What is the Kansas Targeted Employment Act credit for hiring people with developmental disabilities?

Plain-English summary

Kansas Notice 22-14 explains the Kansas Targeted Employment Act, created by 2022 House Bill 2703 (New Sections 1-6). It establishes a tax credit for businesses that employ Kansas residents with developmental disabilities.

Key terms (Section 2). An "eligible individual" is a Kansas resident (including a high school student) employed in a competitive integrated setting who has a documented developmental disability and has agreed to provide required information. A "targeted employment business" is an employer authorized to do business in Kansas that employs eligible individuals in competitive integrated employment and pays them earned income during the calendar year (it does not include a community service provider).

The credit (Section 3). For tax years 2022 through 2027, a targeted employment business -- or a taxpayer that outsources work to one -- may claim a credit against its income, privilege, or premium tax liability. For every hour of work an eligible individual provides, the business earns a credit equal to 50% of the wages paid on an hourly basis, not to exceed $7.50 per hour. The wage rate used cannot be more than a reasonable or usual and customary market wage for a similar job.

Limits. The credit is not refundable, cannot be carried forward, and can be used only once each tax year against just one of the income, privilege, or premium taxes. The maximum of all credits allowed under the Act is $5,000,000 per tax year.

How to claim (Section 4). The business provides the Secretary of Revenue with each eligible individual's name, hourly wage rate, hours worked, and gross wages paid (minus leave compensation), by completing and submitting Kansas Schedule K-69 with its tax return.

What this means for you

Businesses employing people with developmental disabilities

• If you employ Kansas residents with a documented developmental disability in competitive integrated employment, you can earn a credit worth 50% of their wages, capped at $7.50 per hour worked, for tax years 2022-2027.
• The credit is nonrefundable and cannot be carried forward, so use it in the year earned, against one of income, privilege, or premium tax.
• A business that outsources work to a targeted employment business may also claim the credit.
• Report the required employee and wage details on Schedule K-69.

Common questions

Who can claim the credit? A "targeted employment business" that employs eligible individuals, or a taxpayer that outsources work to one.

How much is it? 50% of wages paid per hour of work by an eligible individual, up to $7.50 per hour.

Against what taxes? Income, privilege, or premium tax -- but only one of them, once per year.

Is there a cap? Yes -- $5,000,000 total per tax year; the credit is not refundable and cannot be carried forward.

What years does it cover? Tax years 2022 through 2027.

Citations and references

• House Bill 2703 (2022), New Sections 1-6 -- the Kansas Targeted Employment Act; Section 3 creates the credit for employing Kansas residents with developmental disabilities.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: Notice 22-14

Original ruling text

Policy and Research
109 SW 9th Street Phone: 785-368-8222
PO Box 3506 Fax: 785-296-1279
Topeka KS 66601-3506 www.ksrevenue.gov
Mark A. Burghart, Secretary Laura Kelly, Governor

                                      NOTICE 22-14

                          KANSAS TARGETED EMPLOYMENT ACT

                                  (DECEMBER 13, 2022)

   During the 2022 Legislative Session House Bill 2703 was passed and signed into law. New

Sections 1 through 6 of the Bill are known as the Kansas targeted employment act. The act
establishes a tax credit for businesses that employ individuals who are Kansas residents with
developmental disabilities.

   New Section 2 of the Bill defines certain terms. Subsection (d) and (f) defines the term

"eligible individual" and "targeted employment business" by stating:

         (d) "Eligible individual" means an individual, including a high school student, who is
   a Kansas resident, is employed by an employer in a competitive integrated setting, has a
   developmental disability that has been documented as required by the secretary for aging and
   disability services and who has agreed to provide the secretary for aging and disability
   services, or the secretary's designee, information required by the secretary pursuant to the
   Kansas targeted employment act, or to permit the secretary of revenue to provide such
   information to the secretary for aging and disability services.

         (f) "Targeted employment business" means those employers employing eligible
   individuals in competitive integrated employment in a competitive integrated setting and
   who are authorized to do business in Kansas. In order to qualify as a "targeted employment
   business," the employer must pay earned income to an eligible individual in a calendar year.
   "Targeted employment business" does not include a community service provider.

   New Section 3 provides that for tax years 2022 through 2027, a tax credit can be claimed

against the income, privilege, or premium tax liability of a "targeted employment business," or by
a taxpayer outsourcing work to a targeted employment business. For every hour of work provided
by an "eligible individual" the targeted employment business earns a tax credit equal to 50% of
the wages paid to the eligible individual on an hourly basis, not to exceed $7.50 per hour. The
wage rate used cannot be more than a reasonable or usual and customary market wage rate for a
similar job.

   The credit is not refundable, cannot be carried forward, and can only be used once each

taxable year against the tax liability imposed by only one of the income, privilege, or premium
taxes. New Section 3 also provides the maximum amount of all tax credits allowed in each tax
year under the Kansas targeted employment act shall be $5,000,000.

  New Sec. 4 provides any targeted employment business seeking to qualify for a tax credit is

to provide to the secretary of revenue the names of each eligible individual employed and the wage
rate per hour, hours worked, and gross wages paid, minus any compensation for leave, for each
eligible individual and such other information as the secretary of revenue may require. This
information should be provided by completing and submitting Kansas Schedule K-69 with the
taxpayer's tax return.

                                 TAXPAYER ASSISTANCE

 Additional copies of this notice, forms or publications are available from our web site,

www.ksrevenue.gov. If you have questions about this Notice, please contact:

                              Taxpayer Assistance Center
                             Kansas Department of Revenue
                             Scott Office Building, 1st Floor
                                    120 SE 10th Ave
                                     P. O. Box 3506
                                Topeka, KS 66601-3506
                                  Phone: 785-368-8222
                                   Fax: 785-291-3614