STATE OF HAWAII - DEPARTMENT OF TAXATION
INSTRUCTIONS FOR FORM N-884
CREDIT FOR EMPLOYMENT OF
VOCATIONAL REHABILITATION REFERRALS
the employer is an estate or trust, is a relative or a dependent of an
individual who is a grantor, beneficiary, or fiduciary of the estate or
PURPOSE OF FORM
b) who, if the employer is an estate or trust, is a grantor, beneficiary, or
Use Form N-884 if you hire new employees who are vocational rehabilitation
fiduciary of the estate or trust; or
referrals and you elect to claim a credit for the wages paid or accrued for
c) if, prior to the hiring date of such individual, such individual had been
them during their first year of employment.
employed by the employer at any time during which he was not a
The amount of the tax credit for the taxable year shall be equal to 20% of
vocational rehabilitation referral; or
the qualified first-year wages paid to the vocational rehabilitation referrals for
that year. The amount of the qualified first-year wages which may be taken
d) unless such individual is employed by the employer for at least 90 days
into account with respect to any individual shall not exceed $6,000.
or has completed at least 120 hours of service for the employer.
This form is also used to report any unused credits carried over from prior
6) The amount of credit with respect to wages paid to a vocational
rehabilitation referral by a successor employer shall be made in
S corporations or partnerships qualifying for the Credit for Employment
the same manner as if such wages were paid by the predecessor
of Vocational Rehabilitation Referrals may pass the benefits of this credit
through to their shareholders or partners.
7) No credit will be allowed with respect to any wages paid by an employer
FOR PURPOSES OF THIS CREDIT
to a vocational rehabilitation referral for services performed by such
“Hiring date” means, the day the vocational rehabilitation referral is hired
employee for another person unless the amount reasonably expected
by the employer.
to be received by the employer for such services from such other
“Qualified first-year wages” means, with respect to any vocational
person exceeds the wages paid by the employer to such employee for
rehabilitation referral, qualified wages attributable to service rendered during
the one-year period beginning with the day the individual begins work for the
The credit shall be claimed against the net income tax liability for the
taxable year. If this credit exceeds the taxpayer’s income tax liability, it may
“Qualified wages” means the wages (as defined under the Federal
be used as a credit against the taxpayer’s income tax liability in subsequent
Unemployment Tax Act (FUTA)) paid or incurred by the employer during the
years until exhausted.
taxable year to an individual who is a vocational rehabilitation referral and
NOTE: No deduction shall be allowed for that portion of the wages or
more than one-half of the wages paid or incurred for such an individual is for
salaries paid or incurred for the taxable year that is equal to the current
services performed in a trade or business of the employer.
year’s portion of the credit claimed. See the instructions for your tax
“Vocational rehabilitation referral” means any individual who is certified by
return so you report this adjustment properly.
the Department of Human Services Vocational Rehabilitation and Services
for the Blind Division (DHS) in consultation with the Hawaii State Employment
TIME FOR FILING
Service of the Department of Labor and Industrial Relations as:
All claims for this credit, including any amended claims, must be filed on
1) having a physical or mental disability which, for such individual,
or before the end of the twelfth month following the close of the taxable year
constitutes or results in a substantial handicap to employment; and
for which the credit may be claimed. Failure to comply with the foregoing
2) having been referred to the employer upon completion of (or while
provision shall constitute a waiver of the right to claim this credit.
receiving) rehabilitative services.
The following provisions are applicable when claiming this credit:
1) The employee must be certified by DHS as being a vocational
Line 1. — Enter employees’ names, starting dates, social security numbers,
rehabilitation referral. The employer must receive or request, in writing,
and wages paid during the taxable year. The qualified first-year wages may
a certification from DHS by the date the employee begins work (or
not exceed $6,000 per employee. The employer must retain approved certi-
within 5 days if the employer has received a written preliminary
fication forms for the employees listed on this line for audit purposes.
determination that the employee is a vocational rehabilitation referral).
Line 2. — Add the total qualified first-year wages paid in the current year.
In any request for a certification, the employer shall certify that a good
Line 3. — Compute the credit applicable to the current year by multiplying
faith effort was made to determine that the employee is a vocational
the amount on line 2 by 20%, and enter the result on line 3.
You must subtract your current year credit on line 3 from the deduction on
2) If certification of a vocational rehabilitation referral is revoked by DHS,
your tax return for salaries and wages you paid or owe for the current year.
any wages paid by the employer to such employee after the date on
This is true even if you cannot take the full credit this year and must carry
which notice of revocation is received by the employer shall not be
part of it forward. See the instructions for your tax return so you report this
treated as qualified wages.
3) A credit may not be claimed on any wages paid to a vocational
Line 4. — Enter the amount of credit that was allocated to you as a partner,
rehabilitation referral that were repaid by a federally funded on-the-
shareholder, beneficiary, or patron of a cooperative.
job training program, or for which work supplemental payments were
Line 5. — Enter the amount of unused jobs credit carried over from prior
received under the Social Security Act.
4) A credit may not be claimed on any wages paid to workers who replaced
Line 6. — Partnerships and S corporations: Prorate the credit on line
vocational rehabilitation referrals during a strike or walkout.
6 among the partners or shareholders. Attach Form N-884 to the return
of the partnership or S corporation and on Schedule K-1 (Form N-20) or
5) A credit may not be claimed on any wages paid to a vocational
Schedule K-1 (Form N-35) show the credit for each partner or shareholder,
a) who is a relative or a dependent of the employer, or, if the employer is
Estates and trusts: The credit on line 6 is allocated between the estate or
a corporation, of an individual who owns, directly or indirectly, more
trust and the beneficiaries in proportion to the income allocable to each. On
than 50% in value of the outstanding stock of the corporation, or, if