Tax Reform on the Horizon – Battle for WOTC and Other Incentives Looms

Speaker of the US House of Representatives, John Boehner (R-Ohio) has recently repeated his vow to make comprehensive tax reform a top priority of the new Congress this year.  Symbolic of that end, Speaker Boehner has reserved the designation of House Resolution 1 (HR 1) for the coming tax reform bill.

“Fixing our tax code is one of my highest legislative priorities for this Congress . It’s time we shift the balance of power from the tax collector to the taxpayer.” Read more at The Hill, “Boehner: Tax reform to be H.R. 1.”

Paul Suplizio, President of the WOTC Coalition, made the observation today that given this priority, supporters of the Work Opportunity Tax Credit and other jobs-related incentives will soon face a political challenge that could easily turn against them.

“Integral to tax reform will be decisions on retaining many tax provisions that expire at year-end, including WOTC and VOW Act veterans job incentives.”

“We’ve stressed in the past that our Coalition will have to work harder than ever to keep WOTC alive when the House takes up tax reform, as the odds right now are against our winning a favorable verdict in the Ways and Means Committee.”

The remainder of Mr. Suplizio’s observations today are published here with permission.


Subject: President And Leaders Agree To Avoid Shutdown, Boehner Sets Course For Tax Reform

From: Paul Suplizio
Date: Fri, March 01, 2013 6:10 pm
March 1, 2013

The President and Congressional leaders didn’t resolve the sequester in their meeting today, but they did reach agreement to pass a bill funding the government for the rest of 2013, averting a government shutdown.

Both sides agreed to a measure adhering to the $1.043 trillion cap set for FY 2013 discretionary spending by the Budget Control Act of 2011, and not dealing with sequester or taxes.

The bill will more likely be a Continuing Resolution along the lines of Appropriations Chairman Rogers’ proposal in the House, which includes assured funding levels for Defense and Veterans Administration.

The President acknowledged across-the-board sequester cuts would be taken from the $1.043 trillion Continuing Resolution, so long as the sequester remains in effect.

Funding the government in an orderly manner and avoiding a shutdown means the question of mitigating the sequester remains on the table. The parties are deadlocked but channels are open—whether they’ll be used depends on who feels the most heat.

The heat’s already rising. At a press conference today, Chairman “Buck” McKeon of the House Armed Services Committee, surrounded by his subcommittee chairman, attacked the President for not forestalling the sequester, punishing service men and women. He admitted though, he had voted for sequester in 2011—not expecting the Super Committee would fail and it would come to pass.

The President’s budget for 2014 will be released in a few days, followed by House and Senate budgets next month. If the sequester is still in effect then, it will be absorbed in the struggle of dueling budgets, from which will emerge this year’s major tax and spending bills.

Two days ago Ways and Means Committee Chairman Dave Camp won a decision from Speaker Boehner to report a tax reform bill, whose broad outlines will be set by the coming Ryan budget. The Speaker’s courageous decision was taken despite fears of many Republicans that taking votes to eliminate or cap popular deductions and credits could hurt them.

Integral to tax reform will be decisions on retaining many tax provisions that expire at year-end, including WOTC and VOW Act veterans job incentives. You can read the long list of expiring provisions at the Joint Committee on Taxation’s web site,, in JCX-3-13, “List of Expiring Federal Tax Provisions, 2013-2023.”

We’ve stressed in the past that our Coalition will have to work harder than ever to keep WOTC alive when the House takes up tax reform, as the odds right now are against our winning a favorable verdict in the Ways and Means Committee. Thanks to allies like Senators Baucus and Finance Committee Democrats, we may prevail in the Senate, but once the Senate goes to conference with the House to resolve their differing bills, the game can turn on a whim. We once lost the entire target group of disadvantaged youth in conference because a tobacco-state senator insisted on an excise tax cut—those jobs paid for his cut!

