Work Opportunity Tax Credit reauthorization

Accessible letter PDF: https://www.dol.gov/sites/dolgov/files/ETA/advisories/TEGL/2007/TEGL05-07acc.pdf

CLASSIFICATION
                                                    WOTC
 EMPLOYMENT AND TRAINING ADMINISTRATION
            ADVISORY SYSTEM
              U.S. DEPARTMENT OF LABOR              CORRESPONDENCE SYMBOL
                   Washington, D.C. 20210           OWI

                                                    DATE
                                                    September 11, 2007

TRAINING AND EMPLOYMENT GUIDANCE LETTER NO. 5-07

TO:             ALL STATE WORKFORCE AGENCIES
                ALL STATE WORKFORCE LIAISONS

FROM:           EMILY STOVER DeROCCO /s/
                Assistant Secretary

SUBJECT:        Reauthorization of the Work Opportunity Tax Credit
                and Other Program Changes


l. Purpose. The purpose of this guidance is to announce the reauthorization of
   the Work Opportunity Tax Credit (WOTC) Program under the Small Business
   and Work Opportunity Tax Act of 2007 (P.L. 110-28) and provide procedural
   guidance to the states for processing requests for certifications under the
   consolidated program.

2. References. The Small Business and Work Opportunity Tax Act of 2007 (P.L.
   110-28); Tax Relief and Health Care Act of 2006 (P.L. 109-432); Working
   Families Tax Relief Act of 2004 (P.L. 108-311); Training and Employment
   Guidance Letter (TEGL) No. 20-06, dated April 7, 2007; Internal Revenue
   Code (IRC) of 1986, Section 51, as amended; Employment and Training
   Administration (ETA) Handbook No. 408, Third Edition, November 2002 (the
   Handbook); and the May 2005 Addendum to the Handbook.

3. Background. On December 20, 2006, the President signed into law the Tax
   Relief and Health Care Act of 2006 (P.L. 109-432). This legislation not


RESCISSIONS                                 EXPIRATION DATE:

None                                        Continuing


   only extended the WOTC Program (retroactively to January 1, 2006) through
   December 31, 2007, but also merged the Welfare-to-Work Tax Credit
   (WtWTC) into WOTC and repealed permanently Section 51(A) of the IRC.
   Congress also amended certain statutory definitions with respect to new hires
   that began to work for an employer after December 31, 2006. For additional
   information, see TEGL No. 20-06, dated April 3, 2007.

4. Authorization. The Small Business and Work Opportunity Tax Act of 2007 (P.L.
   110-28) was signed into law on May 25, 2007. Section 8211 of the Act provides a
   44-month extension of the WOTC Program through August 31, 2011.

   Explanation of Specific Statutory Amendments and Provisions. Section 8211
   of the Act:

   a. Renames the High-Risk Youth group (D) and calls it Designated
      Community Resident (DCR).

   b. Amends the statutory definition of a DCR to mean an individual certified
      by the state workforce agency (SWA) as having:

      •   attained age 18 but not 40 on the hiring date, and
      •   his/her principal place of abode within an Empowerment Zone
          (EZ), Renewal Community (RC), or Rural Renewal County (RRC).

      Eligibility Determination of DCRs. Eligibility determination of a new hire
      as a member of the DCR target group involves verification of the
      following two requirements: 1) age; and 2) location of the individual’s
      principal place of abode [residence] in an EZ, RC, or RRC. Age should be
      verified by looking at documents submitted by the employers/consultants
      with the request or requiring from employers one or several of the
      recommended documents in Section E. Examples of Documentary
      Evidence., p. VII-32 of the November 2002, Third Edition, ETA Handbook
      408. Verifying the residential location of a potential DCR as in an EZ, RC,
      or RRC requires reviewing the instructions for IRS Form 8850. EZs, RCs
      and RRCs are all listed in these IRS instructions. SWAs can verify
      whether a DCR’s address is located in a Rural Renewal County on-line by
      visiting the following Web site at: www.usps.gov and following these
      simple steps:


   1) click on Find a ZIP Code; 2) enter and submit the Address and ZIP Code;
   and 3) click on Mailing Industry Information. SWAs should download and
   print the U.S. Postal Service (USPS) Mailing Industry Information sheet, and
   keep a copy in the case file of the new hire, employer, or consultant.

c. Limits “qualified wages” for Designated Community Residents to those paid
   for services performed while the individual is residing in an EZ, RC, or
   RRC.

