How the worlds largest home improvement retailer went about improving its federal and state tax credits through FAO.

by FAOT Staff

As the worlds largest home improvement retailer, The Home Depot had already automated much of the pre-hiring HR process through a system that included kiosks at 1,288 stores nationwide. But the one area that still needed attention was tax screening. The Home Depot employs thousands of hourly wage earners, and the company had benefited greatly from providing employment opportunities to top performers from underprivileged backgrounds. Given the governments enthusiasm for such opportunity creation (through programs such as WOTC and Welfare to Work tax credits), it was an obvious decision to investigate how The Home Depot could best capture the myriad of state and federal credits.

Kathleen Bullock, income tax manager at The Home Depot, knew the need for automated tax screening was obvious. What was not so obvious was whether a solution existed that could meet the companys stringent requirements.

We had three goals, said Bullock. From a financial perspective, to get the most tax credit and incentive dollars as possible, as efficiently as possible; from an HR perspective, we needed to make the process simple, requiring the least amount of our associates time as possible, with as little training as possible; and from the technology perspective, to find a system that could integrate with The Home Depots current systems, with least potential for problems.

The bid to assist The Home Depot became a battle in the accounting technology arena. We reviewed the capabilities of seven other vendors in excruciating detail and looked at more than one type of solution from each of those seven vendors, Bullock said. But unfortunately, it is still common for the prehiring process to be paper-baseda solution that was not an option for The Home Depot, which was already taking all store applications electronically.

Instead, The Home Depot decided to give the business to ITax Group, a relatively new company. In the electronic arena, ITax Group was the only company that had a solution in use that could immediately service a company as large as Home Depot, said Bullock. Although other providers were willing to custom develop a solution, the company was concerned about scope-creep.

Many of the other vendors could have created something just for The Home Depot, but we wanted a product that had already been tested and proven to work. Also, the products that were in limited use by other vendors did not have the comprehensive capabilities of the ITax Group system, Bullock noted. However, she added, it took a great deal of research and discussion, reference checking, and benchmarking to assure The Home Depots CFO that ITax Group could handle the basicsthat they werent just a technology company. We did our homework.

ITax Group tackled all three of The Home Depots goals. They convinced IT that their product could be integrated with existing technology with minimal disturbance. Their solutionan interactive question set that evaluates an applicants eligibility for tax credits when they fill out an electronic applicationfit easily enough into The Home Depots existing hiring and job tracking system that HR was sold. And for the finance department, they were able to show the upside in dollars saved.

The Home Depot is actually participating in the WOTC and WTW programs because ITax Group has made it so easy for us. We are getting credits. We expect the savings to be significant. This program is a vital part of our worldwide effective tax rate planning, Bullock said. And again, because it is so easythe HR Managers have very few steps to completethe solution has a significant amount of support from all levels of the HR department, Bullock added. We expect our compliance rates to be very high. The WOTC screening has become a normal part of our routine very quickly.

The tax information gathered through the pre-hire screening is automatically compiled and maintained by the provider in a secure, hosted system. The Home Depot can instantly access that information to find out if a person qualifies for a tax credit, although the type of credit is not identified in order to remove prejudice from the system. Once The Home Depot decides on a new hire, they notify the provider who, if that hire qualifies for federal or state job credits, generates pre-populated forms for the HR manager and takes care of the steps necessary to generate tax credits for The Home Depot.

In addition to the tax savings generated by the solution, The Home Depot is also benefiting from always-on, always updated information on its performance at capturing tax incentive savings. I can (and do) look at reports online, real-time, every day, says Bullock. When our technology people need a little encouragement, I send them a message with the amount of credits we have gotten so far. When a Division Human Resource Manger wants to know how his or her division is doing, I can download upto- the-minute data to an Excel file and e-mail it to them. When my boss wants to know what our compliance rates are, I can get him that information immediately.

Performance at Home Depot is all about accountability, Bullock added, but first you need to have accurate measurement We believe that our alliance with ITax Group has put The Home Depot at the forefront of incentives and credits technology; working with ITax Group, we will be able to quickly take advantage of any future opportunities resulting from technology changes in this industry, Bullock concluded. With assistance from ITax Group, The Home Depot will be ready, and the compliance process will be even easier than it is now.