For tax years beginning on or after January 1, 2004, you may be able to earn either a $1,000 credit or a $500 credit for a qualifying new employee. You cannot earn both credits for the same employee. The applicable credit rate depends on whether the new employee meets certain wage and benefit criteria. If the new employee does not meet the criteria for either credit rate, you will not be able to claim the credit for that new employee.
Qualifying New Employee
"New employee" means a person who is subject to Idaho income tax withholding and covered for unemployment purposes under Idaho Code. The employee must work in your trade or business at least 20 hours per week and a minimum of nine months during the tax year for which you are claiming the credit to qualify.
$1,000 Credit
To qualify for the $1,000 credit, the new employee must meet both of the following criteria:
- He must have received annual earnings at an average rate of $15.50 or more per hour worked; and
- He must have been eligible to receive employer provided
coverage under an accident or health plan described in Section 105, Internal Revenue Code (IRC).
To earn the $1,000 credit your business does not have to be a revenue-producing enterprise.
$500 Credit
If the new employee does not qualify for the $1,000 credit, you may be able to claim the $500 credit. To qualify for the $500 credit, the employee must have worked for you in a "revenue-producing enterprise." A "revenue-producing enterprise" means
an Idaho business that begins with a natural resource and produces, assembles, fabricates, manufactures, or processes a value-added product. Businesses involving wholesale or retail sales, professional, managerial, repairs or services generally do not qualify. Idaho businesses that consume a natural resource in a process, but do not add value to the natural resource, do not qualify.
Credit Limitations
The total credit allowed cannot exceed 3.25% of the net income of your trade or business in Idaho. If you earn or claim the credit for qualifying new employees, this credit and all other
income tax credits except for the credit for tax paid to other states are limited to 50% of the tax after deducting the credit for tax paid to other states. The promoter-sponsored event credit is not subject to this limitation.
Carry-Over Periods
The credit carry-over is limited to three tax years. If the number of qualifying employees decreases during the carry-over period, you must recompute the credit based on the reduced number of qualifying employees to determine the correct amount of carry-over.
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