DIRECTIVE	:	EMPLOYMENT SERVICE PROGRAM LETTER NO. 10-98
TO	:	ALL STATE EMPLOYMENT SECURITY AGENCIES
FROM	:	John R. Beverly, III Director U.S. Employment Service
SUBJECT	:	Work Opportunity Tax Credit (WOTC) Guidance During Authorization Lapse

1. Purpose. To provide specific procedural guidance to States for processing requests for certification under the Work Opportunity Tax Credit program after it expires. WOTC is in effect through June 30, 1998. This guidance covers the period July 1 - September 30, 1998. If the WOTC has not been reauthorized by September 30, additional guidance will be issued.

2. References. The Taxpayer Relief Act of 1997 (P.L. 105-34); ESPL No. 7-98, dated April 27, 1998; and ETA Handbook No. 408, Draft Second Edition, June 1998.

3. Background. The Current WOTC program's tax credit expires June 30, 1998, with the Welfare-to-Work Tax Credit expiring on April 1999. The President's FY 1999 Budget calls for a 22-month extension of the WOTC through April 30, 2000 and for a 12-month extension of the Welfare-to-Work Tax Credit through April 30, 2000. In this way both tax credits would end at the same time.

4. Information. This guidance is intended to help States and employers in the event that the WOTC is extended retroactively. In the past, the Congress has retroactively revived the Targeted Jobs Tax Credit (TJTC) program, a predecessor of the WOTC. The retroactive nature of these extensions created a hiatus during which employers who failed to file for TJTC certifications were denied the credit, while employers who filed for certifications during the hiatus were eligible for the credit. While this practice may not be repeated under the WOTC, States and employers should be aware of the possibility of a similar hiatus if and when the WOTC is reenacted.

5. Action Required. State Employment Security Agency (SESA) Administrators are asked to take affirmative steps to inform employers of the WOTC authorization lapse and the procedures for handling employer certification requests of new hires beginning work after June 30. Please be sure to notify employers that, although the Congress has retroactively covered authorization lapses in the past, the eligibility of new hires made during this hiatus is not guaranteed.

   SESA's are also requested to adhere to the following:

   Mandatory Procedures:

   • States must continue to process WtW tax credit applications.

   • States must accept and fully process WOTC certification requests for all employees who began work prior to July 1, 1998.

   • States must accept, date stamp, log, and retain all certification requests for all employees beginning work after July 1, 1998.

   • States should continue to issue conditional certifications.

   Voluntary Procedures:

   • States are encouraged to continue to process certification requests up to, but not including issuance of the actual certification.

   • States may utilize Wagner-Peyser funds to carry out WOTC or WtW activities, but must modify their annual plan to reflect such activities.

6. Inquiries. Direct all questions to the appropriate Regional WOTC/WtW Coordinator.