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Tax credits have had limited effect on employment of people with disabilities

Feb. 3, 2003 -- More than 17 million working-age individuals have a self-reported disability that limits work. Their unemployment rate is also twice as high as for those without a work disability, according to recent Census data. In the Ticket to Work and Work Incentives Improvement Act of 1999, the Congress mandated that GAO study and report on existing tax incentives to encourage businesses to employ and accommodate workers with disabilities.

"A very small portion" of either corporate taxpayers (or individual taxpayers with a business affiliation) use the tax credits to encourage the hiring, retention, and accommodation of workers with disabilities, according to IRS data, says the GAO Report. "Taxpayers in the retail and service industries accounted for the largest share of the work opportunity credits reported in 1999, while providers of health care and social assistance services accounted for the largest share of the disabled access credits.

GAO Report 03-39, a report prepared for the Senate Finance Committee and the House Ways and Means Committte, was released in December. Titled "Incentives to Employ Workers with Disabilities Receive Limited Use and Have an Uncertain Impact," it found that for the 1999 tax year, businesses reported $254 million in tax credits from the Work opportunity Credit, set up to "encourage the hiring of economically disadvantaged workers, including those with disabilities."

The Disabled Access Credit, which was designed to help small businesses provide accommodations to customers and employees, allows a business to take up to $5,000 a year. Nearly $60 million were reported to the IRS in 1999 from use of this credit.

However, no figures were available for the Barrier Removal Deduction, said the GAO. This deduction is designed to make businesses and transportation vehicles more accessible and with a $15,000/year maximum allowance, since "usage information" on this was not available to the GAO on the IRS databases they used for their report.

The full report discusses the current usage of the tax incentives, looks at the incentivesŐ ability to encourage the hiring and retention of workers with disabilities, and offers options to enhance awareness and usage of the incentives.

"Information on the effectiveness of the incentives is limited and inconclusive. Only the work opportunity credit has been studied," says the GAO, "and these studies, along with those of a prior hiring credit, showed that some employers revised their recruitment, hiring, and training practices to increase the number of disadvantaged workers hired and retained, but that credits have also have been claimed by employers for workers they would have hired anyway. However, these studies have not focused on workers with disabilities and data limitations preclude conclusively determining their effectiveness for these workers.

"To increase the awareness and usage of the tax incentives, business representatives and experts on disability issues and tax incentives suggested (1) improving government outreach and education efforts; (2) increasing the maximum dollar amount of the incentives; and (3) expanding the types of workers, businesses, and accommodations that are eligible for the incentives. While these options may increase incentive usage, it is uncertain whether the potential loss in tax revenues would be offset by improvements in the employment of workers with disabilities."

Read the GAO report (in PDF format only)










Read the EEOC's Primer for Small Business on complying with the employment provisions of the Americans with Disabilities Act




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