FY 2023 WOTC remaining allotments and backlog awards, Change 1

CLASSIFICATION
   EMPLOYMENT AND TRAINING ADMINISTRATION                WOTC
               ADVISORY SYSTEM                           CORRESPONDENCE SYMBOL
          U.S. DEPARTMENT OF LABOR                       OWI
             Washington, D.C. 20210                      DATE
                                                         March 17, 2023

ADVISORY:       TRAINING AND EMPLOYMENT GUIDANCE LETTER NO. 06-22,
                CHANGE 1

TO:             STATE WORKFORCE AGENCIES
                STATE WORKFORCE ADMINISTRATORS
                WORK OPPORTUNITY TAX CREDIT COORDINATORS

FROM:           BRENT PARTON
                Acting Assistant Secretary

SUBJECT:        Change 1 to Training and Employment Guidance Letter No. 06-22, Work
                Opportunity Tax Credit (WOTC) Initial Funding Allotments for Fiscal Year
                2023

1. Purpose. This Change 1 to Training and Employment Guidance Letter (TEGL) No. 06-22
   conveys the remaining balance for Fiscal Year (FY) 2023 WOTC funding allotments and
   explains application requirements for State Workforce Agencies (SWAs) based on
   appropriated funding. Additionally, this Change 1 TEGL announces 14 states selected to
   receive additional FY 2023 backlog award funding and provides instructions to those states
   on how to proceed. The rest of TEGL No. 06-22 remains the same.

2. Action Requested. Grantees must meet the application requirements detailed in section 4
   within 30 calendar days from the date of this TEGL issuance.

3. Summary and Background.

        a. Summary – On November 14, 2022, the Employment and Training Administration
           (ETA) issued TEGL No. 06-22, which announced the initial FY 2023 WOTC funding
           allotments of $3,900,335 under the Continuing Appropriations and Ukraine
           Supplemental Appropriations Act, 2023 (Pub. L. 117-180). The continuing resolution
           (CR) allowed for incremental grant funding for states’ administration of the WOTC,
           pro-rated based on the CR's end date of December 16, 2022. On December 16, 2022,
           the Further Continuing Appropriations and Extensions Act, 2023 (Pub. L. 117-229)
           became law, providing a second CR (CR2) through December 23, 2023. The amount
           of WOTC funding authorized under CR2 was $354,912. On December 23, 2022, the
           President signed the Further Additional Continuing Appropriations and Extensions
           Act, 2023 (Pub. L. 117-264), providing a third CR (CR3) through December 30,
           2022, and providing additional WOTC funding in the amount of $354,912. On
           December 29, 2022, the Consolidated Appropriations Act of 2023 (Pub. L. 117-328)
           was signed into law, authorizing the full FY 2023 appropriations. ETA has available
 RESCISSIONS                                            EXPIRATION DATE
 None                                                   Continuing

          grant funds totaling $18,485,000 for normal operations in FY 2023. This Change 1
          TEGL announces the full-year appropriation and availability of the remaining balance
          to the states in the amount of $14,584,665, which includes funding authorized under
          CR2 and CR3. The state allotment amounts are listed in Attachment I, “Work
          Opportunity Tax Credit Fiscal Year 2023 State Allotments and Balance after
          Dissemination to States under Continuing Resolution 1.”

          Additionally, the Consolidated Appropriations Act of 2023 authorized an additional
          $2,500,000 in funding to support efforts to reduce WOTC processing backlogs and
          assist states in adopting and/or modernizing information technology for processing of
          certification requests. This Change 1 TEGL announces the 14 states selected to
          receive FY 2023 backlog awards, and their respective award amounts, in Section 4.

       b. Background – The WOTC is set forth under section 51 of the Internal Revenue Code
          of 1986, as amended (26 U.S.C. sec. 51), and is effective until December 31, 2025,
          under the Consolidated Appropriations Act, 2021 (Pub. L. 116-260), Division EE,
          Title 1, Subtitle B, Section 113. The U.S. Department of the Treasury, through the
          Internal Revenue Service (IRS), administers all tax-related provisions and
          requirements of the Federal tax credit. The U.S. Department of Labor, through ETA,
          awards grants to states for administration of the WOTC.

