Department of Labor Issues Interim WOTC Instructions for State Workforce Agencies

This week, the Department of Labor’s Employment and Training Administration issued new instructions to State Workforce Agencies (SWA’s). Agencies needed instructions in the wake of the WOTC re-authorization provided by the Protecting Americans From Tax Hikes (PATH) Act of 2015. President Obama signed this bill on December 18, 2015.

The document summarizes the program changes and other effects created by the PATH Act.  It also guides SWA’s on what to do with applications that were submitted timely (within 28 days from start of employment) in 2015 during the 49-week WOTC authorization lap.  As a result, employers nationwide should now begin receiving certifications for their 2015 qualifying hires.

While these instructions are important and helpful, we are still awaiting further guidance about WOTC’s newest target group, dubbed “Long Term Unemployment Recipients.”

Also, the IRS has not yet issued a notice about the much anticipated transition relief. In prior years, transition relief has temporarily waived the 28-day application deadline for WOTC applications not submitted timely during the program’s authorization lap. For example, last year we were able to submit applications for 2014 hires, without penalty, all the way through April 30, 2015.

While these instructions do not tell us how to qualify or document employees eligible under the new target group, it does inform us that the Department of Labor and IRS are busy modifying WOTC forms to include the new target group.

Furthermore, employers are “encouraged to postpone certification requests for the New Target Group until the revised forms are available.”  If we just can’t wait, the SWA’s will accept applications for the new target group if employers write “Long-term Unemployment Recipient in the top margin [of the ETA 9061 or 9062], right corner underneath the expiration date.”

You can read the entire document for yourself.

DOL PATH Act 2015 – WOTC Interim Instructions (1.27.16)

 

(Thank you to Paul Suplizio, President of the WOTC Coalition, for sending us a copy of the ETA’s interim instructions.)

New WOTC Target Group – Long Term Unemployment Recipient

The recent re-authorization and expansion of the Work Opportunity Tax Credit (WOTC) includes a new WOTC target group.  Reading from the statute, a “Long-term Unemployment Recipient” is defined as an individual “being in a period of unemployment which— (A) is not less than 27 consecutive weeks, and (B) includes a period in which the individual was receiving unemployment compensation under State or Federal law.’’

In plain English? To qualify, your new employee must (1) have been unemployed for at least the past 27 weeks; and (2) he or she must have received unemployment compensation at some point during that time period.

This new target group applies only to employees hired after December 31, 2015.  The IRS has not yet issued guidance or provided any further interpretation of the new law.  It’s not yet clear what if any documentation will be required to demonstrate an employee’s eligibility.

President Promptly Signs Government Funding and Tax Extenders Legislation – WOTC Survives through 2019

President Obama signed a huge tax and spending package into law on Friday following congressional votes that avoided a year-end showdown over the budget and ended legislative business until lawmakers return in 2016

Empowerment zones were reauthorized only through 2016.  Interestingly, however, the bill included a provision that expanded empowerment-zone benefits into some census tracts outside of actual zone boundaries.

It’s not yet clear to me if this empowerment-zone expansion will also affect WOTC’s Designated Community Resident target group.

Read about it in USA Today: “President Obama signs massive spending bill, tax measures into law.”

 

Extenders and Funding Bills Passed by House and Senate

The tax extenders and government funding legislation passed the House and Senate today and is now on its way to the President for his pen.  Of primary interest to WOTC Planet readers is the 5-year extension of the Work Opportunity Tax Credit (WOTC) with Vow to Hire Heroes Act.  These will become law upon receiving the President’s signature.

From USA Today, “Senate clears massive spending bill, tax measures“.

You can read the bill here, at least until they move the file.  For the WOTC extension and revision, scroll to page 38 of the PDF.

Under the 5-year extension, WOTC will be expanded to include a new target group, “Long Term Unemployment Recipients.”  Here’s the language from the bill:

The term ‘qualified long-term unemployment recipient’ means any individual who is certified by the designated local agency as being in a period of unemployment which is not less than 27 consecutive weeks, and includes a period in which the individual was receiving unemployment compensation under State or Federal law.

