Tax Incentives

The Job Accommodation Network (JAN) is an international toll-free consulting service that provides information about job accommodations and the Americans with Disabilities Act (ADA) . The JAN staff compiled this list of resources to assist employers in the search for tax breaks and deductions.

Disabled Access Credit (DAC)

P.L. 101-508, The Omnibus Budget Reconciliation Act of 1990, (OBRA '90) , contains a tax incentive to encourage small businesses to comply with the ADA. The DAC is found in Section 11611 of OBRA '90, which establishes Section 44 of the Internal Revenue Code of 1986. DAC is available to an "eligible small business" and is equal to 50% of the "eligible access expenditures" which do exceed $250 but do not exceed $10,250, for a maximum credit of $5,000 a year.

DAC became effective on the date of enactment of the law, November 5, 1990, and applies to expenditures paid or incurred after that date. It is included as part of the General Business Credit and is subject to the rules of current law which limit the amount of General Business Credit that can be used for any taxable year. DAC can be carried forward up to 15 years and back for three years but not back to a taxable year prior to the date of enactment.

An "eligible small business" is "any person" whose gross receipts did not exceed $1,000,000 for the preceding taxable year, or who employed not more that 30 full-time employees during the preceding year. A full-time employee is defined as one who is employed at least 30 hours per week for 20 or more calendar weeks in the taxable year. In general, all members of a controlled group of corporations are treated as one person for purposes of credit eligibility, and the dollar limitation among the members of any group will be apportioned by regulation. In the case of a partnership, the expenditure limitation requirements will apply to the partnership and to each partner. Similar rules will apply to S corporations and their shareholders. "Eligible access expenditures" are defined as "amounts paid or incurred by an eligible small business for the purpose of enabling small businesses to comply with applicable requirements" of ADA.

Included are expenditures for:

1. Removing architectural, communication, physical or transportation barriers which prevent a business from being accessible to, or usable by, individuals with disabilities;

2. Providing qualified interpreters or other effective methods of making aurally delivered materials available to individuals with hearing impairments;

3. Providing qualified readers, taped texts, and other effective methods of making visually delivered materials available to individuals with visual impairments;

4. Acquiring or modifying equipment or devices for individuals with disabilities; and

5. Providing other similar services, modifications, materials or equipment.

All expenditures must be "reasonable" and must meet the standards promulgated by the Internal Revenue Service (IRS) with the concurrence of the Architectural and Transportation Barriers Compliance Board. Expenses incurred for new construction are not eligible. For the purposes of DAC, disability is defined exactly as in the Americans with Disabilities Act of 1990.

An eligible small business under Section 44 may deduct the difference between the disabled access credit claimed and the disabled access expenditures incurred, up to $15,000, under Section 190 provided such expenditures are eligible for the Section 190 deduction.

For additional information on the Disabled Access Credit, contact a local Internal Revenue Service Office: http://www.irs.gov

Architectural and Transportation Barrier Removal Deduction

In 1986, Congress amended Section 190 of the Tax Reform Act to extend permanently the annual $35,000 tax deduction for the removal of architectural and transportation barriers. P.L. 101-508, the Omnibus Budget Reconciliation Act of 1990, amended Section 190 and reduced the deduction from $35,000 to $15,000, effective for tax years after 1990. Under Section 190, businesses may choose to deduct up to $15,000 for making a facility or public transportation vehicle, owned or leased for use in the business, more accessible to and usable by individuals with disabilities. A facility is all or any part of a building, structure, equipment, road, walk, parking lot, or similar property. A public transportation vehicle is a vehicle such as a bus or railroad car, that provides transportation service to the public, or to customers. The deduction may not be used for expenses incurred for new construction, for a complete renovation of a facility or public transportation vehicle, or for the normal replacement of depreciable property. In the case of a partnership, the $15,000 limit applies to the partnership and to each partner. Amounts in excess of the $15,000 maximum annual deduction can be added to the basis of the property subject to depreciation. In order for expenses to be deductible, accessibility standards established under the Section 190 Regulations must be met.

For additional information on Section 190, contact a local Internal Revenue Service Office: http://www.irs.gov

Rehabilitation Act of 1973

The Vocational Rehabilitation (VR) Program has a 73-year history of assisting people with disabilities to prepare for and enter the competitive work force.

This is a Federal-State program and the Rehabilitation Act of 1973, as amended, authorizes annual funding to state VR agencies in order that they can achieve the goals of the program.

An On-The-Job Training Program can be set up by VR with an employer for an individual client of VR. VR can share in the payment of the wages for the employee for a limited time on a negotiated schedule. The position must be permanent full time, and pay above minimum wage.

The VR staff can act as a recruiter and consultant for employers. They can conduct job analyses, and provide rehabilitation engineering services for architectural barrier removal and worksite modifications.

Also, they can conduct awareness training for a company's management and supervisory personnel.

For more information, contact your local state vocational rehabilitation agency.

Work Opportunity Tax Credit (WOTC) Program

The WOTC was recently extended through December 31, 2003, as a part of the "Job Creation and Worker Assistance Act of 2002." The WOTC offers employers credit for hiring individuals from eight target groups including vocational rehabilitation recipients and SSI recipients. According to the guidelines an employer may receive a credit equal to 40% of the first $6,000, or up to $2,400, in wages paid during the first 12 months for each new hire. WOTC applies to individuals who began work for the employer after December 31, 2001. Employers must retain the employees for at least 180 days or 400 hours. Employers must supply a written request for certification and a "pre-screening" notice (IRS form 8850) . This form on the individual is completed and signed "on or before" the individual is offered employment. The request for certification of eligibility for WOTC and pre-scanning notice should be submitted to the Local Employment Service Office, not later than the 21st day after the individual begins work for the employer.

To qualify for WOTC the person must also have been referred to the employer upon, or at any time after, completing of while receiving rehabilitative services, included on an individualized written rehabilitation plan for the Division of Rehabilitative Services or a vocational rehabilitation program for veterans, carried out under Chapter 31 or Title 38, US Code.

Individuals with disabilities can contact their local state-Federal Vocational Rehabilitation Office to receive a voucher. This is presented to the employer who completes a small portion, and then mails it to the nearest local Employment Service Office. That agency will send back to the employer a certificate which validates the tax credit, which the employer uses when filing Federal tax forms.

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