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S.F. No. 1095 - Credit for Hiring Long-term Unemployed Individuals
 
Author: Senator Lyle Koenen
 
Prepared By: Nora Pollock, Senate Counsel (651/297-8066)
 
Date: March 7, 2013



 

Section 1, subdivision 1. [Credit allowed] Provides an income tax credit of 40 percent of qualified wages paid or incurred by an employer to qualified long-term unemployed individuals.

Subdivision 2.  [Definitions]  Defines the following terms:

“Qualified long-term unemployed individual” means an individual who was not a student for at least six months during the one-year period ending on the date the individual was hired and was either:

  • unemployed for an aggregate of at least 12 months during the two-year period ending on the hiring date; or
  • received unemployment compensation under state or federal law for at least 12 months during the two-year period ending on the hiring date.

“Qualified wages” means wages attributable to service rendered by an individual for an employer, up to $10,000 per year.

“Student” means an individual enrolled at least half-time in a degree, certificate, or other recognized educational credential program for at least six months during the one-year period ending on the hiring date.  The required six months does not have to be consecutive within the one-year period.

“Wages” references the Internal Revenue Code (IRC) definition in section 3306(b) pertaining to wages in the Federal Unemployment Tax Act.  Generally, the term means all remuneration for employment, including the cash value of all remuneration (including benefits) paid in any medium other than cash.  There are several exclusions in the IRC definition.  The definition of “wages” in this bill also excludes:

  • payments made or incurred by the employer for on-the-job training of an individual, if the employer receives federally funded payments for such training; or
  • federal work supplementation payments made to the employer with respect to an individual for that taxable year.

Subdivision 3.  [Certain wages ineligible]  Disallows the credit under the following circumstances:  

  1. the individual is a dependent of the taxpayer; is a family member of the taxpayer; or is a member of the taxpayer’s household;
  2. the taxpayer is a corporation and the individual owns more than 50 percent of the value of outstanding stock of the corporation, or, if the taxpayer is not a corporation, the individual owns more than 50 percent of the capital and profit interests in the entity; or
  3. the taxpayer is an estate or trust and the individual is a fiduciary of the estate or trust, or the individual is a family member or household member of a grantor, beneficiary, or fiduciary of the estate or trust. 

The credit is also disallowed if the individual has been employed by the employer at any time before the hiring date.

Subdivision 4.  [Individuals not meeting minimum employment periods]  Allows an employer an income tax credit of 25 percent of qualified wages paid or incurred by the employer to qualified long-term unemployed individuals, if the individual has worked at least 120 hours, but fewer than 400 hours, during the taxable year.  No credit is allowed unless the individual has worked at least 120 hours for the employer.

Subdivision 5 [Treatment of successor employers; employees’ service to other persons]  Provides that the amount of the credit for a successor employer (i.e., an employer that acquires substantially all the property used in a trade or business of the previous employer) is determined as if the predecessor actually paid the wages to the employee.  Disallows the credit for payment by an employer to an employee if the employee’s services were performed for another person, except when the amount reasonably expected to be received by the employer for the services from the other person exceeds the amount paid by the employer to the employee for the services.

Subdivision 6.  [Partnership and S corporations]  Provides that credits granted to a partnership, LLC taxed as a partnership, or S-corp are passed through to the partners, members, or shareholders respectively, in proportion to their share of the entity’s income.  

Subdivision 7.  [Limitation; carryover]  Provides that the credit is nonrefundable, but may be carried forward to each of the succeeding 15 years.

Subdivision 8  [Expiration]  Provides that the credit is available for wages paid in taxable years beginning after December 31, 2015.

This bill is effective for taxable years beginning after December 31, 2012.

NBP:dv

 

 
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