President, WOTC Coalition

Coalition Strategy for Renewal of Expired Disconnected Youth Target Group

The Work Opportunity Tax Credit (WOTC) target group known as Disconnect Youth was created by the American Recovery and Reinvestment Tax Act of 2009. (See “New WOTC Tax Credit Opportunities Arise from Stimulus Bill”) 

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.

While very successful as part of the work opportunity program, it was also very short lived. An expiration date of December 31, 2010 was built in from its beginning. Since that time, however, many of us have held out hope that the Disconnect Youth target group would be renewed. The WOTC Coalition, among others, has been pressing for its renewal.

Early this morning, I received the following correspondence from Paul Suplizio, President of the WOTC Coalition. In it, Paul addresses current efforts to restore the Disconnected Youth target group. It is published here with permission.


From: “Paul Suplizio”
Date: Wed, February 06, 2013 1:13 am
Subject: WOTC Disconnected Youth Target Group

February 6, 2013

Since expiration of the disconnected youth target group in 2010, our Coalition has been pressing for its restoration. “Disconnected youth,” broadly defined as youth ages 16 through 24 who are out of school and out of work, are approaching 7 million in number today. In the brief 18 months of 2009-2010 when they were a WOTC target group, 362,561 disconnected youth found jobs, and we were easily on the way to a half million a year when their target group was terminated.

Our Coalition’s efforts helped bring about appointment of an inter-agency task force, headed by OMB, in 2011, and a “request for information” was sent to around 800 government agencies and NGO’s, culminating in a webinar conference in June of last year that, regrettably, hasn’t produced much so far. Our dialogue with OMB staff has continued since that time, with the goal of getting the President to address the serious disconnected youth problem in the Fiscal Year 2014 budget, and propose WOTC as the solution.

We are enclosing a copy of our latest message to OMB, sent on January 31st.

We haven’t received a reply to this message and don’t expect one till after release of the President’s budget.

Regardless of the budget, we will go all out way for restoration of disconnected youth this year. If there’s a sequester deal between now and March 1st, we will have a chance to get in the deal. Please bring this up with your White House contacts and ask them to support it—no need to ask them to extend WOTC, just present disconnected youth as major labor force problem that needs to be addressed, that restoring it in the jobs tax credit which proved very effective in 2009-2010 makes sense and should be included in the President’s proposals.

You should also bring it to attention of Majority Leader Harry Reid, Senate Finance Committee Chairman Max Baucus, and ask other Finance Committee senators to urge Senator Baucus to get it in the Democrats’ revenue proposals for a sequester deal. Senator Reid wants revenue in any sequester bill, so if the political stars align, there may be a tax title which can carry both disconnected youth and Hurricane Sandy WOTC to passage.

If sequester doesn’t work, we’ll try again on the next tax vehicle to come along.

We will keep you informed.

President, WOTC Coalition

NEW WOTC Forms, Electronic & FAX Filing and Transition Relief

Catching up with the VOW to Hire Heroes Act, which was signed by President Obama in November of last year, the Internal Revenue Service has issued an updated Form 8850 and some very important guidance.

Links for your convenience:  The new IRS Form 8850.  IRS 8850 Instructions.  IRS Notice 2012-13

Disconnected Youth: Although not unexpected, I should note that in preparing the updated IRS 8850 Pre-screening Notice, the IRS has removed the questions related to qualifying Disconnected Youth.  This category expired on December 31, 2010. 

We’ve been clinging to the hope that it would be added-back with the extension of WOTC.  I personally have not given up on that hope.  Also, if I am not mistaken, the Department of Labor’s current instructions to State Workforce Agencies still requires them to reserve disconnected youth applications on file pending future instructions.

Notice 2012-13: Notice 2012-13 provides guidance on a number of important issues and should not be overlooked.  I suggest a thorough reading.  Major topics covered include:

  • Background of the new veterans categories
  • Transition relief (a grace period extending the 28-day submission deadline for IRS 8850 for qualified veterans hired between November 22, 2011 and May 22, 2012)
  • The use of electronic signatures for IRS 8850
  • Signing or filing IRS 8850 by FAX transmission
  • Guidance for tax-exempt organizations claiming WOTC

Request for Comments: In addition to the guidance provided by the IRS on these topics, the IRS is also requesting comments about (1) alternative methods for certification of qualified veterans and (2)alternative methods of filing Form 8850.

