Notice2023-03470
Work Opportunity Tax Credit, Request for Comments Regarding Proposed Modifications to Procedural Guidance and Administrative Formula
Primary source
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Published
February 21, 2023
Effective
October 1, 2023
Issuing agencies
Labor DepartmentEmployment and Training Administration
Abstract
The Employment and Training Administration (ETA) is proposing to reissue its Work Opportunity Tax Credit (WOTC) procedural guidance through a Change 1 to Training and Employment Guidance Letter (TEGL) No. 16-20, with some modifications; and modify its WOTC administrative formula for state allotments. ETA is also soliciting broader comments regarding potential improvements to WOTC, including policy and procedural guidance modifications. ETA's current procedural guidance for WOTC is available in TEGL 16-20, Work Opportunity Tax Credit Procedural Guidance, accessible at: https://wdr.doleta.gov/directives/ corr_doc.cfm?DOCN=8395. The administrative formula for WOTC is available in TEGL 03-21, Work Opportunity Tax Credit (WOTC) Initial Funding Allotments for Fiscal Year 2022, accessible at: https:// wdr.doleta.gov/directives/corr_doc.cfm?DOCN=3188. This Notice solicits comments regarding these proposed changes.
Full Text
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<title>Federal Register, Volume 88 Issue 34 (Tuesday, February 21, 2023)</title>
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[Federal Register Volume 88, Number 34 (Tuesday, February 21, 2023)]
[Notices]
[Pages 10540-10547]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-03470]
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DEPARTMENT OF LABOR
Employment and Training Administration
Work Opportunity Tax Credit, Request for Comments Regarding
Proposed Modifications to Procedural Guidance and Administrative
Formula
AGENCY: Employment and Training Administration, Labor.
ACTION: Notice; request for comments.
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SUMMARY: The Employment and Training Administration (ETA) is proposing
to reissue its Work Opportunity Tax Credit (WOTC) procedural guidance
through a Change 1 to Training and Employment Guidance Letter (TEGL)
No. 16-20, with some modifications; and modify its WOTC administrative
formula for state allotments. ETA is also soliciting broader comments
regarding potential improvements to WOTC, including policy and
procedural guidance modifications. ETA's current procedural guidance
for WOTC is available in TEGL 16-20, Work Opportunity Tax Credit
Procedural Guidance, accessible at: <a href="https://wdr.doleta.gov/directives/corr_doc.cfm?DOCN=8395">https://wdr.doleta.gov/directives/corr_doc.cfm?DOCN=8395</a>. The administrative formula for WOTC is
available in TEGL 03-21, Work Opportunity Tax Credit (WOTC) Initial
Funding Allotments for Fiscal Year 2022, accessible at: <a href="https://wdr.doleta.gov/directives/corr_doc.cfm?DOCN=3188">https://wdr.doleta.gov/directives/corr_doc.cfm?DOCN=3188</a>. This Notice solicits
comments regarding these proposed changes.
DATES: Any updated WOTC administrative formula will become effective
October 1, 2023. Written comments on this Notice are invited and must
be received on or before April 24, 2023.
ADDRESSES: Submit comments in response to this Notice by postal mail to
the Office of Workforce Investment, Attn: National WOTC Team, Room C-
4510, 200 Constitution Avenue NW, Washington, DC 20210; or by email:
<a href="/cdn-cgi/l/email-protection#bdfcced693eaf2e9fefdd9d2d193dad2cb"><span class="__cf_email__" data-cfemail="69281a02473e263d2a290d0605470e061f">[email protected]</span></a>. Please enter ``2023 WOTC Federal Register Notice'' in
the subject line of the email. Commenters are encouraged, but not
required, to send a courtesy copy of any comments by mail or courier to
the U.S. Department of Labor-OASAM, Office of the Chief Information
Officer, Attn: Departmental Information Compliance Management Program,
Room N1301, 200 Constitution Avenue NW, Washington, DC 20210; or by
email: <a href="/cdn-cgi/l/email-protection#bcf8f3f0e3eceefde3ece9fef0f5fffcd8d3d092dbd3ca"><span class="__cf_email__" data-cfemail="e5a1aaa9bab5b7a4bab5b0a7a9aca6a5818a89cb828a93">[email protected]</span></a>.
FOR FURTHER INFORMATION CONTACT: LaToria Strickland, Office of
Workforce Investment, by email: <a href="/cdn-cgi/l/email-protection#c093b4b2a9a3abaca1aea4ee8ca194afb2a9a1ee8d80a4afaceea7afb6"><span class="__cf_email__" data-cfemail="a2f1d6d0cbc1c9cec3ccc68ceec3f6cdd0cbc38cefe2c6cdce8cc5cdd4">[email protected]</span></a>, or call
202-693-3980. Individuals with hearing or speech impairments may access
the telephone number above via TTY by calling the toll-free Federal
Information Relay Service at 1-877-889-5627 (TTY-TDD).
SUPPLEMENTARY INFORMATION: This Notice represents the first of a two-
stage process. ETA is publishing this Notice
[[Page 10541]]
requesting public comments regarding proposed modifications to its WOTC
procedural guidance and administrative formula. In the final stage, ETA
will publish any modifications for procedural guidance in a TEGL, and
will publish the updated administrative formula, using the most recent
fiscal year performance data available, in the Federal Register. Based
on Congress' budgetary appropriations for Fiscal Year (FY) 2024, ETA
plans to announce WOTC allotments for state grantees by issuing a
funding allotment TEGL based on an updated administrative formula.
