2013 WOTC reauthorization and veteran groups

Accessible letter PDF: https://www.dol.gov/sites/dolgov/files/ETA/advisories/TEGL/2013/TEGL_24_12_Acc.pdf

CLASSIFICATION
   EMPLOYMENT AND TRAINING ADMINISTRATION
                                                       WOTC
               ADVISORY SYSTEM
                                                       CORRESPONDENCE SYMBOL
          U.S. DEPARTMENT OF LABOR
                                                       OWI
             Washington, D.C. 20210                    DATE
                                                                 May 1, 2013


ADVISORY:      TRAINING AND EMPLOYMENT GUIDANCE LETTER NO. 24-12

TO:            STATE WORKFORCE ADMINISTRATORS
               STATE WORKFORCE AGENCIES
               STATE WORKFORCE LIAISONS

FROM:          JANE OATES /s/
               Assistant Secretary

SUBJECT:       Reauthorization of the Work Opportunity Tax Credit Program and Continuation
               of the VOW to Hire Heroes Act Veteran Groups and Provisions

1. Purpose. To inform the State Workforce Agencies (SWAs) of the retroactive legislative
   reauthorization of the Work Opportunity Tax Credit (WOTC) for non-veteran target groups
   and the Empowerment Zones that expired on December 31, 2011, and continuation of the
   WOTC for veteran groups, including the VOW to Hire Heroes Act of 2011 (VOW Act)
   expanded veteran groups. To provide guidance to SWAs, participating agencies and other
   Federal and State partners for processing WOTC certification applications.

2. References.
   • Sections 309 and 327 of the American Taxpayer Relief Act of 2012 (Pub. L. 112-240);
   • Section 261 of the VOW to Hire Heroes Act of 2011 (Pub. L. 112-56) (VOW Act);
   • The American Recovery and Reinvestment Act of 2009 (Pub. L. 111-5) (Recovery Act);
   • Internal Revenue Code of 1986, Section 51, as amended;
   • Internal Revenue Service (IRS) Notice 2013-14 (March 7, 2013);
   • IRS Notice 2012-13 (February 27, 2012);
   • Training and Employment Guidance Letter (TEGL) No. 10-12, Guidance for Work
      Opportunity Tax Credit (WOTC) American Recovery and Reinvestment Act of 2009
      (Recovery Act) Two Expired Target Groups' Applications;
   • TEGL No. 4-12, Revised Forms for the WOTC Program for Implementation of the
      Veterans Opportunity to Work to Hire Heroes Act of 2011 (VOW Act) Provisions and
      Other Program Changes;
   • TEGL No. 30-11, Information and Guidance on the Work Opportunity Tax Credit
      Provisions Introduced by the Veterans Opportunity to Work (VOW) to Hire Heroes Act of
      2011, and IRS Guidance on Submission of Form 8850 (May 24, 2012);
   • TEGL No. 15-11, Work Opportunity Tax Credit (WOTC) Procedural Guidance During
      Authorization Lapse for Non-veteran WOTC Target Groups (January 12, 2012);
   • ETA Handbook No. 408, November 2002, Third Edition (the Handbook); and
   • August 2009 Addendum to the Handbook.

 RESCISSIONS                                          EXPIRATION DATE
 None                                                 Continuing

3. Background. The VOW Act amended and expanded the definition of the qualified veteran
   target group. Specifically, the VOW Act extended the availability of existing veteran
   categories and amended the definition of “qualified veteran” by adding two new unemployed
   veteran categories: a) veterans certified as having aggregate periods of unemployment of at
   least 4 weeks but less than 6 months in the year prior to being hired, and b) veterans certified
   as having aggregate periods of unemployment of 6 months or more in the year prior to being
   hired. The VOW Act also significantly increased the amount of qualified wages taken into
   account for purposes of calculating the credit for certain veteran groups, which resulted in
   certain increased tax credits available to employers that hired individuals from this group.
   Finally, the VOW Act also made a reduced WOTC available to certain tax-exempt
   organizations for hiring qualified veterans. The Employment and Training Administration
   (ETA) provided guidance in TEGL No. 30-11 regarding eligibility for the amended and
   expanded veteran target group and for the tax-exempt organizations permitted to claim the
   WOTC for hiring veterans. The provisions in the VOW Act applied to new employees who
   began working for an employer on or after November 22, 2011, and before January 1, 2013.

   On December 31, 2011, the legislative authority for all WOTC non-veteran target groups
   expired. ETA provided guidance in TEGL No. 15-11 regarding requests for certifications for
   the non-veteran target groups submitted to SWAs during the authorization lapse. This
   guidance directed states to continue accepting applications for employees in these groups
   hired on or after January 1, 2012, but to postpone final processing of those certification
   requests pending further legislative action and guidance.

