New WOTC Tax Credit Opportunities Arise from Stimulus Bill

The American Recovery and Reinvestment Tax Act of 2009, recently signed by President Obama, expands the Work Opportunity Tax Credit Program to include two new eligibility categories that you need to know about.
Unemployed Veterans. The Unemployed Veterans category is pretty straight forward. It includes individuals released from active duty in the armed forces within 5 years prior to their hire date who also received unemployment compensation for at least 4 weeks during the past year.
Disconnected Youth. The Disconnected Youth category, on the other hand, is somewhat more complicated. For purposes of WOTC eligibility, a disconnected youth is someone who at the time of hire: (1) is between the ages of 16 and 24 inclusive, (2) is not regularly attending any secondary, technical, or post-secondary school during the 6-month period prior to hire, (3) is not regularly employed during the same 6-month period, and (4) is not readily employable by reason of lacking a sufficient number of basic skills.
Challenges. My firm is in the process of releasing updated instruments for our clients to screen these new categories. Nevertheless, the Disconnected Youth category is problematic. Until additional guidance is provided by the IRS, employers can not with full confidence determine if an employee meets all the elements of eligibility. Critical terms like “not regularly attending”, “not regularly employed”, “not readily employable” and “lacking a sufficient number of basic skills” are legally vague.
For example, what constitutes “not regularly employed?” Is it the same as unemployed? What are “basic skills” and how many is a “sufficient number?”
You might find it interesting that WOTC certifying agencies themselves are uncertain about the definitions and what documentation will ultimately be required. For example, the California WOTC center is placing applications into a temporary “holding pattern” until official guidance has been issued.
Our Screening Approach (for now). We can rule out most non-qualifying employees under the new categories using the current version of the WOTC survey in use by my firm’s clients. Employees who do potentially qualify require some additional verification. Until updated survey instruments can be finalized, we are accomplishing this using individually-directed follow-up surveys by telephone and fax.
My firm’s updated WOTC survey will reflect the new eligibility requirements and provide for verification. As a result, once the new surveys are distributed, the follow-up calls will no longer be necessary.
Guidance Anticipated Soon. Because the WOTC program is a tax matter, Treasury Regulations (issued by the IRS) are required to implement the changes. According to the national Work Opportunity Tax Credit Coalition, these regulations have been anticipated for the past 4 weeks and should provide the additional guidance we need to properly screen for these employees. Today’s IRS Bulletin failed again to address the issue. So, we’ll look to next week and continue to hope for the best.
In the mean time, my clients can count on us to provide individualized attention as we help you to take appropriate advantage of these new opportunities.

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