Based on this language alone (no IRS interpretation available yet), my understanding is that a new employee must be unemployed at the time of hire and the condition of unemployment must have existed for at least the last 27 weeks (which equals one week more than 6 months).  At some point during that 27-week period, the new hire must have received unemployment insurance compensation.

I won’t be surprised if the IRS interprets this to permit one or more short periods of inconsequential employment during the 27-week period (similar to the HIRE Act which required 60 consecutive days of unemployment but still allowed up to 40 hours of work during that period). BUT, that’s just me hoping out loud.

After the President signs this legislation, we anticipate the IRS will issue a notice providing transition relief for employers that did not file timely WOTC application during the program’s 12-month hiatus.

Senate Finance Committee Reports on Tax Extenders Bill

Last week, on August 5th, the Senate Finance Committee reported its version of the 2015 tax extenders bill, S 1946, The Tax Extension Relief Act of 2015.

 “The Committee on Finance, having considered an original bill, S. 1946, to amend the Internal Revenue Code of 1986 to extend certain expiring provisions, and for other purposes, reports favorably thereon without amendment and recommends that the bill do pass.”

This bill would authorize the Work Opportunity Tax Credit for 2 additional years, retroactively beginning January 1, 2015.  It would also extend WOTC to cover a new target group — long-term unemployment recipients.

“The term ‘qualified long-term unemployment recipient’ means any individual who is certified by the designated local agency as being in a period of unemployment which (A) is not less than 27 consecutive weeks and (B) includes a period in which the individual was receiving unemployment compensation under State or Federal law.’’

That sounds simple enough.  It will still be some time before we find out where the House of Representatives will stand on the issue.

 

Here’s the Senate Finance Committee’s page to track this legislation.  Click through to find the legislative text, the Committee’s Report, and other items.

Tax Extenders Bill Scheduled for Consideration in Senate Finance Committee Next Week

The Senate Finance Committee has scheduled a hearing to consider the Chairman’s markup of a new tax extenders bill.  The Committee will consider the bill on Tuesday, July 21.  In its current form, the bill would give the Work Opportunity Tax Credit a 2-year retroactive extension — January 1, 2015 through December 31, 2016.

The bill will extend federal Empowerment Zone tax benefits for the same period.

Read the Chairman’s markup here.

Senator Tom Udall Introduces Bill to Extend Parts of WOTC Through 2018

Senator Tom Udall of New Mexico has reintroduced legislation that would extend the Work Opportunity Tax Credit’s veteran target groups through 2018 (and retroactively to January 1, 2014).  The bill would not extend non-veteran target groups.

Read the bill here.

And, from the Senator’s website:

WASHINGTON – Today, U.S. Senator Tom Udall announced that he has reintroduced legislation to extend and streamline hiring incentives for unemployed and disabled veterans. The VOW to Hire Heroes Extension Act of 2015 would renew and extend the Work Opportunity Tax Credit (WOTC), which provided employers with tax credits for hiring unemployed or disabled veterans until its expiration in 2014. Udall said the bill is good for veterans, businesses and New Mexico’s economy. For example, some veterans have been overlooked for jobs because they have limited private sector experience — but their skills and discipline make them valuable, fast-learning employees.

Udall is a longtime champion of initiatives to hire veterans. The first piece of legislation he successfully passed in the U.S. Senate expanded tax incentives for employers who hired recently returned veterans. Udall cosponsored the original VOW to Hire Heroes Act to build on that progress, and it was signed into law in 2011. This new bill would renew and extend the program so more unemployed and disabled veterans can find good jobs.

“Transitioning out of military service and back to the civilian workforce can be daunting, especially for veterans who were disabled overseas,” Udall said. “Our veterans have sacrificed for our country, and we owe it to them to help make sure they can transition smoothly back into civilian life. I was proud to champion the original VOW to Hire Heroes Act, which helped thousands of veterans apply their valuable skills to civilian positions. Extending this program will show that our country remains committed to veterans and their families, while helping businesses find good employees and boosting New Mexico’s economy.”

