DIRECTIVE	:	EMPLOYMENT SERVICE PROGRAM LETTER NO. 05-97
TO	:	ALL STATE EMPLOYMENT SECURITY AGENCIES
FROM	:	JOHN R. BEVERLY, III Director U.S. Employment Service
SUBJECT	:	Work Opportunity Tax Credit Administrative and Quarterly Reporting Forms

1. Purpose. To transmit administrative and quarterly reporting forms for Work Opportunity Tax Credit (WOTC) program, and to provide related guidance.

2. References. Internal Revenue Code of 1986, Section 51, as ammended; the.Small Business Job Protection Act of 1996 (P.L. 104-188); ESPL No. 9-96, August 30, 1996; FM No. 58-96, September 4, 1996; and draft ET Handbook No. 377, Work Opportunity Tax Credit (WOTC) Program, 6th Edition, October 1996

3. Background and Information. The WOTC program became effective on October 1, 1996 and is authorized through September 30, 1997. The ETA administrative and reporting forms transmitted by this Employment Service Program Letter (ESPL) have bean authorized by the Office of Management and Budget (OMB) for use through March 31, 1997. The Work Opportunity Tax Credit-Pre-Screening Notice and Certification Request (PSN/CR) form, Internal Revenue Service (IRS) Form 8850, has been authorized by OMB for use through March 1997.

   Some of the attached ETA forms for WOTC administration and reporting are issued as forms whose use is required. Other ETA forms are provided as optional use forms The IRS Form 8850 is a form whose use is required.

   This ESPL also provides policy guidance on WOTC program administration developed subsequent to the day and half of training for State Employment Security Agency (SESA) staff held in Atlanta, Georgia and Denver, Colorado, respectively, during the week of September 15, 1996. Please provide this ESPL to SESA staff responsible for WOTC administration.

4. Required Use (Standard) WOTC Forms. All employers and third parties serving under contract as an employer's agent for purposes of the employer's agent for purpose of the employer's participation in the WOTC program (i.e., contractors) are required to use the IRS Form 8850 (pursuant to IRS Notice 96-52 and Announcement 96-116), and the ETA Individual Characteristics Form (ICF). The ICF must be used without modification. Use of the ICF by employers and contractors is effective on the date of this ESPL. Exceptions to wben the use of the ICF is required are discussed in sub-sections 6.a.(2) and 6.a.(3), below.

   All SESAs and all agencies and programs to which SESAs have delegated responsibility for conditional certification are required to use the attached ETA Conditional Certification Form without modification when issuing original and revalidated conditional certifications. In addition, the quarterly report forms transmitted with this ESPL are required to be used without modification to summarize and report to ETA regional offices on conditional certifications issued (Report No. 1, ETA 9057), tax authorized certifications (Report No. 2, ETA 9058) issued, and verification results achieved (Report No. 3, ETA 9059) during the reporting period stipulated for the respective forms.

5. Optional Use WOTC Forms. SESAs have the option to use the Agency Declaration of Verification Results and Employer Certification forms transmitted with this ESPL. SESAs electing not to use these ETA forms must assure that any alternative forms used contain all of the information that appears on the optional ETA forms.

   SESAs and participating agencies are not required to execute an ICF as part of the process of issuing a conditional certification. However, SESAs and participating. agencies are encouraged to use the ICF as a worksheet to identify the WOTC target group under which an individual qualifies and to aid building a detailed record that supports the decision to issue a conditional certification.

6. WOTC Administrative and Quarterlv Reporting Forms. WOTC administrative and reporting procedures are outlined in draft ET Handbook No: 377, Work Opportunity Tax Credit (WOTC) Program, 6th Edition, October 1996. This transmittal amends and supersedes relevant sections of that Handbook. Administrative and quarterly reporting forms for the WOTC program and related program guidance are discussed below:

   1. Administrative Forms

      1. The Work Opportunity Tax Credit Pre-Screening Notice and Certification Request (PSN/CR), Internal Revenue Service Form 8850, is to be used by employers to establish a record of their belief that a job applicant is a member of a WOTC target group. Attached to this transmittal is an IRS notice providing administrative and procednal information relevant to the requirennes of the program and information pertaining to the employer's use of the pre-screening notice. IRS press releases on WOTC are also attached to this transmittal.