d. Defines a Rural Renewal County as a county that:

   •   is outside a metropolitan statistical area (MSA)
       as defined by the Office of Management and Budget (OMB); and
   •   during the five-year periods, 1990 through 1994, and 1995 through
       1999, had a net population loss.

e. Clarifies that “ticket holders” are included in the vocational rehabilitation
   referral target group by adding at the end of its statutory definition the
   following clause:

   •   an individual work plan developed and implemented by an
       Employment Network pursuant to Subsection (g) of Section 1148 of the
       Social Security Act with respect to which the requirements of such
       Subsection are met.

f. Expands the definition of the “Qualified Veteran” target group to include
   “disabled veterans” who are entitled to compensation for a service-
   connected disability and:

   •   have a hiring date which is not more than one year after having
       been discharged or released from active duty in the Armed Forces of
       the United States; or
   •   have aggregate periods of unemployment during the one-year
       period ending on the hiring date that equal or exceed six months.

g. Defines the terms “compensation” and “service connected” as having the
   meanings under Section 101 of Title 38 of the United States Code,
   pertaining to veterans benefits as follows:


      •   Section 101(13) defines “compensation” as a monthly payment
          made by the Secretary to a veteran because of a service-connected
          disability; and
      •   Section 101(16) defines “service-connected,” with respect to a
          disability, as meaning that the disability was incurred or
          aggravated in the line of duty in the active military, naval, or air
          service.

   h. Increases the amount of “qualified wages,” for disabled veterans only, from
      $6,000 to $12,000.

5. Program Administration. Under the reauthorizing legislation, SWAs
   certification and program operation responsibilities for the consolidated
   WOTC program remain the same as those described in the November 2002,
   Third Edition of ETA Handbook 408 and the May 2005 Addendum. These
   include procedures for: a) determining target group eligibility and issuing
   certifications and denials; b) establishing working partnerships with different
   participating agencies at the state and local levels for resolving technical
   issues and issuing conditional certifications; c) conducting verification
   activities; d) complying with quarterly report responsibilities; and e)
   complying with records’ retention time periods.

6. IRS Form 8850. IRS Form 8850, Pre-Screening Notice (PSN) and Certification
   Request for the Work Opportunity Credit, and the instructions for this form have
   been revised. The June 2007, PSN form and its instructions are available at
   www.irs.gov.

7. Funding. ETA issued Fiscal Year (FY) 2007 funding advances from
   Continuing Resolutions (CRs) to the SWAs for WOTC Program
   implementation and elimination of existing backlogs. The CR advances
   covered activities through February 15, 2007. Funding for the merged
   WOTC Program was passed as part of the FY 2007 funds appropriated in the
   Revised Continuing Appropriations Resolution Act of 2007 (P.L. 110-5).


8. Reporting Authority. Pursuant to the Paperwork Reduction Act, OMB
   extended the information collection requested for the WOTC/WtWTC
   administrative and reporting forms without substantial changes. ETA Form
   9058 - Report 1 and administrative forms 9057, 9059, 9061 - 9063,


   and 9065 are approved under OMB No. 1205-0371 through August 31, 2009.
   SWAs should continue to use the current certification and reporting forms
   until further notice. A package including revised reporting and
   administrative forms, the Spanish versions of IRS Form 8850 and ETA Form
   9061, the revised May 2005 Addendum to ETA Handbook 408 (the
   Handbook), and a revised Technical Assistance and Compliance Review
   Guide will be submitted to OMB for emergency clearance. Training on
   WOTC program amendments, provisions, and new reporting and
   administrative requirements is being planned and will be provided.

9. Action Required. SWA administrators are requested to:

  a. Provide this information to appropriate program staff, employers, and
     their representatives, participating agencies (PAs), and other interested
     partners. They are to ensure that the SWAs and PAs administer the WOTC
     in accordance with the guidance provided in this TEGL, the Handbook, the
     May 2005 Addendum to the Handbook, and the Internal Revenue Code of
     1986, Section 51, as amended; and

  b. Ensure that state coordinators receive a copy of the new legislation, Title
     VIII, Part I., Subpart A., Section 8211 of the Small Business and Work
     Opportunity Tax Act of 2007 (P.L. 110-28) available at
     http://thomas.loc.gov/home/thomas2.html.

10. Inquiries. Direct all questions to the appropriate Regional Coordinator.