FY 2024 WOTC final allotments and backlog funding, Change 2

CLASSIFICATION
   EMPLOYMENT AND TRAINING ADMINISTRATION                WOTC
               ADVISORY SYSTEM                           CORRESPONDENCE SYMBOL
          U.S. DEPARTMENT OF LABOR                       OWI DNPTTA
             Washington, D.C. 20210                      DATE
                                                         May 9, 2024

ADVISORY:       TRAINING AND EMPLOYMENT GUIDANCE LETTER NO. 06-23,
                CHANGE 2

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

FROM:           JOSÉ JAVIER RODRÍGUEZ
                Assistant Secretary

SUBJECT:        Change 2 to Training and Employment Guidance Letter No. 06-23, Work
                Opportunity Tax Credit (WOTC) Initial Funding Allotments for Fiscal Year
                2024

1. Purpose. This Change 2 to Training and Employment Guidance Letter (TEGL) No. 06-23
   conveys the remaining balance for Fiscal Year (FY) 2024 WOTC funding allotments and
   explains application requirements for State Workforce Agencies (SWAs) based on
   appropriated funding. Additionally, this Change 2 TEGL announces 13 states selected to
   receive additional FY 2024 backlog award funding and provides instructions to those states
   on how to proceed. The rest of TEGL No. 06-23 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, 2023, the Employment and Training Administration
          (ETA) issued TEGL No. 06-23, which announced the initial FY 2024 WOTC funding
          allotments of $2,423,384 under the Continuing Appropriations Act, 2024 and Other
          Extensions Act (Pub. L. 118-15). 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 November 17, 2023. On January 5, 2024, ETA issued a Change
          1 to TEGL 06-23, which announced an additional $3,889,243 available for FY 2024
          WOTC funding allotments under a second continuing resolution (CR2) through
          February 2, 2024, under the Further Continuing Appropriations and Other Extensions
          Act, 2024 (Pub. L. 118-22).

          On January 19, 2024, the President signed the Further Additional Continuing
          Appropriations and Other Extensions Act, 2024 (Pub. L. 118-35), providing a third
          CR (CR3) through March 8, 2024, and providing additional WOTC funding in the
   RESCISSIONS                                            EXPIRATION DATE
   None                                                   Continuing

               amount of $1,767,166. On March 1, 2024, the Extension of Continuing
               Appropriations and Other Matters Act, 2024 became law (Pub. L. 118-40), providing
               a fourth CR (CR4) through March 22, 2024, and additional WOTC funding in the
               amount of $707,976. On March 23, 2024, the Further Consolidated Appropriations
               Act, 2024 (Pub. L. 118-47), was signed into law, authorizing the full-year FY 2024
               appropriations. ETA has available grant funds totaling $18,485,000 for normal FY
               2024 operations. This Change 2 TEGL announces the full-year appropriation and
               availability of the remaining balance to the states in the amount of $12,172,373,
               which includes $2,475,142 in combined CR3 and CR4 funding. The state allotment
               amounts are listed in Attachment I, “Work Opportunity Tax Credit Fiscal Year 2024
               State Allotments and Balance after Dissemination to States under Continuing
               Resolution 1 through 2.” ETA requests that SWAs submit applications for funding as
               allotted in Attachment I to this TEGL.

               The Further Consolidated Appropriations Act, 2024 authorized an additional
               $2,500,000 in funding to support states’ efforts in adopting and/or modernizing
               information technology for processing certification requests and reduce WOTC
               processing backlogs. 1 This Change 2 TEGL announces the 13 states selected to
               receive a FY 2024 backlog award, and their respective award amounts, as detailed 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. § 51), and is effective until December 31, 2025,
              under 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 ETA, awards grants to states for
              administration of WOTC.

4. Details. States must enter their state-specific allotment amount from the “Balance to States”
   column provided in Attachment I on their SF-424 Form, Application for Federal Assistance
   (OMB Control No. 4040-004), as their official request for remaining FY 2024 funding. All
   states must submit an electronically signed copy of the SF-424 through Grants.gov. States
   selected for FY 2024 WOTC Backlog Award funding must enter the state-specific award
   amount listed in Section 4 of this TEGL on a separate SF-424 Form.

