IRS Notice Provides Work Opportunity Credit Definitions

The IRS has released a notice that defines the terms “unemployed veteran” and “disconnected youth,” for purposes of the IRC § 51 work opportunity credit (Notice 2009-28). The notice also gives transition relief to employers who hire employees from those targeted groups after Dec. 31, 2008, and before July 17, 2009.

Section 51 provides a credit for employers who hire disadvantaged workers from specific targeted groups. In February, the American Recovery and Reinvestment Act expanded the list of groups to include disconnected youths and unemployed veterans.

UNEMPLOYED VETERAN

For purposes of the credit, an “unemployed veteran” is defined in the notice as any veteran who has been certified by a designated local agency (as defined in section 51(d)(12)) as:

(1) having been discharged or released from active duty in the Armed Forces at any time during the 5-year period ending on the hiring date; and

(2) being in receipt of unemployment compensation under State or Federal law for not less than four weeks during the one-year period ending on the hiring date. [Notice 2009-28, § I]

DISCONNECTED YOUTH

The Code defines a “disconnected youth” as an individual who has been certified by a designated local agency as:

1. Having attained age 16 but not age 25 on the hiring date;
2. Not regularly attending any secondary, technical, or post-secondary school during the six-month period preceding the hiring date;
3. Not regularly employed during that six-month period; and
4. Not readily employable by reason of lacking a sufficient number of basic skills.

The notice defines “not regularly attending” as meaning that during the six months preceding the hiring date the individual has not attended secondary, technical, or post-secondary school for more than an average of ten hours a week. The notice defines “secondary school” by looking to the definition in 20 U.S.C. § 7801(38) and “technical” and “post-secondary” schools by looking to the definitions in 20 U.S.C. §§ 1001, 1002 and 1059. (Title 20 is the education title of the U.S. Code.)

The notice defines “not regularly employed” to mean the individual earned less during the testing period than he or she would have if he or she had worked 30 hours a week and had been paid the minimum wage (either the federal minimum wage or the applicable state minimum wage, if higher).

To qualify as “not readily employable by reason of lacking a sufficient number of basic skills” the notice says the individual must either:

1. State in writing that he or she does not have a certificate of graduation from a secondary school (for example, a high school diploma) or GED certificate; or
2. If he or she does have a certificate of graduation from a secondary school or a GED certificate, that it was awarded no less than six months before the hiring date and that he or she has not held a job or been admitted to a technical or post-secondary school since receiving the certificate.

TRANSITION RELIEF

Section 51 requires an employer to either obtain certification from a designated local agency on or before the day the individual begins work that the individual is a member of a targeted group or else complete a prescreening notice (Form 8850, Pre-Screening Notice and Certification Request for Work Opportunity Credit) on or before the day the individual is offered employment and submit Form 8850 to the designated local agency to request certification not later than 28 days after the individual begins work. However, in the case of an employer who hires an unemployed veteran or disconnected youth after Dec. 31, 2008, and before July 17, 2009, the employer will be considered to have met the deadline if the employer submits Form 8850 to the designated local agency by Aug. 17, 2009.