Initial FY 2025 WOTC administration allotments

CLASSIFICATION
   EMPLOYMENT AND TRAINING ADMINISTRATION               WOTC
               ADVISORY SYSTEM                          CORRESPONDENCE SYMBOL
          U.S. DEPARTMENT OF LABOR                      OWI DNPTTA
                                                        DATE
             Washington, D.C. 20210
                                                        December 5, 2024

ADVISORY:       TRAINING AND EMPLOYMENT GUIDANCE LETTER NO. 08-24

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

FROM:           JOSÉ JAVIER RODRÍGUEZ
                Assistant Secretary

SUBJECT:        Work Opportunity Tax Credit (WOTC) Initial Funding Allotments for Fiscal
                Year 2025

1. Purpose. To convey the Fiscal Year (FY) 2025 initial funding allotments for WOTC
   application requirements for State Workforce Agencies (SWA), based on funding
   appropriated through a continuing resolution through December 20, 2024.

2. Action Requested. Grantees must meet the application requirements detailed in section 4
   within 30 calendar days from the date of this Training and Employment Guidance Letter
   (TEGL) issuance.

3. Summary and Background.

   a. Summary – On September 26, 2024, the President signed into law H.R. 9747, a
      continuing resolution (CR) known as the Continuing Appropriations and Extensions Act,
      2025 (Pub. L. 118-83). The continuing resolution (CR) provides for incremental FY 2025
      grant funding for states’ administration of the WOTC, prorated based on the CR’s
      expiration date of December 20, 2024. The appropriation for WOTC under this CR is
      $4,101,822. Once Congress authorizes final appropriations for FY 2025, or additional
      incremental funding under a subsequent CR, the Employment and Training
      Administration (ETA) will publish a change to this TEGL to announce the incremental or
      full-year allotments and state balances. If applicable, ETA will also announce any
      additional funding appropriated to reduce processing backlogs and assist states in
      adopting or modernizing information technology for processing of certification requests.
      ETA requests that SWAs submit applications for funding as allotted in Attachment I of
      this TEGL.

   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 authorized until December 31, 2025, under the
      Consolidated Appropriations Act, 2021 (Pub. L. 116-260), Division EE, Title I, Section
      113. The U.S. Department of the Treasury, through the Internal Revenue Service (IRS),

  RESCISSIONS                                            EXPIRATION DATE
  None                                                   Continuing

       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 (provided in Attachment I)
   on their SF-424 Form, Application for Federal Assistance (OMB Control No. 4040-0004), as
   their request for initial FY 2025 funding.

   Allotment Formula. ETA determined initial FY 2025 state allotments (provided in
   Attachment I) for normal WOTC operations by calculating each state’s relative share of FY
   2024 funding and multiplying each state’s relative share by the total FY 2025 WOTC CR
   prorated funding amount through December 20, 2024.

   ETA determines FY 2025 state allotments for normal WOTC operations 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 $94,957 minimum allotment and a 95 percent
   stop-loss/120 percent stop-gain from the previous year allotment percentage. We calculate
   the administrative formula as follows:

   a. 40 percent based on each State’s relative share of certifications issued for the most
      recently completed fiscal year’s available data (October 1 through September 30);

   b. 40 percent based on each State’s relative share of the denials issued for the most recently
      completed fiscal year’s available data (October 1 through September 30); and

   c. 20 percent is based on each state’s relative share of Civilian Labor Force (CLF) averages
      for the 12-month period of the most recently completed FY’s available data (October 1
      through September 30).