4. Overview of New Legislative Provisions. On January 2, 2013, President Obama signed the
   American Taxpayer Relief Act of 2012. Section 327 reauthorizes the Empowerment Zones
   and Section 309 reauthorizes the extension of the WOTC program.

   In summary, this legislation:
       • Continues the uninterrupted implementation of all veteran target groups, including
         those implemented under the VOW Act through December 31, 2013.
       • Retroactively reauthorizes all WOTC non-veteran target groups from December 31,
         2011 through December 31, 2013.
       • Provides legislative authorization for Empowerment Zones from December 31, 2011
         through December 31, 2013. (See Section 10 of this TEGL for more detailed
         information on the status of Empowerment Zones).
       • Does not reauthorize the Recovery Act disconnected youth and Recovery Act
         unemployed veteran target groups that expired at the end of 2010.

5. Veteran Target Groups. The following WOTC veteran groups and categories were
   extended, expanded or created under the VOW Act, and are now extended through the
   American Taxpayer Relief Act. The VOW Act’s provisions apply to individuals who begin
   to work for an employer on or after November 22, 2011, and before January 1, 2014. The
   groups are:


       • Veterans receiving Supplemental Nutritional Assistance Program (SNAP) (formerly
         food stamps) benefits,
       • Veterans with a service-connected disability hired within 1 year of leaving active duty,
       • Veterans with a service-connected disability unemployed for at least 6 months,
       • Veterans unemployed for at least 4 weeks, and
       • Veterans unemployed for at least 6 months.

   Note. For additional information on the eligibility requirements for these veteran groups,
   visit the following page on the WOTC Website:
   http://www.doleta.gov/business/incentives/opptax/eligible.cfm.

6. Tax-Exempt Organizations. The VOW Act made WOTC available to qualified tax-exempt
   organizations. Specifically, the Act amended the Internal Revenue Code to provide that
   qualified tax-exempt organizations that hired qualified veterans could claim a credit against
   the employer’s share of social security tax. This provision remains in effect and the
   reauthorization of WOTC means that qualified tax-exempt organizations may continue to
   claim WOTC for qualified veterans that begin work for the organization before January 1,
   2014. This provision only pertains to qualified veterans and the tax credit is not available for
   tax-exempt organizations for the hiring of non-veteran target groups. More information on
   tax-exempt organizations is available in TEGL No. 30-11 and IRS Notice 2012-13.

7. Transition Relief for Employer Submission of Form 8850 for Qualified Veterans.
   Section IV(2) of IRS Notice 2013-14 provides employers, including qualified tax-exempt
   organizations, with transition relief from the 28-day filing requirement by providing
   additional time to file IRS Form 8850 with the SWAs. Under the Notice, an employer who
   hires a qualified veteran on or after January 1, 2013, and on or before March 31, 2013, is
   deemed to satisfy the 28-day filing requirement if the employer submits IRS Form 8850 to
   the SWA to request certification not later than April 29, 2013. The transition relief is not
   available to employers that hire qualified veterans after March 31, 2013, and before January
   1, 2014, in which case the regular 28-day rules applies.

8. Non-Veteran Target Groups. The following WOTC non-veteran target groups were
   reauthorized retroactively through December 31, 2013. ETA provided interim instructions to
   SWAs in early January to indicate that they may finish processing and begin issuing
   determinations on applications for non-veteran groups received during the legislative hiatus
   (those instructions are available on the following page on the WOTC Web site:
   http://www.doleta.gov/business/incentives/opptax/documents/interimInstructions2013.pdf).

   The retroactive extension applies to individuals who began to work for an employer on or
   after December 31, 2011, and before January 1, 2014. The eight non-veteran target groups
   are:

       • Long-term Temporary Assistance for Needy Families (TANF) recipients,
       • Short-term TANF recipients,
       • 18-39 year-old SNAP (formerly food stamps) recipients,


       • 18-39 year-old designated community residents residing in EZs (See Section 10 of
         this TEGL for more detailed information on the status of Empowerment Zones),
       • Vocational Rehabilitation referrals,
       • Ex-felons,
       • Supplemental Security Income recipients, and
       • Summer youth employees (See Section 10 of this TEGL for more detailed
         information on the status of Empowerment Zones).

   Note. For additional information on the eligibility requirements for these non-veteran
   groups, visit the following page on the WOTC Web site:
   http://www.doleta.gov/business/incentives/opptax/eligible.cfm.