(Note that ETA disbursed FY 2023 WOTC allotments based on the existing
administrative formula). Pending comments received through this Notice,
ETA plans to issue a Change 1 to TEGL 16-20 to update its procedural
guidance for WOTC. The proposed revised guidance will allow State
Workforce Agencies (SWAs) to place a greater emphasis on process
improvement, program efficiency, and better alignment with the
requirements of section 51 of the Internal Revenue Code of 1986, as
amended (the Code, available at: <a href="https://uscode.house.gov/view.xhtml?req=">https://uscode.house.gov/view.xhtml?req=</a>(title:26%20section:51%20edition:prelim)). Although not
required by federal statute or regulations, ETA is seeking public
comment and opinions on its proposed guidance, including feedback on
areas where ETA may need to clarify procedural guidance to address
ongoing concerns, such as policies related to authorized
representatives, as well as comments on the proposed administrative
formula modifications. Additionally, ETA is requesting information on
additional means to improve the WOTC as an incentive for employers to
hire job seekers with barriers to employment. Stakeholders, including
SWAs, employers, researchers and advocates, are encouraged to provide
comments on modifications to the WOTC certification process, including
suggestions for program improvement, as outlined in sections II, III
and IV of this Notice. This Notice includes the following sections:
<bullet> Section I of this Notice provides a background of WOTC
procedural guidance, and the current administrative formula used to
determine state funding allotments.
<bullet> Section II requests comments on proposed modifications to
WOTC procedural guidance.
<bullet> Section III requests recommendations for WOTC program
improvements.
<bullet> Section IV describes the proposed modifications to the
administrative formula.
<bullet> Section V provides planning estimates and describes the
stop-loss/stop-gain provision for the proposed administrative formula
implementation year, FY 2024, and subsequent years.
<bullet> Section VI describes formula provisions to address state
grantees that would receive less than the minimum state allotment
amount in annual funding under the proposed new formula.
<bullet> Section VII is a table detailing the impact of proposed
changes on funding amounts for FY 2024 using the modified formula, and
a comparison to actual FY 2022 funding allotments.
I. Background
WOTC is a federal tax credit available to eligible employers that
hire and pay wages to first-time, qualifying members of WOTC targeted
groups. WOTC is authorized until December 31, 2025, under the
Consolidated Appropriations Act, 2021 (Pub. L. 116-260), Division EE,
Title I, section 113 (``the Act''). The U.S. Departments of Labor and
Treasury jointly administer the WOTC. The U.S. Department of the
Treasury, through the Internal Revenue Service (IRS), administers all
tax-related provisions of the WOTC. The U.S. Department of Labor,
through ETA, oversees the administration of some WOTC functions,
including the allotment of grant funding to SWAs, and the development
of guidance and technical assistance to ensure WOTC state and regional
coordinators are equipped to implement any legislative updates in
procedural guidance. SWAs are the statutorily designated state agencies
authorized to administer the WOTC certification process in accordance
with section 51 of the Code.\1\
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\1\ The statute refers to SWAs as State Employment Security
Agencies (SESA), established in accordance with 29 U.S.C. 49.
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To claim the work opportunity credit, an employer must pre-screen
and obtain certification from the appropriate Designated Local Agency
(referred to as a State Workforce Agency or SWA) that an employee is a
member of a targeted group. To satisfy the requirement to pre-screen a
job applicant, on or before the day that a job offer is made, a pre-
screening notice (IRS Form 8850, Pre-Screening Notice and Certification
Request for the Work Opportunity Credit) must be completed by the job
applicant and the employer. Employers submit WOTC certification
requests (IRS Form 8850 and other required ETA forms), to the SWA of
the state in which the employer's business is located. SWAs manage a
growing workload of an estimated eight million certification requests
annually. Annual WOTC performance reports for fiscal years 2018-2022
are available online at: <a href="https://www.dol.gov/agencies/eta/wotc/performance">https://www.dol.gov/agencies/eta/wotc/performance</a>. On a quarterly basis, about 40 percent of the national
workload is comprised of ``incomplete requests.'' An employer's
certification request is considered ``incomplete'' when it does not
include supporting documentation, as required for targeted group
eligibility determination, and/or required ETA processing forms (e.g.,
ETA Form 9061 or 9062). Incomplete certification requests for which the
SWA cannot issue a determination (certification or denial) by the end
of a reporting quarter become part of the SWA's ``requests needing
action'' or pending count. At the close of FY 2021, approximately 30
percent of the national workload was categorized as pending
(backlogged) applications, awaiting additional information for the SWAs
to issue determinations.
In FY 2020 through 2022, Congress appropriated additional funding
to support SWA efforts in reducing the backlog of WOTC certification
requests.\2\ ETA distributed these funds to selected states with the
most critical need to alleviate their backlogs and/or modernize their
WOTC processing systems. To expand upon these efforts, ETA identified
additional opportunities to improve the WOTC administrative process,
which are described in Section II of this Notice. The proposed
modifications to WOTC procedural guidance will help prevent additional
backlogs for SWAs, resulting in more timely determinations for
employers seeking the WOTC.
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\2\ Congress authorized an additional $2,500,000 in funding in
FY20 and FY21, and an additional $3,500,000 in funding in FY22, to
support SWAs' efforts to reduce processing backlogs and assist
states in adopting or modernizing information technology for
processing of certification requests. For additional details, see
TEGL 13-19, Change 1, TEGL 06-20, Change 1 and TEGL 03-21, Change 2
on the ETA Advisory web page, available at: <a href="https://www.dol.gov/agencies/eta/advisories">https://www.dol.gov/agencies/eta/advisories</a>.
