Notice 2021-43

Part III – Administrative, Procedural, and Miscellaneous

Work Opportunity Tax Credit (WOTC) Transition Relief under Internal Revenue Code
§ 51

Notice 2021-43

I. PURPOSE
This notice provides transition relief for certain employers claiming the Work
Opportunity Tax Credit (WOTC) under § 51 of the Internal Revenue Code (Code) for
certain employees beginning work after December 31, 2020, in response to legislation
permitting the designation of an Empowerment Zone, defined in § 1393(b) of the Code,
to be extended from December 31, 2020, through December 31, 2025. Specifically,
section IV of this notice provides transition relief by extending the 28-day deadline for
employers to request certification from a designated local agency (DLA) 1 that an
individual who begins work on or after January 1, 2021, and before October 9, 2021, is
a member of the Designated Community Resident targeted group or the Qualified
Summer Youth Employee targeted group. 2

1 Section 51(d)(12) provides that a “DLA” is a State employment security agency (sometimes referred to
as a State Workforce Agency) established in accordance with 29 U.S.C. §§ 49-49n.
2 For purposes of this notice, the terms “Designated Community Resident” and “Qualified Summer Youth
Employee” refer to those individuals certified by a DLA as having a principal place of residence within an
Empowerment Zone.

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II. BACKGROUND
Section 51(a) of the Code provides the WOTC to employers based on a percentage
of qualified wages paid during the taxable year. Section 51(b) defines “qualified wages”
as wages paid or incurred by an employer during the taxable year to an individual who
is certified as a member of a targeted group. Section 51(d)(1) lists the targeted groups,
which include Designated Community Residents, defined in § 51(d)(5), and Qualified
Summer Youth Employees, defined in § 51(d)(7).
Pursuant to § 51(d)(13)(A), an individual is not treated as a member of a targeted
group unless (1) on or before the day the individual begins work, the employer obtains
certification from the DLA that the individual is a member of a targeted group, or (2) the
employer completes a pre-screening notice on or before the day the individual is offered
employment and submits such notice to the DLA to request certification that the
individual is a member of a targeted group not later than 28 days after the individual
begins work. The Form 8850, Pre-Screening Notice and Certification Request for the
Work Opportunity Credit, is the pre-screening notice that must be submitted by the
employer to the DLA to request certification that an individual is a member of a targeted
group.
To be certified as a Designated Community Resident or a Qualified Summer Youth
Employee, an individual must be certified by the DLA as having a principal place of
residence within an Empowerment Zone where the individual continuously resides. For
such individuals, any wages paid to or incurred on behalf of the individual for services
rendered while the individual is not living at a residence within an Empowerment Zone
do not qualify for the WOTC.

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III. TAXPAYER CERTAINTY AND DISASTER TAX RELIEF ACT OF 2020
AMENDMENTS
The WOTC has been subject to several legislative extensions and modifications
since its enactment by § 1201 of the Small Business Job Protection Act of 1996, Pub. L.
104-188, 110 Stat. 1755 (August 20, 1996). Most recently, § 113 of the Taxpayer
Certainty and Disaster Tax Relief Act of 2020 (Act), enacted as Division EE of the
Consolidated Appropriations Act, 2021, Pub. L. 116-260, 134 Stat. 1182 (December 27,
2020), amended § 51(c)(4) of the Code to extend the effective date of WOTC. As
amended by the Act, § 51(c)(4) provides that WOTC applies to wages paid or incurred
with respect to members of a targeted group who begin work after December 31, 2020,
and before January 1, 2026. In addition, § 118(a) of the Act amended § 1391(d)(1) of
the Code to provide that any designation of an Empowerment Zone ends on the earliest
of (1) December 31, 2025, (2) the termination date designated by the State and local
governments as provided for in their nomination, or (3) the date the “Appropriate
Secretary” 3 revokes the designation. Section 118(d) of the Act provides that where a
nomination of an Empowerment Zone included a termination date of December 31,
2020, § 1391(d)(1)(B) of the Code will not apply with respect to such designation if, after
the date of the enactment of the Act, the entity that made such nomination amends the
nomination, in such manner as the Secretary of the Treasury or her designee may
provide, to provide for a new termination date. The amendment made by § 118(a) of
the Act applies to taxable years beginning after December 31, 2020.
Section 1393(a)(1) of the Code provides that the “Appropriate Secretary” is the Secretary of Housing
and Urban Development (in the case of any nominated area designated under § 1391 that is located in an
urban area as defined in § 1393(a)(3)), or the Secretary of Agriculture (in the case of any nominated area
designated under § 1391 that is located in a rural area as defined in § 1393(a)(2)).
3

