Job creators for residents of Empowerment Zones and Rural Renewal Counties can claim big tax benefits
Various pieces of federal legislation over the past thirty years or so have created special designations for economically distressed communities in both rural and urban places. These designations include Empowerment Zones, Rural Renewal Counties, Enterprise Communities, and more.
These designations allow lawmakers to effectively allocate economic incentives and relief to high-impact areas, many of which face special challenges due to various causes, including disinvestment, population loss, globalization, and other misfortunes.
One example of this is the Work Opportunity Tax Credit (WOTC).
Employers who claim WOTC for hiring “designated community residents” (DCRs) lower federal tax liabilities by up to $2400 per eligible employee. In 2022, DCRs earned their employers over $327 million in total.
What is a designated community resident?
According to the IRS, an employee must meet two criteria to qualify for certification as a designated community resident for WOTC. They are:
1) Be between the ages of 18-40, and
2) Have a principal residence within an Empowerment Zone or a Rural Renewal County.
In 2022, over 152,000 employees gained WOTC certification for meeting these requirements.
There are 30 Empowerment Zones in urban communities, and 10 in rural communities (see list below).
There are over 400 Rural Renewal Counties located within 32 states (see list below).
What is WOTC?
WOTC provides tax credits for businesses and organizations who hire and retain certified applicants from one of nine disadvantaged target groups. The credits range from $1200-$9600. There is no maximum allowable credit. WOTC’s purpose is to incentivize employers to create quality career pathways for Americans who may otherwise rely on government resources to survive.
DCRs are one of nine targeted groups which qualify for WOTC. Each certified DCR new hire lowers their employer’s tax liability by up to $2400.
Which DCRs qualify for WOTC?
To qualify for WOTC as a DCR, a new hire must be between the ages of 18-40 and have a primary residence in either an Empowerment Zones or a Rural Renewal Counties. A comprehensive list of these areas follows.
Empowerment Zones
- Pulaski County, Arkansas
- Tucson, Arizona
- Desert Communities, California (part of Riverside County)
- Fresno, California
- Los Angeles, California
- Santa Ana, California
- New Haven, Connecticut
- Jacksonville, Florida
- Miami/Dade County, Florida
- Southwest Georgia United, Georgia (part of Crisp County and all of Dooly County)
- Chicago, Illinois
- Gary/Hammond/East Chicago, Illinois
- Southernmost Illinois Delta, Illinois (parts of Alexander and Johnson Counties and all of Pulaski County)
- Kentucky Highlands, Kentucky (part of Wayne County and all of Clinton and Jackson Counties)
- Aroostook County, Maine
- Boston, Massachusetts
- Baltimore, Maryland
- Detroit, Michigan
- Minneapolis, Minnesota
- Mid-Delta, Mississippi (parts of Bolivar, Holmes, Humphreys, Leflore, Sunflower, and Washington Counties)
- St. Louis, Missouri/East St. Louis, Illinois
- Cumberland County, New Jersey
- New York, New York
- Syracuse, New York
- Yonkers, New York
- Griggs-Steele, North Dakota (part of Griggs County and all of Steele County)
- Cincinnati, Ohio
- Cleveland, Ohio
- Columbus, Ohio
- Oklahoma City, Oklahoma
- Philadelphia, Pennsylvania/Camden, New Jersey
- Columbia/Sumter, South Carolina
- Oglala Sioux Tribe, South Dakota (part of Jackson County and all of Bennett and Shannon Counties)
- Knoxville, Tennessee
- El Paso, Texas
- Middle Rio Grande FUTURO Communities, Texas (parts of Dimmit, Maverick, Uvalde, and Zavala Counties)
- Rio Grande Valley, Texas (parts of Cameron, Hidalgo, Starr, and Willacy Counties)
- San Antonio, Texas
- Norfolk/Portsmouth, Virginia
- Huntington, West Virginia/Ironton, Ohio
Rural Renewal Counties
- AL: Butler, Dallas, Macon, Perry, Sumter, and Wilcox
- AK: Aleutians West, Wrangell-Petersburg, and Yukon-Koyukuk
- AR: Arkansas, Chicot, Clay, Desha, Jackson, Lafayette, Lee, Little River, Monroe, Nevada, Ouachita, Phillips, Union, and Woodruff
- CO: Cheyenne, Kiowa, and San Juan
- GA: Randolph and Stewart
- IL: Alexander, Edwards, Franklin, Gallatin, Greene, Hancock, Hardin, Jasper, Knox, McDonough, Montgomery, Pulaski, Randolph, Richland, Scott, Warren, Wayne, and White
- IN: Perry
- IA: Adair, Adams, Appanoose, Audubon, Butler, Calhoun, Cass, Cherokee, Clay, Clayton, Emmet, Floyd, Franklin, Fremont, Hancock, Humboldt, Ida, Keokuk, Kossuth, Montgomery, Osceola, Palo Alto, Pocahontas, Poweshiek, Sac, Taylor, Union, Wayne, Winnebago, and Worth
- KS: Atchison, Barber, Barton, Brown, Clay, Cloud, Comanche, Decatur, Edwards, Elk, Ellsworth, Gove, Graham, Greeley, Greenwood, Harper, Hodgeman, Jewell, Kiowa, Labette, Lane, Lincoln, Marshall, Mitchell, Montgomery, Ness, Osborne, Phillips, Rawlins, Republic, Rooks, Rush, Russell, Scott, Sheridan, Sherman, Smith, Stafford, Trego, Wallace, Washington, Wichita, and Woodson
- KY: Bell, Caldwell, Floyd, Harlan, Hickman, Leslie, Letcher, Pike, and Union.
