Photography by Suzy Hazelwood.
According to the U.S. Department of Justice, more than 10,000 former prisoners are released every week across America. They need jobs. In fact, the Prison Policy Initiative reports that 2 years after release, more than 30% are still unemployed.
Gratefully, the State of Iowa offers a special tax benefit to small businesses that hire ex-felons residing in that state. In addition to the federal Work Opportunity Tax Credit (WOTC), Iowa small businesses can receive a tax deduction of up to $20,000 per qualifying hire. Since this is a deduction (not a tax credit), the actual tax effect depends on the business’ tax rate.
Which Employers Are Eligible?
While businesses of all sizes can qualify for WOTC, the Iowa tax deduction for hiring ex-felons is available only to qualifying small business (no more than 20 full-time equivalents). On the other hand, the definition of a qualifying ex-felon is much wider for the Iowa benefit.
Which Ex-felons Qualify?
For WOTC, an ex-felon qualifies only if they were convicted (or released from their incarceration) within 12 months of their hire date. An ex-felon qualifies for the Iowa program, however, if any of the following apply. There are no time-related restrictions.
- Convicted of a felony in Iowa or any other state or the District of Columbia, OR
- On parole, OR
- On probation for an offense other than a simple misdemeanor, OR
- In a work release program, OR
- Still incarcerated, OR
- Qualifies under the interstate probation and parole compact, OR
- Certified as an economically disadvantaged ex-offender for the targeted jobs tax credit
Other states also offer tax benefits for hiring ex-offenders. WOTC, as a federal tax credit, is available to employers in all states. These useful tools help reformed offenders find employment, a step that is crucial to their successful reentry into productive society.
