[Federal Register Volume 89, Number 113 (Tuesday, June 11, 2024)]
[Notices]
[Pages 49231-49234]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-12706]


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DEPARTMENT OF LABOR

Employment and Training Administration


Work Opportunity Tax Credit (WOTC) Program

AGENCY: Employment and Training Administration (ETA), Labor.

ACTION: Notice.

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SUMMARY: This Notice announces the revised administrative formula 
methodology that ETA uses to distribute annual allotment funding to 
State grantees (53 State Workforce Agencies (SWAs)) for the purpose of 
administering the Work Opportunity Tax Credit (WOTC). Additionally, 
this Notice formally communicates the substantial changes to the 
administrative formula and announces the actualized State allotments 
for fiscal year (FY) 2024, the revised formula's implementation year, 
based on Congress' budgetary appropriations.

DATES: The FY 2024 allotment covers the period of October 1, 2023-
September 30, 2024.

FOR FURTHER INFORMATION CONTACT: LaToria Strickland, Office of 
Workforce Investment, Employment and Training Administration, U.S. 
Department of Labor, 200 Constitution Avenue NW, Suite C-4510, 
Washington, DC 20210, telephone: (202) 693-3980 (this is not a toll-
free number) or by email: dol.gov">Ask.WOTC@dol.gov. For persons with a hearing 
or speech disability who need assistance to use the telephone system, 
please dial 711 to access telecommunications relay services.

SUPPLEMENTARY INFORMATION: 
    Background: WOTC is a Federal tax credit available to eligible 
employers that hire and pay wages to first-time, qualifying members of 
WOTC targeted groups. Section 51 of the Internal Revenue Code of 1986, 
as amended, provides the legislative authority for the WOTC. (See 
https://uscode.house.gov/view.xhtml?req=(title:26%20section:51%2edition:prelim). WOTC is 
authorized until December 31, 2025, under division EE, title I, section 
113 of the Consolidated Appropriations Act, 2021 (Pub. L. 116-260).
    This Notice represents the second of a two-stage process. On 
February 21, 2023, ETA published a Request for Comment in which the 
Department proposed modifications to WOTC procedural guidance and the 
administrative formula (88 FR 10540), hereinafter referred to as the 
initial Notice. The 60-day public comment period closed on April 24, 
2023. The initial Notice presented planning estimates for the modified 
administrative formula's implementation year, FY 2024, and the FY 2022 
actualized allotments. In the initial Notice, ETA committed to 
publishing modifications to WOTC procedural guidance in a Change 1 to 
Training and Employment Guidance Letter (TEGL) No. 16-20, ``Updated 
Work Opportunity Tax Credit (WOTC) Procedural Guidance,'' \1\ and 
publishing the updated administrative formula in the Federal Register. 
Based on the comments received during the public comment period and 
ETA's consideration of them, ETA finalized the WOTC administrative 
formula with updated data metrics in the formula methodology, as 
originally proposed in the initial Notice.
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    \1\ ETA, TEGL No. 16-20, Change 1, ``Updated Work Opportunity 
Tax Credit (WOTC) Procedural Guidance,'' Nov. 20, 2023, https://www.dol.gov/agencies/eta/advisories/tegl-16-20-change-1.
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    In this second stage, the finalized formula and actual FY 2024 
State allotments are described further in this subsequent Notice. (The 
FY 2024 State allotments are also published in Change 2 to TEGL No. 06-
23, ``Work Opportunity Tax Credit (WOTC) Initial Fiscal Year (FY) 2024 
Funding Allotments).'' \2\
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    \2\ ETA, TEGL No 06-23, Change 2, ``Change 2 to Training and 
Employment Guidance Letter No. 06-23, Work Opportunity Tax Credit 
(WOTC) Initial Funding Allotments for Fiscal Year 2024,'' May 09 
2024, https://www.dol.gov/agencies/eta/advisories/tegl-06-23-change-
2.
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    This subsequent Notice contains five sections, as follows:
     Section I provides the historical formula methodology used 
for WOTC State allotments, effective FYs 1996-2023.
     Section II reviews the proposed administrative formula 
that was described in the initial Notice (88 FR 10540), published in 
the Federal Register on February 21, 2023.
     Section III summarizes the comments that ETA received in 
response to the initial Notice and ETA's decisions concerning the 
allotment formula modifications, based on those comments.
     Section IV describes the formula's ``stop-loss/stop-gain'' 
provisions, which are designed to provide a staged transition from the 
old to the new funding levels for State allotments. Additionally, 
section IV describes the minimum funding provisions for States under 
the modified formula. These provisions were previously discussed in 
detail in the initial Notice (88 FR 10540).
     Section V describes the application of the modified 
formula (using congressional budgetary appropriations) for FY 2024 
allotments and subsequent years. The table appended to this Notice 
reflects the actual FY 2024 distribution resulting from the revised 
allotment formula.

