Work Opportunity Tax Credit Transition Relief Issued for Empowerment Zones

On December 11, 2020 the IRS issued Notice 2020-78 providing additional instruction and transitional relief for employers that hired certain individuals residing in empowerment zones between January 1, 2018 and December 31, 2020.

Empowerment Zones are distressed areas that have been designated based on specific criteria and benefit from tax incentives, grants, and other forms of government assistance. Section 51 of this notice provides employers with a work opportunity tax credit for hiring certain individuals that identify with a targeted group. The Empowerment Zone designations under section 1391 expired after December 31, 2017 and were retroactively reauthorized on December 20, 2019, for tax years beginning January 1, 2018, through December 31, 2020.

Employers must receive, on or before the day on which such individual begins work for the employer, a certification from a Designated Local Agency that such individual is a member of a targeted group or must request certification that the individual is a member of a targeted group by submitting Form 8850 (Pre-Screening Notification and Certification Request for the Work Opportunity Credit) to a Designated Local Agency within twenty-eight days of hiring that individual. The certification of an individual as a Designated Community Resident under § 51(d)(5), or as a Qualified Summer Youth Employees under § 51(d)(7), requires that the individual reside within an empowerment zone.

This renewal allows employers to timely request certification on these employees by extending the deadline through January 28, 2021 for a Designated Community Resident or Empowerment Zone individual hired in 2018, 2019, and 2020.

As always, if there are any questions please do not hesitate to contact us or visit our website at www.thomas-and-company.com.

Josh Kendall

Author Josh Kendall

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