4. Details. States must enter the state allotment amount in the “Balance to States” column
   (provided in Attachment I) on their SF-424 Form, Application for Federal Assistance, as
   their request for additional FY 2023 funding. States selected for FY 2023 WOTC Backlog
   Award funding must enter the state-specific award amount listed in Section 4 of this TEGL
   on a separate SF-424 Form. All States must submit an electronically signed copy of the SF-
   424 through Grants.gov.
   Allotment Formula. ETA determines state allotments for normal WOTC operations
   according to the following methodology. After allocating $20,000 to the U.S. Virgin Islands,
   ETA distributes the remaining funds to the SWAs by administrative formula with a $66,000
   minimum allotment and a 95 percent stop-loss/120 percent stop-gain from the previous year
   allotment percentage. The administrative formula is calculated as follows:

   a. 50 percent is based on each state’s relative share of total WOTC certifications issued
      from October 1, 2021, through September 30, 2022;
   b. 30 percent is based on each state’s relative share of the Civilian Labor Force averages for
      the 12-month period from October 1, 2021, through September 30, 2022; and
   c. 20 percent is based on each state’s relative share of adult recipients of Temporary
      Assistance for Needy Families averages from October 1, 2020, through September 30,
      2021.

Application Requirements for FY 2023 Funding. ETA requires grantees to submit an
electronically signed copy of the SF-424 Form, Application for Federal Assistance (OMB
Control No. 4040-0004), as their official request for funding opportunity number ‘ETA-
WOTC-TEGL-06-22-23-C1’ at https://www.grants.gov, within 30 calendar days from the
issuance date of this TEGL.

The official, electronically signed SF-424 Form must reflect the amount listed in Attachment
I as the state’s requested estimated funding total in item #18, the Catalog of Federal
Domestic Assistance Number 17.271 for item #11, and the grantee’s 12-characer Unique
Entity Identifier (UEI number) listed for item #8c. Each applicant must have a UEI number
assigned by the System for Award Management, and it must be registered at SAM.gov before
submitting an SF-424 application. Grantees should indicate the estimated amount of Indirect
Costs to be claimed by the recipient for FY 2023, if any, as a sentence for item #15,
Descriptive Title of Applicant's Project. Grantees may use the amount of indirect costs
reported against their FY 2022 WOTC grant as an approximation of FY 2023 indirect cost
expenditures. For example: “Indirect Costs for this award are estimated at $19,000.” If
there is no estimated Indirect Costs, the following statement must be entered: “Indirect Costs
for this award are estimated at $0.00.”

To submit the required documents, applicants must follow the “Apply for Grants” link on
Grants.gov and download the links for the grant application package. For this grant
opportunity, applicants should not follow the “Find Grants” link, as this is not a competitive
funding opportunity. If applicants encounter a problem with Grants.gov and do not find an
answer in any of the other available resources, they should call 1-800-518-4726 or 1-606-
545-5035 to speak to a Customer Support Representative or send an email to
[email protected].

Revised Award Descriptions. As part of a Federal government-wide effort to describe grant
activities consistently and accurately, ETA revised its standard grant award descriptions.
States may see the following text in the grant awards or online descriptions of WOTC grants:

   •   Purpose: The purpose of this grant is to allow SWAs to administer WOTC per ETA
       guidance and provisions of the IRS Code of 1986, Section 51, as amended. Law
       designates the SWAs as the only agencies that can issue a Certification (26 USC
       §51(d)(12)). That statute refers to SWAs as State employment security agencies,
       established in accordance with 29 U.S.C. 49.
   •   Activities to be performed: SWAs must use funds to implement the requirements set
       forth in the WOTC Statement of Work, including to: Designate a state coordinator
       who oversees the administration of WOTC for each state grant; Determine eligibility
       of individuals as members of targeted groups on a timely basis, and issue employer
       certifications, denials, or notices of invalidation for tax credits on a timely basis, and
       in accordance with the policies and procedures set forth by ETA; and Establish and
       maintain appropriate forms’ quality review process, record keeping, and reporting
       capability related to the orderly management of WOTC certification requests.
   •   Expected Outcomes: For WOTC grants, SWAs will issue determinations
       (certifications or denials) for employers’ certification requests, which facilitate tax

       credits determined by the U.S. Department of the Treasury. SWAs will increase
       efficiency in processing employers’ certification requests and develop plans that
       include an estimated timeline to eliminate existing backlogs of certification requests.
   •   Intended Beneficiaries: Job seekers who have access to a higher number of
       employment opportunities, and employers who seek to increase hiring of qualified job
       applicants. Other beneficiaries include state and local partner agencies in the
       American Job Center network that coordinate efforts to promote WOTC to
       employers, job seekers, and other Workforce Innovation and Opportunity Act
       (WIOA) partners.
   •   Subrecipient Activities: SWAs, as WOTC grant recipients, do not typically
       subaward funds. States that wish to subaward funds should seek approval from their
       Grant Officer.