The VOW Act would extend the program through 2018 and simplify the WOTC application process to ensure that paperwork hurdles do not create disincentives that prevent businesses or veterans from taking advantage of the important benefit.

Specifically, the VOW Act would:

– Extend the veterans hiring tax credit for 3 years.

– Simplify the certification of veterans’ status.

– Make the credit available against payroll taxes in certain circumstances.

– Ensure parity for tax exemptions in U.S. territories and possessions.

– Require the Internal Revenue Service and Department of Labor to report annually to Congress on the cost-effectiveness of the credit increasing veterans’ employment.

Sen. Richard Blumenthal (D-Conn.) is leading the legislation, which is also supported by Sens. Michael Bennet (D-Colo.), Ben Cardin (D-Md.) and Jeanne Shaheen (D-N.H.). Congresswoman Julia Brownley (D-Calif.-26) introduced the House companion legislation of the VOW to Hire Heroes Act.

IRS Revises Form 8850

It is time to think about updating your Work Opportunity Tax Credit (WOTC) pre-screening documents.

The IRS’ latest revision to Form IRS 8850, “Pre-Screening Notice and Certification Request for the Work Opportunity Credit” is dated March 2015.  I do not notice any material changes to the form.

Keep alert for possible instructions from the IRS regarding deadlines for switching over.  In the past, the IRS has continued to allow the use of older versions of the form, although this can be problematic if the program’s eligibility criteria have changed.  In this case, however, there are no program changes reflected on the form.

Interestingly, the IRS issued this revision during a period when the WOTC program itself has not yet been reauthorized by Congress for 2015.

For my firm’s clients, we will be updating your screening materials in a manner convenient for you, as you continue to use your current stock of screening packets.

Opportunity Alert! IRS Notice 2015-13 Providing Transition Relief for Employers Submitting Late WOTC Applications

We have been waiting for this!

The IRS has released IRS Notice 2015-13, which provides transition relief given the late retroactive renewal of the Work Opportunity Tax Credit program in December 2014.

Notice 2015-13 waves the 28-day deadline for submitting IRS Form 8850 (the WOTC Pre-screen Notice) for qualifying employees hired in 2014.  The extended deadline for submitting the applications for affected employees is now April 30, 2015.  From the Notice:

Because [Tax Increase Prevention Act of 2014] extended the WOTC retroactively for 2014 for members of targeted groups, employers need additional time to comply with the requirements of § 51(d)(13)(A). Accordingly, a taxable employer that hired a member of a targeted group (as defined in §§ 51(d)(2) through (10)), or a qualified tax-exempt organization that hired a qualified veteran described in § 51(d)(3), on or after January 1, 2014, and before January 1, 2015, will be considered to have satisfied the requirements of § 51(d)(13)(A)(ii) if it submits the completed Form 8850 to the appropriate DLA to request certification not later than April 30, 2015.

A timely request for certification does not eliminate the need for the employer to receive a certification before claiming the credit.

What does this mean in practical terms?

    • Employers who were sitting on the fence in 2014 may now submit WOTC applications for employees hired in 2014.
    • Moreover, employers who were actively screening and submitting WOTC applications during 2014 — but who declined to submit one or more applications because the 28-day deadline had been missed — may now reconsider and submit those “late” applications.
    • All applications for employees hired in 2014 must be submitted on or before April 30, 2015.

WOTC EXTENDED Through End of December

On Friday Pres. Obama signed HR 5771, the Tax Increase Prevention Act of 2014 into law.  While  employers can be glad their efforts to utilize the Work Opportunity Tax Credit and other tax incentives during 2014 were not wasted, we are now faced with a new expiration date approaching in only 12 days.

Paul Suplizio, President of the WOTC Coalition, summarizes our situation and defines our next objective.

We share your disappointment at Congress’ inability to provide more than a one-year extension, which means continued uncertainty for taxpayers who rely on these tax credits in good faith with the aim they were enacted for.

Our immediate goal is to win a WOTC extension for the entire year 2015 on the bill to raise the debt ceiling which will come before Ways and Means in March. If another tax bill moves sooner, for example, raising the gas tax for highway maintenance, we will work to get WOTC included in that bill.

More to follow….