9. Transition Relief for Employer Submission of Form 8850 for Non-Veteran Groups.
   Section IV(1) of IRS Notice 2013-14 provides taxable employers with transition relief from
   the 28-day filing requirement by providing additional time to file IRS Form 8850 with the
   SWAs. Under the Notice, a taxable employer who hires a qualified member of any of the
   eight non-veteran target groups on or after January 1, 2012, and on or before March 31, 2013,
   is deemed to satisfy the 28-day filing requirement if the employer submits IRS Form 8850 to
   the SWA to request certification not later than April 29, 2013. The transition relief is not
   available to an employer that hires a qualified non-veteran target group member after March
   31, 2013, and before January 1, 2014, in which case the regular 28-day rule applies.

10. Empowerment Zones. According to the current instructions to IRS Form 8850, while the
    American Taxpayer Relief Act of 2012 did provide legislative reauthorization for the
    Empowerment Zone (EZ) designation, to extend the designations, state and local
    governments must amend their nominations for designation to change the termination date to
    December 31, 2013. These designations expired at the end of 2011. The IRS is currently
    working with the U.S. Departments of Agriculture and Housing and Urban Development to
    provide guidance on amending nominations for designation.

   SWAs are instructed to continue to accept certification requests for the Summer Youth and
   Designated Community Resident (DCR) groups, which require residence in the expired EZs,
   but to hold off on processing those requests pending further guidance from ETA. It is
   expected that SWAs will be able to process the pending applications as soon as state and
   local governments amend their nominations for designation to change the termination date to
   December 31, 2013. SWAs may continue to process timely filed certification requests for
   eligible members of the DCR target group who reside in Rural Renewal Counties.

11. ETA Program Forms. Through separate guidance, ETA will issue revised versions of the
    following three processing forms: 1) ETA Form 9061, Individual Characteristics Form; 2)
    ETA Form 9062, Conditional Certification Form (and its Spanish version); and 3) ETA
    Form 9058, Certification Workload and Characteristics of Certified Individuals Form.
    These forms and their instructions are being revised to reflect the reauthorization of the
    WOTC program and to add the summer youth target group. SWAs can continue to use the
    current versions of these forms until this guidance is issued.


12. IRS Form 8850. On April 1, 2013, the IRS released a substantively unchanged Form 8850
    and revised instructions for that form. The form and instructions are available at:
    www.irs.gov/form8850.

13. Action Requested. SWA administrators are requested to:

   •   Provide this information to all appropriate WOTC program staff, employers and their
       representatives, participating agencies and other interested partners; and

   •   Ensure that the WOTC State Coordinators and participating agencies implement the
       requirements outlined in this TEGL effective the date the guidance is issued.

14. Inquiries. Questions regarding this guidance should be directed to the appropriate WOTC
    Regional Coordinator listed on the WOTC program Web site at: http://www.doleta.gov/wotc.

15. Attachment.
    • IRS Notice 2013-14 (March 7, 2013)

Attachment 1: https://www.dol.gov/sites/dolgov/files/ETA/advisories/TEGL/2013/TEGL_24_12_Att.pdf

Notice 2013-14


I.    PURPOSE

      This notice provides guidance on § 309 of the American Taxpayer Relief Act of

2012 (the Act), Pub. L. No. 112-240, enacted on January 3, 2013, and transition relief for

employers claiming the Work Opportunity Tax Credit (the WOTC) under §§ 51 and 3111(e)

of the Internal Revenue Code (the Code), as extended by the Act. Section 309 of the Act

amended § 51 to extend the WOTC through December 31, 2013, for taxable employers

and for qualified tax-exempt organizations. Specifically, this notice provides employers

that hire members of targeted groups additional time beyond the 28-day deadline in

§ 51(d)(13) of the Code for submitting Form 8850, Pre-screening Notice and Certification

Request for the Work Opportunity Credit, to Designated Local Agencies (DLAs).

II.   BACKGROUND

      Section 51 of the Code provides for the WOTC for employers that hire individuals

who are members of targeted groups. An employer must obtain certification that an indi-

vidual is a targeted group member before the employer may claim the credit. Certification

of an individual's targeted group status is obtained from a DLA. A DLA is a State employ-

ment security agency established in accordance with 29 U.S.C. §§ 49-49n. An employer

must submit Form 8850 to the DLA not later than the 28th day after the individual begins

work for the employer.


       The Returning Heroes and Wounded Warriors Work Opportunity Tax Credits, con-

tained in § 261 of the VOW to Hire Heroes Act of 2011, Tit. II, subtitle D, of Pub. L. No.

