WOTC long-term unemployment eligibility correction

CLASSIFICATION
   EMPLOYMENT AND TRAINING ADMINISTRATION                   WOTC
               ADVISORY SYSTEM                              CORRESPONDENCE SYMBOL
          U.S. DEPARTMENT OF LABOR                          OWI
             Washington, D.C. 20210                         DATE
                                                            February 16, 2018

ADVISORY:       TRAINING AND EMPLOYMENT GUIDANCE LETTER NO. 25-15,
                Change 2

TO:             STATE WORKFORCE ADMINISTRATORS
                STATE WORKFORCE DEVELOPMENT AGENCIES
                STATE WORKFORCE LIAISONS
                STATE AND LOCAL WORKFORCE BOARDS AND CHAIRS
                STATE WORKFORCE OPPORTUNITY TAX CREDIT
                COORDINATORS
                AMERICAN JOB CENTERS

FROM:           ROSEMARY LAHASKY /s/
                Deputy Assistant Secretary

SUBJECT:        Work Opportunity Tax Credit 2015 Reauthorization Training and
                Employment Guidance Letter 25-15, Change 2

1. Purpose.
   This Training and Employment Guidance Letter (TEGL) 25-15, Change 2
   makes a technical correction to the eligibility determination instructions for the
   Qualified Long-term Recipient (LTUR) target group by replacing the text “the date the
   job applicant signed the IRS Form 8850” with “the day before the job applicant started
   the job (employment start date minus one day), or, if earlier, the date the job applicant
   provided the information on the IRS Form 8850” in Section 6 a. and Section 12.
   Additionally, this guidance removes the text, “revised May 2016,” for the Work
   Opportunity Tax Credit (WOTC) Forms in Section 10 and Section 13. Shortly after the
   Employment and Training Administration (ETA) issued TEGL 25-15, Change 1, the
   Office of Management and Budget (OMB) under the Paperwork Reduction Act (PRA)
   approved the WOTC Forms through January 31, 2020 as noted in Section 11. Lastly,
   this guidance updates Section 15 to reflect the technical correction for the eligibility
   determinations instructions for LTUR target group and provide instructions for
   reprocessing LTUR applications.

2. References.
    Work Opportunity Tax Credit 2015 Reauthorization Training and Employment
      Guidance Letter 25-15, Change 1;
    Sections 142 and 171 of the Protecting Americans from Tax Hikes (PATH Act) of
      2015 (Pub. L 114-113);
    Internal Revenue Code of 1986, Section 51, as amended (the Code);
    Internal Revenue Service (IRS) Notice 2013-14;

 RESCISSIONS                                             EXPIRATION DATE
 TEGL 25-15, Change 1                                    Continuing

     IRS Notice 2012-13;
     IRS Notice 2016-22;
     IRS Notice 2016-28;
     IRS Notice 2016-40; and
     PATH Act - WOTC Interim Instructions for the State Workforce Agencies.

3. Background and Overview.
   The Protecting Americans from Tax Hikes Act of 2015 (the PATH Act) extends and
   modifies the WOTC Program (Section 142) and the Empowerment Zones (EZs) (Section
   171). In summary, the PATH Act:
    Retroactively reauthorizes the following WOTC program target groups for a five-year
      period, from January 1, 2015 to December 31, 2019:
          o a qualified IV-A (TANF) recipient,
          o a qualified veteran,
          o a qualified ex-felon,
          o a designated community resident,
          o a vocational rehabilitation referral,
          o a qualified summer youth employee,
          o a qualified supplemental nutrition assistance program (SNAP) benefits
              recipient,
          o a qualified SSI recipient, and
          o a long-term family assistance (TANF) recipient.
    Provides for an extension of the Empowerment Zones for a two-year period, from
      December 31, 2014 to December 31, 2016.
    Introduces a new target group, LTUR, for new hires that begin to work for an
      employer on or after January 1, 2016 through December 31, 2019.

4. Procedural Guidance for 2015 Hiatus New Hires.
   a. For State Workforce Development Agencies, also known as State Workforce
      Agencies (SWA), that processed all certification requests received during the
      2015 hiatus. SWAs that processed all certification requests received during the 2015
      hiatus, and filed but did not issue those determinations, should now issue those final
      determinations (certifications and denials) to employers or their representatives.

  b. For SWAs that did not process all certification requests received during the 2015
     hiatus. SWAs that received and filed, but did not process or conduct all required
     eligibility determination activities for certification requests received during the 2015
     hiatus should conduct all required eligibility determination activities for certification
     requests received during the hiatus, and issue all final determinations (certifications
     and denials) to employers or their representatives.

      Please see Section 5 of this TEGL for more detailed information on the status of the
      Empowerment Zones.