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Additionally, in this Notice, ETA proposes modifications to its
administrative formula to factor in the SWAs' output workload and make
adjustments for inflation. ETA developed the WOTC administrative
formula in 1996 to distribute federal funding to 53 state grantees (50
United States, District of Columbia, Commonwealth of Puerto Rico, and
U.S. Virgin Islands). The current administrative formula is calculated
as follows:
a. 50 percent is based on each state's relative share of total WOTC
certifications issued from the prior fiscal year (October 1-September
30),
[[Page 10542]]
b. 30 percent is based on each state's relative share of the
Civilian Labor Force averages for the 12-month period from the prior
fiscal year, and
c. 20 percent is based on each state's relative share of adult
recipients of Temporary Assistance for Needy Families (TANF) averages
for the 12-month period from the second preceding fiscal year.
The formula's original methodology is described in the Federal
Register Notice 68 FR 15745, April 1, 2003, accessible at: <a href="https://www.federalregister.gov/">https://www.federalregister.gov/</a>.
II. Request for Comments on Proposed Modifications to WOTC Procedural
Guidance
The proposed modifications are a result of ETA's review of SWA
quarterly performance data,\3\ WOTC state/regional coordinators'
feedback, and inquiries received from the public and other stakeholders
\4\ on TEGL 16-20, WOTC Procedural Guidance. ETA requests comments from
stakeholders regarding the following proposed modifications to WOTC
procedural guidance, and requests that commenters state the section
sub-heading(s) for which each comment is associated. ETA proposes the
following modifications to WOTC procedural guidance:
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\3\ SWAs submit quarterly performance reports using ETA Form
9058 via web-based Tax Credit Reporting System of the Enterprise
Business Services System.
\4\ ETA receives inquiries from the public and other
stakeholders through its WOTC email account, <a href="/cdn-cgi/l/email-protection#e6a7958dc8b1a9b2a5a682898ac8818990"><span class="__cf_email__" data-cfemail="bffeccd491e8f0ebfcffdbd0d391d8d0c9">[email protected]</span></a>.
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A. Apply the same timely submission requirements for IRS Form 8850
and ETA Form 9061 and ETA Form 9062. To verify that an employer's new
hire is a member of a WOTC targeted group, SWAs use the information
provided on IRS Form 8850, Pre-Screening Notice and Certification
Request for the Work Opportunity Credit, together with supporting
documentation, and: (1) ETA Form 9061, Individual Characteristics Form;
or (2) ETA Form 9062, Conditional Certification.\5\ Under section
51(d)(13) of the Code, employers must submit IRS Form 8850 to the SWA
of the state in which their business is located (where the employee
works), generally no later than the 28th calendar day after the
employee begins working for the employer. Receiving the ETA Forms
separately from IRS Form 8850 creates significant processing delays for
SWAs during the certification process and weakens the purpose of the
28-day timely submission requirement. ETA is proposing to update its
procedural guidance for SWAs to require that employers submit all
required WOTC forms concurrently, preferably as a single submission.
ETA will modify its procedural guidance to apply the Code's timely
submission requirement for IRS Form 8850 to ETA Forms 9061/9062, which
will result in more efficient processing, reduce the number of
``pending'' certification requests, prevent additional application
backlog, and ensure that the purpose of the 28-day submission
requirement is fulfilled. Rather than allow employers to submit ETA
Forms after the Code's timely submission requirement for IRS Form 8850,
ETA will require employers to submit all required WOTC forms no later
than the 28th calendar day after the employee begins working for the
employer. When an employer does not submit the required WOTC forms by
the timely submission deadline, the SWA will issue a denial notice to
the employer. SWAs will not be required to review employers' appeals of
denials that were issued due to failure to meet the timely-submission
requirement unless the question of timely submission is the subject of
the appeal.
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\5\ ETA Form 9061, Individual Characteristics Form, and ETA Form
9062, Conditional Certification, are used during the WOTC
certification process to provide detailed information on targeted
group eligibility. The forms and additional information are
available at <a href="https://www.dol.gov/agencies/eta/wotc/how-to-file">https://www.dol.gov/agencies/eta/wotc/how-to-file</a>.
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B. When employers request additional time to submit required
supporting documentation with a certification request, SWAs will not
issue a determination for an additional 90 calendar days after the 28-
day timely submission requirement deadline. Under the procedural
guidance changes proposed above in Section II.A. of this Notice, ETA
would require employers to submit the appropriate ETA Form (9061/9062)
together with the IRS Form 8850 within 28 calendar days of the new
hire's start date. However, ETA recognizes there are some circumstances
when an employer may need additional time to collect and submit
supporting documentation to complete a certification request. Without
the required supporting documentation, SWAs are unable to verify that
an employer hired a qualifying member of a WOTC targeted group. Current
procedural guidance requires SWAs to issue a `Denial Pending More
Information letter,' also known as an `Employer Needs Letter,' to
notify employers when required supporting documentation is missing for
a certification request. If an employer does not submit the necessary
supporting documentation within 90 days from the date the SWA issued
the Employer Needs Letter, the SWA will deny the certification request.
After an employer receives a denial from a SWA for a complete, timely
filed certification request, an employer may submit a written appeal to
the SWA within one year from the date the SWA issued the denial letter.
As part of the appeal, employers submit clarifying information that was
not submitted with the original certification request, or an
explanation of where the employer believes the SWA misinterpreted
information during their determination review. SWAs will review the
clarifying information and redetermine the denial, as appropriate.
Review of annual WOTC performance data shows that approximately 40
percent of all certification requests result in denials.\6\ The
administrative procedures that are in place to manage incomplete
requests require SWAs to spend a significant amount of time issuing
`Denial Pending More Information' letters for employers, as well as
reviewing appeals of denied requests that did not meet the requirements
of the Code. This increases the overall number of pending/backlog
applications and places an extensive administrative burden on the SWAs
that delays certification for other employers.
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\6\ WOTC annual performance reports for fiscal years 2017-2021,
available at: <a href="https://www.dol.gov/agencies/eta/wotc/performance">https://www.dol.gov/agencies/eta/wotc/performance</a>.