In summary, with this notice the IRS has given us a lot to think about and a lot of work to do. 

For a Limited Time Only: New York Youth Works Tax Credit Now Available

The New York Youth Works Tax Credit program was signed into law by Governor Andrew M. Cuomo last month on December 9th.  The program’s hiring credit is effective for qualifying at-risk youth hired between January 1 and July 1, 2012.

The Business Council of New York State has published a detailed facts sheet  describing the program’s eligible employers and employees and the amounts and terms attached to the tax credits.  The fact sheet is available on the Council’s website.

Governor Cuomo issued a press release at the time the legislation was signed.  The following excerpts are drawn therefrom.

Governor Andrew M. Cuomo today signed a bill creating “NY Youth Works,” an inner city youth employment program that will combat high unemployment in the state’s metro areas. The new law includes $25 million in tax credits for businesses that hire unemployed and disadvantaged youth and $62 million to support job training programs.

The NY Youth Works program provides $25 million in tax credits to benefit employers that hire unemployed youth over the first six months of 2012, with the ultimate goal of permanent, unsubsidized employment. . . . Eligible participants for the jobs program include unemployed, low-income youth aged 16 through 24 who are located in one of the following areas: Albany, Brookhaven, Buffalo, Hempstead, Mount Vernon, New Rochelle, New York City, Rochester, Schenectady, Syracuse, Utica, and Yonkers.

Job Creation Task Force Called for Extending WOTC

The Huffington Post published an article by Leo Hindery, Jr. this morning in which Mr. Hindery tells about his task force’s new report, “Vision of Economic Renewal: An American Jobs Agenda.” This report includes a series of 15 recommendations (issued by The Task Force on Job Creation) for reversing America’s economic crisis. 

The article is interesting. If you would like to know about all 15 recommendations, click through and read it.

My focus here is on the last of the 15 recommendations — extend the Work Opportunity Tax Credit (aka WOTC) including the temporary (and now expired) Disconnected Youth category.

The task force is concerned about high unemployment of America’s youth – particularly those between the ages of 16 and 24.

“The hardest hit among the unemployed are young people. Almost 25 percent of teenagers from 16 to 19 are officially unemployed. For young adults aged 20 to 24, unemployment is nearly 16 percent — a number not seen since 1948. Many of these disconnected youth are at risk of becoming permanently disengaged from the labor market. Young people who do not have a successful work experience by age 25 are also at greater risk of lifelong poverty.”

Extending WOTC with its Disconnected Youth category is one way to create more job opportunities for these young potential workers.

The task force’s credentials are impressive and might give some members of Congress a reason to pay attention.  For example, Mr. Hindery is chair of the Smart Globalization Initiative at the New America Foundation and the former CEO of AT&T Broadband and its predecessors, Tele-Communications, Inc. and Liberty Media.  

Mr. Hindery’s co-chair on the task force was Leo W. Gerard, International President of the United Steelworkers and a member of the executive council of the AFL-CIO.   The 20 person task force also included other “policy makers, economists, business and labor leaders” whose names are not mentioned in the Huffington Post article.

WOTC is slated to expire at the end of December 2011.  As I’ve reported previously, this is not unusual . . .  Congress has had to reauthorize WOTC eight times since it’s inception in 1996 (see previous post, The Rocky Road of WOTC).

The issue is somewhat different today, however, in that the U.S. Department of Labor recently recommended termination of WOTC — a small and misguided contribution toward reducing the national budget deficit.  I’ve seen no indication so far that any legislators are taking that recommendation seriously.   The recommendation, nevertheless, is a token of the volatile political environment we currently face.  It is an environment in which almost nothing is certain, except of course death and taxes.

