43-1161

43-1161. Credit for increased employment in
enterprise zones; definitions

(Rpld. 7/1/11)

A. A credit is allowed against the taxes imposed by this title for net increases in
qualified employment positions of residents of this state by a business located in an
enterprise zone established under title 41, chapter 10, article 2, except employment
positions at a zone location where more than ten per cent of the business conducted at
the location consists of retail sales of tangible personal property, measured by either
the number of employees assigned to retail sales or the square footage of the facility
used for retail sales activities at the location in the zone. Retail sales and retail
sales activities do not include:

1. Food and beverage for consumption on the premises solely by employees and
occasional guests of employees at the location.

2. Promotional products not available for sale and displaying the company logo or
trademark.

3. Products sold to company employees.

B. Subject to subsection E of this section, the amount of the credit is equal to:

1. One-fourth of the taxable wages paid to an employee in a qualified employment
position, not to exceed five hundred dollars, in the first year or partial year of
employment.

2. One-third of the taxable wages paid to an employee in a qualified employment
position, not to exceed one thousand dollars per qualified employment position, in the
second year of continuous employment.

3. One-half of the taxable wages paid to an employee in a qualified employment
position, not to exceed one thousand five hundred dollars per qualified employment
position, in the third year of continuous employment.

C. To qualify for a credit under this section:

1. All of the employees with respect to whom a credit is claimed must reside in
this state.

2. Thirty-five per cent of the employees with respect to whom a credit is claimed
for the first year of employment must reside on the date of hire in an enterprise zone
that is located in the same county in which the business is located. If an employee for
whom a credit was allowed in the first year of employment leaves employment during the
second or third year, the taxpayer may substitute another employee who meets the
requirements of paragraph 3 of this subsection and who was hired during the same year as
the original employee. If the original employee was counted toward the residency
requirement under this paragraph, the substitute employee must also have resided in a
zone at the time the substitute was hired.

3. A qualified employment position must meet all of the following requirements:

(a) The position must be a minimum of one thousand seven hundred fifty hours per
year of full-time and permanent employment.

(b) The job duties must be performed primarily at the zone locations of the
business. If an eligible employee in a qualified employment position is transferred or
assigned to work in the taxpayer's workplace at a different location that is also located
in an enterprise zone and qualifies as a zone location, it may be considered to be
continuous employment if it continues to meet all qualified employment position
requirements.

(c) The employment must include health insurance coverage for the employee for
which the employer pays at least fifty per cent of the premium or membership cost. If the
taxpayer is self-insured, the taxpayer must pay at least fifty per cent of a
predetermined fixed cost per employee for an insurance program that is payable whether or
not the employee has filed claims.

(d) The employer must pay compensation at least equal to the wage offer by county
as computed annually by the department of economic security research administration
division.

(e) The employee must have been employed for at least ninety days during the first
taxable year. An employee who is hired during the last ninety days of the taxable year
shall be considered a new employee during the next taxable year. A qualified employment
position that is filled during the last ninety days of the taxable year is considered to
be a new qualified employment position for the next taxable year.

(f) The employee must not have been previously employed by the taxpayer within
twelve months before the current date of hire.

D. A credit is allowed for employment in the second and third year only for
qualified employment positions for which a credit was allowed and claimed by the taxpayer
on the original first and second year tax returns. For the purposes of this subsection,
the requirement to claim the credit on the original tax return does not apply to
qualified employment positions created before January 1, 2002 and certified to the
department of commerce.

E. The net increase in the number of qualified employment positions is the lesser
of the total number of filled qualified employment positions created in the zone during
the tax year or the difference between the average number of full-time employees in the
zone in the current tax year and the average number of full-time employees during the
immediately preceding taxable year. The net increase in the number of qualified
employment positions computed under this subsection may not exceed two hundred qualified
employment positions per taxpayer each year.

F. A taxpayer who claims a credit under section 43-1164.01, 43-1165 or 43-1167 may
not claim a credit under this section with respect to the same employment positions.

G. If the allowable tax credit exceeds the income taxes otherwise due on the
claimant's income, or if there are no state income taxes due on the claimant's income,
the amount of the claim not used as an offset against income taxes may be carried forward
as a tax credit against subsequent years' income tax liability for the period, not to
exceed five taxable years, provided the business remains in an enterprise zone.

H. Co-owners of a business, including partners in a partnership, may each claim
only the pro rata share of the credit allowed under this section based on the ownership
interest. The total of the credits allowed all such owners of the business may not
exceed the amount that would have been allowed for a sole owner of the business.

I. If a person purchases a business in a zone or changes ownership through
reorganization, stock purchase or merger, the new taxpayer may claim first year credits
only for one or more qualified employment positions that it created and filled with an
eligible employee after the purchase or reorganization was complete. If a person
purchases a taxpayer that had qualified for first or second year credits or changes
ownership through reorganization, stock purchase or merger, the new taxpayer may claim
the second or third year credits if it meets other eligibility requirements of this
section. Credits for which a taxpayer qualified before the changes described in this
subsection are terminated and lost at the time the changes are implemented.

J. A failure to timely report and certify to the department of commerce and the
department of revenue the information prescribed by section 41-1525, subsection B,
paragraphs 1, 2 and 3 and in the manner prescribed by section 41-1525, subsection C
disqualifies the taxpayer from the credit under this section. The department of revenue
shall require written evidence of the timely report to the department of commerce.

K. The termination of an enterprise zone does not affect the credit under this
section with respect to:

1. Taxpayers that have employees in the second and third years of employment in
qualified employment positions under subsections A, B and C of this section if the
business remains in the location that was in the enterprise zone.

2. Amounts carried forward into subsequent taxable years under subsection G of this
section.

L. The department may adopt rules necessary for the administration of this section.

M. For the purposes of this section:

1. "Assigned to retail" means working more than twenty-five per cent of an
employee's time in one or more retail sales activities.

2. "Retail sales" means the sale of tangible personal property to an ultimate
consumer.

3. "Retail sales activities" means all activities persons operating a retail
business normally engage in, including taking orders, filling orders, billing orders,
receiving and processing payment and shipping, stocking and delivering tangible personal
property to the ultimate consumer, except drop shipments by a company acting on behalf of
an unrelated company that has made a sale to a final consumer.

4. "Zone location" means a single parcel or contiguous parcels of owned or leased
land, the structures and personal property contained on the land or any part of the
structures occupied by a taxpayer.