SECTION 340:10-3-32. Determination of earned income

(a)   Self-employment income determination. Self-employment income received by a member of the assistance unit whose income is derived from a self-employment business enterprise owned solely or in part by the person; or when the person works for an employer, but is considered self-employed, per Oklahoma Administrative Code (OAC) 340:10-3-31(a), is considered per the procedures listed in (b) of this Section. Other types of self-employment income are listed in (1) through (3) of this subsection.

(1)   Room or board. When a person:

(A)   rents a room in the client's home,the worker subtracts 25 percent of the gross earned income amount received as a business expense; or

(B)   pays for room and board in the client's home,the worker subtracts 50 percent of the gross earned income as a business expense.

(2)   Rental property. Income from rental property is considered earned self-employment income when none of the activities associated with renting the property is conducted by an outside person or agency. When the client does not manage the rental property, it is considered unearned self-employment income. When the client incurs business expenses, such as a mortgage payment, the worker subtracts 50 percent of the client's rental property income as a business expense.

(3)   Profit sharing. Households who operate S corporations, general or limited partnerships, or limited liability companies (LLC) may receive profit sharing that is reported on the household's personal income tax return.

(A)   S corporation profit sharing is considered unearned profit sharing income. Refer to (c)(3) of this Section and OAC 340:10-3-39(o) for information regarding S corporations.

(B)   Partnerships are unincorporated businesses with two or more partners. When a household member is a partner in a business, he or she is considered self-employed and not an employee of the business. Each partner receives a profit share from the business. When a business is considered a:

(i)   general partnership or LLC with a member-manager, each partner's share of the business income is shown as self-employment income on his or her federal income tax form; or

(ii)   limited partnership or other LLC member, each partner's share of the business income is shown as self-employment income or unearned profit sharing income on his or her federal income tax form.

(b)   Self-employment income procedures. Self-employment income that represents the person's annual support is prorated over a 12-month period, even when the income is received in a shorter period of time. The worker uses the gross self-employment shown on the person's most recent federal tax return, when filed, or computes the person's gross self-employment income from the person's business or employer records. When the person claimed business expenses, the worker subtracts 50 percent of the person's gross self-employment income as business expenses and divides the remaining income by the number of months to be averaged to arrive at the person's net monthly self-employment income.

(1)   New income source. When self-employment income was received for less than a year, the income must be averaged over the period of time received and the monthly income projected for the coming year.

(2)   Averaged over period of time received. When there is insufficient data to make a reasonable income projection from this income source, the worker does not consider income from this source until the six-month renewal. At renewal, the worker averages the income over the number of months received until a full year's data information is available.

(3)   Substantial increase or decrease in income. When the person who would normally have the self-employment income annualized experiences a substantial increase or decrease in income, the worker does not calculate self-employment income on the basis of prior earnings, such as income tax returns. Instead, the worker calculates the self-employment income using only the income that can reasonably be anticipated to project future earnings.

(c)   Earned income from sources other than self-employment.

(1)   Earned income from wages, salary, or commission. When the income is from wages, salary, commission, or contract employment, the earned income is the gross income prior to payroll deductions and withholdings. Money from the sale of whole blood or blood plasma is also considered as earned income.

(2)   Earned income from work and training programs.

(A)   Workforce Innovation and Opportunity Act (WIOA) of 2014. Per Section 181 of WIOA, earned income from WIOA is exempt.

(B)   On-the-job training (OJT). Earned income from OJT is considered as any other earned income.

(3)   S corporations. When a household member is a shareholder in an S corporation, he or she may receive profits from the business in two ways; as a salary and/or as a profit share of the business. Both types of income are reported on the household member's personal income tax return. Salary income is considered as earned income and profit share income is considered as unearned income.

[Source: Amended at 10 Ok Reg 527, eff 12-8-92 (emergency); Amended at 10 Ok Reg 2813, eff 6-25-93; Amended at 12 Ok Reg 3446, eff 6-16-95 (emergency); Amended at 13 Ok Reg 2167, eff 6-14-96; Amended at 14 Ok Reg 947, eff 2-1-97 (emergency); Amended at 14 Ok Reg 1310, eff 5-12-97; Amended at 15 Ok Reg 145, eff 11-1-97 (emergency); Amended at 15 Ok Reg 1602, eff 5-11-98; Amended at 17 Ok Reg 2271, eff 5-1-00 (preemptive); Amended at 18 Ok Reg 2055, eff 7-1-01; Amended at 20 Ok Reg 850, eff 6-1-03; Amended at 21 Ok Reg 814, eff 5-1-04; Amended at 23 Ok Reg 980, eff 6-1-06; Amended at 24 Ok Reg 2183, eff 7-1-07; Amended at 27 Ok Reg 2788, eff 8-1-10 (emergency); Amended at 28 Ok Reg 781, eff 6-1-11; Amended at 29 Ok Reg 748, eff 7-1-12; Amended at 34 Ok Reg 1441, eff 9-15-17; Amended at 37 Ok Reg 1776, eff 9-15-20]