HR 2082 – Bill to Extend and Refine the Work Opportunity Tax Credit Program

I received an update from Paul Suplizio, President of the WOTC Coalition today. There is recent progress on the legislative front for an extension of the Work Opportunity Tax Credit.

The WOTC program is currently slated to expire on December 31, 2011. While that might at first seem alarming if your company has been relying on the program to offset hiring costs, its par for the WOTC game. Over the years, Congress has repeatedly allowed the program to expire or nearly expire before renewing it for another term.

Here’s a brief quote from Paul Suplizio’s update this morning.

“Congressmen Aaron Schock (R-IL) and Charles B. Rangel (D-NY) have introduced a bill, H.R. 2082, Work Opportunity Credit Improvements Act, calling for a three-year extension of WOTC till December 31, 2014. Congressman Schock and Congressman Rangel are Ways and Means Committee members and thus able to work for passage within the committee. “


“This is the bill WOTC supporters should rally around as Congress takes up tax legislation in the next two critical months. It’s important we get a maximum number of House members to co-sponsor H.R. 2082 before the measure is taken up in Ways and Means.”

The bill not only proposes to extend the WOTC for 3 years, it includes a number of very interesting refinements to the program and adds back the disconnected youth category.

If you have an interest in the WOTC program, you should definitely contact your member of Congress to recommend their sponsorship of this bill.  I plan to contact our legislators next week AND to send a correspondence to every member of the legislature about this issue.

Please feel welcome to contact me if I can help your efforts in any way.  I can offer you a mail-merge ready list of US Legislators that you could use in preparing your correspondence.

Fight Is Over For Now – Missing Tax Incentives To Stay Missing

The US House is schedule to vote on the tax bill today. The House Rules Committee, however, is allowing a vote on only one proposed amendment – an amendment to increase the estate tax. The rule allows no other motions or amendments on the bill.

While we hoped for an extension of the HIRE Act payroll tax exemption, that program will end for new hires (as it was originally scheduled) on December 31. Do not forget, however, that the HIRE Act’s worker-retention tax credit remains in play — many employees who qualified for the payroll tax exemption in 2010 will generate an additional income tax credit for their employer in 2011 after working for 52 weeks.

Some employers who participate in the Work Opportunity Tax Credit (WOTC) program will experience a small decrease in qualifications in 2011 as the Disconnected Youth and Unemployed Veteran target groups also expire. We are consoled, however, by the fact that the WOTC program itself has been renewed through 2011.

So, far now — for now — the fight is temporarily over. In 2011, we will be working with the new Congress to renew and extend as many of these provisions as feasible.  If you’re interested in joining the WOTC Coalition and playing some role in the effort, contact Paul Suplizio, President of the WOTC Coalition.  Visit the Coalition’s website at

U.S. Senate Passes Tax Bill – Eyes Turn to House to Please Add Back Missing Tax Incentives!

The Senate today passed the much anticipated tax bill without renewing the HIRE Act Payroll Tax Exemption, federal Renewal Communities, or the WOTC provisions for disconnected youth, unemployed veterans, or Gulf Opportunity Zone employers.  This is a disappointment, but not unexpected. 

Now that HR 4853 has been passed to the U.S. House of Representatives, eyes turn to susceptible House members seeking an amendment to add these provisions.  If these incentives are important to you, please consider contacting House Members from your jurisdictions and urge them to support including these 5 provisions with any amendments to the tax bill.  Make a special effort to contact Ways and Means Chairman Sander Levin.

Paul Suplizio, President of the WOTC Coalition, pointed out today that these 5 programs are “current-law job creation incentives” — so we are not urging the creation of any new program.  In summary, what we seek:

  1. Extension of the HIRE tax credits
  2. Extension of the Renewal Community program
  3. Extension of WOTC for disconnected youth
  4. Extension of WOTC for unemployed Iraq-Afghanistan era veterans
  5. Extension of WOTC for Gulf Opportunity Zone employers

On the bright side, the bill passed by the Senate does include reauthorization of:

  • The WOTC Program through 2011
  • The Research and Development Tax Credit
  • The Indian Employment Credit
  • The Empowerment Zone Program
  • The District of Columbia Enterprise Zone

See my previous post on this.

