Posted on March 29, 2005

Federal Bill Targets Immigration Woes

Aimee Tabor, Hawk Eye (Burlington, Ia.), Mar. 26

Companies hiring illegal immigrants no longer will be able to deduct their wages and will have to pay more to the federal government if a proposal by an Iowa congressman becomes law.

U.S. Rep. Steve King, R — Iowa, is working on a bill that would address companies who hire illegal immigrants.

The bill, which hasn’t been submitted yet, is nearly complete and King is getting co-signatures for it. He said the bill likely will be introduced within the next two or three weeks.

“I have one bill that’s almost drafted now that has components in it that will help solve the immigration problem,” King said. “The centerpiece of it is something that’s captured the imagination of some people in Congress now and I think it will get the attention of the country.”

That centerpiece is called the Illegal Deduction Elimination Act, which removes the ability of an employer to deduct wages and benefits paid to illegal immigrants who work for their companies. King gave an example of how his bill would work if approved.

“Say $10 million in wages was paid over the course of five years,” King said. “That would generate about 35 percent in taxes so that would be $3.5 million that one would have paid in taxes out of the $10 million that was deducted. The IRS will take that number and they’ll add interest and penalty to that and that $10 million worth of formally deductible wages becomes a $5 to $6 million liability.”

King developed the proposal based on an employer’s current ability to check a worker’s eligibility. An instant check program that’s been available since 1996 can determine if an employee is eligible to work in the U.S.

King’s proposal would give the IRS the ability to check the history of a company and who it hires.

“The IRS can come in up to six years later and do an audit of the companies,” King said. “If the companies can’t verify that their employees were legal and if the IRS can verify that they were illegal, then the wages that were paid that were a tax deductible item on a business expense would no longer be a business expense and would become taxable.”

If approved, the proposal would mean companies would be paying more in the long run if they hire illegal immigrants.