      Allotment Formula. ETA revised the administrative formula used to calculate states’
      annual allotments for normal WOTC operations, effective for FY 2024 allotments. The
      revised formula changes are detailed below and include an inflation-adjusted increase to
      minimum state funding allotments, as well as revised metrics used in the formula
      methodology. Under the revised formula, state allotments are based on each state’s relative
      share of total certifications issued from the most recently completed fiscal year; each state’s
      relative share of total denials issued for the most recently completed fiscal year; and each
      state’s relative share of the Civilian Labor Force averages for the preceding fiscal year. The

1
    See also S. Rep. No. 118-84, at 19 (2023), https://www.congress.gov/118/crpt/srpt84/CRPT-118srpt84.pdf.

formula will no longer consider each state's relative share of adult recipients of Temporary
Assistance for Needy Families (TANF) for the 12-month period from the second preceding
fiscal year. The revised formula was first published in the Federal Register in February 2023
(88 FR 10540).

While under a CR for FY 2024 appropriations, incremental allotments to states were based
on the prior fiscal year’s formula and allotment percentage. ETA determined CR1 and CR2
WOTC state allotment amounts for FY 2024 by calculating each state’s relative share of full-
year FY 2023 funding, and multiplying each state’s relative share by the total FY 2024 CR
prorated funding amounts, through November 17, 2023 and February 2, 2024, respectively.
Once Congress passed the full-year FY 2024 appropriation, ETA determined FY 2024 state
allotments for normal WOTC operations (‘balance after dissemination to states under CR1
and CR2’), according to the following methodology:

After allocating $36,000 to the U.S. Virgin Islands, ETA distributes the remaining funds to
the SWAs by administrative formula with a $119,000 minimum allotment, and a 95 percent
stop-loss/120 percent stop-gain from the previous year allotment percentage for all states.
Note: In an effort to phase in the increased minimum allotment, which also impacts other
states’ allotments, ETA used the stop-gain provision to gradually increase the minimum
funding allotment amount to reach the $119,000 minimum by FY 2026. The minimum state
allotment increased to $79,131 in FY 2024, which represents a 20 percent share increase
from the FY 2023 minimum of $66,000 and will continue to increase by 20 percent each
fiscal year to reach the $119,000 minimum by FY 2026.

ETA calculates the administrative formula as follows:

a. 40 percent is based on each state’s relative share of total WOTC certifications issued
   from October 1, 2022, through September 30, 2023;

b. 40 percent is based on each state’s relative share of total WOTC denials issued from
   October 1, 2022, through September 30, 2023; and

c. 20 percent is based on each state’s relative share of Civilian Labor Force averages for the
   12-month period from October 1, 2022, through September 30, 2023.

Application Requirements for FY 2024 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 within 30 calendar days from
the issuance date of this TEGL at https://www.grants.gov. For the remaining balances
funding, the opportunity number is ‘ETA-WOTC-TEGL-06-23-C2,’ and for backlog awards
funding, the opportunity number is ‘ETA-WOTC-TEGL-06-23-C2-BACKLOG.’

The official, electronically signed SF-424 Form should be marked as a “Continuation”
application for item #2 and must reflect the state balance amount listed in Attachment I as the
state’s requested estimated funding total in item #18. Grantees must enter the Catalog of
Federal Domestic Assistance Number ‘17.271’ for item #11, and the grantee’s 12-character

Unique Entity Identifier (UEI number) should be listed for item #8c. Each applicant must
have a UEI number available, and it must be registered in the System for Award
Management at SAM.gov before submitting an SF-424 application.

Grantees previously indicated the estimated amount of Indirect Costs to be claimed by the
recipient for FY 2024 expenditures under the SF-424 Form submitted for the CR1 funding
distribution announced in TEGL No. 06-23. Therefore, grantees should NOT resubmit this
information again in item #15, ‘Descriptive Title of Applicant’s Project,’ as part of this SF-
424 application request for remaining balances funding.

All States must submit an electronically signed copy of the SF-424 through Grants.gov.
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].

Award Descriptions. As part of a Federal government-wide effort to describe grant
activities consistently and accurately, ETA uses 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 the WOTC
       program 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 U.S.C. § 51(d)(12)). The statute refers to SWAs as state
       employment security agencies, established in accordance with the Wagner-Peyser
       Act, 29 U.S.C. § 49 et seq.
   •   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 processes, 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
       ETA Grant Officer.