I. Historical Formula Methodology

    The WOTC administrative formula was developed by ETA in 1996 for 
the purpose of distributing Federal funds to 52 State grantees (50 
United States, District of Columbia, and U.S. Virgin Islands) to 
administer the WOTC and the Welfare-to-Work (WtW), enacted in 1997, tax 
credit programs. ETA published the original formula methodology in a 
Federal Register Notice (68 FR 15745) on April 1, 2003, announcing the 
FY 2003 WOTC and WtW program grants to States:
    ``After reserving $584,200 for postage and $20,000 for the Virgin 
Islands, funds are distributed to states by administrative formula with 
a $64,000 minimum allotment and a 95 percent stop-loss/120 percent 
stop-gain from the prior year allotment share percentage.
    The allocation formula is as follows:
    (1) 50 percent based on each state's relative share of total FY 
2002 (the prior FY) certifications issued for the WOTC/WtW Tax Credit 
program;
    (2) 30 percent based on each state's relative share of the civilian 
labor force (CLF) for calendar year 2001 (the preceding calendar year); 
and
    (3) 20 percent based on each state's relative share of the adult 
recipients of Temporary Assistance for Needy Families (TANF) for FY 
2001'' (FY 2001 was the second preceding FY for which complete annual 
TANF data was available).
    The WtW program, which focused on TANF recipients, was folded into 
WOTC in 2006 by division A, title I, section 105 of the Tax Relief and 
Health Care Act of 2006 (Pub. L. 109-432). While ETA has made 
incremental

[[Page 49232]]

modifications over time, including removing the set-aside for postage, 
increasing the minimum allotment from $64,000 to $66,000 (3% increase), 
and adding the Commonwealth of Puerto Rico as a State grantee, the WOTC 
administrative formula methodology has remained largely unchanged. ETA 
used this administrative formula recently for the FY 2023 allotments, 
as provided in TEGL No. 06-22, ``Work Opportunity Tax Credit (WOTC) 
Initial Funding Allotments for Fiscal Year 2023,'' \3\:
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    \3\ TEGL 06-22, available at https://www.dol.gov/agencies/eta/advisories/tegl-06-22.
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    ``After allocating $20,000 to the Virgin Islands, ETA distributes 
the remaining funds to the SWAs by administrative formula with a 
$66,000 minimum allotment and a 95 percent stop-loss/120 percent stop-
gain from the previous year allotment percentage. The administrative 
formula is calculated as follows:
    (1) 50 percent is based on each state's relative share of total 
WOTC certifications issued from October 1, 2021 through September 30, 
2022 (the prior fiscal year);
    (2) 30 percent is based on each state's relative share of the CLF 
averages for the 12-month period from October 1, 2021 through September 
30, 2022 (the prior fiscal year); and
    (3) 20 percent is based on each state's relative share of adult 
recipients of TANF averages from October 1, 2020, through September 30, 
2021 (the 12-month period from the second preceding fiscal year).''

