Many owners and managers of affordable multifamily housing properties are finding it difficult to find qualified staff to work either at the properties or at the main office. This problem has been around for a long time but has been exacerbated by COVID-19. A new federal tax credit was created last year that provides a potential tool for employers looking for a way to find qualified staff.
The Work Opportunity Tax Credit (WOTC) is a little-known federal tax credit available to employers who invest in American job seekers who have consistently faced barriers to employment. Employers can both meet business needs and claim a tax credit by hiring an individual who is in a WOTC targeted group (which will be defined later).
Employers must apply for and receive a certification verifying that 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 WOTC as a general business credit against their income taxes, and tax-exempt employers claim the WOTC against their payroll taxes.
WOTC is authorized until December 31, 2025, and is part of the Consolidated Appropriations Act of 2021.
The program is administered jointly by the Department of Labor (DOL) and the IRS. DOL provides grant funding and policy guidance to the State Workforce Development Agencies (State Workforce Agencies) to administer the certification process, while the IRS administers all tax-related provisions and requirements.
Targeted Groups
WOTC targeted groups include:
- Qualified IV-A Recipients: These are individuals who are members of a family receiving assistance under a state plan approved under part A of title IV of the Social Security Act relating to Temporary Assistance for Needy Families (TANF). The assistance must be received for any nine-month period during the 18-month period ending on the hiring date;
- Qualified veterans: a “qualified veteran” is a veteran who is any of the following: (a) a member of a family receiving assistance under the Supplemental Nutrition Assistance Program (SNAP) for at least three months during the first 15 months of employment; (b) unemployed for a period totaling at least four weeks [whether or not consecutive] but less than six months in the one-year period ending on the hiring date; (c) unemployed for a period totaling at least six months [whether or not consecutive] in the one-year period ending on the hiring date; (d) a disabled veteran entitled to compensation for a service-connected disability hired not more than one year after being discharged or released from active duty in the U.S. Armed Forces; or (e) a disabled veteran entitled to compensation for a service-connected disability who is unemployed for a period totaling at least six months [whether or not consecutive] in the one-year period ending on the hiring date.
- Qualified Ex-Felon: a “qualified ex-felon” is a person hired within a year of:
- Being convicted of a felony, or
- Being released from prison for the felony.
- Designated Community Resident (DCR): A DCR is an individual who, on the date of hiring –
- Is at least 18 years old but under 40;
- Resides within one of the following:
- An Empowerment Zone,
- An Enterprise community, or
- A Renewal Community
- AND continues to reside at the locations after employment.
- Vocational Rehabilitation Referral: A “vocational rehabilitation referral” is a person who has a physical or mental disability and has been referred to the employer while receiving or upon completion of rehabilitative services pursuant to:
- A state plan approved under the Rehabilitation Act of 1973, or
- An Employment Network Plan under the Ticket to Work Program, or
- A program carried out under the Department of Veterans Affairs.
- Summer Youth Employee: a “qualified summer youth employee” is one who:
- Is at least 16 years old, but under 18 on the date of hire on on May 1, whichever is later, AND
- Is only employed between May 1 and September 15 (was not employed prior to May 1), AND
- Resides in an Empowerment Zone (EZ), enterprise community or renewal community.
- Supplemental Nutrition Assistance Program (SNAP) Recipient: this is an individual who on the date of hire is:
- At least 18 years old and under 40, AND
- A member of a family that received SNAP benefits for:
- The prior six months, OR
- At least three of the previous five months.
- Supplemental Security Income (SSI) Recipient: in order to qualify under this category, the person must have received SSI benefits within 60 days of the hire date.
- Long-Term Family Assistance Recipient: this is a member of a family that meets one of the following conditions:
- Received assistance under an IV-A program for a minimum of the prior 18 consecutive months; OR
- Received assistance for 18 months beginning after August 5, 1997 and it has not been more than two years since the end of the earliest of such 18-month period, OR
- Ceased to be eligible for such assistance because a Federal or State law limited the maximum time those payments could be made, and it has been not more than two years since the cessation of the benefits.
