On March 18, 2010, President Obama signed into law the Hiring Incentives to Restore Employment (HIRE) Act. The bill had passed in House of Representatives on March 4, 2010 by a vote of 217 to 201, and had passed in the Senate on March 17, 2010 by a vote of 68 to 29.

One of the key features of the HIRE Act is the tax incentives provided to employers who hire and retain new employees. The Act exempts qualifying employers from paying the employer share of Social Security employment (payroll) taxes (approximately 6.2 percent of the employee’s wages, up to a maximum of $6,621) for wages paid in 2010 for any new employee hired after February 3, 2010 and before January 1, 2011.

In order to qualify, the employee must have previously been unemployed, and the hire cannot replace another employee of the employer. Additionally, as an incentive for employers to retain these new hires, the Act provides qualifying employers with a $1,000 income tax credit for every qualifying new employee that they continue to employ for 52 weeks.

A qualifying employer is any employer other than a federal, state, or local government entity or instrumentality.

In addition to its job-creation incentives, the HIRE Act contains several other interesting features, including the following:

  • The extension of the increased allowances for small-business expenditure write-offs, which will remain at a maximum of $250,000 for capital expenditures and purchases of new equipment incurred during 2010.
  • Enhanced reporting requirements for foreign financial institutions with U.S. accountholders. This provision is designed to eliminate the use of foreign financial institutions, foreign trusts, and foreign corporations as tax shelters.
  • Various highway and infrastructure projects and allocations, school construction, energy conservation, and renewable energy projects and programs.