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On March 26, 2021, the Department of the Treasury (Treasury Department) and the
Internal Revenue Service (IRS) released Revenue Procedure 2021-18, 2021-15 I.R.B.
1007 (April 12, 2021), to explain how a State or local government is deemed to extend
the termination date designated in an Empowerment Zone nomination until December
31, 2025. Revenue Procedure 2021-18 provides that if a State or local government did
not submit a written declination to extend an Empowerment Zone to the IRS by May 25,
2021, and if the Appropriate Secretary did not revoke the Empowerment Zone
designation, then the termination date provided in that Empowerment Zone nomination
is automatically extended to December 31, 2025.
IV. GRANT OF RELIEF
As explained below, because the Act extended the WOTC and the period for which
Empowerment Zone designations are in effect through December 31, 2025, employers
may need additional time to comply with the certification requirements of
§ 51(d)(13)(A)(ii).
The Treasury Department and the IRS understand that, because the termination
dates designated in Empowerment Zone nominations are not automatically extended
until after the deadline set forth in Revenue Procedure 2021-18 for submitting a written
declination has passed, employers that hired an individual who is a Designated
Community Resident or a Qualified Summer Youth Employee and who began work for
that employer on or after January 1, 2021, may not have submitted Form 8850 to the
DLA within 28 days of the individual beginning work. To be eligible for the relief
provided by this notice, an employer that did not submit Form 8850 to the DLA within 28
days of an individual beginning work must submit the completed Form 8850 to the DLA

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by the date set forth in section IV.A of this notice.
In addition, the Treasury Department and the IRS are aware that some employers
that hired individuals who are Designated Community Residents or Qualified Summer
Youth Employees may have submitted Form 8850 to the DLA within 28 days of the
individual beginning work, regardless of the expiration of the Empowerment Zone
designations. To be eligible for the relief provided by this notice, an employer that
submitted Form 8850 to the DLA and subsequently received a denial letter from the
DLA due to the expiration of the Empowerment Zone designations must re-submit the
completed Form 8850 by the date set forth in section IV.A of this notice. If an employer
submitted Form 8850 to the DLA and was not issued a denial letter by the DLA, the
employer does not need to re-submit Form 8850 to be eligible for the relief provided in
this notice.
For these reasons, the Treasury Department and the IRS are providing employers
with additional time to submit Form 8850 to the DLAs in accordance with the following
timeframe.
A. Additional time for employers hiring individuals who are Designated
Community Residents or Qualified Summer Youth Employees who begin work on
or after January 1, 2021, and before October 9, 2021, to submit a completed
Form 8850 to the DLA no later than November 8, 2021.
An employer that hires or hired an individual who is a Designated Community
Resident or a Qualified Summer Youth Employee and who begins or began work for
that employer on or after January 1, 2021, and before October 9, 2021, will be
considered to have satisfied the requirements of § 51(d)(13)(A)(ii), whether or not the

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employer submitted the completed Form 8850 to the DLA within 28 days of the
individual beginning work for the employer, if the employer submits the completed Form
8850 to the DLA to request certification no later than November 8, 2021. If an employer
hired an individual who is a Designated Community Resident or a Qualified Summer
Youth Employee who began work on or after January 1, 2021, and before May 26,
2021, and the employer submitted Form 8850 to the DLA but either was not issued a
denial notification by the DLA or was issued a certification, then the employer does not
need to re-submit Form 8850 to request certification from the DLA.
B. Application of 28-day requirement to individuals who begin work on or after
October 9, 2021.
An employer that hires an individual who is a Designated Community Resident or a
Qualified Summer Youth Employee and who begins work for the employer on or after
October 9, 2021, is not eligible for the transition relief described in this notice with
respect to that new employee.
V. EFFECTIVE DATE
The effective date of this notice is August 10, 2021.
VI. DRAFTING INFORMATION
The principal author of this notice is Christopher Dellana of the Office of Associate
Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes).
For further information regarding the WOTC, contact Mr. Dellana at (202) 317-5500 (not
a toll-free number).