On the final day of the sixty-first Legislature, Idaho lawmakers passed a bill which provides varying levels of tax credits for private employers who hire at least one employee after April 15, 2011. Governor Otter signed the legislation amending Idaho Code section 63-3029F on April 13.
In order to qualify for the credit, a newly hired employee must receive qualifying employer-provided health care benefits as determined by the Idaho State Tax Commission and be employed in a county within in the state of Idaho with an unemployment rate at or greater than the benchmarked annual employment rate as determined by the Department of Labor on the date the new employee was hired. That benchmark is either ten percent (10%) or more at average annual earnings of twelve dollars ($12.00) or more per hour, or less than ten percent (10%) at average annual earnings of fifteen dollars ($15.00) or more per hour. The available credit is not earned, however, until the new employee has worked for a minimum of nine consecutive months with any part of the qualifying period ending during the taxable year for which the credit is claimed. Additionally, the credit is not available when an employer acquires a trade or business or who operates in a place of business the same or substantially identical trade or business as operated by another qualifying business within the prior twelve months. Employees transferred from a related business shall also not be included in the computation of the credit.
The amount of the credit varies between 2-6% depending on how the employer is rated for unemployment tax purposes. Employers with a positive rating earn the highest amount of the credit while deficit rated business earn the lower amount. The credit is calculated based on the gross salary paid to the eligible new employee during the initial twelve months of employment and claimed during the qualifying taxable year.
The Tax Commission is charged with promulgating rules implementing the legislation. To claim the credit, rated employers must attach to the employer’s income tax return the taxable wage rate notice issued by the department of labor for the income tax year for which the credit is claimed. An estimate of the financial impact from the Department of Labor and Division of Financial Management indicates that the legislation could draw $7.9 million per year from the general fund while generating $25.3 million in state tax revenue.
This legislation is very complex and may be difficult for employers to determine whether they may quality for the credit. If you have questions, please contact your attorney.