Work Opportunity Tax Credit For Hurricane Katrina Employees

On September 23, 2005 , the President signed into law the KATRINA EMERGENCY TAX RELIEF ACT OF 2005 (Public Law No: 109-73). This legislation extends the WOTC program by adding a special temporary category for individuals impacted by Hurricane Katrina. The legislation also simplifies the process that employers need to follow in order to avail themselves of the tax credit.

The tax credit can reduce an employer’s federal tax liability by as much as $2,400 per new hire. To apply for the credit, employers do not need to complete the standard required WOTC forms. New forms are currently being developed and will be posted on the IRS website shortly.

WHAT IS THE WORK OPPORTUNITY TAX CREDIT FOR HURRICANE KATRINA EMPLOYEES? It is a federal income tax credit that encourages employers to hire individuals who lived in the Hurricane Katrina disaster area and lost their jobs due to Hurricane Katrina.

Employers that hire “ Hurricane Katrina Employees” for employment outside of the affected area can be eligible for the tax credit if they hire Katrina impacted individuals who begin to work on or after August 29, 2005, and ending on December 31, 2005.

In the case of an individual who is being hired for a position that has a principal place of employment within the Hurricane Katrina disaster area, the period of eligibility is extended until August 28, 2007 .

WHAT NEW HIRES CAN QUALIFY EMPLOYERS FOR THE KATRINA WORK OPPORTUNITY TAX CREDIT?

The credit applies to the following new hires:

	(1) any individual who on August 28, 2005, had a principal place of abode 
	(residence) in the core disaster area and who is hired during the 2-year period 
	beginning on such date for a position the principal place of employment of 
	which is located in the core disaster area, and
	(2) any individual who on such date had a principal place of abode (residence) 
	in the core disaster area, who is displaced from such abode (residence) by 
	reason of Hurricane Katrina, and who is hired during the period beginning on 
	such date and ending on December 31, 2005.

* The present-law WOTC certification requirement is waived for Hurricane Katrina employees. In lieu of the certification requirement, an individual may provide to the employer reasonable evidence that he/she is a Hurricane Katrina employee. Self-attestation will be sufficient.

* The present-law WOTC expiration date is waived for Hurricane Katrina employees.

* The present-law rule that denies the credit to wages of employees who had been previously employed by the employer is waived for the first hire of such employee as a Hurricane Katrina employee—unless such employee was an employee of the employer on August 28, 2005 .

* Hurricane Katrina Disaster Area is an area declared a major disaster by the President before September 14, 2005 , under the Robert T. Stafford Disaster Relief and Emergency Assistance Act (DREAA) by reason of Hurricane Katrina (Section 2(1)).

HOW CAN EMPLOYERS PARTICIPATE IN THE KATRINA WORK OPPORTUNITY TAX CREDIT?

To apply for the credit, employers do not need to complete the standard required WOTC forms. New forms are currently being developed and will be posted on the IRS website shortly. For IRS information visit http://www.irs.ustreas.gov/ or call 1-800-829-1040.

FOR MORE INFORMATION CALL OR VISIT YOUR LOCAL STATE WORKFORCE AGENCY WOTC COORDINATOR OR CALL THE U.S. DEPARTMENT OF LABOR REGIONAL WOTC COORDINATOR NEAREST YOU.