packages. The approach taken here suggests that lawmakers are positioning WOTC for long-term renewal once broader negotiations begin.
Why these updates matter
The proposed changes reinforce the role of the Work Opportunity Tax Credit in supporting employers that hire from underrepresented or overlooked populations. Updated wage thresholds reflect current labor costs and reduce the risk that wages outpace the credit’s value. Inflation indexing helps maintain consistency over time, and expanded eligibility rules may support industries experiencing shortages.
Together, these factors strengthen WOTC as a tool for workforce planning rather than a year-to-year incentive.
If you have questions about how the Improve and Enhance the Work Opportunity Credit Act may influence your hiring strategy, eligibility forecasting, or credit value, our WOTC specialists can help you review potential impacts and plan ahead.
