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Worker Opportunity Tax Credit: A $4.9 Billion Value

Justice-involved individuals face significant barriers to employment. Unemployment for justice-involved individuals is a major predictor of recidivism. Businesses that offer a second chance to a qualified, justice-involved candidate can help keep communities safer while benefiting from tax credits, and get a loyal employee in the process. In 2018, over 13,000 people reentered society from the Louisiana Department of Corrections. They are three times less likely to reoffend if gainfully employed.

Over the past two years, Right on Crime has hosted Employer Engagement Forums across Louisiana with the express goal of helping people transition from tax burdens to taxpayers. These forums focus on providing information to employers about the benefits of hiring justice-involved individuals. Right on Crime also produced a corresponding Employer Handbook to give employers the information they need to make informed decisions when considering this population for employment.

One of the tax benefits highlighted in the Employer Handbook is the Work Opportunity Tax Credit (WOTC). The WOTC is a provision of the Internal Revenue Code to incentivize employers who hire individuals who meet certain criteria (convicted felons) to claim a tax credit equal to a portion of the wages paid to those individuals up to $2,400 for people with felony convictions. According to WOTC regulations, “a qualified ex-felon is an individual who has been convicted of a felony under state or federal law and has a hiring date that is within one year of either the individual’s conviction or release from prison.” The purpose of the WOTC program is to assist people who face significant barriers to employment.

Louisiana employers could take more advantage of this program. In fact, Louisiana businesses use of WOTC represented only 2.4 percent of the credits given in 2019 nationwide. “Ex-felon” is one of ten categories of people that employers can claim for WOTC. In Louisiana, 80 percent of WOTC credits were for those receiving food stamps, while claims for justice-involved individuals was 4.4 percent. In contrast, Texas, Georgia, Wisconsin, Missouri, and Kentucky were the top five states to take advantage of the WOTC for justice-involved people in 2018.

Clearly, there is more work to be done in Louisiana to reduce barriers to employment for justice-involved individuals, and to educate employers of the potential of hiring this population.

How does an employer take advantage of WOTC? The Louisiana Workforce Commission is an invaluable and overlooked resource for employers. To apply for WOTC, employers must file an IRS Form 8850 with the Louisiana Workforce Commission within 28 days after hiring the qualifying employee. Employees are required to work a minimum of 120 hours during the first year of employment. The maximum savings for qualified justice-involved individuals is $2,400.

The WOTC is one of many benefits available to employers who consider hiring the formerly incarcerated.

Right on Crime’s in-person forums have moved to a virtual format. Join us on  September 23, 2020 as we discuss additional benefits of hiring the formerly incarcerated with Secretary James LeBlanc and Josh Smith.

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