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ETA is proposing to modify its procedural guidance to allow SWAs to
not issue a determination for an additional 90 calendar days, beginning
with the day after the 28th calendar day timely submission requirement
date, when employers simply check the corresponding box on ETA Form
9061 to request additional time to submit required supporting
documentation with their WOTC certification request. Doing so will
reduce the administrative burden on the SWAs to issue Employer Needs
Letters, while granting employers additional time to submit supporting
documentation for qualifying first-time hires that meet the targeted
group eligibility requirements of the Code. Employers will continue to
have the more efficient option of submitting supporting documentation
with a completed IRS Form 8850 and ETA Form 9061/9062, all within 28
calendar days of the new hire's start date. SWAs will process these
complete certification requests and issue determinations (certification
or denial) based on the information provided on IRS Form 8850, ETA Form
9061/9062, and supporting documentation. However, if employers need
additional time to submit supporting documentation that is not readily
available within the 28-day window, employers will have the secondary
option to specify that the
[[Page 10543]]
supporting documentation is `forthcoming' in box 24 of ETA Form 9061.
SWAs will follow the procedural guidance detailed below for when
supporting documentation is noted as `forthcoming' with submission of
ETA Form 9061.
(i) Employer marks ``documentation forthcoming'' on ETA Form 9061.
When an employer marks that supporting documentation is forthcoming on
ETA Form 9061, the employer will have an additional 90 calendar days
(beginning the day after the 28th calendar day submission requirement)
to submit the required supporting documentation for the targeted
group(s) specified on IRS Form 8850 and ETA Form 9061. The SWA will not
process the certification request until after the 90th day. If an
employer does not submit the supporting documentation by the 90-day
deadline, the SWA will process the certification request as is, based
on any targeted group eligibility data that is available to the SWA,
and issue a final determination. SWAs will follow the guidelines
outlined below:
<bullet> The SWA does not need to delay issuing a final
determination (certification or denial) if the employer does not
specify that documentation is forthcoming in box 24 of ETA Form 9061.
<bullet> The employer will have up to 90 calendar days (beginning
the day after the 28th calendar day timely submission requirement for
IRS Form 8850 and ETA Form 9061/9062) to submit the additional
(forthcoming) documentation, after which the SWA will process the
certification request to determine eligibility for the targeted
group(s) selected on IRS Form 8850 and ETA Form 9061, using the
information submitted by the employer and/or the SWA's available data.
<bullet> If the employer submits the required supporting
documentation within the 90-day calendar deadline, and the SWA did not
consider the submitted documentation when issuing the determination,
the employer may appeal the determination. The SWA will then review and
redetermine the request based on certification requirements of the
Code, taking into consideration the additional supporting documentation
submitted.
<bullet> The SWA will deny a certification request that is missing
supporting documentation after the 90-day calendar deadline, and for
which the SWA is unable to verify targeted group eligibility using
internal data sources available to the SWA. If the employer appeals the
SWA's determination (either a denial, or a certification for an
alternative targeted group that yields a lesser tax credit), the SWA is
not required to process the employer's appeal. The decision to process
employers' appeals will be at the discretion of the SWA. ETA encourages
SWAs to update their WOTC state policies and standard operating
procedures to notify employers of their state-specific policy on
appeals and redeterminations.
Depending on the targeted group(s) specified on IRS Form 8850, SWAs
may have internal access to data needed to verify that an individual
meets targeted group eligibility requirement(s), such as wage records
for long-term unemployment recipient (LTUR) determinations, with or
without supporting documentation provided by employers. Prior to
application submission, employers should confirm which data sources are
accessible to the SWA, and which targeted groups require the employer
to submit supporting documentation. SWAs must update their WOTC
websites to communicate examples of supporting documentation that are
acceptable for each targeted group, and which data sources are
available to the SWA for eligibility determinations.
(ii) Employer does not mark ``documentation forthcoming'' on ETA
Form 9061. When an employer does not specify that documentation is
forthcoming on ETA Form 9061, the SWA will immediately process the
certification request as is, using the submitted supporting
documentation and/or available internal data sources. SWAs will use
information and data sources available at the time the certification
request is processed to issue final determinations. SWAs will follow
the guidelines outlined below for when supporting documentation is not
noted as `forthcoming' with submission of ETA Form 9061:
<bullet> The SWA will immediately process certification requests
based on the targeted group(s) specified on IRS Form 8850 and ETA Form
9061/9062, and the supporting documentation and/or SWA's available
data.
<bullet> Employers often specify more than one targeted group on
IRS Form 8850. Depending on available data sources and automated
processing capabilities, SWAs may be able to verify targeted group
eligibility for multiple targeted group(s) simultaneously. If an
employer does not submit supporting documentation for the targeted
group(s) specified on their WOTC certification request, the SWA will
verify eligibility for any targeted group(s) that are specified on the
IRS and ETA Forms, for which the SWA has available data. Based on the
applicant's targeted group eligibility verification results, the SWA
will issue a certification for the employer for the targeted group
yielding the highest available tax credit for the employer.
<bullet> If (1) the employer does not indicate that supporting
documentation is forthcoming on ETA Form 9061, (2) the employer does
not submit any supporting documentation within 28 calendar days of the
new hire's start date, and (3) the SWA cannot verify eligibility for
any WOTC targeted group selected on the IRS/ETA Forms, then the SWA
will issue a denial notice to the employer. The denial is not eligible
for employer appeal. However, an employer may appeal to have the SWA
redetermine a certification that was issued for an alternate targeted
group that was also initially selected on the certification request
(IRS Form 8850 and ETA Form 9061) and would yield a higher tax credit
than the targeted group certified by the SWA. In this circumstance, the
employer appeal would be to submit new supporting documentation for the
alternative targeted group that was also selected on the original IRS
Form 8850.