   Application Requirements for FY 2025 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-08-24’ at https://www.grants.gov, within 30 calendar days from the issuance
   date of this TEGL. The official, electronically signed SF-424 Form should be marked as a
   ‘new’ application for funding and must reflect the 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) for item #8c. Each applicant must have a UEI
   number available, and it must be registered in the System for Award Management
   (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 2025 expenditures, 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
   2024 WOTC grant as an approximate for FY 2025 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 funding
opportunity, applicants may also follow the “Search Grants” link and enter ’ETA-WOTC-
TEGL-08-24’ in the Keyword(s) field to search for the formula funding opportunity. If
applicants encounter a problem with Grants.gov and do not find an answer in 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 award or in online descriptions of the WOTC grants:
    • Purpose: The purpose of this grant is to allow SWAs to administer WOTC per ETA
         guidance and provisions set forth in 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 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.

General Administration. With their FY 2025 grant award, SWAs are responsible for
conducting the WOTC activities outlined in the WOTC Statement of Work (Attachment II).

   As noted above, this TEGL provides incremental funding proportional to funds appropriated
   through the December 20, 2024 expiration date in the Continuing Resolution; the timing and
   amount(s) of subsequent incremental funding depends on future appropriations.

   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 extended the
      authorization for WOTC (https://www.congress.gov/116/plaws/publ260/PLAW-
      116publ260.pdf);
   •  Pub. L. 118-47, Further Consolidated Appropriations Act, 2024
      (https://www.congress.gov/118/plaws/publ47/PLAW-118publ47.pdf);
   •  TEGL No. 06-23, Change 2, Change 2 to Training and Employment Guidance Letter No.
      06-23, Work Opportunity Tax Credit (WOTC) Initial Funding Allotments for Fiscal Year
      2024 (https://www.dol.gov/agencies/eta/advisories/tegl-06-23-change-2); and
   • Pub. L. 118-83, Continuing Appropriations and Extensions Act, 2025
      (https://www.congress.gov/118/plaws/).

7. Attachment(s).
   •  Attachment I: Work Opportunity Tax Credit Fiscal Year 2025 Initial State Allotments
   •  Attachment II: Work Opportunity Tax Credit Statement of Work

                               Work Opportunity Tax Credit           Attachment I
                       FY 2025 Funding under Continuing Resolution

 State                   “CR #1: 10/1/24 thru 12/20/24 (22.19%)"          Total

                                                                          $4,101,822

Alabama                                                                        63,204
Alaska                                                                         17,559
Arizona                                                                        72,528
Arkansas                                                                       34,411
California                                                                   518,848
Colorado                                                                      63,058
Connecticut                                                                    35,810
Delaware                                                                       21,541
District of Columbia                                                           17,559
Florida                                                                      209,810
Georgia                                                                      107,341
Hawaii                                                                         22,190
Idaho                                                                         19,887
Illinois                                                                     153,888
Indiana                                                                        57,553
Iowa                                                                           46,079
Kansas                                                                         30,941
Kentucky                                                                       74,530
Louisiana                                                                      65,422
Maine                                                                          17,559
Maryland                                                                       83,976
Massachusetts                                                                 80,143
Michigan                                                                     121,030
Minnesota                                                                      60,663
Mississippi                                                                    43,681
Missouri                                                                       79,746
Montana                                                                        17,559
Nebraska                                                                       28,092
Nevada                                                                         36,118
New Hampshire                                                                  17,559

                         Work Opportunity Tax Credit           Attachment I
                 FY 2025 Funding under Continuing Resolution

New Jersey                                                               78,690
New Mexico                                                               35,779
New York                                                               264,050
North Carolina                                                         115,858
North Dakota                                                            17,559
Ohio                                                                   183,143
Oklahoma                                                                 54,830
Oregon                                                                   54,860
Pennsylvania                                                           149,669
Puerto Rico                                                             21,688
Rhode Island                                                             19,017
South Carolina                                                           59,346
South Dakota                                                             17,559
Tennessee                                                              137,697
Texas                                                                  334,613
Utah                                                                    26,406
Vermont                                                                  17,559
Virginia                                                                 87,198
Washington                                                               87,601
West Virginia                                                            26,406
Wisconsin                                                                68,462
Wyoming                                                                  17,559
Virgin Islands                                                            7,988

