There seems to be a certain amount of excitement and “buzz” in the Enterprise Zone consulting community regarding the opportunity represented by Jessica McClintock’s appeal victory at the SBOE. It is not my intention to be a killjoy, but my initial analysis of the case is that it does open the floodgates to a torrent of new qualified employees.

If I can succinctly summarize the point of contention, it is whether or not an employee who would have been eligible to receive JTPA assistance prior to hire under JTPA’s 10% exception rule is considered a qualified employee for the Enterprise Zone. Clear?

My understanding is that the FTB agrees that the employee only needs to be eligible and not enrolled in JTPA to be qualified for Enterprise Zone, and that they further agree that the employees in question may very well have been eligible to receive JTPA assistance under the 10% exception rule had they asked for it. But, FTB reasons, being eligible for the 10% exception is two steps removed from Enterprise Zone qualification – either one has to be eligible for JTPA proper (not based on the 10% exception), or one has to actually be enrolled even if they became enrolled by virtue of the 10% exception. How can it ever be determined that an individual who was only eligible for the JTPA 10% exception in potential would have in actuality been part of the 10% of the real JTPA population receiving benefits? Clear?

The taxpayer, on the other hand, argued that the 10% exception represents a full fledged eligibility category in JTPA and that the Enterprise Zone program is not concerned whether or not an individual could have been part of the real 10% JTPA population, only that they had the characteristics of an individual who could.

I can actually see both sides of the argument.

After listening to the audio of the hearing, I don’t think the SBOE members fully grasped the FTB’s position. I think the FTB’s presentation could have been more focused.

Here is why I don’t think the SBOE decision will be a boon for Enterprise Zone taxpayers and their consultants:

1. The whole question pertains to the qualification of vouchers under JTPA. The Federal JTPA program expired on June 30, 2000. All of the vouchers in question in this appeal were for employees hire before 6/30/2000 and anyone interested in taking advantage of this case would also only be able to deal with employees hired before that date.
2. All of the vouchers in question were submitted prior to the implementation of regulations that went into effect on 1/1/2007. These regulations are silent on the issue of JTPA, but the “Final Statement of Reasons” (FSOR) for the regulations makes the following statement, “Because the JTPA program was superseded by WIA and is thus no longer in effect, the regulations exclude voucher applications for employees hired prior to July 1, 2000 who may have qualified under the JTPA. The regulations address the current successor program – WIA. Further, the department’s understanding is that the JTPA program does not allow for “retroactive” determinations of eligibility. Thus, the only employees that would fall into this JTPA category are those who received a determination of eligibility (or were enrolled in JTPA) more than six years ago and have not yet sought a voucher. The department believes that the number of employees falling within this category to be small. However, to the extent that a taxpayer is seeking a voucher under the JTPA for an employee hired prior to July 1, 2000, these regulations do not change the existing documentation and eligibility standards that must be met.” Therefore, at least according to HCD, anyone seeking a voucher now for JTPA would have to show proof of enrollment.

There is probably a fair amount of room for more debate here. Unfortunately, the opportunity for overreaction on the part of the Legislature is very real and the victory on the part of Jessica McClintock’s representatives may turn out to be Pyrrhic.

See also, Part 1.