Pub L 111-147: HIRE Act and FATCA Provisions

In 2010, the United States Congress passed Public Law 111-147, known as the Hiring Incentives to Restore Employment (HIRE) Act. This law contained two significant and largely unrelated sets of provisions. The first was a response to economic conditions, creating temporary tax incentives for employers to encourage new hiring and stimulate domestic job growth.

The second set of provisions within the HIRE Act established a framework aimed at improving international tax compliance. This component was designed to address the use of foreign accounts by U.S. persons to conceal assets and evade tax obligations. While the hiring incentives were temporary and have since expired, the tax compliance provisions remain a part of U.S. law.

Employer Hiring Incentives

The HIRE Act introduced two primary incentives for employers. The first was a payroll tax exemption, which relieved employers from paying their 6.2% share of the Social Security tax on wages paid to qualifying new employees. This exemption was applicable for wages paid between March 19, 2010, and December 31, 2010.

To be eligible for this payroll tax relief, the new hire had to be a “qualified employee.” This meant the individual had to certify they had been unemployed for the 60 days immediately preceding their hire date or had worked no more than 40 hours for another employer during that period. The new hire could not be related to the employer or hired to replace another employee unless that prior employee left voluntarily or for cause.

A separate incentive was a general business tax credit, often referred to as the retention credit. This was a one-time tax credit for each qualified employee retained on the payroll for at least 52 consecutive weeks. The employer could claim a credit of up to $1,000 for each of these retained workers, provided the wages paid during the second 26-week period of employment were at least 80% of the wages paid during the first 26-week period.

Foreign Account Tax Compliance Act

The other major part of Public Law 111-147 is the Foreign Account Tax Compliance Act, or FATCA. This section of the law focuses on curbing offshore tax evasion by establishing information reporting and withholding rules for U.S. taxpayers with foreign assets and the institutions that hold them.

For individuals, FATCA requires U.S. citizens and residents to report their foreign financial assets to the Internal Revenue Service (IRS) if the value exceeds certain thresholds. The primary tool for this is Form 8938, Statement of Specified Foreign Financial Assets, which is filed with the individual’s annual income tax return. Reporting thresholds vary based on filing status and residency, starting at $50,000 for a single filer living in the United States.

FATCA also imposes requirements on Foreign Financial Institutions (FFIs), such as banks and brokerages. These institutions must enter into agreements with the IRS to identify accounts held by U.S. taxpayers and report information about those accounts to the agency. FFIs that fail to comply face a 30% withholding tax on certain payments they receive from U.S. sources, creating an incentive for global cooperation.

Claiming the HIRE Act Incentives

To claim the hiring incentives, employers were required to collect and maintain specific documentation. The primary document was a signed statement from the new hire, using Form W-11, HIRE Act Employee Affidavit, to certify their eligibility. This form confirmed the employee met the 60-day prior unemployment requirement and was kept with the employer’s payroll records.

The payroll tax exemption was claimed on a quarterly basis using Form 941, Employer’s QUARTERLY Federal Tax Return, which reduced the amount of payroll taxes the employer had to deposit for that quarter. The retention credit was claimed annually on the employer’s income tax return for each qualified employee who completed 52 consecutive weeks of employment.