Work Opportunity Tax Credit Program (WOTC)

This federal tax credit was designed to help individuals from certain targeted groups who consistently face significant barriers to employment move from economic dependency to self-sufficiency. Businesses are encouraged to hire targeted group member

The Work Opportunity Tax Credit (WOTC) is a federal tax credit available to employers who invest in American job seekers who have consistently faced barriers to employment. Employers are encouraged to meet their business needs and claim the tax credit if they hire an individual who is an eligible WOTC targeted group member. Employers must apply for and receive a certification from their State Workforce Agency verifying the new hire is a member of a targeted group before they can claim the tax credit. After the required certification is secured, taxable employers claim the work opportunity credit as a general business credit against their income taxes, and tax-exempt employers claim the credit against their payroll taxes.

States (not individuals), the District of Columbia, the U.S. Virgin Islands, and Puerto Rico. The "designated local agency," also known as the State Workforce Agency (SWA), is the designated state employment security agency (established in accordance with the Wagner-Peyser Act of June 6, 1933, as amended (29 U.S.C. 49-49n)) authorized to administer the WOTC.

Beneficiaries are all employers seeking to hire members of WOTC targeted groups, and members of those targeted groups seeking employment. The ten different targeted groups have statutory definitions (Public Law 104-188, as amended) with specific eligibility requirements that must be verified by the State Workforce Agency (SWA) before a WOTC certification can be issued to an employer. Participating employers and/or their authorized representatives must submit their certification requests to the appropriate SWA using IRS Form 8850 and ETA Form 9061/9062 within 28 calendar days of the new hire's start date. IRS Form 8850 should be submitted with ETA Form 9061/9062, and any required supporting documentation to prove targeted group eligibility.

States are to use these formula grants to administer the WOTC in accordance with the grantee requirements outlined in the WOTC statement of work. Required activities include: accepting WOTC applications from employers; determining eligibility of individuals as members of targeted groups; issuing employer certifications or denials; developing working agreements with partner agencies in American Job Centers (also called One-Stop Career Centers) or other State agencies to verify or document eligibility of new hires, including issuing Conditional Certifications; and coordinating efforts to promote WOTC with employers, job seekers and other Workforce Innovation and Opportunity Act (WIOA) partners. ETA develops procedural guidance and program technical assistance, awards funding to states, and provides general administrative oversight to the states. See above for additional information.

Funding is provided by annual formula allotments with a two-year period of performance cycle. Method of awarding/releasing assistance: Notice of Award (NOA) letter.

WOTC grant funds are provided to State Workforce Agencies (SWAs) on an annual fiscal year basis. Grant amounts are determined by administrative formula.

As provided in funding allotment and policy guidance issued by ETA and IRS.

Grantees who do anticipate being able to fully expend their grant award by the period of performance end date may apply for a period of performance no cost extension, to extend the period of performance by one additional year. Grantees should consult with their ETA federal project officer for more information.