How the HIRE Act Can Result in Tax Savings for Franchisees

On March 18th, 2010, President Obama signed into law the Hiring Incentives to Restore Employment Act ("HIRE Act") which is intended to encourage business owners to hire workers. The HIRE Act could potentially result in a substantial benefit to small business, impacting franchises. This act provides for tax incentives that can help franchisees afford to hire the employees needed for them to grow their franchise.

The HIRE Act provides for payroll tax forgiveness which exempts qualified franchisees, and other employers, from having to pay the 6.2% Social Security portion of Federal Insurance Contribution Act (FICA) taxes on certain new hires through the end of the year. To qualify, an employee must be hired after Feb. 3, 2010, and before Jan. 1, 2011, and must have been unemployed for the 60-day period ending on the newly hired employee's start date. A franchisee may also be able to benefit from the Retention Credit, which applies to employees who qualify for payroll tax forgiveness, if the employee remains employed by the franchisee for 52 consecutive weeks. In addition, to the above tax incentives, there are additional provisions in the HIRE Act which may be of interest to franchisees, and franchisors, including extending the increase for the Section 179 expensing election which allows a current deduction for newly acquired assets that otherwise would have to be depreciated over a number of years.

The Internal Revenue Service has not yet finalized the format with which to obtain these credits, however it is advisable to retain certain documentation so that these "small business incentives" are not lost. We suggest that franchisors and franchisees contact their tax advisors to in order to take the appropriate steps needed in order to maximize their tax savings.

For more information on this matter, please contact Citrin Cooperman & Company, LLP, Franchise Accounting and Consulting Division, (Franchise Tax Advisors Sector):

Aaron Chaitovsky
Mark Carrow
Michael Zyborowicz
Stephen Hellner