5. Empowerment Zones.
   The PATH Act provides an extension of the Empowerment Zones designations for two-
   years through December 31, 2016. Therefore, termination dates in State and Local
   Government Empowerment Zones designations must be extended from December 31,
   2014 to December 31, 2016. Please see IRS Notice 2016-28 for additional guidance on
   the extension of Empowerment Zone designations at: https://www.irs.gov/pub/irs-drop/n-
   16-28.pdf.

6. Eligibility Determinations for Qualified Long-Term Unemployment Recipient.
   A qualified long-term unemployment recipient is any individual who on the day before
   the individual begins work, or, if earlier, the day the individual completes the IRS Form
   8850 as a prescreening notice in accordance with the certification provisions described in
   §51(d)(13)(A)(ii) of the Code, is in a period of unemployment that is: (i) not less than 27
   consecutive weeks; and (ii) includes a period (which may be less than 27 weeks) in which
   the individual received unemployment compensation under State or Federal law (see IRS
   Notice 2016-22 and IRS Notice 2016-40).

  a. To determine whether the individual has been in a period of unemployment for at
     least 27 weeks as described above, State Workforce Development Agencies, also
     called State Workforce Agencies (SWA), will need to use unemployment insurance
     (UI) wage records. To verify that the individual has been in a period of
     unemployment for at least 27 weeks, SWAs must verify that the individual has had
     zero UI wages for the two most recent completed quarters prior to the day before the
     job applicant started the job (employment start date minus one day), or, if earlier, the
     date the job applicant provided the information on the IRS Form 8850. SWAs are
     required to use the employment start date minus one day or the date the applicant
     provided information on the IRS Form 8850, based upon which is more favorable to
     the applicant in determining eligibility.

  b. To determine whether the individual has received unemployment compensation under
     State or Federal law during a period of unemployment, SWAs will need to use UI
     claims records to verify that the individual has received unemployment
     compensation for all or part of the period of unemployment that is at least 27 weeks.
     Note: An individual is not required to be receiving unemployment compensation at
     the time they are hired. ETA recognizes that many individuals may have an
     unemployment period that is longer than 27 weeks; and in such cases, will have
     exhausted their unemployment compensation prior to the date the job applicant
     signed the IRS Form 8850. In such cases, the State UI agency will have records,
     either in the current database or in archives, of the individual’s claim series. If the
     individual filed a claim and was denied benefits, the State UI agency will have that
     record, too.

  When the UI data, UI wage records and/or UI claim records are available, SWAs should
  issue those final determinations (certifications and denials) to employers or their
  representatives based on the available data.

  When there is an absence of UI wage records and/or UI claims records (in other words, if
  the UI data is not available to determine whether the individual has had zero UI wages
  and has received unemployment compensation), SWAs may use the ETA Form 9175,
  Long-Term Unemployment Recipient Self-Attestation Form (SAF), provided by the new
  hire to make final determinations (certifications and denials). Further technical assistance
  will be provided on this topic.

  Note: To facilitate the SWAs’ eligibility determination and verification processes for this
  target group, ETA created a national SAF. A completed and signed SAF must be filed
  with a SWA as part of each certification request (accompanying IRS Form 8850 and ETA
  Forms 9061 or 9062) for this group or, if filed separately, within a reasonable period of
  time, as determined by the SWA.

7. Accessing Unemployment Insurance Claims and Wage Records.
   SWAs that have not already done so must negotiate with their State UI agency to
   determine the most efficient and effective way to access the UI claims records and wage
   data. Claim and wage information is required to be kept confidential by the State UI
   agency, and may only be disclosed under certain circumstances. Regulations at 20 CFR
   603.5(e) permit the disclosure of unemployment compensation information “to a public
   official for use in the performance of his or her official duties.” Since the SWA is a
   public official, informed consent is not necessary.

  Note: Each SWA will have to enter into an agreement with its State’s UI agency that
  includes a provision for protecting the data from unauthorized access (20 CFR 603.9) and
  provides for reimbursement for costs (20 CFR 603.8) except as set out below. The
  agreement must meet the terms and conditions set forth in 20 CFR 603.10(b).

  To obtain information from the State UI agency, SWAs must provide a Social Security
  Number for each participant of whom a claim or wage data is sought. In those instances,
  where the SWAs anticipate a large volume of requests for data, the State UI agency may
  require that the request be made electronically.

  State UI agencies are not required to obtain reimbursement for providing the requested
  information if the amount of staff time in responding to the request is incidental and only
  nominal processing costs are involved in making the disclosure. SWAs that choose to
  use informed consent releases from individuals will need to work with employers to
  ensure that informed consent releases are collected at the time of hire. Because
  confidentiality laws vary by State, SWAs should work with their State UI agencies to
  determine the necessary form and content of the informed consent release.