      2. The Individual Characteristics, Work Opportunity Tax Credit (ICF) form, ETA 9061, is a U.S. Department of Labor, Employment and Training Administration (ETA) form required to be used without modification by all employers and their: contractors. The purpose of the ICF is to expedite certification processing by enabling the individual for whom certification is requested to be identified with a specific category of eligibility. The ICF also provides other information needed to support verification and reporting.

         SESAs may attach supplemental information to the ICF that causes it to contain State-specific information. Any supplementation of the ICF may provide information only. Supplemental information may not have the effect of adding new data elements to the information collection called for in the ICF. Examples of appropriate supplemental information include the address to be used to file the ICF, information that denotes Empowerment Zones and Enterprise Communities in a State, and a person that may be contacted, or a "help number" that may be called to have questions answered about the Statess WOTC program. Supplemental information may also include material that expresses in easy to understand terms the characteristics that establish eligibility under the various WOTC target groups, or describes the supporting documentation that will be accepted as proof of eligibility under a WOTC category.

         In specifying the supporting documentation that will be accepted as proof of eligibility under a WOTC category, SESAs must accept the type of documentation indicated in draft ET Handbook No. 377, Work Opportunity Tax Credit (WOTC) Program, 6th Edition, October 1996, and may not require additional documentation from employees or employers and contractors that sets a higher standard of proof of eligibility.

         Employers and their contractors must submit an ICF as part of the certification process except where an employer's certification request is based on a valid conditional certification. No ICF is required to be filed for employer certification requests that are based on a valid Conditional Cerification Form.

         For employer certification requests that are not based on a conditional certification, the ICF may be executed at any time during the selection process. The ICF may also be executed after an employee begins work. Employers should be advised-tbat the processing of certification request cannot proceed without an ICF on file. Thus, SESAs are advised to set processing guidelines that encourage employers (and their contractors) to attach an executed ICF to each PSN/CR that is submited. (The exception is an ICF that is filed electronically and therefore cannot be attached to the PSN/CR. In this case, steps should be taken to match the ICF with the relevant PSN/CR).

         Employers and contractors may execute the ICF by interviewing job applicants and employees either in person or.electronically (e.g. via telephone) or by using information obtained from records under the employer's (contractor's) control or other accessible records. Employers have the obligation to notify the job applicant or employee that the information and supporting docxcmentation collected in executing the ICF will be used to qualify the employer for an employer tax credit available through the Work Opportunities Tax Creoit program authorized by the Small Business Job Protection Act of 1996. The ICF "tear-off" section may be used for this purpose.

         The ICF may be signed by the person to whom the information on the form pertains; or an authorized official directly employed by the employer, or an employer's contractor; or a person having legal status to verify the information on the form in the case of a minor. Authorized officials of SESAs and participating agencies may also sign the ICF.

         The ICF may be filed electronically, e.g. via fax or E-Mail. ICFs filed electronically are presumed to be "signed" by the individual or corporate entity under whose authorization the filing was made.

         Currently, there is no option to file the PSN/CR electronically.

         When the ICF is filed electronically employers and contractors are encouraged to take steps that enable the ICF to be matched with the relevant PSN/CR. For example, one method is to attach a note to the PSN/CR to the effect that an ICF has been filed electronically. Such notation will avoid processing delays that could arise because the SESA had no notice that an a ICF had been "filed" in conjunction with the PSN/CR but under separate cover.

         It is the responsibility of the SESA to take reasonable steps to assure that the documentation needed to make a certification decision is available to the SESA. While SESAs may accept documentation provided by an employer or contractor as part of a strategy to meet this responsibility, SESAs may not rely solely on an employers' (or contractors') efforts to secure documentation that establishes eligibility. At a minimum, the SESAs should attempt to obtain adequate documentation from participating agencies (for example, through a Memorandum of Understanding). If the SESA's efforts fail to secure the needed documentation after a reasonable effort conducted over a reasonable period of time, the SESA shall deny certification and inform the employer of the reason for the denial.

