For tax years beginning on or after January 1, 1984, but
before January 1, 1989, a taxpayer who operates a business which is considered
to be a small business as defined in subrule 40.21(2) is allowed an additional
deduction for 50 percent of the first 12 months of wages paid or accrued during
the tax years for work done in Iowa by employees first hired on or after
January 1, 1984, or after July 1, 1984, where the taxpayer first qualifies as a
small business under the expanded definition of a small business effective July
1, 1984, and meets one of the following criteria.
A handicapped individual domiciled in this state at the time
of hiring.
An individual domiciled in this state at the time of hiring
who meets any of the following conditions:
4. Is in a work release program pursuant to
Iowa Code chapter 247A.
An individual, whether or not domiciled in this state at the
time of the hiring, who is on parole or probation and to whom the interstate
probation and parole compact under Iowa Code section 913.40 applies.
For tax years beginning on or after January 1, 1989, the
additional deduction for wages paid or accrued for work done in Iowa by certain
individuals is 65 percent of the wages paid for the first 12 months of
employment of the individuals, not to exceed $20,000 per individual.
Individuals must meet the same criteria to qualify their employers for this
deduction for tax years beginning on or after January 1, 1989, as for tax years
beginning before January 1, 1989.
For tax years ending after July 1, 1990, a taxpayer who
operates a business which does not qualify as a small business specified in
subrule 40.21(2) may claim an additional deduction for wages paid or accrued
for work done in Iowa by certain convicted felons provided the felons are
described in the four numbered paragraphs above and the following unnumbered
paragraph and provided the felons are first hired on or after July 1, 1990. The
additional deduction is 65 percent not to exceed $20,000 for the first 12
months of wages paid for work done in Iowa.
The qualifications mentioned in subrules 40.21(1), 40.21(4),
40.21(5) and 40.21(6) and in subrule 40.21(3), paragraphs
"f"and"g, "apply to the additional deduction
for work done in Iowa by a convicted felon in situations where the taxpayer is
not a small business as well as in situations where the taxpayer is a small
business.
The additional deduction applies to any individual hired on
or after July 1, 2001, whether or not domiciled in Iowa at the time of hiring,
who is on parole or probation and to whom either the interstate probation and
parole compact under Iowa Code section 907A.1 or the compact for adult
offenders under Iowa Code chapter 907B applies. The amount of additional
deduction for hiring this individual is equal to 65 percent of the wages paid,
but the additional deduction is not to exceed $20,000 for the first 12 months
of wages paid for work done in Iowa.
(1) The additional deduction shall not be
allowed for wages paid to an individual who was hired to replace an individual
whose employment was terminated within the 12-month period preceding the date
of first employment. However, if the individual being replaced left employment
voluntarily without good cause attributable to the employer or if the
individual was discharged for misconduct in connection with the individual's
employment as determined by the department of workforce development, the
additional deduction shall be allowed.
The determination of whether an individual left employment
voluntarily without good cause attributable to the employer or if the
individual was discharged for misconduct is a factual determination which must
be made on a case-by-case basis.
(2) The term "small business" means a
business entity organized for profit including but not limited to an individual
proprietorship, partnership, joint venture, association or cooperative. It
includes the operation of a farm, but not the practice of a profession. The
following conditions apply to a business entity which is a small business for
purposes of the additional deduction for wages:
a. The small business shall not have had more
than 20 full-time equivalent employee positions during each of the 26
consecutive weeks within the 52-week period immediately preceding the date on
which an individual for whom an additional deduction for wages is taken was
hired. Full-time equivalent position means any of the following:
1. An employment position requiring an
average work week of 40 or more hours;
2. An employment position for which
compensation is paid on a salaried full-time basis without regard to hours
worked; or
3. An aggregation of any
number of part-time positions which equal one full-time position. For purposes
of this subrule each part-time position shall be categorized with regard to the
average number of hours worked each week as a one-quarter, half, three-quarter,
or full-time position, as set forth in the following table:
Average Number of Weekly
Hours
Category
More than 0 but less than 15 1/4
15 or more but less than 25 1/2
25 or more but less than 35 3/4
35 or more 1 (full-time)
b. The small business shall not have more
than $1 million in annual gross revenues, or after July 1, 1984, $3 million in
annual gross revenues or as the average of the three preceding tax years.
"Annual gross revenues" means total sales, before deducting returns and
allowances but after deducting corrections and trade discounts, sales taxes and
excise taxes based on sales, as determined in accordance with generally
accepted accounting principles.
c.
