State of Wisconsin
Department of Children and Families
Self-Employment Policies for the Child Care Subsidy Program
DCF 201
The Wisconsin Department of Children and Families proposes to create ss. DCF 201.036 (3m) and 201.039 (8m), relating to self-employment policies for the child care subsidy program. Analysis Prepared by the Department of Children and Families
Statutes interpreted: Section 49.155, Stats. Related statutes and rules: DCF 202, 250, 251, and 252
Explanation of Agency Authority
The department administers the child care subsidy program under s. 49.155, Stats. Section 49.155 (1m) (d), Stats., authorizes the department to establish additional eligibility criteria by rule. Section 227.11 (2) (a), Stats., expressly confers rule-making authority on each agency to promulgate rules interpreting the provisions of any statute enforced or administered by the agency if the agency considers it necessary to effectuate the purpose of the statute. Summary of the Rule
The proposed rule incorporates department policies into rule regarding the eligibility of and authorizations for parents who are self-employed and are applying for or receiving a subsidy for child care expenses.
Eligibility
Section 49.155 (1m) (c), Stats., provides that when calculating farm and self-employment income for determining financial eligibility for the child care subsidy program, the department or county department or agency shall include the sum of net earnings reported to the Internal Revenue Service plus depreciation expenses, personal business and entertainment expenses, personal transportation costs, purchases of capital equipment and payments on the principal of loans. The proposed rule requires that a parent whose approved activity is self-employment file personal and business tax returns with the Internal Revenue Service if the parent’s income from the previous year included income from self-employment. This provision applies regardless of the amount of the parent’s net business income. The parent is required to submit copies of the parent’s most recent personal and business tax returns when the parent submits an initial request for assistance and at each annual eligibility redetermination. Prior to the date that the parent is required to file a business tax return, the parent is required to submit actual or anticipated business income and expenses on a department form. The child care administrative agency may require additional verification if the agency believes that the tax returns or the business income and expense information on the department form is questionable or may be falsified.
A parent’s self-employment will be considered a hobby and not an approved activity if the parent does not have an annual net business income of at least $400 when the parent’s business is considered to be an ongoing business or after 24 months of self-employment.
Authorizations
New business. The proposed rule provides that a child care administrative agency shall consider a parent’s self-employment to be a new business for the 24 months following the date that the parent reports beginning the business. A parent may switch to a different type of self-employment during the 24-month period for the initial business, but the subsequent business will be treated as a new business only until the end of the 24-month period for the initial business.
A child care administrative agency may consider a parent’s self-employment to be a new business until the parent’s eligibility redetermination following the end of the 24-month period and may consider a parent’s switch to a new type of self-employment to be a new business during this time.
While a parent’s self-employment is considered a new business, the agency may authorize payment for the number of hours of child care that the parent states is needed, up to a maximum of 50 hours per week. After the 24-month period ends or after the parent’s next eligibility redetermination after the 24-month period ends, the agency shall determine the maximum number of hours of child care that may be authorized for a parent who begins a new type of self-employment in the same manner as an ongoing business.
Ongoing business. If a parent’s self-employment is not a new business, the child care administrative agency shall determine the maximum number of hours of child care that may be authorized for the parent per week by dividing the parent’s average monthly gross earnings from self-employment by the higher of the hourly minimum wage under state or federal law and dividing that amount by 4.3 weeks. After determining the maximum number of the hours that may be authorized, the child care administrative agency shall assess the assistance group’s child care needs to determine the number of hours of subsidized child care to authorize for the parent.
Summary of Factual Data and Analytical Methodologies
The proposed rule incorporates existing department policies.
Summary of Related Federal Law
Filing an income tax return is required if net annual earnings from self-employment are $400 or more.
Comparison to Adjacent States
Minnesota
To be eligible for child care assistance for self-employment, a parent must work for at least an average of 20 hours per week (10 hours if a full-time student) with a gross income of at least the minimum wage. If the parent meets this minimum activity requirement, the number of hours of subsidized child care that is authorized is the lesser of the following:
The parent’s annual gross earned income from the self-employment activity, divided by 52 weeks, and then divided by the applicable minimum wage.
The actual hours the parent spends in the self-employment activity. Iowa
The number of hours of subsidized child care authorized for a self-employed parent is based on a statement from the parent on the number of hours needed, unless the agency has a reason to question the parent’s statement.
Illinois
The numbers of hours authorized cannot exceed the parent’s income divided by the state minimum hourly wage.
Michigan
Child care assistance is approved based on a parent’s completion of a form with self-employment income and expenses.
Effect on Small Businesses