FY 2023 WOTC Backlog Awards. ETA intends to distribute WOTC backlog awards to 14
states with the most critical needs for assistance in alleviating processing backlogs and
adopting or modernizing information technology for processing of certification requests. To
inform the selection process, ETA analyzed the following data:

   a. FY 2022 backlog total and percentage ratio it represents of the state’s total workload;
   b. FY 2022 and FY 2021 financial reports; and
   c. FY 2022 qualitative data based on states’ and/or regional coordinators’ narratives,
      which explain how the states could use this award to make improvements to their
      existing systems or procedures and reduce their backlog.

ETA carefully reviewed these three sources of data to gain an understanding of the states’
needs and any contributing factors that led to the states’ backlog. ETA did not consider the
states that received backlog awards in FY 2022, nor did it extend FY 2021 grantees, due to
the overlapping grant period of performance. ETA examined the remaining states’ backlogs
and information technology modernization needs to identify this set of selected states.
Additionally, ETA analyzed FY 2022 and FY 2021 financial reports to determine a state’s
ability to use additional funding and did not select states with extraordinarily low expenditure
rates to receive backlog funds. Finally, ETA reviewed narratives that states submitted. The
selected states expressed interest in this additional backlog funding to help them attain staff
support, enhance their current partially automated systems, and develop automated systems.
Based on these factors, ETA identified 14 states with the most critical need to address
backlog or system modernization issues and to receive additional funding. Based on the
availability of $2,500,000 in funds, ETA established three funding tiers to distribute these
awards to 14 states:

    • Tier 1 = $100,000
    • Tier 2 = $200,000
    • Tier 3 = $300,000

   The selected states and corresponding funding amounts for these awards are as follow:

               $100,000                       $200,000                          $300,000
       •   Alabama                      •   Connecticut                  •   California
       •   Alaska                       •   Hawaii                       •   Indiana
       •   Illinois                     •   New Hampshire                •   New Jersey
       •   Montana                      •   North Carolina
       •   Rhode Island                 •   Ohio
       •   Virginia

   Note: If a state fails to submit the required application materials timely, or decides to refuse
   the award, ETA reserves the right to either redistribute such funds to the other selected states
   and/or consider additional state(s) for an award, as appropriate.

   General Administration. With their FY 2023 grant award, SWAs are responsible for
   conducting the WOTC activities outlined in the WOTC Statement of Work. (See Attachment
   II of TEGL 06-22, Work Opportunity Tax Credit (WOTC) Initial Funding Allotments for
   Fiscal Year 2023, available here: https://www.dol.gov/agencies/eta/advisories/tegl-06-22).

   Reporting Requirements.
   a) Quarterly Financial Report – SWAs must report fiscal expenditures quarterly using
      ETA Form 9130. Financial reports are due no later than 45 days following the end of
      each quarter. Timely submission of these reports is important to ensure proper
      accounting of funds. As part of ETA’s transition away from legacy systems, the new
      Payment Management System (PMS) Financial Reporting System will go live for ETA
      grant recipients’ submission of the quarterly ETA-9130 financial reports on April 3,
      2023. PMS is operated by the U.S. Department of Health and Human Services, which
      will conduct training for ETA grant recipients on the use of the new reporting system.
      Additional guidance and information on the access and use of the PMS Financial
      Reporting System for the submission of future ETA-9130 quarterly financial reports is
      provided in Training and Employment Notice No. 16-22. The PMS Financial Reporting
      System training sessions will be recorded and available for future reference.
   b) Quarterly Performance Report – SWAs must use the web-based Enterprise Business
      Support System (EBSS) Tax Credit Reporting System to report quarterly activities and
      outcomes using ETA Form 9058. Performance reports are due no later than 45 days
      following the end of each quarter. Timely submission of these reports is important for
      administration purposes.

5. Inquiries. Please direct inquiries to the appropriate Regional WOTC Coordinator listed on
   the WOTC website at https://www.dol.gov/agencies/eta/wotc/contact/regional-offices.

