In part 1, I focused on federal tax incentives for employers that hire formerly incarcerated people (FIP). I highlighted the federal government’s Work Opportunity Tax Credit (WOTC) opportunity for employers hiring FIPs. The WOTC was created by Congress during the Obama administration to incentivize employers to hire individuals within target groups—one of which includes the formerly incarcerated. In sum, the WOTC helps FIPs move from economic dependency to self-sufficiency while participating employers reduce their business income tax liability.
Wants and Needs
In part 2, I focus on state incentive programs that have the same purpose as the WOTC. In a previous blog, Jobs, Jobs, Jobs, I discussed the wants and needs of FIPs in detail.
In 1943, psychologist Abraham Maslow proposed a hierarchy of needs with a five-tier approach to what motivates human beings. According to a 2017 Simply Psychology post by Saul McLeod, those motivating factors, visually presented as a pyramid, escalate from broad-based basic needs to the highest level of self-fulfillment needs. The basic needs are what we must have to exist. The horror of the unknown felt by many FIPs upon reentry is caused by uncertainty concerning the two most primitive basic human needs: basic need number 1—“psychological needs: food, water, warmth, and rest,” and basic need number 2—“security needs: security and safety.”
In his 2017 Psychology Today post entitled “Our Hierarchy of Needs,” Neel Burton, M.D., succinctly makes a point for what Maslow called deficiency needs in classes of people such as FIPs:
Maslow called the bottom four levels of the pyramid “deficiency needs” because a person does not feel anything if they are met, but becomes anxious if they are not. Thus, physiological needs such as eating, drinking, and sleeping are deficiency needs, as are safety needs, social needs such as friendship and sexual intimacy, and ego needs such as self-esteem and recognition.
A 2016 article on the American Psychological Association website entitled “Exploring the Link between Unemployment and Mental Health Outcomes” has important findings that are applicable to FIPs who have spent years of their lives in neutral gear while incarcerated. Authors Arthur Goldsmith, PhD, and Timothy Diette, PhD, state that
a widespread conviction in psychology is that the response to stressful events, such as unemployment, takes the form of a progression through stages. Shock tends to characterize the initial phase, during which the individual is still optimistic and unbroken. As unemployment advances, the individual becomes pessimistic and suffers active distress, and ultimately becomes fatalistic about their situation and adapts unenthusiastically to their new state.
As I wrote in Jobs, Jobs, Jobs, once the prison experience is over, there is a want/need cycle that quickly arises front and center. The need for a job and wanting the benefits that flow from productive work can be devastatingly destructive and lead to the FIPs’ committing crimes, resorting to drugs, contributing to family breakdowns, or just giving up.
Helpful State Tax Credits
Iowa and Illinois offer a state income tax benefit for businesses that hire FIPs. These states’ are distinctly different from the federal program and each other in procedure and benefits provided.
In Illinois, FIPs personally receive job credits that reduce their individual state tax obligations. Illinois Department of Revenue Schedule 1299-D provides that “for tax years beginning on or after January 1, 2007, the Ex-Felons Jobs Credit is 5 percent (.05) of qualified wages paid during the taxable year to an employee who is a qualified ex-offender. The total credits for all tax years for wages paid to a particular ex-offender may not exceed $1500.”
Like all other states, Illinois also provides federal tax credits through the federal WOTC to employers who hire and retain FIPs. Therefore, in Illinois both the employer and the employee receive tax incentives to hire or be hired.
Iowa’s regulations are set forth in its State Department Rules and Regulations 40.21. “Iowa employers who meet specific criteria are allowed an additional deduction on their Iowa income tax returns for hiring ex-offenders.” These regulations provide benefit for hiring FIPs, which include “[an] Iowa income tax deduction for 65% of the wages paid in the first 12 months of employment, and [a] maximum deduction of $20,000 per employee.”
Iowa employers are entitled to additional federal tax credits for the hiring of FIPs under the WOTC program. However, unlike Illinois, Iowa has no individual FIP state tax benefit.
The California Model
The California model follows the federal approach by having federal tax incentives for employers but without an individual FIP state income tax benefit like the Illinois model. The Employment Development Department (EDD) is the WOTC certifying agency for California employers. As with the federal program, FIPs are within the target group for employers to consider. To qualify, the employee must be hired no later than one year after conviction or release from prison. The tax credit available to employers is 40 percent of qualified first year wages up to $6,000 if the individual is retained for at least four hundred hours.
The process for applying for WOTC is provided by the EDD:
- The first step is pre-screening to determine eligibility. The job seeker or the employer must complete the Individual Characteristics Form, Work Opportunity Tax Credit, ETA 9061.
- The employer and the job seeker must complete the Pre-Screening Notice and Certification Request for the Work Opportunity Tax Credits, Form 8850and sign under penalty of perjury, attesting that the job seeker is a member of a target group.
- The employer may request certification for the WOTC by submitting the Form 8850 and the ETA 9061 to the EDD, either online or by mail.
- The Form 8850 must be submitted online or postmarked no later than the 28th day after the job seeker begins work.
- Employers with 25 or more employees . . . must first enroll in Employer Services Online to be able to submit online WOTC Request for Certification Applications.
- Employers with 24 employees or less . . . have the option to mail the applications to:
Employment Development Department
Attn: Work Opportunity Tax Credit Authorization Center
2901 50th Street
Sacramento, CA 95817.
All WOTC-related forms can be viewed, downloaded, or printed from the WOTC Forms and Publications page.
California should adopt the humane taxation philosophy that Illinois has forged by legislating a state tax benefit for FIPs as well as employers. Employers should understand that a person who has done time—who has been punished—has the same wants and needs as they do. The indelible stain of incarceration runs deep. In these times of humans’ erosion of caring about other humans’ wants and needs, we produce and package throwaway people. We use labels. We form Me Too movements.
Because California’s EDD is the certifying agency for California employers, it is required to adhere to the processes and standards set by the federal government. As with any request for aid from the feds, the process and procedures are mired in paperwork and timelines to be met. Men I did time with were very limited in their abilities to advocate for themselves or to pursue their rights. You’re not told what to do when you get out; you’re told what not to do.
Knowledge is power when it comes to engaging in the process of accessing government benefits such as WOTC. Many FIPs don’t know anything about taxes. They should. My reentry brief in 2005 was simply “there’s the door.”
While the national WOTC program is well meaning in its intentions to incentivize employers to hire FIPs, the program is not very visible to the public, and therefore is inconsequential. I recently learned about the WOTC through a conversation related to the unemployment problems of FIPs.
The Illinois model—benefitting employers at the federal tax level as well as their hires at the state tax level—is the optimum approach. This is an enticing way to get potential employers to look at FIPs in a more favorable light (financially) and to put otherwise equally qualified FIPs in the running for job opportunities.
On the Same Topic
Some municipalities offer an incentive program to employers that are willing to offer job opportunities to ex-offenders. For example, Philadelphia’s Fair Chance Hiring Initiative provides a cash reimbursement to employers who hire an ex-offender who has been released from incarceration within the past five years.
Additionally, the US Department of Labor sponsors CareerOneStop.
CareerOneStop’s Job Search Help for Ex-Offenders website offers information, tips, and resources to help people with criminal convictions overcome barriers they might face in their job search including:
- State-specific resources for help with basic needs or getting ready to job search
- Work restrictions that apply to certain convictions
- Paying for training or college
America’s Job Center of California also provides access to employment-related services.
Every state is part of the federal WOTC. Locate your state WOTC coordinators here.
Your comments and suggestions are always welcome.
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