Issues & Advocacy

Issue Brief

Work Opportunity Tax Credit

The Work Opportunity Tax Credit is a federal tax incentive that encourages employers to recruit, hire and retain people who come from demographic groups that have historically faced challenges in finding employment.

Among the groups that the WOTC assists are long-term recipients of Temporary Assistance for Needy Families, qualified veterans, food-stamp recipients, vocational-rehabilitation referrals, and others.

Since it was established in 1996, the WOTC has become an efficient and effective hiring incentive for employers. Many of the individuals in the groups that benefit from the law have few job skills or little experience. The WOTC allows those individuals to find and maintain employment and gain valuable work experience.

Depending on the employee hired, the WOTC can be worth a tax credit of up to $9,600 per eligible employee. Congress recently reauthorized the credit for five years, allowing employers to claim the credit for eligible employees hired through Dec. 31, 2019.

A recent study by Peter Cappelli, the George W. Taylor Professor of Management at the University of Pennsylvania’s Wharton School of Business, concluded that WOTC is one of the most successful and cost-effective tools created by Congress to move individuals from welfare to work.

A BENEFIT FOR RESTAURANTS AND EMPLOYEES

Restaurants have hired tens of thousands of employees because of the WOTC, and those that have incorporated the WOTC into their hiring practices have employed individuals most in need of valuable job skills and experience. The WOTC has helped more than 6 million people find jobs in the nearly two decades since it was established.  

The WOTC has helped improve the labor market, reduce federal and state support payments and provided millions with the ability to move from dependency to the dignity of work.

The WOTC has a proven track record of success and should be retained as a permanent part of a reformed tax code. Making the program permanent would enhance program efficiencies, provide certainty to employers and help even more individuals secure jobs.