<bullet> SWAs must review employer appeals for denials issued, so
long as the original application (IRS form 8850 and ETA Form 9061/9062)
was complete and timely submitted to the SWA. However, ETA will not
require SWAs to review employer appeals for a certification
redetermination. For example, if a SWA makes an eligibility
determination for a targeted group, ETA will not require the SWA to
process an employer's appeal for a certification redetermination for an
alternate targeted group with a higher tax credit. The SWA has the
discretion whether to process any such employer appeal of a
certification. ETA encourages SWAs to update their WOTC state policies
and standard operating procedures to notify employers of their state-
specific policy on appeals and redeterminations.
C. Verify that an employer's certification request is for a first-
time, qualifying hire. In addition to verifying that an individual is
in a WOTC targeted group, ETA is proposing to update its procedural
guidance to require SWAs to verify that an employer is seeking WOTC
certification for a ``first-time hire.'' \7\ A ``first-time hire'' is
an individual that has not, at any time, been employed by the employer
seeking certification prior to the hiring date the employer provides on
IRS Form 8850.
[[Page 10544]]
SWAs will compare available wage data with the information that an
employer provides on the IRS Form 8850, including the employer
identification number (EIN), employee's social security number, and
hire date, to verify that: (1) the person is receiving wages from the
employer; and (2) the person did not receive wages from the employer
prior to their hire date. SWAs will check for wage records preceding
the new employee's hire date, based on the availability of data and SWA
capacity. Some states have begun to implement this practice and shared
that doing so allows the SWA to identify which certification requests
meet the requirements of the Code at the onset of the certification
process, before investing time and resources on ineligible
applications, including non-qualifying rehires. Additionally, by
incorporating this step into the verification process, SWAs will ensure
that they are processing certification requests that have been
submitted to the appropriate SWA (state where the employer's business
is located), per the instructions for IRS Form 8850. Wage verification
helps prevent SWAs from processing duplicate certification requests
when an employer submits the same certification request for a new hire
to multiple SWAs for processing. When a SWA is not able to confirm that
an employer is requesting certification for a ``first-time hire'' who
is a qualifying member of a targeted group, the SWA will issue a denial
notice. ETA will not require SWAs to review employers' appeals for
certification requests that do not meet the requirements of section
51(i)(2) of the Code, ``Nonqualifying Rehires,'' which states ``No
wages shall be taken into account with respect to any individual if,
prior to the hiring date of such individual, such individual had been
employed by the employer at any time.''
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\7\ Pursuant to section 51(i)(2) of the Code, a non-qualifying
rehire may not qualify an employer for the tax credit if, prior to
the hiring date, the person was employed by the employer at any
time.
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D. Discontinue use of IRS Form 2848, Power of Attorney and
Declaration of Representative, for WOTC purposes. Under current
procedural guidance, an employer may choose to authorize an individual
to represent them for WOTC purposes by submitting an IRS Form 2848,
Power of Attorney and Declaration of Representative, to a SWA. SWAs
collect, retain, and track updates to employers' IRS Form 2848 Power of
Attorney as part of their administrative responsibilities. A power of
attorney gives one or more persons the power to act on a person's
behalf as their agent. The power may be limited to a particular
activity or be general in its application. IRS Form 2848 is a Power of
Attorney (POA) declaration form used to authorize an individual to
represent a taxpayer before the IRS. ETA recognizes the concerns raised
by SWAs and employers/consultants regarding IRS Form 2848 instructions,
and its applicability to WOTC. Employers will be able to use an ETA
Employer Representative Declaration Form to authorize a
representative(s) to facilitate the WOTC certification request process
on their behalf. The ETA Form will not constitute a formal power of
attorney arrangement between the employer and its representative but
will authorize the representative to conduct WOTC business with SWAs on
behalf of the employer (see TEGL 16-20 for the list of authorized
activities). SWAs will be responsible for managing employer
representative declarations, including if and how an employer may
authorize multiple representatives, according to ETA's recordkeeping
policy for WOTC.\8\ In general, formal power of attorney designations
should not be required for employer representatives to conduct WOTC
business with SWAs, and ETA discourages SWAs from imposing additional
requirements for documenting employer representative declarations
beyond the requirements listed in ETA's procedural guidance.
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\8\ See `Recordkeeping for SWAs' in TEGL 16-20, WOTC Procedural
Guidance, for additional information.
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Using ETA's Employer Representative Declaration Form to designate
an employer representative for WOTC reduces the administrative burden
for SWAs and employers by creating one standard form and set of
instructions for all SWAs to implement. Additionally, this policy
change accounts for states' varying levels of funding and staff
capacity to manage employer representative declarations. ETA will
provide technical assistance to WOTC State Coordinators and ETA
Regional Coordinators on this new policy guidance and form
instructions.
In conducting WOTC outreach activities, SWAs should educate WOTC
employers and stakeholders on the updated procedural guidance and
policies.
III. Request for Comments on Recommendations for WOTC Program
Improvement
In addition to comments on the proposed procedural guidance changes
described in Section II of this Notice, ETA is soliciting broader
feedback from various stakeholders on ways to enhance and improve the
WOTC program, including strategies and practices to improve the
effectiveness and efficiency of WOTC as an incentive for employers to
hire individuals with barriers to employment and as an employer subsidy
to support successful hires, and improvements to the WOTC certification
process. ETA has a strong interest in program improvements that could
improve employment outcomes, including equitable access to and
retention in good jobs and ensuring job quality, for the designated
categories of workers (members of targeted groups). The Departments of
Labor and Commerce recently published Good Jobs Principles, which set
forth a shared vision of job quality. These Principles can be found at
<a href="https://www.dol.gov/general/good-jobs/principles">https://www.dol.gov/general/good-jobs/principles</a>. What is a good job
can be subjective, and these Principles may not be applicable in all
employment contexts; however, ETA expects to continue to use these
Principles as the starting point of conversations about job quality.
