Veteran Hiring Tax Credit

Summary#

HB 2877 would amend Pennsylvania’s Tax Reform Code of 1971 to create the Returning Heroes Employment Tax Credit. Its stated goal is to provide tax credits to taxpayers who employ a person certified as a qualified veteran; the bill does not guarantee that it will increase veteran employment. It is an introduced bill and is not law.

  • The Department of Labor and Industry would certify whether an employee is a qualified veteran and issue a credit certificate if the taxpayer meets the department’s requirements.
  • An eligible taxpayer would receive a $2,000 credit against certain state tax liabilities. The bill does not clearly say whether that amount is for each qualified veteran or each taxpayer.
  • The total credits approved could not exceed $20 million in a fiscal year. The department would allocate them first come, first served.
  • Unused credit could be carried forward for up to 15 taxable years, but could not be refunded, carried back to an earlier year, or assigned to someone else.
  • A pass-through business without tax liability to use the credit could pass a share of it to its owners or members, based on their share of its distributive income.
  • The Secretary must report annually on use and effectiveness, including public names of businesses using the credit and the amounts approved and used.

What it means for you#

  • Employers: A taxpayer with an employee certified as a qualified veteran could apply to the Department of Labor and Industry for a certificate. The credit could reduce eligible state tax liability, but the annual cap and first-come, first-served allocation may limit access.
  • Pass-through business owners and members: If the business cannot use the credit against its own eligible tax liability, owners or members could claim a share. The same expense cannot be used for a credit by both the business and its owners or members.
  • Veterans and the public: The bill does not provide a direct payment or benefit to veterans. It does not set a hiring duration, wage level, or requirement that the job be newly created or retained.
  • Taxpayers generally: The bill would make the names of businesses using the credit and the amounts approved and used public, despite laws that otherwise keep tax records confidential.

Money#

The bill would allow up to $20 million in tax credits to be approved per fiscal year; No publicly available information gives an estimate of actual state revenue loss or administrative costs.

  • The $2,000 credit would apply to tax liabilities under Articles III, IV, or VI of the Tax Reform Code, but not to employer withholding tax.
  • The bill requires the Department of Labor and Industry to certify veterans and the Secretary of Revenue to issue regulations; it provides no staffing or cost estimate.
  • The credit would apply to tax years beginning after December 31, 2024, if enacted, even though the bill was introduced in 2026.

What is unclear#

  • The bill does not clearly state whether the $2,000 credit is per qualified veteran, per employer, or per another measure.
  • It leaves the department to set proof and certification requirements, but does not set application deadlines, decision timelines, or an appeal process.
  • It does not specify a new-hire requirement, minimum employment period, wage level, or other job conditions.
  • The bill refers to a federal definition of “qualified veteran,” but the federal provision is not included in the supplied material.
  • The Tax Reform Code itself was not supplied, so the credit’s interaction with current tax-credit rules and programs cannot be verified.

Case for#

  • A possible argument for the bill is that a tax credit could reduce the cost to an employer of employing a qualified veteran.
  • The credit could be used over time: taxpayers unable to use all of it in the first year could carry the balance forward for up to 15 years.
  • Public reporting of participating businesses and credit amounts could make the program’s use more visible.

Case against#

  • The bill does not explain whether the credit is per veteran or per taxpayer, or require that the job be new or last for a set period. Those gaps make it hard to judge who would qualify and what hiring the credit would reward.
  • A $20 million annual cap with first-come, first-served allocation could mean otherwise eligible taxpayers miss out once the cap is reached.
  • The bill gives no cost estimate, while allowing credits to apply to tax years beginning before its introduction.
  • Publishing business names and credit amounts could reveal information that tax records would otherwise keep confidential.