n-16-22.pdf

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Work Opportunity Tax Credit (WOTC) Guidance and Transition Relief

Notice 2016-22
I. PURPOSE
This notice provides guidance and transition relief for employers claiming the
Work Opportunity Tax Credit (WOTC) under §§ 51 and 3111(e) of the Internal Revenue
Code (Code), as extended and amended by the Protecting Americans from Tax Hikes
Act of 2015, Pub. L. No. 114-113, div. Q (the PATH Act). Section 142(a) of the PATH
Act amended § 51(c) of the Code to extend the WOTC through December 31, 2019.
Section 142(b) of the PATH Act amended § 51(d) of the Code to expand the “targeted
groups” of individuals, the employment of whom may qualify the employer for a credit
listed in the statute, to include qualified long-term unemployment recipients (as defined
in § 51(d)(15) of the Code). This notice provides guidance and transition relief beyond
the 28-day deadline in § 51(d)(13)(A)(ii) of the Code for employers that hire members of
targeted groups (other than qualified long-term unemployment recipients) on or after
January 1, 2015, and on or before May 31, 2016. This notice also provides guidance
and transition relief beyond the 28-day deadline in § 51(d)(13)(A)(ii) of the Code for

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employers that hire members of the new targeted group of qualified long-term
unemployment recipients on or after January 1, 2016, and on or before May 31, 2016.
II. BACKGROUND
Section 51(a) of the Code provides the WOTC to employers based on a
percentage of qualified wages paid during the taxable year. Section 51(b) of the Code
defines qualified wages as wages paid or incurred by an employer during the taxable
year to an individual who is a member of a targeted group. Section 51(d)(1) of the Code
lists the targeted groups. Pursuant to § 51(d)(13)(A) of the Code, an individual is not
treated as a member of a targeted group unless (1) on or before the day the individual
begins work, the employer obtains certification from the designated local agency (DLA)
that the individual is a member of a targeted group; or (2) the employer completes a
pre-screening notice on or before the day the individual is offered employment and
submits such notice to the DLA to request certification not later than 28 days after the
individual begins work. To request certification from a DLA, an employer submits IRS
Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity
Credit, to the DLA no later than the 28th day after the day an individual who is a
member of a targeted group begins work for the employer. An employer also must
submit a Department of Labor Employment and Training Administration (ETA) Form
9061 (Individual Characteristics Form) or 9062 (Conditional Certification) to the DLA.
Section 51(d)(12) of the Code provides that a DLA means a State employment security
agency established in accordance with 29 U.S.C. §§ 49-49n.

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Since originally enacted by § 1201 of the Small Business Job Protection Act of
1996, Pub. L. No. 104-188, the WOTC has been subject to a series of legislative
extensions and modifications.
III. AMENDMENTS MADE BY THE PATH ACT
The PATH Act extends the WOTC through December 31, 2019 for taxable
employers that hire members of a targeted group and for qualified tax-exempt
organizations described in § 501(c) of the Code that hire qualified veterans.
The PATH Act also amends § 51(d)(1) of the Code to add qualified long-term
unemployment recipients to the list of targeted groups, effective as of January 1, 2016.
Section 51(d)(15) of the Code defines a qualified long-term unemployment recipient as
any individual who is certified by a DLA as being in a period of unemployment which is
not less than 27 consecutive weeks and includes a period in which the individual was
receiving unemployment compensation under State or Federal law. This additional
targeted group does not apply for purposes of qualified tax-exempt organizations taking
the credit provided by § 3111(e) against an employer social security tax.
IV. GUIDANCE AND TRANSITION RELIEF
An employer must obtain certification that an individual is a member of a targeted
group before the employer may claim the WOTC. As stated in Section II of this notice,
§ 51(d)(13)(A) of the Code provides that an individual is not treated as a member of a
targeted group unless (i) on or before the day the individual begins work for the
employer, the employer obtains certification from a DLA that the individual is a member
of a targeted group; or (ii) on or before the day the individual is offered employment with
the employer, a prescreening notice (IRS Form 8850) is completed and no later than 28