8. Qualified Wages and Tax Credit Caps Applicable to the Long-Term Unemployment
   Recipient Group.
   The 1996 legislative “qualified wages” provisions that apply to most adult non-veteran
   target groups also apply to the new target group, as do the amounts of the tax credit
   employers can claim for certified new hires. Qualified wages for certified new hires
   under the Long-Term Unemployment Recipient target group are capped at $6,000 during

  the first year of employment, for a maximum tax credit of up to $2,400 depending on the
  number of hours the new hire works (i.e., how new hires meet the provisions of the
  Minimum Employment or Retention Period). Specifically:
  a. For WOTC certified new hires working at least 120 hours, employers can claim 25%
      of first year wages paid up to $6,000 for a maximum tax credit of up to $1,500; or for
      WOTC certified new hires working 400 hours or more, employers can claim 40% of
      first year wages up to $6,000 for a maximum tax credit of up to $2,400.

  b. Employers or their representatives may request certifications for individuals who start
     to work for an employer on or after January 1, 2016.

9. Transition Relief for Employer Submission of Form 8850.
   Section IV.A, page 4, of IRS Notice 2016-22 available at: https://www.irs.gov/pub/irs-
   drop/n-16-22.pdf, and IRS Notice 2016-40 available at: https://www.irs.gov/pub/irs-
   drop/n-16-40.pdf, provide employers, including qualified tax-exempt organizations, with
   transition relief from the 28-day timely filing requirement by providing additional time to
   file the pre-screening notice, IRS Form 8850, with SWAs.

  a. Additional time for employers that hired members of targeted groups (other
     than qualified long-term unemployment recipients) between January 1, 2015 and
     August 31, 2016. An employer that hired a member of a targeted group (described in
     § 51(d)(1)(A) through (d)(1)(I) of the Code) who began work for that employer on or
     after January 1, 2015, and on or before August 31, 2016, will be considered to have
     satisfied the requirements of § 51(d)(13)(A)(ii) of the Code if the employer submitted
     the completed IRS Form 8850 to the SWA to request certification no later than
     September 28, 2016.

      Additional time for employers that hired or hire long-term unemployment
      recipients between January 1, 2016 and August 31, 2016. An employer that hired
      or hires an individual who is a long-term unemployment recipient (described in §
      51(d)(1)(J) of the Code) and who began or begins work for that employer on or after
      January 1, 2016, and on or before August 31, 2016, will be considered to have
      satisfied the requirements of § 51(d)(13)(A)(ii) of the Code if the employer submits
      the completed IRS Form 8850 to the SWA to request certification no later than
      September 28, 2016.

  b. Application of 28-day requirement to individuals hired on or after September 1,
     2016. An employer that hires a member of a targeted group (described in §
     51(d)(1)(A) through (d)(1)(J) of the Code), including a long-term unemployment
     recipient, who begins work for that employer on or after September 1, 2016, is not
     eligible for the transition relief described in this notice.

10. WOTC ETA Forms.
    To help facilitate the eligibility determination and verification process, ETA issued the
    SAF and made minimal changes that reflect statutory requirements authorized under the
    PATH Act to the following Forms:

      ETA Form 9175, Long-Term Unemployment Recipient Self-Attestation Form;
      ETA Form 9058, Report -1 - Certification Workload and Characteristics of Certified
       Individuals Form;
      ETA Form 9061, Individual Characteristics Form;
      ETA Form Spanish 9061, Individual Characteristics Form;
      ETA Form 9062, Conditional Certification Form;
      ETA Form 9063, Employer Certification Form; and
      ETA Form 9065, Agency Declaration of Verification Results Worksheet.

11. Paperwork Reduction Act of 1995, Notice of Action and Reporting Authority.
    The SAF and ETA Forms 9058, 9061, 9062, 9063, and 9065 were approved by OMB
    under the PRA and approved for use through January 31, 2020. The currently OMB
    approved forms are available at:
    https://www.doleta.gov/business/incentives/opptax/forms.cfm.

   According to PRA, no persons are required to respond to a collection of information
   unless such collection displays a valid OMB Control Number 1205-0371. The U.S.
   Department of Labor notes that a Federal agency may not conduct or sponsor a collection
   of information, nor is the public required to respond to a collection of information, unless
   it is approved by OMB under the PRA, and displays a currently valid OMB Control
   Number (44 U.S.C. 3507). Also, notwithstanding any other provision of law, no person
   shall be subject to penalty for failing to comply with a collection of information if the
   collection of information does not display a currently valid OMB Control Number (44
   U.S.C. 3512).

