A Little History: This is Nothing New. The Work opportunity Tax Credit (WOTC) was created by the Small Business Job Protection Act of 1996. This Act authorized WOTC for a 12-month period. Then, in 1997, WOTC was re-authorized and extended for 9 months, followed by an additional 12 months in 1998. This process of expiration and re-authorization has been repeated by Congress nine times during the past 12 years.
Because of the political process, Congress has sometimes been delayed in its reauthorization of the WOTC program. In 2002, 2003 and 2006, the reauthorization was delayed as much 3, 10, and even 12 months after the program’s most recent authorization had expired. In each case, however, the program was then reauthorized retroactively back to the previous expiration date so that there has been no break in the continuity and availability of the tax credits.
Continued Screening and Processing vs. Losing Tax Credits. During these delays in reauthorization, the U.S. Department of Labor issues guidelines that have enabled employers and the government offices that administer the program to remain active in processing WOTC paperwork and applications. This has always involved some risk, however, since Congress is not obligated to renew the program.
On the other hand, employers who choose to delay the survey and application process loose their tax credits. They are lost because even during the temporary breaks in legislative authority, the program’s 28-day employee application deadline still applies. Employee applications submitted after 28 days are rejected by the WOTC program in each state.
Currently, we are experiencing a similar delay. The legislation that authorized major parts of the WOTC program expired on December 31, 2011. However, at about the same time, a very specialized bill was signed by President Obama that reauthorized and expanded the part of WOTC that generates tax credits when a business hires qualifying military veterans. This bill was called the VOW to Hire Heroes Act.
As a result of the VOW to Hire Heroes Act, some parts of WOTC are currently authorized while other parts are experiencing the now-common delay in reauthorization. As in all previous cases, friends in Congress are working to reauthorize the entire WOTC program. My firm is screening for ALL potential qualifiers influenced by the hope that the remaining employee-eligibility categories will also be reauthorized.
As a final note, Congressional reauthorization of WOTC has no impact on most state hiring credit programs. These remain effective and available even during the delay affecting WOTC.
For more information, see the Department of Labor’s Training and Employment Guidance Letter (TEGL) 15-11 dated January 24, 2012.