Family and Children's Medicaid MA-3300 Income

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(XI.A.)

4. Commissions - percentage of money made on sales and given in pay, in addition to salary or wages.

5. Tips - Gratuities or sums of money in excess of $20 per month given voluntarily for services rendered.

6. Bonus - Occasional special payment made to an employee, such as a holiday bonus. If the bonus is received in the base period, divide by 12 months (or the period of time it covers) and consider only the average monthly amount.

B. Wages - See XIII. and IX. for computation procedures.

1. Types of Wages

a. Wages from employment, commissions, tips, seasonal work

b. Payments made directly to a renal dialysis patient’s assistant who is a Medicaid client

c. Adult Developmental Activities Program (ADAP) for cases where employment continues after completion of a training program

d. Earnings from the Title V Program for adults age 55 or older (through U.S. Department of Labor)

e. Annual leave pay and sick pay when subject to tax deductions

f. Payments made to or on behalf of an employee as payment for services, in some form other than cash or check. These are considered in-kind wages and may be in the form of goods, services, shelter, etc. The fair market value of such payments at the time they are provided is countable wages.

For example, if a company pays the a/b’s utility bills and car payment in addition to a weekly salary, the value of the utilities and car payments are countable as wages.

(1) Do not count as wages the value of food provided on the job to an employee, such as meals provided by a restaurant to the staff.

(2) Count the value of shelter (fair market value of rent or mortgage) provided by the employer only if living in the shelter is an option by the employee and is not a condition of the employment.

(3) Do not count the value of shelter provided to agricultural employees.

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(XI.B.1.)

g. Income from sheltered workshop is considered earned if there is an employer/employee relationship. If there is no employer/employee relationship, see XI.S., below.

h. Royalties earned in connection with any publication of the individual.

i. Basic Allowance for Housing (BAH) - Housing allowance for military families, which is reported on the Leave Earnings Statement.

2. Responsibility of the A/B

Unless the a/b is mentally or physically incapable or requests assistance, he must provide verification of income. See 5., below, for acceptable sources of verification.

3. Applications - See IV., V. and VIII. for base periods.

a. Ask the applicant if he or any member of the budget unit is employed. If he states neither he nor any other members of the budget unit is employed, discuss work history for the last 6 months for leads on employment. Refer to MA-3515, Automated Inquiry and Match Procedures, for IEVS requirements. Explore the possibility of unemployment insurance benefits.

b. Ask for names of former employers during that period. Contact them for any information on current employment. Do not pend the application for the information from the former employers.

c. If the applicant or other members of the budget unit have wages, request verification of wages.

4. Re-enrollments - See VI. and VIII. for base periods.

a. Ask the recipient if he or any member of the budget unit is employed.

b. If the recipient or other members of the budget unit have wages, set a deadline for the wage verification to be returned. Ensure the deadline for returning verification allows you to complete the review timely. Follow IEVS requirements in MA-3515, Automated Inquiry and Match Procedures.

c. If the recipient provides verification by the deadline, complete the re-enrollment.

d. If wage verification is not provided by the deadline, send a timely notice to propose termination.

e. An ex parte review process in used for MIC and NCHC cases. See MA-3420, Reenrollment for MIC and NC Health Choice re-enrollment procedures.

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(XI.B.4.)

5. Verification Sources

a. Wage stubs/verification forms, or

b. Contact with current/former employers.

c. Refer to III. above for income verification procedures for MIC/NCHC re-enrollment.

C. Self-Employment Income

Self-employment income is the gross income from a continuing trade or business activity minus the allowable operational expenses for that activity.

Self-employment income also includes any distributive share (profit at the end of the year) from a partnership, whether or not the income was actually distributed. See 2.b., below, for income from partnerships.

Self-employment income may be received annually (such as farming), or it may be received monthly (such as rental income), or it may fluctuate (such as a lawn care business).

1. Definition of Self-Employment

An individual is self-employed when he is working in his own business, trade or profession rather than working for an employer. Self-employment income includes but is not limited to farm income; rental income; roomer/boarder income; income from a solely operated business; income from a trade such as a carpenter or a cosmetologist; income from a partnership; and income earned by an individual working as a consultant or independent subcontractor.