II. Formula Updates and Modifications

    The WOTC administrative formula bases 50 percent of States' annual 
allotments on each State's relative share of total WOTC certifications 
issued in the most recently completed FY's available data (October 1-
September 30). Thirty percent is based on each State's relative share 
of CLF averages for the most recently completed FY's available data, 
and 20 percent is based on each State's relative share of adult 
recipients of TANF averages from the second preceding FY. The same 
three data metrics (certifications issued, CLF averages, and TANF 
averages) have been the basis of the administrative formula used to 
determine State allotments since 1996.
    In the initial Notice (Feb 2023), ETA proposed modifications to its 
administrative formula to factor in the SWAs' output workload to 
include denials issued and to adjust for inflation. The proposed 
allotment formula includes two formula factors: (1) total number of 
determinations issued by the SWA (certifications and denials) for the 
most recently completed FY's available data, based on SWAs' certified 
performance data; and (2) each State's relative share of CLF averages 
for the most recently completed FY's available data. States report 
their annual certification performance data on ETA Form 9058, 
Certification Workload and Characteristics of Certified Individuals, 
through an existing information collection under the ``Work Opportunity 
Tax Credit'' ICR, approved under OMB Control Number 1205-0371.\4\ A 
description of how the data is used to calculate the State allotments 
using the proposed modified formula is provided below:
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    \4\ ETA Form 9058, Certification Workload and Characteristics of 
Certified Individuals--ETA Form 9058 (dol.gov).
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    (1) 40 percent based on each State's relative share of 
certifications issued for the most recently completed fiscal year's 
available data (October 1-September 30),
    (2) 40 percent based on each State's relative share of denials 
issued for the most recently completed fiscal year's available data 
(October 1-September 30), and
    (3) 20 percent based on each State's relative share of CLF averages 
for the most recently completed fiscal year's available data (October 
1-September 30).
    In addition to populating the administrative formula with updated 
metrics, ETA proposed modifications that would raise the minimum 
allotment to the States and improve the formula's accuracy in terms of 
estimating the true administrative workload of the SWAs. The proposed 
modifications were a result of ETA's review of SWAs' quarterly 
performance data, WOTC State/regional coordinators' feedback, and 
inquiries received from program stakeholders.
    A summary of changes under the proposed modified formula (as 
detailed in Section IV of the initial Notice) are provided below:
     The formula will no longer factor in States' share of 
adult TANF recipient averages. With this formula modification, the 
administrative workload of the SWA (annual certifications and denials 
issued) is the primary indicator used to determine fiscal year funding.
     To align the funding formula more closely with the SWAs' 
workload, ETA will lessen the formula weight of the CLF averages used 
in the allotment formula. States with larger population sizes (i.e., 
California, Florida, New York, and Texas) have a larger number of 
eligible employers participating in WOTC. These States process a higher 
volume of certification requests leading to a larger volume of the 
determinations issued, and consequently receive a larger relative share 
of the Federal funding allocation.
    ETA believes that focusing on the SWAs' workload outcomes 
(certifications and denials issued) is the most appropriate metric on 
which to base WOTC State allotments. To gradually phase in State 
funding allotment changes due to the updated formula, ETA will continue 
to use the 95 percent stop-loss/120 percent stop gain funding 
provisions which are currently used in WOTC allotment formula 
calculations. This provision is described further in Section V of this 
subsequent Notice.

III. Summary of Public Comments Received

    Although not required by Federal statute or regulations, ETA sought 
public comment on the proposed administrative formula modifications in 
the initial Federal Register Notice (88 FR 10540; Feb. 21, 2023). As 
with all grant formulas, changing calculation metrics will result in 
changes to each State's relative share of Federal funding. Two 
commenters [SWAs] concurred with the modified formula as announced in 
the initial Notice, two commenters [SWAs] proposed adjusting the weight 
of formula calculation metrics (i.e., lessening the weight for denials 
issued), and one commenter [SWA] raised concern for States that may 
receive up to a five percent decrease in allotment during the 
implementation year (FY 2024). ETA considered these comments and 
proceeded with updating the WOTC administrative formula for State 
allotments as originally proposed in the initial Notice. SWAs expend 
resources to process a growing number of employer certification 
requests, regardless of the application's outcome (certification or 
denial). In FY 2023, SWAs issued 3,708,081 denials, representing 48 
percent of the national total workload, compared to 1,918,901 
certifications, representing 25 percent of the total workload.\5\ ETA 
recognizes this impact and, in the initial Notice, adjusted the 
administrative formula to better align State funding with SWA workloads 
by including `denials issued' at the same weight as `certifications 
issued' in the new formula.
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    \5\ National Tax Credit Certification Reporting by Fiscal Year, 
available at https://www.dol.gov/agencies/eta/wotc/performance.

