Opinion ID: 681060
Heading Depth: 3
Heading Rank: 1

Heading: Work Incentive Credits

Text: 4 1. Background. In 1971, Congress established work incentive (WIN) tax credits to provide employers with an incentive to hire employees who might otherwise receive public assistance. Participating employers were required to submit certifications from state agencies showing that their employees were either receiving welfare assistance or participating in a work-incentive program at the time they were hired. 2 In return, the employer would receive a tax credit equal to a portion of the employee's first- and second-year wages. 5 Prior to January 29, 1982, Albertson's had hired numerous employees who qualified for the WIN credits. Some of these employees remained unidentified, however, and Albertson's was unable to claim any credits for them. In 1985, during an IRS audit of its 1983 return, Albertson's hired a consulting firm to help identify those employees. Albertson's discovered that 121 of its existing employees (WIN employees) were qualified for the WIN credit program at the time of their hiring. It therefore requested and obtained state-agency certification for those employees during the summer of 1985. 6 The IRS initially allowed Albertson's to certify its WIN employees retroactively. That is, Albertson's was permitted to submit certifications that it had requested and obtained after its WIN employees had already started work. The IRS later changed its mind, however, and assessed Albertson's for a tax deficiency of $141,795. Albertson's refused to pay and appealed to the Tax Court. The Tax Court held for the Commissioner, reasoning that Congress had abolished the retroactive certification of WIN employees in 1981. We affirm the judgment of the Tax Court. 7 2. Analysis. Albertson's argues that the Tax Court erred in refusing to allow it to submit certifications that it had requested and obtained after its WIN employees had already started work. We disagree. In 1981, Congress expressly abolished the retroactive certification of WIN credits through the Economic Recovery Tax Act of 1981, Pub.L. 97-34, 95 Stat. 172 (ERTA). 3 The statute provides that an employee cannot qualify for WIN-type credits after September 26, 1981, unless his employer requests or obtains state-agency certification on or before the date on which such individual begins work. See I.R.C. Sec. 51(d)(16) (emphasis added). Congress imposed this contemporaneous certification requirement because it felt that retroactive certification failed properly to motivate employers to hire WIN-qualified workers and resulted in substantial revenue losses. See Staff of the Joint Committee on Taxation, General Explanation of the Economic Recovery Tax Act of 1981, at 171 (Joint Committee Print 1981) [hereinafter Joint Committee Explanation]. 4 8 Albertson's argues that another part of ERTA, Sec. 261(g)(1)(B), creates an exception to the contemporaneous certification rule for all employees who were hired as of January 1, 1982. 5 It bases its argument on a provision that directs all current WIN employees to be treated as if such employees had been members of a targeted group for taxable years beginning before January 1, 1982. Id. Albertson's argues that because its WIN employees were hired during taxable years beginning before January 1, 1982, the company should be allowed to certify them retroactively for any taxable year beginning after December 31, 1981. 9 We reject Albertson's reading of section 261(g)(1)(B). That section was enacted simply to ensure that employees who had been hired under the old WIN program would not be treated any differently under the new targeted jobs program. As we explained above, Congress merged the WIN credit with the targeted jobs credit through ERTA, but did not change the basic qualifications for obtaining WIN-type credits. See discussion supra note 4. Accordingly, Congress wanted to ensure that the former WIN employees were not read out of the statute simply because they were now targeted employees. Section 261(g)(1)(B) does not address in any way the issue of retroactive certification. That determination is left to section 261(g)(2), which clearly abolishes retroactive certification for all claims made after September 26, 1981. 6 10 Albertson's argument is also refuted by the express language of the act, which unambiguously states that the contemporaneous certification requirement shall apply to all individuals whether such individuals began work for their employer before, on, or after the date of enactment. Id. Sec. 261(g)(2)(A) (emphasis added). In light of this language, Congress could not have possibly intended a broad-based exception to the contemporaneous certification rule for all employees who had been hired as of January 1, 1982. 7 11 In sum, because Albertson's did not claim the WIN credits until after September 26, 1981 (in fact, not until 1985), and because it did not request or obtain state-agency certification until after the start dates of the 121 employees in question, it cannot rely upon retroactive certification for its WIN employees. Accordingly, it is not entitled to the WIN credits. 8