Capitol Insights: WOTC Extension and Proposed Enhancements

Capitol Insights is our weekly series covering the latest developments in Washington that affect the Work Opportunity Tax Credit (WOTC). Each update highlights key legislative activity and what it means for employers.

At a Glance:

• WOTC excluded from the One Big Beautiful Bill Act (P.L. 119-21), while other expiring provisions were made permanent

• Multiple bipartisan proposals seek to strengthen and expand WOTC eligibility

• Risks remain if WOTC lapses and is renewed retroactively, creating budget uncertainty

• Expiring Affordable Care Act premium tax credits may serve as the legislative vehicle for WOTC renewal

• Outlook: growing momentum for renewal, with potential enhancements on the table

Congress returned from recess this month with two major tax issues on the table: the looming expiration of the Work Opportunity Tax Credit (WOTC) and the future of enhanced premium healthcare tax credits.

WOTC Excluded from OBBBA

While the One Big Beautiful Bill Act (P.L. 119-21) made permanent other expiring business provisions like R&D expensing and bonus depreciation, WOTC was left out. Advocates and lawmakers are now focused on ensuring WOTC is included in any year-end tax package.

Proposals to Strengthen WOTC

Several lawmakers are pushing not just for renewal, but for enhancements that would expand the program’s reach and impact:

• Rep. Lloyd Smucker (R-PA): Improve and Enhance the WOTC Act – raises the credit from 40% to 50% of first-year wages, with an additional tier for employees working more than 400 hours.

• Rep. Don Beyer (D-VA): Military Spouse Hiring Act – extends eligibility to employers who hire military spouses.

• Sen. Jacky Rosen (D-NV) & Sen. Jerry Moran (R-KS): Hire Student Veterans Act – lowers the hour requirement from 400 to 120 hours, allowing student veterans using GI Bill benefits to qualify for WOTC.

• Rep. Steven Horsford (D-NV): introduced an amendment to extend WOTC eligibility to veterans affected by federal workforce reduction-in-force actions (though it failed in markup).

These proposals show bipartisan momentum not only for WOTC’s continuation, but also for expanding its benefits to new groups of workers.

Risks of a Retroactive Extension

Industry stakeholders warn that if WOTC lapses and is extended retroactively, employers could face budget uncertainty and a potential multibillion-dollar tax increase. For service providers, expiration would also disrupt certification processes and outreach efforts.

Healthcare Credits May Carry WOTC Forward

Enhanced premium tax credits under the Affordable Care Act are also set to expire at the end of 2025. Without action, the Congressional Budget Office projects 3.8 million people annually could lose coverage, with premiums jumping 75% on average.

• Because of the political stakes around healthcare, analysts expect these credits to be the foundation of a bipartisan extenders package.
• If that happens, WOTC could be included as part of the same bill.

Outlook

With multiple bipartisan proposals in play, WOTC advocates are optimistic that Congress won’t just extend the program but also modernize and expand it. Employers should follow these developments closely, as the enhancements could increase credit values and broaden the pool of eligible hires.

We’ll continue tracking negotiations and provide updates as legislative activity unfolds this fall.