Notice2024-12706
Work Opportunity Tax Credit (WOTC) Program
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
June 11, 2024
Issuing agencies
Labor DepartmentEmployment and Training Administration
Abstract
This Notice announces the revised administrative formula methodology that ETA uses to distribute annual allotment funding to State grantees (53 State Workforce Agencies (SWAs)) for the purpose of administering the Work Opportunity Tax Credit (WOTC). Additionally, this Notice formally communicates the substantial changes to the administrative formula and announces the actualized State allotments for fiscal year (FY) 2024, the revised formula's implementation year, based on Congress' budgetary appropriations.
Full Text
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<title>Federal Register, Volume 89 Issue 113 (Tuesday, June 11, 2024)</title>
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[Federal Register Volume 89, Number 113 (Tuesday, June 11, 2024)]
[Notices]
[Pages 49231-49234]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-12706]
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DEPARTMENT OF LABOR
Employment and Training Administration
Work Opportunity Tax Credit (WOTC) Program
AGENCY: Employment and Training Administration (ETA), Labor.
ACTION: Notice.
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SUMMARY: This Notice announces the revised administrative formula
methodology that ETA uses to distribute annual allotment funding to
State grantees (53 State Workforce Agencies (SWAs)) for the purpose of
administering the Work Opportunity Tax Credit (WOTC). Additionally,
this Notice formally communicates the substantial changes to the
administrative formula and announces the actualized State allotments
for fiscal year (FY) 2024, the revised formula's implementation year,
based on Congress' budgetary appropriations.
DATES: The FY 2024 allotment covers the period of October 1, 2023-
September 30, 2024.
FOR FURTHER INFORMATION CONTACT: LaToria Strickland, Office of
Workforce Investment, Employment and Training Administration, U.S.
Department of Labor, 200 Constitution Avenue NW, Suite C-4510,
Washington, DC 20210, telephone: (202) 693-3980 (this is not a toll-
free number) or by email: <a href="/cdn-cgi/l/email-protection#9bdae8f0b5ccd4cfd8dba7fabbf3e9fefda6" http: dol.gov">dol.gov</a>">Ask.WOTC@<a href="http://dol.gov">dol.gov</a></a>. For persons with a hearing
or speech disability who need assistance to use the telephone system,
please dial 711 to access telecommunications relay services.
SUPPLEMENTARY INFORMATION:
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. Section 51 of the Internal Revenue Code of 1986,
as amended, provides the legislative authority for the WOTC. (See
<a href="https://uscode.house.gov/view.xhtml?req=">https://uscode.house.gov/view.xhtml?req=</a>(title:26%20section:51%2edition:prelim). WOTC is
authorized until December 31, 2025, under division EE, title I, section
113 of the Consolidated Appropriations Act, 2021 (Pub. L. 116-260).
This Notice represents the second of a two-stage process. On
February 21, 2023, ETA published a Request for Comment in which the
Department proposed modifications to WOTC procedural guidance and the
administrative formula (88 FR 10540), hereinafter referred to as the
initial Notice. The 60-day public comment period closed on April 24,
2023. The initial Notice presented planning estimates for the modified
administrative formula's implementation year, FY 2024, and the FY 2022
actualized allotments. In the initial Notice, ETA committed to
publishing modifications to WOTC procedural guidance in a Change 1 to
Training and Employment Guidance Letter (TEGL) No. 16-20, ``Updated
Work Opportunity Tax Credit (WOTC) Procedural Guidance,'' \1\ and
publishing the updated administrative formula in the Federal Register.
Based on the comments received during the public comment period and
ETA's consideration of them, ETA finalized the WOTC administrative
formula with updated data metrics in the formula methodology, as
originally proposed in the initial Notice.
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\1\ ETA, TEGL No. 16-20, Change 1, ``Updated Work Opportunity
Tax Credit (WOTC) Procedural Guidance,'' Nov. 20, 2023, <a href="https://www.dol.gov/agencies/eta/advisories/tegl-16-20-change-1">https://www.dol.gov/agencies/eta/advisories/tegl-16-20-change-1</a>.