General Administration. With their FY 2024 grant award, SWAs are responsible for
conducting the WOTC activities outlined in the WOTC Statement of Work. (See Attachment
II of TEGL 06-23, Work Opportunity Tax Credit (WOTC) Initial Funding Allotments for
Fiscal Year 2024, available here: https://www.dol.gov/agencies/eta/advisories/tegl-06-23).

FY 2024 WOTC Backlog Awards. ETA intends to distribute WOTC backlog awards to 13
states with the most critical needs for adopting or modernizing information technology for
processing of certification requests, and/or assistance in alleviating processing backlogs.
To inform the selection process, ETA analyzed the following data:

a. FY 2023 backlog total and percentage ratio it represents of the state’s total workload;

b. FY 2023 and FY 2022 financial reports; and

c. Qualitative data based on states’ and/or regional coordinators’ narratives, which explain
   how the states would use this award to make improvements to their existing systems or
   procedures and reduce their backlog, and/or how states have used prior backlog awards to
   make improvements to their systems/reduce processing 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’ existing backlog. Note: ETA did
not consider states that received backlog awards in FY 2023, nor FY 2022 backlog award
grantees who received a no-cost, period of performance extension to their grant project, due
to the overlapping modified grant end date (09/30/2024). ETA analyzed FY 2022 and FY
2023 financial reports to determine a state’s ability to use additional funding and did not
select states with extraordinarily low expenditure rates to receive additional backlog funds.
Finally, ETA reviewed the narratives that states submitted which confirmed states’ backlogs
and information technology modernization needs. The selected states expressed interest in
additional backlog funding to help them attain staff support, enhance/replace their current
partially automated systems, and/or develop automated systems to more efficiently process
certification requests. Based on these factors, ETA identified 13 states with the most critical
need to address system modernization issues and/or existing backlog to receive additional
funding. Based on the availability of $2,500,000 in funds, ETA established three funding
tiers to distribute these awards:

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

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

               $100,000                       $200,000                        $300,000
            Massachusetts                      Arizona                         Georgia
               Maryland                       Arkansas                       New Mexico
           South Carolina                    Louisiana                        Oklahoma
          U.S. Virgin Islands                 Michigan
                                            South Dakota
                                                Utah

   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.

   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.
   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 (26 U.S.C. § 51)
      (https://uscode.house.gov/view.xhtml?path=/prelim@title26/subtitleA/chapter1/subchapt
      erA/part4/subpartF&edition=prelim);
   •  Chapter 4B of Title 29 of the United States Code (Labor)
      (https://uscode.house.gov/view.xhtml?path=/prelim@title29/chapter4B&edition=prelim);
   •  Pub. L. 116-260, Consolidated Appropriations Act, 2021, which authorizes WOTC
      (https://www.congress.gov/116/plaws/publ260/PLAW-116publ260.pdf);
   •  Pub. L. 118-15, Continuing Appropriations Act, 2024 and Other Extensions Act
      (https://www.congress.gov/118/plaws/publ15/PLAW-118publ15.pdf);
   •  Pub. L. 118-22, Further Continuing Appropriations and Other Extensions Act, 2024
      (https://www.congress.gov/118/plaws/publ22/PLAW-118publ22.pdf);
   • Pub. L. 118-35, Further Additional Continuing Appropriations and Other Extensions Act,
      2024 (https://www.congress.gov/118/plaws/publ35/PLAW-118publ35.pdf);
   •  Pub. L. 118-40, Extension of Continuing Appropriations and Other Matters Act, 2024
      (https://www.congress.gov/118/plaws/publ40/PLAW-118publ40.pdf);

   •   Pub. L. 118-47, Further Consolidated Appropriations Act, 2024
       (https://www.congress.gov/118/bills/hr2882/BILLS-118hr2882enr.pdf);
   •   Senate Report 118-84 (https://www.congress.gov/118/crpt/srpt84/CRPT-118srpt84.pdf);
   •   Training and Employment Guidance Letter No. 06-23, Work Opportunity Tax Credit
       (WOTC) Initial Funding Allotments for Fiscal Year 2024, and Attachments
       (https://www.dol.gov/agencies/eta/advisories/tegl-06-23); and
   •   Federal Register (88 FR 10540): Work Opportunity Tax Credit, Request for Comments
       Regarding Proposed Modifications to Procedural Guidance and Administrative Formula.

