On March 4, the House passed 217-201 legislation that includes $17.6 billion in tax cuts aimed at encouraging businesses to hire new employees. Six Republicans voted in favor of the bill while 35 Democrats—mostly Blue Dog Coalition and Congressional Black Caucus members—voted against the measure.

Several changes from the original Senate version were made to H.R. 2847, the Hiring Incentives to Restore Employment (HIRE) Act, including some technical corrections designed to improve the administration of the hiring tax incentives while ensuring the measure conforms to the House’s pay-as-you-go budgetary rules. In order to adhere to the pay-go rules, the measure delays for one year, from 2019 to 2020, the worldwide interest allocation tax break, offsetting about $2 billion of the bill’s cost over ten years.

Specifically, the bill features a $1,000 hiring and retention tax credit and a payroll tax holiday that totals $13 billion to encourage businesses to hire workers who have been unemployed for at least 60 days. Under the HIRE Act, employers are exempt from paying their share of Social Security employment taxes (6.2 percent of the first $106,800 of wages) for wages paid in 2010 for any new employees hired after Feb. 3, 2010 and before Jan. 1, 2011. In order to qualify, the new employee must be previously unemployed and not hired to replace another employee of the employer. H.R. 2847 also allows an additional $1,000 income tax credit for every new employee retained for 52 weeks. This proposal is estimated to cost $13.038 billion over ten years.

In order to help small businesses quickly recover the cost of certain capital expenses, small-business taxpayers may elect to write-off the cost of these expenses in the year of acquisition in lieu of recovering these costs over time through depreciation. Prior to the American Recovery and Reinvestment Act of 2009 (ARRA), small business taxpayers in 2009 and 2010 were only allowed to write-off up to $125,000 (indexed for inflation) of capital expenditures subject to a phase-out once capital expenditures exceed $500,000 (indexed for inflation).

In ARRA, Congress temporarily increased the amount that small businesses could write-off for capital expenditures incurred in 2009 to $250,000 and increased the phase-out threshold for 2009 to $800,000. This bill would extend these temporary increases for capital expenditures incurred in 2010. This proposal is estimated to cost $35 million over ten years.

Additionally, the legislation includes an extension of Build America Bonds used by state and local governments to cut financing costs for infrastructure projects. It also contains language providing the Treasury Department with new tools to find and prosecute U.S. individuals that hide assets overseas from the Internal Revenue Service (IRS). The HIRE Act requires new reporting by foreign financial institutions to give the IRS more data to detect fraud and tax evasion.

While the legislation originated in the Senate, the House changed the bill, and so it must return to the Senate for lawmakers' final approval. The Senate will likely consider this measure, which already passed that chamber on Feb. 24 by a vote of 78-20, after completing work on a tax extenders bill (H.R. 4213) that has been on the floor this week.