To determine if an individual is self-employed, evaluate the individual’s work situation. If an employer is withholding Social Security and income taxes, the individual is not self-employed. A self-employed individual generally exercises control over how the business will be conducted, not just the end product. Also, a self-employed individual usually incurs operational expenses related to conducting his business or work activity.

For example, a carpenter who works for a construction company, has materials provided, and receives a regular paycheck with taxes withheld is not self-employed. A carpenter who is self-employed solicits his own work, works on various jobs, provides his own tools and is paid when the job is finished with no taxes withheld.

An a/b who babysits in another person’s home is an employee of that person. An a/b who babysits in her own home is self-employed.

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(XI.C.)

2. Types of Self-Employment

The following is an overview of the possible types of business arrangements encountered with a/b’s who have income other than regular wages. Some but not all of these are treated as self-employment income for Medicaid purposes.

a. Sole Proprietorship (Self-Employment)

(1) An individual who owns and operates his trade or business activity alone. No formal legal action is required to establish this type of activity. All profit and loss belong to the individual.

(2) Gross income is calculated by subtracting the operational expenses from the gross receipts of the business in the base period. Any salary or disbursements made to the individual from his business are disregarded in calculating gross self-employment income.

For example, a painter’s gross receipts for the 12 month base period are $53,000 and her operational expenses are $28,500. She has withdrawn from her business account $350 per week in the same period for a total of $18,200. Her gross income from the business is $24,500, the difference between receipts and expenses, rather than the amount she withdrew.

b. Partnership (Self-Employment)

(1) Two or more individuals who agree to contribute money and skill/labor and to share profits and losses as well as management. No formal legal action is required to establish a partnership but written agreements may exist.

(2) Gross income is calculated by subtracting the operational expenses from the gross receipts of the business in the base period and dividing that amount by each partners’ share. This is the distributive share and is countable regardless of whether it is actually distributed. Any salary or disbursements made to the individual from his business are disregarded in calculating gross self-employment income.

For example, two individuals work together as equal partners in a lawn care service. Their gross receipts in the base period were $63,000 and their operating expenses were $12,000. The gross income from the business is $51,000 and each partner’s gross income is $25,500.

(3) Partnerships are required by the IRS to file a Form 1065 Partnership Return of Income which shows the income and expenses of the partnership, as well as the assets and liabilities of the partnership.

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(XI.C.2.b.)

NOTE: If the partners do not file the required tax forms, they are still treated as partners for the purposes of determining countable income.

c. Limited Partnership (Not Self-Employment)

(1) Two or more individuals who are investors only and are legally liable only to the extent of their investment. This type of partnership is established by executing a Certificate of Limited Partnership which must be recorded with the Secretary of State and which specifies the partners’ percentage of profit and loss. A limited partner by definition is not an active participant in the business.

(2) There must be at least one general partner who is actively involved in operating the business and who is considered self-employed for there to be a limited partner. Income for the general partners is treated as self-employment income and is calculated according to b., immediately above.

(3) Because the limited partner is not actively involved in the business activity, the income from a limited partnership is treated as unearned income and not as self-employment. See XII.L.

d. Corporation

(1) A corporation is a distinct legal entity formed by individuals but having separate legal status from the individuals. The owners must file Articles of Incorporation with the Secretary of State. The Articles specify the type of corporation and the ownership agreement between the owners.

NOTE: A Professional Association (PA) is a corporation.

(2) An incorporated business whose stock is not publicly traded on the stock market is referred to as a “closely held corporation.” This is applicable to most small incorporated businesses in which the stockholders are also working in the business.

(3) C Corporation (Not Self-Employment)

(a) This is the more common type of corporation. The profits of the corporation are taxable income to the corporation and not to the individual stockholders. When the profits are distributed as dividends, the dividends are taxable unearned income to the shareholders.

(b) An a/b who works for a corporation for a salary is not self-employed, even if he is the primary stockholder in the corporation.

Treat the salary as wages, and treat any dividends or distributions of profits from ownership of the stock as unearned income. See XII.L. for treatment of dividends.

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(XI.C.2.d.(3))

(c) Be alert to the fact that many small incorporated businesses provide in-kind compensation to the owners in the form of payment of personal bills and expenses directly from the business accounts. This is generally treated as countable wages to the a/b as it is part of his compensation. See X.B.1.g.