7. Attachment(s).
   •  Attachment I: Work Opportunity Tax Credit Fiscal Year 2024 State Allotments and
      Balance after Dissemination to States under Continuing Resolution (CR) 1 through 2

                                 U. S. Department of Labor                                     Attachment I
                           Employment and Training Administration
                            Work Opportunity Tax Credit
 FY 2024 State Allotments and Balance after Dissemination to States under Continuing
                            Resolutions (CR) 1 through 2

                        FY 2024 Full     Obligated under    Obligated under     Balance to
                       Year Allotment     CR# 1 (10/1/23    CR# 2 (11/18/23       States
                          Amount        through 11/17/23)   through 2/2/24)
        State

Total                     $18,485,000         $2,423,384         $3,889,243      $12,172,373

Alabama                       284,832              36,168              58,046        190,618
Alaska                         79,131               8,653              13,886         56,592
Arizona                       326,852              45,145              72,452        209,255
Arkansas                      155,074              16,956              27,214        110,904
California                  2,338,208             322,953             518,300      1,496,955
Colorado                      284,172              39,250              62,991        181,931
Connecticut                   161,380              22,290              35,772        103,318
Delaware                       97,077              10,615              17,036         69,426
District of Columbia           79,131               8,653              13,886         56,592
Florida                       945,515             130,594             209,588        605,333
Georgia                       483,737              63,177             101,392        319,168
Hawaii                        100,002              10,935              17,548         71,519
Idaho                          89,620               9,799              15,727         64,094
Illinois                      693,500              92,574             148,570        452,356
Indiana                       259,363              35,823              57,492        166,048
Iowa                          207,657              28,682              46,030        132,945
Kansas                        139,438              19,259              30,909         89,270
Kentucky                      335,870              46,390              74,451        215,029
Louisiana                     294,826              37,757              60,596        196,473
Maine                          79,131               8,653              13,886         56,592
Maryland                      378,442              52,270              83,888        242,284
Massachusetts                 361,166              49,884              80,058        231,224
Michigan                      545,425              75,334             120,902        349,189
Minnesota                     273,378              37,759              60,598        175,021
Mississippi                   196,850              27,189              43,635        126,026
Missouri                      359,378              49,637              79,662        230,079
Montana                        79,131               8,653              13,886         56,592
Nebraska                      126,596              17,485              28,062         81,049
Nevada                        162,766              21,806              34,997        105,963
New Hampshire                  79,131               8,653              13,886         56,592
New Jersey                    354,620              42,846              68,762        243,012
New Mexico                    161,240              22,270              35,742        103,228
New York                    1,189,950             164,355             263,771        761,824
North Carolina                522,119              66,967             107,475        347,677
North Dakota                   79,131               8,653              13,886         56,592
Ohio                          825,339              94,433             151,553        579,353
Oklahoma                      247,091              34,128              54,772        158,191
Oregon                        247,227              34,147              54,802        158,278
Pennsylvania                  674,490              93,160             149,512        431,818
Puerto Rico                    97,738              10,687              17,152         69,899
Rhode Island                   85,699               9,371              15,039         61,289
South Carolina                267,444              32,836              52,699        181,909
South Dakota                   79,131               8,653              13,886         56,592
Tennessee                     620,535              85,708             137,551        397,276
Texas                       1,507,945             171,750             275,639      1,060,556
Utah                          119,000              14,219              22,820         81,961
Vermont                        79,131               8,653              13,886         56,592
Virginia                      392,959              54,275              87,106        251,578
Washington                    394,776              54,526              87,509        252,741
West Virginia                 119,000              15,518              24,904         78,578
Wisconsin                     308,525              41,958              67,337        199,230
Wyoming                        79,131               8,653              13,886         56,592
    State Total            18,449,000           2,420,762           3,885,035     12,143,203
Virgin Islands                 36,000               2,622               4,208         29,170

                                                     I- 1