REVENUE RULE 94-8

1994-1 C.B. 18, 1994-5 I.R.B. 5.

Internal Revenue Service
Revenue Ruling

TARGETED JOBS CREDIT; CERTIFICATION REQUIREMENTS

January 12, 1994

Section 51. Amount of Credit, 26 CFR 1.51-1: Amount of credit.

Targeted jobs credit; certification requirements. An employer may not claim a targeted jobs credit for wages paid to an employee if on or before the date the employee begins work he or she does not receive a written preliminary determination and the employer does not request in writing or receive certification from a designated local agency, as required by section 51(d)-(16) of the Code, that the employee is a member of a targeted group. The requirement is unchanged even if the employee was hired during the period from July 1, 1992, through August 9, 1993, the day prior to the enactment of the Revenue Reconciliation Act of 1993, during which period no targeted jobs credit was in effect. Rev. Rul. 87-94 modified.

ISSUE

Is an employer entitled to a targeted jobs credit under section 51 of the Internal Revenue Code with respect to an employee who began work for an employer after June 30, 1992, if the employer, within the time period prescribed by section 51(d)(16), did not receive or request certification that the employee was a member of a targeted group described in section 51(d)?

FACTS

Employee A began work for Employer X after June 30, 1992, but before August 10, 1993. As of the day A began work for X, X had neither requested nor received certification from a designated local agency that A was a member of a "targeted group" described in section 51(d)(1) of the Code. Also, A had not received a written preliminary determination of A's status as a member of such a group.

LAW AND ANALYSIS

Under section 51 of the Code, the amount of the targeted jobs credit for a taxable year is equal to a specified percentage of the qualified first-year wages for the year.

Section 51(b)(1) of the Code defines "qualified wages" as wages paid or incurred by the employer to individuals who are members of a targeted group. Section 51(b)(2) defines "qualified first-year wages" as qualified wages attributable to service rendered by an individual during the 1-year period beginning with the day the individual begins work for the employer.

Under section 51(b)(3) of the Code, the amount of the qualified first-year wages that may be taken into account with respect to any individual is limited to $6,000 per year.

Under section 51(d)(16) of the Code, an individual is not treated as a member of a targeted group unless, on or before the day the individual begins work, the employer has received or requested in writing certification from a designated local agency that the individual is a member of a targeted group. This deadline is extended until five days after the individual begins work if the individual receives a preliminary determination of his or her status on or before the day he or she begins work.

Section 13102(a) of the Revenue Reconciliation Act of 1993(the RRA '93), which was signed into law on August 10, 1993, extends the period over which the credit is effective by amending section 51(c) of the Code. Prior to its amendment, section 51(c) had provided that the term "wages" did not include amounts paid to an individual who began work after June 30, 1992. Section 13102(a) of the RRA '93 replaced "June 30, 1992" with "December 31, 1994."

The RRA '93 amended section 51 of the Code retroactively to apply with respect to individuals who began work after June 30, 1992. Thus, if an individual began work between June 30, 1992, and August 10, 1993, and the individuals employer met all the conditions precedent to claiming a targeted jobs credit with respect to that individual, the employer can claim the credit. Among the conditions precedent is the requirement in section 51(d)(16) that the employer have timely received or requested in writing certification of the status of the individual.

A fact situation similar to that addressed by this ruling was addressed in Rev. Rul. 87-94, 1987-2 C.B. 39. Rev. Rul. 87-94 considered the permissibility of retroactive certification requests after the credit was extended retroactively by the Tax Reform Act of 1986, 1986-3 (Vol. 1) C.B. 689. Noting that Congress included no relief from the timely certification requirements of section 51(d)(16) of the Code in the Tax Reform Act of 1986, that ruling concluded that retroactive certification requests were not permissible. Similarly, in the RRA '93, Congress did not provide for retroactive certification requests. Thus, an employer cannot obtain a targeted jobs credit for an employee in connection with the retroactive extension of the credit by the RRA '93 if the employer did not receive or request timely certification of the employee's targeted group status.

Certification procedures are under the jurisdiction of the Department of Labor. On October 5, 1993, the Department of Labor stated in Employment Service Program Letter 13-93 that the targeted jobs credit had been reauthorized and that designated local agencies had accepted and retained for possible future processing requests for certification for employees who began work after June 30, 1992.

Satisfactory evidence that an employer timely requested written certification from a designated local agency includes (1) in the case of a mailed request, the original written request with postmark made by the U.S. Postal Service, dated certificate of mailing, or designated agency date-stamp (or a photocopy of any of the above), and (2) in the case of a hand-delivered request, any dated receipt or designated agency dated log entry.

HOLDING

X is not entitled to a targeted jobs credit with respect to wages paid to A, because X had not, within the time period prescribed by section 51(d)(16) of the Code, requested in writing or received certification from a designated local agency that A was a member of a targeted group.

EFFECT ON OTHER REVENUE RULING

Rev. Rul. 87-94, 1987-2 C.B. 39, is modified.

DRAFTING INFORMATION

The principal author of this revenue ruling is Robert Wheeler of the office of Associate Chief Counsel (Employee Benefits and Exempt Organizations). For further information regarding this revenue ruling, contact Mr. Wheeler on (202) 622-6060 (not a toll-free number).