Capitol Insights: DHS funding resolution signals next phase for WOTC

Capitol Insights provides a recurring update on federal legislative activity that may influence employer tax incentives and workforce programs, including developments affecting the Work Opportunity Tax Credit (WOTC).

At a glance:

• Congress passed a targeted DHS funding bill in late April, ending a lapse of more than 70 days

• Recent legislative activity has focused on immediate funding and deadline-driven priorities

• Current reconciliation efforts are focused on immigration-related funding

• Broader policy considerations remain unresolved

DHS funding addressed through a targeted bill

In late April, Congress passed a funding bill to reopen the Department of Homeland Security (DHS), ending a lapse that had extended for more than 70 days and marked the longest shutdown in the agency’s history. The measure restored funding for most DHS operations but did not include funding for immigration enforcement activities such as Immigration and Customs Enforcement (ICE) and Border Patrol.

Separating immigration-related funding from the broader DHS bill allowed lawmakers to resolve immediate operational needs while deferring additional policy considerations. Funding for those activities is expected to be addressed through the budget reconciliation process, where separate legislation is under development. Because the legislation was limited in scope, tax-related items, including those relevant to WOTC, were not part of the bill’s structure.

Recent activity reflects legislative sequencing

In recent weeks, lawmakers have been managing multiple funding deadlines, including DHS appropriations and expiring statutory authorities. This has led to a pattern of addressing time-sensitive issues through targeted or temporary measures, while deferring broader legislative decisions.

The DHS funding bill resolved immediate operational needs but left immigration enforcement funding to be addressed separately through reconciliation. In parallel, Congress approved a short-term extension of Section 702 of the Foreign Intelligence Surveillance Act (FISA), which governs certain national security surveillance authorities, ahead of its expiration.

Taken together, these actions reflect a sequencing approach in which near-term funding and statutory deadlines are addressed first, with more complex policy issues considered through subsequent legislation. This structure has implications for the timing of broader policy items, including tax-related provisions.

Reconciliation advances with a limited scope

With immediate funding pressures addressed, attention is expected to shift toward broader legislative activity. Lawmakers have adopted a budget resolution that allows reconciliation to move forward, with current instructions focused on immigration-related funding and not including tax-writing committees.

This phase of reconciliation is expected to address funding for Immigration and Customs Enforcement (ICE) and Border Patrol separately from the broader DHS bill, with a reconciliation bill of around $70 billion under development. This indicates that tax-related provisions are not part of the current phase of reconciliation. As a result, the Work Opportunity Tax Credit remains tied to a future legislative package that includes tax provisions.

Separate tax discussions continue in parallel, including proposals related to digital asset taxation that could serve as a vehicle for future tax legislation.

What to watch next

Congress is in recess this week as members return to their states ahead of the midterm election cycle. When lawmakers return, attention will shift to whether House leadership introduces a broader reconciliation framework to address priorities not included in the initial budget resolution. If House leadership moves forward with a broader reconciliation framework, it may include instructions for a tax title, which would be necessary for programs such as WOTC to be considered.

Workforce and employer advocacy groups continue to engage with policymakers as legislative priorities are evaluated ahead of the midterm elections, including efforts to highlight the role of programs such as WOTC. While the program remains expired, employers should continue screening and submitting applications for eligible WOTC candidates as part of standard hiring processes. Based on prior legislative patterns, certifications submitted during lapse periods may be processed retroactively if the program is renewed.