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In this second stage, the finalized formula and actual FY 2024
State allotments are described further in this subsequent Notice. (The
FY 2024 State allotments are also published in Change 2 to TEGL No. 06-
23, ``Work Opportunity Tax Credit (WOTC) Initial Fiscal Year (FY) 2024
Funding Allotments).'' \2\
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\2\ ETA, TEGL No 06-23, Change 2, ``Change 2 to Training and
Employment Guidance Letter No. 06-23, Work Opportunity Tax Credit
(WOTC) Initial Funding Allotments for Fiscal Year 2024,'' May 09
2024, <a href="https://www.dol.gov/agencies/eta/advisories/tegl-06-23">https://www.dol.gov/agencies/eta/advisories/tegl-06-23</a>-change-
2.
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This subsequent Notice contains five sections, as follows:
<bullet> Section I provides the historical formula methodology used
for WOTC State allotments, effective FYs 1996-2023.
<bullet> Section II reviews the proposed administrative formula
that was described in the initial Notice (88 FR 10540), published in
the Federal Register on February 21, 2023.
<bullet> Section III summarizes the comments that ETA received in
response to the initial Notice and ETA's decisions concerning the
allotment formula modifications, based on those comments.
<bullet> Section IV describes the formula's ``stop-loss/stop-gain''
provisions, which are designed to provide a staged transition from the
old to the new funding levels for State allotments. Additionally,
section IV describes the minimum funding provisions for States under
the modified formula. These provisions were previously discussed in
detail in the initial Notice (88 FR 10540).
<bullet> Section V describes the application of the modified
formula (using congressional budgetary appropriations) for FY 2024
allotments and subsequent years. The table appended to this Notice
reflects the actual FY 2024 distribution resulting from the revised
allotment formula.
I. Historical Formula Methodology
The WOTC administrative formula was developed by ETA in 1996 for
the purpose of distributing Federal funds to 52 State grantees (50
United States, District of Columbia, and U.S. Virgin Islands) to
administer the WOTC and the Welfare-to-Work (WtW), enacted in 1997, tax
credit programs. ETA published the original formula methodology in a
Federal Register Notice (68 FR 15745) on April 1, 2003, announcing the
FY 2003 WOTC and WtW program grants to States:
``After reserving $584,200 for postage and $20,000 for the Virgin
Islands, funds are distributed to states by administrative formula with
a $64,000 minimum allotment and a 95 percent stop-loss/120 percent
stop-gain from the prior year allotment share percentage.
The allocation formula is as follows:
(1) 50 percent based on each state's relative share of total FY
2002 (the prior FY) certifications issued for the WOTC/WtW Tax Credit
program;
(2) 30 percent based on each state's relative share of the civilian
labor force (CLF) for calendar year 2001 (the preceding calendar year);
and
(3) 20 percent based on each state's relative share of the adult
recipients of Temporary Assistance for Needy Families (TANF) for FY
2001'' (FY 2001 was the second preceding FY for which complete annual
TANF data was available).
The WtW program, which focused on TANF recipients, was folded into
WOTC in 2006 by division A, title I, section 105 of the Tax Relief and
Health Care Act of 2006 (Pub. L. 109-432). While ETA has made
incremental
[[Page 49232]]
modifications over time, including removing the set-aside for postage,
increasing the minimum allotment from $64,000 to $66,000 (3% increase),
and adding the Commonwealth of Puerto Rico as a State grantee, the WOTC
administrative formula methodology has remained largely unchanged. ETA
used this administrative formula recently for the FY 2023 allotments,
as provided in TEGL No. 06-22, ``Work Opportunity Tax Credit (WOTC)
Initial Funding Allotments for Fiscal Year 2023,'' \3\:
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\3\ TEGL 06-22, available at <a href="https://www.dol.gov/agencies/eta/advisories/tegl-06-22">https://www.dol.gov/agencies/eta/advisories/tegl-06-22</a>.