                                                                                  Attachment II

                           Work Opportunity Tax Credit (WOTC)
                                      Statement of Work
State Workforce Development Agencies, also known as State Workforce Agencies (SWA), must
use funds for the Fiscal Year to conduct the following mandatory activities:

1. Adhere to Employment and Training Administration (ETA) guidance, and provisions of the
   Internal Revenue Code of 1986, Section 51, as amended, in administering the Work
   Opportunity Tax Credit (WOTC) certification process. Law designates the SWA as the only
   agency that can issue a Certification (26 U.S.C § 51(d)(12)). (That statute refers to SWAs as
   State employment security agencies, established in accordance with 29 U.S.C. § 49 et seq.).
2. Designate a State Coordinator who oversees the WOTC administration for each state grant
   and attends monthly technical assistance grantee calls hosted by ETA’s National and/or
   Regional Offices.
3. Determine eligibility of individuals as members of targeted groups, on a timely basis, and
   issue determinations (certifications, denials, or notices of invalidation for invalid
   certifications that were previously issued) on a timely and consistent basis, and in accordance
   with the national guidelines, policies and procedures set forth by ETA.
4. Establish and implement a standard operating procedures (SOP) or operating manual for
   consistent administration of the WOTC program which includes an appeals resolution
   process in accordance with the guidelines provided by ETA.
5. Develop a backlog reduction plan that includes an estimated timeline to eliminate the state’s
   existing backlog, based on current policies and procedures, and efforts to modernize
   information technology for processing certification requests. SWAs must notify their ETA
   Regional Coordinator of backlog reduction work plans prior to plan implementation.
6. Establish and maintain appropriate quality review processes, record keeping procedures, and
   reporting capability related to the orderly management of WOTC certification requests in
   accordance with the policies and procedures set forth by ETA.
7. Establish and maintain an orderly system for regularly verifying the eligibility of a random
   sample of individuals certified under WOTC on a quarterly basis, and initiating effective
   corrective action when appropriate, as indicated by results of such quality control activities.
Additionally, SWAs are strongly encouraged to use the funds to conduct the following activities:
 •   Adopt information technology (i.e., systems applications, software, etc.) to process
     certification requests more efficiently, or make modernization improvements to their
     existing systems or procedures to increase efficiency and reduce any processing backlog.
 •   Develop working agreements, such as Memoranda of Understanding (MOU) or other
     formal agreements, with partner agencies in the American Job Center network (also known
     as the One-Stop Career Center system) to coordinate efforts to promote WOTC to
     employers, job seekers and other Workforce Innovation and Opportunity Act partners.
 •   Develop working agreements such as MOUs or other formal agreements with other SWAs
     for the timely and orderly processing of “out of state” certification requests requiring

                                                                                      Attachment II

         SWAs to provide available documentation and/or records for WOTC applicants (new hires)
         working remotely or relocating and working in another state.
    •    Develop working agreements, such as MOUs or other formal agreements, with Federal,
         State or local partnering agencies (i.e., Vocational Rehabilitation Agencies, Veterans
         Affairs Administration and related organizations, Employment Networks, and other local
         workforce areas), for the purposes of expediting verification of targeted group eligibility
         information submitted in certification requests, and issuing Conditional Certifications,
         where appropriate. SWAs are expected to train participating agency staff, and provide
         monitoring and technical assistance to these agencies, as appropriate, for conducting
         targeted group preliminary eligibility determinations and issuing Conditional Certifications.

Other Grant Agreement Conditions
By entering into this agreement, the SWA agrees to the following conditions:
•       SWAs must assure that all data exchanges conducted through or during the course of
        performance of this grant will be conducted in a manner consistent with applicable Federal
        law and TEGL No. 39-11, issued on June 28, 2012. All such activity conducted by ETA
        and/or recipients will be performed in a manner consistent with applicable state and Federal
        laws.

•       SWAs must fulfill performance and financial reporting requirements under the grant
        agreement.