5101:4-6-11 Food assistance: determining eligibility of assistance groups with income from self-employment.

 

 

 

5101:4-6-11                 Food stamps: determining eligibility of AGs with income from self-employment.

 

 

 

(A)  Basic work registration requirement applies

 

Work registration considerations for AGs with income from self-employment are as follows:

 

(1)   The receipt of income from self-employment does not automatically exempt a member from the work registration requirement. The member must be actively engaged in the enterprise on a day-to-day basis, and the EWcounty agency must determine that the self-employment enterprise either:

 

(a)     Requires at least thirty hours of work per week during the period of certification or an average of thirty hours per week on an annual basis; or

 

(b)     If not generating thirty hours of work a week, is receiving weekly earnings at least equal to the federal minimum wage multiplied by thirty hours.

 

(2)   When work is contracted

 

In instances where the member hires or contracts for another person or firm to handle the daily activities of such enterprise, the member will not be considered as self-employed for the purpose of work registration or completion of the information form unless the person himself works in such activity at least thirty hours per week or receives the equivalent of the federal minimum wage multiplied by thirty hours.

 

(3)   Cases of seasonal work patterns

 

The EWcounty agency should carefully review the circumstances of the members engaged in seasonal self-employment to determine if the minimum requirement is met in the off-season. If on an annual basis the seasonal employment either averages thirty hours of work per week, or produces earnings averaging at least the federal minimum wage multiplied by thirty hours, the AG member so engaged is exempt from registering or completing the information form even in nonwork periods. In other words, if the member works a minimum of one thousand five hundred sixty hours during the season (thirty hours times fifty-two) or earns the equivalent of this multiplied by the federal minimum wage, he or she is exempt from work registration or completion of the information form even during the off-seasons. If the annual average does not meet the minimum for exemption, the member must register for  work  or  complete  the  information  form  (unless  otherwise  exempt).

 

 

However, the member shall still be exempt during the work season if he or she is actively engaged in such enterprise on an average of thirty hours per week or receives the minimum earnings equivalent to the federal wage times thirty hours per week, over the certification period.

(4)   Owners of rental property

Ownership of rental property is considered self-employment although the work registration exemption applies only if one of the criteria in paragraph (B)(1) of this rule is met.

(B)  Special income considerations

Special income considerations for AGs with income from self-employment are as follow:

(1)   Income from rental property

Income derived from rental property is considered earned income for the twenty per cent earned income deduction only if a member of the AG is actively engaged in the management of the property at least an average of twenty hours per week. Regardless, income from rental property always has the costs of doing business excluded. If the twenty hours per week criterion is not met, the net income is considered unearned and the earned income deduction is not allowed.

(2)   Handling capital gains

(a)    The term "capital gains" as used by the internal revenue service (IRS) describes the handling of the profit from the sale or a transfer of capital assets used in a self-employment enterprise or securities, real estate, or other real property held as an investment for a set period of time.

(b)     The proceeds from the sale of capital goods or equipment must be calculated in the same manner as a capital gain for federal income tax purposes. Even if only fifty per cent of the proceeds from the sale of capital goods or equipment is taxed for federal income tax purposes, the county agency must count the full amount of the capital gain as income for food stamp purposes.

(c)    For AGs whose self-employment income is calculated on an anticipated (rather than averaged) basis in accordance with paragraph (C) of this rule, the county agency must count the amount of the capital gains the AG anticipates receiving during the months over which the income is

being averaged.

(d)     Lump sum payments for the sale of property not connected with self-employment enterprise will be treated as provided in paragraph (B) of rule 5101:4-4-07 of the Administrative Code and paragraph (J) of rule 5101:4-4-13 of the Administrative Code.

(3)   Internal revenue service publications

IRS publications 17, "Your Federal Income Tax"; 334, "Tax Guide for Small Business"; and 533, "Information on Self-Employment Tax" provide detail on how self-employment income is handled for federal income tax purposes. These are available from IRS information offices.