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``After allocating $20,000 to the Virgin Islands, ETA distributes
the remaining funds to the SWAs by administrative formula with a
$66,000 minimum allotment and a 95 percent stop-loss/120 percent stop-
gain from the previous year allotment percentage. The administrative
formula is calculated as follows:
(1) 50 percent is based on each state's relative share of total
WOTC certifications issued from October 1, 2021 through September 30,
2022 (the prior fiscal year);
(2) 30 percent is based on each state's relative share of the CLF
averages for the 12-month period from October 1, 2021 through September
30, 2022 (the prior fiscal year); and
(3) 20 percent is based on each state's relative share of adult
recipients of TANF averages from October 1, 2020, through September 30,
2021 (the 12-month period from the second preceding fiscal year).''
II. Formula Updates and Modifications
The 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 FY's available data (October 1-
September 30). Thirty percent is based on each State's relative share
of CLF averages for the most recently completed FY's available data,
and 20 percent is based on each State's relative share of adult
recipients of TANF averages from the second preceding FY. The same
three data metrics (certifications issued, CLF averages, and TANF
averages) have been the basis of the administrative formula used to
determine State allotments since 1996.
In the initial Notice (Feb 2023), ETA proposed modifications to its
administrative formula to factor in the SWAs' output workload to
include denials issued and to adjust for inflation. The proposed
allotment formula includes two formula factors: (1) total number of
determinations issued by the SWA (certifications and denials) for the
most recently completed FY's available data, based on SWAs' certified
performance data; and (2) each State's relative share of CLF averages
for the most recently completed FY's available data. States report
their annual certification performance data on ETA Form 9058,
Certification Workload and Characteristics of Certified Individuals,
through an existing information collection under the ``Work Opportunity
Tax Credit'' ICR, approved under OMB Control Number 1205-0371.\4\ A
description of how the data is used to calculate the State allotments
using the proposed modified formula is provided below:
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\4\ ETA Form 9058, Certification Workload and Characteristics of
Certified Individuals--ETA Form 9058 (<a href="http://dol.gov">dol.gov</a>).
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(1) 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),
(2) 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
(3) 20 percent based on each State's relative share of CLF averages
for the most recently completed fiscal year's available data (October
1-September 30).
In addition to populating the administrative formula with updated
metrics, ETA proposed modifications that would raise the minimum
allotment to the States and improve the formula's accuracy in terms of
estimating the true administrative workload of the SWAs. The proposed
modifications were a result of ETA's review of SWAs' quarterly
performance data, WOTC State/regional coordinators' feedback, and
inquiries received from program stakeholders.
A summary of changes under the proposed modified formula (as
detailed in Section IV of the initial Notice) are provided below:
<bullet> The formula will no longer factor in States' share of
adult TANF recipient averages. 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.
<bullet> To align the funding formula more closely with the SWAs'
workload, ETA will lessen the formula weight of the CLF averages used
in the allotment formula. States with larger population sizes (i.e.,
California, Florida, New York, and Texas) have a larger number of
eligible employers participating in WOTC. These States process a higher
volume of certification requests leading to a larger volume of the
determinations issued, and consequently receive a larger relative share
of the Federal funding allocation.
ETA believes that focusing on the SWAs' workload outcomes
(certifications and denials issued) is the most appropriate metric on
which to base WOTC State allotments. To 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 which are currently used in WOTC allotment formula
calculations. This provision is described further in Section V of this
subsequent Notice.
III. Summary of Public Comments Received
Although not required by Federal statute or regulations, ETA sought
public comment on the proposed administrative formula modifications in
the initial Federal Register Notice (88 FR 10540; Feb. 21, 2023). As
with all grant formulas, changing calculation metrics will result in
changes to each State's relative share of Federal funding. Two
commenters [SWAs] concurred with the modified formula as announced in
the initial Notice, two commenters [SWAs] proposed adjusting the weight
of formula calculation metrics (i.e., lessening the weight for denials
issued), and one commenter [SWA] raised concern for States that may
receive up to a five percent decrease in allotment during the
implementation year (FY 2024). ETA considered these comments and
proceeded with updating the WOTC administrative formula for State
allotments as originally proposed in the initial Notice. SWAs expend
resources to process a growing number of employer certification
requests, regardless of the application's outcome (certification or
denial). In FY 2023, SWAs issued 3,708,081 denials, representing 48
percent of the national total workload, compared to 1,918,901
certifications, representing 25 percent of the total workload.\5\ ETA
recognizes this impact and, in the initial Notice, adjusted the
administrative formula to better align State funding with SWA workloads
by including `denials issued' at the same weight as `certifications
issued' in the new formula.