If the income the a/b draws from the business does not appear reasonable or sufficient to meet his living needs, explore the possibility that funds are being used from the business accounts to pay personal expenses.

For example, the recipient owns a used record store with his brother and the business is incorporated. He states he only receives $100 per week salary. The caseworker learns that he also writes checks out of the business account to pay his car payment and car insurance and his rent. This is considered in-kind wages and is countable.

(d) You must also evaluate the value of the stock as an asset. If the corporation is a small business and the stock is not traded on the open market (a closely held corporation), it is necessary to establish the value of the a/b’s ownership interest as an asset. Refer to MA-3320, Resources, for treatment of stocks as a resource.

(4) S Corporation

Some small businesses incorporate as an S Corporation. This is a special tax status, which operates the same as a partnership in that the income is taxed at the individual level and there are no corporate taxes. For self-employment income purposes, treat individuals in an S Corporation the same as partners in XI.C.2.b.

3. Verification of Self-Employment Income

a. Business Records

The primary source of verification of self-employment income is the business records of the business, if available. This may include but is not limited to the following:

(1) Business accounting records or statements from an outside accountant (generally compiled based on information provided by the a/b).

(2) Ledger books or bookkeeping records, including those maintained by the a/b or an employee, either paper or in software programs such as Quicken.

(3) Verification Form For Self-Employment Income and Expenses – See b. below.

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(XI.C.3.a.)

(4) IRS tax forms, if available from the most recent tax year. For example, for applications taken in 2001, the most recent tax year is 2000.

(a) You may use the a/b’s IRS tax records to establish the gross receipts before expenses for the months in the base period which are included on the tax form.

(b) Do not use the tax records unless at least some of the months included on the tax form are included in the base period, even if the a/b states there has been no change in his average earnings.

(c) You may also project income from the tax forms for the entire base period if the a/b states there has been no change. If the a/b states there has been a change, use another source for the months in the base period not included on the tax form.

For example, application is made on 4/01 and the base period is 10/00-3/01. The tax records from tax year 2000 indicate gross receipts before expenses of $36,000. The monthly average is $3,000 per month. This is the monthly average for 10/00-12/00. The a/b states there has been no change, so $3,000 per month may be projected for 1/01-3/01.

In this same example, the caseworker cannot use tax records from tax year 1999 because none of those months are included in the base period.

NOTE: Refer to X.C.4.c.(4) for procedures for using tax forms to average operational expenses.

(5) Information from banks, Production Credit Association, farm agents, suppliers, purchasers or customers of the business.

b. Applicant’s Statement

At application, the applicant’s statement of income may be accepted AS A LAST ALTERNATIVE only if no business or current tax records are available and the applicant has not previously been informed of the requirement to keep business records. Applicant’s statement is acceptable for gross income receipts only, not net receipts after operating expenses. The applicant’s statement cannot be accepted for operational expenses. If you must accept the applicant’s statement of gross income:

(1) Document the reason the applicant has no business records and that he has been instructed that for any subsequent applications he will be required to provide proof of his self-employment income.

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(XI.C.3.b.)

(2) Advise the applicant that at subsequent reviews and applications he must provide adequate business records to establish income received from the business.

(3) Give the applicant/recipient a DMA-5043, Self-Employment Income and Expenses Verification Form. Instruct the a/b that he is responsible for keeping this record current, and that without this information his eligibility for ongoing Medicaid cannot be established. Also, instruct the a/b that for any subsequent Medicaid applications, he will have to provide verification.

(4) Advise the applicant that the county has the option of requesting an income review after 3 months to determine that records are being maintained and that the statements provided at application were correct. If the income provided for the review is significantly different (not just fluctuating income), treat as a change in situation.

This review is optional to the county. Do not terminate assistance if the recipient does not provide requested information. However, the recipient may be terminated at the end of the 6/12 month c.p. if he does not provide the requested information for the regular review. The purpose of this income review is to encourage the recipient to keep adequate records to establish eligibility.

(5) If the recipient opts to use another form of verification for subsequent certification periods, such as using the services of an accountant, those records will be acceptable.

(6) A/B’s statement is NOT acceptable verification at re-enrollment. Income must be verified using the DMA-5043 or by some other form of business records.