Community-based groups, unions and other worker organizations,
employers, service providers, researchers, and advocates may have
recommendations regarding these issues.
ETA requests that commenters address the questions listed below.
Commenters do not need to address every question and should focus on
those that relate to their expertise or perspective. To the extent
possible, please clearly indicate the question(s) addressed in your
response. Comments on program modifications may include activities,
policies, practices, data collection or evaluations that are allowable
and potentially feasible under current law and funding levels. Comments
may also identify potential program improvements that would require
changes in law, funding level, or administrative structure.
Specifically, ETA is requesting comments on the following questions:
Recommendations for WOTC Program/Potential Improvement
(1) To pre-screen a job applicant for WOTC eligibility, on or
before the day that a job offer is made, a pre-screening notice (IRS
Form 8850) must be completed by the job applicant and the employer. How
do employers implement the job applicant pre-screening process for
WOTC?
(a) Do any aspects of the pre-screening process pose particular
challenges?
(b) How is WOTC reflected in employer hiring practices or policies?
(c) Does the tax credit influence employer hiring decisions?
(d) What improvements would better connect WOTC-eligible workers
with employers and increase hiring?
(2) Are WOTC monetary incentives sufficient to motivate employer
[[Page 10545]]
participation in the WOTC certification process in order to receive the
subsidy?
(3) To what extent are stakeholders aware of the WOTC and how to
utilize it--including small and mid-sized employers, employers that
provide good jobs, advocates, and community-based groups or service
providers that serve the targeted populations?
(a) How can the Department of Labor increase awareness of the WOTC
in the public workforce system and other human services and disability
systems?
(4) What is the biggest challenge employers face in seeking WOTC
certifications for new hires? (e.g., completing forms, submitting forms
timely to the SWA, collecting supporting documentation/information from
job applicants).
(5) What are the greatest challenges for SWAs in processing
employers' certification requests?
(6) What are the greatest challenges in the WOTC program and how
might the Department of Labor address these challenges?
(7) Should there be a mechanism to confirm that the employer pre-
screens the job applicant, and obtains information provided by the job
applicant on the basis of which the employer believes that the job
applicant is a member of a targeted group?
(8) How can the Department increase the likelihood that the WOTC
results in greater hiring and retention for eligible workers, as well
as the likelihood that these are good jobs, such as jobs with family-
sustaining wages or equitable opportunities for advancement?
(9) What does extant research and evaluation indicate regarding the
effectiveness and efficiency of the WOTC or related hiring incentives,
and what are potential implications of this information? How might the
Department use this information to improve the WOTC?
(a) What are critical gaps in the research and evaluation on WOTC?
(b) What data sources and/or research methods would enable research
and evaluation to address these gaps?
(c) What is the significance of WOTC in the hiring and retention of
the broader eligible populations, and in comparison to other workforce
investments that have similar employment outcome goals?
(d) What key factors increase or inhibit employer claiming of the
WOTC?
(10) What new targeted group classifications, or modifications to
existing targeted group eligibility requirements, would improve the
effectiveness of the WOTC?
IV. Proposed FY 2024 Modifications to the WOTC Allotment Formula
ETA will establish the FY 2024 state allotment estimates based on
modifications to the existing WOTC administrative formula, using the
most recent state-level WOTC performance data, which is the annual
certifications and denials issued by the SWAs, and the executed FY 2022
allotment amounts. The proposed allotment formula includes two formula
factors: (1) number of annual determinations (certifications and
denials) issued by the SWA for the most recently completed fiscal
year's available data, based on certified performance data \9\ from ETA
Form 9058, Certification Workload and Characteristics of Certified
Individuals; and (2) each state's relative share of civilian labor
force averages for the most recently completed fiscal year's available
data. A description of how the data is used to calculate the state
allotments using the proposed modified formula is provided below:
---------------------------------------------------------------------------
\9\ SWA annual performance data is available at <a href="https://www.dol.gov/agencies/eta/wotc/performance">https://www.dol.gov/agencies/eta/wotc/performance</a>. ETA Form 9058 is
available at <a href="https://www.dol.gov/sites/dolgov/files/ETA/wotc/pdfs/ETA%20Form%209058.pdf">https://www.dol.gov/sites/dolgov/files/ETA/wotc/pdfs/ETA%20Form%209058.pdf</a>.
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<bullet> 40 percent based on each state's relative share of
certifications issued for the most recently completed fiscal year's
available data (October 1-September 30),
<bullet> 40 percent based on each state's relative share of denials
issued for the most recently completed fiscal year's available data
(October 1-September 30), and
<bullet> 20 percent based on each state's relative share of
civilian labor force averages for the most recently completed fiscal
year's available data (October 1-September 30).
In addition to populating the administrative formula with updated
data, ETA is proposing modifications that will improve the formula's
accuracy in terms of estimating the true administrative workload of the
SWA, and raise the minimum allotment to the states, which has been the
same since the original formula was developed in 1996.