- LA: The parishes of Bienville, Claiborne, Franklin, Jackson, Morehouse, St. Mary, Tensas, Vernon, and Webster
- ME: Aroostook and Piscataquis
- MI: Gogebic, Marquette, and Ontonagon
- MN: Big Stone, Chippewa, Cottonwood, Faribault, Jackson, Kittson, Koochiching, Lac Qui Parle, Lincoln, Marshall, Martin, Murray, Norman, Pipestone, Red Lake, Redwood, Renville, Stevens, Traverse, Wilkin, and Yellow Medicine
- MS: Adams, Coahoma, Humphreys, Montgomery, Quitman, Sharkey, Tallahatchie, and Washington
- MO: Atchison, Carroll, Chariton, Clark, Holt, Knox, Mississippi, New Madrid, Pemiscot, and Worth
- MT: Carter, Daniels, Dawson, Deer Lodge, Fallon, Garfield, Hill, Liberty, McCone, Petroleum, Phillips, Powder River, Prairie, Richland, Roosevelt, Rosebud, Sheridan, Valley, and Wibaux
- NE: Antelope, Banner, Boone, Box Butte, Boyd, Burt, Cedar, Chase, Deuel, Dundy, Fillmore, Franklin, Garden, Garfield, Greeley, Hayes, Hitchcock, Holt, Jefferson, Johnson, Logan, Nance, Nemaha, Nuckolls, Pawnee, Perkins, Red Willow, Richardson, Rock, Sheridan, Sherman, Thayer, Thomas, Valley, Webster, and Wheeler
- NV: Esmeralda, Lander, and Mineral
- NH: Coos
- NM: Harding and Quay
- NY: Clinton and Montgomery
- ND: Adams, Barnes, Benson, Billings, Bottineau, Burke, Cavalier, Dickey, Divide, Dunn, Eddy, Emmons, Foster, Golden Valley, Grant, Griggs, Hettinger, Kidder, LaMoure, Logan, McHenry, McIntosh, McKenzie, McLean, Mercer, Mountrail, Nelson, Oliver, Pembina, Pierce, Ramsey, Ransom, Renville, Sargent, Sheridan, Slope, Stark, Steele, Stutsman, Towner, Traill, Walsh, Wells, and Williams
- OH: Crawford, Monroe, Paulding, Seneca, and Van Wert
- OK: Alfalfa, Beaver, Cimarron, Custer, Dewey, Ellis, Grant, Greer, Harmon, Harper, Kiowa, Major, Roger Mills, Seminole, Tillman, and Woodward
- PA: Venango and Warren
- SC: Marlboro
- SD: Aurora, Campbell, Clark, Day, Deuel, Douglas, Faulk, Grant, Gregory, Haakon, Hand, Harding, Hutchinson, Jones, Kingsbury, Marshall, McPherson, Miner, Perkins, Potter, Sanborn, Spink, Tripp, and Walworth
- TX: Andrews, Bailey, Baylor, Borden, Briscoe, Brooks, Castro, Cochran, Coleman, Collingsworth, Cottle, Crane, Culberson, Deaf Smith, Dimmit, Eastland, Fisher, Floyd, Foard, Gray, Hall, Hardeman, Haskell, Hemphill, Hockley, Hutchinson, Kenedy, Kent, Knox, Lamb, Martin, McCulloch, Morris, Nolan, Oldham, Reagan, Reeves, Refugio, Roberts, Scurry, Stonewall, Terrell, Terry, Upton, Ward, Wheeler, Wilbarger, Winkler, Yoakum, and Zavala
- VA: Buchanan, Dickenson, Highland, and Lee, and the independent cities of Clifton Forge, Covington, Norton, and Staunton
- WV: Calhoun, Gilmer, Logan, McDowell, Mercer, Mingo, Summers, Tucker, Webster, Wetzel, and Wyoming
- WY: Carbon and Niobrara
WOTC employees help businesses grow
The benefits of a well-executed WOTC program extend beyond lowered tax liabilities. All things considered, WOTC employees are 408% more profitable for their employers than non-WOTC employees. That’s in part due to the fact that research shows that WOTC workers:
- Perform better than or equal to their peers
- Stay in their job as long or longer than non-WOTC employees
- Are less likely to leave their job in the first year than their peers
- Earn as much over time as their peers
- Progress through career ranks at the same pace as non-WOTC employees
- Are just as likely as non-WOTC employees to move to another job following their WOTC-eligible job (rather than unemployment)
Additionally, WOTC workers tend to come from diverse backgrounds, and bring diverse experiences to workforces. As a result, adding WOTC employees to your workforce can benefit DEI initiatives, and benefit your workplace culture in a myriad of ways–including driving innovation and growth, according to Harvard Business Review.
We’ve helped hundreds of companies realize >40% increases in cash flow through implementing WOTC.
Arvo provides risk-free WOTC services
DCRs are only one of nine groups eligible for WOTC. All things considered, over 20% of Americans qualify for WOTC. In fact, the IRS issued nearly $5 billion in WOTC in 2023! If your business isn’t claiming any part of that huge benefit, don’t wait any longer.
Our fees are 100% contingent, so there is no risk in integrating our WOTC tools and solutions.
If you already claim WOTC by another means and would like to learn how we can get you more, schedule a call with one of our tax experts today.
There’s no reason to wait to make a difference for your business and for residents of economically distressed communities.