HR Outsourcer Can’t Get Tax Credits for Workers at Client Sites

A human resources outsourcing company wasn’t able to claim the Work Opportunity Tax Credit or Empowerment Zone Employment Credit for workers employed by its clients just because it deems itself their statutory employer, the US Tax Court held in an opinion Monday.

IRC Sections 51, 1396, and 1397 established the WOTC and EZEC and govern employer tax credits designed to incentivize hiring specific workers, such as veterans, long-term unemployment recipients, and individuals living in economically distressed areas.

But Congress intended those sections to provide credits only for common-law employers, a relationship determined according to certain factors such as degree of ...