Work Opportunity Tax Credit - Planning for the future

Work Opportunity Tax Credit (WOTC):
Planning for the future
Watch a replay of the September 7, 2017 webcast

Work Opportunity Tax Credit: Planning for the future
► This presentation is provided solely for the purpose of enhancing knowledge on tax matters. It does
not provide tax advice to any taxpayer because it does not take into account any specific taxpayer’s
facts and circumstances.
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► Ernst & Young does not bear any responsibility whatsoever for the content, accuracy or security of
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► The views expressed by the presenters are not necessarily those of Ernst & Young LLP.
► This presentation is © 2017 Ernst & Young LLP. All Rights Reserved.
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Disclaimer

How to get RCH credits
For those with CPP or FPC designations
► RCH credit certificates will be emailed to qualified
participants within two weeks of this event.
► Be sure you provided the correct email address when you
registered for this event.
► You must respond “yes” to the RCH polling question that
will appear toward the end of this presentation.
► You must also respond to all other polling questions
during this webcast.

Today’s panel
Amanda Fergusson
Senior Manager
WOTC Services
Ernst & Young LLP
Dallas, Texas
David Olds
Executive Director
WOTC Services
Ernst & Young LLP
Richmond, Virginia
Moderator
Leigh Messina
Partner
National Director, WOTC Services
Ernst & Young LLP
Dallas, Texas
Panelists
Donna Flynn
Executive Director
Washington Council
Ernst & Young
Ernst & Young LLP
Washington, DC
Michael Bison
Director of Tax
Allegis Group
Baltimore, Maryland

Giving something back?
Getting something back?
Discover how the Work Opportunity Tax Credit can help individuals
join the workforce while helping you to lower your federal income
tax liability.

Work Opportunity Tax Credit:
Today’s agenda
► View from the Hill
► Tax reform/WOTC legislative update
► Hurricane Harvey disaster relief
► WOTC leading practices
► Client success story – Allegis Group
► WOTC and State Workforce Agencies
► State automation highlights
► Recent Department of Labor (DOL)
announcements
► Talent outreach

“The foundation of our job creation agenda is to
fundamentally reform our tax code for the first
time in more than 30 years.”
– President Donald Trump, August 30, 2017
“So part of the reason I think people feel we’re
underperforming is because too many artificial
deadlines – unrelated to the reality of the
complexity of legislating – may not have been
fully understood.”
– Senate Majority Leader Mitch McConnell,
August 8, 2017
“The House and the Senate are now socializing
the plan with their members. We’re going to
release a blueprint, it’s going to go to committee
and we’re going to turn this into a bill that the
president will sign.”
– US Secretary of the Treasury Steven Mnuchin,
August 31, 2017
► Obstacles
Consensus
The current political environment
Reading between the lines

May: Tax reform
listening sessions
began
Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec
September 30:
Federal Aviation Administration
funding, authorization expires,
government funding continuing
resolution (CR) must be passed
February 28:
President addressed
joint session of
Congress
Budget reconciliation
► Republicans don’t have filibuster-proof 60 Senate votes
► Reconciliation allows majority vote (51) for spending, tax, debt limit bills (or combination), under
a two-step process
July 31-September 4:
Congress summer
recess
April 28: Stopgap
spending bill passed
to avert government
shutdown
May 4:
AHCA*
passed
House
September – December
Priorities: debt ceiling, healthcare, tax
reform
May 23:
Trump
released
FY18 budget
April 26: Trump
released tax
reform plan
March 25:
Healthcare
bill pulled
before vote
* American Health Care Act of 2017 (AHCA)
2017 congressional timeline

Expires on
schedule
Considered in
tax reform
Made
permanent
1 2 3
Possible outcomes for the WOTC

Expired December 31, 2016
Federal empowerment zone tax credits
Indian employment tax credits
Energy-efficient commercial buildings
deduction
Production tax credits (non-wind technologies)
Investment tax credits (non-solar)
Credit for alcohol fuel, biodiesel and
alternative fuel mixtures
Expires December 31, 2019
Work opportunity tax credit
Low-income housing tax credits
New markets tax credits
Production tax credits (wind technologies)
Historic rehabilitation tax credits
Expires December 31, 2021
Investment tax credits (solar)
The Protecting Americans from Tax Hikes Act of 2015 (PATH Act) contained provisions
related to several tax extenders, their expiration dates as shown in the graphic below
Legend
People Buildings Green
Other credits
Expiration/repeal of tax credits
Do they have a continuing role after tax reform?