4. Operational Expenses

A deduction from the gross income receipts of the business is allowed for the ordinary and necessary expenses required for the operation of the business. Specifically excluded are expenses allowed by the IRS, such as depreciation and amortization, which do not reflect the actual income available to the a/b to meet living expenses.

Operational expenses should be carefully reviewed to determine the actual level of income available to the a/b. In most cases this will differ from a determination of allowable deductions and business income for tax purposes.

a. Base Period - The base period for operational expenses is the same as the base period for determining self-employment income. Deduct only those operational expenses that have been paid during the base period.

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(XI.C.4.)

b. Operational expenses include but are not limited to:

(1) Taxes required to operate the business

(2) Licenses and permit fees

(3) Rent payments (not for the home in which the a/b lives except as specified in g., below)

(4) Insurance (such as fire, liability, theft, or storm insurance on business assets, health/accident insurance on employees)

(5) Labor costs and employee benefits (such as Worker’s Compensation and Unemployment Insurance)

(6) Maintenance and upkeep

(7) Products, materials and supplies

(8) Transportation costs (see f., below)

(9) Utility costs for business buildings

(10) Interest on debts, including mortgages and loans

(11) Business use of the a/b’s home (see g., below)

(12) Accounting, advertising, and legal costs

(13) Food costs for roomer/boarders and for babysitters who keep children in their own home. See e. below.

c. Verification

(1) Allow operational expenses as a deduction from income for the business activity only when the expense is verified. Do not accept client statements for operational expenses at application or review.

(2) Verification must indicate that the expense was paid in the base period (except when using IRS tax records to average as described in (4)(c) immediately below.

(3) If documentation is inadequate to clearly establish the amount, date and type of the expense, and that it is for items related to the type of business activity, do not allow it as a deduction from income.

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(XI.C.4.c.)

(4) Sources of verification include but are not limited to:

(a) Business records, such as ledger sheets, receipt files, accounting records, including those maintained regularly by the a/b, on paper or in software programs such as Quicken.

(b) Statements from suppliers, banks, farm agents or others conducting business with the a/b.

(c) IRS tax records. IRS allows expenses not allowable for Medicaid purposes. Ensure that the item is clearly identifiable as an allowable expense for Medicaid. The tax forms do not show the actual date paid, but you may use IRS tax forms to average expenses.

Using the same example used for gross receipts in X.C.3.a. (4) above, application is made in 4/01 and the base period is 10/00-3/01. The tax records from tax year 2000 indicate allowable operational expenses of $12,000. The monthly average is $1,000 per month. This is the monthly average for 10/00-12/00. The a/b states there has been no change, so $1,000 per month may be projected for 1/01-3/01.

(d) Receipts from the source of purchase of materials/ supplies. Use this source only if there are no other business records available, or if it is not clear from the business records that a particular item is allowable.

d. Maintenance/Repair Versus Capital Expenditures

(1) Expenses incurred for repair or maintenance are allowable operational expenses. Capital expenditures are not an allowable operational expense.

(2) Maintenance/repair is an incidental correction to an existing structure such as repairing a broken light switch, patching holes in a roof, or servicing the furnace.

(3) A capital expenditure is one that adds to or increases the value of fixed assets and is subject to depreciation for income tax purposes. Examples are rewiring a house, installing new plumbing, purchasing a vehicle or farm machinery, or adding a room.

(4) Replacement of an existing feature that could be repaired is not an allowable operational expense.

(5) Depreciation and the principal portion of mortgage payment are not allowable operational expenses for Medicaid purposes even though they are allowable IRS tax deductions. They are considered capital expenditures.

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(XI.C.4.)

e. For roomer/boarder income, the only allowable operational expense is food costs. (These procedures also apply to babysitters who claim food costs when keeping children in their home.)

(1) Use the a/b’s records to verify food expenses.

(2) If the a/b does not have records, use the Value Table, below, to determine the cost.

Value Table for Food Expense

Number of Persons	1	2	3	4	5	6	7	8	9	10
Allowance Per Person (10/01)	$182	$117	$84	$70	$62	$57	$53	$50	$48	$44

Add $43 for each additional person

(3) Add the total number of boarders/children to the number of persons in the needs unit to determine the food allowance per person.

