In June the IRS extended the dates for both hiring and applying for certification in Notice 2016-40.
With spring training underway in Arizona (where this author lives), it's appropriate to have a baseball tie in to a tax development, so we turn to one of the great insights given to us by a player of the sport:
“It’s like déjà vu all over again.”
The above quote, attributed to Yogi Berra, is appropriate to the IRS returning again to dealing with the mess left by Congress’s late in 2015 decision to retroactively extend the Work Opportunity Credit. The IRS has issued another notice to “clean up” problems created by Congress’s delay in extending expired code provisions, waiting until late December to pass the Protecting Americans from Tax Hikes Act of 2015 (PATH), just as the Congress did one year earlier.
In Notice 2016-22 the IRS provided procedures to be used for employers that hired individuals that retroactively qualify as “targeted” individuals during the period where the work opportunity credit under IRC §51 had expired.
PATH retroactively extended that credit through the end of 2015. Thus, targeted individuals hired at any time during 2015 could have qualified an employer for the credit.
However, under §51(d)(13)(A) (also retroactively extended) an individual will not be treated as a member of such a group for the credit unless:
- On or before the day the individual begins work, the employer obtains certification from the “designated local agency” (DLA) that the individual is a member of a targeted group; or
- The employer completes a pre-screening notice (Form 8850) on or before the day the individual is offered employment and submits such notice to the DLA to request certification not later than 28 days after the individual begins work.
DLAs are generally state employment security agency. Such agencies, following the expiration of the statute, were not issuing such certifications, nor were they accepting Forms 8850 for what was a no longer in existence credit.
As well, Congress added a brand new category of qualified individuals for 2016 (though not retroactively for 2015) that qualify for the credit, the long-term unemployed. This new provision will require modification to the forms used to request this certification (IRS Form 8850 and Department of Labor Forms ETA 9061 and 9062). The notice provides for this class of individual the agency expects the following items to be part of this modification:
The Treasury Department and the IRS anticipate that the modified forms will include a requirement that the individual signing the form attest that he or she meets the requirements to be a qualified long-term unemployment recipient and a requirement that the individual attest to the period(s) during which the individual was unemployed and the period the individual received unemployment compensation.
Since Congress still does not have the power to order time to move backwards (despite what they appear to believe) and did not issue a fix on its own (also not terribly surprising), the IRS has issued a fix that is similar to the one the agency issued the last time Congress extended the provision long after it had left the law.
The notice provides that an employer will be deemed to have satisfied the certification requirements of IRC §51(d)(13)(A)(ii) if
- The employer hired a member of a targeted group on or after January 1, 2015 and on or after before May 31, 2016 and
- The employer submits the completed Form 8850 to the appropriate DLA to request certification no later than June 29, 2016.
For long term unemployed the same extension will apply, though obviously the person must be hired on or after January 1, 2016 (that is, hired in 2016) since the class didn’t qualify for the credit in 2015.
An employer still may not claim the credit until the employer actually receives the certification from the DLA. Employers that have not yet filed their returns would, therefore, generally file for an extension of time to file the return to await the certification. Those who have already filed, or whose extension time period comes to an end, will need to file amended returns to claim the credit once certification is received.
The next time the credit is scheduled to expire is December 31, 2019, so we will have some reprieve from revisiting this issue until we see what Congress does then—most likely in December of 2020 if the institution holds true to form.