► There are currently nine House bills and two
Senate bills that seek to expand the WOTC.
► Further support of veterans
► Others advocating for foster youth and at-risk
youth categories
► Benefits to revitalize underserved areas
► In addition to these expansion bills,
Representative Tom Reed (R-NY), a Ways &
Means Committee member, introduced on
August 11, 2017 a bill (HR 3652) to make WOTC
permanent.
WOTC legislation in the 115th Congress
Recent bill supports permanence

► IRS is providing relief to affected taxpayers* for
most tax returns as well as for certain time-
sensitive actions.
► Such relief includes additional time to comply
with the submission requirement for any Form
8850 that is due to be submitted to the State
Workforce Agencies on or after August 23, 2017,
and before January 31, 2018.
► Covered disaster areas, as declared by FEMA,
currently total 39 counties as of September 5, 2017.
*An affected taxpayer is a taxpayer listed in Treas. Reg. § 301.7508A-1(d)(1)
and includes any business entity or sole proprietor whose principal place of
business is located in a covered disaster area. In addition, taxpayers not in the
covered disaster area, but whose records are necessary to meet a deadline
listed in Treas. Reg. § 301.7508A-1(c) are also entitled to relief.
Hurricane Harvey disaster relief

Polling question
In your view, how likely is it that WOTC will be extended
beyond its current expiration of December 31, 2019?
A. Very likely
B. Somewhat likely
C. Not likely
D. No opinion

Today’s agenda
► View from the Hill
► Tax reform/WOTC legislative update
► Hurricane Harvey disaster relief
► WOTC leading practices
► Client success story – Allegis Group
► WOTC and State Workforce Agencies
► State automation highlights
► Recent DOL announcements
► Talent outreach

The company transitioned its
WOTC program from a paper-
based process to an integrated
step in its Applicant Tracking
System.
Allegis is headquartered in
Hanover, Maryland and employs
150,000.
Allegis Group is a global leader in
talent, staffing and recruitment
services for job seekers.
WOTC success story

Polling question
What do you think is the largest category of WOTC
eligibility in number (volume)?
A. Veterans
B. Welfare recipients
C. Long-term unemployed
D. Food stamp (SNAP) recipients
E. Vocational rehabilitation referral
F. I don’t know

WOTC eligibility categories
* Data represents Ernst & Young LLP client population only; Economy drives eligibility in many cases.
Food Stamps - 51%
Long-Term TANF - 26%
Long-Term Unemployed - 6%
Veterans of War (VOW) - 6%
Designated Community
Resident - 3%
TANF/AFDC - 3%
Supplemental Security
Income - 3%
Ex-Felon - 1%
Voc Rehab - 1%
Eligibles by Category*
Food Stamps - 51%
Long-Term TANF - 26%
Long-Term Unemployed - 6%
Veterans of War (VOW) - 6%
Designated Community Resident - 3%
TANF/AFDC - 3%
Supplemental Security Income - 3%
Ex-Felon - 1%
Voc Rehab - 1%
TANF-Temporary Assistance for Needy Families
AFDC-Aid to Families with Dependent Children

State workforce agencies and automation
Federal Form
W-4 not
allowed
No income tax
withholding
State income tax
withholding
FL
ME
VT
NH
NY
PA
WV
NC
SC
GA
IL
OHIN
MIWI
KY
TN
ALMS
AR
LATX
OK
MOKS
IA
MN
ND
SD
NE
NMAZ
CO
UT
WY
MT
WA
OR
ID
NV
CA
VA
CT
RI
DE
MD
NJ
MA
WA
DC
AK
HI
Automated process
Mail-in/manual process