(4) If the boarder/child eats only some meals in the home (1/2, 1/3, 2/3, etc.), determine what portion of a month’s 91 meals are eaten with the a/b. Divide the food allowance by the portion of meals eaten with the a/b. Round to the next highest dollar.

Example: A boarder eats one meal a day or 1/3 of his meals per month with client and client’s spouse. Divide the food allowance for 3 by 3. Subtract this amount from the amount paid for board as an expense.

Example: A babysitter keeps a child 22 days/month and feeds the child 2 meals/day (44 out of 91 meals/month) or 48%. The needs unit is 4 plus the child = 5, food value per person is $62. The total allowable expense is $62 x 48% = $29.76.

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(XI.C.4.)

f. Transportation Expenses

(1) There are two methods of allowing transportation expenses as an operational expense. The a/b may choose either method, regardless of whether he or the business owns the vehicle, as long as there is documentation to support the expense. The two methods are:

(a) Deduct the actual cost of operating the vehicle, such as gas, oil, repairs, tires, tags, and insurance.

(b) Take a standard mileage allowance equal to the amount currently allowed by the IRS.

NOTE: The only exception is when the vehicle is used for hire, such as taxis, limousines, buses and vans. For vehicles used for hire, only the actual costs of operating the vehicle may be deducted as an operational expense.

(2) The cost of purchasing/leasing a vehicle is not an allowable operational expense, whether owned by a business or an individual. It is considered a capital expenditure. However, the interest paid on the loan is allowable.

(3) If the vehicle is used solely for the business or is registered in the name of the business, all allowable operating costs may be deducted.

(4) If the vehicle is used for both business and personal use, only the expenses related to the business use are deducted.

(a) Accept the a/b’s statement for the percentage of business use and personal use if there is no documentation, unless it is questionable.

(b) If the a/b’s statement is questionable, you may request the a/b to maintain mileage records to substantiate his deductions for future reviews.

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(XI.C.4.f.)

(5) The a/b who uses his vehicle for both personal and business use may not take a deduction for the mileage incurred in getting to and from home to the work site. A deduction is allowed for mileage between multiple work sites during the day, as well as for other travel necessary to the operation of the business.

Example 1: Sole proprietor of a flower shop owns a van in her name which is used primarily for delivering flowers but is also used for occasional personal travel. She drove 20,000 miles during the base period and states that 16,000 were for delivering flowers. She can claim a mileage allowance for the 16,000 miles related to the business activity, or she may claim 80% of actual costs for which she has receipts.

Example 2: Married couple with a turkey farm own a truck registered in both names and it is their only vehicle. They state they use the truck both for farm work and as their private vehicle. They have no mileage records but they have receipts for gas, oil, tires, and repairs. They state that approximately 50% of the mileage is related to farm work, mostly picking up supplies and providing transportation for laborers. They may claim 50% of the actual costs as an expense.

g. Business Use of the Home

(1) To deduct expenses for business use of the home, the following criteria must be met:

(a) The area must be used EXCLUSIVELY and regularly for the activities of the business, and

(b) The a/b has NO OTHER FIXED LOCATION where the business is conducted, and

(c) The area must be the PRINCIPAL PLACE FOR DOING THE PRIMARY WORK of the business. The two factors that determine the primary work of the business are the relative importance of the tasks and the time spent in the office.

For example, the primary work of a painter is painting. The other tasks, such as buying supplies, preparing written estimates and sending invoices, are secondary.

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(XI.C.4.g.)

(2) Examples of allowable expenses are repairs or maintenance of the area in use (such as painting or cleaning), utilities, rent, insurance on the premises and equipment.

NOTE: Mortgage payments are not an allowable expense for home offices as they are considered a capital expenditure.

(3) The basic local telephone service is not allowable. However, long-distance phone calls related to the business are allowable, as well as the cost of a second phone line used exclusively for the business (including fax and Internet lines).

NOTE: This rule applies for deducting telephone expenses even if the a/b cannot claim a deduction for the business use of the home.

(4) The allowable expenses must be prorated, based either on the percentage of the square footage of the home in business use or the number of rooms in business use.

For example, if the total area is 1,200 square feet and the room used for the business is 240 square feet, 20% of the home is used for business. Therefore 20% of the utilities may be allowed as an operational expense.

In another example, the home has four rooms and one room is used for the business. Therefore 25% of the utilities may be allowed.

