Most of the time we think about incentives in the context of relocating or expanding businesses, but incentives serve a variety of economic development objectives. This week I had the chance to learn more about state tax credits designed to encourage employers to hire workers with disabilities. These include:
- Tennessee Job Tax Credit for Employing Persons with Disabilities
- Maryland Disability Employment Tax Credit
- New York Workers with Disabilities Employment Tax Credit
- Delaware Employer Tax Credit for Hiring Individuals with Disabilities
- Iowa Income Tax Benefit for Employers Who Hire Persons with Disabilities
- Louisiana Tax Deduction to Employ Disabled Individuals
Employment for individuals with disabilities is an important economic development issue. According to a December 2016 report from the Council of State Governments and National Conference of State Legislatures:
- An estimated 1 in 5 Americans live with a disability
- 28% of non-institutionalized people with disabilities age 18-64 fall below the poverty line
- 20% of people with disabilities participate in the workforce compared to 69% without disabilities
- The percentage of the US population with a disability is expected to double in the next 20 years
The tax credits generally range from $1,500-$5,000 per qualified hire. In some, but not all, cases the individual must be certified as having a disability. For example, Maryland’s Division of Rehabilitation Services (DORS) within the Department of Education primarily serves this function within that state, while the Division of Vocational Rehabilitation and Division for the Visually Impaired take on this role in Delaware.
Rules about the type of employers that qualify also vary from state to state. In Tennessee, qualified employers must hold franchise and excise tax accounts within the state, and non-profits are not eligible. In Maryland, the credit may be taken agains a variety of taxes, including the corporate income tax, personal income tax, insurance premium taxes, and a few others. Many types of businesses, including sole proprietorships, LLCs and nonprofits can claim the credit.
Some tax credits are refundable, some can be carried forward, and some can be used for a limited number of years. Most have some rules about the nature of employment relative to hours per week, wages, benefits, and/or duration of the job.
The Louisiana program is actually a tax deduction of 50% of gross wages for the first four months and 30% in subsequent months for taxpayers providing continuous employment to qualified individuals. The credit is limited to 100 employees and is administered by the Department of Health and Hospitals. Iowa’s program is directed to small businesses, which can claim an income tax deduction equal to 65% of wages paid in the first 12 months of employment. It may be used in combination with Iowa’s Targeted Jobs Tax Credit.
For more information on this important topic, including state policies and workforce initiatives, see Work Matters: A Framework on Workforce Development for People with Disabilities and the NCSL Disability Employment State Statute and Legislation Scan.