The Work Opportunity Tax Credit (WOTC) Page: 2 of 19
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The Work Opportunity Tax Credit (WOTC)
Summary
The Work Opportunity Tax Credit (WOTC), which was authorized by the Small Business Job
Protection Act of 1996, is meant to induce employers to hire members of families receiving
benefits under the Temporary Assistance to Needy Families (TANF) program and other groups
thought to experience employment problems regardless of general economic conditions (e.g.,
food stamp recipients and ex-felons). Shortly thereafter, Congress passed the Welfare-to-Work
(WtW) tax credit in the Taxpayer Relief Act of 1997 to focus specifically on more disadvantaged
TANF recipients. About ten years later, the 109th Congress folded the WtW credit into a revised
WOTC as part of the Tax Relief and Health Care Act of 2006.
Provisions to increase the minimum wage and to provide tax relief to small businesses were
included in emergency supplemental appropriations during the 110th Congress. The U.S. Troop
Readiness, Veterans' Care, Katrina Recovery, and Iraq Accountability Act of 2007 was signed
into law on May 25, 2007. P.L. 110-28 extends the WOTC for three-and-one-half years through
August 31, 2011. It also expands the definition of WOTC-eligible veterans to persons entitled to
compensation for service-connected disabilities (a) with a hiring date not more than one year after
having been discharged or released from active duty in the Armed Forces or (b) having been
unemployed for at least six months during the one-year period ending on the hiring date, and
doubled (to $12,000) the maximum wage against which the subsidy rate could be applied for this
component of the veterans group. Additionally, the law expands the age range of high-risk youth
from 18 to 24-year-olds to include 25 to 39-year-olds and renamed the WOTC-eligible group
"designated community residents." It also clarifies the definition of vocational rehabilitation
referrals, adds "rural renewal county" to the places of residence for designated community
residents, and allows the WOTC and tip credit against the AMT.
Subsequently during the 110t Congress, legislation concerning the WOTC was introduced to,
among other things, extend the credit's expiration from August 28, 2007, to December 31, 2009,
for firms who hire "Hurricane Katrina employees" to work in the disaster area. Such a provision
was part of the Emergency Economic Stabilization Act of 2008 (P.L. 110-343).
Most recently, the WOTC has been mentioned in the context of the economic recovery package
under development by the 111th Congress. The Chairman of the House Committee on Ways and
Means announced on January 15, 2009, that as part of providing tax relief to businesses he is
proposing to expand the WOTC to "disconnected youth" and unemployed, recently discharged
veterans.Congressional Research Service
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Levine, Linda. The Work Opportunity Tax Credit (WOTC), report, October 3, 2008; Washington D.C.. (https://digital.library.unt.edu/ark:/67531/metadc809600/m1/2/: accessed July 17, 2024), University of North Texas Libraries, UNT Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.