(5) If the criteria in (1), immediately above, are not met, the a/b is not allowed to deduct the expenses for the use of his home (utilities, repairs, etc.). However, he may still deduct other expenses related to operating the business, such as supplies, phone lines, computers, labor, etc.

Example 1: Self-employed plumber has a room in his home which he uses exclusively as an office to phone customers, order supplies, keep books. He has a part-time secretary who also uses the office. He spends approximately 35 hrs/week in his customers’ homes installing and repairing plumbing and 10 hrs/week in the office. His office is not where he does the primary work of his business and the expenses for the space in his home are not allowable. However, he may still deduct the cost of supplies, the labor costs for the secretary and other costs related to operating the business.

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(XI.C.4.g.(5))

Example 2: Transcriptionist has a room in her home used exclusively as an office where she does her transcription on a computer, contacts customers by phone, prepares invoices, keeps business records, and mails advertising brochures. She spends 25-30 hrs/wk in the office and 6-8 hrs/wk picking up and delivering materials to be transcribed. The office is her principal place of business and the expenses are allowable.

5. Multiple Self-Employment Enterprises

If the a/b is involved in more than one self-employment enterprise, determine income as follows:

a. Combine the total gross income receipts for the base period from each enterprise.

b. Combine the total allowable operational expenses for the base period from each enterprise.

NOTE: Do not allow the same operational expenses more than once. For example, if the a/b rents a space and uses it for two businesses, the rent may only be allowed once.

c. Subtract the operational expenses from the total gross income receipts to determine the countable gross income.

For example, a recipient operates a lawn care business for most of the year. During the off-season he does plumbing installation and repair. These are two separate business activities. The total gross income in the base period from the lawn care business is $43,050 and from the plumbing business $12,140 for a total of $55,190. His operational expenses from the lawn care business are $16,650 and $3,450 from the plumbing business for a total of $20,100. His gross countable income from self-employment is $35,090 (55,190 - 20,100).

6. Net Loss

a. When the a/b incurs a verified net loss in one business activity, it can be offset by other self-employment income for the base period. (See 5. immediately above.) Do not use a loss to offset any other type of earned or unearned income, and do not reduce the total self-employment income below zero.

b. The loss must be verified. It must be a loss according to Medicaid income calculations, not IRS tax calculations.

c. When the a/b indicates a net loss from his business, discuss how current living expenses are being met to determine what other income is available to the family.

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(XI.C.)

7. Disagreements

If there are conflicting records/statements, attempt to resolve the difference. If it cannot be resolved, use the lowest verified amount.

8. Discontinued Business

If the business or activity is being discontinued, do not include the self-employment income from the base period in the income calculation for the upcoming c.p. Include as reserve any remaining portion of the total available net proceeds from the business.

9. Temporary Loss of Profit

For Medically Needy cases, if the business or activity is to be continued but no profit is realized due to temporary circumstances beyond the control of the a/b, do not consider the property value in reserve. (Business assets are always countable in Categorically Needy cases.) Refer to MA-3320, Resources, for procedures for treatment of excluded property no longer producing income.

a. Flag the case for review when the income begins. Advise the a/b to notify the caseworker within 10 calendar days of resuming the business activity. Document the record.

b. Discuss with the a/b how current living expenses are being met to determine what other income is available to the family.

10. Special Self-Employment Situations

a. Contract Grower Income

(1) Contract growers are individuals who grow a product under contract with a company. The product is generally livestock, such as hogs, turkeys or chickens, but may also be produce, such as sweet potatoes. The company provides the livestock (or plants), the feed and medicine and certain supplies needed to raise the livestock or produce. The grower provides the houses for animals, labor, utilities, and equipment to maintain the business.

(2) Income - The grower and the company sign a contract, which specifies how the grower will be paid. The grower receives a form 1099 at the end of the year showing the gross amount the company paid him.

(a) The grower is generally paid several times a year, for example every 60 days.

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(XI.C.10.a.(2))

(b) He also generally receives a lump sum payment when the final product is delivered to the company.

(c) He may also be paid a bonus based on production.

(d) The contract may specify that the payments be split between the grower and a bank or other mortgage/lien holder. However, the total amount of payment is countable income to the grower.

