Generating Tax Savings with WOTCJune 2017

Proprietary and Confidential

• Founded in 1999, First Capitol Consulting, Inc.combines regulatory and tax expertise gained from decades of experience working in national law firms and “Big 4” accounting firms with innovative science, data analytics, and intelligent technology to provide unparalleled regulatory compliance services, tax strategies and actionable intelligence to help companies make wise business decisions.

• Through its national regulatory compliance practice, First Capitol Consulting is an industry leader in helping businesses successfully manage requirements of the ACA. Among the company’s wide range of partners are three of the top 10 accounting firms and 15 of the leading health insurance brokers in the country. Using its Humanefits technology platform, First Capitol Consulting supports businesses in implementing an optimal ACA action plan by combining expertise in managing ACA compliance, tax, payroll, human resources and regulatory compliance with data collection infrastructure and proprietary technologies.

First Capitol Consulting, Inc.

• Joanna, formerly a partner with Akin Gump Strauss Hauer & Feld LLP, is VP of Regulatory Affairs and General Counsel. Joanna has over 20 years of legal experience advising clients on a wide range of regulatory, employment, tax, intellectual property, and other related business issues. Additionally, Joanna brings additional regulatory compliance experience from Hughes Aircraft.

• Currently, Joanna spearheads the ACA practice at First Capitol Consulting, focusing on employer compliance issues.

Joanna H. Kim-Brunetti

Professional Affiliations, Publications and CredentialsFormer President and Board Member, Korean American Bar AssociationRising Star, Super LawyersFormer Subcommittee Chair, American Bar Association Former Committee Member, Federal Courts Coordinating Committee of Los Angeles County Bar Association

Employer ACA Compliance in Trump World (LBG Advisors Benefits Symposium, 2017)

The IRS ACA Audit Forces Employers to Prove Case or Face Penalties (Accounting Today, 2017)

Would the American Health Care Act Dis-incentivize L.A. Employers from Offering Health Care? (LA Biz, 2017)

I’ve Got My Eye On You – Balancing Employee Privacy Rights and the Employer’s Need to Know (Association of Corporate Counsel In House Conference, 2016)

Trade Secrets and Noncompetes with Rogue Employees (ABA, 2014)

Guide to Protecting and Litigating Trade Secrets (ABA 2012) Ethical Considerations in Reissues and Reexaminations (Practicing Law Institute, 2011)

Symposium on Ethics Issues Arising in the Context of Electronic Discovery and Document Destruction Policies (, 2005)

EducationB.S. Chemical Engineering, University of California, BerkeleyJ.D., Loyola Law School, Los Angeles

About the Work Opportunity Tax Credit (WOTC)• Enacted in 1977, as the Targeted Job Tax Credit. (PL 95-30). Renewed by the Work Opportunity Tax

Credit Act in 1996. (PL 104-188).• WOTC is a voluntary federal tax credit program to encourage businesses to hire individuals who

typically experience significant barriers to employment, such as disadvantaged workers within the federal poverty level, military veterans, and the disabled. WOTC translates to significant tax credits for businesses who employee these individuals.

WOTC Benefits• Empower individuals, who are economically distressed or hard to hire, through employment.• Turn HR into a profit center that generates tax savings.• Reduce federal income tax liability.• WOTC data can be used to assist other state credits and incentives.

Incorporating WOTC Into CPA Practice to Optimize Client Service• Coordinating a WOTC practice with Client tax return preparation process optimizes the

Client’s cash flow and expands the bandwidth of the CPA’s understanding of the Client’s business to add depth to the consultancy relationship.

WOTC Basics (1/2)

How WOTC works• A business can hire as many WOTC eligible individuals as it likes. There is no limit to

the number of tax credits for which a business can apply. • The new employees must work at least 120 hours in the first year of employment for a

business to receive the tax credit. • WOTC can translate to tax credits up to $9,600 per qualifying employee.• Federal tax credits can be applied quarterly and annually against income tax liability.• Unused credits can be carried forward 20 years, or carried back 1 year (IRC Sec. 39).• WOTC can offset AMT (IRC Sec. 38 (c)(4)(B)(ix).

Eligibility• Job applicants must be part of a group recognized as eligible for the WOTC. Job

applicants must be screened to determine their eligibility for the tax credit. • Within 28 days of the job applicant being hired, businesses must submit this WOTC

information by completing IRS Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit, and submitting it to their state workforce agency (SWA).

