Community Rehabilitation Program Tax Credit Frequently Asked Questions
Can purchase orders that businesses submit to Community Rehabilitation Programs (CRPs) be used to meet some of the Wisconsin Department of Revenue’s documentation requirements that are needed to claim the credit? These documentation requirements include the type of work to be completed, the time period during which the work will be performed, and the amount CRPs will be paid for that work.
Yes. Additionally, contracts between CRPs and their business customers should state that purchase orders will be used to specify these requirements in writing (i.e., the type of work to be completed, the time period during which the work will be performed, and amount the CRPs will be paid for that work).
How does the Wisconsin Department of Revenue define a “contract”?
“A contract is legally binding agreement that creates an obligation to do or not to do a particular thing. There must be mutuality of agreement and obligation, legal consideration, and competent parties.”
Additionally, contracts between businesses that intend to claim the tax credit and the CRPs must contain the dates during which contracts are effective (an initiation and end date), as well as an offer by the CRPs of a product or service and acceptance of that offer by the CRPs’ business customers (i.e., business entities that will claim the credit, also referred to as “the taxpayer”).
How specific do the dates of the contract need to be? Can CRPs enter into contracts with businesses that are renewed annually or that specify they are self-renewing each year (i.e., “evergreen” contracts)?
The purchase order can be used to specify dates during which services or products must be delivered. As long as a start date is specified, both annual contract renewals and evergreen contracts will meet the Wisconsin Department of Revenue’s requirements for a dated contract.
Do CRPs have to provide their business customers with the dollar amounts eligible for the tax credit (i.e., the portion of the services or products to be delivered that will be done by people with disabilities) in contracts, proposals, or purchase orders? Would the dates they are to be paid for services or products delivered to their customers need to be specified in contracts, proposals, or purchase orders? Or, may the CRPs provide this information to their business customers when the taxpayers request it for filing the credit?
CRPs are required to provide the information about the dollar amounts attributed to disability labor needed to claim the credit at the request of its business customers. This information is provided in Part II of Schedule CM. Typically, this information would be gathered from the CRPs’ record-keeping and accounts receivable systems. Contracts do not typically include the actual amount to be paid for each contracted service or product and proposals and purchase orders do not typically identify the disability labor associated with it. The CRPs should be prepared to provide information on the dollar amounts of disability labor to any taxpayers wanting to claim the credit for all payments made to the CRP during the taxpayers’ corporate reporting period. The corporate reporting periods will have to be specified by taxpayers in their requests to the CRPs for information needed to file the claim.
Does the location of where the work is performed matter?
No. As long as the other requirements are met and the work is performed by a person or persons with a disability, it could be done at the customers’ business locations, in work centers operated by CRPs, or in at any other location.
Are businesses that employ people with disabilities in supported employment enclaves eligible for the CRP tax credit?
Yes, as long as the CRPs employ the people with disabilities involved, contracts exist between CRPs and the businesses, and all other requirements can be met.
What types of labor performed by people with disabilities qualify for the CRP tax credit?
Production, packaging, assembly, food service, custodial service, clerical work, and any other commercial activities that provide employment opportunities for people with disabilities would qualify.
When can the tax credit be claimed?
The credit must be claimed within four years of the unextended due date of the taxpayer's franchise or income tax return.
Is the credit refundable or nonrefundable?
The credit is nonrefundable. If the credit is not entirely offset against qualifying Wisconsin franchise or income taxes due for the current taxable year, the balance may be carried forward for 15 years.
Do business customers of the CRPs need to keep any records besides having copies of the contracts available for review?
Yes. Taxpayers wanting to claim the credit will need to keep a copy of the data that they request from the CRP that is required on the form (i.e., the value in dollars of the disability labor that was included in the payments for services or products delivered under the contract with the CRP) for the length of time they are subject to an audit. Businesses / taxpayers should retain these documents in their records, but they are not required to keep the payroll data, purchase orders, or other documents that CRPs would use in determining the amounts that taxpayers are eligible to claim. It would be important for CRPs to retain all of this data, however, for as long as taxpayers are subject to audit by the Wisconsin Department of Revenue
What information does the CRP need to supply to customers so they can accurately fill out their Schedule CM?
