FY 2026 Work Opportunity Tax Credit administration allotments

CLASSIFICATION
   EMPLOYMENT AND TRAINING ADMINISTRATION                 WOTC
               ADVISORY SYSTEM                            CORRESPONDENCE SYMBOL
          U.S. DEPARTMENT OF LABOR                        OWIDNPTTA
                                                          DATE
             Washington, D.C. 20210
                                                          April 28, 2026

ADVISORY:       TRAINING AND EMPLOYMENT GUIDANCE LETTER NO. 09-25

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

FROM:           HENRY MACK, ED.D 
                Assistant Secretary

SUBJECT:        Work Opportunity Tax Credit Initial Funding Allotments for Fiscal Year 2026

1. Purpose. To convey the Fiscal Year (FY) 2026 funding allotments for the Work
   Opportunity Tax Credit (WOTC) and application requirements for State Workforce Agencies
   (SWAs) for fiscal year 2026.

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

3. Summary and Background.

   a. Summary- On February 2, 2026, the President signed Public Law No. 119-75, the
      Consolidated Appropriations Act, 2026. The funding available under the appropriation
      for administration of WOTC is $15,203,383. 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 was 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), 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.

       Congress has not extended the legislative authority for employers to claim WOTC credits
       for new hires who begin work beyond the current expiration date of December 31, 2025.
       With respect to new WOTC certification requests that employers may submit for new
       hires who start work on or after January 1, 2026, ETA reminds SWAs that WOTC
       Procedural Guidance in TEGL 16-20, Change 1 says: "States can continue to review and
       prepare WOTC certification requests when there is a WOTC authorization lapse but may
       not issue a certification." Additionally, as part of the review and preparation process for

   RESCISSIONS                                             EXPIRATION DATE
   None                                                    Continuing

       certification requests, states may send employers and consultants Needs letters and
       Denial Pending More Information letters but may not issue a determination.

       For WOTC certification requests that employers submit or have submitted for new hires
       who started work on or before December 31, 2025, including backlogged requests,
       SWAs must use allotted WOTC funds to process and certify such requests in accordance
       with WOTC procedural guidance.

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 FY 2026 funding.

   A. Allotment Formula. ETA determined FY 2026 state allotments (provided in
      Attachment I) 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:

       i. 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);

       ii. 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

       iii. 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).

   B. Application Requirements for FY 2026 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-09-25’ 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 in item #2 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 2026 expenditures, if any, as a sentence for item #15, ‘Descriptive Title
       of Applicant's Project.’ For example: “Indirect Costs for this award are estimated at

   $19,000.” Grantees may use the amount of indirect costs reported against their FY 2025
   WOTC grant as an approximate for FY 2026 indirect cost expenditures. 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-09-25’ 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].

C. 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.

   D. General Administration. With their FY 2026 grant award, SWAs are responsible for
      conducting the WOTC activities outlined in the WOTC Statement of Work (Attachment
      II).

   E. Reporting Requirements.
      i. 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.
      ii. Quarterly Performance Report – SWAs must use the web-based ‘State Workforce
          Agency Reporting and Analysis System’ (SWARAS) application 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);
   •  Wagner-Peyser Act, 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 provides program
      authorization for WOTC through December 31, 2025
      (https://www.congress.gov/116/plaws/publ260/PLAW-116publ260.pdf); and
   • Pub. L. 119-75, Consolidated Appropriations Act, 2026
      (https://www.congress.gov/119/bills/hr7148/BILLS-119hr7148enr.pdf).

7. Attachments.
   •  Attachment I: Work Opportunity Tax Credit Fiscal Year 2026 State Allotments
   •  Attachment II: Work Opportunity Tax Credit Statement of Work

                                                                                   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
   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.
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.