Urgent Call to Action: 2026 Lame Duck Session

WOTC Background

The Work Opportunity Tax Credit (“WOTC”) is a proven program for helping hard-to-hire individuals transition off government assistance and into the workforce. A modest incentive, WOTC helps reduce hiring and retention costs for employers in exchange for helping millions of individuals such as veterans, the disabled, long-term unemployed, and beneficiaries of Temporary Assistance for Needy Families (“TANF”) and the Supplemental Nutrition Assistance Program (“SNAP”).

Per US Department of Labor (“DOL”) statistics, over 1.5 million WOTC certifications were issued in Federal Fiscal Year 2024 and 9.8 million over the last 5 years.

WOTC is a tax credit equal to 40% of qualified first-year wages paid to individuals who are members of a targeted group. The full list of targeted groups includes: (1) qualified TANF recipients (2) qualified veterans, (3) qualified ex-felons, (4) designated community residents (see end for list of Empowerment Zones and Rural Renewal Counties), (5) vocational rehabilitation referrals, (6) qualified summer youth employees, (7) qualified SNAP recipients, (8) qualified supplemental security income (“SSI”) recipients, (9) qualified long-term TANF recipients, and (10) qualified long-term unemployment recipients. In general, the maximum credit is between $2,400 and $9,600 per employee. Over 87% of certifications are for targeted groups with a maximum credit of $2,400.

While individuals facing barriers to employment deserve opportunities to move from government assistance to the workforce, recent critics have made claims that question WOTC’s value and impact. As discussed below, WOTC is an effective tool to encourage employers to hire and retain these individuals and should be extended.

Responding to Recent Criticism

DOL statistics show that WOTC certifications average around two million each year and nearly 10 million WOTC hirings over the past 5 years. Recently, critics of WOTC have claimed that WOTC does not work. The critiques cite various pieces of information, including a study from researchers at the University of Wisconsin – Madison (the “University of Wisconsin Study”). There are several problems with these critiques.

First, the 2026 version of the University of Wisconsin study states: “Our estimates imply that 96% of WOTC-subsidized hires are inframarginal, and we cannot reject the null that all are inframarginal.” This statement simply means that the researchers’ central estimate implies 4% of the cost of WOTC subsidizes new job creation and that a 0% result is within the statistical error bounds of their estimate. The 4% figure is at the lower end of the range of historical WOTC studies. A recent WOTC study conducted by Ernst & Young LLP helpfully compiled past WOTC studies and summarized findings as follows: “… these papers suggest that between 63% and 96% of the cost of WOTC go toward jobs that would have existed without the credit, while 4% to 37% support jobs that would not have been created otherwise.” In short, the University of Wisconsin study’s conclusion that 100% of WOTC costs may be windfall goes against decades of research on WOTC and is unlikely to be true.

Second, the CATO Institute article misquoted the EY study to suggest that up to 96% of the cost of WOTC accrues as windfall to employers. It is important to note that the EY study was commissioned to estimate the economic impact of WOTC, not to evaluate how employers use the program. The references to past research on WOTC were simply used by EY to identify a midpoint for making a conservative estimate of the program’s economic impact. The study does not conclude that 96% of the cost of WOTC accrues as windfall to employers.

Third, the University of Wisconsin study highlights a small sample of job applications, specifically citing the sample language in Figure A19, to incorrectly imply that WOTC eligibility has no effect on job outcomes. The sample language in Figure A19 (a) states “your answers to the survey questions will not be shared with this employer.” The author’s interpretation of the preamble language is simply incorrect – while detailed answers to specific WOTC survey questions are not always provided back to employers (to prevent improper use of sensitive information), simple eligibility determinations are provided to employers. In fact, thanks to modern Applicant Tracking Systems with data integrations, many WOTC determinations are provided to employers instantaneously. This process aligns with the IRS Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Tax Credit, which purposefully groups multiple target groups together to aid employers in identifying WOTC-eligible individuals while safeguarding sensitive underlying information. Indeed, a 2020 Opinion Letter from the Equal Employment Opportunity Commission (EEOC) supports this practice. In concluding that WOTC screening is lawful under the Americans with Disabilities Act (ADA), the EEOC stated, “The single, broad question listed at Box 2 on Form 8850 is not a disability-related inquiry and therefore is lawful under the ADA, because a "yes" or "no" answer does not reveal whether the individual marked "yes" because he or she has a disability or for one of the other listed reasons.” In short, Figure A19 is a mischaracterization of how WOTC survey data is used.