WOTC Basics (2/2)

Target Group A: Short-term Temporary Assistance for Needy Families (TANF) Recipient An individual who is a member of a family that received TANF benefits for any 9 months during the 18-month period ending on hiring date.Target Group B: Qualified Veterans – three requirements1. Must have served on active duty (not including training) in the U.S. Armed Forces for

more than 180 days or have been discharged or released from active duty for a service-connected disability;

2. cannot have a period of active duty (not including training) of more than 90 days that ended during the 60-day period ending on the hiring date.

3. AND ONE of the following:a. A member of a family that received Supplemental Nutrition Assistance Program benefits (food

stamps) for at least 3-months during the 15-month period ending on the hiring date; b. Entitled to compensation for a service-connected disability and was:

• Hired within 1 year of discharge or release from active duty, or • Unemployed for at least 6 months in the year ending on the hiring date;

c. Unemployed for: (i) At least 4 weeks (but less than 6 months) in the year ending on the hiring date, or (ii) At least 6 months in the year ending on the hiring date.

WOTC Target Groups (1/4)

Target Group C: Ex FelonsAn individual who: • Has been convicted of a felony; AND • Who is hired within 1 year after the conviction or release date from prison.

Target Group D: Designated Community Residents (18-39 Years Old)An 18-39 year old who lives within one of the federally-designated Rural Renewal Counties or Empowerment Zones.

Target Group E: Vocational Rehabilitation RecipientAn individual with a disability who completed or is completing rehabilitative services from a state certified agency, an Employment Network under the Ticket to Work program, or the VA.

Target Group F: Summer Youth (16-17 Years Old)A 16 or 17 year-old youth who: • Works for the employer between May 1st and September 15th; AND • Lives within one of the federally-designated Empowerment Zones.

WOTC Target Groups (2/4)

Target Group G: Food Stamp Recipient (18-39 Years Old)A Supplemental Nutrition Assistance Program (SNAP) recipient age 18-39 years who is a member of a family that received SNAP benefits (food stamps) for: • The 6-month period ending on the hiring date; OR • At least 3 of the 5 months ending on the hiring date, in the case of a family member who

ceased to be eligible for such assistance under Section 6(o) of the Food Stamp Act of 1977.

Target Group H: Supplemental Security Income RecipientAn individual who received Supplemental Security Income (SSI) benefits for any month that ended during the 60-day period ending on the hire date.

WOTC Target Groups (3/4)

Target Group I: Long-Term Family Assistance RecipientAn individual who is a member of a family that meets one of the following: • Received TANF benefits for at least 18 consecutive months ending on the hiring date;

OR • Stopped being eligible for TANF payments during the past 2 years because a

fed/state law limited the maximum time those payments could be made, and the individual is hired not more than 2 years after such eligibility ended; OR

• Received TANF benefits for any 18 months after August 5, 1997, and has a hiring date that is not more than 2 years after the end of the earliest 18-month period after August 5, 1997.

Target Group J: Qualified Long-Term Unemployment RecipientAn individual after 2015 who on the day before the individual begins work for the employer, or, if earlier, the day the individual completes Form 8850 as a prescreening notice, is in a period of unemployment that: Is not less than 27 consecutive weeks, and includes a period (which may be less than 27 consecutive weeks) in which the individual received unemployment compensation under state or federal law.

This Target Group is the most recent addition to the WOTC Target Group.

WOTC Target Groups (4/4)

WOTC Target Group Potential Tax Credits

Target Groups Potential Tax Credits

A TANF Recipients Up to $2,400 (40% of $6,000)

B Qualified Veterans Up to $9,600

C Ex-Felon Up to $2,400

D Designated Community Residents (18-39 Years Old) Up to $2,400

E Vocational Rehabilitation Recipient Up to $2,400

F Summer Youth (16-17 Years Old) Up to $1,200

G Food Stamp Recipient (18-39 Years Old) Up to $2,400

H Supplemental Security Income Recipient Up to $2,400

I Long-Term Family Assistance Recipient Up to $9,000

J Qualified Long-Term Unemployment Recipient Up to $2,400

WOTC Best Practices (The Five Performance Metrics)

