Do 'leased employees' count as 'qualified business facility employees' for purposes of Kansas income-tax job-creation credits?

Plain-English summary

A taxpayer asked how the Kansas income-tax job-creation credits treat "leased employees" — specifically, whether they count as "qualified business facility employees." The Department's position: they do not.

The credits and the definition. The question concerned "the definition of a 'qualified business facility employee' for purposes of tax credits allowed by K.S.A. 74-50,113-119; K.S.A. 79-32,153-180." The Department quoted the definition in K.S.A. 79-32,154(d): a "[q]ualified business facility employee shall mean a person employed by the taxpayer in the operation of a qualified business facility during the taxable year for which the credit allowed by K.S.A. 79-32,153 . . . is claimed." A person is treated as engaged if he or she performs the duties on "(1) A regular, full-time basis; (2) a part-time basis, provided such person is customarily performing such duties at least 20 hours per week throughout the taxable year; or (3) a seasonal basis" for substantially all of the customary season.

The holding. The Department advised "that the 'leased employees' that you have described . . . would not meet the definition of a 'qualified business facility employee'" for these credits.

Why. The Department gave concrete reasons: the leased employees "are not considered employees of the [taxpayer], by the federal government, and in fact are issued a W-2 from a company, other than" the taxpayer. Further, the taxpayer "does not provide health and welfare benefits, or a retirement plan for the 'leased employees,'" nor pay their workers' compensation premium. Because they are the leasing company's employees — not the taxpayer's — they are not counted in the taxpayer's qualified-business-facility employee total.

What this means for you

Businesses claiming Kansas job-creation credits

If your workers are supplied through an employee-leasing arrangement and are the leasing company's employees for federal purposes, the Department's position is that they do not count as your "qualified business facility employees" for the K.S.A. 79-32,153 job-creation credits. Count only workers who are your own employees.

The federal-employer facts drive the answer

The Department looked at who the federal government treats as the employer: who issues the W-2, and who provides health and welfare benefits, retirement, and workers' compensation. When those point to a separate leasing company, the leased workers are not the taxpayer's employees for the credit.

Check current law before relying on this

This is a 1999 ruling interpreting the statutes as they then read, and it binds the Department only as to the requesting taxpayer. Kansas economic-development credit statutes have changed over the years, so confirm the current definitions and credit provisions (and how leased or PEO workers are treated) before applying this to a present-day claim.

Common questions

Q: Do leased employees count toward Kansas job-creation income-tax credits?
A: No. The Department ruled that leased employees do not meet the K.S.A. 79-32,154(d) definition of a "qualified business facility employee" for these credits.

Q: Why don't they count?
A: Because they are not the taxpayer's employees for federal purposes — they get a W-2 from another company, and the taxpayer does not provide their health and welfare benefits, retirement plan, or workers' compensation premium.

Q: What makes someone a "qualified business facility employee"?
A: Under K.S.A. 79-32,154(d), the person must be employed by the taxpayer in operating a qualified business facility during the credit year, on a regular full-time basis, a part-time basis of at least 20 hours per week throughout the year, or a qualifying seasonal basis.

Citations and references

• K.S.A. 79-32,154(d) — defines "qualified business facility employee" as a person employed by the taxpayer in the operation of a qualified business facility during the taxable year, engaged on a regular full-time, qualifying part-time (at least 20 hours per week), or seasonal basis. The Department found leased employees do not fit this definition.
• K.S.A. 79-32,153 — the statute allowing the job-creation credit for which the qualified-business-facility-employee count is made; the credits at issue also arise under K.S.A. 74-50,113 to 119 and K.S.A. 79-32,153 to 180.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-1999-09

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

January 25, 1999

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Dear Mr. TTTTTT:

We wish to acknowledge receipt of your letter dated December 15, 1998, regarding the definition of a "qualified business facility employee" for purposes of tax credits allowed by K.S.A. 74-50,113-119; K.S.A. 79-32,153-180, and the amendments thereto.

K.S.A. 79-32,154(d) states in part: ". . . Qualified business facility employee shall mean a person employed by the taxpayer in the operation of a qualified business facility during the taxable year for which the credit allowed by K.S.A. 79-32,153, and amendments thereto, is claimed. A person shall be deemed to be engaged if such person performs duties in connection with the operation of the qualified business facility on: (1) A regular, full-time basis; (2) a part-time basis, provided such person is customarily performing such duties at least 20 hours per week throughout the taxable year; or (3) a seasonal basis, provided such person performs such duties for substantially all of the season customary for the position in which such person is employed. . ."

Please be advised that it is the position of this office that the "leased employees" that you have described in the above referenced letter would not meet the definition of a "qualified business facility employee" for purposes of tax credits allowed by K.S.A. 74-50,113-119; K.S.A. 79-32,153-180, and the amendments thereto. The reasons for this position is that the "leased employees" are not considered employees of the TTTTTTTTTTTTTTTTTTTT, by the federal government, and in fact are issued a W-2 from a company, other than TTTTTTTTTTTTTTTTTTTTTT. Further, the TTTTTTTTT TTTTTTTTTTT does not provide health and welfare benefits, or a retirement plan for the "leased employees". Nor, is the workman's compensation premium for the "leased employees" TTTTTTTTTTTTTTTTTTTTTTTTTTTTT.

This is a private letter ruling pursuant to K.A.R. 92-19-59. It is based solely on the facts provided in your request. If it is determined that undisclosed facts were material or necessary to an accurate determination by the department, this ruling is null and void. This ruling will be revoked in the future by the operation of law without further department action if there is a change in the statutes, administrative regulations, or case law, or published revenue ruling, that materially effects this private letter ruling. If I may be of further assistance, please contact me at your earliest convenience at (785) 296-7776.

Sincerely yours,

Thomas P. Browne, Jr.
Tax Specialist

TPB

Date Composed: 01/26/1999 Date Modified: 10/10/2001

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