12. Guidance for SWAs and Employers Following ETA’s Interim Instructions.
    SWAs that received certification requests for the LTUR new target group on “previously
    OMB approved forms” between January 1, 2016 and the day prior to January 11, 2017
    can process those certification requests if they can access the required UI wage and
    claims records as described in Section 6 of this TEGL to make eligibility determinations.
    SWAs should continue to issue final determinations (certifications or denials) to the
    respective employers or representatives.

   However, if the SWA is not able to issue final determinations (certifications or denials)
   based on UI wage records and UI claims records to determine that the individual has been
   in a period of unemployment for at least 27 weeks prior the day before the job applicant
   started the job (employment start date minus one day), or, if earlier, the date the job
   applicant provided the information on the IRS Form 8850, SWAs must send “Needs
   Letters” to those employers and request that they file a signed and dated SAF within 90
   days of the receipt date of the letter so the SWAs can process those requests and issue
   final determinations.

13. Grace Period for States and Employers for Automated Systems and WOTC Forms.
    Extended Grace Period to Modify Automated Systems
    To allow States and the employer community additional time to conform their automated
    systems for use/modify their automated systems, with the revised IRS and ETA Forms,

    ETA grants an additional 90-day grace period. The grace period begins on January 11,
    2017, Change 1 and ends 90 calendar days later.

    During this extended grace period, employers and their authorized representatives may
    file certification requests using other filing methods (e.g., via email, fax, scanned, mail)
    and using ETA Forms with OMB Control Number 1205-0371 and IRS Form 8850 with
    OMB Control Number 1545-1500 for all WOTC eligible groups. If you are not sure how
    your State accepts applications, contact the WOTC Coordinator in your State. A directory
    of State WOTC Coordinators is available at:
    https://www.doleta.gov/business/incentives/opptax/State_Contacts.cfm.

    Grace Period for Use of Previously OMB Approved ETA Forms and IRS Form All
    Target Groups
    Additionally, to ensure SWAs continue an uninterrupted processing of employers’ timely
    filed certification requests and issuance of determinations (certification or denials) for
    individuals who are members of reauthorized WOTC Target Groups, other than the new
    target group, LTUR, ETA grants a 90-day grace period that allows employers and their
    representatives to continue to file certification requests with the SWAs using either: 1)
    the previously (2012) OMB approved ETA Forms and IRS Form; or 2) the currently
    OMB approved ETA Forms with OMB Control Number 1205-0371 and IRS Form 8850
    with OMB Control Number 1545-1500. The 90-day grace period begins on January 11,
    2017 Change 1 and ends 90 calendar days later, April 11, 2017.

    For certification requests for the new target group, LTUR, received on the 2012 OMB
    approved forms, SWAs should follow the guidance under Section 12 until the 90-day
    grace period ends. SWAs should continue to issue final determinations (certifications or
    denials) to the respective employers or representatives.

    After the grace period ends, SWAs should accept certification requests for all WOTC
    target groups only if submitted on currently OMB approved ETA Forms with OMB
    Control Number 1205-0371 and IRS Form 8850 with OMB Control Number 1545-1500.

14. Program Administration.
    The SWA certification and program operation responsibilities
    will remain the same under the PATH Act. These responsibilities include: a) determining
    targeted group eligibility by conducting eligibility determinations and verification
    activities and issuing certifications and denials; b) establishing working partnerships with
    different participating agencies at the State and Local levels for issuing Conditional
    Certifications; c) complying with quarterly reporting requirements; and d) complying
    with requirements for records’ retention time periods.

15. Action Requested.
    SWA administrators are requested to:
     Provide this information to all appropriate State WOTC coordinators and related
       program staff, employers and their representatives, participating agencies and other
       interested partners;

      Ensure that the SWAs and participating agencies administer the requirements outlined
       in this TEGL and continue to process certifications requests for all WOTC target
       groups, including LTUR;
      Use the currently OMB approved ETA WOTC Forms and IRS Form 8850, and share
       them with related program staff, employers and their representatives, participating
       agencies, and other interested partners;
      State Coordinators, employers and their representatives, and other partners are
       required to update their process and/or systems to reflect this technical correction to
       the eligibility determination instructions for the LTUR target group; and
      SWAs must reprocess previously denied LTUR certification requests using the
       updated guidance in this TEGL. If the SWA finds that it must reverse its
       determination on a previously denied certification request, the SWA must issue a
       certification. However, if the SWA finds that its original denial determination is still
       valid under this updated guidance, the SWA is not required to issue a second denial.
       As noted above, SWAs are required to use the employment start date minus one day
       or the date the applicant provided information on the IRS Form 8850, based upon
       which is more favorable to the applicant in determining eligibility.

16. Inquiries.
    Questions regarding this guidance should be directed to the appropriate WOTC Regional
    Coordinator listed on the WOTC program website at:
    https://www.doleta.gov/business/incentives/opptax/Regional_Contacts.cfm.