The University of Wisconsin study also suggests employers do not ask applicants about eligibility out of fear of legal liability. Since 2000, the EEOC has issued many informal letters indicating that WOTC screening is permissible prior to an offer of employment. In 2020, the EEOC issued a formal opinion letter that employers could rely on in court. Thanks to the EEOC opinion letters, fear of legal liability has diminished significantly, except for the “ex-felon” target group. Despite the EEOC letter, some employers remain concerned about lawsuits related to criminal conviction inquiries on job applications in states that have implemented “Ban the Box” laws. Even though WOTC is intended to help individuals with criminal backgrounds rather than discriminate against them, some employers have decided to exclude criminal history inquiries from WOTC surveys to avoid state-level legal challenges. That being said, the ex-felon target group comprises a very small portion of overall WOTC certifications (less than 4%). This limited exception should not be used to discount the demonstrated value of WOTC as a whole.

Importantly, the University of Wisconsin study did dispel one common but unfounded criticism of WOTC: the idea that employers “churn” employees to increase their credit. The researchers studied this issue and found no evidence that employers churn employees to get a larger tax credit. Contrary to the aforementioned critiques and the churning misperception, WOTC has encouraged many employers to proactively engage with local workforce development agencies. Beyond simply screening for WOTC-eligible individuals at the job application stage, many employers proactively collaborate with groups helping reintegrate veterans and assisting hard-to-hire individuals since they recognize that a portion of individuals coming through these agencies will be WOTC-eligible (e.g., veterans, long-term unemployed, etc.).

WOTC Pays for Itself

WOTC’s Positive Impact on Workers

Critics claim that workers do not benefit from WOTC or the jobs they receive are low-wage jobs that do not add to the upward mobility of workers. However, with an average of around 2 million WOTC certifications each year and nearly 10 million WOTC hirings over the past 5 years, WOTC is helping millions of workers transition from government assistance or unemployment to being part of the workforce and receiving a paycheck. In fact, WOTC is helping unemployed individuals and underemployed workers gain sustainable employment and remain in the workforce, mostly at wages higher than the Federal minimum wage.

Per Department of Labor statistics, in Fiscal Year 2023, 85% of WOTC certifications were related to jobs at $10 per hour or higher and, in Fiscal Year 2024, 61% of hires received $15 per hour or higher and 11% received $20 per hour or higher. Further, in 2012, RAND undertook a study to measure the impact of the 2007 WOTC expansion on employment and earnings of disabled veterans. According to the RAND study, WOTC increased 1) employment among disabled veterans by two percentage points in 2007 and 2008, representing roughly 32,000 jobs each year, and 2) annual wage income of the target group by 40 percent, which equates to roughly $1,000 per eligible individual. Our experience with WOTC indicates that such benefits are not exclusive to the veteran target group.

WOTC Policy Recommendations

First and foremost, HIRE urges Congress to renew WOTC as soon as possible (with a retroactive effective date of January 1, 2026).

Second, WOTC is an effective program that warrants a long-term extension. Employers should be given the peace of mind that if they incorporate WOTC into their hiring processes it will be around for the long-haul versus the on-again, off-again history of the program. A minimum 5-year extension is necessary. In addition to a long-term extension, the positive improvements proposed by Senator Cassidy and Representative Smucker in the Improve and Enhance the Work Opportunity Tax Credit Act (S.3265/H.R.6231), including creation of a new military spouse target group, would encourage further employer participation and should be adopted. As suggested in the University of Wisconsin study, Congress should also consider codifying the EEOC opinion letter to further minimize any reverse discrimination concerns that may still exist in the employer community, despite the EEOC guidance.

