Work Opportunity Tax Credit Program (WOTC)

 

This federal tax credit was designed to help individuals from certain targeted groups who consistently face significant barriers to employment move from economic dependency to self-sufficiency. Businesses are encouraged to hire targeted group members in order to claim the tax credit against wages paid to eligible new hire(s) during their first year of employment. WOTC joins other workforce programs that incentivize workplace diversity and facilitate access to good jobs for American workers.

Active 17.271 Employment and Training Administration, Department of Labor A - Formula Grants Fiscal Year 2021 In Fiscal Year (FY) 2021, the Employment and Training Administration (ETA) distributed grant funds totaling $18,485,000 to 53 state workforce agencies for the administration of the Work Opportunity Tax Credit (WOTC). Additionally, the Consolidated Appropriations Act, 2021 authorized an additional $2,500,000 in funding to WOTC, which ETA distributed to 12 states with the most critical needs to alleviate processing backlogs and assist states in adopting or modernizing information technology for processing of certification requests. In FY 2020, a total of 1,620,806 WOTC certifications were issued to eligible employers. Following the COVID-19 pandemic, SWAs were able to resume normal certification request processing capabilities, and issued 2,081,474 WOTC certifications at the close of FY21, an increase of 22 percent from certifications issued in FY20.
Fiscal Year 2023 In Fiscal Year 2023, ETA distributed grant funds totaling $21,000,000 to 53 state workforce agencies (SWAs) for the administration of the WOTC and to 14 states for alleviating processing backlogs and modernizing WOTC processing systems. As a result, SWAs have successfully decreased their backlog of certification requests, and more SWAs are utilizing automated systems to increase processing efficiency. As of quarter ending 6/30/2023 (FY 2023 Q3), the SWAs have issued over 1,021,000 certifications. WOTC is authorized until December 31, 2025 (Section 113 of Title III, Division EE of P.L. 116-260 -- Consolidated Appropriations Act, 2021)., Title Consolidated Appropriations Act, 2021, Part Division EE - Taxpayer Certainty and Disaster Tax Relief Act of 2020, Section Section 113 of Division EE of Public Law 116-260, Public Law 116th Congress-Public Law 116-260 (December 27, 2020), 26 USC 51: Amount of Credit / (26 USC 52: Special Rules) U.S.C. Subtitle A, Chapter 1, Subchapter A, Part IV, Subpart F, Section 51 (P.L. 104-188)
The Work Opportunity Tax Credit (WOTC) is set forth under section 51 of the Internal Revenue Code of 1986, as amended (26 U.S.C. sec. 51), and is authorized until December 31, 2025, by the Consolidated Appropriations Act, 2021 (Pub. L. 116-260), Division EE, Title 1, section 113. The U.S. Department of the Treasury, through the Internal Revenue Service (IRS), administers all tax-related provisions and requirements of the tax credit. The U.S. Department of Labor, through the ETA, awards grants to states for administration of the WOTC certification process. States (not individuals), the District of Columbia, the U.S. Virgin Islands, and Puerto Rico. The "designated local agency," also known as the State Workforce Agency (SWA), is the designated state employment security agency (established in accordance with the Wagner-Peyser Act of June 6, 1933, as amended (29 U.S.C. 49-49n)) authorized to administer the WOTC. Beneficiaries are all employers seeking to hire members of WOTC targeted groups, and members of those targeted groups seeking employment. The ten different targeted groups have statutory definitions (Public Law 104-188, as amended) with specific eligibility requirements that must be verified by the State Workforce Agency before a WOTC certification can be issued to an employer. Participating employers and/or their authorized representatives must submit their certification requests to the appropriate State Workforce Agency using IRS Form 8850 within 28 calendar days of the new hire's start date. IRS Form 8850 should be submitted with ETA Form 9061/9062, and any required supporting documentation to prove targeted group eligibility. State grantees must meet the application requirements detailed in the applicable Training and Employment Guidance Letter (TEGL) that authorizes the fiscal year funding. ETA requires grantees to submit an electronically signed copy of the SF-424 Form, Application for Federal Assistance, for the linked funding opportunity within 30 days of the funding opportunity announcement. No additional credentials nor documentation is required. 2 CFR 200, Subpart E - Cost Principles applies to this program. Preapplication coordination is not applicable. 2 CFR 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards applies to this program. 2 CFR 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards applies to this program. WOTC grant funds are provided to State Workforce Agencies (SWAs) on an annual fiscal year basis. Grant amounts are determined by administrative formula. Not applicable. Not applicable. Not applicable. Not applicable. Not applicable. States are to use these formula grants to administer the WOTC in accordance with the grantee requirements outlined in the WOTC statement of work. Required activities include: accepting WOTC applications from employers; determining eligibility of individuals as members of targeted groups; issuing employer certifications or denials; developing working agreements with partner agencies in American Job Centers (also called One-Stop Career Centers) or other State agencies to verify or document eligibility of new hires, including issuing Conditional Certifications; and coordinating efforts to promote WOTC with employers, job seekers and other Workforce Innovation and Opportunity Act (WIOA) partners. ETA develops procedural guidance and program technical assistance, awards funding to states, and provides general administrative oversight to the states. See above for additional information. Performance Reports: Program Reports: Program performance reporting by quarterly data submission is required via ETA Form 9058 in the tax credit reporting system EBSS. In accordance with the provisions of 2 CFR 200, Subpart F - Audit Requirements, nonfederal entities that expend financial assistance of $750,000 or more in Federal awards will have a single or a program-specific audit conducted for that year. Non-Federal entities that expend less than $750,000 a year in Federal awards are exempt from Federal audit requirements for that year, except as noted in 2 CFR 200.503. See below. Standard recordkeeping for periodic internal audits are required. ETA's procedural guidance for WOTC administration, and the Internal Revenue Service (IRS) require that the State Workforce Agencies (SWAs) keep and maintain certification records for three years, and denial records for one year in the event of an employer audit by IRS or an employer appeal to the SWAs. Statutory formula is not applicable to this assistance listing.

Matching requirements are not applicable to this assistance listing.

MOE requirements are not applicable to this assistance listing. Funding is provided by annual formula allotments with a two-year period of performance cycle. Method of awarding/releasing assistance: Notice of Award (NOA) letter. Method of awarding/releasing assistance: Letter. Contact information for WOTC State Coordinators and ETA Regional Officers is available on the WOTC program website at https://www.dol.gov/agencies/eta/wotc/contact. Steven Rietzke
200 Constitution Ave. NW, Room C-4510
Washington, DC 20210-0001 US
Rietzke.Steven@dol.gov
Phone: 2026933912 https://www.dol.gov/agencies/eta/wotc 16-0179-0-1-999 (Formula Grants) FY 22$22,000,000.00; FY 23 est $21,000,000.00; FY 24 est $21,000,000.00; FY 21$21,000,000.00; FY 20$21,000,000.00; FY 19$18,000,000.00; FY 18$18,000,000.00; FY 17$18,000,000.00; FY 16$18,000,000.00; - After allocating $20,000 to the U.S. Virgin Islands, ETA distributes the remaining funds to state grantees (SWAs) by administrative formula with a $66,000 minimum allotment. For Fiscal Year 2023 allotments, grants to states ranged from $66,000 to $2,463,406. Section 51 of the Internal Revenue Code, Title 26 U.S.C. Training and Employment Guidance Letter (TEGL) No. 16-20, WOTC Procedural Guidance. TEGL 16-20 and applicable U.S. Department of Labor, Employment and Training Administration policy directives are available on the WOTC program website at https://www.dol.gov/agencies/eta/wotc/resources. Not applicable.