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[[Page 49233]]

IV. Description of Stop-Loss/Stop-Gain and Minimum Funding Provisions

    ETA mitigates large changes in State allotments (which may be 
caused by changes to formula methodology) by using the ``Stop-Loss/
Stop-Gain'' provision, which gradually phases in State funding 
allotment changes due to updated formula metrics. ETA will continue to 
use the 95 percent stop-loss/120 percent stop-gain funding provisions 
in the WOTC allotment formula calculations. This approach is based on a 
State's previous year allotment percentage, which is its relative share 
of the total formula allotments. The stop-gain provision provides that 
no State grantee will receive an amount that is more than 120 percent 
of their previous year's allotment percentage. The stop-loss provision 
provides that no State grantee will receive an amount less than 95 
percent of their previous year's allotment percentage. The prior (pre-
FY 2024) administrative formula was calculated with 95 percent stop-
loss/120 percent stop-gain provisions, and this did not change in the 
modified formula for FY 2024 and subsequent years.
    Under the proposed new formula, the new State allotment minimum 
would be raised to $119,000 ($36,000 for U.S. Virgin Islands), adjusted 
for inflation. As previously mentioned, the stop-gain provision 
provides that no State grantee will receive an amount that is more than 
120 percent of their previous year's allotment percentage, and using 
the proposed new formula, some State grantees would require over a 20 
percent increase of their FY 2023 allotment percentage to reach the FY 
2024 allotment minimum. To phase in the increased minimum allotment, 
which also impacts other States' allotments, ETA will use the stop-gain 
provision to gradually increase the minimum funding allotment amount to 
reach the new $119,000 minimum by FY 2026. The minimum State allotment 
increased to $79,131 in FY 2024, which represents a 20 percent share 
increase from the prior minimum of $66,000 in FY 2023, and it will 
increase by 20 percent each fiscal year, to reach the new $119,000 
minimum by FY 2026. A State grantee that would receive less than 
$119,000 by application of the FY 2024 formula will, at the option of 
ETA, continue to receive an allotment that is proportional to the SWA's 
current fiscal year allotment and anticipated administrative workload.

V. Revised WOTC Administrative Formula, Effective FY 2024 State 
Allotments

    ETA will determine State allotments for normal WOTC operations 
according to the following methodology, effective with the FY 2024 
State allotments:
    After allocating $36,000 to the U.S. Virgin Islands, ETA 
distributes the remaining funds to the SWAs by administrative formula 
with a $119,000 minimum allotment and a 95 percent stop-loss/120 
percent stop-gain from the previous year allotment percentage. The 
administrative formula is calculated as follows:
    (1) 40 percent based on each State's relative share of 
certifications issued for the most recently completed fiscal year's 
available data (October 1-September 30);
    (2) 40 percent based on each State's relative share of denials 
issued for the most recently completed fiscal year's available data 
(October 1-September 30); and
    (3) 20 percent based on each State's relative share of CLF averages 
for the 12-month period of the most recently completed fiscal year's 
available data (October 1-September 30).
    The State allotments set forth in the table appended to this 
subsequent Notice reflect the distribution resulting from the revised 
allotment formula described above. In FY 2023 and FY 2024, Congress 
appropriated $18,485,000 in funding for State grantees (SWAs) to 
administer WOTC. The figures in column 1 show the actual FY 2023 
formula allotments to State grantees. Column 2 shows the percentage of 
each States' allotment in proportion to the total funding appropriated. 
Column 3 shows the actual FY 2024 formula allotments with the 
application of the 95 percent stop-loss/120 percent stop-gain, and 
$119,000 minimum funding provisions. Column 4 shows each State's 
relative share of total FY 2024 allotments and column 5 shows the 
percentage share difference between FY 2024 and FY 2023 State 
allotments. Additional information on FY 2024 funding allocations may 
be referenced in TEGL No 06-23, Work Opportunity Tax Credit (WOTC) 
Initial Funding Allotments for Fiscal Year 2024, available at https://www.dol.gov/agencies/eta/advisories/tegl-06-23.

Jos[eacute] Javier Rodr[iacute]guez,
Assistant Secretary for Employment and Training Administration, Labor.