- Qualified Long-Term Unemployment Recipient: this is a person who has been unemployed for not less than 27 consecutive weeks at the time of hiring and received unemployment compensation during some or all of the unemployment period.
It will be obvious to many affordable housing operators that a number of these categories of individuals already are found at properties and provide the potential for hiring residents and obtaining a substantial tax benefit for such hiring.
Benefits to Employers
The credit available ranges from $2,400 up to $9,600, depending on the targeted group and qualified wages paid to the new employee generally during the first year of employment. Generally, the credit is 40% of qualified first-year wages for individuals who work 400+ hours in their first year of employment (an average of just less than eight hours per week).
If a new hire meets the eligibility requirements for a WOTC targeted group, employers will receive a certification (ETA Form 9063) from your state workforce agency.
How Can Employers Find Job Candidates in WOTC Targeted Groups?
The American Job Centers (AJCs) and partnering agencies and programs can help employers connect with skilled job seekers who may be in a targeted group for the WOTC. AJCs can assist employers in recruiting talent, hosting job fairs, conducting skills assessments, and providing support to workers transitioning to new jobs.
A state workforce agency (SWA) can determine whether a job seeker may be in a WOTC targeted group and note this determination with a Conditional Certification, ETA Form 9062. The SWA then gives that pre-certification to the job-ready applicant to use during their job search. The Conditional Certification serves as an official record of WOTC pre-certification by:
- Alerting prospective employers to the availability of the tax credit if the individual is hired, and
- Providing a means for employers to request a WOTC certification for the job applicant/new hire.
Many owners and managers of affordable multifamily housing properties are finding it difficult to find qualified staff to work either at the properties or at a main office. This problem has been around for a long time but has been exacerbated by COVID-19. A new federal tax credit was created last year that provides a potential tool for employers looking for a way to find qualified staff.
The Work Opportunity Tax Credit (WOTC) is a little-known federal tax credit available to employers who invest in American job seekers who have consistently faced barriers to employment. Employers can both meet business needs and claim a tax credit by hiring an individual who is in a WOTC targeted group (which will be defined later).
Employers must apply for and receive a certification verifying that 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 WOTC as a general business credit against their income taxes, and tax-exempt employers claim the WOTC against their payroll taxes.
WOTC is authorized until December 31, 2025 and is part of the Consolidated Appropriations Act of 2021.
The program is administered jointly by the Department of Labor (DOL) and the IRS. DOL provides grant funding and policy guidance to the State Workforce Development Agencies (State Workforce Agencies) to administer the certification process, while the IRS administers all tax-related provisions and requirements.
Targeted Groups
WOTC targeted groups include:
- Qualified IV-A Recipients: These are individuals who are members of a family receiving assistance under a state plan approved under part A of title IV of the Social Security Act relating to Temporary Assistance for Needy Families (TANF). The assistance must be received for any nine-month period during the 18-month period ending on the hiring date;
- Qualified veterans: a “qualified veteran” is a veteran who is any of the following: (a) a member of a family receiving assistance under the Supplemental Nutrition Assistance Program (SNAP) for at least three months during the first 15 months of employment; (b) unemployed for a period totaling at least four weeks [whether or not consecutive] but less than six months in the one-year period ending on the hiring date; (c) unemployed for a period totaling at least six months [whether or not consecutive] in the one-year period ending on the hiring date; (d) a disabled veteran entitled to compensation for a service-connected disability hired not more than one year after being discharged or released from active duty in the U.S. Armed Forces; or (e) a disabled veteran entitled to compensation for a service-connected disability who is unemployed for a period totaling at least six months [whether or not consecutive] in the one-year period ending on the hiring date.
- Qualified Ex-Felon: a “qualified ex-felon” is a person hired within a year of:
- Being convicted of a felony, or
- Being released from prison for the felony.
