Work Opportunity Tax Credit (WOTC) Transition Relief under Internal Revenue Code § 51

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The IRS issued guidance this week providing additional transition relief to employers participating in the work opportunity tax credit program. Notice 2021-43 (PDF) provides transition relief for employers that hire or hired certain individuals residing in empowerment zones and who begin work on or after January 1, 2021, and before the date that is 60 days from the date of publication of the notice.

Section 51 of the Code provides employers with a Work Opportunity Tax Credit for hiring certain individuals certified by a Designated Local Agency (DLA) to be a member of a targeted group listed in section 51(d).

Employers must receive, on or before the day on which such individual begins work for the employer, a certification from a DLA that such individual is a member of a targeted group or must request certification that the individual is a member of a targeted group by submitting Form 8850 (Pre-Screening Notification and Certification Request for the Work Opportunity Credit) to a DLA within 28 days of that individual beginning work. The certification of an individual as a Designated Community Resident, under section 51(d)(5), or as a Qualified Summer Youth Employee, under section 51(d)(7), requires that the individual reside within an empowerment zone. Empowerment zone designations under section 1391 of the Code were not in effect after December 31, 2020.

However, in accordance with an automatic procedure for a state or local government in which an empowerment zone is located to extend the empowerment zone designation made under section 1391(a) of the Code, if the state or local government did not opt out of an empowerment designation by May 25, 2021, the designation was deemed to be extended until December 31, 2025. Employers, therefore, could not timely request certification for employees otherwise satisfying the criteria for these two targeted groups until empowerment zone designations were renewed. This notice allows employers additional time beyond the 28-day requirement to request certification for individuals in these two targeted groups.

Notice 2021-43 will appear in IRB 2021-35, dated Aug. 30, 2021.

 

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