See above. The information that is required is listed in “Part II – To be completed by the community rehabilitation program” on Schedule CM. “Work performed” in item #6 on Schedule CM, which reads, “amount of payments in 5 above that was for work performed,” refers to the labor performed by people with disabilities. Labor costs can include payroll taxes and benefits for the employees with disabilities involved, as well as the indirect labor performed by people with disabilities that can be attributed to contracts with the CRPs’ business customers.
If CRPs deliver products or provide services under contracts with companies that are located outside the state of Wisconsin, are these businesses eligible to take the credit?
If the businesses that are located outside the state have a Wisconsin income tax liability, the answer is “yes.”
CMS: Prevoc Services do not have a mandated time limit
The Centers for Medicare and Medicaid Services Director Cindy Mann responded to Congresswoman Baldwin's constituent concerns about limits to prevocational services for people with disabiliites in Wisconsin.
CMS ... has not mandated a specific time limit and has tied the continuation of this (and any other waiver) service to the person centered planning process. Supported employment for people with disabilities is intended to be provided to people in jobs in their communities and language in our regulations clarifies that point, "[supported employment is] conducted in a variety of settings, particularly worksites in which persons without disabilities are employed" (CFR 440.1S0(c) (2)(iii). Guidance in the Informational Bulletin does not differ from previous waiver guidance around this aspect of supported employment. While we empathize with Mr. Jessen's concerns about his son's well being and the continuation of his services, we do not believe that the new CMS guidance would force him to lose needed services.
ACCSES Response to National Council on Disability Report on Subminimum Wage and Supported Employment
We strongly disagree with assertions regarding the alleged ‘propagation of injustices’ under the current system, which relies on section 14(c) of the Fair Labor Standards Act (Section 14(c)). [page 24] We also adamantly oppose the recommendations included in the report for phasing out Section 14(c) and recommendations regarding the Individuals with Disabilities Education Act (IDEA), and statements regarding enforcement of ADA and Olmstead v. L.C. These recommendations and statements are not supported by the findings included in the report; in fact, these recommendations and statements are contrary to the report’s findings. In addition, by eliminating and restricting appropriate and justified options and opportunities to work, these recommendations and statements violate the tenets of self-determination, informed choice, and person-centered planning--concepts that are fundamental to disability employment policy. And most importantly, as a direct result of these recommendations, hundreds of thousands of people with disabilities will most likely become unemployed or lose the opportunity to become employed in the future. Read more on this topic. ACCSES policy paper links.
White House receives prevocational recommendations
Jan. 2011 ACCSES joined with Easter Seals, Goodwill Industries International, NISH, The Arc of the United States, and United Cerebral Palsy and sent the Obama Administration "Recommendations for Updating the Prevocational Services Provisions in the CMS Instructions, Technical Guide, and Review Criteria under the Medicaid Home and Community-Based Waiver."
RFW in Action's Concerns About the New Definition from DHS
Dec. 22, 2010 Read the clarification from Susan Crowley, DHS Long Term Care Administrator, about how new entrants can access prevocational services in Family Care.
Dec. 8, 2010 Secretary Timberlake responds to Senators' concerns about prevocational services.
Oct. 21, 2010 Senators Erpenbach and Hansen weigh in on prevocational services in letter to Karen Timberlake, Wisconsin Department of Health Services Secretary.
Dear Secretary Timberlake,
As you know we have been deeply concerned with the implementation of new guidelines for Family Care and their impact on the ability of constituents in our district to receive pre-vocational services. Read more.
The national association of disability service providers published a white paper on center-based employment and provisions of the Fair Labor Standards Act in September 2009, which RFW in Action endorses. Read more (pdf).
