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WOTC Update: New Senate Finance Committee Chairman to Focus on Expired Incentives

U.S. labor department instructs state workforce agencies to continue to accept certification requests


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Overview

Senator Ron Wyden, the new chairman of the Senate Finance Committee, has recently stated that one of his priorities will be the re-enactment of federal tax incentives that expired on December 31, 2013.1 The federal Work Opportunity Tax Credit ("WOTC") is among the expired incentives. Prior to its expiration, the WOTC served as a federal income tax credit designed to encourage businesses to hire individuals from certain targeted groups, with the WOTC potentially reducing an employer’s federal tax liability by up to $9,600 per qualified applicant (depending upon the applicable employee target group). To be eligible for the credit, employers were required to timely file requests for certification with State Workforce Agencies ("SWAs").

Although there is no guarantee that the WOTC will be extended, the U.S. Department of Labor ("DOL") has recently issued Training and Employment Guidance Letter No. 8-13 ("TEGL No.
8-13") wherein the Employment and Training Administration ("ETA") instructs SWAs to continue to accept employer certification requests in anticipation that Congress may retroactively reauthorize this federal credit.2 In this Tax Alert we summarize the DOL’s guidance and offer some taxpayer considerations.

DOL guidance in anticipation of a potential retroactive "extenders package"

While the WOTC has in prior years been extended as part of an "extenders package," there is no guarantee that any such extension will be passed this time around and, if passed, that the extension will include transition rules permitting retroactive certification of eligibility. However, as stated in TEGL No. 8-13, "in the past when the tax credit program’s authority lapsed and Congress subsequently reauthorized the program, certain legislative provisions allowed for retroactive certification of eligibility for the [hiatus] period between the expiration date and the reauthorization date."3 To be eligible for the WOTC during the hiatus period "employers must have properly filed requests for certification [with the applicable SWA] in a timely manner [(within 28 days of an employee’s commencement of employment)] and the [the SWA] . . . must have received and logged them in for subsequent approval or denial."4 To enable proper certification in the event that Congress retroactively reauthorizes the WOTC in the current instance,
TEGL No. 8-13 provides as follows: "[The ETA instructs] the SWAs to continue to accept applications for the expired target groups after December 31, 2013, but to hold off on processing the requests pending further legislative action and guidance from [the] ETA."5

Taxpayer considerations

In light of the guidance provided in TEGL No. 8-13, taxpayers may wish to consider those actions that would enable WOTC qualification in the event that Congress retroactively reauthorizes the WOTC. Included among actions to consider are the following:

  1. The continued screening of employee candidates and the completion of page 1 of IRS Form 8850 (Pre-screening Notice and Certification Request for the Work Opportunity Credit) on or before the day the job offer is made;
  2. Completion of page 2 of IRS Form 8850 after a qualified individual is hired;
  3. Completion of ETA Form 9061 (Individual characteristics form work opportunity tax credit applicant information); and
  4. Submission of the completed and signed IRS and ETA forms to the applicable SWA (note that such forms must be submitted within 28 calendar days of the employee’s start date).

Contacts

If you have questions regarding TEGL No.8-13, the WOTC generally or other federal or state employment credits, please contact any of the following Deloitte Tax professionals.

 

Michael Locascio
Director
Deloitte Tax, LLP, San Francisco
mlocascio@deloitte.com
+1 415 783 6041

 

Kevin Potter
Director
Deloitte Tax, LLP, New York
kevpotter@deloitte.com
+1 212 492 3630

 

Marcus Panasewicz
Senior Manager
Deloitte Tax, LLP, Los Angeles
mpanasewicz@deloitte.com

+1 213 688 1837

 

Bart Butler
Senior Manager
Deloitte Tax, LLP, Dallas
bbutler@deloitte.com
+1 214 840 1188
Joe Fahndrich
Senior Manger
Deloitte Tax, LLP, Chicago
jfahndrich@deloitte.com
+1 312 486 1952
 

 

This alert contains general information only and Deloitte is not, by means of this alert, rendering accounting, business, financial, investment, legal, tax or other professional advice or services. This alert is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte shall not be responsible for any loss sustained by any person who relies on this alert.

1 See, Bloomberg News, Wyden Says Tax-Break Extension Goal of Senate Panel (Transcript), Feb. 13, 2014, http://www.bloomberg.com/news/2014-02-14/wyden-says-tax-break-extension-goal-of-senate-panel-transcript-.html; See also, Wall Street Journal, Renewing tax breaks at top of incoming Senate finance chief Wyden’s list, Feb. 11, 2014,
http://blogs.marketwatch.com/capitolreport/2014/02/11/renewing-tax-breaks-at-top-of-incoming-senate-finance-chief-wydens-list/.
2
DOL Training and Employment guidance Letter No. 8-13 (Jan. 2, 2014), accessible at: 
http://wdr.doleta.gov/directives/attach/TEGL/TEGL_8_13.pdf.
3 Id.
4
Id.
5
Id. Note that for prior hiatus periods, the ETA has instructed SWAs to accept certification requests in anticipation of a retroactive reauthorization.

As used in this document, “Deloitte” means Deloitte LLP [and its subsidiaries]. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting.

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