NSC releases new recommendations to update the Work Opportunity Tax Credit

By Katie Spiker, December 07, 2017

On December 7, National Skills Coalition released a new brief, Opportunity Knocks: How expanding the Work Opportunity Tax Credit could grow businesses, help low-skill workers, and close the skills gap.

Businesses continue to struggle to find workers, and at the same time millions of low-skill workers lack the training to meet those business needs. Work-based learning programs offer one strategy for businesses to skill-up workers, while providing those workers with access to a paying job. These programs, however, are expensive – particularly when participants may need additional supports to ensure success or a longer training pathway to reach full productivity. Tax credits can help support businesses as they build out work-based learning programs, however there is no current tax credit that focuses on the costs businesses incur when providing work-based learning for low-skill workers.

To address this need, policymakers should expand the Work Opportunity Tax Credit (WOTC) to support businesses providing work-based learning to populations currently targeted under the tax credit.

WOTC provides credits of up to $9,600—totaling nearly $1 billion claimed by employers each year—to companies for hiring workers such as veterans, the long-term unemployed, and Supplemental Nutrition Assistance Program (SNAP) and Temporary Assistance for Needy Family (TANF) recipients.

By updating WOTC to provide an additional credit for businesses who hire and train workers from these target populations, the credit can help businesses build a pipeline of workers and help workers access skills they need.

Specifically, policymakers should update WOTC in the following ways:

  • Authorize a tax credit for each worker, from WOTC targeted populations, who participates in a work-based learning program;
  • Add a definition of “qualifying work-based learning program;”
  • Update the WOTC certification process to better enable businesses to enroll participants in work-based learning programs; and
  • Allow organizations without tax liability to apply the credit to payroll taxes for work-based learning participants.

NSC releases this brief as Congress continues tax reform negotiations. Both the House and Senate have passed tax reform bills and are currently working to reconcile these bills into one package with enough support to pass in both chambers. The House version of the tax reform bill would repeal the Work Opportunity Tax Credit, while the Senate version would leave WOTC unchanged. WOTC currently authorized through 2019.