CRS NOTES TAX CHANGE ON HIRING OF, AND ACCESS FOR, HANDICAPPED.

                          December 27, 1990

This report examines available tax provisions designed to either help businesses in making their facilities available to the handicapped or which promote the hiring of handicapped persons. Current Federal tax law provides four Internal Revenue Code provisions of special significance to handicapped individuals in these areas. The first three provisions discussed in this report are available to the employer. These provisions include the targeted jobs tax credit, the deduction for architectural and transportation barrier removal, and the tax credit for public accommodations expenditures for disabled individuals as provided for under the recently passed Revenue Reconciliation Act of 1990. The final tax provision for employee business expenses is available to a handicapped employee.

TARGETED JOBS TAX CREDIT

A targeted jobs tax credit for handicapped individuals undergoing vocational training is available to employers. The credit is equal to 40 percent of the first $6,000 of wages paid during the first year of employment. As such, the maximum credit per employee is $2,400. The amount of the credit reduces the company's deduction for wages.

The Tax Reform Act of 1986 (Public Law 99-514) modified the credit and extended it for three additional years. An additional one year extension was provided by the Technical Corrections and Miscellaneous Revenue Act of 1988 (Public Law 100-647). The provision was again extended by the Revenue Reconciliation Act of 1990 (Public Law 101-508). Under this act the extension was made effective for those individuals who began work after September 30, 1990, and is presently scheduled to expire after December 31, 1991.

The targeted jobs tax credit, in conjunction with other credits, may not reduce the employer's tax liability by more than 90 percent. However, unused credits may be carried back three years for refunds of previous taxes paid or carried forward fifteen years to reduce future tax liability. ¹

ARCHITECTURAL AND TRANSPORTATION BARRIER REMOVAL DEDUCTION

The removal of architectural and transportation barriers is allowed to be treated as a deductible expense (rather than as an expenditure which is capitalized over the useful life of the asset). Expenditures must be made to make facilities or public transportation vehicles (either owned or leased by the taxpayer and used in the taxpayer's trade or business) more accessible to and usable by the elderly and handicapped.

The maximum deduction permitted a business taxpayer (either individual, corporation, or a controlled group of corporations) for qualifying expenditures was limited to $35,000. The maximum deduction has been reduced to $15,000 for tax years beginning after the date of enactment of the Revenue Reconciliation Act of 1990. This reduction in the maximum permitted deduction is a result of the newly created credit provision for public accommodations expenditures made for disabled individuals (see following provision).

TAX CREDIT FOR PUBLIC ACCOMMODATIONS EXPENDITURES FOR DISABLED INDIVIDUALS

A nonrefundable tax credit is provided for expenditures made by eligible small businesses to help comply with the requirements of the Americans With Disabilities Act of 1990. The credit is equal to 50 percent of the eligible expenditures made during the year. Eligible access expenditures must exceed $250 but expenditures greater than $10,250 are not eligible for the credit. Thus, a maximum tax credit is available of $5,000. This credit is included as a general business credit and subject to present law limits. This 'disabled access credit' may not be carried back to tax years which ended before the date of enactment of the Revenue Reconciliation Act of 1990.

The conferees reported that "eligible access expenditures generally include amounts paid or incurred (1) for the purpose of removing architectural, communication, physical, or transportation barriers which prevent a business from being accessible to, or usable by, individuals with disabilities; (2) to provide qualified interpreters or other effective methods of making aurally delivered materials available to individuals with hearing impairments; (3) to provide qualified readers, taped texts, and other effective methods of making visually delivered materials available to individuals with visual impairments; (4) to acquire or modify equipment or devices for individuals with disabilities; or (5) to provide other similar services, modifications, materials, or equipment. The expenditures must be reasonable and necessary to accomplish these purposes."

Additionally, small businesses are defined as those whose gross receipts did not exceed $1 million or had no more than 30 full-time employees. Full time employees are those that work at least 30 hours per week for 20 or more calendar-weeks during the tax year.

EMPLOYEE BUSINESS EXPENSES

Employee business expenses other than reimbursed expenses (sec. 62(2)(A)) are allowed only as itemized deductions and are subject to a floor of two percent of the taxpayer's adjusted gross income. However, the floor does not apply to impairment-related work expenses for handicapped employees. This provision was effective for taxable years beginning on or after January 1, 1987.