    U.S. Department of Labor Employment and Training Administration Work Opportunity Tax Credit (WOTC) State
                   Allotment Grants Impact of Formula Changes on FY 2024 Allotments to States
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                                        FY 2023 (actual)                FY 2024 (actual)            Percentage
                                ----------------------------------------------------------------      share
             State                                                                               difference  (FY
                                    Allotment      Percentage       Allotment      Percentage      2024 vs.  FY
                                                      share                           share           2023)
                                            (1)             (2)             (3)             (4)              (5)
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Total..........................     $18,485,000             100     $18,485,000             100              +/-
Alabama........................         275,882             1.5         284,832             1.5              3.3
Alaska.........................          66,000             0.4          79,131             0.4             20.0
Arizona........................         344,353             1.9         326,852             1.8             -5.0
Arkansas.......................         129,340             0.7         155,074             0.8             20.0
California.....................       2,463,406            13.3       2,338,208            12.7             -5.0
Colorado.......................         299,388             1.6         284,172             1.5             -5.0
Connecticut....................         170,021             0.9         161,380             0.9             -5.0
Delaware.......................          80,968             0.4          97,077             0.5             20.0
District of Columbia...........          66,000             0.4          79,131             0.4             20.0
Florida........................         996,142             5.4         945,515             5.1             -5.0
Georgia........................         481,902             2.6         483,737             2.6              0.5
Hawaii.........................          83,407             0.5         100,002             0.5             20.0
Idaho..........................          74,748             0.4          89,620             0.5             20.0
Illinois.......................         706,132             3.8         693,500             3.8             -1.7
Indiana........................         273,250             1.5         259,363             1.4             -5.0
Iowa...........................         218,776             1.2         207,657             1.1             -5.0

[[Page 49234]]

 
Kansas.........................         146,904             0.8         139,438             0.8             -5.0
Kentucky.......................         353,854             1.9         335,870             1.8             -5.0
Louisiana......................         288,003             1.6         294,826             1.6              2.5
Maine..........................          66,000             0.4          79,131             0.4             20.0
Maryland.......................         398,705             2.2         378,442             2.1             -5.0
Massachusetts..................         380,504             2.1         361,166             2.0             -5.0
Michigan.......................         574,630             3.1         545,425             3.0             -5.0
Minnesota......................         288,016             1.6         273,378             1.5             -5.0
Mississippi....................         207,390             1.1         196,850             1.1             -5.0
Missouri.......................         378,621             2.1         359,378             1.9             -5.0
Montana........................          66,000             0.4          79,131             0.4             20.0
Nebraska.......................         133,374             0.7         126,596             0.7             -5.0
Nevada.........................         166,333             0.9         162,766             0.9             -2.1
New Hampshire..................          66,000             0.4          79,131             0.4             20.0
New Jersey.....................         326,817             1.8         354,620             1.9              8.6
New Mexico.....................         169,874             0.9         161,240             0.9             -5.0
New York.......................       1,253,665             6.8       1,189,950             6.4             -5.0
North Carolina.................         510,810             2.8         522,119             2.8              2.3
North Dakota...................          66,000             0.4          79,131             0.4             20.0
Ohio...........................         720,311             3.9         825,339             4.5             14.7
Oklahoma.......................         260,321             1.4         247,091             1.3             -5.0
Oregon.........................         260,465             1.4         247,227             1.3             -5.0
Pennsylvania...................         710,605             3.8         674,490             3.7             -5.0
Puerto Rico....................          81,519             0.4          97,738             0.5             20.0
Rhode Island...................          71,478             0.4          85,699             0.5             20.0
South Carolina.................         250,468             1.4         267,444             1.4              6.9
South Dakota...................          66,000             0.4          79,131             0.4             20.0
Tennessee......................         653,761             3.5         620,535             3.4             -5.0
Texas..........................       1,310,072             7.1       1,507,945             8.2             15.2
Utah...........................         108,459             0.6         119,000             0.6              9.8
Vermont........................          66,000             0.4          79,131             0.4             20.0
Virginia.......................         414,000             2.2         392,959             2.1             -5.0
Washington.....................         415,914             2.3         394,776             2.1             -5.0
W. Virginia....................         118,367             0.6         119,000             0.6              0.6
Wisconsin......................         320,045             1.7         308,525             1.7             -3.5
Wyoming........................          66,000             0.4          79,131             0.4             20.0
                                --------------------------------------------------------------------------------
    Total......................      18,465,000             100      18,449,000             100  ...............
Virgin Islands (non-formula)...          20,000             n/a          36,000             n/a  ...............
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[FR Doc. 2024-12706 Filed 6-10-24; 8:45 am]
BILLING CODE 4510-FN-P