Iowa Administrative Code › Agency 701 - Revenue Department › Title I - Administration › Chapter 53 - Determination of Net Income › Rule 701-53.11 - Additional Deduction for Wages Paid or Accrued for Work Done in Iowa by Certain Individuals

Current through Register Vol. 47, No. 3, July 24, 2024
For tax years beginning on or after January 1, 1984, a
				  taxpayer which is considered to be a small business corporation, as defined by
				  subrule 53.11(2), is allowed a deduction for 50 percent of the first 12 months
				  of wages paid or accrued during the tax years for work done in Iowa for
				  employees first hired on or after January 1, 1984.
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:
1. Has been convicted of a felony in this or
				any other state or the District of Columbia.
2. Is on parole pursuant to Iowa Code chapter
				906.
3. Is on probation pursuant to
				Iowa Code chapter 907 for an offense other than a simple misdemeanor.
4. Is in a work release program pursuant to
				Iowa Code chapter 904.
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 chapter 913 applies.
For tax years beginning on or after January 1, 1989, a
				  taxpayer which is considered to be a small business corporation, as defined by
				  subrule 53.11(2) is allowed a deduction for 65 percent not to exceed $20,000 of
				  the first 12 months of wages paid or accrued during the tax year for work done
				  in Iowa for employees first hired after January 1, 1989, who meet the above
				  criteria.
(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 Iowa division of job service
				of the department of employment services, 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 corporation"
				includes the operation of a farm but does not include the practice of a
				profession. The following conditions apply for the purpose of determining what
				constitutes a small business corporation.
a.
				A small business corporation shall not have had more than 20 full-time
				equivalent positions during each of the 26 consecutive weeks within the 52-week
				period immediately preceding the date on which the 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
¼
15 or more but less than 25
½
25 or more but less than 35
¾
35 or more
1 (full-time)
b. A small business corporation 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.
				A small business corporation 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 corporation 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.
(7) For tax years ending after July 1, 1990,
				a taxpayer who did not qualify for the additional deduction for wages paid or
				accrued for work done in Iowa by certain individuals set forth above is allowed
				an additional deduction of 65 percent not to exceed $20,000 of the first 12
				months of wages paid or accrued for work done in Iowa for employees first hired
				on or after July 1, 1990, if the new employee is:
a. An individual domiciled in this state at
				the time of the hiring who meets any of the following conditions:
(1) Has been convicted of a felony in this or
				any other state or the District of Columbia.
(2) Is on parole pursuant to Iowa Code
				chapter 906.
(3) Is on probation
				pursuant to Iowa Code chapter 907, for an offense other than a simple
				misdemeanor.
(4) Is in a work
				release program pursuant to Iowa Code chapter 904, division IX.
b. 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 907A.1 applies.
The additional deduction is not 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
				  Iowa division of job service of the department of employment services, the
				  additional deduction is 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.
The taxpayer must 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 whom the taxpayer claims the additional
				  deduction for wages.
If the employee for whom an additional deduction for wages
				  was allowed fails to successfully complete a probationary period and the
				  taxpayer has already filed an Iowa corporation income tax return taking the
				  additional deduction for wages, the taxpayer must file an amended return adding
				  back the additional deduction for wages. The amended return must state the name
				  and social security number of the employee who failed to successfully complete
				  a probationary period.
(8) 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. The conditions set out in the
				unnumbered paragraphs under paragraph
"b"
of subrule 53.11(7)
				also apply to the deduction for the hiring of certain individuals in this
				subrule.
This rule is intended to implement 2011 Iowa Code Supplement
				  section
				  42235.
				  as amended by 2012 Iowa Acts, Senate File 2247.