WOTCResults

Average Certification Value

Percent Certified

Forms Compliance

Percent Eligible

Screening Compliance

WOTC: The Process

New Hire Process• Onboarding• Applicant Tracking

Screening Options• Paper• Telephone• Web Direct• Online Integrated

Candidate Eligibility• WOTC• Other Screening

Credits

Screening

Compliance• 28 Day Filing Deadline• Supporting Documents

Document Capture• Employee Specific

Vouchering

Types• Compliance Report• Tax Schedules

Performance• Screening Compliance• Forms Compliance• Eligibility Percent• Percent Certified

Management• Compliance• Lost Opportunities• Tax Filings• Audit Support• WOTC Update• Technology Advances

Reporting

Certifications• Approved• Appealed• Need More Info• Denied

Government Relations• Federal Level• State Level• Agency Visits• Taxpayer Advocacy

Certifying

WOTC Delivery Methods

• A company’s HR department handling WOTC requires expertise in WOTC eligibility and timing requirements and communications with the state workforce agencies (SWAs).

• Third party WOTC providers can take this burden away from businesses using various WOTC screening methods: paper filing, WOTC call center, and on-line solutions.

• Call center operations tend to offer much higher qualifying ratios than other methods.

• Useful Features to Assist Evaluation of WOTC Providers:• WOTC performance metrics (and experience)• Expertise in communications with SWAs• Availability of dashboard analysis of 28 days deadline• E-sign technology to maximize participation• Periodic reporting providing client performance metrics

WOTC: Total Annual Qualifiers Per State

Annual Total Qualifiers by State:

• 0-10,000 Qualifiers: – Virgin Islands, Vermont, Hawaii, Montana, Arkansas, District of Columbia,

Delaware, Puerto Rico• 10,000 – 50,000 Qualifiers:

– Wyoming, New Hampshire, South Dakota, Rhode Island, North Dakota, Maine, Idaho, Connecticut, Nebraska, West Virginia, New Mexico

• 50,000 – 100,000 Qualifiers: – Nevada, Colorado, Kansas, Massachusetts, Maryland, Wisconsin, Utah,

Minnesota, New Jersey, Iowa, Virginia, Illinois, Washington, Oregon• 100,000 – 200,000 Qualifiers:

– Arizona, South Carolina, Tennessee, Oklahoma, Louisiana, Missouri, Kentucky, North Carolina, Michigan, Georgia, Alabama, Pennsylvania, Indiana, New York

• 200,000+ Qualifiers:– Florida (301,692), Ohio (348,740), California (356,310), Texas (528,678)

* List is in ascending order. Based on latest (2013) US Dept. of Labor data.

WOTC: Turn Around Time by State

AK

HI

WA

OR

CA

NV

ID

MT

WY

COUT

NMAZ

TX

OK

KS

NE

SD

NDMN

WI

IL

IA

MO

AR

LA

AL

TN

MI

PA

NY

VT

GA

FL

MS

KY

SC

NC

MDOH DE

INWV

NJ

CT

MA

ME

RI

VA

NH

0-6 Months

7-12 Months

13-18 Months

18 + Months

WOTC: Backlog Timeframes by State

• 0-6 Months: – Alabama, Colorado, Florida, Georgia, Illinois, Kentucky, Louisiana,

Massachusetts, New Jersey, New York, Ohio, Oregon, South Dakota, Tennessee, Texas, Vermont, Virginia, Washington

• 7-12 Months:– California, Iowa, Minnesota, Nebraska, New Mexico, North Carolina,

Pennsylvania, South Carolina, Texas • 13-18 Months:

– Arizona, Arkansas, Idaho, Kansas, Michigan, Missouri, New Hampshire, Oklahoma, Utah, Indian, Pennsylvania

• 18+ Months:– Alaska, Connecticut, Maine, Montana, Nevada, Rhode Island, Oregon,

Vermont, West Virginia, Wisconsin, Wyoming

*For Illinois, timeframes are longer (16 months) for all groups other than A, I or G. For Wyoming, while current forms are being reviewed as received, a backlog since 2011 exist. For Hawaii, the backlog depends on the zip code.

Q&A

For more information:Gregg KasubuchiPhone: (213) 355-5108Email: gkasubuchi@fcci.us.com

Joanna H. Kim-Brunetti, Esq.Phone: (213) 355-5106Email: jkim-brunetti@fcci.us.com

First Capitol Consulting, Inc.3530 Wilshire Blvd., Suite 1460Los Angeles, California 90010

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