U.S. Department of Labor
Washington, D. C. 20210





March 30, 2005





Assistant Secretary
SUBJECT : Guidance for Work Opportunity Tax Credit (WOTC) and Welfare-to-Work Tax Credit (WtWTC) Allotments and Grant Plan Submission

  1. Purpose. To provide guidance to state workforce agencies (SWAs) responsible for management of the WOTC and WtWTC from October 1,2004, through September 30,2005, and to provide state allotments for Fiscal Year (FY) 2005.

  2. References. The Consolidated Appropriations Act of 2005 (P.L. 108-447); the Wagner- Peyser (W-P) Act (Act), Section 7(d); Internal Revenue Code of 1986, Sections 51 and 51A; the Small Business Job Protection Act of 1996 (P.L. 104-188); the Taxpayer Relief Act of 1997 (P.L. 105-34); the Tax and Trade Relief Extension Act of 1998 (P.L. 105-277); the Ticket to Work and Work Incentives Improvement Act of 1999 (P.L. 106-170); the Job Creation and Worker Assistance Act of 2002, (P.L. 107-147); the Working Families Tax Relief Act of 2004 (P.L. 108-311); November 2002, Third Edition of ETA Handbook 408; 29 CFR Parts 93,96,97,98, and 99; OMB Circular A-87 and the ETA WOTC/WtWTC Web site: http://www.uses.doleta.gov/tax.asp

  3. Background. The President signed into law the Working Families Tax Relief Act of 2004 (P.L. 108-311) on October 4, 2004. This legislation extends the WOTC and the WtWTC program, without changes, for a two-year period through December 31, 2005. The reauthorization is retroactive to December 31, 2003, and applies to new hires that begin work for an employer on or after January 1, 2004, and before January 1, 2006. This TEGL, by announcing full program finding, supercedes the finding information in TEGL 18-03.

  4. Funding. Attachment I1 contains the allotment to SWAs of FY 2005 funds for program operations in 2005. Funding for the WOTC and the WtWTC program was passed as part of the FY 2005 funds appropriated in the Consolidated Appropriations Act of 2005, P.L. 108- 447, signed into law December 8,2004.

    The appropriation also incorporated an across-the-board reduction of .80 percent to all discretionary program hnds. The total funding for FY 2005, after the reduction, is $1 7,856,000. After reserving $499,968 for postage and $20,000 for the Virgin Islands, funds are distributed to the states by administrative formula with a $64,000 minimum allotment and a 95% stop-loss/l20% stop-gain from the prior year allotment share percentage. The FY 2005 allotment formula is as follows:

    (1) 50% is allocated based on each state's relative share of total certifications issued for the WOTC and WtWTC program;
    (2) 30% is allocated based on each state's relative share of the Civilian Labor Force (CLF); and
    (3) 20% is allocated based on each state's relative share of the adult recipients of Temporary Assistance for Needy Families (TANF).

    The data utilized for these factors reflect actual certifications reported for FY 2003, Fiscal Year 2004 CLF averages, and adult recipients of TANF for FY 2003.

  5. General Administration. SWAs are responsible for administering the WOTC and WtWTC program, including the certification process and reporting program data on a quarterly basis. SWAs should use the guidance in this TEGL for WOTC and WtWTC program operations that cover the 12-month period beginning October 1,2004, through September 30,2005. Authorization for the cost reimbursable grant is provided in the Wagner-Peyser Act, Section 7(d). Pursuant to Training and Employment Information Notice No. 24-99, the ETA National Office continues as the grant officer funding authority for this and other Employment Service cost reimbursable grants.

    Cost reimbursable grant funds are issued to SWAs for program administration. ETA Regional Offices are responsible for conducting field level reviews of these cost reimbursable grants. This includes on-site reviews and analysis of expenditures and performance data. SWAs are required to administer WOTC and WtWTC funds in accordance with the Act and applicable IRS regulations, and the terms and conditions of the Wagner-Peyser (W-P) Act Annual Funding Agreement, which includes administrative requirements and cost principles of Fdcral Rcgulatiolls at 29 CFR Part 97 and OMB Circular A-87 the Plan Narrative (Statement of Work) in Attachment III.

    In addition, the WOTC and WtWTC program must be administered in accordance with the policies and procedural guidance set forth in the November 2002, Third Edition of ETA Handbook No. 408. Current Federal Regulations at 20 CFR 658.400 Subpart E cover the complaint procedures. Other allplicable regulatory provisions are incorporated in the Plan Narrative (Statement of Work).

  6. Reporting. SWAs should report expenditures quarterly by direct data entry of Standard Form 269 (SF-269) into the Web-based Enterprise Information Management System (EIMS)-Cost Reporting System. Quarterly financial reports are due within 30 days following the end of each quarter per 29 CFR 97.41(b) (4). Timely submission of these reports is extremely important to ensure proper accounting of funds. Regional Offices will conduct a financial reconciliation at the end of the fiscal year. Questions regarding financial management and reporting for FY 2005 or for any existing prior year hnd balances should be addressed to the appropriate Regional Office.

    SWAs should continue to use the web-based EIMS-Tax Credit Reporting System to report quarterly program activities and outcomes. A schedule of report due dates is available at: http://www.uses.doleta.gov/tax.asp

  7. Grant and Plan Effective Date. Plans should be prepared in accordance with this guidance and submitted for the 12-month period beginning October 1,2004 through September 30, 2005. SWAs may request extensions through the ETA Regional Office.

  8. Action Required. SWAs are requested to take the following action:

    1. Immediately transmit this issuance to the appropriate staff.

    2. Submit three (3) copies of the WOTC and WtWTC Grant Plan package for the 12-month period beginning October 1,2004, through September 30,2005 to the appropriate Regional Office. Submissions must be prepared in accordance with Attachments I, II, and III, Grant Procedures, Allocation List, and Plan Narrative (Statement of Work). The WOTC/WtWTC Plan should be submitted to the appropriate Regional Office within 30 days after the issuance date of this guidance letter. It must include:

      1. Transmittal Letter (Optional)
      2. Application for Federal Assistance (SF 424)
      3. Budget Expenditure Plan (SF 424 A - Section D only)
      4. Plan Narrative (Statement of Work - Attachment III).

  9. Inquiries. Program questions may be directed to the Regional Office or to Carmen Ortiz, Office of Workforce Investment, Division of Adult Service at (202) 693-2786. All questions regarding grant and financial issues should be directed to Gwendolyn Baron-Simrns at (202) 693-3309 or Fred Tello (202) 693-3333.

  10. Attachments.

    1. Grant Procedures
    2. FY 2005 Funding Allotments
    3. WOTC and WtWTC Plan Narrative (Statement of Work)