Asking the US House to Include Key Tax Incentives in House Amendment

As noted in my most recent post, some key employment incentives were left out of the Senate version of the tax bill being discussed in Washington D.C.  I received a correspondence today from Paul Suplizio, President of the WOTC Coalition, detailing current efforts to include the missing programs in the House version of the bill.

Specifically, the WOTC Coalition is urging that the following be included in the House bill if the opportunity for amendment materializes.

  • Reauthorization of the HIRE Act’s Payroll Tax Exemption for Employers
  • Reauthorization of Renewal Communities
  • Continuation of Disconnected Youth as a WOTC targeted group
  • Continuation the Unemployed Veterans as WOTC targeted group
  • Continuation of WOTC for Gulf Opportunity Zone employers

Efforts at persuasion are focused on Representative Sander Levin, Chairman of the House Committee on Ways and Means and Senator Max Baucus, Chairman of the Senate Committee on Finance. 

Representative Charles B. Rangel, a known expert and champion of the WOTC program within the House of Representatives has also been contacted with the hope that he will use his expertise to help persuade the Chairman to include these items in any amendment to the bill.

FINAL? Final Guidance about Disconnected Youth and Unemployed Veteran WOTC Groups

Perhaps you remember a post with a very similar title from March of this year? On March 5, 2010, the Department of Labor published TRAINING AND EMPLOYMENT GUIDANCE LETTER NO. 03-09, Change 2, which purported to be

Final Guidance to State Workforce Agencies (SWAs) and Employers for the Implementation of the Two American Recovery and Reinvestment Act (ARRA) of 2009 Work Opportunity Tax Credit (WOTC) Target Groups Requirements

I guess it was not so final after all. 

What appears to the final, final guidance was published earlier today as TRAINING AND EMPLOYMENT GUIDANCE LETTER NO. 03-09, Change 3.  This change letter provides some new “clarification” to the Final Guidance previously received.

In fact, is does provide some very important clarification — not about the substance or definitions of qualifying employees — but rather, about the deadlines and procedures for submitting the official “Disconnected Youth Self Attestation Form” or SAF.  The original SAF, published with Change 2, included instructions that seemed to require the SAF and ETA 9061 to be submitted together all within 28 days of the qualifying employees start date.  Today’s publications clarifies that the 28-day deadline does not apply to the SAF or ETA 9061.  That’s good news.

Earlier, I had in fact noticed the questionable instructions on the SAF and had silently asked myself, “Are they serious?” 

It would be a big deal if they were, since previously the only form with a 28-day deadline attached was the IRS 8850 “Pre-Screening Notice and Certification Request for the Work Opportunity Credit.”  All other forms, including the Department of Labor’s ETA 9061 Personal Characteristics form and all other supporting documentation could be submitted later without jeopardizing an employee’s eligibility.

The less heartwarming aspect of Change 3 is that a new version of the Disconnected Youth SAF has now been published (to accommodate the revised instructions).  Furthermore, after 90 days, WOTC certifying agencies throughout the United States are instructed to no longer accept the old version.  

Here’s where we all say “ugg” in unison.

On a positive note, the actual content of the SAF has not changed at all.  The employee’s statement is identical in both language and appearance to the original form. 

I suspect that we have not yet heard the end of this issue.  In any case, my clients will begin now to incorporate the new SAF form into their processes.  And as always, when the government throws a small boomerang like this, we’ll figure out how to catch it and redirect it to maximize our clients’ WOTC qualifications and tax benefits.

If you have questions about the Work Opportunity Tax Credit, or any aspects of this discussion, please contact me.  I am Vaughn Hromiko.  You can reach me at  or toll free at (800) 655-5281, ext 101.