For example, a hog farmer receives a $15,000 payment. He signed an agreement that 60% of his payment ($9,000) is paid directly to Carolina Bank who holds a mortgage on his hog houses. The remaining 40% ($6,000) is paid directly to the farmer. However, the countable gross income is $15,000.

(3) Operational Expenses

(a) The grower may have allowable operational expenses, such as interest on mortgages and loans, labor, utilities, maintenance and repairs on farm equipment, etc.

(b) The largest expense to the grower is the houses for raising the livestock or the land for raising produce. A bank or mortgage lender usually finances these. The principals on loans and mortgages and depreciation are not allowable expenses for self-employment for Medicaid purposes.

b. Production Flexibility Payments

These are annual payments to farmers from the federal government based upon contract acreage for production of certain feed/grain crops. Treat these payments as self-employment income. The payment is included on the farmer's tax returns, along with operational expenses. This is annualized income. Divide the net annual income after expenses by 12 to calculate the countable monthly income.

c. Rental Income

(1) Income Received Monthly

(a) For applications, the base period is the month prior to the month of application, unless there is a recent change such as a new rental contract.

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(XI.C.10.c.(1))

(b) For re-enrollments, the base period month can never be earlier than the 4th month of the current 6 month certification period or the 10th month of the current 12 month certification period, and can never go beyond the 1st month of the new certification period.

(2) For income received other than monthly, the base period is 6 or 12 months.

(3) Operational Expenses - The base period for operational expenses is the same as the base period for income.

(4) Rental income may be from a rental business operation, such as a rental management company or real estate business, or it may be rental income from property owned directly by the individual, such as heir property. If the a/b has an ownership interest in property that produces income, the a/b also has a legal interest in the income. Count the a/b's share of the rental income, regardless of whether he actually receives the income. If he receives more than his legal share, count the amount actually received.

Example: Applicant owns 1/3 interest in undivided heir property with his 2 brothers. It is farm property that is rented for $600/month after operational expenses. 1/3 of the net rental received, or $200, is countable income applicant. He reports he receives 1/2 the income, or $350, from the property because he helps manage the property. Count $350 as income.

d. Ministers

If a minister files taxes as a self-employed person, determine gross income as follows:

(1) Count all money paid to the minister during the base period for his services, including salary, household allowance, travel allowances, insurance, church’s share of Social Security and retirement, etc. Payments for services such as weddings, funerals, and baptisms are also countable income.

(2) Deduct allowable operational expenses that can be verified. See XI.C.4. for allowable operational expenses.

(3) The difference is the gross income from self-employment for the base period.

NOTE: If the church provides a house for the minister, the current market value of the monthly expense for the house (rent or mortgage payment) is considered income unless living in the house is a condition of employment.

REVISED 10/01/11 - CHANGE NO. 13-11

(XI.C.)

11. Refer to MA-3320, Resources, for treatment of business property and assets in MAF cases. Business assets are not an eligibility factor for MIC cases.

D. Supplemental Payments in Excess of State Maximum Rates for Foster Care Payments and State Foster Home Funds Paid by the County

Definition - Payments by a county that exceed the state maximum rates or exceed the rates set by the county

1. Verify the supplemental payment from county records.

2. Determination of Gross Income

Count the full amount of the supplemental payment as gross income.

E. Worker’s Compensation/Employer Funded Disability Payments

Definition - Benefits resulting from loss of employment due to injury on the job.

1. Count as earned income when:

a. Employer funded,

b. Provided to an individual who remains employed while recuperating from a temporary illness/injury pending return to the job, and

c. Characterized under state law as a temporary wage replacement.

2. Count as unearned income when:

a. The individual no longer remains employed, or

b. The individual receives private disability benefits.

3. At application and review, explore potential benefits for each budget unit member. If receipt of Worker’s Compensation is denied but disability/incapacitation occurred during employment, contact the employer to determine eligibility for Worker’s Compensation.

REVISED 10/01/11 - CHANGE NO. 13-11

(XI.E.)

4. Verification sources

a. Contact the employer/payer of benefit.

b. Current check.

c. Award letter. Verify that an increase has not occurred since the date of the award letter.

5. Use the gross amount of monthly Worker’s Compensation received by each budget unit member in determining countable income.







For questions or clarification on any of the policy contained in these manuals, please contact your local county office.