Capitol Insights: Favorable conditions emerging for WOTC action

Capitol Insights offers weekly analysis of federal policy developments that influence employer tax credits and compliance planning. Each update examines legislative activity that could shape the future of the Work Opportunity Tax Credit and related workforce incentives.

At a glance:

• Government funding negotiations and expiring healthcare subsidies are driving early January legislative priorities.

• Lawmakers are exploring bipartisan compromise options to avoid another shutdown.

• Tax provisions that expired at the end of 2025 are likely to be addressed in a broader tax title.

• Bipartisan support for extending and improving the Work Opportunity Tax Credit continues to build.

• The coming weeks may present a narrow but meaningful window for WOTC legislative action.

As Congress settles back into Washington after the holiday recess, circumstances are aligning that could create a viable legislative path for extending and improving the Work Opportunity Tax Credit (WOTC) in the coming weeks.

January’s legislative agenda is dominated by three major, interrelated issues: extending funding for most of the federal government beyond the January 31 deadline; resolving the lapse of enhanced healthcare premium subsidies that expired at the end of 2025; and assembling a tax title to address numerous tax provisions that also expired at the end of last year, along with several miscellaneous tax items. Collectively, these matters are creating a familiar environment in which bipartisan tax legislation has historically advanced.

Healthcare and tax issues converge

The government shutdown last fall stemmed from disagreements over extending the healthcare premium subsidies. Since then, Democrats have successfully forced a House vote on a subsidy extension through a discharge petition supported by a small group of Republicans, over the objections of Speaker Johnson. While Senate Majority Leader John Thune has opposed a full extension, Republican leaders are now actively exploring compromise solutions, potentially including adjustments such as a lower income cap for subsidy eligibility.

Historically, negotiations of this nature have often resulted in healthcare and tax provisions being packaged together within an omnibus government funding bill. That same legislative vehicle could now serve as a pathway for WOTC extension and improvement legislation. Importantly, any such package is expected to be bipartisan in nature, reflecting the shared interests of both parties in avoiding another shutdown while addressing expiring tax provisions.

Strong bipartisan support for WOTC

Momentum continues to build behind WOTC specifically. The program’s leading congressional champions, Senator Bill Cassidy (R‑Louisiana) and Representative Lloyd Smucker (R‑Pennsylvania) are working intensively to recruit additional cosponsors and build broader support for their legislation.

Encouraging signals are also coming from House Democratic leadership. House Ways and Means Ranking Member and former Chairman Richard Neal (D‑Massachusetts) stated earlier this week that there is bipartisan support for extending WOTC and reaffirmed his personal commitment to the program. His support significantly strengthens the case for including WOTC in any tax title that moves forward.

Timing and legislative mechanics

While January 31 remains the key deadline for government funding, final timing for a broader omnibus package could slip slightly beyond the end of the month. Although Congress has only been back in session for a few days, both the House and Senate are scheduled to be out of Washington for separate one‑week periods later this month, complicating negotiations and floor logistics.

Given these constraints, a short‑term, “clean” funding extension is possible to provide negotiators additional time. Nevertheless, with prospects improving for a compromise on healthcare subsidies, Senate Majority Leader Chuck Schumer has indicated that Democrats are unlikely to allow another government shutdown.

Outlook

Although plans are still being finalized and negotiations remain fluid, the overall environment is promising. There is a realistic possibility that a tax vehicle attached to a spending agreement in the coming weeks will include a tax title and that WOTC legislation will be part of that package.

With bipartisan support, committed congressional champions, and multiple legislative vehicles under discussion, the weeks ahead may represent the strongest opportunity yet this year to secure a meaningful extension and improvement of the Work Opportunity Tax Credit.

Employers with questions about how potential WOTC extensions or enhancements could affect their hiring strategy can contact Maximus for guidance as developments continue.