6. References.
   • Section 51 of the Internal Revenue Code of 1986, as amended
      (https://uscode.house.gov/view.xhtml?path=/prelim@title26/subtitleA/chapter1/subchapt
      erA/part4/subpartF&edition=prelim);

   •   Section 49 of Title 29 of the United States Code (Labor)
       (https://uscode.house.gov/view.xhtml?req=(title:29%20section:49%20edition:prelim));
   •   Pub. L. 117-180, Continuing Appropriations and Ukraine Supplemental Appropriations
       Act of 2023 (https://www.congress.gov/117/bills/hr6833/BILLS-117hr6833enr.pdf);
   •   Pub. L. 117-229, Further Continuing Appropriations and Extensions Act, 2023
       (https://www.congress.gov/117/bills/hr1437/BILLS-117hr1437enr.pdf);
   •   Pub. L. 117-264, Further Additional Continuing Appropriations and Extensions Act,
       2023 (https://www.congress.gov/117/bills/hr4373/BILLS-117hr4373enr.pdf);
   •   Pub. L. 117-328, Consolidated Appropriations Act of 2023
       (https://www.congress.gov/117/bills/hr2617/BILLS-117hr2617enr.pdf); and
   •   Training and Employment Guidance Letter No. 06-22, Work Opportunity Tax Credit
       (WOTC) Work Opportunity Tax Credit Initial Funding Allotments for Fiscal Year 2023,
       and Attachments (https://www.dol.gov/agencies/eta/advisories/tegl-06-22).
   •   Training and Employment Notice No. 16-22, The Employment and Training
       Administration is Implementing GrantSolutions for Grant Award Processing and the
       Payment Management System for Financial Reporting
       (https://www.dol.gov/agencies/eta/advisories/ten-16-22).

7. Attachment(s).
   •  Attachment I: Work Opportunity Tax Credit FY 2023 State Allotments and Balance after
      Dissemination to States under Continuing Resolution (CR)

                        U. S. Department of Labor                             Attachment I
                  Employment and Training Administration
                    Work Opportunity Tax Credits
 FY 2023 State Allotments and Balance after Dissemination to States
                under Continuing Resolution (CR) 1

                        FY 2023 Full     Obligated under       Balance to
                       Year Allotment     CR# 1 (10/1/22         States
                          Amount        through 12/16/22)
        State

Total                     $18,485,000             $3,900,335   $14,584,665

Alabama                       275,882                61,275        214,607
Alaska                         66,000                13,926         52,074
Arizona                       344,353                60,549        283,804
Arkansas                      129,340                28,727         100,613
California                  2,463,406               511,283       1,952,123
Colorado                      299,388                66,496         232,892
Connecticut                   170,021                31,842        138,179
Delaware                       80,968                17,983         62,985
District of Columbia           66,000                13,926         52,074
Florida                       996,142               175,155        820,987
Georgia                       481,902               107,033        374,869
Hawaii                         83,407                14,666         68,741
Idaho                          74,748                16,602         58,146
Illinois                      706,132               156,836        549,296
Indiana                       273,250                60,690        212,560
Iowa                          218,776                48,591        170,185
Kansas                        146,904                25,831        121,073
Kentucky                      353,854                78,593        275,261
Louisiana                     288,003                63,967        224,036
Maine                          66,000                14,478         51,522
Maryland                      398,705                88,554        310,151
Massachusetts                 380,504                84,512        295,992
Michigan                      574,630               127,628        447,002
Minnesota                     288,016                61,790        226,226
Mississippi                   207,390                46,062        161,328
Missouri                      378,621                84,094        294,527
Montana                        66,000                13,926         52,074
Nebraska                      133,374                29,623        103,751
Nevada                        166,333                33,289        133,044
New Hampshire                  66,000                13,926         52,074
New Jersey                    326,817                71,295        255,522
New Mexico                    169,874                34,324        135,550
New York                    1,253,665               233,115       1,020,550
North Carolina                510,810               100,647         410,163
North Dakota                   66,000                13,926          52,074
Ohio                          720,311               147,859         572,452
Oklahoma                      260,321                57,819         202,502
Oregon                        260,465                57,851         202,614
Pennsylvania                  710,605               157,829         552,776
Puerto Rico                    81,519                16,370          65,149
Rhode Island                   71,478                15,876          55,602
South Carolina                250,468                55,630         194,838
South Dakota                   66,000                13,926          52,074
Tennessee                     653,761               145,204         508,557
Texas                       1,310,072               290,974       1,019,098
Utah                          108,459                24,089          84,370
Vermont                        66,000                13,926          52,074
Virginia                      414,000                 91,951       322,049
Washington                    415,914                 92,377       323,537
West Virginia                 118,367                 26,290        92,077
Wisconsin                     320,045                 69,058       250,987
Wyoming                        66,000                 13,926        52,074
  State Total              18,465,000              3,896,115    14,568,885
Virgin Islands                 20,000                  4,220        15,780