Selling a business can create unexpected WOTC tax credit issues and opportunities long after the transaction closes. Because employee certifications may not be issued until months (or even years) later, both sellers and successor employers should understand how delayed certifications can affect their tax credits.

When business owners prepare to sell their company, they naturally focus on things like purchase agreements, employee transitions, customer relationships, and tax planning. An item that is often overlooked is the status of pending Work Opportunity Tax Credit (WOTC) applications.

Because WOTC certification frequently takes months, and in some states several years, valuable tax credits may still be working their way through the certification process after ownership has changed.

Without careful planning, those tax credits can be misunderstood, overlooked, or claimed incorrectly.

Tax Credits Earned Before the Sale May Still Belong to the Original Employer

Generally speaking, WOTC tax credits attributable to qualified wages paid by the original employer remain available to that employer, even if an employee’s WOTC certification is not issued until after the business has been sold. This is an important consideration because, in some states, the WOTC certification process for individual employees may take anywhere from a few weeks to multiple years.

This can create an unusual situation:

• The certification arrives after the business has been sold.
• The former owner may no longer be actively involved in the business.
• Accounting records may have been archived.
• The individuals responsible for the transaction may assume the opportunity has passed.

In many cases, however, that opportunity has not passed.

Depending on the circumstances, those certifications may support amended tax returns or other tax benefits relating to the period before the acquisition. Your CPA should determine the appropriate tax treatment, while your WOTC service provider can help identify which certifications and wages relate to the pre-acquisition period.

Successor Employers May Continue Receiving WOTC Benefits

Business owners are often surprised to learn that, generally speaking, a successor employer steps into the shoes of the previous employer for WOTC purposes. Employees who were hired and certified by the original employer before the acquisition may continue generating WOTC tax credits for the acquiring employer, subject to the normal WOTC limitations and maximum credit amounts.

This does not transfer tax credits attributable to wages paid before the acquisition. Rather, it allows the successor employer to continue earning WOTC tax credits on its own qualified wages paid after acquiring the business.

Transferred Employees Are Not New Hires

Another common misunderstanding occurs after an acquisition when employees become part of the acquiring company. Generally speaking, the IRS does not treat these transferred employees as new hires for WOTC purposes.

As a result:

• Employees transferred from the previous employer cannot be screened again for WOTC eligibility simply because ownership changed.
• If an employee was previously certified, the acquiring employer generally continues under that existing certification rather than obtaining a new one.
• If an employee was not WOTC eligible at the time they were originally hired, the acquiring employer generally cannot create a new WOTC opportunity simply because ownership changed.

Understanding this distinction can prevent unnecessary screening efforts and avoid compliance mistakes.

Communication Is Essential During a Business Transition

Whenever a business is being sold, both the seller and purchaser should discuss any pending WOTC activity with their tax advisors and WOTC service provider.

Questions worth addressing include:

• How many WOTC applications are still awaiting certification?
• Which certifications may still produce tax credits for the selling employer?
• Which employees may continue generating WOTC benefits for the acquiring employer?
• How should future certifications be tracked after the transaction closes?

Addressing these questions early can help ensure that valuable tax credits are properly identified, documented, and claimed by the appropriate employer.

If a business acquisition is anticipated, now is the time to review all pending WOTC applications with your CPA and WOTC service provider. Doing so can help ensure that certifications issued months (or even years) after closing are properly tracked and that the resulting tax credits are claimed by the appropriate employer.

Every acquisition is unique, and WOTC treatment depends on the specific facts of the transaction. Business owners should work closely with their CPA and experienced WOTC professionals to ensure these opportunities are not overlooked during the transition.

WOTC Planet does not provide tax, accounting, or legal advice. This content is for informational purposes only.

For employers and workforce professionals who follow the Work Opportunity Tax Credit (WOTC) program, recent activity in Congress offers an encouraging sign.

The Improve and Enhance the Work Opportunity Tax Credit Act (H.R. 6231 / S. 3265), legislation currently serving as a vehicle for the next reauthorization of the WOTC program while also expanding eligibility to military spouses, continues to attract bipartisan support in both the House and Senate.

The bipartisan coalition supporting this bill extends well beyond the legislation’s original sponsors, with additional lawmakers continuing to join as cosponsors months after the bills were introduced.

As of late May, the House bill includes one sponsor and 24 cosponsors, while the companion Senate bill includes one sponsor and 11 cosponsors.

Most recently, Representatives Stephanie Bice (R-OK), Donald Davis (D-NC), and Maggie Goodlander (D-NH), along with Senator Tim Sheehy (R-MT), added their names as cosponsors during May 2026. Their participation follows a steady stream of lawmakers who have joined the legislation since its introduction in late 2025.

For supporters of WOTC, this continued growth in cosponsorship may be one of the most encouraging developments during the program’s current reauthorization cycle.

You can examine the bills’ lists of sponsors and other legislative information here:
In the U.S. House of Representatives – H.R. 6231
In the U.S. Senate – S 3265

---

WOTC Planet does not provide tax, accounting, or legal advice. This content is for informational purposes only.

WOTC’s 2026 reauthorization cycle and current legislative pause naturally raise an important question for employers:

Should we continue screening new hires for WOTC while Congress is navigating the program’s reauthorization cycle?

When a tax credit’s legislation enters a reauthorization cycle, it’s reasonable to pause and evaluate. This article provides context based on the program’s long history and how WOTC has been administered during past reauthorization cycles.

While only Congress can authorize or reauthorize the program, the consistent best practice (based on decades of precedent and agency guidance) is to continue screening and submitting applications. Continue reading to understand why.

A Pattern That Has Repeated Over Decades

During its 30-year history, the Work Opportunity Tax Credit (WOTC) has been renewed thirteen times as part of the federal “tax extenders” process. In more than half of those occasions, Congress allowed the program to enter a temporary hiatus while new legislation was being crafted and approved. Every time, the pause was followed by a full retroactive reinstatement.

In other words, Congress reauthorized WOTC, and employers who continued screening new hires and filing their applications were rewarded with the full tax credit amount.

From a legislative standpoint, the current reauthorization cycle follows a familiar pattern.

What Happened During Previous Cycles?

During prior reauthorization cycles, the U.S. Department of Labor instructed State Workforce Agencies (SWAs) to continue receiving WOTC applications within the required filing timeframes. Employers were expected to continue timely screening. While certifications could not be issued until reauthorization legislation was approved, state agencies continued to receive applications and then issued the certifications after Congress acted.

State agencies are communicating similar expectations today. For example, the California Employment Development Department’s WOTC web page currently states:

Employers should continue submitting WOTC applications within [the] required timeframes. Applications with start dates of January 1, 2026, and after will be accepted and retained pending federal reauthorization.

See EDD CA WOTC

What Does This Mean to Employers Today?

Historically, employers who continued screening and submitting applications during reauthorization cycles were positioned to receive tax credits once the program was reinstated. By contrast, if screening is paused or otherwise missed, WOTC-eligibility information is not collected, and applications can not be filed. When the program is later reauthorized, most, if not all, of the potential credits can be lost.

Reauthorization depends on Congressional action, so non-renewal is possible. However, the program’s long history of consistent renewal, combined with strong bipartisan support in Congress, reinforces the expectation that it will continue as it has in prior cycles.

The consistent best practice (based on decades of precedent and agency guidance) is to continue screening and submitting WOTC applications

For more information, Work Opportunity Tax Credit (WOTC) Reauthorization Update: What Employers Should Know.

---

WOTC Planet does not provide tax, accounting, or legal advice. This content is for informational purposes only. Employers should consult their tax and legal advisors when evaluating changes to HR or PII handling policies.