         Employers may list sources of information (such as parole officer name or a welfare case member) to aid the SESA in establishing eligibility in a timely manner. Employers also may obtain a letter from the agency that administers the relevant Program indicating that the employee or a member of his or her household meets one of the eligibility requirements. For example, an employer may obtain a letter from the state welfare office that states th employee has been on welfare for 9 of the last 18 months and their case number. Employers may secure copies of the following documentation: birth certificate, driver's license, school I.D. card, work permit, I-9, pay stubs, military discharge paper, and utility bills. The employer should not request, obtain or provide the actual documentation for the remaining categories. For example it would not be appropriate for an employer to request the employee's food stamp benefit history

         SESAs should advise employers and contractors regarding when supporting documentation should be received. Within 90 days of filing the PSN/CR and ICF is a suggested time standard. The objective of this standard is to expedite the SESA's certificaion decision. However, SESAs cannot cite failure to submit supporting documenmon within 90 days of filing a PSN/CR and ICF as the reason for denial of certification.

         Broad, active and continuing employer participation in the WOTC is a major policy goal for the WOTC program that the United States Employment Service (USES) will work vigorously to achieve. SESAs are asked to cooperate with the USES to achieve this goal.

         Our joint success requires limiting the number of "doorways" that employers must pass through to have access to the program. Therefore, while SESAs may use written agreement with employers where the SESA's strategy to process certification requests emphasizes receiving supporting documentation from employers or their contractors, SESAs may not require an employer to execute such an agreement. Agreements of this kind should be used only where they clearly serve to facilitate employer participation program. They may not serve as a condition for an employer's participation in the program.

      3. The Conditional certification, Work Opportunity Tax Credit form, ETA 9062, is a required U.S. Department of Labor, ETA, form that must be used without modification by all SEAS and all participating agencies and programs to which the SESA may defegate responsibility for conditional certification authority. The Conditional Certification Form establishes that the named individual has been tentatively determined eligible as a member of the WOTC target group indicated, and therefore hiring this person may lead to an employer certification under the WOTC program. When then employer declaration is executed, this form, together with an executed PSN/CR, is submitted to the SESA by the employer to request full certification. No ICF needs to be submitted by the employer when a valid Conditional Certification Form is filed with a PSN/CR.

         If an employer seeks WOTC certification for a job applicant who has a conditional certification when the PSN/CR is executed, the SESA may render a certification decision based on the employer's timely submission of the PSN/CR and a copy of the conditional certification form that displays an expiration date confnming that the named individual qualifies as a member of the specified WOTC target group given the hiring date indicated on the,PSN/CR.

         SESAs may delegate conditional certification (but not final certification) to a participating agency. Such delegation. of authority must be made pursuant to a written agreement with the participating agency. The agreement must specify the scope of the participating agency's or program's conditional certification arrangements and indicate whether the scope of conditional certifying suthority.extmds to all WOTC target groups or only to a specific target group(s). Please refer to draft ET Handbook, No. 377, Work Opportunity Tax Credit (WOTC) Program, 6th Edition, October 1996, for information on other key elements of an agreement.

         A "participating agency" is a federal, state, county, or local, government or agency or a grantee of these agencies. A participating agency may include (is not, limited to) State Employment Security Agencies, One-Stop Career Centers, Job Corps Centers, JTPA grantees, School-to-Work Transition grantees, Vocational Rehabilitation agencies, city and county welfare offices, Veterans Affairs offices, and other veterans-serving organizations.

         SESAs have the responsibility to assure through the terms of particiapating agency agreements and through SESA verification activity that all participating agencies and programs have a file (paper or electronic) that is available for inspection on demand and contains the supporting documentation and other evidence used to render the finding of eligibility made for each individual to whom a conditional certification was issued.