WOTC program participation
increased over 450% from 2002
to 2015
WOTC allocations have decreased
by 11% since 2002
► 2002 allocation $21,000,000
► 2017 allocation $18,485,000
2002 and 2017 US DOL Funding TEGLs
423 436
260
630
339
633 692 719
914
1160
892
1591
1304
1914
Certifications
Number of certifications by year (in 000’s)
Historical DOL reporting on WOTC state activity
02 03 04 05 06 07 08 09 10 11 12 13 14 15
FY17 US Department of Labor funding

► Created by the PATH Act of 2015
► Made effective January 1, 2016
► Intent: encourage employers to hire those
individuals who have been out of a job over a
“long term”
► Data shows that it is much harder to get a job
after the six-month mark
Any individual who is certified by the designated
local agency as being in a period of unemployment
which is:
A. Not less than 27 consecutive weeks
and
B. Includes a period in which the individual was
receiving unemployment compensation under
state or federal law
Long-term unemployed – IRC §51(d)(15)
Long-term unemployed (LTU) WOTC category

Most State
Workforce Agencies
(SWAs) are
backlogged due to
the hiatus and lack
of resources
necessary to timely
review and issue
certifications.
DOL has instructed
the SWAs to
review state
unemployment
insurance (UI)
wage databases
and verify that the
two most recent
completed quarters
have zero UI
wages.
Majority of the
SWAs are unable to
view wages on a
week-to-week basis.
And, those “wages”
may not necessarily
mean employment
wages (i.e., could be
severance).
DOL has authorized the SWAs to rely on a self-attestation form, signed under penalties
of perjury by the applicant, to issue LTU certifications where UI data is not available.
Issues facing employers trying to obtain an LTU certification
21 3
Considerations in the LTU certification
process

Polling question
How focused is your organization on targeted hiring
due to an effort to increase talent diversity or
regulatory compliance or both?
A. High priority – corporate department specifically built
around these efforts
B. Moderate attention – initial efforts under way; awareness
exists
C. Low to no priority – other competing commitments have
prevailed
D. Does not apply (EY, faculty, other)

Talent outreach – building a more robust
applicant pool
► As the labor market tightens, employers are challenged with finding qualified applicants.
► Leveraging community-based organizations throughout the country and hiring from their
targeted populations helps employers meet diversity and inclusiveness goals.
► At the same time, employing this applicant pool can increase your WOTC eligibility while
reducing your recruiting and hiring costs.
Talent outreach
Work Opportunity
Tax Credit (WOTC)
eligibility
Community-
based
organizations:
Referring a diverse,
qualified, WOTC-
eligible pool of
job applicants
Employers:
Building a diverse
and qualified
workforce

Polling question
Will you require an RCH certificate for today’s webcast?
Those with CPP or FPC professional designations check “yes” to
this question. All others check “no.”
A. Yes
B. No

One-minute recap

Questions

For more information
► Learn more about US tax reform by visiting us at ey.com/taxreform to get up-to-date
insights on US tax reform proposals and how they impact your business.
► Additional webcasts on 2017 US tax reform measures will be scheduled as the situation
warrants.
► Find out more about Washington Council Ernst & Young (WCEY)
http://www.ey.com/us/en/services/tax/tax_about-wcey-professionals
For more information, contact one of the Ernst & Young LLP or WCEY representatives below:
Leigh Messina
Workforce Advisory Services
Ernst & Young LLP
leigh.messina@ey.com
David Olds
Ernst & Young LLP
david.olds@ey.com
Donna Flynn
Washington Council Ernst & Young
Ernst & Young LLP
donna.flynn@wc.ey.com
Amanda Fergusson
Ernst & Young LLP
amanda.fergusson@ey.com

Ernst & Young LLP
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Work Opportunity Tax Credit - Planning for the future

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