The current WOTC administrative formula bases 50 percent of states'
annual allotments on each state's relative share of total WOTC
certifications issued in the most recently completed fiscal year's
available data (October 1-September 30). 30 percent is based on each
state's relative share of civilian labor force averages for the most
recently completed fiscal year's available data, and 20 percent is
based on each state's relative share of adult recipients of Temporary
Assistance for Needy Families (TANF) averages from the second preceding
fiscal year. WOTC was enacted in 1996 as an incentive for employers to
hire members of families receiving TANF benefits, and other groups that
experience significant barriers to employment, regardless of general
economic conditions (Supplemental Nutrition Assistance Program (SNAP)/
Food Stamps recipients, returning citizens, etc.). In 1997, Congress
passed the Welfare-to-Work (WtW) tax credit, which focused specifically
on more disadvantaged TANF recipients. The WtW credit became part of
WOTC in 2006, and the emphasis on TANF recipients continued. Each
state's relative share of adult recipients of TANF averages was
factored into the WOTC administrative formula.
(1) To use data that more accurately reflect the individuals
certified under WOTC, the formula will no longer factor in states'
share of adult TANF recipient averages. From FY 2009-FY 2019,
individuals certified as Qualified IV-A (TANF) recipients only
accounted for 8-13 percent of annual certifications issued. In
comparison, individuals certified as SNAP recipients accounted for 54-
73 percent of annual certifications issued (FY 2009-FY 2022).
Therefore, the updated allotment formula will not incorporate a state's
relative share of adult recipients for any specific targeted group.
With this formula modification, the administrative workload of the SWA
(annual certifications and denials issued) is the primary indicator
used to determine fiscal year funding allotments.
(2) Secondly, and to align the funding formula more closely with
the SWAs' workload, ETA will lessen the formula weight of the civilian
labor force (CLF) averages used in the WOTC allotment formula. The CLF
is the subset of the U.S. civilian noninstitutional population, ages 16
and older, that is classified as either employed or unemployed, in
accordance with the concepts of the Current Population Survey.\10\
Currently, 30 percent of the WOTC administrative allotment formula is
based on each states' relative share of the CLF averages from the most
recently completed fiscal year's available data. Certification requests
are submitted to the SWA of the state in which the employer's business
is located. States that have a higher volume of eligible employers
participating in WOTC receive and process a higher volume of
[[Page 10546]]
certification requests. States with larger population sizes (i.e.,
California, Florida, New York, and Texas) receive higher volumes of
employer certification requests and therefore have a larger percentage
of the national total workload and program output. The CLF average is
useful as a proxy for determining the overall population/size of a
state and provides some stability in the allotment formula that is not
tied to the state's WOTC performance data. As a result, ETA proposes
modifying the allotment formula by lessening the weight of the CLF
factor in the allotment formula. ETA believes that focusing on the
SWA's workload outcomes (certifications and denials issued) is a better
metric on which to base WOTC allotment allocations.
---------------------------------------------------------------------------
\10\ Data source: <a href="https://www.bls.gov/cps/definitions.htm">https://www.bls.gov/cps/definitions.htm</a>.
---------------------------------------------------------------------------
ETA is seeking public comment on the proposed modifications to the
administrative formula. As with previous allocations of WOTC grant
funds, updating the data sources used in the formula and discontinuing
the use of adult TANF recipient averages as a calculation metric will
result in changes to each state's relative share of federal funding.
ETA mitigates large changes in state allotments by using the Stop-Loss/
Stop-Gain provisions discussed in Section V.
V. Description of the Stop-Loss/Stop-Gain Provision
To mitigate and more gradually phase in state funding allotment
changes due to the updated formula, ETA will continue to use the 95
percent stop-loss/120 percent stop-gain funding provisions in the WOTC
allotment formula calculations. This approach is based on a state's
previous year allotment percentage, which is its relative share of the
total formula allotments. The stop-gain provision provides that no
state grantee will receive an amount that is more than 120 percent of
their previous year's allotment percentage. The stop-loss provision
provides that no state grantee will receive an amount less than 95
percent of their previous year's allotment percentage. The current
administrative formula is calculated with 95 percent stop-loss and 120
percent stop-gain provisions, and this will not change in the proposed
modified formula for FY 2024 and subsequent years.
VI. Minimum Funding Provisions
Currently, after allocating $20,000 to the U.S. Virgin Islands, ETA
distributes the remaining appropriated fiscal year funding to state
grantees by way of administrative formula, with a $66,000 minimum
allotment. Under the proposed new formula, the new state allotment
minimum would be raised to $119,000 ($36,000 for U.S. Virgin
Islands).\11\ Using the proposed new formula, some state grantees would
receive up to a 20 percent increase of their FY 2022 allotment
percentage in the new formula's implementation year, FY 2024. (The
stop-gain provision provides that no state grantee will receive an
amount that is more than 120 percent of their previous year's allotment
percentage). In an effort to phase in the increased minimum allotment,
which also impacts other states' allotments, ETA will use the stop-gain
provision to gradually increase the minimum funding allotment amount to
reach the new $119,000 minimum. The minimum state allotment will
increase to $79,131 in FY 2024, which represents a 20 percent share
increase from the current minimum of $66,000, and increase by 20
percent each fiscal year, to reach the new $119,000 minimum by FY
2026.\12\ A state grantee that would receive less than $119,000 by
application of the FY 2024 formula will, at the option of ETA, continue
to receive an allotment that is proportional to the SWA's current
fiscal year allotment and anticipated administrative workload. ETA
deems funding below $119,000 as sufficient funding for SWAs that will
receive the $79,131 minimum allotment in FY 2024 and will not interfere
with a SWA's ability to administer the WOTC program.
---------------------------------------------------------------------------
\11\ Based on calendar year 2021 inflation and cost of living
increases since 1996, as determined by the Consumer Price Index
(CPI) inflation calculator. Data Source: <a href="https://www.bls.gov/data/inflation_calculator.htm">https://www.bls.gov/data/inflation_calculator.htm</a>.
\12\ WOTC is authorized until December 31, 2025, under the
Consolidated Appropriations Act, 2021 (Pub. L. 116-260), Division
EE, Title I, Section 113.
