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INSTRUCTIONS — FORM N-884

(REV. 2001)

PAGE 2

c) if, prior to the hiring date of such individual, such individual had been em-

GENERAL INSTRUCTIONS

ployed by the employer at any time during which he was not a vocational

There shall be allowed to each taxpayer subject to Hawaii net income taxes a

rehabilitation referral; or

credit related to the employment of vocational rehabilitation referrals which shall

d) unless such individual is employed by the employer for at least 90 days

be deductible from the taxpayer’s net income tax liability, if any, for the taxable

or has completed at least 120 hours of service for the employer.

year in which the credit is properly claimed.

6) The amount of credit with respect to wages paid to a vocational rehabilita-

S corporations qualifying for the Credit for Employment of Vocational Rehabili-

tion referral by a successor employer shall be made in the same manner as

tation Referrals may pass the benefits of this credit through to its shareholders.

if such wages were paid by the predecessor employer.

7) No credit will be allowed with respect to any wages paid by an employer to a

PURPOSE OF FORM

vocational rehabilitation referral for services performed by such employee

Use Form N-884 if you hire new employees who are vocational rehabilitation

for another person unless the amount reasonably expected to be received

referrals and elect to claim a credit for the wages paid or accrued for them during

by the employer for such services from such other person exceeds the

their first year of employment.

wages paid by the employer to such employee for such services.

The amount of the tax credit for the taxable year shall be equal to 20% of the

The credit shall be claimed against the net income tax liability for the taxable

qualified first-year wages paid to the vocational rehabilitation referrals for that

year. If this credit exceeds the taxpayer’s income tax liability, it may be used as a

year. The amount of the qualified first-year wages which may be taken into ac-

credit against the taxpayer’s income tax liability in subsequent years until ex-

count with respect to any individual shall not exceed $6,000.

hausted.

This form is also used to report any unused credits carried over from prior

NOTE: No deduction shall be allowed for that portion of the wages or sala-

years.

ries paid or incurred for the taxable year that is equal to the current year’s

portion of the credit claimed. See the instructions for your tax return so you

FOR PURPOSES OF THIS CREDIT

report this adjustment properly.

“Hiring date” means, the day the vocational rehabilitation referral is hired by

the employer.

TIME FOR FILING

“Qualified first-year wages” means, with respect to any vocational rehabilita-

All claims for this credit, including any amended claims, must be filed on or be-

tion referral, qualified wages attributable to service rendered during the

fore the end of the twelfth month following the close of the taxable year for which

one-year period beginning with the day the individual begins work for the em-

the credit may be claimed. Failure to comply with the foregoing provision shall

ployer.

constitute a waiver of the right to claim this credit.

“Qualified wages” means the wages (as defined under the Federal Unemploy-

SPECIFIC INSTRUCTIONS

ment Tax Act (FUTA)) paid or incurred by the employer during the taxable year

to an individual who is a vocational rehabilitation referral and more than one-half

Line 1. — Enter employees’ names, starting dates, social security numbers, and

of the wages paid or incurred for such an individual is for services performed in a

wages paid during the taxable year. The qualified first-year wages may not ex-

trade or business of the employer.

ceed $6,000 per employee.

“Vocational rehabilitation referral” means any individual who is certified by the

Line 2. — Add the total qualified first-year wages paid in the current year.

Department of Human Services Vocational Rehabilitation and Services for the

Blind Division (DHS) in consultation with the Hawaii State Employment Service

Line 3. — Compute the credit applicable to the current year by multiplying the

of the Department of Labor and Industrial Relations as:

amount on line 2 by 20%, and enter the result on line 3.

1) having a physical or mental disability which, for such individual, constitutes

You must subtract your current year credit on line 3 from the deduction on your

or results in a substantial handicap to employment; and

tax return for salaries and wages you paid or owe for the current year. This is

2) having been referred to the employer upon completion of (or while receiv-

true even if you cannot take the full credit this year and must carry part of it for-

ing) rehabilitative services.

ward. See the instructions for your tax return so you report this adjustment prop-

erly.

The following provisions are applicable when claiming this credit:

1) The employee must be certified by DHS as being a vocational rehabilitation

Line 4. — Enter the amount of credit that was allocated to you as a partner,

referral. The employer must receive or request, in writing, a certification

shareholder, beneficiary, or patron of a cooperative.

from DHS by the date the employee begins work (or within 5 days if the em-

Line 5. — Enter the amount of unused jobs credit carried over from prior years.

ployer has received a written preliminary determination that the employee

is a vocational rehabilitation referral). In any request for a certification, the

Line 6. — Enter the total credit claimed for the year on this line and on Schedule

employer shall certify that a good faith effort was made to determine that

CR, line 5 (for Form N-11, N-12, N-15, N-30, and N-70NP filers).

the employee is a vocational rehabilitation referral.

Partnerships and S corporations: Prorate the credit on line 6 among the part-

2) If certification of a vocational rehabilitation referral is revoked by DHS, any

ners or shareholders. Attach Form N-884 to the return of the partnership or S

wages paid by the employer to such employee after the date on which no-

corporation and on Schedule K-1 (Form N-20) or Schedule K-1 (Form N-35)

tice of revocation is received by the employer shall not be treated as quali-

show the credit for each partner or shareholder, respectively.

fied wages.

Estates and trusts: The credit on line 6 is allocated between the estate or trust

3) A credit may not be claimed on any wages paid to a vocational rehabilitation

and the beneficiaries in proportion to the income allocable to each. On the dot-

referral that were repaid by a federally funded on-the-job training program,

ted line to the left of the amount on line 6, the estate or trust should enter its part

or for which work supplemental payments were received under the Social

of the total credit. Label it “N-40 PORTION” and enter this amount on the appli-

Security Act.

cable line of the return of the estate or trust. Attach Form N-884 to the return of

4) A credit may not be claimed on any wages paid to workers who replaced vo-

the estate or trust and on Schedule K-1 (Form N-40) show the credit for each

cational rehabilitation referrals during a strike or walkout.

beneficiary.

5) A credit may not be claimed on any wages paid to a vocational rehabilitation

Cooperatives: Most tax-exempt organizations cannot take the credit; but a co-

referral:

operative may claim the credit to the extent it has an income tax liability. Any ex-

a) who is a relative or a dependent of the employer, or, if the employer is a

cess is shared among its patrons. A statement should be prepared by the coop-

corporation, of an individual who owns, directly or indirectly, more than

erative informing each patron of their share of the credit.

50% in value of the outstanding stock of the corporation, or, if the em-

ployer is an estate or trust, of a grantor, beneficiary, or fiduciary of the

estate or trust; or

b) who, if the employer is an estate or trust, is a grantor, beneficiary, or fidu-

ciary of the estate or trust; or

Form N-884 - Credit For Employment Of Vocational Rehabilitation Referrals With Instructions Page 2

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