People with disabilities, families, community members, and prevocational (employment) services providers have been concerned about new policies issued by the Wisconsin Department of Health Services (DHS) that impact funding and participation in integrated employment and community rehabilitation programs through Family Care. To learn more, including restrictions on new entrants to the program as of Sept. 1, 2010.
LifeRESERV is an innovative concept to create a qualified long term care supplement that helps families touched by disability with one of their most important financial goals - the long term care of children with severe disabilities. The intent is to provide families with an additional option to make tax free investments to ensure their loved one's long term care is appropriately funded.
The long term hope is to have the federal and state government match the family contributions based on a family income scale. The LifeRESERV plan would be administered by the Wisconsin Office of the State Treasurer and managed by a national insurance company. Any funds unused by the individual would rollover to a LifeRESERV Foundation for redistribution.
To learn more about RFW's current LifeRESERV initiative, read the discussion paper.
RFW in Action and its members have proposed these solutions to help close the $500 million funding gap in State Medicaid services in the 2011-2013 budget.
We encourage you to contact RFW in Action to make additional suggestions to these categories.
Community Rehabilitation Programs (CRPs) have evolved considerably through the years to become commercial and social enterprises that are successful catalysts for economic development in Wisconsin. These organizations provide products and services to private industry, such as 3M; purchasers for state agencies, municipalities, and school districts.
What is a Community Rehabilitation Program?
Community Rehabilitation Program means a nonprofit entity, county, municipality, or state or federal agency that directly provides, or facilitates the provision of, vocational rehabilitation services to individuals who have disabilities to maximize the employment opportunities, including career advancement, of such individuals.
"Vocational rehabilitation services” includes education, training, employment, counseling, therapy, placement, and case management.
"Work” includes production, packaging, assembly, food service, custodial service, clerical service, and other commercial activities that improve employment opportunities for individuals who have disabilities.
What is the CRP Tax Credit?
This credit is available to businesses that contract with CRPs beginning on or after August 1, 2011. A credit is available for 5% of labor costs performed by people with disabilities, up to a maximum of $25,000 in credits for up to $500,000 of contract labor for each CRP.
A business with multiple contracts with different CRPs could claim up to 5% of the value of the labor for a maximum credit of $25,000 for each CRP business customer. For example, a business that contracts with 10 CRPs would be able to claim a maximum credit of $250,000.
The labor performed by people with disabilities can include indirect labor that is provided to the business as part of the “overhead” charges. For example, the wages, payroll taxes, and benefits for a person with a disability who supplies multiple assembly lines for various contracts could be allocated to each of the contracts using any reasonable basis for allocating these costs, which can be justified under standard accounting principles.
Who qualifies for the credit?
- Corporations Tax-option (S) corporations
- Exempt organizations. The credit is allowed only if the exempt organization contracts with a community rehabilitation program to perform work for the claimants business and that work relates to unrelated trade or business activity.
- Sole proprietorships. Estate and trusts share the credit among themselves and their beneficiaries in proportion to the income allocable to each.
- Partnerships, limited liability companies, and tax-option corporations compute the credit and allocate it to the partners, members, and shareholders in proportion to their ownership interests.
Why is the CRP Tax Credit important to Wisconsin businesses and economic development?
- Businesses receive excellent quality control and superior services from a dedicated workforce
- When businesses partner with CRPs to fulfill products and services contracts, they are making a REAL and POSITIVE impact on economic development in Wisconsin by keeping jobs local
- This strong commitment by businesses to partner with CRPs helps veterans and Wisconsin’s most vulnerable citizens achieve independence and meaningful employment
- It reduces reliance on state agencies for employment and other services
What form should I use?
Schedule CM. A link to this form is below.
CRP Tax Credit Forms for Businesses
2011 Schedule CM (fill in PDF)
2011 IC-334 Instructions for Schedule CM
Pub 123 Business Incentives for 2011 (pg 25-26 explains what the credit is)