Finally, and in response to recent criticism of WOTC, HIRE recommends that Congress encourage the IRS and DOL to formally collaborate with WOTC stakeholders to address concerns around the pre-screening process. Based on the way Internal Revenue Code Section 51 is written, we are confident the concerns raised can be addressed through administrative action and do not require a legislative fix. While HIRE believes the concerns are overstated, a formal stakeholder group would increase confidence in the program. WOTC stakeholders could include small businesses, large employers, local workforce development boards, veterans groups, advocates for justice-impacted individuals, and State Workforce Agencies, to name a few. Further, a formal WOTC stakeholder group would be best positioned to develop administrative enhancements to ensure WOTC operates as effectively as possible. Such enhancements may include updating form instructions, refining IRS audit techniques to ensure timely pre-screening, and further digitization and streamlining of the certification process. HIRE believes a formal WOTC stakeholder group would provide greater certainty and clarity for employers participating in WOTC, increase confidence in pre-screening compliance, and improve the workforce participation rates of individuals facing barriers to employment.

HIRE welcomes further discussion on this important program. Please reach out to admin@hirecoalition.org with any questions or to schedule time to discuss in more detail.

Urban Empowerment Zones

• Baltimore, MD
• Boston, MA
• Chicago, IL
• Cincinnati, OH
• Cleveland, OH
• Columbia/Sumter, SC
• Columbus, OH
• Cumberland County, NJ
• Detroit, MI
• El Paso, TX
• Fresno, CA
• Gary/Hammond/East Chicago, IN
• Huntington, WV/Ironton, OH
• Jacksonville, FL
• Knoxville, TN
• Los Angeles, CA
• Miami/Dade County, FL
• Minneapolis, MN
• New Haven, CT
• New York, NY
• Norfolk/Portsmouth, VA
• Oklahoma City, OK
• Philadelphia, PA/Camden, NJ
• Pulaski County, AR
• San Antonio, TX
• Santa Ana, CA
• St. Louis, MO/East St. Louis, IL
• Syracuse, NY
• Tucson, AZ
• Yonkers, NY

Rural Empowerment Zones

• Aroostook County, ME
• Desert Communities, CA
• Griggs-Steele, ND
• Kentucky Highlands, KY
• Mid-Delta, MS
• Middle Rio Grande FUTURO Communities, TX
• Oglala Sioux Tribe, SD
• Rio Grande Valley, TX
• Southernmost Illinois Delta, IL
• Southwest Georgia United, GA