---------------------------------------------------------------------------
VII. FY 2024 Preliminary State Allotments
The state allotments set forth in the Table appended to this Notice
reflect the distribution resulting from the revised allotment formula
described above. In FY 2022, Congress appropriated $18,485,000 in
funding for state grantees (SWAs) to administer WOTC. The figures in
the first numerical column show the actual FY 2022 formula allotments
to state grantees. The next column shows the percentage of each states'
allotment in proportion to the total funding appropriated. For purposes
of illustrating the effects of the updates to the allotment formula,
column 3 shows the FY 2024 state grantee allotments with the
application of the 95 percent stop-loss, 120 percent stop-gain and
$79,131 minimum funding provisions, followed by each state's relative
share of total FY 2024 allotments in column 4. The percentage share
difference between FY 2024 and FY 2022 allotments is shown in column 5.
U.S. Department of Labor Employment and Training Administration Work Opportunity Tax Credit (WOTC) State
Allotment Grants Impact of Proposed Changes on FY 2024 Allotments to States
----------------------------------------------------------------------------------------------------------------
FY 2022 FY 2024
--------------------------------------------------------------------------------
Using stop-loss/stop-gain
------------------------------------------------
State Percentage Percentage
Allotment share Percentage share
Allotment share difference
(FY24 vs FY22)
(1) (2) (3) (4) (5)
----------------------------------------------------------------------------------------------------------------
Total.......................... $18,485,000 100 $18,485,000 100 +/-
Alabama........................ 290,402 1.6 275,643 1.5 -5.0
Alaska......................... 66,000 0.4 79,131 0.4 20.0
Arizona........................ 286,961 1.6 272,377 1.5 -5.0
Arkansas....................... 136,147 0.7 143,824 0.8 5.7
California..................... 2,423,147 13.1 2,299,995 12.5 -5.0
Colorado....................... 315,145 1.7 299,128 1.6 -5.0
[[Page 10547]]
Connecticut.................... 150,908 0.8 180,933 1.0 20.0
Delaware....................... 85,229 0.5 102,186 0.6 20.0
Dist. of Columbia.............. 66,000 0.4 79,131 0.4 20.0
Florida........................ 830,118 4.5 909,221 4.9 9.6
Georgia........................ 507,265 2.7 481,484 2.6 -5.0
Hawaii......................... 69,506 0.4 83,335 0.5 20.0
Idaho.......................... 78,682 0.4 94,337 0.5 20.0
Illinois....................... 743,297 4.0 705,520 3.8 -5.0
Indiana........................ 287,632 1.6 273,014 1.5 -5.0
Iowa........................... 230,290 1.2 218,586 1.2 -5.0
Kansas......................... 122,420 0.7 144,593 0.8 18.2
Kentucky....................... 372,478 2.0 353,547 1.9 -5.0
Louisiana...................... 303,161 1.6 287,753 1.6 -5.0
Maine.......................... 68,617 0.4 82,269 0.4 20.0
Maryland....................... 419,689 2.3 398,359 2.2 -5.0
Massachusetts.................. 400,530 2.2 380,174 2.1 -5.0
Michigan....................... 604,874 3.3 574,132 3.1 -5.0
Minnesota...................... 292,845 1.6 277,962 1.5 -5.0
Mississippi.................... 218,305 1.2 207,210 1.1 -5.0
Missouri....................... 398,548 2.2 378,293 2.1 -5.0
Montana........................ 66,000 0.4 79,131 0.4 20.0
Nebraska....................... 140,394 0.8 133,259 0.7 -5.0
Nevada......................... 157,767 0.9 149,749 0.8 -5.0
New Hampshire.................. 66,000 0.4 79,131 0.4 20.0
New Jersey..................... 337,889 1.8 320,716 1.7 -5.0
New Mexico..................... 162,673 0.9 154,405 0.8 -5.0
New York....................... 1,104,812 6.0 1,048,662 5.7 -5.0
North Carolina................. 477,001 2.6 571,905 3.1 20.0
North Dakota................... 66,000 0.4 79,131 0.4 20.0
Ohio........................... 700,755 3.8 665,140 3.6 -5.0
Oklahoma....................... 274,022 1.5 260,095 1.4 -5.0
Oregon......................... 274,174 1.5 260,240 1.4 -5.0
Pennsylvania................... 748,005 4.1 709,989 3.8 -5.0
Puerto Rico.................... 77,585 0.4 93,021 0.5 20.0
Rhode Island................... 75,240 0.4 90,210 0.5 20.0
So. Carolina................... 263,650 1.4 250,250 1.4 -5.0
South Dakota................... 66,000 0.4 79,131 0.4 20.0
Tennessee...................... 688,169 3.7 653,194 3.5 -5.0
Texas.......................... 1,379,023 7.5 1,653,394 9.0 20.0
Utah........................... 114,167 0.6 119,000 0.6 4.3
Vermont........................ 66,000 0.4 79,131 0.4 20.0
Virginia....................... 435,789 2.4 413,641 2.2 -5.0
Washington..................... 437,804 2.4 415,553 2.3 -5.0
W. Virginia.................... 124,597 0.7 119,000 0.6 -4.4
Wisconsin...................... 327,288 1.8 310,654 1.7 -5.0
Wyoming........................ 66,000 0.4 79,131 0.4 20.0
--------------------------------------------------------------------------------
Total...................... 18,465,000 100 18,449,000 100 ...............
Virgin Islands (non-formula)... 20,000 .............. 36,000 .............. ...............
----------------------------------------------------------------------------------------------------------------
Brent Parton,
Acting Assistant Secretary for Employment and Training, Labor.
[FR Doc. 2023-03470 Filed 2-17-23; 8:45 am]
BILLING CODE 4510-FR-P
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This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.