(4)   Allowable exclusions

Exclusions from costs of producing self-employment income:

(a)   Expenses

Allowable costs of producing self-employment income include, but are not limited to: the identifiable costs of labor; stock; raw material; seed and fertilizer; payments on the principal of the purchase price of income-producing real estate and capital assets; equipment, machinery and other durable goods; interest paid to purchase income-producing property; insurance premiums; and taxes paid on income producing property. If an AG can document that costs on that portion of a home used in a self-employment enterprise are separate and identifiable, these costs may be excluded as costs of doing business.

(b)   Unallowable exclusions

The following items are not considered as a cost of producing self-employment income:

(i)   Net losses from previous periods.

(ii)      Federal, state, and local income taxes, money set aside for retirement purposes, and other work-related personal expenses for the applicant's AG, such as transportation to and from work. These expenses are accounted for by the twenty per cent earned income deduction.

(iii)   Depreciation.

(c)    Exclusions from day care income and income received from boarders shall be considered in accordance with rule 5101:4-6-03 of the Administrative Code.

(d)Exempt income of children in migrant AGs shall be handled in accordance with paragraph (H) of rule 5101:4-4-13.

(C)  Determining self-employment income

Self-employment income is determined in the following manner.

(1)   Averaging self-employment income

(a)   Self-employment income must be averaged over the period the income is intended to cover, even if the AG receives income from other sources. If the averaged amount does not accurately reflect the AG's actual circumstances because the AG has experienced a substantial increase or decrease in business, the county agency must calculate the self-employment income on the basis of anticipated, not prior, earnings.

(b)   If the AGsAG's self-employment enterprise has been in existence for less than a year, the income from the self-employment enterprise must be averaged over the period of time the business has been in operation and the monthly amount projected for the coming year.

(2)   Determining monthly self-employment income

(a)   For the period of time over which self-employment income is determined the county agency must:

(i)    Add all gross self-employment income (either actual or anticipated as provided in paragraph (C)(1) of this rule) and capital gains (as provided in paragraph (B)(2) of this rule; then,

(ii)     Exclude the costs of producing the self-employment income (as determined in paragraph (B)(4) of this rule); and

(iii)     Divide the remaining amount of the self-employment income by the number of months over which the income will be averaged.

This amount, the monthly net self-employment income, must be added to any other earned income received by the AG to determine total monthly earned income.

(3)   Offsetting losses

(a)     If the cost of producing self-employment income exceeds the income derived formfrom self-employment as a farmer who receives or anticipates receiving annual gross proceeds of one thousand dollars or more from the farming enterprise, such losses must be prorated in accordance with paragraph (C)(1) of this rule and then offset against countable income to the AG as follows:

(i)      Offset farm self-employment income losses first against other self-employment income.

(ii)    Offset any remaining farm self-employment losses against the total amount of earned and unearned income after the earned income deduction has been applied.

(D)  Certification periods

AGs with countable income from self-employmentthat receive their annual support from self-employment and have no other source of income may be certified for up to twelve months. For those AGs that have other sources of income or whose self-employment income is intended to cover a period of time that is less than a year, the county agency shall assign a certification period appropriate for the AG's circumstances. For those self-employed AGs that receive their annual income in a short period of time, the initial certification shall be assigned to bring the AG into the annual cycle. For example, the county agency may provide a reapplication at the time the AG normally receives all or a majority of its annual income or may prefer to have the annual cycle coincide with the filing of the AG's income taxshall have their certification periods established in accordance with paragraph (C)(1) of rule 5101:4-5-03.

Replaces:                                 5101:4-6-21, 5101:4-6-23, 5101:4-6-25

Effective:                                02/01/2004

R.C. 119.032 review dates:    11/14/2003 and 02/01/2009

CERTIFIED ELECTRONICALLY

Certification

01/22/2004

Date

Promulgated Under:   111.15

Statutory Authority:   5101.54

Rule Amplifies:           329.04, 329.042, 5101.54 Prior Effective Dates: 6/2/80, 10/1/81, 9/27/82,

5/1/86(Emer.),

6/15/86(Emer.),

8/1/86(Emer.), 10/1/86,

8/1/87(Emer.), 10/25/87,

1/5/90(Emer.),

3/22/90(Emer.), 10/1/90,

5/1/96, 4/1/97(Emer.), 6/6/97,

2/1/99, 6/1/01