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\5\ National Tax Credit Certification Reporting by Fiscal Year,
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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[[Page 49233]]
IV. Description of Stop-Loss/Stop-Gain and Minimum Funding Provisions
ETA mitigates large changes in State allotments (which may be
caused by changes to formula methodology) by using the ``Stop-Loss/
Stop-Gain'' provision, which gradually phases in State funding
allotment changes due to updated formula metrics. 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 prior (pre-
FY 2024) administrative formula was calculated with 95 percent stop-
loss/120 percent stop-gain provisions, and this did not change in the
modified formula for FY 2024 and subsequent years.
Under the proposed new formula, the new State allotment minimum
would be raised to $119,000 ($36,000 for U.S. Virgin Islands), adjusted
for inflation. As previously mentioned, 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, and using
the proposed new formula, some State grantees would require over a 20
percent increase of their FY 2023 allotment percentage to reach the FY
2024 allotment minimum. 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 by FY 2026. The minimum State allotment
increased to $79,131 in FY 2024, which represents a 20 percent share
increase from the prior minimum of $66,000 in FY 2023, and it will
increase by 20 percent each fiscal year, to reach the new $119,000
minimum by FY 2026. 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.
V. Revised WOTC Administrative Formula, Effective FY 2024 State
Allotments
ETA will determine State allotments for normal WOTC operations
according to the following methodology, effective with the FY 2024
State allotments:
After allocating $36,000 to the U.S. Virgin Islands, ETA
distributes the remaining funds to the SWAs by administrative formula
with a $119,000 minimum allotment and a 95 percent stop-loss/120
percent stop-gain from the previous year allotment percentage. The
administrative formula is calculated as follows:
(1) 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);
(2) 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
(3) 20 percent based on each State's relative share of CLF averages
for the 12-month period of the most recently completed fiscal year's
available data (October 1-September 30).
The State allotments set forth in the table appended to this
subsequent Notice reflect the distribution resulting from the revised
allotment formula described above. In FY 2023 and FY 2024, Congress
appropriated $18,485,000 in funding for State grantees (SWAs) to
administer WOTC. The figures in column 1 show the actual FY 2023
formula allotments to State grantees. Column 2 shows the percentage of
each States' allotment in proportion to the total funding appropriated.
Column 3 shows the actual FY 2024 formula allotments with the
application of the 95 percent stop-loss/120 percent stop-gain, and
$119,000 minimum funding provisions. Column 4 shows each State's
relative share of total FY 2024 allotments and column 5 shows the
percentage share difference between FY 2024 and FY 2023 State
allotments. Additional information on FY 2024 funding allocations may
be referenced in TEGL No 06-23, Work Opportunity Tax Credit (WOTC)
Initial Funding Allotments for Fiscal Year 2024, available at <a href="https://www.dol.gov/agencies/eta/advisories/tegl-06-23">https://www.dol.gov/agencies/eta/advisories/tegl-06-23</a>.
Jos[eacute] Javier Rodr[iacute]guez,
Assistant Secretary for Employment and Training Administration, Labor.