Rural Renewal Counties

• Alabama: Butler, Dallas, Macon, Perry, Sumter, Wilcox
• Alaska: Aleutians West, Wrangell-Petersburg, Yukon-Koyukuk
• Arkansas: Arkansas, Chicot, Clay, Desha, Jackson, Lafayette, Lee, Little River, Monroe, Nevada, Ouachita, Phillips, Union, Woodruff
• Colorado: Cheyenne, Kiowa, San Juan
• Georgia: Randolph, Stewart
• Illinois: Alexander, Edwards, Franklin, Gallatin, Greene, Hancock, Hardin, Jasper, Knox, McDonough, Montgomery, Pulaski, Randolph, Richland, Scott, Warren, Wayne, White
• Indiana: Perry
• Iowa: Adair, Adams, Appanoose, Audubon, Butler, Calhoun, Cass, Cherokee, Clay, Clayton, Emmet, Floyd, Franklin, Fremont, Hancock, Humboldt, Ida, Keokuk, Kossuth, Montgomery, Osceola, Palo Alto, Pocahontas, Poweshiek, Sac, Taylor, Union, Wayne, Winnebago, Worth
• Kansas: Atchison, Barber, Barton, Brown, Clay, Cloud, Comanche, Decatur, Edwards, Elk, Ellsworth, Gove, Graham, Greeley, Greenwood, Harper, Hodgeman, Jewell, Kiowa, Labette, Lane, Lincoln, Marshall, Mitchell, Montgomery, Ness, Osborne, Phillips, Rawlins, Republic, Rooks, Rush, Russell, Scott, Sheridan, Sherman, Smith, Stafford, Trego, Wallace, Washington, Wichita, Woodson
• Kentucky: Bell, Caldwell, Floyd, Harlan, Hickman, Leslie, Letcher, Pike, Union
• Louisiana: Bienville, Claiborne, Franklin, Jackson, Morehouse, St. Mary, Tensas, Vernon, Webster
• Maine: Aroostook, Piscataquis
• Michigan: Gogebic, Marquette, Ontonagon
• Minnesota: Big Stone, Chippewa, Cottonwood, Faribault, Jackson, Kittson, Koochiching, Lac Qui Parle, Lincoln, Marshall, Martin, Murray, Norman, Pipestone, Red Lake, Redwood, Renville, Stevens, Traverse, Wilkin, Yellow Medicine
• Mississippi: Adams, Coahoma, Humphreys, Montgomery, Quitman, Sharkey, Tallahatchie, Washington
• Missouri: Atchison, Carroll, Chariton, Clark, Holt, Knox, Mississippi, New Madrid, Pemiscot, Worth
• Montana: Carter, Daniels, Dawson, Deer Lodge, Fallon, Garfield, Hill, Liberty, McCone, Petroleum, Phillips, Powder River, Prairie, Richland, Roosevelt, Rosebud, Sheridan, Valley, Wibaux
• Nebraska: Antelope, Banner, Boone, Box Butte, Boyd, Burt, Cedar, Chase, Deuel, Dundy, Fillmore, Franklin, Garden, Garfield, Greeley, Hayes, Hitchcock, Holt, Jefferson, Johnson, Logan, Nance, Nemaha, Nuckolls, Pawnee, Perkins, Red Willow, Richardson, Rock, Sheridan, Sherman, Thayer, Thomas, Valley, Webster, Wheeler
• Nevada: Esmeralda, Lander, Mineral
• New Hampshire: Coos
• New Mexico: Harding, Quay
• New York: Clinton, Montgomery
• North Dakota: Adams, Barnes, Benson, Billings, Bottineau, Burke, Cavalier, Dickey, Divide, Dunn, Eddy, Emmons, Foster, Golden Valley, Grant, Griggs, Hettinger, Kidder, LaMoure, Logan, McHenry, McIntosh, McKenzie, McLean, Mercer, Mountrail, Nelson, Oliver, Pembina, Pierce, Ramsey, Ransom, Renville, Sargent, Sheridan, Slope, Stark, Steele, Stutsman, Towner, Traill, Walsh, Wells, Williams
• Ohio: Crawford, Monroe, Paulding, Seneca, Van Wert
• Oklahoma: Alfalfa, Beaver, Cimarron, Custer, Dewey, Ellis, Grant, Greer, Harmon, Harper, Kiowa, Major, Roger Mills, Seminole, Tillman, Woodward
• Pennsylvania: Venango, Warren
• South Carolina: Marlboro
• South Dakota: Aurora, Campbell, Clark, Day, Deuel, Douglas, Faulk, Grant, Gregory, Haakon, Hand, Harding, Hutchinson, Jones, Kingsbury, Marshall, McPherson, Miner, Perkins, Potter, Sanborn, Spink, Tripp, Walworth
• Texas: Andrews, Bailey, Baylor, Borden, Briscoe, Brooks, Castro, Cochran, Coleman, Collingsworth, Cottle, Crane, Culberson, Deaf Smith, Dimmit, Eastland, Fisher, Floyd, Foard, Gray, Hall, Hardeman, Haskell, Hemphill, Hockley, Hutchinson, Kenedy, Kent, Knox, Lamb, Martin, McCulloch, Morris, Nolan, Oldham, Reagan, Reeves, Refugio, Roberts, Scurry, Stonewall, Terrell, Terry, Upton, Ward, Wheeler, Wilbarger, Winkler, Yoakum, Zavala
• Virginia: Buchanan, Dickenson, Highland and Lee Counties; the independent cities of Clifton Forge, Covington, Norton and Staunton
• West Virginia: Calhoun, Gilmer, Logan, McDowell, Mercer, Mingo, Summers, Tucker, Webster, Wetzel, Wyoming
• Wyoming: Carbon, Niobrara