- Designated Community Resident (DCR): A DCR is an individual who, on the date of hiring –
- Is at least 18 years old but under 40;
- Resides within one of the following:
- An Empowerment Zone,
- An Enterprise community, or
- A Renewal Community
- AND continues to reside at the locations after employment.
- Vocational Rehabilitation Referral: A “vocational rehabilitation referral” is a person who has a physical or mental disability and has been referred to the employer while receiving or upon completion of rehabilitative services pursuant to:
- A state plan approved under the Rehabilitation Act of 1973, or
- An Employment Network Plan under the Ticket to Work Program, or
- A program carried out under the Department of Veterans Affairs.
- Summer Youth Employee: a “qualified summer youth employee” is one who:
- Is at least 16 years old, but under 18 on the date of hire on on May 1, whichever is later, AND
- Is only employed between May 1 and September 15 (was not employed prior to May 1), AND
- Resides in an Empowerment Zone (EZ), enterprise community or renewal community.
- Supplemental Nutrition Assistance Program (SNAP) Recipient: this is an individual who on the date of hire is:
- At least 18 years old and under 40, AND
- A member of a family that received SNAP benefits for:
- The prior six months, OR
- At least three of the previous five months.
- Supplemental Security Income (SSI) Recipient: in order to qualify under this category, the person must have received SSI benefits within 60 days of the hire date.
- Long-Term Family Assistance Recipient: this is a member of a family that meets one of the following conditions:
- Received assistance under an IV-A program for a minimum of the prior 18 consecutive months; OR
- Received assistance for 18 months beginning after August 5, 1997 and it has not been more than two years since the end of the earliest of such 18-month period, OR
- Ceased to be eligible for such assistance because a Federal or State law limited the maximum time those payments could be made, and it has been not more than two years since the cessation of the benefits.
- Qualified Long-Term Unemployment Recipient: this is a person who has been unemployed for not less than 27 consecutive weeks at the time of hiring and received unemployment compensation during some or all of the unemployment period.
It will be obvious to many affordable housing operators that a number of these categories already are found at properties and provide the potential for hiring residents and obtaining a substantial tax benefit for such hiring.
Benefits to Employers
The credit available ranges from $2,400 up to $9,600, depending on the targeted group and qualified wages paid to the new employee generally during the first year of employment. Generally, the credit is 40% of qualified first-year wages for individuals who work 400+ hours in their first year of employment (an average of just less than eight hours per week).
If a new hire meets the eligibility requirements for a WOTC targeted group, employers will receive a certification (ETA Form 9063) from your state workforce agency.
How Can Employers Find Job Candidates in WOTC Targeted Groups?
The American Job Centers (AJCs) and partnering agencies and programs can help employers connect with skilled job seekers who may be in a targeted group for the WOTC. AJCs can assist employers in recruiting talent, hosting job fairs, conducting skills assessment, and providing support to workers transitioning to new jobs.
A state workforce agency (SWA) can determine whether a job seeker may be in a WOTC targeted group, and note this determination with a Conditional Certification, ETA Form 9062. The SWA then gives that pre-certification to the job-ready applicant to use during their job search. The Conditional Certification serves as an official record of WOTC pre-certification by:
- Alerting prospective employers to the availability of the tax credit if the individual is hired, and
- Providing a means for employers to request a WOTC certification for the job applicant/new hire.
How Can Employers Get Started with WOTC?
Employers who are interested in this tax credit should visit the DOL WOTC website at www.dol.gov/agencies/eta/wotc.
A list of SWAs is available at www.dol.gov/agencies/eta/wotc/contact/state-workforce-agencies.
Employers who are interested in this tax credit should visit the DOL WOTC website at www.dol.gov/agencies/eta/wotc.
A list of SWAs is available at www.dol.gov/agencies/eta/wotc/contact/state-workforce-agencies.