         In specifying the supporting documentation that will be accepted as proof that an individual qualifies as a member of a WOTC target group SESAs must accept the type of documentation indicated in draft ET Handbook No. 377, Work Opportunity Tax Credit (WOTC) Program, 6th Edition, as amended, October 1996, and may not require additional documentation from participating agencies and programs that sets a higher standard of proof of eligibility.

         The Job Corps and the USES will execute a national agreement to facilitate conditional certification of eligible youth participating in or terminating from Job Corps programs. The national agreement requires that Job Corps programs assure that supporting documentation is readily available to the SESA having certification responsibility. Further, the national agreement alleviates the need for individual agreements between Job Corps Centers and SESAs responsible for certification. The national agreement will be transmitted under separate cover.

      4. The Employer Certification, Work Opportunity Tax Credit form, ETA 9063, is an optional U.S. Department of Labor, ETA form. The form provides the employer with a record of the results of the SESA's action on the employer's certification request. By law, this form can only be issued by the SESA.

         If a SESA opts to develop and use a State-specific employer certification form the State-specific form must contain all of the information that appears on the optional ETA form. This form can only be issued by the SESA.

         Issuing an Employer Certification cannot be made contingent on the SESA conducting a personal or "walk-in" interview of the person whose employment establishes the employer's claim to the tax credit. Although personal or walk-in interviews may be used in conjunction with issuing a Conditional Certification, they may not be mandated as part of the SESA's certification process that follows an employer's submission of a certification request.

      5. Agency Declaration of Verification Results, Work Opportunity Tag Credit form, ETA 9065, is an optional U.S. Department of Labor, ETA form for SESA use only in recording the results of verification activities conducted by the SESA. If the SESA elects to use an alternative form to record verification results, the alternative form must contain all of the information that appears on the optional ETA form.

   2. Quarterly Reporting Forms

      1. Conditional Certifications by Target Group and.Partfcipating Agency, Work Opportunity Tax Credit -- Report No. 1, ETA 9057, is a standard U.S. Department of Labor, ETA, form required to be used by all SESAs without modification to provide a quarterly summary report of conditional certifications and revalidations issued, by target group, through SESA and participating agency action.

      2. Tax Authorized Certifications, Work Opportunity Tax Credit -- Report No. 2, ETA 9058, is a standard U.S. Department of Labor, ETA, form required to be used by all SESAs without modification to provide a quarterly summary report of certifications issued. Authorized certifications are reported by target group and individual chararistics.

      3. Verification Results, Work Opportunity Tax Credit -- Report No. 3, ETA 9059 is a standard U.S. Department of Labor, ETA, form required to be used by all SESAs without modification to provide a quarterly summary report of SESA verification activity and to report the proportion of certifications found to be ineligible upon verification.

7. Using the WOTC to Improve Job-finding for Elgible Job-seekers 

   SESAs and participating agencies are encouraged to use Conditional Certification to leverage employment opportunities for eligible job-seekers. Conditional Certification provides a clear signal to prospective employers that if the person in question is hired a portion of the costs incurred to bring the employee to full performance productivity may be offset through a tax credit. The WOTC can provide a powerful hiring incentive that improves job-finding outcomes for customers who may experience difficulty without targeted assistance. The United States Employment Service will closely monitor the use of Conditional Certifications and facilitate the sharing of information throughout the federally supported workforce development system on cases where WOTC is used strategically to achieve better job-finding outcomes.

8. IRS Transition "Window". Because of the short time between enactment of the WOTC and its effective date, the IRS is providing a "transition window." If an employer made a job offer between August 19 and November 1, 1996, and at the time of the offer, reasonably believed the job-seeker to be WOTC eligible, the employer may submit an IRS Form 8850 by the later of November 21, 1996, or the 21st day after the employee starts work.

   Employers filing a certification request under this provision should put "Pursuant to Notice 96-52" (dated Sept. 26, 1996), at the top of Form 8850. Also, the employer should strike from the jurat preceding the signature line on Form 8850 the words "...I completed this form on or before the day a job was offered to the applicant and that..."