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days after the individual begins work the employer submits the prescreening notice to
the DLA for certification. An employer obtains certification of an individual’s targeted
group status from a DLA by submitting both the IRS Form 8850 and an ETA Form 9061
or 9062 to the DLA. Employers are encouraged to submit both the IRS Forms 8850 and
the ETA Forms 9061 or 9062 together in the same submission.
A. QUALIFIED LONG-TERM UNEMPLOYMENT RECIPIENTS
The PATH Act’s amendment and expansion of the targeted groups described in
§ 51(d)(1) of the Code to include long-term unemployment recipients will require
changes to forms used by employers to request certification for qualified long-term
unemployment recipients hired on or after January 1, 2016. For purposes of this notice,
a qualified long-term unemployment recipient is any individual who on the day before
the individual begins work for the employer, or, if earlier, the day the individual
completes the IRS Form 8850 as a prescreening notice in accordance with the
certification described in§ 51(d)(13)(A)(ii), is in a period of unemployment that is (i) not
less than 27 consecutive weeks, and (ii) includes a period (which may be less than 27
weeks) in which the individual received unemployment compensation under State or
Federal law.
The IRS Form 8850 and ETA Forms 9061 and 9062 are being modified
consistent with the guidance in this notice so that they can be used to request
certification by the DLAs for qualified long-term unemployment recipients. Those
modified forms and instructions will indicate the information that must be provided on
the forms for the employer to receive certification from the DLA that the individual is a
qualified long-term unemployment recipient. The Treasury Department and the IRS

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anticipate that the modified forms will include a requirement that the individual signing
the form attest that he or she meets the requirements to be a qualified long-term
unemployment recipient and a requirement that the individual attest to the period(s)
during which the individual was unemployed and the period the individual received
unemployment compensation.
B. TRANSITION RELIEF
Because the PATH Act extended the WOTC retroactively for 2015 for members
of targeted groups described in § 51(d)(1)(A) through (d)(1)(I) of the Code, and because
the PATH Act created a new targeted group described in § 51(d)(1)(J) of the Code
(qualified long-term unemployment recipients), employers need additional time to
comply with the requirements of § 51(d)(13)(A)(ii) of the Code for those targeted groups.
For these reasons, the Treasury Department and the IRS have determined that it is
appropriate to provide employers with additional time to file IRS Form 8850 with the
DLAs.
1. Additional time for employers that hired or hire members of targeted
groups other than qualified long-term unemployment recipients between
January 1, 2015 and May 31, 2016
An employer that hired or hires a member of a targeted group described in
§ 51(d)(1)(A) through (d)(1)(I) of the Code and who began or begins work for that
employer on or after January 1, 2015, and on or before May 31, 2016, will be
considered to have satisfied the requirements of § 51(d)(13)(A)(ii) of the Code if the
employer submits the completed IRS Form 8850 to the DLA to request certification no
later than June 29, 2016.

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2. Additional time for employers that hired or hire long-term unemployment
recipients between January 1, 2016 and May 31, 2016
An employer that hired or hires an individual who is a long-term unemployment
recipient described in § 51(d)(1)(J) of the Code and who began or begins work for that
employer on or after January 1, 2016, and on or before May 31, 2016, will be
considered to have satisfied the requirements of § 51(d)(13)(A)(ii) if the employer
submits the completed IRS Form 8850 to the DLA to request certification no later than
June 29, 2016.
3. Application of 28-day requirement to individuals hired on or after June 1,
2016
An employer that hires a member of a targeted group described in § 51(d)(1)(A)
through (d)(1)(J) of the Code, including a long-term unemployment recipient, who
begins work for that employer on or after June 1, 2016, is not eligible for the transition
relief described in this notice with respect to any such new hire.
V. DRAFTING INFORMATION
The principal author of this notice is R. Lisa Mojiri-Azad of the Office of Associate
Chief Counsel (Tax Exempt and Government Entities). For further information regarding
the WOTC, contact Ms. Mojiri-Azad at (202) 317-5500 (not a toll-free number).