U.S. Department of Labor Employment and Training Administration Work Opportunity Tax Credit (WOTC) State
Allotment Grants Impact of Formula Changes on FY 2024 Allotments to States
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FY 2023 (actual) FY 2024 (actual) Percentage
---------------------------------------------------------------- share
State difference (FY
Allotment Percentage Allotment Percentage 2024 vs. FY
share share 2023)
(1) (2) (3) (4) (5)
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Total.......................... $18,485,000 100 $18,485,000 100 +/-
Alabama........................ 275,882 1.5 284,832 1.5 3.3
Alaska......................... 66,000 0.4 79,131 0.4 20.0
Arizona........................ 344,353 1.9 326,852 1.8 -5.0
Arkansas....................... 129,340 0.7 155,074 0.8 20.0
California..................... 2,463,406 13.3 2,338,208 12.7 -5.0
Colorado....................... 299,388 1.6 284,172 1.5 -5.0
Connecticut.................... 170,021 0.9 161,380 0.9 -5.0
Delaware....................... 80,968 0.4 97,077 0.5 20.0
District of Columbia........... 66,000 0.4 79,131 0.4 20.0
Florida........................ 996,142 5.4 945,515 5.1 -5.0
Georgia........................ 481,902 2.6 483,737 2.6 0.5
Hawaii......................... 83,407 0.5 100,002 0.5 20.0
Idaho.......................... 74,748 0.4 89,620 0.5 20.0
Illinois....................... 706,132 3.8 693,500 3.8 -1.7
Indiana........................ 273,250 1.5 259,363 1.4 -5.0
Iowa........................... 218,776 1.2 207,657 1.1 -5.0
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Kansas......................... 146,904 0.8 139,438 0.8 -5.0
Kentucky....................... 353,854 1.9 335,870 1.8 -5.0
Louisiana...................... 288,003 1.6 294,826 1.6 2.5
Maine.......................... 66,000 0.4 79,131 0.4 20.0
Maryland....................... 398,705 2.2 378,442 2.1 -5.0
Massachusetts.................. 380,504 2.1 361,166 2.0 -5.0
Michigan....................... 574,630 3.1 545,425 3.0 -5.0
Minnesota...................... 288,016 1.6 273,378 1.5 -5.0
Mississippi.................... 207,390 1.1 196,850 1.1 -5.0
Missouri....................... 378,621 2.1 359,378 1.9 -5.0
Montana........................ 66,000 0.4 79,131 0.4 20.0
Nebraska....................... 133,374 0.7 126,596 0.7 -5.0
Nevada......................... 166,333 0.9 162,766 0.9 -2.1
New Hampshire.................. 66,000 0.4 79,131 0.4 20.0
New Jersey..................... 326,817 1.8 354,620 1.9 8.6
New Mexico..................... 169,874 0.9 161,240 0.9 -5.0
New York....................... 1,253,665 6.8 1,189,950 6.4 -5.0
North Carolina................. 510,810 2.8 522,119 2.8 2.3
North Dakota................... 66,000 0.4 79,131 0.4 20.0
Ohio........................... 720,311 3.9 825,339 4.5 14.7
Oklahoma....................... 260,321 1.4 247,091 1.3 -5.0
Oregon......................... 260,465 1.4 247,227 1.3 -5.0
Pennsylvania................... 710,605 3.8 674,490 3.7 -5.0
Puerto Rico.................... 81,519 0.4 97,738 0.5 20.0
Rhode Island................... 71,478 0.4 85,699 0.5 20.0
South Carolina................. 250,468 1.4 267,444 1.4 6.9
South Dakota................... 66,000 0.4 79,131 0.4 20.0
Tennessee...................... 653,761 3.5 620,535 3.4 -5.0
Texas.......................... 1,310,072 7.1 1,507,945 8.2 15.2
Utah........................... 108,459 0.6 119,000 0.6 9.8
Vermont........................ 66,000 0.4 79,131 0.4 20.0
Virginia....................... 414,000 2.2 392,959 2.1 -5.0
Washington..................... 415,914 2.3 394,776 2.1 -5.0
W. Virginia.................... 118,367 0.6 119,000 0.6 0.6
Wisconsin...................... 320,045 1.7 308,525 1.7 -3.5
Wyoming........................ 66,000 0.4 79,131 0.4 20.0
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Total...................... 18,465,000 100 18,449,000 100 ...............
Virgin Islands (non-formula)... 20,000 n/a 36,000 n/a ...............
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[FR Doc. 2024-12706 Filed 6-10-24; 8:45 am]
BILLING CODE 4510-FN-P
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