The small business shall not be an affiliate or subsidiary of a business which
is dominant in its field of operation. "Dominant in its field of operation"
means having more than 20 full-time equivalent employees and more than $1
million of annual gross revenues, or after July 1, 1984, $3 million of annual
gross revenues or as the average of the three preceding tax years. "Affiliate
or subsidiary of a business dominant in its field of operations" means a
business which is at least 20 percent owned by a business dominant in its field
of operation, or by partners, officers, directors, majority stockholders, or
their equivalent, of a business dominant in that field of operation.
d. "Operation of a farm" means the
cultivation of land for the production of agricultural crops, the raising of
poultry, the production of eggs, the production of milk, the production of
fruit or other horticultural crops, grazing or the production of livestock.
Operation of a farm shall not include the production of timber, forest
products, nursery products, or sod and operation of a farm shall not include a
contract where a processor or distributor of farm products or supplies provides
spraying, harvesting or other farm services.
e. "The practice of a profession" means a
vocation requiring specialized knowledge and preparation including but not
limited to the following: medicine and surgery, podiatry, osteopathy,
osteopathic medicine and surgery, psychology, psychiatry, chiropractic,
nursing, dentistry, dental hygiene, optometry, speech pathology, audiology,
pharmacy, physical therapy, occupational therapy, mortuary science, law,
architecture, engineering and surveying, and accounting.
(3) Definitions.
a. The term
"handicapped person
" means any person who has a physical or mental impairment which
substantially limits one or more major life activities, has a record of such
impairment, or is regarded as having such an impairment.
The term handicapped does not include any person who is an
alcoholic or drug abuser whose current use of alcohol or drugs prevents the
person from performing the duties of employment or whose employment, by reason
of current use of alcohol or drugs, would constitute a direct threat to the
property or the safety of others.
b. The term"physical or mental
impairment" means any physiological disorder or condition, cosmetic
disfigurement, or anatomical loss affecting one or more of the following body
systems: neurological; musculoskeletal; special sense organs; respiratory,
including speech organs; cardiovascular; reproductive; digestive;
genitourinary; hemic and lymphatic; skin and endocrine; or any mental or
psychological disorder, such as intellectual disability, organic brain
syndrome, emotional or mental illness, and specific learning
disabilities.
c. The
term"major life activities" means functions such as caring for
one's self, performing manual tasks, walking, seeing, hearing, speaking,
breathing, learning, and working.
d. The term"has a record of such
impairment" means has a history of, or has been misclassified as
having, a mental or physical impairment that substantially limits one or more
major life activities.
e. The
term
"is regarded as having such an impairment" means:
1. Has a physical or mental impairment that
does not substantially limit major life activities but that is perceived as
constituting such a limitation;
2.
Has a physical or mental impairment that substantially limits major life
activities only as a result of the attitudes of others toward such impairment;
or
3. Has none of the impairments
defined as physical or mental impairments, but is perceived as having such an
impairment.
f. The
term"successfully completing a probationary period" includes
those instances where the employee quits without good cause attributable to the
employer during the probationary period or was discharged for misconduct during
the probationary period.
g. The
term"probationary period" means the period of probation for
newly hired employees, if the employer has a written probationary policy. If
the employer has no written probationary policy for newly hired employees, the
probationary period shall be considered to be six months from the date of
hire.
(4) If a newly
hired employee has been certified as either a vocational rehabilitation
referral or an economically disadvantaged ex-convict for purposes of
qualification for the work opportunity tax credit under Section 51 of the
Internal Revenue Code, that employee shall be considered to have met the
qualifications for the additional wage deduction.
A vocational rehabilitation referral is any individual
certified by a state employment agency as having a physical or mental
disability which, for the individual constitutes or results in a substantial
handicap to employment. In addition, the individual must have been referred to
the employer after completion or while receiving rehabilitation services
pursuant to either a state or federal approved vocational rehabilitation
program.
For all other newly hired employees, the employer has the
burden of proof to show that the employees meet the qualifications for the
additional wage deduction.
(5) The taxpayer shall include a schedule
with the filing of its tax return showing the name, address, social security
number, date of hiring and wages paid of each employee for which the taxpayer
claims the additional deduction for wages.
(6) If the employee for which an additional
deduction for wages was allowed fails to successfully complete a probationary
period and the taxpayer has already filed an Iowa individual income tax return
taking the additional deduction for wages, the taxpayer shall file an amended
return adding back the additional deduction for wages. The amended return shall
state the name and social security number of the employee who failed to
successfully complete a probationary period.
This rule is intended to implement 2011 Iowa Code Supplement
section
4227.
as amended by 2012 Iowa Acts, Senate File 2247.