   These certification requests will be treated as being timely completed and filed. Where an ICF and supporting documentation is not submitted in connection with the certification request, the SESA (or a participating agency or program) shall take reasonable steps to assure that the needed documentation is available to support a certification decision. Individuals to whom job offers were made during this transition window could not have started work before October. 1,1996.

9. Funding. Twenty (20) million dollars have been appropriated for WOTC administration in FY 1997. Allocation of these funds, with an adjustment for postage, has been made. States may use indicia mail.

   Given that funds have been appropriated for WOTC administration, SESAS .shall not charge fees to employers to process their certification requests. However, exceptions to this general directive may be granted, case by case, under circumstances where a state provides a compelling justification for limited and temporary fees to deal with an unanticipated and unusually large WOTC proessing workload that will clearly generate a significant certification backlog given the States FY 1997 allocation for WOTC administration. Administrative fees must be approved by the ETA regional office serving your State.

10. Quarterly Report Filing Deadlines. ETA 9057 and 9058 forms (Reports #1 and #2) must be received by the ETA regional office (RO) serving the reporting SESA not later than 20 calendar days following the closing of the report period. ETA.9059 (Report #3) must be received by the ETA regional office (RO) serving the reporting SESA not later than the 20th calendar day of the fifth month following the closing date of the report period.

    The outcomes of the WOTC will be closely monitored duting its one year authorization. Timely submission of accurate and complete quarterly reports is therefore critical. The revision of draft ET Handbook No. 377, 6th Edition, October 1996, played to be completed. by December 16, 1996, will provide more detail on administrative and reporting procedures.

11. Records Retention. SESAs and their participating agencies are required to retain all records created in connection with WOTC administration and reporting for four (4) years after their creation.

12. Reporting Authority. Pursuant to the Paperwork Reduction Act, OMB has approved the information collection requested through these forms. IRS Form 8850 is approved under OMB No. 1545-1500. ETA reporting forms 9057, 9058, and 9059 are approved under OMB No. 1205-0371, expiration date March 31, 1997, and ETA administrative forms 9061, 9062, 9063, and 9065 are approved under OMB No. 1205-0374, expiration date March 31, 1997.

13. INTERNET Access. The PSN/CR is available on the INTERNET (http://www.irs.ustreas.gov) or by modem by dialing (703) 321-8020 (not toll-free). Employers may also request Form 8850 by calling 1-800-829-3676. INTERNET access to ETA forms attached to this ESPL is planned. Information on when these forms will be available on the IINTERNET is forthcoming. ETA is also planning to publish the ICF in Spanish.

14. Action Required. State Employment Security Agency Administrators are requested to provide this information to appropriate staff, employers and participating agencies, and to administer their WOTC programs in accordance with the program guidance provided in this ESPL.

15. Inquiries. Direct questions to the appropriate Regional WOTC Coordinator.

16. Attachments. 

    (1)  Work Opportunity Credit Pre-Screening Notice and Certification Request (PSN/CR), IRS Form 8850, and related documents

    (2)  IRS Notice 96-52

    (3)  IRS Announcement 96-116

    (4)  IRS press releases

    (2) Individual Characteristics Form, Work Opportunity Tax Credit, ETA 9061

    (3) Conditional Certification, Work Opportunity Tax Credit, ETA 9062

    (4)  Employer Certification, Work Opportunity Tax Credit, ETA 9463

    (5)  Agency Declaration of Verification Results, Work Opportunity Tax Credit, ETA 9065

    (6)  Conditional Certifications by Target Group and Participating Agency, WorkOpportunity Tax Credit -- Report No. 1, ETA 9057

    (7)  Tax Authorized Certifications, Work Opportunity Tax Credit -- Report No. 2, ETA 9058

    (8)  Verification Results, Work Opportunity Tax Credit -- Report No. 3, ETA 9059

    (9)  Roster of Regional WOTC Coordinators