112-056 (the VOW Act), enacted on November 21, 2011, amended § 51 of the Code to

extend and expand the WOTC to employers hiring certain qualified veterans (as defined in

§ 51(d)(3)) before January 1, 2013. The VOW Act did not extend the WOTC for targeted

group members other than qualified veterans. Thus, the WOTC was not available with re-

spect to targeted group members who began work after December 31, 2011, other than

qualified veterans.


       The VOW Act also amended §§ 52 and 3111 to make a reduced WOTC available to

organizations described in § 501(c) and exempt from taxation under § 501(a) ("qualified

tax-exempt organizations") as a credit against the employer share of social security tax

imposed under § 3111(a). The reduced credit is available for qualified tax-exempt organi-

zations that hire qualified veterans for which the WOTC would have been allowable under

§ 51 if the organization were not a qualified tax-exempt organization. The credit was first

available to qualified tax-exempt organizations for qualified veterans hired on or after No-

vember 21, 2011. For additional guidance on the WOTC for qualified tax-exempt organi-

zations and changes made to the WOTC under the VOW Act, see Notice 2012-13, 2012-9

I.R.B. 421.

       Notice 2012-13 provided transition relief for all employers that hired any qualified

veteran described in § 51(d)(3) of the Code on or after November 22, 2011, and before

May 22, 2012. Those employers were considered to have satisfied the requirements of

§ 51(d)(13)(A)(ii) if they submitted the completed Form 8850 to the DLA to request certifi-

cation not later than June 19, 2012.


III.   AMENDMENTS MADE BY THE ACT

       The Act extends the WOTC through December 31, 2013, for taxable employers hir-

ing individuals in targeted groups as defined in § 51(d)(1) through (d)(10) of the Code, and

for qualified tax-exempt organizations hiring qualified veterans as defined in § 51(d)(3) of

the Code. This extension does not apply to the “unemployed veterans” or “disconnected

youth” targeted group categories (as defined in § 51(d)(14) of the Code), which had ex-

pired as of January 1, 2011. As mentioned above, during 2012, the WOTC was available

for employers hiring qualified veterans, and not for hiring members of other targeted

groups. Thus, the Act retroactively extended the availability of the WOTC for taxable em-

ployers who hired individuals from those other targeted groups in 2012.

       Because the Act did not amend §§ 52 or 3111(e), qualified tax-exempt organiza-

tions may continue to claim the WOTC under § 3111(e) only for hiring qualified veterans,

and not for hiring any other targeted group members.

IV.    TRANSITION RELIEF

       Section 51(d)(13)(A) of the Code provides that an individual shall not be treated as

a member of a targeted group unless (1) on or before the day the individual begins work,

the employer obtains certification from the DLA that the individual is a member of a tar-

geted group; or (2) the employer completes a pre-screening notice (Form 8850) on or be-

fore the day the individual is offered employment and submits such notice to the DLA to

request certification not later than 28 days after the individual begins work.

       Because the WOTC was extended retroactively for 2012 for members of targeted

groups (other than qualified veterans), employers need additional time to comply with the


requirements of § 51(d)(13)(A) for those targeted groups. Similarly, because the WOTC

for qualified veterans was set to expire for qualified veterans hired after December 31,

2012, employers that hire qualified veterans after December 31, 2012, may also need ad-

ditional time to comply with the requirements of § 51(d)(13)(A). For these reasons, the

Treasury Department and the IRS have determined that it is appropriate to provide em-

ployers with additional time to file Form 8850 with a DLA.

   (1) Transition relief for taxable employers that hire members of targeted groups (other

       than qualified veterans)

       A taxable employer that hires a member of a targeted group (as defined in

§ 51(d)(2) through (10), other than a qualified veteran described in § 51(d)(3)) on or after

January 1, 2012, and on or before March 31, 2013, will be considered to have satisfied the

requirements of § 51(d)(13)(A)(ii) if it submits the completed Form 8850 to the DLA to re-

quest certification not later than April 29, 2013.

   (2) Transition relief for all employers that hire qualified veterans

       An employer that hires any qualified veteran described in § 51(d)(3) on or after

January 1, 2013, and on or before March 31, 2013, will be considered to have satisfied the

requirements of § 51(d)(13)(A)(ii) if it submits the completed Form 8850 to the DLA to re-

quest certification not later than April 29, 2013.

DRAFTING INFORMATION

       The principal authors of this notice are Shoshanna Tanner and Ligeia Donis of the

Office of Division Counsel/Associate Chief Counsel (Tax Exempt and Government Enti-

ties). For further information regarding the WOTC, contact Ms. Tanner at (202) 622-6080


(not a toll-free number). For further information on how to claim the WOTC on behalf of

tax-exempt organizations, contact Ms. Donis at (202) 622-6040 (not a toll-free number).