Work Opportunity Tax Credit Initial Funding Allotments for Fiscal Year 2026

The Work Opportunity Tax Credit administrative funding for state workforce agencies is issued by the U.S. Department of Labor through its Employment and Training Administration. This funding supports the administration of the federal Work Opportunity Tax Credit program, which is authorized under Section 51 of the Internal Revenue Code. The program is designed to incentivize employers to hire individuals from targeted groups by offering tax credits, and state workforce agencies are responsible for certifying eligibility for those credits. The Department of Labor allocates funding to states to carry out these administrative responsibilities in accordance with federal law and guidance. The primary purpose of this funding is to enable state workforce agencies to administer the Work Opportunity Tax Credit program efficiently and in compliance with federal requirements. Funds are used to support activities such as determining eligibility of job applicants, issuing certifications or denials, maintaining records, and ensuring proper reporting and quality control processes. Agencies are also expected to develop plans to reduce any backlog of certification requests and improve processing efficiency. These activities directly support employers and job seekers by facilitating access to employment opportunities and associated tax benefits. Funding is distributed according to a formula determined by the Employment and Training Administration. As noted in the document, the total funding available for fiscal year 2026 is $15,203,383, as shown in the table on page 5. After a fixed allocation to the U.S. Virgin Islands, the remaining funds are distributed to states based on a formula that considers certifications issued, denials issued, and the civilian labor force. There is a minimum allotment and limits on year-to-year changes to ensure stability. Each state must request its specific allotment amount as provided in Attachment I of the guidance. Eligible applicants for this funding are state workforce agencies, also referred to as state employment security agencies, established under the Wagner-Peyser Act. These agencies are the only entities authorized to issue Work Opportunity Tax Credit certifications. The funding is not intended for subawards, although states may seek approval if they wish to distribute funds further. The program does not specify a matching requirement, and funds must be used strictly for the administration of the Work Opportunity Tax Credit program. The application process requires submission of the Standard Form 424 through Grants.gov within 30 calendar days of the issuance date of the guidance letter. Applicants must include their state-specific funding request, ensure they are registered in the System for Award Management, and provide a Unique Entity Identifier. Additional information such as estimated indirect costs must be included in the application. Technical assistance is available through Grants.gov support channels if needed. Performance expectations include timely processing of certification requests, maintaining reporting systems, and submitting quarterly financial and performance reports. Reports must be submitted within 45 days after the end of each quarter. The program also emphasizes compliance with federal data exchange requirements and adherence to established procedures. There is no specified application cycle beyond this issuance, and funding is tied to federal appropriations and administrative needs, suggesting a recurring but not formally scheduled opportunity. Overall, this funding opportunity supports a critical administrative function within the federal workforce system, ensuring that employers can access tax credits and that eligible individuals can benefit from increased employment opportunities. The structured allocation formula, clear reporting requirements, and defined administrative responsibilities underscore the program’s emphasis on accountability and operational efficiency.